We expect the Treasury yield curve to “disinvert” in 2024, as we think the Fed will cut rates by more than investors expect and term premia will remain at least as high as they are now. The spread between the yields of 10-year and 2-year Treasuries has …
4th December 2023
Although the spread between the 10-year German and Swiss government bond yields has widened significantly over the past couple of years, we think it will stay close to this level for a long while yet. The soft Swiss CPI data released today has added to …
Brazil’s first sovereign ESG bond arrived last month amid much fanfare, but the reality is that any “ESG premium” looked fairly limited to us. And we think ESG bond premia, in general, will likely remain low. Brazil’s government issued its 7-year US …
Our view about relative economic and interest rate prospects in Sweden and the euro-zone suggests that the Swedish krona’s recent rebound may prove durable. In fact, given how far below “fair value” it appears to us, we think that the krona will rise …
With the budget deficit rebounding over the last year and Congress characterised by partisan dysfunction, the odds of a full-blown fiscal crisis developing over the next decade are rising. The US faced a similarly bleak fiscal outlook in the early 1990s …
The latest batch of state election results suggests that support for Prime Minister Modi’s BJP remains firmly intact and that it is clearly in the driving seat to secure another victory in next year’s general election. That reduces the risk of big fiscal …
While there have been growing concerns about public finances in some euro-zone countries recently, prospects for Greece’s debt are quite bright. Steady economic growth, large primary surpluses and low interest expenditure should keep the debt ratio on a …
The COP28 jamboree in Dubai will produce a long list of climate promises from governments and corporate leaders, but these will be of little practical help to market participants attempting to track progress on the green transition in a systematic way. …
This publication has been updated with additonal analysis and charts. Falling inflation means rate cuts are near The unexpected fall in Swiss inflation to 1.4% in November ensures that the SNB will not be at all tempted to raise interest rates in …
This publication has been updated due to an error in the previous version. Further evidence of easing price pressures The small rise in Turkish inflation to 62.0% y/y in November adds to evidence that inflation pressures in the economy continue to cool. …
Overview – Following a strong 2023, GDP growth is set to slow towards potential next year and the labour market will tread water for now. However, with the virtuous cycle between consumer prices and inflation set to gain momentum, we expect the Bank …
Group Chief Economist Neil Shearing warns the potential threat to fiscal positions from higher rates is “perhaps the most important question hanging over the outlook for the next couple of years”. In this episode, he speaks to Head of Research Vicky …
3rd December 2023
The greenback’s grind lower has continued this week amid falling US Treasury yields and strong appetite for risk. While comments from numerous Fed speakers (including Chair Powell today) continued to point to an extended pause, PCE data and November’s …
1st December 2023
The voluntary production cuts announced by OPEC+ this week will support oil prices in the first quarter of next year, but there is clearly dissent among the ranks. We think OPEC+’s next move will be to increase production. After much wrangling, some …
Despite strong growth, core inflation normalising Q3 growth up, Q4 down This week’s modest upward revision to third-quarter GDP growth, which is now estimated to have been as strong as 5.2% annualised, rather than 4.9%, was certainly eye-catching. It …
The revisions to the national accounts leave the post-pandemic recovery looking stronger than we thought. But that is partly due to intense inventory building, which leaves the economy vulnerable to a period of destocking now that demand is weakening. …
The emerging market manufacturing PMIs for November were a mixed bag – although most headline indices edged up, they remained below 50 in over half the countries that we track, largely due to weak external demand. But price pressures did ease across the …
The manufacturing PMI surveys have overstated the weakness in industrial production over the past couple years. But, even taking this into account, November’s PMIs suggest that while global industry might be past the worst, it looks set to end 2023 and …
Despite how far it has come this year, we think the S&P 500 can make further big gains over time. The S&P 500 has made little ground this week, on net, despite the further big fall in Treasury yields. But it has come a long way lately, thanks both to a …
Argentina: signs of more orthodox shock therapy There have been two key developments in Argentina this week that give a sense of what President-elect Javier Milei’s policy agenda will look like. First, the confirmation that Luis Caputo will become economy …
This page had been updated with additional analysis since the first publication. Manufacturing activity continues to struggle The unchanged reading of 46.7 for the ISM manufacturing index in November suggests that manufacturing activity continued to …
Investors increased their expectations for interest rate cuts by the ECB after November’s soft euro-zone inflation print this week, but in parts of Central and Eastern Europe (CEE) the latest developments suggest inflation will take a lot longer to fall …
China PMI surveys suggest that the economy flatlined in November, but there was good news for commodity demand with the relative strength in the construction PMI. We suspect that underlying activity is stronger than the PMIs and that this will support …
Labour market conditions loosening The labour market is weaker than the 24,900 rise in employment might suggest, with the unemployment rate rising again and hours worked slumping by 0.7% m/m last month. The fall in hours worked means that the preliminary …
In light of the inflation and activity data released this week we are bringing forward our forecast for the start of the ECB’s rate cuts from September to June next year. And we now think the deposit rate will come down from 4.0% currently to 3.0% by the …
Andrew Wishart, who leads our UK housing coverage, presented an Economic Update to attendees of the Land, Planning and Development Federation Annual Conference in London on the 30th November. The presentation addresses the questions: Is the economy in …
This page has been updated with additional analysis since first publication . Further signs that Brazil’s recent outperformance has ended The meagre 0.1% m/m expansion in Brazil’s industrial production in October adds to the signs that, after a very …
The prospect of earlier interest rate cuts in the US and the euro-zone has led to a sharp fall in US and euro-zone government bond yields this week. 10-year US Treasury and German Bund yields have fallen by 15 and 22 basis points (bps), to 4.32% and 2.43% …
SA's public debt risks a problem for banks? The key takeaway from the South African Reserve Bank’s latest Financial Stability Review released this week is growing concern about local financial institutions’ holdings of government bonds – what the report …
Ramp up in fiscal support yet to be fully felt Government borrowing has been strong ever since the Politburo called for an acceleration in bond issuance at its July meeting. Momentum has been sustained by a rare mid-year increase in the deficit target …
With hindsight, part of the boom in the industrial sector seen during and after the pandemic now looks like a bubble. That raises the risk that the overhang of assets started during that period of irrational exuberance will now weigh on rents. However, …
Korea makes a weak start to Q4 This week’s data dump from Korea suggests the economy weakened at the start of Q4, supporting our view that the tightening cycle is over and that interest rate cuts could come onto the agenda soon. Figures published …
A poor end to 2023 South Africa’s manufacturing PMI rose in November but it still looks like the economy will end 2023 on a weak note. That said, as the drags from loadshedding, high inflation and fiscal austerity ease, we expect a modest pick-up in …
Revising up our GDP forecasts The activity data this week confirm that India’s economy is rude health. The GDP data for Q3 (Q2 of FY23/24) showed a slowdown in both y/y and q/q, but this was very mild and the bigger picture is that the pace of growth …
This page has been updated with additional analysis since first publication. CEE turning a corner The manufacturing PMIs in Central and Eastern Europe (CEE) rose in November suggesting that industrial sectors in the region are turning a corner, while …
This page has been updated with additional analysis and charts. Export-driven strength unlikely to last The 0.3% q/q increase in GDP was better than the consensus and our own forecasts (consensus: 0.1%; CE: 0.0%) but there was a downward revision to Q2 …
Rising prices continue to confound forecasters The further small increase in the Nationwide house price index in November was unexpected and came on the heels of an even larger rise in October. It means house prices are on track to fall by just 2% y/y in …
This page has been updated with additional analysis since first publication. Manufacturing activity likely to end the year on a high note The manufacturing PMI survey for November suggests that activity continues to remain strong in Q4. The economy is on …
Consumption falling but labour market tightening The October activity data were a mixed bag. While industrial production rose by 1% m/m, firms’ forecasts for the next couple of months were weak and point to a stagnation in output across Q4 following …
House prices falling again in Sydney and Melbourne Data released by CoreLogic today showed that house prices rose by 0.6% m/m in seasonally-adjusted terms in November, the smallest rise since April. And CoreLogic’s daily data show that house price …
The November PMIs for Emerging Asia generally nudged up a touch but remained weak overall. The outlook for manufacturing sector in the region remains bleak in the near term as elevated inventory levels, high interest rates and subdued foreign demand weigh …
This page has been updated with additional analysis since first publication. Labour market not out of the woods yet The renewed tightening of the labour market in October probably reflects the lagged effects from the surge in output across the first half …
30th November 2023
House prices may soon start to fall again House price growth kept slowing in November and, with affordability the most stretched since the early 1990s, that slowdown has further to run. In seasonally-adjusted terms, house prices across Australia’s eight …
Despite a rebound over recent days, the dollar fell sharply in November and, in aggregate, is now roughly flat on the year as a whole. With interest rate expectations shifting down decisively in the US and most other major economies, we expect the rebound …
Oil prices have seemingly had little spillover to other financial markets over recent months, and we don’t think anything from the latest OPEC+ meeting is likely to prevent a further rally in US Treasuries. While the end of the OPEC+ meeting today sparked …
GDP contracted in the third quarter and there are downside risks to the outlook. As house prices are falling again, household debt is elevated and high interest rates are still feeding through, the key risk is that the mild recession we forecast could …
While we expect the return of striking workers to help non-farm payrolls rise by a stronger 200,000 in November, underlying labour demand probably eased. October’s employment report showed signs of a further loosening in the labour market, with a more …
Today, OPEC+ announced 1mn barrels per day (bpd) of voluntary cuts to supply in Q1 2024. This comes on top of around 5mn bpd in cuts already in situ, and brings the total cut in the first quarter to around 6% of global production. The group is presumably …
Our View: We are more dovish than investors regarding the amount of rate cuts that the Fed – and several other DM central banks – will deliver next year. As a result, we forecast that Treasury yields will fall further over the next year or so, putting …
