Left-wing Peronist Alberto Fernández is widely expected to win Sunday’s presidential election, and we think that his tenure would be marked by more accommodative policy, persistently high inflation, further large currency falls and a large debt …
23rd October 2019
We think that the recent weakness in emerging market (EM) currencies will continue during the rest of 2019, as a weaker global economy triggers a fresh bout of risk aversion. In 2020, we think that the renminbi and the currencies of other Asian EMs with …
The weakness in Russian retail sales looks close to bottoming out, but any turnaround will be modest. This is one reason to think that the overall recovery in GDP growth will be weak and that the central bank’s easing cycle is likely to be deeper than …
As valuations have improved this year and investors have become willing to accept lower yields, demand for quality Paris assets has ballooned, most likely driving a record year for French investment. This has begun to push prime yields lower and we now …
While we think that there is still a bit more scope for the Norwegian krone to fall against the euro, we expect the currency to bounce back over the next couple of years, as the country’s terms of trade improve. For all the talk about krone weakness, its …
After small net inflows in Q2, we estimate that emerging markets (EMs) experienced net outflows in Q3. With the recent detente in the trade war unlikely to continue, further capital outflows are likely in the coming quarters. Capital flows play a major …
There have been suggestions that the Bank of Korea (BoK) might soon need to adopt some of the unconventional policy measures that are being tried by the world’s major central banks. However, evidence from other countries that have tried quantitative …
We estimate that a fiscal stimulus equivalent to 1.5% of GDP would still be consistent with maintaining Australia’s AAA-rating. Unfortunately, fiscal policy probably won’t come to the rescue, leaving the onus to support demand on the RBA. The slowdown in …
This Update was originally sent to clients as a Rapid Response immediately after the votes in Parliament on 22 nd October on Boris Johnson’s Brexit deal. Tonight’s votes in Parliament on Boris Johnson’s Brexit deal suggest that Brexit will probably be …
22nd October 2019
Some leading indicators of house price growth, such as the size of mortgage approvals and months’ supply of new homes on the market, are pointing to an acceleration in growth to around 5% y/y by the end of the year. But a slowing economy and tightening …
The financial woes of WeWork have cast doubts over its long-run future and, given the reliance of the London office market on the co-working trailblazer, on the property outlook. In our view, this is a real concern, but it is unlikely to be the hammer …
21st October 2019
Early indicators suggest that GDP growth stabilised across Emerging Asia last quarter. While we think the worst is now over for the region, the recovery will be slow going. Countries in Emerging Asia are among the first in the world to publish national …
This Update analyses the key Brexit events in Parliament this week and highlights at what point we would be able to conclude that a Brexit deal is either done or dead. As such, the next week or so will be pivotal in determining whether the pound takes …
As things stand, there are reasons to think that the protests that erupted in Chile in recent days will have a relatively small impact on the economy and financial markets. The central bank is likely to look through the political turmoil and cut the …
Given the widespread use of the US dollar in international trade and finance, policymakers outside the US have suggested that the dollar’s appreciation is partly to blame for the slowdown in the world economy. While US exchange rate moves do exert …
The protests in Lebanon (and policymakers’ response) underline that pushing through the austerity needed to stabilise the public finances is politically impossible. With large debt repayments due over the next year, a crunch point is approaching fast. A …
The success of environmentalist parties in yesterday’s Federal Elections in Switzerland echoes similar gains elsewhere in Europe in recent months. But given Switzerland’s consensus-based political system, the result is unlikely to cause any major change …
This Update analyses the key Brexit events in British Parliament this week and highlights at what point we would be able to conclude that a Brexit deal is either done or dead. As such, the next week or so will be pivotal in determining whether the pound …
Our best guess is that vehicle production in the euro-zone will stabilise at around its current level over the next year. If so, the sector would subtract 0.2% from GDP this year, but neither add to nor subtract from GDP in 2020. Regardless, the euro-zone …
The detailed breakdown of China’s Q3 GDP data released today shows that a slowdown in industry overshadowed strength in the construction sector. The headwinds to the construction sector should only get stronger in the coming quarters. GDP growth edged …
The newly-revamped Loan Prime Rate (LPR), the reference point against which banks now price loans, was unchanged in October. This will only increase pressure on the PBOC to ease funding costs for banks in the coming months. The one-year LPR was unchanged …
This Update was originally sent to clients as a Rapid Response immediately after the vote on 19 th October on Boris Johnson’s Brexit deal. The decision by Parliament to essentially postpone a meaningful vote on Boris Johnson’s Brexit deal until after a …
19th October 2019
We expect the upturn in consumer confidence in Greece this year to feed through to a pick-up in retail sales growth, supporting retailer demand in Athens. Coupled with further yield falls, Athens high street capital values are set to significantly …
18th October 2019
We expect the rally in corporate bonds in the US, UK and euro-zone to unwind a bit in the rest of 2019 as global growth slows further. Next year, we think that corporate bonds in the US and the UK will continue to struggle, but those in the euro-zone will …
We expect weak global growth to keep a lid on UK tourist flows. And with yields most likely to continue to rise, hotel capital values are likely to fall over the next few years. A weak global economy and ongoing Brexit uncertainty weighed on tourist flows …
The shift in market expectations in Brazil towards much larger interest rate cuts by early 2020 now looks overdone. However, expectations for the Selic rate over a longer time horizon (2-5 years) look too high . There is a growing debate about how far …
17th October 2019
The Conservatives are sticking to their commitment to balance the budget if elected, but over the next 18 months the party’s deficit proposals look very similar to the Liberal’s. While the high overall public debt burden has been touted as a reason to …
Though government bond yields have rebounded over the past week, inflation compensation remains near record lows in the US and the euro-zone. In our view, this is unlikely to persist, especially in the US, which is one reason why we expect Treasury bond …
This Update was originally sent to clients as a Rapid Response immediately after the announcement on 17 th October that the UK and EU had agreed a Brexit deal. If the Brexit deal agreed by the EU and UK earlier today passes through Parliament, then there …
The outperformance of Budapest’s office sector is coming to a close, but we still expect the retail and industrial sectors to beat their CEE peers in terms of total returns. Hungary’s economy has weathered the euro-zone slowdown so far, but we think that …
If a Brexit deal is signed and ratified then sterling could rise further over the next few weeks or months, from $1.28 to $1.35 (€1.17). If interest rates were then to rise, sterling could hit $1.40 (€1.22) in 2021. At the end of July, when the chances of …
16th October 2019
Over the past couple of years buyers of high-end homes in New York City have been hit by higher taxes, and can no longer hide their identity. That has cut home buyer demand and house prices, and may lead to an increase in rental supply. But, at the same …
The Fed’s move to begin purchasing $60bn of Treasury bills per month will eventually push the size of its balance sheet back up to $4trn over the coming year, not far below its $4.2trn peak. However it would be wrong to view this as a complete …
South Africa’s retail sector didn’t perform as badly as the mining or manufacturing sectors in August, but there is still a growing risk the economy contracted over Q3 as a whole. Figures released this morning showed that South African retail sales growth …
Subdued global economic activity will weigh on oil demand next year. That said, we expect GDP growth to gradually pick up over the course of the year, and new International Maritime Organization rules (IMO 2020) to boost crude demand from the shipping …
London has led the fall in housebuilding, but more recently, construction has fallen sharply in nearly every region. Looking ahead, given continued economic uncertainty, housing starts are on track to see a sizable fall in 2019 – regardless of Brexit. But …
India’s goods trade deficit narrowed to a seven-month low in September 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 yesterday show that India’s monthly goods trade …
The Bank of Korea (BoK) cut its policy rate from 1.50% to 1.25% today and with growth set to remain subdued and price pressures likely to remain very weak, we are expecting more easing next year. Today’s decision followed the first rate cut in three years …
Economic growth in Kuwait is likely to remain sluggish in the coming years due to the impact of oil production cuts as well as ongoing tensions between the government and parliament, which will prevent fiscal loosening. Our GDP growth forecasts lie well …
15th October 2019
A Brexit deal is still unlikely, but it would remove much of the uncertainty that has caused firms to hold off investment projects and consumers to rein in their spending, and would therefore result in GDP growth, interest rates, the pound and bond yields …
We think that local-currency and USD-hedged returns from developed market government bonds will generally be poor through the end of 2020, but that USD- unhedged returns will be positive next year. Our detailed views of monetary policy can be found in our …
The corporate earnings season starting this week in the US could provide the trigger for the drop in the S&P 500 that we forecast to happen this year. Indeed, we think that earnings will disappoint expectations, and doubt that Fed policy or a big …
Turkey’s financial markets have taken the US sanctions imposed yesterday in their stride, but the threat of harsher measures in the context of the country’s weak external position could result in a fresh sell-off in the coming days. This would act as a …
Despite the latest “mini-deal”, we think it is only a matter of time before trade tensions between the US and China escalate again. Either way, we think that the recovery in global economic growth that we expect over the course of 2020 will be a far …
At first glance, the impact of this month’s sales tax hike on inflation and so on real incomes will be small. Headline inflation will probably rise by only 0.4%-point in October. But that’s partly because the impact will be offset by the government’s …
The growing threat of sanctions on Turkey in relation to its recent incursion into Syria have already put significant downward pressure on Turkish financial assets and fragilities in the banking sector could precipitate even more severe problems. …
14th October 2019
The decades-long downward trend in the Swedish krona means that a Nobel prize in US dollar terms is worth less than half what it was in the early 1990s. With the krona set to fall further by year-end, and unlikely to rise much over the medium term, …
Tunisia’s new president will face the immediate challenge of a fractured parliament and, amid what are set to be arduous coalition talks, policy paralysis is likely to set in. The country’s large imbalances will be left unchecked, raising the risk of a …
