Market concerns about sovereign debt risks across frontier markets have eased a touch in recent months. For our part, while we think that Egypt and Nigeria should be able to avoid default, Kenya faces a more challenging path to do so. And in the cases of …
23rd August 2023
In an environment in which firms feel able to pass on higher energy costs in their selling prices, the latest leap in wholesale gas prices poses an upside risk to our forecast for core CPI inflation to fall to 2.0% by the start of 2025 and to our forecast …
While difficult to quantify, we estimate that the growth of tourism added around 0.3% to euro-zone GDP growth in the first half of 2023. However, we think growth will be much slower in the second half of the year as the sector has now broadly regained its …
22nd August 2023
Somewhat paradoxically, climate-driven shifts in tourist patterns could help to smooth the seasonal peaks seen in summer destinations, and some countries – particularly in northern Europe – will become more attractive places to visit. However, there is a …
Equities in Latin America have generally returned more than those in the rest of the world so far this year for US dollar-based investors willing to shoulder the currency risk. We think that is set to change. The total return in US dollars from the MSCI …
We estimate that firms have now passed on all of the increase in import costs to consumer prices which suggests that inflation will slow sharply over the coming months. Japan’s import prices have fallen sharply in recent months. However, goods inflation …
China’s push to develop the BRICS bloc into a geo-political counterweight to the G7 is likely to be thwarted by the competing interests and priorities of other member states. Nonetheless, positioning ahead of this week’s BRICS summit will provide some …
21st August 2023
Price volatility in the wake of news of possible strike action at Australian LNG export terminals serves as a reminder that natural gas markets are still carrying the scars of Russia’s invasion of Ukraine. High volatility is likely to remain until …
The Dominican Republic recorded an impressive post-pandemic recovery, but we think that a combination of a fading boost from tourism, weakness in the US and tight fiscal policy will cause growth to slow by more than most expect this year and next. The …
With inflation cooling, the government may soon become more willing to support the economy, but we doubt it will provide as much support as it did during the global financial crisis. However, net trade may not provide as much support as during previous …
We continue to expect historic highs for apartment completions in 2023-24 even though there are signs some will be deferred. This also means that, although new permits have dropped back amid softer market conditions and a tougher outlook for investors, we …
18th August 2023
Property yields have risen less sharply this year, but there remains considerable uncertainty about where they will peak. We returned to our yield model for guidance and, while a re-specified equation supports our view that office yields will top out at …
The S&P 500 IT sector has struggled this month amid rising bond yields and waning enthusiasm for AI. While we think the sector may fall further this year in absolute terms, we still project it to outperform in this period. What’s more, we expect the …
17th August 2023
Housing market coming back into balance The decline in the home sales-to-new listing ratio in July supports our forecast that house price growth will slow over the rest of the year. While housing starts remained high in July, they still look likely to …
With the headwinds growing for China’s economy, we think its equity markets will struggle, its 10-year yield will continue to fall and its currency won’t rebound as quickly as we’d thought. At the start of the year China’s economy was powering ahead. But …
China’s economy has stalled recently and headwinds are still intensifying on multiple fronts. The lack of a stronger stimulus response partly reflects a greater tolerance for economic weakness. But it also points to a worrying degree of policy paralysis, …
China’s prominence as a creditor to African economies goes a long way to explaining the slower speed of debt restructuring negotiations in Zambia, in contrast to Ghana, following their respective defaults. Mozambique and Kenya are two other countries …
Mortgage arrears were still low in Q2, but the number of Buy-to-Let (BTL) mortgages in early arrears increased at an alarming pace. We suspect that will continue in Q3. A growing number of landlords inability to meet their mortgage costs is likely to lead …
The central bank (BSP) in the Philippines today left interest rates unchanged for a third consecutive meeting and, although the economy weakened markedly in Q2 and inflation is nearly back to target, rate cuts are off the table in the near-term due to …
Norges Bank is very close to the end of its tightening cycle. After today’s 25bp hike, taking the deposit rate to 4%, we expect one final 25bp increase in September. We have then pencilled in a faster pace of rate cuts next year than policymakers …
Exceptionally high inflation in the major economies of Central and Eastern Europe (CEE) relative to elsewhere has left their currencies overvalued against the US dollar and on a trade-weighted basis in our view. We think there is scope for these …
16th August 2023
The outlook for industrial metals demand has deteriorated alongside the weakening of China’s economy this year, particularly in the property sector. Monetary and fiscal stimulus might paper over the cracks, but we doubt it will be enough to do much more …
The support to industrial production from the end of major supply chain disruption has run its course. And while the drop in gas prices over the past year could give a boost to some firms, output expectations in the most energy-intensive sectors are …
Note: We’ll be discussing the economic and financial risks facing China’s economy, and their implications for global markets, in an online briefing on Thursday, 17th August. Register here to join. Financial problems at Country Garden, once considered …
The Reserve Bank of New Zealand left rates on hold, as was widely expected. However, the minutes of today’s meeting were unambiguously on the hawkish side, with the Committee indicating the need to keep policy settings restrictive for a protracted period. …
Given the dominance of coal in China’s energy mix, a medium-sized electric vehicle (EV) produced there currently starts life with a “carbon debt” almost twice that of an equivalent internal combustion engine (ICE) vehicle. However, the greater efficiency …
15th August 2023
On the back of the remote work revolution, US downtowns have seen reduced office-led footfall and rising crime rates. Cities will need to be proactive to drive conversion to alternative use and to find ways to regenerate what were often thriving areas …
The crises unfolding in Argentina, Russia, as well as in China’s property sector, this week may rumble on for some time. And in the case of China’s property downturn, there are likely to be spillovers to other EMs, particularly metals producers. But these …
The decision by Russia’s central bank to increase its policy rate by 350bp, to 12.00%, at an unscheduled meeting today underscores the challenges that policymakers are now facing to maintain macroeconomic stability in an economy that is being distorted by …
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 more than 80% of cases in the last 30 years. Sovereign debt defaults occurred after …
We think that Arabica and Robusta coffee prices will remain historically high over the next 12 months or so, but especially the Robusta price owing to greater El Niño-related supply risks. With that said, we forecast that global coffee supply will …
Inflation across Emerging Asia should continue to decline over the coming months. However, the risks are to the upside amid uncertainty over the outlook for food prices. And while we are sticking with our forecast that more Asian central banks will lower …
Interest rate-sensitive activity in advanced economies has fallen, but is still holding up rather well given how much interest rates have risen. This is partly due to the rebound in auto sales and more recently mortgage approvals. But we still think …
Most of the plunge in import volumes last quarter reflects lower energy imports. With the Ukraine war rekindling concerns about energy security and energy prices remaining stubbornly high, import volumes may continue to fall in future even if domestic …
This page was first published on Tuesday 15 th August, covering the reduction to the Medium-term Lending Facility rate. We added commentary following the cut to the 1-year Loan Prime Rate on Monday 21 st August. LPR follow-up disappoints after largest MLF …
Oil output cuts fuelled Saudi Arabia’s economic downturn in the first half of 2023 and the drag from the oil sector appears to have intensified more recently. Taking together with signs that activity in the non-oil sector is cooling, the Kingdom’s …
14th August 2023
In contrast to shops and retail warehouses, the nascent recovery in shopping centre rents has already faded. The shift to remote work and greater exposure to online competition has led to relatively weak sales of the type of goods shopping centres offer, …
The immediate global economic and market fallout from troubles at Chinese property developer Country Garden seems likely to be limited. Foreign exposure to China’s property sector has fallen sharply over recent years and policymakers should step in to …
Surveys show that most people in the UK want action to tackle climate change but many do not have the appetite to pay for it. And given that the fiscal firepower and political will to grease the wheels of the green transition are both in short supply, …
Core inflation has been falling for around a year in the US and we suspect that it won’t be long before it starts falling in the euro-zone too. However, while core goods inflation in the euro-zone is likely to follow that in the US by dropping sharply, we …
The surprisingly strong showing for far-right self-proclaimed “anarcho-capitalist” Javier Milei in Argentina’s primary elections (known as the PASO) suggests that there is popular appetite for a shock-therapy style approach to deal with the economy’s …
Natural gas prices were the biggest mover in commodity markets this week, jumping higher on the back of news of potential industrial action at LNG plants in Australia. We don’t think gas prices in Europe are likely to return to their peaks of last year , …
11th August 2023
The big swings in Treasury yields recently have sent some ripples through the US stock market. This Update sets out how we think this will continue to play out, for the equity market as a whole and across some particularly interest-rate sensitive sectors, …
Consumer price inflation slipped into negative territory in July. But this probably won’t last more than a quarter or two and has less to do with the health of domestic demand than many think. Inflation in services, the part of the CPI basket most …
Since our last Financial Market Stress Monitor on 13 th May, strains have continued to ease. This abbreviated Stress Monitor takes stock of developments since then. Overall, stress across core financial markets appears about as low as at any point …
10th August 2023
With lingering pandemic and energy support measures coming to a close and governments returning one eye to previous fiscal targets, fiscal policy will tighten a little in advanced economies over the coming years. This will contribute to slower growth. But …
We are unconvinced by Christine Lagarde’s claim that the recent strength of employment in the euro-zone is due mainly to labour hoarding and shifts in the sectoral composition of employment. Instead, we suspect it is mainly due to understaffed firms …
The stark and unusual contrast between falling credit spreads of high-yield (HY) corporate bonds and rising ones of private-label commercial mortgage-backed securities (CMBS) in the US suggests investors expect the economy there to shrug off lingering …
We think Norges Bank will go through with its plan to raise its policy rate by 25bp next week, to 4.0%, and follow that up with a final hike in September to 4.25%. At its last meeting, in June, Norges Bank raised its policy rate by 50bp, to 3.75%. That …
Bucharest offices have been CEE’s best performing so far this year, as rent growth has accelerated rapidly. Although we expect growth to slow sharply from 2024, constrained supply of prime space and persistently high inflation suggest prime rents will …
