Stage set for a softer fourth quarter While the fall in durable goods orders in September was mostly due to the volatile transportation components, the decline in underlying capital goods shipments will still drag on business equipment investment. The …
25th October 2024
This page has been updated with additional analysis since first publication. Upside risks to the Bank’s consumption forecasts growing The increase in retail sales in August and flash estimate for another rise in September poses an upside risk to the Bank …
Having behaved “normally” over the summer, gold has slipped back into anti-traditional-driver mode in recent weeks. The ~4% rise in the gold price since the start of October has come alongside sharp rises in US Treasury yields and the dollar. Soberingly, …
Our central forecast is that there won’t be a fiscally induced ‘crisis’ in the Treasury market. But there is clearly a risk of yields rising in response to higher term premia and more restrictive monetary policy than would otherwise be the case, if the US …
This week’s news has persuaded us that the ECB is likely to cut interest rates further and faster than we previously thought. We now see a greater-than-even chance of a 50bp rate cut in December, and think the “terminal” rate in this cycle will be below …
Why does the new rule allow more borrowing? The Chancellor, Rachel Reeves, has confirmed that in next week’s Budget she will shift from targeting the Public Sector Net Debt excluding the Bank of England (PSND Ex BoE) measure of government debt to another …
Surprise 200bp hike takes policy rate to a new high The decision by the Russian central bank (CBR) to hike its policy rate by a larger-than-expected 200bp today, to 21.00%, is evidence that – despite President Putin’s efforts at this week’s BRICS summit …
Weak GDP data may give BoK second thoughts National accounts data published on Thursday showed that Korea only narrowly avoided a technical recession, with GDP expanding by just 0.1% q/q in Q3 after a 0.2% decline in Q2. The main drag came from exports, …
Fiscal package may be revealed in two weeks At its 12 th October press conference, the Ministry of Finance (MoF) offered some reassurances that fiscal spending would pick up in the final months of this year and stay supportive into 2025. But it didn’t …
We suspect Asian currencies would underperform under a Trump presidency, even if they don’t seem to have been affected worse than others by the apparent rise in his chances of winning lately. At face value, it’s surprising how well Asia’s currencies …
New bank lending has risen recently as the interest rates on loans have begun to edge down, but it is still weak. While it will probably continue to increase gradually in the coming months, the ECB might need to cut its policy rates substantially to give …
The past week has been one of the more eventful for India in recent memory on the geopolitical front. The most eye-catching development was an agreement with China on patrolling arrangements along their disputed border in the Himalayas. News of the …
This page has been updated with additional analysis since first publication. Germany stuck in recession The rise in the Ifo Business Climate Index in October still left it deep in recessionary territory. With growth in the rest of the euro-zone also weak, …
October surprise? The result of Japan’s Lower House election should be clear by early Monday morning. The new prime minister, Shigeru Ishiba, called Sunday’s vote to take advantage of a revival in the government’s popularity since he replaced Fumio …
Inflation concerns appear misplaced At an event organised by the Peterson Institute this week, RBNZ Governor Adrian Orr suggested that the Bank was likely to be more circumspect about loosening policy going forward. The Governor argued that it was …
The government’s new immigration plan implies that the population will decline by 0.2% in both 2025 and 2026, a huge shift from population growth of almost 3% over the past two years. That means GDP growth is likely to remain subdued in the next couple of …
24th October 2024
We think a pick-up in global growth and the further inflation of a US equity bubble mean prospects for euro-zone equities are generally promising, despite sluggish economic growth in the region. European equities have risen, on net, so far today, more so …
Overview – With goods inflation vanquished, the last leg of disinflation in advanced economies must come from falling services inflation. After plateauing at the start of the year, services inflation has fallen in recent months, and we think that this …
The latest flash PMIs suggest that GDP growth got off to a weak start in Q4 in most major advanced economies. The surveys also imply a slowdown in both services activity and employment growth in October, meaning that the ECB and Bank of England may up the …
The latest activity data have brought further evidence that India’s economy has entered a softer patch. Coupled with the RBI's change in policy stance in its October meeting, this suggests that monetary policy easing is still likely before long, despite …
We expect the Boeing strike and two recent hurricanes to have temporarily cooled the labour market in October. We think non-farm payrolls rose by 100,000 while the unemployment rate was unchanged at 4.1%. Payroll growth limited by strike and hurricanes …
Pick-up in sales to be short-lived The increase in new home sales in September was probably supported by the fall in mortgage rates last month. Rates have rebounded since then, however, which lends support to our view that new home sales will not rise …
Al-Sisi demands review with IMF Comments from Egypt’s President al-Sisi over the past week pushing back against the pace of reforms under the current IMF deal has alarmed investors a little, but the bigger picture is that Egypt’s economy is in a far …
EM GDP growth picked up in Q3, but we expect growth to slow over the coming quarters - despite the recent stimulus announcements in China. The threat of more protectionist trade policy in the US poses an additional downside risk to our already …
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 …
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 …
