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 …
25th November 2019
A sharp rise in the US dollar assets of Taiwanese life insurance companies poses a major threat to the health of the country’s financial sector and could also have consequences for the stability of the global financial system. A key cause of previous …
Flash PMIs for November provide further evidence of a stabilisation in the industrial sector. But with labour markets on the cusp of a marked slowdown, overall economic growth is likely to remain subdued for a while yet. Using flash PMIs for the US, …
22nd November 2019
The Labour Party’s manifesto contains several measures which, if implemented, would have a significant negative effect on UK equites. A surprise Labour win could send UK equities tumbling, despite a softer Brexit. Labour’s manifesto is one of the most …
In our view, market participants have recently become too downbeat on the prospects for lead. In fact, we think there are several reasons to expect the price of lead to rebound in the year ahead . At first glance, the near-10% fall in the price of lead …
A victory for Labour in the general election on 12 th December would probably cause the pound to slide from $1.29/£ to around $1.20/£. But the prospect of a softer Brexit, or even no Brexit at all, would limit the downside posed by some of Labour’s …
While we doubt that the growth of collateralised loan obligations has set the stage for a financial crisis in the near term, the risks of one happening further ahead have risen. Collateralised loan obligations (CLOs) are securitisation vehicles that hold …
While the manufacturing downturn has not helped the industrial sector in Germany at a national level, growing e-commerce means that prime industrial rents will still muster some growth over the next few years. Nevertheless, Germany will lag markets like …
President-elect Alberto Fernández’s plan to resolve Argentina’s debt crisis by growing the economy is not a realistic option. We think that a large debt write-down within a few years is inevitable, suggesting that there is little scope for a large or …
Following the slump in mortgage rates, the rise in the sales-to-new listing ratio suggests that house price inflation will surge. As rising houses prices will support consumption growth, the case is growing that markets, or perhaps more accurately central …
With housebuilders already close to capacity, the sector will struggle to sustain a further surge in output. As a result, if elected, we think Labour would likely to miss their manifesto commitment to build 150,000 council and social homes per year by the …
GDP growth was either flat or picked up slightly in most parts of Emerging Asia last quarter, and we think regional growth will rise gradually over the coming year helped by a slow recovery in exports and looser fiscal and monetary policy. All of the …
Calls for much looser fiscal policy in the euro-zone are falling on deaf ears. While the Netherlands and Germany have set out fiscal stimuli for 2020, each has past form for running tighter policy than planned. And any loosening in these countries is …
21st November 2019
South African policymakers left their key rate on hold at 6.50% today, and we expect that it will remain on hold going into 2020. But we do admit that the risk of a cut in the middle of next year has increased. South African policymakers’ decision to …
Bank Indonesia (BI) today left interest rates unchanged, but the cut to the reserve requirement ratio (RRR) and dovish comments from Governor Perry Warjiyo suggest that further interest rate cuts are likely. The decision by Indonesia’s central bank to …
Recent market moves, most notably in US equities, suggest to us that there may be too much bad news priced into commodity markets. Accordingly, we expect a modest rise in commodity indices in 2020, but forecast that US equities will trade in a narrow …
The price of lumber has surged in recent months. We think that prices will continue to rise in 2020 primarily on the back of ongoing strength in US housing starts and falling lumber supply from Canada . To recap, the price of US lumber has rallied by …
20th November 2019
Labour would probably borrow a lot more than the Conservatives if it won the election, but we doubt gilt yields would soar. Labour’s fiscal plans wouldn’t bring debt sustainability into question, inflation expectations are unlikely to leap and relatively …
While the Riksbank’s plans for an official digital currency are still in the early stages, we think it is more likely than not that it will launch the e-krona by the mid-2020s. Moreover, we suspect that it will opt for a design which has the potential to …
We estimate that net capital outflows from emerging markets (EMs) eased in October, and more timely data point to a further improvement so far this month. But we doubt that, on a net basis, capital will flow in to EMs anytime soon. Capital flows play a …
US Treasury yields have rebounded over the past few weeks, as worries about the US-China trade war and the outlook for the global economy have eased somewhat. But while we don’t expect them to revisit their lows, we also think that Treasury yields are …
A sharp fall in the rupee and a series of aggressive interest rate hikes has led to a welcome fall in Pakistan’s external imbalances. However, with growth slowing sharply and inflation close to multi-year highs, the country is not out of the woods yet. …
The tensions between Korea and Japan are unlikely to end anytime soon. That suggests that tourist arrivals may fall further and Koreans will continue to boycott Japanese consumer goods. However, Japan’s shipments to Korea are dominated by intermediate …
November’s “Black Friday” boost to retail sales volumes will actually show up in December’s retail sales figures this year. More importantly, consumers may not be in the mood to spend freely over the Christmas period. As a result, retailers may find just …
The latest Loan Prime Rate (LPR) reductions confirm that banks are lowering lending rates on new loans in response to the recent cuts to the PBOC’s lending facilities. And policymakers’ willingness to embrace lower rates on long-term loans hints at a …
The price of zinc has risen a little since its recent low in September on the back of unanticipated disruptions to supply. But we expect it to fall back again next year, premised on a rebound in supply at a time of subdued demand growth . The price of …
19th November 2019
Pressure is growing on Lebanon’s dollar peg and, in the event of a devaluation, the pound could fall by as much as 50% against the dollar. A messy sovereign default and a deep recession would follow. But over a longer horizon, a more competitive currency …
Optimism about trade has been a factor behind the rally in global equities in the past month. But with a “mini-deal” now largely discounted in the markets, and economic growth unlikely to do better than stagnate over the next couple of years, we suspect …
Asian export growth should start to pick up over the coming months. However, the recovery will mainly reflect a more favourable base for comparison following the collapse in electronics exports at the end of last year, than an improvement in underlying …
While GDP growth picked up in Q3, activity data for September indicates that the economy had already slowed significantly prior to the protests beginning. GDP is likely to contract in Q4. That said, events of recent days have raised hopes of the protests …
18th November 2019
The euro-zone’s services sector has held up relatively well so far this year. However, we expect spill-overs from the industrial recession and slowing employment growth to take a toll in the coming months. The latest business surveys point to a sharp …
The lessons for the UK from the election of a Labour government in New Zealand in 2017 are that businesses and financial markets will probably put more weight on policies that could restrain economic growth than the prospect of much looser fiscal policy. …
We couldn’t agree more with recent comments from RBI Governor Shaktikanta Das that much better governance is needed to improve the long-term health of the banking sector. The problem stems in large part from the outsized role of the state. Privatisation …
The monthly goods trade deficit was virtually unchanged in October and we think that it will remain small over the coming quarters as low oil prices continue to keep a lid on imports. Data released on Friday evening show that India’s monthly goods trade …
For the first time this easing cycle, the People’s Bank has cut the rate it charges banks for short-run liquidity. We expect further cuts in the coming months, which will open the door to lower interbank rates and make banks less reluctant to cut lending …
The recent surge in stock buybacks has largely been driven by mining and financial firms and therefore can’t explain the weakness in non-mining investment. Non-mining profit growth should rebound a little over coming quarters as domestic demand picks up a …
One reason to think that the relentless outperformance of the US stock market since the Global Financial Crisis (GFC) will not continue for another decade is its valuation, which has become comparatively stretched over the past year . Admittedly, …
15th November 2019
Although volatility in the US stock market is expected to remain very low, we don’t think that this is a worrying sign that investors are being complacent. That is because big stock market corrections are usually the cause , rather than the symptom, of an …
Housing completions have reached their highest level in over three decades. But timelier data on housing starts point to a weakening pipeline of construction. On that basis, we think housing completions could fall by 10% over the next three or four years. …
After loosening policy again yesterday, Mexican policymakers will probably cut rates by another 75bp over the coming six months. Given that the US loosening cycle now seems to be at an end, market expectations – which point to 150bp of cuts – seem to have …
The 100bp interest rate cut delivered by Egypt’s central bank today is likely to be followed by further easing in the coming months. While we expect inflation to edge up in the near term, it will remain below the central bank’s target. As such, we …
14th November 2019
Tight supply of affordable homes, and a relatively large increase in their price, are encouraging builders back to the starter home sector. But a slowing economy and tighter credit conditions rule out a substantial shift to cheaper homes. Instead, we …
We have just returned from two days of client meetings in Stockholm from which the key takeaway is that we are not alone in being puzzled by the Riksbank’s stance. Policymakers seem determined to raise the repo rate in December, but we remain confident …
While policy loosening has caused a marked easing of financial conditions around the world, lending growth is still quite subdued. We doubt that this will change, particularly since demand for loans is now weakening again. This is another reason to expect …
A new wave of structural reforms, if implemented, could plausibly lift average EM GDP growth by over 1%-pt in the 2020s. But we doubt that these reforms will be forthcoming. Even if they are, EM GDP growth would still be much weaker than the 6% average …
We think that aluminium consumption figures are being flattered by a resurgence in off-exchange stockpiling. As such, and contrary to consensus expectations of a market deficit in 2019, we think that the aluminium market is currently comfortably supplied …
Downbeat activity figures suggest that South Africa’s economy contracted again in Q3. This adds to the evidence that the risks to our below-consensus growth figures are heavily weighted to the downside. Figures released this morning showed that mining …
It was no surprise that the central bank in the Philippines (BSP) left its main policy rate at 4.00% today, and it is unlikely to adjust rates at its December meeting either. But with growth likely to disappoint and inflation set to remain subdued, we …
Palm oil prices have soared recently in part because of unfavourable weather, which has clouded the outlook for supply. At the same time, we think that demand from the world’s top consumers is set to rise strongly. As a result, we expect prices to …
13th November 2019
