The ECB left its policy settings unchanged today, made little change to its assessment of the economic outlook and said nothing new about the strategy review. While the markets are pricing in no policy changes this year, we still suspect that the Bank …
23rd January 2020
We don’t expect the recent marked outperformance of US mega-cap equities to continue during the rest of this year and suspect that it will unwind if a Democrat wins the race to the White House. The phenomenal showing by US mega-cap equities can be seen in …
There are encouraging signs that the cost and availability of materials, lots and labour are all starting to improve. Coupled with strong new home demand, and a shift toward the construction of cheaper homes, that supports our above-consensus call for …
The Egyptian pound has strengthened further at the start of this year but it is now making exports uncompetitive and, with support from high real interest rates likely to fade, the currency will probably give up some of its gains over the rest of this …
We estimate that net capital outflows from Emerging Markets fell to a six-month low in December, and they probably declined further at the start of this year. With global growth close to bottoming out and the Phase One US-China trade deal now agreed, …
This morning’s decision by the Norges Bank to leave its key policy rate on hold at 1.50% was widely expected. We suspect that the Bank will leave rates on hold until 2022 though, if anything, our forecast for oil prices to rise suggests that the balance …
Bank Indonesia (BI) today left interest rates unchanged at 5.0% but kept the door open to further cuts. With the economy struggling, inflationary pressures low and the rupiah continuing to appreciate against the US dollar, we think further easing is …
The ECB could decide in its strategy review to include owner-occupied housing costs in the measure of inflation which it targets. But we think it is unlikely to do so and, in any case, such a change would not make much difference to measured inflation, …
22nd January 2020
We are not convinced the Bank of Canada made a sharp dovish turn today as many suggest. As the data are likely to surprise the Bank to the upside before its next meeting, we continue to see it on hold in 2020. The initial reactions to the policy statement …
The Fed’s recent asset purchases and repo auctions have reversed more than half of the earlier quantitative tightening. Even so, it is the Fed’s interest rate cuts that have been the far more important factor driving money & credit aggregates . (See Chart …
The legislation that President Joko Widodo has presented to parliament, which includes proposals to cut red tape, lower taxes and free up the labour market, would form the basis of any foreign investor’s wish list. However, with opposition to the reforms …
This Update was originally sent to clients as a US Rapid Response on Tuesday 21 st January. The new Wuhan coronavirus has apparently already spread to the US – with a first case reported in Washington State – but we don't expect it to cause the sort of …
After holding up despite the slowdown in economic activity, we expect jobs growth in office-based sectors to lose momentum over the next two years, weighing on occupier demand. This underpins our forecast of a slowdown in growth in euro-zone prime office …
Bank Negara Malaysia (BNM) today cut its policy rate from 3.00% to 2.75%, and with growth set to slow further over the next couple of quarters, we think the central bank will ease policy again later this year. Only two of the 26 analysts polled by …
Single-family housing starts and new home sales set for another good year A lack of homes for sale means forecasters agree that existing home sales will just tread water over 2020. But we are more optimistic than others on the outlook for new home sales …
21st January 2020
Fears are growing about the spread of a newly-identified coronavirus across Asia. In this Update we discuss the likely implications for the region’s economies. Stock markets across the region fell today as fears over the spread of the virus escalated. It …
While we have altered our forecasts for ECB policy this year, we are still more dovish than investors about the outlook for interest rates in the euro-zone. As such, we continue to think that government bond yields in the region will fall back and that …
The Bank of Japan shocked no one in leaving its major policy settings unchanged today. And with obstacles to further easing high, the slight fall in capacity shortages we are expecting this year won’t be enough to push the Bank into cutting its policy …
We doubt that the bushfire crisis will prompt a major shift in the Australian government’s attitude towards the mining industry. But the sector’s importance is set to decline either way as mining investment has slumped and a structural slowdown is …
In this Update we take a look at the important elections and political events that are set to take place across Asia over the coming year, assessing the implications for policymaking and economic growth. One of the main political events of the year has …
20th January 2020
Underlying inflation pressures in the euro-zone have been building over the past five years, but so slowly that it’s barely perceptible. And rather than being the start of a new trend, the jump in core inflation at the end of last year is more likely to …
Although the share of global capital raised by European-focused funds has reduced in the last couple of years, there are indications that investors are starting to view real estate in Europe as increasingly attractive. This supports our view that demand …
PBOC on hold, for now The Loan Prime Rate (LPR) was unchanged in January. The one-year rate remained at 4.15% (both the Bloomberg consensus and our forecast was 4.10%), and the five-year rate stayed at 4.80%. The LPR replaced the PBOC’s traditional …
Against a weak outlook for both commercial property returns and the UK economy, any upside for development remains limited in 2020. After plummeting post-EU-referendum, there were signs of a stabilisation in development activity a year ago, though we …
17th January 2020
In a surprise move, the Central Bank of Egypt (CBE) left interest rates on hold yesterday even though policymakers don’t seem to be worried by the recent rise in inflation. We think that the easing cycle will be resumed in the coming months and forecast …
The Bank of Korea (BoK) left policy unchanged today, but with the economy struggling for momentum and price pressures set to remain weak, we expect the Bank to resume its easing cycle later this year. Today’s decision marks the second consecutive meeting …
Optimism about a Phase One deal has driven the rally in Chinese equities and the renminbi since late 2019. But now that the deal has been signed, this ought to be fully discounted in the markets. And with a Phase Two deal unlikely anytime soon, if at all, …
16th January 2020
South African policymakers surprised the markets by cutting the repo rate, but with inflation set to rise there is limited room for further easing. We expect just one further 25bp cut. Policymakers at the South African Reserve Bank unanimously voted to …
The account of December’s ECB meeting confirmed that the Governing Council is content to leave monetary policy unchanged for some time. But it left the option of further easing on the table – an option that we think it will take up in the second half of …
There has been a muted response in commodities markets to the signing of the Phase One trade deal between the US and China, perhaps because the good news was already priced in. That said, it may also be a reflection of the fact that China’s promises to …
The Turkish central bank (CBRT) cut interest rates by another 75bp today as policymakers bowed to pressure from President Erdogan for looser policy. More rate cuts are likely in the next few months. But the strong economic recovery will cause inflation to …
The deal signed yesterday between the US and China was broadly as expected and has not led us to change our economic forecasts. The apparent ceasefire in the battle over tariffs removes a downside risk to growth. But tariffs remain high and we suspect …
Strong November retail sales figures suggest that South Africa’s economy gained ground in the middle of Q4. Given power cuts in December, however, we expect that output still fell over the quarter as a whole. Activity figures released today showed that …
The signing of the Phase One trade deal is unlikely to spell the end of the trade war, and the disruption it has caused to Asian supply chains looks set to continue. On the plus side, the deal reduces the chances of an escalation in the near term, and if …
The narrowing in India’s goods trade deficit in December is likely to reverse over the coming months. But we think that a low level of commodity imports will help to prevent the external shortfall from ballooning to unsustainable levels. India’s monthly …
The Phase One trade agreement signed today removes the downside risk of a never-ending escalation of tariffs imposed by the US and China on each other’s imports, but the modest scale of the roll-back of existing tariffs means that the deal will provide …
15th January 2020
We have argued for some time that a near-term interest rate cut is a strong possibility. The market has now come around to this view. While the decision is a toss-up, at least until we see the next batch of data, our hunch remains that interest rates will …
We think that a combination of stronger supply, and weaker demand, growth will push the wheat market into a surplus this year. As a result, we expect wheat prices to drop by about 20% in 2020 . To recap, the price of wheat has surged to around 570 cents …
As the slowdown in household spending and the growth in e-commerce weighs on prime retail rents, we think that rents will fall in all Nordic cities this year. While most of continental Europe has been grappling with weakness in the retail sector, much of …
Hungary’s economy is likely to lose some steam this year, but loose policy will ensure that growth remains above potential. This will keep inflation high and economic imbalances will continue to build . The outperformance of Hungary’s economy last year …
Banks’ housing lending standards remain tight. But this hasn’t prevented housing arrears from climbing to fresh highs as household balance sheets are stretched. And given that we expect the unemployment rate to creep higher and income growth to remain …
While the price of gold remains elevated at present, we think it’s only a matter of time before it begins to ease back. Subdued gold imports in China and India and softer safe-haven demand should depress the price. Meanwhile, we expect that some US dollar …
14th January 2020
There is mounting evidence to suggest that business investment growth is set to rebound, which should help drive overall GDP growth back above its potential pace in the second half of this year. Looking at the latest hard data, the downturn in business …
China’s commodity imports were strong in December, and in 2019 as a whole, in part because a number of one-off structural factors boosted volumes. Looking ahead, we expect growth in commodity imports to ease back this year as China’s economy slows . …
The sharp rise in the Future Sales Indicator of the Business Outlook Survey (BOS) is surely the final nail in the coffin for the idea that the Bank of Canada might soon cut interest rates. The survey supports our view that GDP growth will rebound in the …
13th January 2020
We expect the S&P 500 to outperform Treasuries by much less in 2020 than in 2019, as government bond yields edge up, the equity risk premium stops tumbling, and corporate earnings continue to disappoint. While US large-cap equities and government bonds …
This decade is likely to be marked by slower growth and softer inflation in emerging markets. One consequence is that interest rates will probably be lower than most currently anticipate. A broad-based monetary easing cycle has been underway in emerging …
Five years after the so-called Frankenshock, the SNB is near the end of the road for conventional monetary easing. Accordingly, the Bank may be forced to make another radical policy choice if there is a substantial appreciation in the franc in the coming …
The swift appointment of Haitham bin Tariq as the Sultan of Oman, following the death of Sultan Qaboos, has eased fears that the country would enter a prolonged period of political uncertainty. But the new leader faces a difficult task of securing …
