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 …
15th August 2023
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 …
The yield of 10-year Japanese government bonds (JGBs) may come closer to the new “just-in-case” cap of 1.0% in the coming months, but we doubt it will settle that high further ahead. Since the Bank of Japan (BoJ) effectively abandoned Yield Curve Control …
After a strong run since April, inflows into EM bond and equity markets have softened markedly in the past few weeks. Inflows into India, in particular, have weakened. Turkey continues to see sizeable foreign inflows, but these are only a fraction of the …
Angola’s recent 40% devaluation of the kwanza will add to inflation pressures and prompt the central bank to tighten monetary policy aggressively, all of which will weigh on near-term growth. The large share of public debt in foreign currency, means that …
The RBI kept the repo rate on hold at 6.50% today as expected and maintained a hawkish tone amid the recent surge in food prices. It’s unlikely that the rate hiking cycle will restart. But there is a significant risk of the easing cycle that we expect to …
Market conditions continue to worsen Given the recent rise in average mortgage rates to their highest level since 2008, we are not surprised by the further deterioration in the RICS headline survey figures. And as we do not expect market conditions to …
The data show a small, but limited, divergence in performance between overall class A and classes B and C office space. But that differential appears to have been driven by newly-built trophy space rather than the broader class A grouping. We expect this …
9th August 2023
Recent interest rate cuts in Brazil and Chile have fuelled talk of a broad-based EM easing cycle and we expect most EM central banks to start cutting rates in Q4 or Q1. We expect those with the highest policy rates (above 10%) to deliver 500bp or so of …
Even though the financial strains that emerged after SVB’s collapse have dissipated, interest rate hikes have left overall financial conditions in major advanced economies close to their tightest since the GFC, posing downside risks to activity. As …
China’s commodity import volumes fell in July compared to June. Policy support should help lift metals imports over the next few months. And although crude oil imports fell sharply, we think that rising international aviation to and from China will …
8th August 2023
While Paris rents have been flat for some time, there are signs that the post-pandemic rebound in tourism is starting to boost high street luxury retail. And the upcoming Paris Olympics in 2024 will also add to demand, meaning retail rental growth should …
The appreciation in the Swiss franc this year has been largely at odds with moves in many of the factors which typically drive the currency. We believe this is mostly due to intervention from the Swiss National Bank (SNB) in foreign currency markets. …
7th August 2023
With CPI inflation soon to fall below average earnings growth, the cost of living crisis appears to be coming to an end. But households won’t suddenly stop feeling the pinch. We suspect the level of real household disposable income will remain below where …
Economies in Central and Eastern Europe (CEE) have experienced large and persistent net migration outflows in recent decades, but the tide has shifted in the past five years or so as outflows have dropped sharply. This is likely to continue, with net …
We previously argued that stretched housing affordability and a looser labour market would result in a second leg down in house prices. However, with the housing market going from strength to strength on the back of resurgent population growth, we now …
Extreme weather phenomena in Europe as well as worldwide, including El Niño , could push up food and energy prices. But we think that these only pose a very small upside risk to our inflation forecasts. Over the past few years, warmer temperatures and …
4th August 2023
The US government losing another one of its “AAA” ratings after Fitch Ratings’ downgrade decision Wednesday is more symbol than substance. But three key related points are worth highlighting. First, the market reaction differs significantly from that of …
Saudi Arabia’s announcement yesterday that it would extend its unilateral oil production cut of 1m bpd into September sent the Brent crude oil price climbing to $85 per barrel, where it remains today. We think the price will remain at around this level …
The Central Bank of Egypt unexpectedly hiked interest rates late yesterday, by 100bp to 19.25%, but it still needs to follow through with another devaluation as well as further rate hikes in order to get investors back on board. With growing signs that …
We suspect the boost to “risky” assets from the resilience of the economy may have mostly run its course. Risky assets in the US have stumbled over the past couple of days as Treasury yields have climbed. But that still leaves them having made quite big …
The French stock market’s strong showing since 2018 appears to have been built on solid ground. But French equities have stopped outperforming their German peers this year, and the bar is quite high for them to start doing so again. French and German …
3rd August 2023
As major central banks near the end of their tightening cycles, the latest evidence of US economic resilience suggests to us that the dollar is poised to appreciate over the next couple of quarters. Over the past week or so, the Fed and other major DM …
The key points that stand out from the recent moves by central banks in Brazil, Chile and Hungary to cut interest rates are, first, how quickly policymakers have shifted from hawkish to dovish and, second, how they appear to be front-loading their …
Despite capital value falls of 7% and 9% to-date for industrial and apartments respectively, we are forecasting around 15% further value declines as cap rates rise. But the falls in appraisal-based indices appear to be lagging those in the market, where …
We’ll be discussing Argentina’s upcoming PASO election and what it means for the economy in a 20-minute online Drop-In on Wednesday 9 th August at 10:00 EDT/15:00 BST. (Register here .) There are some unnerving similarities between Argentina’s current …
Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm BST today. (Register here .) Today’s 25 basis point (bps) rise in interest rates from 5.00% …
We think El Ni ño poses downside risks to the prices of emerging market assets, in general. But even if the effect in aggregate wasn’t all that large, there are several vulnerable sectors where such an event could create some relative winners and …
We have collated a range of low-profile activity data for the UAE that point to strong activity in the non-oil economy. But this won’t be enough to offset the impact of oil production cuts. Prospects for next year are better, though, and we think the UAE …
The property downturn has left state-owned developers the dominant players in a previously privately-led sector. The state is likely to continue playing a larger role as consolidation continues around more financially-secure firms. Based on a sample of …
We recently held a Drop-in titled “Office Sector Armageddon – Who gets hit hardest?”, which you can view on-demand here . This Update addresses some of the specific European questions we received during the event. Which European cities will do better? At …
Despite some recent high-profile labour strikes, it still seems likely that overall wage growth will slow sharply during the next 12 months, as labour demand cools and elevated immigration boosts supply. Some commentators have argued that the recent …
2nd August 2023
Last week, we held a Drop-In on the future of office property, which you can view here . This Update provides answers for a variety of questions from a UK perspective that emerged from the discussion. How does the office outlook compare across regions in …
We estimate that China’s trend rate of growth has slowed from 5.0% in 2019 to 3.0% now, based on our China Activity Proxy. This is a steeper deceleration than in the years leading up to the emergence of COVID-19. The official GDP data, while not fully …
The Bank of Thailand (BoT) today raised its policy rate by a further 25bps (to 2.25%), but we think this marks the end of the tightening cycle. With inflation now well below target and headwinds to the economic recovery mounting, we expect rates to remain …
