Our forecast is for a cumulative fall in Spanish prime office rents over the next two years. But we think this view is justified as occupier demand is likely to improve only gradually, meaning space released to the market won’t be fully absorbed. In fact, …
11th January 2021
The risks to vaccination programmes fall into three groups: procurement, deployment, and effectiveness. In the coming few months, deployment issues will be a key limiting factor in most countries. These should be overcome relatively quickly in DMs, but …
8th January 2021
Despite the jump in US Treasury yields this week following the Georgia Senate run-off election results, we continue to think that the Fed will keep them from rising much further this year. The 10-year Treasury yield has risen above 1% for the first time …
The share of bank loans flowing to the property sector has doubled during the past 15 years. But new restrictions are likely to put an end to this upward trend. Coupled with broader limits on developer debt introduced last year, the scene is set for a …
We expect both the Swedish krona and the Norwegian krone to appreciate against the euro and the dollar in 2021. However, in contrast to 2020, we expect the NOK to outperform the SEK slightly this year. The fortunes of the Swedish krona and Norwegian krone …
7th January 2021
The Bank of England may not be ready to use negative interest rates until H2 2021. And by then, COVID-19 restrictions might be easing and the economy could be growing rapidly. In any case, if the Bank does loosen policy further, we suspect it will use …
While it’s still early days, the underwhelming start to vaccinations in mainland Europe lends support to our view that governments won’t lift most of the restrictions until May/June (see here ), and the uneven start suggests that some countries will make …
The pandemic has created fertile ground for populists to win presidential elections in Ecuador, Chile and Peru this year. That would have the biggest adverse market reaction in the former, and could lead to medium-term concerns about policymaking in the …
Compared to consensus, we are relatively downbeat on the outlook for home sales this year. Mortgage rates will stay close to record lows, but they will not fall further. Pent-up demand from last spring will soon be exhausted, inventory is at record lows …
Despite a brighter economic outlook later in 2021, many of the factors that weighed on investment activity last year are set to persist. In turn, following a likely 20% fall in European (excluding UK) investment in 2020, we think the recovery this year is …
If implemented, Saudi Arabia’s shock pledge to cut oil production by 1m bpd in February and March should offset much of the current lockdown-related weakness in global oil demand. Consequently, the market should remain in a deficit, which is why we have …
The Polish central bank’s (NBP’s) concerns about the strength of the zloty are likely to prompt it to intervene more aggressively in the FX market and deliver a 10bp interest rate cut, to 0.00%, most likely in March. But there is a growing risk that the …
6th January 2021
For 2021 we highlight five key calls. In particular we expect a year of two halves in which yields initially rise, but end 2021 close to their current levels. Retail and office rent falls will accelerate and while regional mall returns are expected to be …
Euro-zone core inflation is likely to rise this year as the temporary VAT cut in Germany expires and last year’s sharp falls in holiday and clothing prices are reversed. However, the inflation rate will remain very low, and we do not expect any sustained …
The wide range of forecasts for house prices in 2021 shows that there is still a lot of uncertainty ahead. Nevertheless, given strong demand and low mortgage rates, our view is that prices will continue to rise. According to the Teranet index, house price …
Risky assets have continued to rally even as the near-term economic picture has turned a bit gloomier, but we do not think this reflects excessive optimism. Indeed, we think risky assets could rally further still. To recap, notwithstanding some wobbles on …
With Democrats picking up both Georgia Senate seats in yesterday’s run-off elections, President-elect Joe Biden will have a much easier time confirming his picks for cabinet positions and the chances of a limited fiscal stimulus passing further down the …
Although the rollout of effective vaccines should allow economic activity to rebound in the second half of the year, we do not think that European property markets will bounce back quickly. This Update outlines four key developments to watch out for in …
The announcement that Saudi Arabia will remove its three-year blockade of Qatar will help to strengthen political ties in the Gulf, but the direct economic benefits from the détente are likely to be limited. Instead, Qatar’s (and Saudi Arabia’s) economic …
5th January 2021
The government’s plan to end the furlough scheme and the stamp duty holiday in the spring sets the housing market up for a hangover from the surge in prices in 2020. As a result, we are more downbeat on the prospects for house prices in 2021 than most …
The third lockdown to contain COVID-19 means that the economy will start the year in recession and the recovery will be delayed again. Even so, by expecting the economy to regain its pre-crisis level in Q2 2022 and to avoid major long-term scarring, we …
The pandemic – and the associated increase in working from home – may cause a fundamental shift in the way that cities function in future. But this shift will not necessarily trigger a more fundamental economic decline in the world’s largest urban …
The lockdowns implemented at the end of last year did not lead to another surge in bank lending, probably because they were less strict and more focused on limiting social activity. But if lockdowns are extended or made more draconian, firms’ demand for …
Korea’s population last year shrank for the first time in its history, underlining the seriousness of the demographic “time bomb” facing the country. The poor demographic outlook is the key reason why we expect trend growth in Korea to slow sharply over …
Developments from the past two weeks reinforce the message that 2021 will be a year of two halves for the world economy. In the near term, high/rising infections in most major economies mean that restrictions will be tightened or kept in place for longer, …
4th January 2021
While the EM manufacturing PMI declined last month, largely reflecting a fall in China’s index, the overall message is that EM industry held up well at the end of last year. The sector is likely to fare well in 2021 provided that the rollout of vaccines …
The virus data for the holiday period in the euro-zone are not as alarming as those for the UK, but they will force governments to extend and intensify restrictions in the coming weeks. As a result, economic activity looks less likely to pick up in Q1 …
Recently-announced measures to curb South Africa’s second wave of COVID-19 will probably throw the economic recovery off course, with GDP likely to contract in Q1 if restrictions are extended. We think that the darkening clouds over the recovery will …
China’s December PMI readings suggest that the pace of economic expansion has started to ease, which chimes with our view that the demand for and, prices of, most metals will fall this year . The official manufacturing PMI fell to 51.9 in December, down …
It looks likely that a state of emergency will be declared in the Greater Tokyo Area over the coming weeks which could involve the closure of shops, schools and restaurants. While that will result in a fall in consumption, we still think that a rebound in …
India’s current account is likely to swing from an unprecedented surplus in 2020 back into deficit in 2021 as domestic demand rebounds and oil prices continue to recover. But when it does return, the deficit should remain small. And with capital inflows …
Today’s news that a UK-EU Brexit deal will soon be announced may not boost the financial markets by much more than it already has. But a decent economic recovery from the COVID-19 crisis in the second half of next year may mean that the pound rises from …
24th December 2020
Despite all the current gloom about COVID-19, the outlook for next year has been brightened by the vaccination programme. While we don’t think this will be enough to prevent further falls in capital values, property transactions should benefit, though any …
23rd December 2020
We anticipate that UK mid- and large-cap equities will fare much better in 2021 than they have in 2020, provided vaccines prove effective in winning the battle against COVID-19. The MSCI World Index includes mid- and large-cap equities in 23 developed …
The price of palm oil has climbed resolutely since May, trading currently at a nine-year high of around MYR 3,800 per tonne. Nonetheless, we think that the price will fall in 2021, as supply constraints ease . The recent rally in the price of palm oil has …
The Bank of Thailand’s (BoT) decision to leave interest rates unchanged at an all-time low of just 0.5% today came as no surprise, and the poor outlook for the economy means rates are likely to remain at their current low level until at least the end of …
Emerging market (EM) Asian equities have performed well compared with those in other EMs when coronavirus concerns have worsened this year, but we suspect any further deterioration in the virus situation would not provide the same support. To recap, EM …
22nd December 2020
We think that most risky assets will make further gains next year as policymakers continue to anchor safe bond yields around their current levels and the US dollar weakens further. After a pandemic-driven rollercoaster of a year in financial markets, …
The hotel sector has been hit hardest by the virus, and we expect its recovery will be slower than the other sectors. And, even when vaccines pave the way for an improvement in occupancy, structural changes to demand may limit a return to former glories. …
The $900bn fiscal relief deal agreed by Congress won’t represent as big a fiscal expansion as the headline figures suggest as it appears to mostly involve recycling the unused funding from previous stimulus deals this year. Nevertheless, it provides …
The recent re-introduction of weekend curfews and the announced four-day new year lockdown suggest that the struggles of the retail sector will continue into 2021. And despite the improving outlook for consumer spending and tourism, we think that weakness …
Yesterday’s approval of the first vaccine by European authorities marked the start of the roll-out of COVID-19 vaccines in the EU, which we expect to lead to a lifting of restrictions in Q2. However, the gradual pace at which production is being ramped …
