The boom in credit in Qatar since the turn of the year has caused a renewed build-up of vulnerabilities in the banking sector. Severe balance sheets strains should be avoided, but the recent pace of credit growth won’t be sustained, which will add to the …
13th November 2019
The recent softening of hiring intentions implies that average monthly employment gains will slow further, to below the sustainable rate. While base effects will keep annual hourly wage growth above 4% in November and December, we expect it to decline to …
More EMs’ income levels have fallen relative to the US’s than have risen this year, the first time this has happened since the 1990s. This is likely to be a sign of things to come in the 2020s. There are lots of ways of defining catch-up growth, but our …
Our forecast of a downturn in China’s property sector bodes ill for the price of Chinese steel. Moreover, falling iron ore prices and a bleak outlook for China’s steel exports will add to the downward pressure . The price of Chinese steel rebar has ticked …
There is no immediate threat of any country in Emerging Asia falling into a prolonged period of deflation, but persistently weak price pressures are likely to remain a worry for central banks and will tip the balance towards more easing over the coming …
The Angolan currency’s recent fall will push up inflation and increase the debt-to-GDP ratio even further. While we don’t think that default is an imminent risk, the government will have to tighten fiscal policy. Consequently, GDP is likely to contract …
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 …
The Reserve Bank of New Zealand sounded cautious when it left rates on hold today and we believe that a deterioration in the economy will force the Bank to 0.5% by early next year. We were one of the five forecasters polled by Bloomberg who correctly …
Households frustrated by the lack of affordable single-family homes for sale will find conditions are no better in the rental market, where the number of homes available for under $1,250 a month has dropped 40% since 2013. That will boost investor demand …
12th November 2019
The sharp fall in the Chilean peso today amid widespread strikes will push up inflation although, with the central bank focused more on the hit to the economy, further interest rate cuts are still likely. There is a growing risk that the unrest lasts for …
The recent pick-up in bank lending in Turkey probably has further to run over the coming months, which will provide some support to the economic recovery. But the pace and composition of new lending indicates that vulnerabilities in the banking sector and …
The latest activity and confidence indicators point to continued near-stagnation in the Italian economy. While household consumption is likely to keep growing, prospects for investment and exports are bleak. Italy’s GDP has increased by 0.1% q/q in each …
GDP growth in Sri Lanka is likely to remain weak whichever of the two main candidates wins the presidential election on Saturday. Sri Lanka’s presidential election will take place on 16 th November. A record 35 candidates have filed nominations for …
The loss of the South African government’s final investment grade credit rating is already largely priced in, but there are still reasons to be downbeat on the country’s government bonds, and the rand . Concerns about the South African government’s large …
11th November 2019
The Dutch retail sector is grappling with changing consumer habits and will struggle to provide a positive return to investors. But, with online sales set to grow rapidly and supply chains still adjusting, we expect logistics property to perform well in …
The decline in Egyptian inflation to a 14-year low of 3.1% y/y in October raises the risk that the central bank lowers interest rates by more than the 100bp that we have pencilled in for Thursday’s meeting. Inflation is likely to rise from here, but we …
If the Conservative Party wins an outright majority in the upcoming general election on 12 th December, as polls suggest is the most likely outcome, there is potentially significant upside for UK equities. Since the 2016 referendum, UK mid- and large-cap …
If Hong Kong’s special treatment under US law were revoked, the city would lose access to sensitive US technology and face an increased threat of US tariffs. The short-term economic damage would be manageable, but it would accelerate the erosion of Hong …
GDP figures this week are likely to show that Central and Eastern Europe recorded another strong quarter of growth in Q3, despite ongoing weakness in the euro-zone. But more timely data suggest that this strength won’t last, supporting our view that …
The prospect of further political stalemate in Spain, following yesterday’s inconclusive election result, does not alter the short-term economic outlook. But it does mean that there is little chance of a fiscal stimulus, or of making progress in reforming …
The People’s Bank is powerless to stop consumer price inflation jumping above its target without undermining its broader mandate to support growth and employment. Given this trade-off we expect the central bank to prioritise the latter and ease monetary …
Despite steadily rising supply, strong demand growth and expanding export opportunities should ensure that the average price of US natural gas (Henry Hub) will be higher in 2020 than 2019 . The year-to-date average Henry Hub price is 14% lower than in …
8th November 2019
The statement accompanying yesterday’s decision by Peru’s central bank to cut interest rates made it clear that this did not mark the beginning of a prolonged easing cycle. With inflation and economic activity likely to gradually rise, we expect the …
China’s commodity imports were generally weak in October, and we expect volumes to remain subdued in the coming months given our forecast of a further slowdown in China’s economy . The contraction in China’s imports and exports in US dollar terms eased …
We have revised up our end-2020 forecasts for the prices of gold and silver as we now expect a smaller rise in US Treasury yields next year. That said, we retain our view that a softening in safe-haven and consumer demand will cause the prices of gold and …
Moody’s decision to cut its outlook on India’s sovereign rating is based in part on the government’s struggle to rein in the fiscal deficit. This is justifiable if a little behind the curve. But the ratings agency’s decision is also based on its …
By signalling that inflation will remain below the lower end of its 2-3% target band for the foreseeable future, the RBA signalled that further easing is on the cards. Our view remains that the Bank will cut rates to 0.25% and launch quantitative easing …
There is a good chance that protests caused GDP to contract in Q4. While we expect growth to strengthen by next year, the weak starting point from Q4 has prompted us to revise down our 2020 growth forecast from 3.5% to 2.5%. We are currently forecasting …
7th November 2019
Many of the non-oil producing countries in the region have tended to support their dollar pegs by maintaining a level of FX reserves sufficient to cover the monetary base. In Egypt and Jordan, reserves are more than enough to cover the monetary base. But, …
The statement following today’s MPC meeting confirmed that the Czech central bank is still concerned about above-target inflation and the need to hike interest rates. But with the economy likely to slow sharply next year and inflationary pressures to …
Polls suggest that the general election in Spain this weekend will not end the political deadlock there. That is the key reason why, despite brighter growth prospects, we doubt that bonds and equities in Spain will do better than those elsewhere in the …
The Monetary Policy Committee’s (MPC) dovish shift at its November meeting leaves the Committee unsure in which direction the next change in interest rates will be. As well as softening its language on the chances of rate hikes if there were a Brexit …
We think that the forthcoming Saudi Aramco IPO is unlikely to have much of an impact on Saudi Arabia’s oil policy or on global oil prices either now, or in the future. Instead, Saudi output in the coming decades is likely to be dictated by a need to sell …
With the Conservatives and the Labour Party now competing on fiscal profligacy rather than fiscal prudence, it is unsurprising that the Chancellor Sajid Javid announced today a full rewrite of the fiscal rules. But the new rules still allow a big fiscal …
Against a backdrop of stubbornly-low inflation and rising unemployment, we now think that the RBA will launch quantitative easing (QE) in 2020. Here, we consider the implications for Australia’s assets. Assessments of the impact of QE elsewhere are not …
We expect most major EMs to loosen fiscal policy further next year. Weak public finances mean that a few major EMs, notably Brazil and South Africa, will need to tighten policy. But aside from Argentina, the risk of messy sovereign debt crises is …
Headline consumer price inflation is likely to have risen above the RBI’s 4.0% target for the first time in 15 months in October due to another jump in food inflation. This won’t dissuade the central bank from loosening policy further in the near term. …
The National Bank of Poland (NBP) left interest rates on hold at 1.50% today and with external headwinds mounting and the economy likely to slow sharply over the coming quarters, calls for interest rate cuts are likely to grow. But we think that …
6th November 2019
Although occupier demand appears to be holding up in Germany, a combination of structural and cyclical factors has weighed on retail rents. And with meagre economic growth expected until at least the middle of next year, the prospects for retail rents are …
We think that markets are underestimating the chance of the Bank of Canada cutting interest rates in December, but we would change our view if the US and China agreed to roll back tariffs meaningfully. Based on the Bank’s forecasts alone, it wouldn’t have …
The fiscal package presented to Brazil’s congress yesterday shows that the government is not resting on its laurels after its successful pension reform. However, the good news on fiscal reform already seems to be priced in, suggesting that there’s little …
The Bank of Thailand (BoT) cut its key policy rate to 1.25% today, and with economic growth set to remain weak and concerns about the strength of the baht mounting, we think the central bank will loosen policy again next year. Today’s decision was …
This Update clarifies the tweaks to our forecasts for the economy and the financial markets triggered by the delay to Brexit to 31 st January and the recent changes to our forecasts for the global financial markets. Although the numbers are slightly …
5th November 2019
One reason to think that US equities will outperform US corporate bonds over the next couple of years is a larger-than-average wedge between their valuations. Comparing the valuations of US equities and US corporate bonds is not straightforward. One …
With Brexit delayed and a general election ahead, all our Brexit scenarios remain on the table. However, recent developments mean that, under each scenario, we think that all-property capital values will fall by less than previously expected, but most …
The Fed’s latest Senior Loan Officer survey points to a continued drop off in demand for commercial and industrial loans, consistent with business equipment investment contracting again in the fourth quarter. And while looser policy has prompted a surge …
Economic growth in Finland outpaced the euro-zone average before the global financial crisis but has been broadly in line with it in recent years. We think that this trend will continue and that Finnish GDP growth will slow to around 1% in 2020-2021 – a …
Spain’s fourth general election in as many years looks likely to result in further political stasis, but we doubt that this will have a detrimental effect on the economy. Nevertheless, weaker consumer spending and investment are likely to cause GDP growth …
