The sharp rise in Egyptian external debt in the last few years has triggered alarm in some quarters. But it has been accompanied by a large increase in FX reserves, suggesting that risks are currently manageable. Egypt’s external debt has increased …
20th August 2019
Quasi-rate cut still leaves the PBOC with work to do The newly revamped Loan Prime Rate (LPR), intended to replace the traditional benchmark lending rate as the reference point against which banks price loans, was launched today. The one-year LPR was set …
With mortgage rates set to drop to 3.8% over the next couple of weeks, and inventory tight, we have edged up our house price forecast and now expect a rise of 3% this year. But a slowing economy and tighter mortgage lending standards argue against a …
19th August 2019
We forecast that a weaker South African rand coupled with the high prices of by-products at platinum mines will mean that the price of platinum stays firmly in the doldrums over the next couple of years . After years of a falling or lacklustre platinum …
While much of the sharp contraction in manufacturing in the second quarter can be put down to Brexit distortions, a meaningful recovery is unlikely given the ongoing struggles of global manufacturing. But the resilience of the services sector suggests …
A long-awaited shake-up of how China’s banks price loans should in time give policymakers much finer control of bank lending rates and could open the door to a quasi-rate cut as soon as tomorrow. But it won’t immediately clear the roadblocks that have …
The era of sustained, rapid house price growth appears to be over. But even so, the cost of owning a home is still favourable compared to renting and is likely to stay that way. That suggests that households’ strong preference for owner occupation will be …
While the imminent change in leadership at the Central Bank of Iceland (CBI) is unlikely to affect its current easing bias, the new Governor will have a bigger role in shaping policy than his predecessors. Having been named as the new Governor of the …
The Japanese yen has continued to appreciate and is now close to our year-end forecast of ¥105/$. Though the drivers behind its strength may shift, we expect upward pressure on the yen to persist. Since President Trump’s latest escalation of the …
16th August 2019
Copper prices are hovering near two-year lows, reflecting investor concerns about the outlook for global growth. While dwindling mine supply should put a floor under prices, deteriorating investor sentiment will probably prevent any meaningful rebound …
We think that emerging market (EM) currencies will continue to struggle over the rest of 2019 as the global economy remains weak for longer than investors anticipate, the trade war escalates further and political risks, notably in Argentina, remain high. …
15th August 2019
Despite the recent pick-up in wage growth, we continue to think that core inflation will decline over the next 12 months. Hourly wage growth rose to 4.5% in July, according to the Labour Force Survey, and 3.7% in May according to the Survey of Payrolls, …
Inverted yield curves in the US and elsewhere tell us very little about the timing of future downturns and, for now at least, the economic data are more consistent with a slowdown than a downturn in the world economy. That said, there are clear risks to …
The inversion of the yield curve has stoked concerns about the possibility of an imminent recession, if the UK is not already in one. However, even though the downside risks to the economy have increased recently, unless there is a no deal Brexit we still …
The rout in Argentine markets is likely to push the economy back into recession. We now expect GDP to contract by 3% over this year as a whole (our previous forecast was -2.0%) and inflation to breach 60% y/y (from 55% y/y now). We also anticipate a …
The Nigerian president’s call to exclude all food importers from the official FX market will probably be poorly-enforced and have little effect on inflation. But the government’s ever-expanding influence over the nominally-independent central bank will …
We think that government bonds in Italy will come under pressure again in the coming months, given the brewing political crisis there and the resulting increased uncertainty over the country’s fiscal policy. Last week, Deputy Prime Minister Matteo Salvini …
While this morning’s decision by the Norges Bank to leave its key policy rate unchanged at 1.25% was in line with expectations, the dovish shift in its tone suggests that the last bastion of hawkishness among advanced economies has fallen. In contrast to …
After picking up a touch this year, we think that economic growth in Tanzania will slow in 2020 and in 2021. President John Magufuli’s increasingly erratic policymaking will deter investment while external conditions will cause the country’s terms of …
The merchandise trade deficit narrowed in July and we think that it will remain small over the coming months given India’s limited exposure to trade tensions between the US and China and the fact that oil prices are likely to stay around their current low …
We still anticipate a modest economic downturn rather than a recession, but the spreading weakness in other parts of the global economy has increased the danger of an outright economic contraction in the US. In addition, there are some key downside risks …
14th August 2019
The rise in Polish inflation to a seven-year high in July and likelihood that it will stay above target over the next 18 months will keep the focus of the MPC on tightening. But we don’t think this will tip the balance and are sticking with our view that …
With Argentine markets continuing to come under pressure, a sovereign debt default is increasingly likely. We think this is most likely to come in response to a request from the IMF, probably before year-end. This would result in smoother debt …
The Fannie Mae Home Purchase Sentiment Index has hit a record high, but the detail shows the share of households who see now as a good time to buy is still relatively low. High house prices and a lack of inventory are keeping that component of sentiment …
Having seen investors move in line with our previously uber-dovish view on Swedish interest rates in recent months, we now expect the Riksbank to cut the repo rate to -0.50% by the end of the year. With news on the economic front going from bad to worse, …
Disruptions from the ongoing protests look set to pull down Hong Kong’s GDP growth to its lowest since the global financial crisis this quarter and there is a growing risk of an even worse outcome if a further escalation triggers capital flight. The Hong …
June retail sales figures released today added to the evidence that the economy returned to growth in Q2. But the recovery was soft – we estimate around 1.6% q/q saar – and we still think that policymakers at the SARB will cut their key rate by 25bp in …
The three-month delay to the imposition of tariffs on more than half of the $300bn of Chinese imports, originally scheduled to take effect next month, is obviously designed to avoid a politically-damaging rise in consumer prices ahead of the holiday …
13th August 2019
The higher-than-expected forecasts for wheat and corn production in 2019/20 included in the USDA’s latest projections have sent prices tumbling. While we think that agricultural markets are right to have turned more bearish on wheat prices, we suspect …
Glencore’s decision to temporarily close the world’s largest cobalt mine by the end of this year has given cobalt prices a shot in the arm. As a result, the price of cobalt could rally by more than 60% by end-2021 as demand surges and the market swings …
Emerging economies whose currencies have fallen by 15% or more against the dollar in a single day – as the Argentine peso did yesterday – have fallen into recession in 85% of cases in the last 25 years. Sovereign debt defaults occurred after roughly half …
The rout in Argentine markets yesterday, and increasing likelihood of a lurch to the left in October’s presidential election, has rekindled sovereign default fears. One crunch point could be 15 th September, when the next IMF loan tranche is due to be …
London’s rental market is shifting to a new phase of adjustment. Low returns and tax changes are driving landlords from the market, while rising wages and low unemployment are supporting tenant demand. As a result, fresh imbalances between rental supply …
An official from the Monetary Authority of Singapore (MAS) today confirmed that it is not considering an unscheduled policy adjustment, but given the poor outlook for the economy loosening in October is still very likely. Singapore’s Ministry of Trade and …
The raft of liquefied natural gas (LNG) projects in the works suggests that the downward pressure on prices from surging global supply will continue this year and next. But with demand growth set to remain healthy, and the stream of new projects likely to …
The falls in EM currencies today suggest that the South African rand, Turkish lira and many of those in Latin America will remain in the firing line if, as we think likely, concerns about Argentina’s debt continue to build. So far at least, there’s little …
12th August 2019
The rout in Argentine markets today will push up the public debt ratio to over 100% of GDP, and makes a sovereign default even more likely. It’s possible that the IMF requests a debt restructuring before October’s election. The collapse in markets, a …
We’ve cut our end-year rand forecast from an already below-consensus ZAR15/$ to ZAR16.5/$. While risks are growing, we’re holding to our view that the SARB will cut its policy rate by 25bp in September. While most emerging market currencies have weakened …
The planned IPO of Aramco – which reports suggest is back on – will probably make the government less inclined to impose fresh austerity measures in response to lower oil prices. The partial sale of the company itself won’t do much to improve the …
The comprehensive victory for Alberto Fernandez in Argentina’s primary election paves the way for the return to left-wing populism that many investors fear. With a renewed focus on sovereign default risks, bonds, equities and the peso will come under …
As consumer spending growth slows in Poland, we expect retail spending to slow. The effect of this on physical retail outlets will be compounded in secondary locations by a growing share of sales migrating online, as well as the full implementation of the …
Government bonds have rallied further in developed economies in recent weeks, fuelling speculation that they are in a bubble which will burst at some point. We disagree. Admittedly, we think that the rally has gone a bit too far. But we doubt that bond …
9th August 2019
Nickel prices have surged in recent weeks, owing to optimism over future demand from the electric vehicle sector and speculation that Indonesia’s ban on nickel ore exports could be brought forward from 2022. But the rally isn’t justified by current …
The statement accompanying the decision by Peru’s central bank to cut interest rates left the door open for further easing. And with the incoming growth and inflation data still weak, there is a window for further rate reductions. We’ve pencilled in 50bp …
The recent pace of Russian household lending looks frothy, but the central bank already appears to have taken some of the steam out of the credit boom. Even if household loans start turning sour further down the line, the impact on the banking sector …
8th August 2019
The risk to the euro-zone from the US-China trade war is rising. And it seems increasingly likely that the US will raise tariffs on auto imports from the EU, which could tip Germany into recession. There is also a chance that higher auto tariffs would be …
We’re comfortable with our below-consensus forecast for global growth but, for now, the increasingly gloomy view priced into bond markets seems difficult to square with the latest economic data . Regular readers will know that we’ve been among the most …
Despite the weak performance of the manufacturing sector, June activity data strengthened our view that South Africa returned to growth in Q2 after a sharp fall in Q1. Combined with recent currency weakness, a brisk recovery raises the risk that …
China’s commodity imports jumped in July, but this comes after pitifully low volumes in prior months and, in some cases, merely reflected improved availability. As such, it is unlikely to mark the start of a sustained recovery in demand . Export growth …
We probably won’t know for sure if the UK is heading for a no deal Brexit until the moment it actually happens, which would be at 11.00pm on 31 st October 2019. But there are a number of keys dates in the 84 days between now and then that could either …
