Oil prices are likely to remain buffeted by supply fears as long as the conflict in the Middle East continues. However, we think there will be support on the demand side later in the year as monetary policy in most major economies is loosened. By …
6th February 2024
Distress in the US commercial property market is once again in the news, but the risk of that spreading to the UK is low. The rise in aggregate loan-to-value ratios to date looks manageable and with interest rates also trending down we doubt there will be …
Western metros again at risk from announced layoffs Although December’s average job growth rate of 0.3% 3m/3m across our 30 metros signalled a tepid end to 2023, it brings to a close a surprisingly solid year for total employment. The same can’t be said …
This page has been updated with additional analysis since first publication. Construction PMIs start 2024 in contractionary territory The rise in the headline CIPS construction PMI from 46.8 in December to 48.8 in January was driven by improvements in …
With the Reserve Bank of Australia still striking a hawkish tone at its meeting today, we’re pushing back our forecast for the Bank’s first rate cut from May. But we still think that incoming data will show enough of a drop in inflation alongside …
RBA pours cold water on the prospect of early rate cuts Although we're sticking with our view that the RBA is done tightening policy, rate cuts may not be in play until the second half of this year. The RBA’s decision to leave its cash rate on hold at …
This page has been updated with additional analysis since first publication. Further regular wage increases incoming While winter bonus payments increments disappointed in December, regular wage growth accelerated substantially. Looking ahead, we think …
5th February 2024
Credit conditions normalising The Fed’s latest Senior Loan Officer Opinion Survey suggests that banks have put last year’s SVB regional bank crisis firmly behind them and, with long-term interest rates markedly lower than the peaks reached last October, …
Recent headlines have drawn attention to the immediate risks facing multifamily investors and lenders. While we think this concern is appropriate, we think the biggest risks face assets financed at historically low fixed rates in 2020-21. Problems are …
Energy prices have so far shrugged off disruptions to shipping in the Red Sea and the risk of wider conflict in the Middle East. If energy production continues to be largely unaffected, we expect most prices to fall further by the end of the year. Greater …
Oil prices have had only limited impact on US Treasury yields recently, and we suspect that this will remain the case in the next couple of years. So far this month, oil prices have fallen back quite sharply. At around $72 per barrel (pb) at the time of …
The news this morning that the unemployment rate is lower than previously thought increases the chances that interest rate cuts start a little later and are slower. After publishing experimental labour market data for the five months to November due to a …
Given the rise in rents and the recent decline in mortgage rates, the financial benefit of buying over renting is increasing. This will boost buyer demand and cause tenant demand to soften this year. As housing is a necessity, households must either rent …
Services activity apparently gaining momentum Following on the heels of the strong labour market data, the rebound in the ISM services index to a four-month high of 53.4 in January, from 50.5, is another signal that the US economy remains impervious to …
To mark the addition of Canada to our Regional Climate Databank , this Update takes a closer look at the sub-national climate-related data in the country. Our Global Climate Databank and Green Transition Scores are the places to go to compare climate …
Euro-zone investment improved a little in Q4, but that did not prevent it experiencing its worst year in a decade. While we have raised our forecast for through-year growth, we still expect a weak start to 2024 and think that by historic standards it will …
January’s batch of PMIs showed that activity across non-hydrocarbon sectors in the Gulf eased a touch at the start of the year, but activity remains robust and will support the broader economic recovery in 2024. In contrast, the disruption in the Red Sea …
The big takeaway from the first Federal Reserve, European Central Bank and Bank of England meetings of 2024 is that policymakers will not be pushed into cutting rates any time soon. Policymakers in China appear to be in a similarly cautious mood. The …
Headline inflation picks up, all eyes on new governor Headline inflation edged up slightly in Turkey to 64.9% y/y in January, and the m/m figure – a 6.7% increase on the back of a large minimum wage hike – looked even worse. The figures highlight the …
The national accounts data released today suggest that economic growth remained broadly stable last quarter, but we don’t have much faith in the official data. With economic activity likely to remain weak in the coming quarters, and concerns about …
If Jerome Powell dampened talk of a March rate cut on Wednesday then the January payrolls report on Friday stamped it out for good. In the latest episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil Shearing dives into the …
2nd February 2024
The US Employment Report , released today, showed that non-farm payrolls for January came in at a whooping 353,000 – even more than the upwardly revised 333,000 number for December and almost double analysts’ median expectation. Immediately after the …
The DXY index seems set to close this week at its strongest level in almost two months, breaking out of a narrow range amid a flurry of data releases out of the US. Consistent with Fed Chair Powell’s continued emphasis on data dependence, signs of …
Naira plunges again, is the policy shift back? This week the naira dropped for a second time in eight months, contradicting months of claims by officials that the currency will witness a revival. The hope is that this new found policy pragmatism extends …
We have revised down our forecast for US natural gas prices this year, as the outlook for domestic supply has improved. In the near term, a perfect storm of impediments to exports has emerged and sent spot prices tumbling. Henry Hub was down by over 20% …
First rate cut delayed until May Based on the steer provided by Fed Chair Jerome Powell halfway through this week’s press conference, we now expect the first Fed rate cut to come at the early-May FOMC meeting rather than in mid-March, with the Fed cutting …
Milei’s shock therapy plan suffers another blow As expected, the IMF Board signed off on the seventh review of Argentina’s $44bn programme this week. This gives the country access to the next loan tranche of $4.7bn to support “authorities’ upfront policy …
The upside surprise to fourth-quarter GDP should, somewhat counterintuitively, make the Bank of Canada more confident that inflation is heading back to 2% because it implies that productivity has rebounded. Nonetheless, with the Federal Reserve pushing …
Rate forecast changes on more hawkish Fed Our US Team changed their interest rate forecasts on Wednesday after Federal Reserve Governor Powell pushed back against the possibility of a rate cut in March. We now expect a first cut in May. In response we are …
The Bank of England caused a lot of waves in the media and some ripples in the markets this week. But it hasn’t altered our thinking that lower inflation than the Bank of England expects will mean rates are cut from 5.25% to 5.00% in June and all the way …
Surging employment may explain Fed’s hawkishness The 353,000 surge in non-farm payrolls in January illustrates why the Fed is apparently in no rush to start cutting interest rates and kills off any remaining chance of a cut as soon as March. Even if that …
EM Drop-In : We'll be discussing EM policy easing, debt risks and the outlook for bond yields in our monthly EM drop-in on Thursday 8th February . Register here . Ukraine aid deals ends a week of uncertainty Hungary dropped its veto against the EU’s …
Industrial metals demand will recover this year, boosted by rate cuts and stabilising economic growth in advanced economies. In addition, construction activity in China is robust and we think support for property developers will stabilise the sector and …
Events in Egypt yesterday, including a large interest rate hike and comments that a disbursement of more IMF funding is close, suggest that a shift towards more orthodox policy is nearing. If a new, enhanced IMF deal is agreed, that will almost certainly …
TFP touted as key metric for Xi’s new growth model President Xi has spoken a lot in recent years about the need to foster “high-quality development” (HQD). There have been a raft of policy documents and state media editorials attempting to flesh out what …
We expect big tech to drive the S&P 500 higher still in 2024, despite a mixed performance from the shares of most of the so-called ‘Magnificent 7’ over the last ten days in the wake of a flurry of earnings reports. To re-cap, six of the Magnificent 7 have …
Price hikes back on the menu Data released this week support the case of ECB policymakers who are concerned about the strength of domestic inflation. January’s European Commission business and consumer survey, released on Tuesday, suggested that selling …
Kishida pushing for wage increases PM Kishida pledged on Tuesday that the government will “take all possible steps” to raise real incomes this year. While he mentioned no new measures, his government recently rolled out tax breaks for firms that offer …
Finance Ministry focuses on consolidation Despite the looming general election, we had expected the Interim Budget for FY24/25 to be a muted affair. In the event, the Finance Ministry showed even more restraint than had generally been anticipated. The …
At face value, the rebound in European equity REIT prices over recent months suggests that capital values could be nearing their trough. But the past relationship is weak and REITs have benefited from the stock market rally. We therefore don’t see the …
Elevated inflation and hawkish RBI rhetoric suggest rates to be left on hold next week Policy pivot only likely when headline inflation is closer to 4% Rate cuts will materialise in second half of 2024, much later than in many other EMs We agree with …
RBA will soon be gearing up for rate cuts… CPI data released this week bolstered our conviction that the Reserve Bank of Australia will loosen policy in Q2, rather than in Q4 as the analyst consensus is predicting. For one thing, both headline and trimmed …
We don’t expect the Australian and New Zealand dollars – which have been two of the worst-performing G10 currencies this year – to fall much further. It’s been a rough start to the year for the aussie and the kiwi: although all the non-US G10 currencies …
Indonesians go to the polls on 14 th February to elect a successor to Joko Widodo, the president popularly known as Jokowi, who pushed through some key reforms to secure the country’s long-term economic future. Will his successor build on those efforts …
1st February 2024
While developed market central banks pontificate over the timing of rate cuts, the loosening cycle among emerging markets is well underway and gathering pace. But which EMs will be next to fire the starting gun on policy easing? And what does all of this …
The big picture from January’s manufacturing PMIs was the growing outperformance of industry in major EMs compared to their advanced economy peers. The surveys also highlighted that Red Sea disruptions are causing delivery times to lengthen. For now, …
Despite the Bank of England (BoE) following the Fed in pushing back against imminent rate cuts, Gilt and Treasury yields are on track to post big falls today. That partly reflects renewed concerns over US regional banks, and offers a reminder that for …
While the emerging market manufacturing PMIs for January generally edged up, we think that weak global demand will weigh on EM industry over the coming months. The good news is that price pressures remain in check, supporting our view that the EM easing …
