The fading energy crisis and the falls in inflation and interest rates generated a more positive mood about the economic outlook at Euromoney’s Central and Eastern European (CEE) forum in Vienna this week compared with last year. But ongoing labour …
18th January 2024
Capital inflows into EM bond and equity markets have eased off a little recently, but they are still running around their highest level in over three years. And taken together with the narrowing of current account deficits over the last year, it suggests …
Lenders ready to meet increasing mortgage demand The latest Credit Conditions Survey showed a rise in the availability of mortgage credit in Q4 as financial market interest rates fell, but demand for mortgages slipped as mortgage rates took time to catch …
Headline and primary budget balances across Latin America generally improved over the course of 2023 (Brazil was a key exception). But it seems unlikely that this will be sustained, and debt-to-GDP ratios will return to an upwards trajectory over 2024-25. …
We think Norges Bank will keep its policy rate unchanged at 4.50% next week but, given the weakness in the krone and tight labour market, retain a hawkish bias in its guidance. Further ahead, we think rates will be cut sooner than the Bank expects as …
The Bank of England’s Q4 Credit Conditions Survey suggests the worst of the drag on economic growth from higher interest rates is fading. That suggests an economic recovery will begin later this year. The net percentage balance of banks’ supply of …
Early prime office yield data for Q4 suggest that the property correction deepened at the end of 2023. The sharp rises in yields occurred despite a more favourable market interest rate environment. This suggests that property pricing still has further to …
17th January 2024
The downward trend in the EU carbon price since early 2023 has been driven by lower demand for pollution permits on the back of industrial weakness and growth in cleaner energy sources. With energy-intensive activity in the bloc set to stay weak, and …
The latest euro-zone inflation data, published this morning, will dampen policymakers’ concerns about the strength of domestic price pressures. But with underlying inflation still too high for comfort, this won’t be enough for the Bank to change its …
Lower mortgage rates supporting demand The decline in mortgage rates appears to be supporting demand, with home sales rebounding last month. While prices continued to fall in December, the sales-to-new listing ratio is now pointing to positive house price …
16th January 2024
Perhaps surprisingly, the latest escalation in Middle East tensions has not prompted a surge in oil prices. We think this is because, so far, oil output is unaffected. Moreover, we suspect it also reflects concerns about weak demand, strong supply growth …
We are downbeat on industrial total returns over the next two years compared to the consensus because of our relatively pessimistic views on both rents and cap rates. And we think the risks to long-term returns are skewed towards the downside, which, if …
While sterling has outperformed other G10 currencies amid the dollar sell-off over the past couple of months, we expect it to reverse its gains against the greenback as short-term Gilt yields edge lower. So far this year, the pound has held up well …
The incidence of sovereign debt distress has fallen sharply across the emerging world in the last few months, but that doesn’t rule out the possibility of default in a handful of EMs. Tunisia looks most likely to do so, followed by Argentina and Ecuador, …
We have long highlighted the risk in Dubai’s corporate sector and the large debts that government-related entities (GREs) have accrued. This Update provides our latest estimates of these debts. The key point is that GREs appear to have weathered the large …
The resilience of euro-zone rental growth last year surprised us. But our analysis indicates that better-than-expected economic activity explained much of that strength and as recession looms in 2024, all-property rents are likely to slow more decisively. …
One of the big questions in Kenya in 2024 is whether the government can meet a $2bn Eurobond repayment due in the middle of the year. An improving balance of payments position, alongside an enhanced IMF deal and other external financing, mean that it …
The Bank of Canada’s quarterly business and consumer surveys continue to flash warning signs about the outlook for the economy and labour market. The normalisation of inflation expectations remains painfully slow, however, presenting a risk to our view …
15th January 2024
We doubt the recent resilience of business investment in the face of higher interest rates will last. Instead, we think a drop back in business investment will contribute to the economy continuing to stagnate in the first half of this year and a modest …
There was a wide disparity in house price growth across regions in 2023 and little reason to think that this year will be any different. Following the recent decline in mortgage rates, we suspect the largest rises in prices will be in the regions that …
We doubt that the modest fall in mortgage rates we anticipate this year will bring a great deal more stock onto the market. Because of that, the supply of existing homes will remain very tight, so we’re now forecasting a more subdued recovery in existing …
12th January 2024
We think that most major currencies in Latin American will fall against the US dollar this year. As a result, the relatively poor returns that we expect from equities in the region in local-currency terms are likely to be even worse in US dollar terms. …
China’s commodity imports were generally strong in 2023 and while growth rates will probably slow this year, we expect volumes to remain high in the coming months. China’s export volumes edged up in December and remained close to a record high fuelled …
This Update discusses how we think Taiwan’s election this weekend – which could be another flashpoint in Taiwan-China relations – might affect global equity markets, in aggregate and across some key sectors that look particularly exposed. Saturday’s …
Note: This is an updated version of an Update first published on 11 January following the belated release of government statistics on housebuilding for Q3 2023. Barring Q2 2020, when lockdown caused construction activity to cease temporarily, housing …
11th January 2024
In contrast to most of the past 20 years, RoUK industrial rental growth has almost matched the South East over the past couple of quarters. But that is unlikely to last. The boost to demand for big sheds in the Golden Triangle thanks to the surge in …
Much has been talked about a ‘flight to quality’ in the office sector given the structural shift to hybrid working. However, while there is evidence of this in relative rental performance, a look at the yield data suggests that the opposite has been true …
The IMF’s approval of the next disbursement of Argentina’s current deal will provide the government with the necessary funds to make upcoming repayments (due to the Fund itself). And the fact that the Fund endorsed the new administration’s policies marks …
Economic growth in Jordan has been sluggish for the best part of a decade and the outlook doesn't look much brighter. While the renewed IMF programme will help to contain external strains, the Israel-Hamas conflict will weigh on the crucial tourism sector …
The Bank of Korea left its policy rate on hold today (at 3.5%), but struck a more dovish tone than after previous meetings. With inflation on the way down and growth likely to struggle over the coming months, we expect the central bank to start cutting …
Communications from the governor of the National Bank of Poland (NBP) today suggest to us that policymakers could cut interest rates again at the central bank’s March meeting. But we think core inflation will remain above the central bank’s target until …
10th January 2024
The lagged effects of the weak economy and high interest rates may mean that loan default rates rise in the coming months. But the prospect of interest rate cuts later this year will mean they won’t rise much. Higher interest rates and the weak economy …
Note: W e held a client briefing straight after the election weekend to discuss what the vote means for Taiwan and the global economy. View the on-demand recording here . China may respond to a victory for Tsai Ing-wen’s chosen successor in Saturday’s …
The surge in Italian prime retail rents over the past year is likely to give way in 2024, as inflation falls back and consumer spending stagnates. But the strong fundamentals that have supported this outperformance are still in place and will help rent …
The surge in Chapter 11 business bankruptcy filings last quarter is not as bad as it looks, as many of them related to the WeWork failure. Excluding those, bankruptcies trended lower at the end of 2023 and, with corporate bond yields falling sharply in …
Some ECB Governing Council Members have called for an increase in reserves requirements, primarily in order to reduce the Eurosystem’s interest expenditure. If implemented – which we think is likely – this would have the effect of tightening monetary …
Our total returns forecasts for 2024 are significantly below consensus, as we predict that value falls will reach double digits for the second consecutive year. Retail stands out as the only sector where we expect positive returns, but distress in the …
9th January 2024
The surge in spending by state & local governments has boosted economic growth over the past year but, with tax revenues falling back in recent quarters, that boom is now set to fade. While there has been plenty of commentary on the support to the economy …
Aggregate EM GDP growth is set to slow in 2024, but as important as the overall story is understanding the different cycles that are playing out at a country level. We think some countries that performed surprisingly well last year (notably Mexico and …
The sharp drop in net foreign direct investment (FDI) inflows into India over the past year was in part a consequence of the rise in global interest rates and the worsening global economic backdrop. But it was also due to a clampdown on the roundtripping …
Industrial output in Germany is likely to follow November’s decline with further falls this year. While the recent fall in natural gas prices could help to stem the bleeding in the near term, energy costs are still high. And weak demand will compound …
Given the thick smog covering parts of South Asia, forcing schools to shut down and disrupting activity, this Update takes a closer look into the economics of air pollution. Air pollution is mostly caused by the burning of fuels and biomass, vehicle …
8th January 2024
Although bonds and equities have started the year on the back foot, which may continue in the near term, we think they’ll fare better over the year as a whole. We project especially large gains for equities. Any renewed hopes for a “soft landing” prompted …
In what was an extremely volatile year for the housing market, we made two key forecasting errors. Firstly, we didn’t anticipate the extent of the rise in mortgage rates. Because of that, we underestimated how tight supply in the existing housing market …
5th January 2024
Stubbornly high inflation pushed risk-free rates, and yields, somewhat higher than we had anticipated by the end of 2023. By contrast, rental growth proved surprisingly resilient even as the economy slowed to a crawl. But with economic growth set to be …
Our forecast of earlier Bank Rate cuts means that mortgage rates will be significantly lower than we had anticipated this year, which will lead to a stronger recovery in demand from mortgaged buyers. With little reason to think that demand from cash …
Falling interest rates will herald the end of the commercial property downturn in 2024. However, owing to price declines in H1 we still think values will end the year lower. Our forecast for marginally positive euro-zone returns – while a considerable …
The redirecting of trade ships away from the Red Sea and the associated rise in shipping costs are unlikely to lead to a resurgence in global inflation. However, if the warfare underpinning the disruption to shipping escalates into a wider regional …
4th January 2024
While we estimate the US dollar remains only somewhat above “fair value”, the valuations of some other major currencies are at extreme levels. For these currencies – notably the Mexican peso and Czech koruna – we think reversion towards fair value could …
While equities in China might make up some lost ground over the next few months relative to those in India, we suspect they’ll underperform over the longer term. In the fifteen years or so that preceded the COVID-19 pandemic, equities in China and India …
