The fact that most governments were caught on the backfoot in the early stages of the pandemic meant that they had little alternative but to respond with widespread lockdowns. Six months on, a combination of a better understanding of the virus and …
22nd September 2020
The Riksbank’s decision to leave the repo rate on hold at zero this morning was never in doubt, but it left the option of a rate cut firmly on the table, linking it explicitly to moves in inflation expectations. We think it more likely than not that the …
Success in bringing the COVID-19 outbreak under control in Pakistan, Sri Lanka and to a lesser extent Bangladesh has enabled activity in these places to rebound much faster than in India, where new infections continue to surge. This supports our view that …
A tightening in restrictions designed to quash the resurgence in new COVID-19 cases would set back the economic recovery. We’ll be in a better position to quantify the impact once the government announces its plan tomorrow. But if the government resorted …
21st September 2020
While we continue to forecast that equity markets will make further ground in the next few years, the rapid increase in COVID-19 cases in Europe poses a downside risk to our projections. We have been arguing for a while that with the major economies …
Pakistan’s central bank (SBP) left interest rate unchanged today at 7.0% and appeared to signal the end of its recent easing cycle. With the economy recovering well from the coronavirus crisis and inflation concerns increasing, we expect rates to remain …
Commercial banks left the Loan Prime Rate (LPR) on hold today. With the economy now largely back to its pre-virus path and the PBOC appearing reluctant to keep monetary policy loose for longer than needed, we think the next move in the LPR will be an …
Our analysis suggests that UK commercial property is fairly valued when compared to the pricing of alternative assets. However, with that finding based on the assumption that current income streams are sustained, we think that it is unlikely to provide …
18th September 2020
The decision by Russia’s central bank to leave its policy rate on hold at 4.25% today is likely to mark a pause rather than an end to its easing cycle. The central bank will maintain its cautious approach to policy over the coming months as inflation …
China’s economic rebound has been about as v-shaped as one could reasonably hope for – but it isn’t boosting growth elsewhere. One important point that gets missed in the debate over the likely shape of the post-virus recovery is that different economies …
Strong demand from China will put a floor under corn and soybean consumption in 2020/21. But with record expected yields in the US, we expect corn and soybean prices to come off the boil . In the September World Agricultural Supply and Demand Estimates …
We don’t think the surge in high-LTV interest rates signals an incoming credit crunch. Rather, it probably reflects lenders prioritising demand from less risky borrowers. As the surge from pent-up demand wanes in the coming months, we expect high-LTV …
Today’s decision by South African Reserve Bank’s to keep its benchmark rate unchanged probably means that further easing is unlikely to materialise. Even so, monetary conditions are likely to remain very loose in the coming years and we expect rates to …
17th September 2020
There are several reasons why a second wave of the coronavirus should be far less disruptive for the economy than the first, and we think that GDP will continue to grind higher even if cases pick up further. While the number of new daily cases of Covid-19 …
As the Bank of England already has a QE programme in place and financial markets have remained calm, it was no surprise that the MPC voted unanimously to keep policy unchanged in September. But we think that it will loosen policy further, most likely in …
Although policymakers in Japan may prefer a weaker yen, in our view it is more likely to rise than to fall. When Japan’s retiring prime minister Shinzo Abe came to power in late 2012, one of the key aspects of his “Abenomics” economic package was the …
Bank Indonesia’s (BI) decision to leave interest rates unchanged today at 4.0% shows that it is prioritising financial stability over supporting the economy. Further easing is possible later in the year if the currency stabilises, but the pace of rate …
The renminbi has risen 5% against the US dollar since May, to its strongest since early 2019. And with China on course for a more pronounced recovery than elsewhere, its external position the strongest in a decade, and onshore yields unusually attractive …
With the economy holding up relatively well, the decision by Taiwan’s central bank (CBC) to leave interest rates on hold came as no surprise. Further rate cuts are unlikely, and we expect interest rates to remain on hold for the foreseeable future. The …
The dovish tone of the Brazilian central bank’s statement from yesterday’s meeting (at which the Selic rate was left at 2.00%) supports our view that the policy rate will remain at its current historic low into 2022. In contrast, most analysts and …
The Bank of Japan’s decision to keep policy settings unchanged today didn’t come as a surprise and we don’t expect incoming PM Suga to push the Bank into policy rate cuts. The Bank kept its policy rate at -0.1% and its target for 10-year government bond …
The FOMC’s updated economic and rate projections show that officials expect to leave the fed funds rate at the current near-zero rate until at least 2023 and probably well beyond that. With the five-year Treasury yield already at less than 0.2%, however, …
16th September 2020
The sharp drop in the rental absorption rate would, other things equal, be expected to weigh on multifamily housing starts. However, the recent shift away from cities will provide an opportunity for developers to focus more heavily on the for-sale market, …
Our Tracker suggests that last month EMs suffered the largest net outflow of capital since the height of the market turmoil in March. Net outflows look set to persist in the coming months, although they should remain small compared to past standards, …
In contrast to the US where falling inventories may start to push up prices, euro-zone firms’ inventories suggest that near-term price pressures are weak. Euro-zone retail sales have recovered much more quickly than industrial production since lockdowns …
Consumer spending in Saudi Arabia seems to have bounced back quickly in recent months, but the steep VAT hike and the suspension of the Cost of Living Allowance means that this is unlikely to be sustained. Keeping track of Saudi consumer spending is …
The widening in India’s goods trade deficit in August won’t put the external position at risk, but the underlying data suggest that the recovery in external and domestic demand is stuttering. India’s monthly goods trade deficit widened from $4.8bn in July …
The price of US steel has surged recently, and we think that the price will continue to rise in the year ahead as demand picks up at a time of constrained supply . After hovering at around $475 per tonne during April-August, the price of US steel (HRC) …
15th September 2020
The weak economic outlook has put the spotlight back on Spain’s property market. House price inflation was already slowing prior to the virus. But a big collapse in prices seems unlikely given that supply is not excessive, valuations do not appear …
Inflation has been close to the midpoint of the RBA’s 2-3% inflation target since its launch in the 1990s, but this has come at the expense of soaring house prices and household debt. Australia’s experience underlines that central banks need better tools …
Votes due this week by Peru’s congress on whether to impeach the president and to censure (remove) the finance minister will likely be close calls and could leave a power vacuum. That said, history suggests that the near-term economic and financial market …
14th September 2020
Our Global Covid Mobility Tracker* has risen in recent weeks, suggesting that the world economy has continued to recover despite rising virus numbers. But the national trackers reveal that renewed containment measures are having adverse effects in Spain …
The Czech Republic has seen a renewed surge in virus cases in recent weeks and now has one of the worst outbreaks in Europe. While this poses a growing downside risk to the outlook, it has not changed our view that the Czech economic recovery is set to be …
With initial jobless claims still running at close to one million per week, it could be argued that, at 8.4% in August, the unemployment rate is not capturing the full extent of the slack in the labour market. But the survey evidence and the job turnover …
We don’t think that the recent underperformance of UK equities will continue. But we no longer expect them to make up the ground that they have lost to their peers since the virus hit. Since the plunge in equity prices in March, UK equities have …
The recent rebound in housing transactions and jump in house prices will boost consumption over the coming months, but the boost will only be temporary. Once the stamp duty holiday expires at the end of March and the unemployment rate starts to rise, the …
Despite the recent resurgence in uncertainty about the UK's future relationship with the EU, we think that it is still possible to make a positive case for UK assets. Although uncertainty around the Brexit process has re-emerged in the past few days, it …
11th September 2020
Despite its recent rally, the euro is not particularly strong in our view, and we think that it could well rise further over the next couple of years. Since its lows in mid-March, the euro has gained about 10% against the US dollar, rising from $/€1.06 to …
A combination of strong demand from China and a slow recovery in global production from its virus-related trough means that the price of iron ore is likely to remain elevated for the remainder of this year. However, we expect prices to fall in 2021 as …
While no policy change was expected today, President Lagarde used the press conference to convey a slightly less gloomy message about the economy. She also dampened expectations for an early increase in the already-substantial PEPP envelope or for any …
10th September 2020
China’s strong economic recovery is likely to provide more of a support to the recovery in (non-oil) commodity producers in Latin America and Africa than it will in the rest of Asia. But we don’t think that China’s growth will provide as much of a boost …
The financial markets have woken up with a bang to the possibility that the Brexit transition period ends on 31 st December without a deal. That could set back the UK’s economic recovery from the coronavirus recession and prompt the pound to weaken from …
Activity data released today suggest that the pace of South Africa’s economic recovery had already started to slow in July. Taken together with a terrible Q2 GDP outturn, we think that this will give more impetus for the central bank to cut interest rates …
Chile’s economy is recovering more quickly than we had previously expected and, as a result, we are revising up our 2020 GDP growth forecast to -5.5% (previously -7.0%). The stronger rebound has eased pressure on the central bank to loosen monetary policy …
The rebound in Russian consumer spending since April has been supported by a more active fiscal policy stance than we had expected. Although the pace of growth will soften, spending is likely to remain strong and there’s a growing chance that the economy …
Most industrial metals prices are now above their pre-virus levels, after rallying from their March lows. We reckon that the price rebound has further to go, as China’s impressive economic revival continues, and the backdrop for risky assets continues to …
While the euro’s recent appreciation has generated a lot of attention, it is in fact close to its historical average by most measures. So while ECB policymakers may note at today’s press conference that the exchange rate influences their economic …
Bank Negara Malaysia (BNM) left its main policy rate on hold at 1.75% today, but with the economy likely to remain weak for some time to come, we doubt this marks the end of the Bank’s easing cycle. Today’s meeting was always likely to be a close call. …
Shopping centres are likely to suffer in the near term as people avoid enclosed spaces, shop more online and as retailers continue to go bust or consolidate space. Since mid-2018, rents have deteriorated fastest in larger centres, and we think this trend …
