Renewed jitters in bond markets in part reflect a nagging sense that inflation isn’t whipped. Headline rates have come back to target, but central banks in many economies are faced with still-sticky core inflation readings that investors worry will force …
24th October 2024
Capital values are now recovering and, notwithstanding a recent rise in interest rates, will continue to do so. However, with not much prospect for yield compression the recovery will be weak by past standards. Thanks to stronger rental growth the …
Banxico’s space to cut hinges on US election The fall in Mexican core services inflation in the first half of October in principle gives Banxico space to press ahead with another 25bp rate cut next month, but much will hinge on the outcome of the US …
We held online Drop-In sessions this week to discuss how we factor the US election into our thinking on the macro and market outlook for the US and other parts of the world. See here for a recording of the session focused on the US and here for the rest …
A victory for Donald Trump in the US election would probably result in higher US Treasury yields and a stronger dollar. That’s an environment in which central banks in EMs with strained balance sheets (notably Turkey) could hike rates and others that are …
Strong US labour market should have soothed hard landing concerns Domestic data remain strong, but Bank has signalled that it won’t hike in October Bank will wait until December to hike again, but won’t tighten any further in 2025 The Bank of Japan …
This page has been updated with additional analysis since first publication. Budget concerns trigger slowdown in activity The fall in October’s composite flash PMI to an 11-month low suggests that real GDP growth, after what is shaping up to be a 0.2% q/q …
This page has been updated with additional analysis since first publication. Flash PMIs support case for 50bp rate cut The low activity and price components of the flash PMIs for the euro-zone in October will strengthen the conviction of policymakers who …
Saudi Arabia’s economy is making a steady recovery as solid growth in the non-oil sector offsets low oil production. Growth will continue to pick up over the coming quarters, but the drivers will change. Oil output is set to rise, potentially sharply, …
Flash PMI economic momentum is fizzling out The sharp fall in the composite PMI to a 2-year low supports our view that the strong rebound in activity that started in Q2 will be more muted across the second half of the year. Today’s flash estimate showed …
The latest GDP figures showed a tepid rebound in Q3, following the contraction in Q2 and we expect Korea’s economic growth to remain below trend for the next few quarters. The advance estimate of GDP released today show that the economy expanded by just …
We discussed the Bank’s policy decision in a Drop-In. You can view the recording here . The weak economic backdrop means we still see a strong case for the Bank of Canada to follow its larger 50bp cut today, which took the policy rate to 3.75%, with …
23rd October 2024
We expect the Japanese yen to bounce back before long, putting more pressure on the Japanese stock market, at least in local currency terms. The Japanese yen has fallen by more than 1% against the US dollar today, adding up to a roughly 8% fall since its …
Recent threats by Donald Trump to impose tariffs on Mexico’s vehicle sector could just be pre-election bluster or an attempt to get concessions from Mexico. But if implemented, they would deal a big blow to Mexico’s economy – a 0.6% drop in real GDP for …
Stagnant existing home sales should rally soon The 1% m/m fall in seasonally adjusted existing home sales in September seems underwhelming given last month’s drop in mortgage rates, but the rise in mortgage applications in September points to a recovery …
50bp cut likely to be followed by another The weak economic backdrop means there is a strong case for the Bank of Canada to follow its larger 50bp cut today, which took the policy rate to 3.75%, with another 50bp move at the next meeting in December. Our …
Uruguay‘s election on Sunday is unlikely to change the path of economic policy but will have big implications for relations with China. Arguably more important than the election itself is the outcome of the pension referendum taking place at the same time …
We expect Spain’s public debt ratio to continue falling for the next three or four years, helping to support demand for Spanish government bonds. However, further ahead its debt-to-GDP ratio is likely to rise again as population ageing and a lack of …
There is growing concern about how the green transition may create stranded real estate assets, impacting negatively on both lenders and investors. We can get some idea of the scale of the problem in Dutch markets where EPC targets have been more …
Poor economic growth and vulnerability to structural change in the office and retail sector are set to weigh on German property returns in the coming years. But solid rental prospects in the residential sector mean it remains a compelling candidate for …
Sharp drop sets the stage for 25bp rate cut in November The drop in South Africa’s headline inflation rate, to 3.8% y/y, in September, means that the SARB will almost certainly continue its easing cycle. The chances of a 50bp cut at its the next meeting …
We argued last year that the relative strength of Japan’s stock market mostly reflected the weak yen rather than a fundamental transformation of its corporate sector. Developments since then suggest that we were right and with the yen set, in our view, to …
A Trump victory in the US election would accelerate the structural shifts that are a major challenge for Europe including rising protectionism, reduced export opportunities to China and the US, and the need to spend more on defence at a time when fiscal …
22nd October 2024
Following a record high in August, our proprietary measure of China’s green export volumes edged down in September. Meanwhile, China’s exports of EVs to Europe surged despite the recent EU tariffs, and we expect continued strong performance in China’s …
We expect Swiss inflation to average less than 0.5% next year and there are several key downside risks that could push inflation over the edge, namely lower oil prices than we expect, a stronger franc and lower housing rent. These risks will encourage the …
The strong recovery in property equities prices across the UK, euro-zone and US implies larger rises in commercial property capital values by the end of the year than we are currently forecasting. However, property equities have been boosted by the …
The recent sell-off in long-dated Treasuries and the accompanying ‘bear steepening’ of the curve make sense given recent developments. We continue to think that the former will unwind before too long, though a Trump win would likely lift yields higher. …
Alternatives have grown in importance in portfolios in recent years and structural drivers including AI, an aging population and poor housing affordability point to further growth in occupier demand for these assets. With investors increasingly looking …
With two weeks to go until election day, Donald Trump has opened a meaningful lead over Kamala Harris in betting markets, although the latest polling suggests the race remains too close to call. To recap, we suspect Trump’s proposed curbs on immigration …
MNB pauses easing cycle again The Hungarian central bank (MNB) acknowledged the possibility that interest rates could be left on hold for an “extended period” after it paused its easing cycle today. We maintain our forecast that the policy rate will be …
Overview – A fall in mortgage rates from 4.5% now to around 3.6% in late 2025 may mean that, despite increases in taxes in the Budget on 30 th October, house prices rise by 5.0% in 2025 rather than the consensus forecast of 2.5-3.0%. By allowing the …
Australia is exceptional. Monetary easing cycles may be in full swing in many advanced economies, but the Reserve Bank shows no appetite to cut rates yet. Even though headline and core inflation are cooling, the labour market remains too tight for comfort …
Retail sales collapse in September, but weakness probably temporary The much weaker-than-expected Polish retail sales data for September suggest that the economy slowed more than we had been expecting in Q3. Even so, we think that this weakness was …
The boom in bank lending in Qatar in the 2010s has unwound so far in a relatively orderly manner. Banks are well capitalised and are able to absorb a far greater rise in non-performing loans than we have seen. Still, there are lingering vulnerabilities …
This page has been updated with additional analysis since first publication. Borrowing disappoints but won’t prevent the Chancellor from raising investment While it is too late for September’s disappointing public finances figures to influence the amount …
The depreciation pressure on the renminbi has abated over recent months and the USD/CNY rate is currently trading around our end-2024 target of 7.10. But with US interest rate expectations on the rise again, China’s stimulus announcements continuing to …
21st October 2024
Upward revisions by the ULI consensus mean our forecasts remain more downbeat over the next couple of years. However, this is largely down to our weaker view on industrial, while our forecasts for the other sectors are more optimistic, particularly for …
The September release of US non-farm payrolls was just the start of a run of strong employment releases in advanced economies this month, reigniting fears about pay growth and inflation. However, when putting a few quirks to one side and judging a range …
The persistent strength of wage growth in Central and Eastern Europe (CEE) reflects continued tightness in labour markets and lingering effects from the 2022-23 inflation shock. While the latter should unwind, we think that wage growth will generally …
Concerns that Brazil’s economy is overheating are justified – to an extent. But the economy looks very different now compared with the last bout of overheating in the early 2010s. As a result, while inflation pressures are likely to remain uncomfortably …
The recent outperformance of emerging market equities, relative to their developed market peers, has almost entirely reversed in October and we think this may be a sign of things to come. Chinese equities did not react much to the larger-than-expected …
The outcomes of the EM central bank meetings since the beginning of October underscore the point that Asia will lead the next phase of the EM easing cycle. Central banks in Central and Eastern Europe and Latin America are slowing the pace of (or pausing) …
A crucial part of understanding the global economy is getting out into it. As well as an opportunity to catch up with old friends, getting on the road and meeting with clients provides important perspective on how global issues are being considered – and …
Economy set to cool further Economic growth in Malaysia softened in Q3 but came in well above trend for the third consecutive quarter. Looking ahead we think GDP growth will drop back to trend if, as we expect, a jump in inflation driven by the removal of …
The PBOC continues to support the economy Today’s reductions to both the one-year and five-year Loan Prime Rates (LPR) continue the PBOC’s efforts to support the economy. We expect additional easing to follow in the coming quarters, but this is unlikely …
The US dollar has made further gains this week as US data continue to come in strong, contrasting favourably with the ECB’s surprisingly dovish policy announcement and softer inflation data in other G10 economies. With the US election drawing nearer and …
18th October 2024
SARB lays out requirements for lower rates The South African Reserve Bank’s Monetary Policy Review (MPR) released this week made clear that recommitting to fiscal consolidation and pushing through structural reforms are key to creating extra space for …
With the US election drawing closer and former president Trump’s perceived chances of winning on the rise, financial markets may be starting to shift towards discounting a Trump win. But, in our view, that is still far from fully priced in. Since early …
Although corporate credit spreads in the US and the UK have nearly reached multi-decade lows, we think they will remain near those levels over the next year or so. And we don’t see spreads in the euro-zone widening either, despite dim economic prospects. …
Fundamental frailties back to the fore The risk premium in oil prices collapsed this week after reports suggested that Israel would not target Iran’s oil and nuclear facilities in any retaliatory strike. Brent oil prices have fallen from a high of around …
