The hit to apartment absorption from the coronavirus has occurred at the same time as a large number of new units are set to enter the market. Even with current tenants staying put, that raises the risk of a spike in the vacancy rate. However, …
1st July 2020
With lockdowns continuing to ease across the globe, it was of little surprise that the manufacturing PMIs rose in June. While the PMIs are still considerably below their pre-crisis levels, they have rebounded more swiftly than they did during the …
The chances of PM Abe serving a fourth term as LDP leader have fallen considerably in recent months. Instead, speculation has turned to whether Mr Abe will be able to hang on as Prime Minister for the duration of his third term as party leader, which …
The decision by the Colombian central bank to slow the pace of easing from 50bp to 25bp at last night’s meeting suggests that the rate-cutting cycle is approaching its conclusion. We remain comfortable with our forecast for two more 25bp cuts in the …
China’s June PMIs indicated a continued improvement in domestic industrial activity, which should be positive for commodities. However, fading external demand may prove to be a headwind for exports . The Caixin manufacturing PMI rose to 51.2 in June, from …
The Riksbank has put its money where its mouth is when it comes to expanding its balance sheet, but in our view all roads still lead to a return to negative interest rates, either in late-2020 or early-2021. While the Riksbank’s decision to leave the repo …
India’s current account swung into a rare surplus in Q1. That probably won’t last for long as oil prices rebound, remittances drop and the trade deficit starts to widen again over the coming months. But the deficit is likely to remain very small. And with …
China’s import data are another sign that demand is bouncing back in the world’s largest metal consumer. However, in some cases, a lack of supply is restricting shipments. This is likely to become more of an issue in the months ahead and is another reason …
30th June 2020
The Saudi economy contracted by 1% y/y in Q1 and the figures from Q2 point to an even sharper downturn in Q2 due to the coronavirus crisis. The lifting of the lockdown this month is helping to support a recovery but a fresh bout of fiscal austerity means …
Governments in Brazil and South Africa have outlined plans for large multi-year fiscal squeezes from 2021, which will hold back their economic recoveries and are likely to be politically untenable over a sustained length of time. While a few other …
With further fiscal support likely to be unveiled at some point in the next few weeks, the government appears willing to sustain the fiscal stimulus into the years ahead rather than lurch towards austerity as it did after the Global Financial Crisis. This …
29th June 2020
Weak demand and a recovery in supply should push the sugar market into a surplus in 2020/21. As a result, we forecast that sugar prices will remain low over the coming year . Despite droughts in major producers, including India and Thailand, the price of …
While the proposed joint EU fiscal response has been hailed by some as a “Hamilton moment”, the central budget will be just one-quarter as large as a share of GDP as US federal firepower was in the 1790s. In the absence of greater tax-and-transfer powers, …
While the euro and many euro-zone assets have rallied significantly over the past two months, we think that there is scope for them to make more headway this year . To recap, during this period the euro has gained ground against the US dollar and is now …
26th June 2020
UK retailers continue to suffer, even given the recent re-opening of shops and signs of improving sales. Shopping centres have fared worst and this has been highlighted by the woes of owner Intu. And as some of the underperformance reflects deeper …
The recent withdrawal of high LTV products could impede as many as one in four prospective first-time buyers. More broadly, tighter credit conditions reinforce our view that, despite signs of a surge in demand, lending and transactions won’t recover their …
The current burst of bank lending suggests that governments’ loan guarantees and the ECB’s TLTROs are having the desired effects. Now that economies are re-opening, corporate revenues should begin to recover, making firms less reliant on state-backed …
Having suffered sizeable net capital outflows in March and April, our Tracker suggests that capital flows into and out of the emerging world were essentially balanced last month. And daily data suggest that EMs may have attracted net capital inflows this …
25th June 2020
In light of the recent revision to our China economic growth forecast and our expectation that the rebound in equities has further to run, we have revisited our oil price forecasts for the year ahead. We expect that constrained OPEC+ supply will not be …
Tourism sectors across Africa, like much of the rest of the world, are at a standstill and any recovery is likely to be slow going. Even if travel restrictions are lifted international tourists are unlikely to return this year, and a big hit to incomes …
Recent revisions to our macroeconomic and markets forecasts are more positive for industrial metals than oil, and they support our slightly bearish outlook for the price of gold . The starting point for our commodity price analysis is our view on the …
The ECB has used the minutes of this month’s policy meeting to try to defuse the dispute in Germany over the legality of its asset purchase programmes. Helped by the Bundesbank, this should be enough to smooth things over for now. But future court cases …
Turkey’s central bank unexpectedly left interest rates on hold today and it’s difficult to see how economic conditions will change in such a way over the coming months to justify renewed easing. We now expect rates to be left on hold over the rest of this …
Transactions in April and May have surprised on the upside. What’s more, there are signs that new demand in June has been stronger than expected. Of course, the economic damage from lockdown suggests that sales won’t sustain their pre-virus level anytime …
The central bank in the Philippines (BSP) today cut its policy rate by a larger-than-expected 50bps, to 2.25%, and with economic activity unlikely to recover fully anytime soon, we expect further easing. The timing of today’s decision was a surprise given …
We estimate that the revenues of firms in most sectors were still too low in mid-June to generate profits. If those conditions persisted, nearly one-third of firms would run out of cash by the end of Q3. However, revenue should recover over coming months …
While the Greek economy is set to slump this year, it is becoming increasingly clear that the drop in activity will be much less severe than we previously anticipated. We now think that the Greek economy will shrink by “only” 8% or so this year. At the …
We suspect that the real yields of US Treasury Inflation Protected Securities (TIPS) will fall a bit further, fuelling renewed gains in risky assets and underpinning gold despite a reduction in safe-haven demand. To re-cap, the real yields of TIPS have …
24th June 2020
South Africa’s emergency budget highlighted that the dire state of the public finances is limiting the scope for fiscal support this year and attention is already focused on dealing with the legacy of higher debt. Austerity will be the first port of call, …
Reports that the US is considering rescinding Canada’s exemption to its 10% tariff on aluminium this week are unlikely to have much of an impact on the metal’s price . But such moves have the potential to worsen the oversupply in the global market, acting …
The Bank of Thailand’s (BoT) decision to leave interest rates unchanged at 0.5% today despite the dire outlook for the economy suggests that further cuts to the policy rate are unlikely. Instead, the emphasis over the coming months is likely to be on what …
Euro-zone countries seeking to avoid a surge in unemployment have sought to replicate Germany’s short-time working scheme that served it well during the global financial crisis. Germany’s experience suggests that while euro-zone unemployment will probably …
The Reserve Bank of New Zealand (RBNZ) sounded fairly balanced when it left policy settings unchanged today. But we still think the Bank will cut rates into negative territory next year. The Bank’s decision to keep rates on hold was correctly anticipated …
The generosity of CERB, signs the government will continue payments for as long as needed, and the fact that household savings have already risen sharply all suggest the initial stages of the rebound in consumer spending will be stronger than we thought. …
23rd June 2020
Hungary’s central bank (MNB) unexpectedly cut its base rate from 0.90% to 0.75% at today’s monetary policy meeting, and we now think another cut is likely in the second half of this year. With the economic recovery likely to fall short of the central …
The latest batch of DM flash PMIs generally came out below 50, which might suggest that output fell a bit further in June compared to May. But we should not read too much into the precise level of the PMIs. The point is that they have come back a long way …
The Fed’s balance sheet has started to shrink again, as the emergency liquidity measures deployed at the height of the crisis have started to wind down, the pace of Treasury purchases has slowed dramatically and the rollout of the new 13( 3 ) lending …
Gasoline demand in the US is recovering from the coronavirus-related slump. However, we think that it will take some time before consumption fully returns to its pre-virus level . By way of background, implied US gasoline demand was around 9m bpd in 2019. …
22nd June 2020
The increase in coronavirus cases in Germany is a reminder that the virus has not been eradicated and suggests that local restrictions may be re-imposed periodically in the coming months. But for now, the increase seems too small and localised to pose a …
If the behaviour of Samuel Pepys after the Great Plague of 1665/66 is anything to go by, then people will be willing to return to offices, shops, pubs and theatres surprisingly quickly once the coronavirus crisis subsides. So as long as the virus is …
Recent developments have strengthened the ruling BJP’s hand in the Rajya Sabha (the upper house of parliament). This should help to ease the passage of economic reforms, provided that the BJP has the appetite to pursue them. Efforts over the past month to …
Consumer spending is bouncing back more strongly than we had anticipated. However, that partly reflects pent-up demand and the strong support from government initiatives. Employment income has slumped and we only expect spending to return to pre-virus …
Commercial banks left the Loan Prime Rate (LPR) on hold today. We may see a cut or two next quarter but most signs suggest that the bulk of monetary easing this cycle has already taken place. The one-year rate was unchanged at 3.85% (the Bloomberg …
If we are right that commodity prices will make up more ground as economies continue to reopen, the rally in commodity currencies may have further to go. Australia, Canada, New Zealand and Norway are heavily reliant on exports of commodities (see Chart …
19th June 2020
We have turned more positive on the outlook for the price of tin. China’s demand is coming back strongly after a virus-related slump and, in the more medium-term, tin will benefit from its heavy use in new technologies. At the same time, supply is …
The economic fallout from the coronavirus crisis is likely to push bad loans in South Africa’s banking sector to levels that trigger a round of recapitalisations, which could further increase the burden on the public finances and reinforce fears about the …
While there has been a decline in the number of pubs, revenues had been rising in recent years. This has led to some big deals in the sector and falling prime yields. Nevertheless, when pubs re-open, social distancing and reduced tourism are likely to …
Russia’s central bank (CBR) didn’t disappoint at today’s meeting, cutting the key policy rate by 100bp to a new post-Soviet low of 4.50%. With disinflationary forces proving stronger than expected and financial markets stabilising, the accompanying …
