In our view, the outlook for copper prices over the next twelve months is positive. Supply is unlikely to recover nearly as quickly as many assume following major disruptions this year, and demand should at least stabilise. In addition, exchange stocks of …
9th December 2019
The WTO looks set to lose its power to rule on trade disputes this week. This will not immediately transform the economic or policy outlook since the body had been effectively side-lined already. But the failure of world leaders to get it back on track is …
China’s commodity imports were relatively strong in November, perhaps reflecting some front-loading of regional spending on infrastructure. But our view that growth in China’s property sector is set to slow suggests the strength in commodity imports will …
The continued weakness of core inflation that we expect in November’s consumer price data will probably give the MPC scope to ease policy again in the near term. But the big picture is that the inflation backdrop is set to turn more difficult over the …
The peso has rebounded over the past year due in large part to a sharp narrowing of the current account deficit. But with the deficit set to widen again next year as infrastructure spending picks up, the currency is likely to come under renewed downward …
The OPEC+ oil quota cuts announced today are unlikely to have a significant economic impact on most Gulf economies, but they will on Saudi Arabia. The direct impact of the output cuts means GDP growth in Q1 there might be some 0.6%-pts weaker than we …
6th December 2019
France’s public sector strikes will probably dampen economic activity this quarter, but experience from previous, similar walkouts suggests that the hit to GDP will be small. Moreover, while protests have occasionally caused governments to abandon planned …
In view of the wider interest, this Global Markets Update is made available to clients of the UK Markets service as well. A surprise win for Labour at Thursday’s election could be a major shock to UK equity markets. There are few recent examples of an …
A surprise win for Labour at Thursday’s election could be a major shock to UK equity markets. There are few recent examples of an unexpected sharp left-ward political turn in a developed economy. But there are some historical precedents that help put a …
Assuming a Brexit deal is agreed by the 31st January, the improved economic outlook is unlikely to support a rebound in commercial property investment in 2020. Indeed, we predict that a rise in yields will cause capital values to fall next year. And given …
While employment tends to lag changes in economic activity, the labour market figures will be crucial in leading the MPC’s decision about whether to cut interest rates or not in the coming months, even if there is a clear Conservative election victory and …
Given that employment growth has probably peaked, we expect office occupier demand to slow further over the next year or so, which will act as a drag on rental value growth. But the labour market may not be as tight as it first appears, so the risks to …
5th December 2019
While a Conservative election win followed by a Brexit deal would boost the economy, the lingering uncertainty generated by Boris Johnson’s pledge not to extend the transition period beyond 2020 will limit the rise in GDP growth and will probably negate …
House price inflation in Spain is now slowing but we do not envisage a slump in property prices that would derail GDP growth. After all, economic and financial conditions are supportive and there is little evidence that valuations are particularly …
The statement accompanying the Chilean central bank’s decision to hold interest rates at 1.75% yesterday signalled that policy rates will be left unchanged over Q1, but we still think it’s most likely that rates will be lowered over the next 12 months. We …
The Reserve Bank unexpectedly left interest rates unchanged for the first time this year, following five successive rate cuts. Nevertheless, the MPC has left the door open for further easing in the near term and a rate cut in February now looks likely. In …
Inflation in the Philippines rose last month for the first time since May and is set to climb higher over the coming year. However, with inflation set to remain low by past standards, we are sticking with our view that the central bank will loosen policy …
The fiscal stimulus package unveiled today will include much less fresh spending than the headline suggests. And the bulk of the spending will merely offset the unwinding of previous stimulus measures rather than result in a major fiscal expansion. Even …
The Reserve Bank of New Zealand’s decision to leave mortgage lending restrictions unchanged and tighten capital requirements means that lending and house prices are unlikely to surge in 2020. As such, concerns about financial stability won’t prevent the …
The political situation in Lebanon shows little sign of improving and the risk of a disorderly devaluation, sovereign default and banking crisis are rising by the day. Our sense is that the authorities will eventually turn to the IMF, probably before …
4th December 2019
Recent payroll employment growth is likely to be revised down in the annual revision early next year, which is unquestionably a negative. But the flip-side is that productivity growth must have been stronger than the current data suggest. As we’ve flagged …
Our baseline assumption is that the returns in common currency from mid- and large-cap equities will be similar in the euro-zone and the US in 2020, after a decade in which those in the US have outperformed substantially. The elections there next year, …
President Trump’s decision to impose tariffs on imports of steel and aluminium from Brazil and Argentina is likely to have little impact on prices. And while this could be interpreted as a sign that tariffs on the remaining “List 4” imports from China …
While there is likely to be more turbulence ahead for the Chilean peso, the big falls are probably behind us. Indeed, with the central bank intervening and copper prices likely to rise, we think it’s more likely than not that the peso will strengthen by …
Given our pessimistic view of China’s economy and the trade war, we think that the underperformance of developed market (DM) companies exposed to China will continue. Admittedly, the MSCI index that tracks those firms has actually done pretty well this …
Concerns about foreign currency debts in emerging markets have flared up again in recent weeks, but we think that the worst of these fears are probably overdone. FX debt burdens in most EMs have fallen as a share of GDP in recent years and balance sheet …
3rd December 2019
While the resignation of the Finnish Prime Minister today is unlikely to lead to a collapse in government, elections may well take place before 2023, when they are due. If so, the nationalist Finns Party could end up in power which could lead to fiscal …
With mortgage rates set to remain close to their current low level over the next couple of years, refinancing activity will be strong in 2020. Tighter credit conditions will constrain demand to some extent, but a decline in the number of households who …
Our economic forecasts for Italy are based on the assumption that the coalition government holds together, at least for the next two years. But in our view, the economic impact would be small if it fell apart. Bond yields would probably rise, but not as …
The sharp contraction in South African output in Q3 strengthened our view that trend growth in the country is flagging, and that GDP will only rise by a meagre 0.5% in 2020. Figures released today showed that South African GDP contracted by 0.6% in Q3 at …
The RBA turned more optimistic when it kept rates unchanged today but we think that further stimulus will be required before long. We reiterate our long-held view that the Bank will cut rates to 0.25% next year and will launch quantitative easing in the …
The IMF has suggested that the Bank of Japan could target shorter bond yields in order to steepen the yield curve and support the profitability of financial institutions. But the benefits to insurance firms and pension funds wouldn’t compensate for the …
The November manufacturing PMIs point to diverging prospects for EM manufacturers at a regional level, with conditions improving in most of Emerging Asia but deteriorating in Emerging Europe. The EM manufacturing PMI stayed at 51.0 in November for the …
2nd December 2019
Manufacturing PMIs for November suggest that industrial activity strengthened in most regions. This provides another welcome sign that the global industrial downturn may be bottoming out. In November, the global manufacturing PMI picked up slightly from …
We doubt that recent developments in Hong Kong will prevent the US and China reaching a “phase one” trade deal in the coming weeks. But it would do little to boost global growth. And given the fundamental differences between the two sides, tensions will …
Despite President Trump’s frequent complaints about the strength of the dollar, its valuation is not especially high in our view and is unlikely to prevent it from rising further in the next couple of years. Admittedly, the US currency has risen a long …
China’s official and unofficial PMIs rose in November, suggesting that the weakness in the manufacturing sector has eased. While this could provide some support to industrial commodity prices in the near term, we are sceptical that it will mark the …
Recently published figures showing a further fall in the fertility rate in Korea underline the seriousness of the demographic “time bomb” facing the country. The worsening demographic outlook is the key reason why we expect trend growth in Korea to slow …
Labour and the Conservatives have pulled their punches on housing policy. Indeed, only Labour’s pledge to boost social housing construction would materially affect the market. As a result, we expect the outcome of the election to have little impact on …
29th November 2019
We think that while yield compression across CEE markets has further to go in the next two years, property yields will rise beyond 2021 as tighter monetary policy in the region feeds through. In our recent Valuation Monitor , a fall in bond yields last …
Q3 GDP figures due next week are likely to show that Turkey’s economic recovery has continued and we think that year-on-year growth could reach as high as 5-6% in Q4 and early 2020. But policy loosening and rapid credit growth risk fuelling a fresh …
The Bank of Korea (BoK) left rates on hold today but kept the door open to further easing. With growth set to stay subdued and inflation likely to remain weak, we have pencilled in one more 25bp rate cut for early 2020. Today’s decision to leave the main …
Comments by Venezuelan President Nicolás Maduro suggest that the government considers dollarisation as an option to tackle hyperinflation. If implemented, this would probably bring inflation down sharply. But we doubt that this would be sustained so long …
28th November 2019
Following the recent correction in the nickel price, we now think there is room for it to rise next year. We expect a large loss of supply and a recovery in demand to yield a deeper market deficit, forcing drawdowns in both reported and unreported …
Our GDP Tracker suggests that Saudi Arabia’s economy contracted by around 0.5% y/y in Q3 as a greater drag from oil production cuts (as well as the temporary disruption from the attacks on oil facilities in September) more than offset stronger growth in …
27th November 2019
Since the imposition of US sanctions in May 2018, Iranian oil production has fallen by nearly 45%. For our part, we think that output would recover quickly if sanctions were lifted. Moreover, we see little risk of Iran’s oil industry suffering the same …
Revised GDP figures have, again, shown Mexico as one of the worst-performing large EMs. But a closer look at the data underlines the huge variation within the country, which includes both pockets of outperformance as well as sectors locked in structural …
In its first five months in office Greece’s new government has implemented a range of tax cuts that should support the economy and has made a start with some structural reforms. But we are sceptical that it will execute the deeper reforms needed to raise …
26th November 2019
We now expect mortgage interest rates to stay close to their current level over the next couple of years. That will give some support to housing demand but, as was the case this year, offsetting factors such as modest economic growth, tightening credit …
25th November 2019
We doubt that the global pick-up in government bond yields will resume anytime soon, so domestic monetary policy is likely to be the key driver of bonds in Switzerland and the Nordics. With that in mind, while we think that bond yields in Norway will not …
