Commodity prices have largely shrugged off the conclusion of China’s Fifth Plenum and discussion of the 14 th Five-Year Plan (FYP). This is not so surprising as the main takeaway from the event is that we will have to wait until March for any detail. But …
30th October 2020
Greater remote working looks set to be a legacy of the pandemic. However, given that working from home was already relatively prevalent in Sweden and Denmark, the scope for significant further rises there is limited, reducing the risks to office demand …
A Biden presidency would probably result in a tougher US foreign policy stance against both Russia and Turkey, paving the way for a further deterioration in relations, an increased risk of tighter sanctions, and an acceleration in both countries’ recent …
The ECB left its policy settings unchanged at today’s meeting, but explicitly stated that it would “recalibrate” them in December. We think this will include an increase in the size and duration of the PEPP and lower TLTRO interest rates. More radical, …
29th October 2020
European investment activity is likely to remain subdued into 2021, as pricing has been slow to adjust and investors continue to push back investment decisions in the current uncertain environment. CBRE data showed that there were no signs of a recovery …
We think the one-month national “lockdowns” will result in GDP contracting by around 2.5% q/q in France in Q4 while in Germany GDP will be flat at best. There is obviously a big risk that the lockdowns stay in place for much longer than a month, are …
The tone of the Brazilian central bank’s statement from yesterday’s meeting (at which the Selic rate was kept at 2.00%) was a little less dovish than the previous one. But it still provides plenty of reason to expect the Selic rate to remain unchanged for …
Out of all the banking sectors in major economies, India’s warrants the most concern. It came into the crisis in the worst shape, and the scale of damage to private balance sheets means it will be one of the hardest hit from rising defaults. Policymakers …
We estimate that firms deferred around ¥17tn in tax and social security contributions during the state of emergency. Most of those deferrals will have to be paid back by mid-2021 but we suspect that the government will extend the deadline for struggling …
The Bank of Japan today revised up its outlook for GDP growth for the next couple of years, reducing the already scant chances of additional easing even further. As widely anticipated, the Bank kept its short-term policy rate at -0.1% and its target for …
While the Bank of Canada today trimmed the pace of its QE purchases, we agree with its claim that the program should be as stimulative as before providing those purchases are focused on longer-term bonds as it signalled. Moreover, the Bank’s enhanced …
28th October 2020
Recent developments point to a weaker short-term economic outlook in the UK. In our view, this will weigh most heavily on next year’s office sector recovery and suggests that the turnaround that we expected in all-property capital values is now in the …
It is looking increasingly likely that the Brazilian government will violate its constitutional spending cap, or at least the spirit of it. While this could lead to some ructions in the real and Brazil’s bond market, we think its equity market should …
Despite issues with sampling due to COVID-19, the third quarter HVS survey did provide some interesting information on the impact of the virus. A surge in median asking rents was caused by a jump in the share of expensive multifamily units on the market, …
South Africa’s Finance Minister Tito Mboweni today fleshed out harsh austerity plans for the next few fiscal years. But the emphasis on spending cuts, including a three-year public wage freeze, will be politically difficult to push through. The debt …
The Turkish lira has fallen sharply in recent days amid concerns about the central bank’s decision making, rising geopolitical tensions, and the backdrop of a dire external position. The experience from previous sell-offs is that most of the fall in the …
We expect TIPS to continue to perform quite well, and better than conventional Treasuries, in the next few years. But we see a risk of higher inflation thereafter. That would, however, probably only cause TIPS to perform poorly, even if not as badly as …
With headline labour market figures affected by the various government support schemes, survey measures may provide a better indication of the true amount of slack in the labour market. These suggest that wage growth in the coming months is likely to be …
Asian exports have continued to defy gravity. Despite the biggest slump in the global economy since the Second World War, regional exports are already back to their pre-crisis level. The resilience of exports in much of Asia has helped offset some of the …
A Democratic clean sweep in the US election is probably the scenario that would be most beneficial for Canada’s GDP, but the effects would still be far outweighed by other factors. The US election has the potential to impact the Canadian economy through …
27th October 2020
While the COVID crisis has prompted an unprecedented fiscal response worldwide, there have been major differences between economies. The US saw large and immediate support, which has already expired without disastrous consequences. China’s infrastructure …
We think that MSCI’s indices of emerging market (EM) equities in Latin America and EMEA will reverse some of their recent underperformance relative to the MSCI EM Asia index over the next few years, just as they did following their sharp falls during the …
26th October 2020
The overwhelming vote in favour of rewriting Chile’s constitution will set the ball rolling towards entrenching a larger role of the state in the economy. And it may cause the central bank to adopt a more dovish stance in the medium term. This is likely …
The minutes of the Reserve Bank’s October policy meeting – in which policy was left unchanged – show that the MPC has turned more dovish on the inflation outlook and that it has reservations about the strength of the economic recovery. This reinforces our …
October’s batch of flash PMIs supports our view that divergences have emerged in advanced economies, both between sectors and between countries. With Europe dealing with second waves of infections and a new round of restrictions, their recoveries are set …
23rd October 2020
The decision by Russia’s central bank to leave its policy rate at 4.25% today suggests that inflationary concerns are preventing further easing for now. But the communications reinforce our view that interest rates are likely to be cut next year to 3.50%; …
Recent data provide an indication that the virus outbreak will likely result in a faster online transition in Germany. The impact on instore demand will add to the pressures already facing retailers and suggests that there is downside risk to our forecast …
We are sticking to our forecast that the 10-year German government bond (Bund) yield will end this year at around -0.50%, even though it has recently fallen through this level following a renewed surge in COVID-19 cases in Europe. To recap, the yield of …
22nd October 2020
We think that Swiss policymakers would be prepared to match any small interest rate cut by the ECB, albeit reluctantly. However, if policymakers in the euro-zone opt to ease policy in other ways, as we think is more likely, this may help to reduce …
Despite a surge in mortgage applications, holdings of residential loans by commercial banks declined in August and September. We suspect that divergence is due to a rise in mortgage repayments, which would be in line with the jump in the saving rate. In …
Outstanding commercial real estate debt held by banks is likely to rise again in the coming months, providing the improvement in investment transactions seen in September continues. Yet even if there were renewed lockdowns, the deferral of loan payments …
Recent court rulings clarifying the application of the government’s new “equal pay for equal work” law are unlikely to lead to higher labour costs for firms. Most firms already pay their irregular workers allowances for dependents as well as holiday and …
Turkey’s central bank (CBRT) left its benchmark one-week repo rate unchanged at 10.25% today but adjusted its other policy rates to give it more scope to tighten monetary conditions via the ‘corridor’. Political pressure is clearly making the CBRT …
Depressed investment activity and a weak rental outlook are set to put upward pressure on office yields. That said, given that prime property values have been slower to adjust than we had initially anticipated, there is a risk that the yield rise we …
The Central Bank of Sri Lanka (CBSL) left both its deposit and lending rate on hold at 4.50% and 5.50% respectively at its meeting today but, given the poor outlook for the economy, we think the easing cycle has further to run. The decision was correctly …
While the chances of a pre-election fiscal deal remain slim, markets appear to believe that a Democratic clean sweep of next month’s elections would result in a major post-election stimulus package. But with the Democrats unlikely to win a …
21st October 2020
If the recent wave of protests across Nigeria and the curfew in Lagos come to an end in the next day or two, the economic impact should be limited. But if these run on for longer, the recovery in the non-oil sector would be derailed in Q4, and …
With the US election result unlikely to have immediate ramifications for US GDP, the main issue for much of Asia is how it affects trade policy. A Joe Biden presidency would be less confrontational towards Asian economies outside China. By contrast, a …
The RBA’s assets will rise further over the coming months as banks draw down funding under the TFF. But so will the assets of other central banks. If the Bank wanted to catch up with the advanced economies’ most expansionary central banks, it would need …
The Bank of Canada’s balance sheet has been shrinking in recent weeks, as demand for its emergency repos loans continues to subside, and it will experience a bigger fall next spring, when the 12-month repo loans made at the height of the …
20th October 2020
The government is removing some of its support to employment. The national furlough ends on the 31 st October and the new Job Support Scheme is less generous and narrower. As a result, the pace of the fall in employment will soon speed up. At its peak in …
We think that the second wave of COVID-19 infections and new containment measures will cause the euro-zone economy to stagnate over the next six months or so. In quarter-on-quarter terms, GDP would still increase slightly in Q4, but it would mean zero …
While we wouldn’t rule out negative interest rates being used a bit further down the line, over the next 6-12 months we think 10-year gilt yields will be kept close to 0.15% by the Bank of England expanding quantitative easing (QE) by a further £250bn by …
The detailed breakdown of China’s Q3 GDP data published today shows that the recovery within the service sector remains highly uneven. Encouragingly though, all types of services activity showed a clear improvement, especially among the sectors hardest …
Commercial banks left the Loan Prime Rate (LPR) on hold today. With the PBOC appearing reluctant to keep monetary policy loose for longer than needed amid a broadening economic recovery, we think the next move in the LPR will be an increase early next …
While there has been some good news on virus numbers in India and Latin America, Europe and parts of the US are grappling with a big resurgence in infections. Restrictions have already been tightened in several European countries, and more measures are …
19th October 2020
