The granular data on mortgage lending in Q1 contained some signs of relief following the dip in mortgage rates at the end of last year. But given that decline in rates has since reversed, we don’t think it signals a further improvement in activity to …
11th June 2024
Net capital inflows into EMs have climbed back into positive territory in recent weeks, driven by a sharp rise in foreign investors’ purchases of Turkish government debt. This strength could continue if investor confidence in the country’s policy shift is …
The ramp-up in public capital expenditure in the last five years has helped to ease some of the bottlenecks that had previously acted as a constraint on India’s economy. Despite the Modi government’s weakened electoral mandate, there are good reasons to …
Although we expect equities in general to fare well over the next year or so, we think that falls in most commodity prices will weigh on the energy and materials sectors. That would be bad news for stock markets with big energy/materials exposure and …
10th June 2024
Mexican President-elect Claudia Sheinbaum’s strong environmental credentials mean that a shift away from fossil fuels and towards renewables is likely during her tenure. We doubt that she’ll fully open up the energy sector to private investment and think …
We expect the US to remain the world’s pre-eminent global economy for the foreseeable future. Not only will its own economic performance remain comparatively strong – not least as the advent of AI plays to its advantages – but the other key contenders for …
The State Bank of Pakistan (SBP) kicked off its easing cycle today with a 150bps rate cut, and while further cuts are likely, ongoing negotiations with the IMF for a new long-term loan deal mean that the pace of further loosening is likely to be …
Rising car prices explain why US import prices from Japan haven’t fallen despite the sharp weakening of the yen. While growth in car prices has slowed as supply shortages have unwound, this hasn’t boosted export volumes so far and we think that the weak …
Elections in South Africa, India, and Mexico have generated sizeable reactions in their financial markets over the past week or so, highlighting the potential for electoral surprises to generate short-term volatility. This Update takes stock of the …
7th June 2024
The decision by OPEC+ last Sunday to increase output from October caught investors by surprise and sent oil prices sinking to below $78 per barrel early in the week. Ahead of the meeting, investors had expected that the cuts would be rolled over for the …
The RBI kept the repo rate on hold at 6.50% today as expected but, notably, two of out of the six MPC members voted for a cut. With inflation likely to continue falling over the coming months, we maintain our long-held view that the easing cycle will …
Container shipping costs have rebounded in the past month amid a pick-up in demand for goods from China and a possible front-loading of festive orders due to concerns about future shipping disruptions. And shipping costs could yet rise further. Our …
6th June 2024
Investors appear to have shifted their bets away from stocks expected to benefit from using AI and doubled down on those expected to benefit from enabling the AI revolution. But the bigger picture is that AI hype has been continuing to support the US …
The ECB began its easing cycle today, as expected, but the accompanying guidance and forecasts suggest that it will proceed cautiously. We now think the Bank will cut interest rates by only a further 50bp before the end of the year, with the next cut …
Indications that take-up stabilised across many markets in Q1 were encouraging. However, looking ahead we think the prospects for occupier demand are better in southern European markets. As we recently highlighted , there were tentative signs that Europe …
A return of La Niña could provide some respite for those commodity producers who have been hit hardest by El Niño. But it could also pose problems for others – not least in South America – and so assessing any potential impacts on commodity prices is …
Aggregate EM GDP growth remained strong in Q1, though we still expect a slowdown later this year. At a regional level, Emerging Asia will lead the pack, however there are tentative signs that recoveries in parts of Central and Eastern Europe and Latin …
India’s election result isn’t, in our view, reason to turn downbeat on the country’s equity market, its wobbles earlier this week notwithstanding. But with a very positive story seemingly still priced in to India’s equities, both on the political and …
Today’s interest rate cut from the Bank of Canada will be the first of many, and the dovish tone of the accompanying communications suggests another rate cut in July is nailed on. As Governor Tiff Macklem shrugged off any potential concerns about exchange …
5th June 2024
Our 2020 analysis of the impact of changed working patterns on office demand correctly estimated the share of fully remote work, but underpredicted the extent of hybrid work. Yet with office job growth set to stay strong for the rest of the decade, the …
Whoever wins the general election on 4 th July will have three main choices when it comes to spending and taxes. First, the new government could change the fiscal rules to give itself more fiscal space. Second, it could keep the current fiscal rules and …
The April JOLTS data provided further evidence of normalisation, with job openings falling further, layoffs still at historically low levels and the leading indicators all pointing to wage growth cooling. The job openings rate fell to 4.8% in April, from …
4th June 2024
Inflation has been stickier than we had expected and we have therefore pushed back when we think the Bank will start cutting interest rates. That may put a little upward pressure on property yields over the next couple of months. But we still think …
Narendra Modi will begin his third term as India’s Prime Minister with a weakened mandate and that will make the passage of contentious economic reforms more difficult. But he will still be able to work as the head of a stable coalition, and the broader …
At long last, OPEC+ outlined a plan on Sunday for when and how members would unwind the large production curbs currently in place. We assume that this plan is followed th rough and that output gradually increases from October, pushing the crude market …
Global demand is giving a bigger boost to China’s economy than we had anticipated this year and foreign tariffs will make little difference to aggregate export performance in the near term. We now think that China’s economy will expand 5.5% this year as a …
The EM manufacturing PMI remained at a three-year high in May but the picture is becoming increasingly nuanced at a country level. Meanwhile, the PMIs also showed price pressures rose again last month, matching the signs of recent strength seen in other …
3rd June 2024
Our initial response to Claudia Sheinbaum’s victory in Mexico’s presidential election can be found here . We also held a Drop-in earlier today. This Update summarises the key points that we discussed and answers some of the client questions that we …
The latest manufacturing PMIs suggest that the recovery in global industry has continued to gather momentum so far in Q2 and that price pressures have increased somewhat. But that probably won’t prevent central banks from loosening policy in the coming …
The decision by OPEC+ to keep oil production lower over the rest of this year means that oil sectors in the Gulf will grow more slowly than we had previously anticipated and we have revised down our GDP growth forecasts for this year and next. The …
Having lagged behind other emerging market (EM) currencies for most of the post-pandemic period, the Polish zloty has lead the pack over the past six months. While we think that most of this rally has now run its course, we expect the zloty to stay …
With the government debt-to-GDP ratio likely to trend up over the medium term, and the budget deficit set to stay above 3% of GDP, we suspect that France will be subject to further rating downgrades in future. The risks are significantly higher in the …
South Africa’s final election results confirmed that support for the ANC fell far short of a majority, leaving it reliant on a coalition with one of the larger opposition parties to stay in power. The newsflow over the weekend suggests that the chances of …
The manufacturing PMIs for Emerging Asia remained weak in May but have been a poor guide to the hard data on activity over the past year anyway. However, the PMIs have been a decent guide to price pressures and the latest data suggest the risk of a …
This year’s minimum wage increase will be a bit smaller than we had anticipated. And with the looser labour market putting downward pressure on wage growth among workers not covered by the minimum wage and awards, we expect wage growth to slow faster than …
While house price growth accelerated rather sharply in May, stretched affordability points to a renewed slowdown. Indeed, most leading indicators point to a renewed moderation in price growth. Allowing for seasonal swings, house price growth across the …
This report was first published on Friday 31st May covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Monday 3rd June and the Caixin services and composite PMIs on Wednesday 5th June. Recovery still ongoing The PMIs for May …
31st May 2024
The stronger than expected Q1 GDP data in several major economies suggest that the global economy got off to a strong start in 2024. But we expect global growth to fall back to a slightly below-trend pace in the next few quarters, as China’s fiscal …
30th May 2024
During the coming months, we expect falling goods and energy inflation to pull down the headline inflation rate in Sweden. This should encourage policymakers to cut rates from 3.75% currently to 3.00% by the end of the year. However, we are not pencilling …
We suspect that monthly core price growth will accelerate marginally from the very soft rates seen in the first four months of the year but, on the whole, core price pressures should remain muted. That sets the stage for both core and headline inflation …
Sovereign bond yields in Russia have surged to multi-year highs this year as markets have increasingly questioned the trade-off between the war effort on the one hand and policymakers’ ability to maintain fiscal stability and control inflation on the …
29th May 2024
A victory for Claudia Sheinbaum in Mexico’s election on Sunday is likely to see a continuation of Amlo’s generous social policies – which will also make Banxico’s fight against inflation harder. The main points of contrast with Amlo are that she will face …
While German property yields stabilised in Q1, further indications of rising distress give us confidence in our view that property values there have not yet reached the bottom. The stabilisation in German prime all-property yields in Q1 has led some to …
The latest IPF Consensus Survey showed limited change on the previous forecast round in March. There was a small upward revision to all-property rental growth expectations for 2024, but a downgrade to total return expectations, which implies yields are …
While the timing of the sharp hit to UK commercial real estate values owes much to the ill-fated “mini-Budget” of September 2022, we think the UK’s role in leading the valuation downgrades also owes to its relatively insulated lending market in this …
28th May 2024
The debt-to-income restrictions launched by the Reserve Bank of New Zealand today won’t restrict the flow of new mortgage lending. In fact, the concurrent easing of restrictions on loan-to-value restrictions will result in slightly looser lending …
Resolution of China’s property crisis would result in residential sales being substantially higher than today. Sales could rise by a third. But we wouldn’t expect prices to increase by much, if at all. And property construction activity will be weaker in …
24th May 2024
We think the kiwi and the aussie strength will continue over the next couple of years as we expect they will be among the last developed economies to start an easing cycle. The aussie and the kiwi have been among the best performing G10 currencies since …
The sharp drop in frontier market sovereign dollar bond spreads this year has caught many by surprise. We think there’s a case that the bond rally may have gone too far in Argentina, Ecuador and Tunisia. But the decline in spreads in some frontiers, …
Spanish industrial rent growth beat expectations in Q1 this year, outpacing rises elsewhere in the euro-zone. However, this was mainly due to Barcelona, where we have raised our prime rent forecast. Madrid rent gains were more sluggish and this trend is …
