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We don’t think US equity market outperformance is over yet, despite the challenge from DeepSeek. The tone in US equity markets has turned more positive lately, with a modest gain on Thursday and futures pointing (at the time of writing) to another in …
31st January 2025
This page has been updated with additional analysis since first publication. Higher mortgage rates starting to weigh on prices, but it won’t last Although the muted 0.1% m/m rise in Nationwide house prices in January was slightly worse than expected …
BoJ may need to lift inflation forecasts further The economic data released this week support our non-consensus view that the Bank will deliver two more 25bp rate hikes this year. For a start, two out of the three measures of underlying inflation the Bank …
We still expect a shallow easing cycle Over the past few weeks, we’ve been flagging the risk that the Reserve Bank of Australia would loosen policy settings sooner rather than later. With CPI data released this week surprising materially to the downside, …
Conditions for further tightening remain in place The end-month data rush vindicates the Bank’s decision to lift its policy rate last week and suggests that further tightening over the coming months is likely. Taking the activity data first, the 0.3% m/m …
The Q4 RICS commercial property survey saw investment sentiment turn positive for the first time since 2022 and a shift in perceptions of cycle phase, with the majority now believing we have reached the bottom or already in an early upturn. At the sector …
30th January 2025
January’s EC survey points to continued weak GDP growth at best. While it also suggests that there are some upside risks to inflation in the near term, firms’ employment expectations and labour shortages are easing which should help to bring down services …
We forecast a 170,000 gain in non-farm payrolls in January, which would mark a slight acceleration from the recent average if we are right in assuming that there will be downward revision to past payrolls figures. Meanwhile, we think the unemployment rate …
Underlying economic growth remains solid The 2.3% annualised gain in fourth-quarter GDP was a little weaker than the consensus estimate at 2.6%, but expectations would have come down a little after the December advance economic indicators showed a big …
Bank to cut interest rates by 25bps at February’s meeting, from 4.75% to 4.50% The tail risks of both faster disinflation and slower disinflation have increased Rate cuts to stay gradual, but rates to fall to 3.50% in 2026 versus market pricing of 4.00% …
This page has been updated with additional analysis since first publication. Downbeat outlook isn’t heavily weighing on households’ financial decisions December’s money and lending figures suggest the downbeat economic outlook isn’t weighing on households …
Fed moves to the sidelines The Fed left its key policy rate unchanged at between 4.25% and 4.50% today and the accompanying statement suggests the FOMC is happy to remain on the sidelines, as it awaits more clarity on the potentially stagflationary mix of …
29th January 2025
Fed moves to the sidelines The Fed left its key policy rate unchanged at between 4.25% and 4.50% and the accompanying statement suggests the FOMC is happy to remain on the sidelines, as it awaits more clarity on the potentially stagflationary mix of …
Overview – Inflation has proved somewhat stickier than we had anticipated, but the outlook of lacklustre growth, softening labour markets, normalising supply conditions and falling energy costs is consistent with further falls to come. Tariffs are a fly …
With the economy doing better recently, the Bank of Canada’s decision to cut by 25bp today might have been a closer call were it not for the looming threat of tariffs. Admittedly, the Bank hinted that it might have to refrain from providing more policy …
Bank cuts by 25bp as 25% tariff threat hangs over the economy With the economy doing better recently, the Bank of Canada’s decision to cut by 25bp today might have been a much closer call were it not for the looming threat of US tariffs. Any tariffs could …
Soft CPI data paves the way for RBA to cut in February With underlying inflation on track to enter the RBA’s 2-3% target band this quarter, we now expect the Bank to begin its easing cycle at its next meeting in February. The 0.2% q/q rise in consumer …
The inflationary impact of tariffs for all President Trump’s various tariff threats would, if implemented in full, trigger a rebound in consumer price inflation later this year to between 3% and 4%, which would make it much harder for the Fed to resume …
28th January 2025
Fourth-quarter business equipment investment set to decline The fall in durable goods orders in December was due to the volatile transport component, whereas core and underlying capital goods orders both rose. While real underlying capital goods shipments …
News that Chinese start-up DeepSeek’s AI Assistant has usurped US OpenAI’s ChatGPT as the most downloaded free app on Apple’s App Store has dealt the US stock market a blow today, just a week after Stargate was launched to much fanfare. Exports from the …
27th January 2025
Newbuild demand remains a bright spot in otherwise frozen market The 3.6% increase in new home sales in December wraps up a solid year for newbuild demand in an otherwise stagnant housing market, with sales up nearly 3% over 2024 as a whole. We expect new …
The experience from other advanced economies is that there’s no hard and fast rule for how long it will take for the labour market to loosen in response to rate hikes by the Bank of Japan. But with the real policy stance set to remain loose, we expect the …
President Donald Trump’s first week back in office kicked off with a bang. He signed around 100 executive orders and strongly signalled that there were more policy changes to come. The week’s developments give us more confidence in our earlier assumptions …
24th January 2025
An especially ‘Blue Monday’ for Canadians President Trump used his first week (back) in office to double down on threats to impose a 25% tariff on imports from Canada, with the added detail that this could come into effect on February 1 st . As we …
Small rise in sales does not mark beginning of the recovery The small rise in existing home sales in December reflects deals that came together in September and October, when mortgage rates hit a nadir of 6.2%, getting across the line. Given the recent …
At face value, the latest batch of flash PMIs suggest that economic activity remained weak in Europe at the start of the year and lost some momentum in the US. Meanwhile, price pressures seem to be increasing everywhere, meaning that most central banks …
In the first glimpse into how the economy has started the new year, this week’s data took another turn for the worse. First, according to the CBI Industrial Trends Survey (ITS) of the manufacturing sector, in Q1, the optimism, expected activity and …
This page has been updated with additional analysis since first publication. Stagflation concerns remain at the start of 2025 Despite the small rise in the composite activity PMI from 50.4 in December last year to 50.9 in January, at face value it is …
Having hit a record high, we expect the trade-weighted US dollar to climb further in 2025. While the short-term danger that a strong dollar poses to the world economy tends to be overblown, the bigger risk is that is worsens external imbalances which …
The Bank of Japan signalled further tightening when it lifted its policy rate to 0.5% today. With inflation set to remain above its 2% target this year, we expect the policy rate to reach 1.25% next year. The Bank’s decision to lift interest rates to 0.5% …
BoJ signals further tightening As widely anticipated, the Bank of Japan resumed its tightening cycle with a 25bp rate hike to 0.5% at its meeting on Friday. And the Bank’s Outlook report suggests that there’s more to come: the Bank revised up its …
Bank of Japan will lift policy rate to 1.25% next year The Bank of Japan hiked its policy rate to 0.5% today and we think it will lift it to an above-consensus 1.25% by the middle of next year. The Bank’s decision to resume its tightening cycle with a …
Case for RBNZ to ease aggressively remains intact With data released this week showing that inflation in New Zealand remained subdued last quarter, it’s all but certain that the RBNZ will cut rates by another 50bp, to 3.75%, at its meeting next month. …
Flash PMI points to pick-up in activity this quarter The continued rise in the composite PMI to its highest point since Q3 last year supports our view that activity will pick up again this quarter. Today’s flash estimate showed that the manufacturing PMI …
Strength in underlying inflation points to further tightening The acceleration in headline inflation and strength in underlying inflation in December should add to the Bank’s confidence that it can resume rate hikes today and over the coming months. In …
23rd January 2025
Although developed market (DM) equities outside the US have purportedly benefited from bargain hunting recently, we doubt they will outperform their counterparts in the US over the course of 2025 as a whole. MSCI’s World ex USA Index of DM equities has …
Economists from our US, Europe and UK teams hosted this online briefing all about the first rate decisions of 2025 from the Federal Reserve, European Central Bank and the Bank of England. During the session, the team addressed key issues, including: How …
Heading for another strong quarter On the surface, the 0.4% decline in retail sales volumes in November looks worrying, but that fall partly reflects households delaying purchases ahead of the December GST holiday. Encouragingly, November’s drop appears …
Our analysis suggests that most of the recent rise in the household saving rate can be attributed to cyclical rather than structural factors, which means the saving rate will slowly fall as interest rates decline. That lends support to our view that …
Recent upside surprises to activity and core inflation could justify a pause However, with tariffs hanging over the economy, Bank will opt for a 25bp cut Bank set to call time on QT this year The recent pick-up in GDP growth and core inflation pressures …
22nd January 2025
Donald Trump’s ringing endorsement of Stargate is another shot in the arm for Artificial Intelligence (AI) in the early days of his second presidency, and supports our long-standing view that the S&P 500 will thrive in 2025 amid growing investment in, and …
We think Trump’s trade policies will weigh on equity returns outside of the US, making 2025 a year of muted returns for emerging market (EM) equities. But we think it will still be a decent year for stocks in other developed markets (DMs). (See Charts 1 & …
This page has been updated with additional analysis since first publication. Figures not as bad as they appear but challenges remain Against a backdrop of slowing GDP growth and high interest rates, December’s overshoot in borrowing is further …
We suspect that a Coalition government would run slightly tighter fiscal policy than Labor, which in turn may encourage the Reserve Bank of Australia to loosen monetary policy a bit more aggressively than we’re anticipating. But while we expect the …
This page has been updated with additional analysis since first publication. With price pressures continuing to abate, the RBNZ should have no qualms about cutting rates by another 50bp at its meeting next month. The 0.5% q/q rise in consumer prices last …
21st January 2025
