Coal prices should receive their usual seasonal uplift later this year. Nevertheless, we think that the average price of Newcastle coal will fall in 2020 and 2021 owing to weak demand and strong supply . The price of Newcastle (Pacific) coal has plummeted …
3rd June 2020
The ECB has been purchasing a disproportionate share of Italian government bonds, but they are less heavily skewed towards Italy than we had anticipated. This in turn means that there may be less risk of a renewed flare-up of tensions over the ECB’s asset …
2nd June 2020
A look at South Africa’s recent history would suggest that the monetary easing cycle has further to run. We now expect an additional 75bp of cuts in the coming months, taking the repo rate from the current 3.75% to 3.00% by year-end. This is more …
Consumer confidence has fallen by far more in Canada than elsewhere in the past few months, which is another reason to think that the economic recovery will lag that in the US. Standardising the latest indices from the OECD (which are formed from the main …
Markets that are most reliant on international capital will inevitably bear the brunt of the collapse in cross-border flows as investors remain very cautious in the face of COVID-19-related uncertainty. But the relative stability and liquidity of the core …
A sharp slowdown in Vietnam this year is unavoidable, but with the virus contained and with exports holding up better than might have been expected, we are raising our 2020 GDP growth forecast. Vietnam is likely to be one of the few economies anywhere in …
The RBA sounded cautiously optimistic when it left policy settings unchanged today, but we still think that it will expand government bond purchases soon. The RBA surprised no one by keeping both the target for the cash rate and the target for 3-year …
Prime Minister Modi’s BJP has expedited structural reforms that normally face stiff political resistance, ostensibly as part of efforts to support recovery from the coronavirus crisis. These moves will do little to boost demand in the near term. But if …
While we would interpret the May PMIs with caution, the small rise in the EM manufacturing PMI last month tallies with high-frequency indicators and suggests that EM activity is probably past the worst. The increase in the EM manufacturing PMI to 45.4 in …
1st June 2020
May’s PMIs offer evidence that the global industrial sector is now on the slow road to recovery. But with demand extremely weak, activity is still far below normal levels and price pressures have eased. While the global manufacturing PMI partially …
Inflation expectations are not always a good leading indicator of inflation. However, the decline in most measures of inflation expectations in the past two months may be a cause for concern at the ECB. Rather than being a guide to future inflation, …
China’s latest raft of PMIs showed a continued improvement in industrial activity in May, which is positive news for commodities demand. However, the pace of recovery remains slow . The Caixin manufacturing PMI picked up to 50.7 in May, from 49.4 in …
Our GDP Tracker suggests that the Saudi economy held up relatively well in Q1, but more timely low-profile data point to a collapse in activity in Q2. And, as lockdown measures are eased, the onset of fiscal austerity will hold back the economic recovery. …
The partial recovery in REIT prices since their late March trough gives further support to our view that all-property capital value falls will not exceed 10% this year. But, with data centres, single-family homes and self-storage outperforming in recent …
29th May 2020
We anticipate that financial repression will bear down on the renewed low level of volatility of Treasuries, while facilitating a further decline in the level of volatility of US equities . Against this backdrop, we project that the returns from the …
Additional stimulus from China strengthens our view that the rebound in equities will continue, especially in emerging markets. But the effect is unlikely to be as big as in 2008-09, and China’s increasingly-tense relationship with the US risks …
So far, there is only limited evidence that a lack of raw material is constraining output at Chinese smelters. But we think that will change in the months ahead. In our view, output is still most likely to be curbed at copper and nickel smelters, which is …
Given the collapse in the global economy, merchandise exports from Emerging Asia have so far held up better than might have been anticipated. The fact that the global slump has been driven by services rather than manufacturing and the strength of demand …
Bank lending to firms jumped again in April, suggesting that government loan guarantees and cheap ECB funding for banks are having the desired effects. But the central bank’s work is far from done. We expect it to announce a further increase in its …
We think that today’s 100bp interest rate cut by the Nigerian central bank, to 12.50%, will be followed by further loosening as economic recovery proves weaker than the central bank expects. We have pencilled in an extra 50bp cut, most likely at the …
28th May 2020
An incentive to sell to support cash-flow, relatively affluent buyers and a streamlined selling process help explain why new home sales increased in April even as the unemployment rate hit a record high. Without those benefits, existing home sales will …
While Sweden’s economy has fared better than the worst-affected countries, as a result of its comparatively light-touch lockdown, it is still set for a year to forget. We expect the decline in GDP this year as a whole to be in a similar ballpark to that …
The euro-zone is not suffering from excessive leverage among banks and households, or slow and counter-productive responses from policymakers, which held back its recovery from the last two crises. But the current downturn still throws up some of the same …
The prospect of a joint European fiscal response has helped to ease upward pressure on the Swiss franc and means that there is light at the end of the tunnel for the SNB following its recent bout of FX interventions. While monetary policy will remain …
Quarantine measures associated with COVID-19 have seen geopolitical disputes, such as US-Iran tensions, seemingly fall under the radar of energy traders. That said, the national security law imposed on Hong Kong by China could re-escalate US-China trade …
The Bank of Korea (BoK) cut its policy rate by 25bps to a new record low of 0.50% and gave some vague assurances that it would act to keep long term government bond yields down. With growth likely to disappoint and conventional policy reaching its limit, …
Amid the severe economic damage that the coronavirus and containment measures have caused, one potential positive is the greater prevalence of cashless payments as people make more purchases from home or transfer less physical cash to prevent the virus …
The EC fiscal proposal confirms that Europe’s fiscal response will be large enough to help to ease concerns about how the current crisis will be financed. But the details are yet to be finalised, and the money will probably not start to flow until next …
27th May 2020
Although the S&P 500’s rally over the past two months is remarkable, we don’t think that it reflects excessive optimism among investors. In our view, equities can rise further from here. The S&P 500 has risen by over 30% from its intraday low on 23 rd …
The large supplementary budget drafted by PM Abe’s Cabinet today lifts fresh government spending in response to the virus to around 8% of GDP. That should provide the platform for a strong recovery in the second half of the year, provided infections don’t …
Our forecast that the Brazilian real will recoup some lost ground by end-2020 should put upward pressure on the prices of its commodity exports. However, other factors, such as the health of the Chinese economy, are likely to be more important drivers of …
The impact of the crisis so far has been overwhelmingly disinflationary, and with demand likely to be depressed for a long time to come, inflation is set to remain very weak. A period of entrenched deflation is a growing concern in some countries, most …
Large parts of Emerging Asia have controlled the virus exceptionally well, which should allow activity to recover quicker than in most other EMs. In contrast, many countries in Latin America are still struggling to contain their outbreaks. With lockdowns …
26th May 2020
This Update answers five questions we are asked most frequently on sovereign debt risks in Sub-Saharan Africa. While there are lots of factors at play, it seems likely that governments in much of the region (South Africa being a key exception) will …
A surge in pharmaceutical production has provided a significant boost to Singapore’s economy over the past couple of months, but this is likely to prove temporary and will not prevent a massive contraction in the economy this year. April data show that …
Unlike the period after the global financial crisis, we doubt that we will see a widespread trend of austerity to reduce public sector debt ratios. Nonetheless, austerity will still be undertaken in a few isolated cases, primarily in emerging markets. And …
Although US equities still have a lot of lost ground to make up on long-dated Treasuries since the outbreak of coronavirus, we think that they will do so over time as the Fed engages in renewed financial repression. The underperformance of US equities …
22nd May 2020
The extended mortgage holiday scheme will cushion the blow for financially distressed households. Alongside the other financial support already available, it further reduces the chance of an immediate house price crash. But large downside risks to house …
At the time of writing, we still lack the detail on China’s policy plans. That said, the headline expansion in the budget deficit and plans to boost credit growth are unequivocally positive for commodities demand – particularly industrial metals, but …
The fiscal stimulus announced today at the National People’s Congress in China failed to make much of a splash in metals markets. Nevertheless, we think it will underpin stronger iron ore demand this year . Although infrastructure spending will be a key …
The move by China’s National People’s Congress (NPC) to impose a new security law on Hong Kong effectively overrides the “one country, two systems” framework that has allowed Hong Kong to prosper since 1997. The move will probably trigger protests and …
Q1 GDP data from Peru suggest that its lockdown is having a bigger impact on activity than measures elsewhere in Latin America. And with new infections in Peru surging in recent weeks, we are revising down our estimate for the fall in GDP this year from …
On the face of it, it might look like major economies have not yet reached the stage of debt monetisation. Where central banks are buying government bonds, it is on the secondary market, is supposed to be only temporary and the primary aim is not to fund …
The RBI has further stepped up its response to the collapse in economic activity from the coronavirus and containment measures in another emergency announcement today. The central bank has also left the door open for further loosening and, with the …
This Update summarises the key announcements from the National People's Congress. For in depth analysis, see this Focus . We had anticipated that the National People’s Congress (NPC) would lay out plans for a further ramp up in policy support and it did …
The Bank of Japan launched a new lending facility today to support bank lending to small businesses and we suspect its measures will now be sufficient to secure the financing needs of firms throughout the coronavirus crisis. As widely anticipated, the …
The government’s furlough scheme has prevented the UK economy from being engulfed by a tsunami-like first wave of unemployment. But a second wave will probably come once the reduction in the generosity of the scheme in August forces businesses to decide …
21st May 2020
Consensus downgrades suggest a more downbeat mood Forecasts for all indicators in 2020 have shown a marked deterioration since the interim year-end 2019 forecast published in January. While the consensus sector ranking is in line with our March forecasts, …
May’s Flash PMIs revealed a partial rebound, suggesting that the global economy is past the nadir. But, the recovery in advanced economies appeared slower than that in China, and the services sector remains particularly weak. With lockdown measures …
