With the number of confirmed infections of the new coronavirus rising in Japan, cancellation or postponement of this year’s Tokyo Olympics is becoming a possibility worth considering. The key point in terms of the economic impact of such a move is that …
21st February 2020
While the price of US natural gas (Henry Hub) has slumped on the back of coronavirus-related concerns, it has fared better than natural gas prices elsewhere. And given the low exposure of US LNG exporters to areas affected by the virus, we expect Henry …
The price of platinum has risen by nearly 5% since the start of February, buoyed by heightened uncertainty prompted by the outbreak of COVID-19. Later this year, and assuming the virus is successfully contained, we anticipate that a gradual turnaround in …
20th February 2020
While we agree with investors’ general view that monetary conditions will be accommodative in DMs this year, there’s a group of countries – including the US – where the markets look too dovish. At the same time, we think too little easing has been …
Rental growth of 3.5% to 4.5% y/y over the next five years is the key reason why we expect apartments will outperform other commercial property sectors. Stretched home valuations, tightening mortgage lending standards and a record low number of homes for …
The account of the ECB’s January meeting suggests that the ECB was becoming a little more positive on the economic outlook. But weak data and the spread of the coronavirus since then will have surely added to the downside risks. We are sticking to our …
The IMF’s (belated) announcement that Argentina’s public debt is “unsustainable” removes any doubt that private bondholders will need to stomach large haircuts in a restructuring. But investors are unlikely to accept those anytime soon, and we think that …
Due to the ongoing protests that have crippled the rail network, we are reducing our forecast for first-quarter GDP growth to 1.5% annualised, from 1.8%. But providing the blockades end soon, growth should now be stronger in the second quarter. First …
With the number of confirmed coronavirus cases in Korea jumping sharply over the past few days, the Bank of Korea is almost certain to cut interest rates at its meeting next week. The number of confirmed cases of the coronavirus in Korea doubled on …
Bank Indonesia (BI) today cut its main policy rate by 25bp to 4.75%, but we doubt this will be the start of a prolonged easing cycle given the country’s relatively limited exposure to the slowdown in China and the central bank’s concern over the rupiah. …
The Supreme Court’s ruling that Vodafone’s joint venture in India must pay up to US$7bn in retrospective levies and penalties has grabbed headlines over the past few days. In this Update , we answer three key questions about the current situation and its …
Commercial banks cut the Loan Prime Rate (LPR) today in response to moves by the People's Bank earlier in the month to lower their funding costs. While more easing is likely in the coming weeks, this alone won’t change the fortunes of the millions of …
In contrast to market expectations, we are still sceptical that the Fed will cut interest rates this year, but we agree with Treasury investors that rates are more likely to fall than rise over the next few years. Over the past six weeks, futures markets …
19th February 2020
While the euro has already fallen to its lowest level in nearly two years against the US dollar, we think that it will drop a bit further during the rest of 2020, pushed down by several factors including a weaker economic outlook and looser monetary …
The Turkish central bank (CBRT) shrugged off rising inflation and lowered interest rates by another 50bp today, but the accompanying statement was a little more cautious and we think that the easing cycle is nearing an end. With inflation set to surprise …
The proposed change to the mortgage stress tests could put even more upward pressure on house prices over the next 12 months, by increasing the amount that buyers can borrow by more than 3%. With the Bank of Canada already concerned about the impact that …
The vast majority of firms in China have enough funds to keep paying their creditors and employees for at least a couple of months amid the disruptions caused by the coronavirus outbreak. But a minority are already having to lay off workers and job losses …
Current account positions in the largest MENA economies (particularly in the Gulf, but also Egypt) have improved over the past few years. But deficits elsewhere remain large. And Algeria, Tunisia and, to a much greater extent, Lebanon face sharp currency …
Heightened global uncertainty related to the outbreak of the coronavirus will support gold and silver’s investment appeal in the near term. Later this year, however, and assuming the disease is brought under control, we anticipate that a gradual pick-up …
Our forecast for the US dollar to remain strong in 2020 suggests downward pressure on commodities prices. However, we would argue that there are instances when commodity prices can still rise - despite an appreciating US dollar - if the global …
18th February 2020
There is potential for cobalt’s end-use in electric vehicle batteries to grow rapidly. However, concerns over the concentration of cobalt supply in the DRC have held back demand so far. Several auto manufacturers are already switching to less …
Despite softer occupier activity and an increasing pipeline of supply, we think that demand will be strong enough to prop up office rental growth over the next two years. That said, given that we now expect bond yields to be higher, capital value growth …
While we suspect that the SNB has intervened to slow the rise of the franc in recent weeks, it has not prevented it from reaching a multi-year high against the euro. At the margin, an increased tolerance for a stronger currency argues against the Bank …
When faced with the choice of deciding whether to impose higher import tariffs on goods (exposing consumers to higher inflation) or lower ones (exposing firms to greater competition), the government’s latest tariff proposals suggest it has plumped for the …
After Italy’s economy shrank at the end of last year, it looks set to continue to struggle in 2020. In fact, there is a clear risk that it falls back into recession for the fourth time since 2008. The 0.3% q/q contraction in Italy’s economy in the final …
A slump in tourist arrivals has been the initial channel through which the virus outbreak in China has harmed Japan’s economy and will most likely knock around 0.4%-pts off GDP growth in Q1. As long as disruptions to supply chains and goods exports are …
With the economic cost of the coronavirus mounting, Singapore’s government opted to loosen policy significantly in its 2020 budget today. Growth is still likely to slow sharply, but the strong fiscal response means that the economy should be able to …
A slump in investment has been the key factor behind the sharp economic slowdown over the past year. A spectacular rebound is not on the cards but investment should recover gradually over the coming quarters due to a combination of fiscal and monetary …
We think that the greenback will remain strong this year, even if some of its recent strength may unwind. The dollar has started the year on the front foot : since 1 st January it has appreciated by about 3% on average against other G10 and 2% against …
17th February 2020
Disruption to China’s commodity imports, owing to the outbreak of coronavirus, has sent the Baltic Dry Index into freefall. While freight rates should recover as and when China’s industrial activity picks up, our forecast of lacklustre demand for iron ore …
While the weakening in the global economy has reignited a downside risk to the UK economy, at the moment we don’t think it will derail the recovery in domestic activity that appears to be in train. Around the turn of the year both we and the MPC took …
The recent election result in Ireland has made the prospect of reunification slightly less remote. In this Update , we answer four political questions and four economic questions about what it might mean. Although Sinn Féin won the highest share of the …
The People’s Bank (PBOC) has taken yet another step to help banks and borrowers weather the economic disruption from the coronavirus outbreak. But more easing will probably be needed. The PBOC has just cut the one-year rate at which it lends to banks via …
India’s merchandise trade deficit widened to a seven-month high in January, but we think that a low level of commodity imports will help to prevent the external shortfall from ballooning to unsustainable levels over the coming months. India’s monthly …
The worst commercial real estate busts have tended to follow a ramping-up in lending activity, driven by the availability of debt rising and its cost falling. However, regularly updated Fed lending data suggest that there is no real evidence of this …
14th February 2020
The outbreak of the coronavirus appear to have caused a pull back of net capital inflows to EM bond and equity markets on a similar scale to that seen during flare-ups in the US-China trade war last year. But the most recent figures suggest that inflows …
The post-election housing market recovery is likely to last a few more months, and we have upgraded our 2020 forecasts in response. But the housing market fundamentals were unchanged by the election. As a result, we expect the surge in activity to subside …
The latest MSCI data confirmed the gloom in UK commercial property showed no signs of abating during Q4 2019. But one of the few surprises was that City offices did better than expected, mirroring a pick-up in sentiment since the election. While we don’t …
President Cyril Ramaphosa’s State of the Nation Address contained a few promising announcements, relating to independent power firms. But his continued stress on the need for consensus strengthened our view that he won’t take the bold steps needed to …
Softer office occupier demand is expected to weigh on German prime office rents this year. But we still think that rents can grow at a decent pace because, even though office supply is expected to increase significantly, office occupier demand will still …
We had already expected something big on fiscal policy in the Budget. But the change in Chancellor increases the chances that new, less restrictive fiscal rules are announced, and that government policy boosts the economy by more over the next few years …
We think that the recent rebound in the yields of many developed and emerging market government bonds will generally continue in the rest of this year, if the coronavirus epidemic is contained. By contrast, we expect EM currencies, which have not …
13th February 2020
Although Japan’s stock market has persistently underperformed its US counterpart since the financial crisis, there are several reasons why it may not continue to lag during the rest of this year and beyond. Chart 1 shows the cumulative returns in US …
The sharp fall in job openings over the past year appears to be a lagged response to the earlier slowdown in hiring intentions rather than a sign that labour market conditions are about to deteriorate. We still expect solid jobs growth to help drive a …
Spain’s new government has downgraded its forecasts for economic growth and eased up on the planned pace of budget deficit reduction. But we think that GDP growth this year will be even slower than it expects, due to weakening domestic demand and the …
We think that a recent string of on-target inflation data and a less accommodating external environment will delay further interest rate cuts in Ghana. But monetary loosening will probably resume in 2021. Data released this week showed that headline …
This Update was originally sent to clients as a Rapid Response immediately after the announcement that Sajid Javid was being replaced as Chancellor by Rishi Sunak at 12pm on 13 th February 2020. The unexpected resignation of Sajid Javid as Chancellor and …
