Nordic & Swiss


Virus news testing the SNB; “Take 2” for Swedish PM

Market worries about the B.1.1.529 virus variant have exacerbated upward pressure on the safe-haven Swiss franc and will test the SNB’s tolerance of a stronger currency. In our view, the Bank seems to be focused on managing rather than preventing the appreciation against the euro and we suspect that it will eschew large-scale interventions unless the franc reaches the CHF 1.025 per euro mark. Next week, we expect Swedish national accounts data to show that GDP rose by 1.8% q/q in Q3, while Swiss inflation data are likely to show that the headline rate edged down to 1.1% in November.

26 November 2021

Riksbank injects a dash of hawkishness

In comparison to the chaotic scenes in the Riksdag yesterday, the Riksbank’s November meeting was a more sedate affair. While the Bank is in no rush to raise the repo rate, the insertion of a rate hike into the end of its three-year projection period means it is no longer as decidedly dovish.

25 November 2021

Scandinavia & Switzerland: Values to rise further

The rebound in economic activity and robust investor demand paved the way for a continued improvement in Scandinavian and Swiss property markets in Q3. Office and industrial values rose further, as strong competition pushed down yields. Retail yields also fell in Stockholm. But we think its too soon to call a turning point for retail. Indeed, retail rents also fell, indicating that conditions in the sector are still weak. Nevertheless, the better outlook for the other sectors means we think that all-property values will rise further. That said, with economic growth expected to slow in the coming months and structural shifts weighing on retail and office sectors, the pace of improvement is likely to moderate.

23 November 2021
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The energy crisis rumbles on …

This week showed that the energy crisis is not in the rear-view mirror just yet. Germany’s energy regulator suspended its certification process of the Nord Stream 2 pipeline on Tuesday, owing to issues regarding the organisational structure of the pipeline’s ownership (rather than a political energy supply security assessment). Markets took the surprise delay, which was not previously expected to be an issue in the approval process, badly as prices soared by 18%. It is now increasingly unlikely that gas flows through Nord Stream 2 will ease the shortage of stocks in Europe over this winter. What’s more, there is little evidence that flows from Russia have increased as suggested might happen by President Putin. And European stocks are both much lower than normal levels and now falling in line with seasonal norms. As a result, we suspect that gas prices will remain high over the next few months. Looking to the week ahead, the main data release will be November’s batch of flash PMIs on Tuesday. We expect that those in the Euro-zone will soften and show the impact of recent surges in virus cases, which probably dampened international and domestic travel and oil demand.

An opportunity to dial down the dovishness a touch

The Riksbank is all but certain to leave its policy settings on hold next week. But against a backdrop of above-target inflation and the broader hawkish shift by policymakers elsewhere, we expect it to dial down the dovishness a bit and to perhaps further prepare the ground for balance sheet reduction next year.

Sweden Consumer Prices (Oct.)

CPIF inflation rose to a 15-year high in October, although the headline rate was just half that reached in the US, for example, and the core rate remained below 2%. Policymakers won’t be losing sleep just yet, but we’d be amazed if the Riksbank didn’t insert some rate hikes to the end of its projection period at its scheduled policy meeting next week.

Déjà vu at the SNB; labour shortages reach Greenland

The renewed rise in the Swiss franc has lifted it back to territory that will ring alarm bells at the SNB, and the usual release of sight deposit data on Monday morning will indicate whether the Bank has put its money where its mouth is by intervening to stem the appreciation. Elsewhere, we expect data from Norway to show that CPI-ATE inflation remained well below the Norges Bank’s target in October, and that mainland GDP rose by 2.5% q/q in Q3, which would have left it about 1.5% higher than its Q4 2019 level.

How pandemic changes will affect European cities

Europeans are returning to cities, though the return to offices has been much slower and this has had negative effects on city retail. Looking ahead, weaker demand for office and retail will weigh on performance in cities with large concentrations of these assets. However, prospects are better for cities that are attractive to more than just workers and that can fill the gap left by excess office and retail with other property types where the outlook is more positive. The cities which we think will perform best in the coming years as a result are Stockholm, Paris and Berlin. In view of the wider interest, we are also sending this European Commercial Property Focus to clients of our UK Commercial Property service & UK Housing service.

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