Copom on hold, rate cuts off the cards for the rest of 2024 Rising inflation, a worsening fiscal position and a slump in the real prompted Brazil’s central bank to leave the Selic rate at 10.50% today and strike a more hawkish tone in the accompanying …
31st July 2024
Fed lays the groundwork for September rate cut There was no surprise rate cut from the Fed today, with the fed funds target range left unchanged at between 5.25% and 5.50%, but the changes in the accompanying statement – which included a shift from a …
Fed lays groundwork for September rate cut There was no surprise rate cut from the Fed today, with the fed funds target range left unchanged at between 5.25% and 5.50%, but the changes in the accompanying statement – which included a shift from a …
Africa Chart Pack (Jul. 2024) …
We don’t think the recent rotation in US equities sets the stage for something much bigger. We expect the “big-tech” sectors to lead the charge again before long, helping equities in the US outperform those in most other economies. And we expect equities …
Activity softens a touch at the end of Q2 Russia’s economy lost a bit of steam in June, but it still looks like GDP growth over Q2 as a whole was very strong, with growth tracking at 4.5-5.0% y/y. Industrial production growth slowed from 5.3% y/y in May …
Labour puts wind in the sails of renewable rollout The new UK Labour government took swift action on climate policy this month on two fronts . First, the additional planning restrictions that applied to onshore wind projects in England have now been …
If implemented in full on day one, Donald Trump’s trade, immigration and fiscal policies would together be stagflationary. We suspect that he will be forced to water down his plans, however, and it could take some time to implement them. The upshot is …
Business bankruptcies rose further in the first half of 2024, mainly due to higher Chapter 11 filings as firms were forced to restructure their debts. It is typically the change in borrowing costs that matters most for Chapter 11 bankruptcies, however, …
The rise in severe weather events over the last five years has left property insurers scrambling to price-in physical risks, causing premium growth to reach a 20-year high. While we think the worst is over, growth will likely remain above the historic …
Emerging Asia Chart Pack (July 2024) …
Second-quarter growth looks a bit better than expected The larger-than-expected rise in GDP in May suggests that the economy performed a little better than we anticipated last quarter, although the preliminary estimate of only a small rise in June is …
We have revised down our forecasts for government bond spreads in Spain and Portugal, but we continue to think that those in France, as well as in Italy and Belgium, are more likely to rise than fall. The dust has now settled in bond markets after the …
Slowdown in wage growth another reason for Fed to cut rates The further slowdown in wage growth evident in the second-quarter employment cost index data won’t be enough to prompt a surprise rate cut from the Fed later today, but it does strengthen the …
The Argentine peso’s overvaluation is becoming an increasing point of concern and attention has shifted to whether the Milei administration will lift capital controls. We think that some form of easing of restrictions, such as the scrapping of taxes on FX …
At the end of the pandemic, there was a view that remote working would drive a wedge between CBD and other submarket rents. The evidence of this remains uneven. But in some cities, notably Paris and London, a shift to central locations may have helped …
Our view on emerging market local-currency government bonds is broadly upbeat for the next year or so. We think returns will be largest, in common-currency terms, in Emerging Asia. It’s been a mixed year so far for local-currency sovereign bonds in …
The latest rate hike by the Bank of Japan (BoJ) has implications for domestic and global markets – we think there are several points to note. Today’s decision by the BoJ to tighten policy by more than discounted in the markets was accompanied by a …
This page has been updated with additional analysis since first publication. Services inflation easing, but still too high for comfort The small fall in services inflation in July is probably just enough for a September rate cut to remain the base case. …
External demand no longer driving growth Hong Kong’s GDP growth slowed significantly in Q2, with activity expanding by just 0.4% q/q, down from a strong 2.3% q/q expansion in Q1, although this was slightly stronger than both we and the consensus expected …
Economy stalls, but growth to accelerate in H2 Taiwan’s economy almost stalled in the second quarter, with growth coming in well below our expectations. While we think GDP growth will pick up in the second half of the year, we are cutting our full-year …
The fading drag from load-shedding was widely expected to allow a recovery in South Africa’s economy this year, but this hasn’t materialised. We think that weak demand is to blame, itself a symptom of tight fiscal and monetary policy and a challenging …
Strong non-oil growth underpins solid Q2 Saudi Arabia’s flash estimate of GDP showed that that the economy grew by a solid 1.4% q/q in Q2 and, while non-oil activity is likely to slow over the second half of this year, it will be more than offset by …
We still think that a fading in services inflation and below-target CPI inflation will prompt the Bank of England to cut interest rates from 5.25% now to 3.00% by the end of 2025, rather than to 4.00% as investors anticipate. That explains why we think …
The Bank of Japan outlined a plan for reducing its bond purchases and hiked its policy rate by 20bp today. We think it will follow up with another 20bp hike at its October meeting . Only one-third of analysts polled by Reuters, ourselves included, had …
We think the yen’s rally will continue, but suspect that won’t stop the Australian and New Zealand dollars – alleged victims of the carry trade’s unwind – from making some ground over the next year or two. Australia’s Q2 inflation data took a bit of a …
The Reserve Bank of Australia is likely to leave policy settings unchanged when it meets next week. Although there has been little progress on disinflation in recent months, the Board is likely to pin that on the long and variable lags of monetary policy. …
Bank will hike rates once more in October The Bank of Japan hiked its policy rate by 20bp today and we think it will follow up with another 20bp hike at its October meeting. Only one-third of analysts polled by Reuters, ourselves included, had expected …
With underlying inflation edging lower, RBA will refrain from tightening Although underlying inflation is running too high for the RBA’s liking, it is at least heading in the right direction. Therefore, although the Board will probably reiterate the need …
This report was first published on 31 st July covering the official PMIs. We added commentary on the Caixin manufacturing PMI on 1 st August and the Caixin services and composite PMIs on 5 th August. A poor start to Q3, but more policy support on its way …
Growth should hold up in Q3 June’s strong activity data suggest that GDP may have rebounded even more strongly last quarter than we’re anticipating. The 3.6% m/m fall in industrial production merely reversed a similar-sized gain in May and wasn’t as …
Today’s release of inflation and activity data for the euro-zone has in our view slightly reduced the chances of a cut from the ECB at its next meeting. However, the bigger picture is that the data released over the past month still suggest to us that a …
30th July 2024
The JOLTS labour market data for June will do little to change the Fed’s assessment of labour market conditions ahead of its policy announcement tomorrow, with slack continuing to grow gradually and clearer signs of an easing in wage pressures. With JOLTS …
Significant homebuilding in the Sun Belt region over the past three years has restored housing inventory to pre-pandemic levels, which is why house prices there have stalled. In contrast, markets in the Northeast and California, which haven’t seen the …
Rising supply weighing on house price inflation Another moderate 0.3% m/m rise in house prices in May adds to the evidence that sellers are losing their grip on the market due to increasing supply. Do not write our forecast for a 5% gain in house prices …
In detailed analysis last year, we concluded that equilibrium nominal interest rates would settle at between 3% and 4% in advanced economies in the next ten years. We maintain that opinion and in fact some of the forces boosting equilibrium rates seem to …
Our China Activity Proxy suggests that the economy has lost some steam recently with weak domestic demand weighing on activity. Alongside recent rate cuts, policymakers have signalled that fiscal support will be ramped up soon, which should provide a …
This page has been updated with additional analysis since first publication. Services inflation still sticky The increase in German HICP inflation from 2.5% in June to 2.6% in July left it a little higher than expected and means that the aggregate …
Further signs of recovery losing momentum The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) generally fell in July, and our regional-weighted measure hit a five-month low, providing additional evidence that the …
This page has been updated with additional analysis since first publication. Recovery continued in Q2 but surveys weakening at start of Q3 The euro-zone’s recovery continued at a moderate pace in Q2 and it should get a small boost from the Paris Olympics …
Weak Q2 makes August rate cut likely The weaker-than-expected 0.2% q/q expansion in Mexico’s economy in Q2 means that Banxico is likely to resume its easing cycle at next week’s Board meeting with a 25bp cut to 10.75%. The outturn was a little weaker …
Recovery slowing National-level data released so far suggests that euro-zone GDP growth slowed to 0.2% q/q in Q2 and the weakening of the surveys in July suggests GDP growth may have eased further this quarter. GDP figures for the euro-zone’s largest …
Recoveries stutter in Q2 The weaker-than-expected Q2 GDP data out of Czechia and Hungary show that weak external demand is still acting as a constraint on the speed of recoveries in Central Europe. While we expect growth to strengthen over the second half …
Leadership flags increased policy support but offers few new ideas The readout of the Politburo’s latest triannual meeting on economic affairs has just been published by state media. It was dovish in tone and adds to recent evidence that the leadership …
The lack of much reaction on net in markets to today’s statement by the UK’s new Chancellor suggests to us that investors remain confident in the Labour Party’s commitment to fiscal discipline. But the disputed ‘revelation’ that the country’s public …
29th July 2024
Our best judgement is that in order to fund the increase in spending of £22bn outlined by the Chancellor today, Reeves will raise an additional £10bn a year (0.3% of GDP) via higher taxes and increase borrowing by about £7bn a year (0.3% of GDP). The …
After the sharp sell-off in recent days, what’s the state of the themes that have been driving US equities? Is the AI story over? Will the rotation trade develop? And what bearing is the presidential election having on the performance of US equities? Our …
