Brazil’s economy and financial markets have provided a positive surprise over the past 12-18 months. This Focus answers five key questions that will determine whether 2024 will be chalked up as a success too. The short point is that we think sentiment now …
24th January 2024
While we expect equities around the world to rebound – as a stock market bubble inflates on the back of growing hype around AI – we suspect that Latin American stock markets will keep lagging. Global stock markets are not off to a great start this year. …
January’s flash PMI surveys suggest that GDP growth in advanced economies ticked up from a very weak pace at the start of 2024. And with price pressures still strong, central banks will probably continue to push back against expectations for rate cuts in …
The Bank of Canada’s decision to drop its tightening bias today is the first step toward interest rate cuts, particularly as the Bank also hinted that it may be willing to look through elevated mortgage interest costs and rent inflation. We continue to …
March rate cut is data dependent Rate expectations have rebounded Officials need to see more evidence that disinflation will be sustained We think that evidence is coming, paving way for a March rate cut At next week’s FOMC meeting, we don’t expect the …
Ghana’s relatively quick progress in debt restructuring talks with creditors contrasts with the slow experiences of Ethiopia and Zambia. Much of this can be explained by the China’s role in discussions, but private bondholders are also playing hardball. …
Bank drops its hiking bias The Bank of Canada’s decision to drop its tightening bias today is the first step toward interest rate cuts. We continue to think that the Bank’s forecasts for the economy are too optimistic, and that inflation will slow faster …
Tunisia’s government faces a large debt repayment next month and, while it should be able to make that, there is still a lot of debt coming due in the next twelve months. President Saied’s unwillingness to sign up to an IMF deal means that a sovereign …
The long boom in residential investment has been severely dented by soaring interest rates. Solid fundamentals mean investor interest will remain strong, but it is unlikely residential yields have peaked, or that relative performance will be as stellar as …
Inflation jumps, February cut in balance The jump in Mexico’s inflation to a higher-than-expected 4.9% y/y in the first half of January was entirely due to a particularly sharp rise in agricultural goods inflation. But it probably means the chances of …
The People’s Bank’s policy announcements today will provide only a small boost for China’s economy. Meaningful improvements in household or corporate borrowing would require substantial rate cuts or a significant change in economic sentiment. Neither …
This page has been updated with additional analysis since first publication. Lingering evidence of sticky services inflation may continue to concern the BoE The small rise in the composite activity PMI, from 52.1 in December to 52.5 in January, suggests …
This page has been updated with additional analysis since first publication. PMIs remain consistent with recession January’s euro-zone Composite PMI, published this morning, remained consistent with the economy contracting by around 0.2% q/q. The tick up …
Property yields rose further in Q3, but with risk-free rates now falling back, we think they will stabilise in the first quarter of 2024. But given historically narrow yield spreads, we doubt we will see much yield compression ahead either. As the economy …
Sharp inflation fall not enough to encourage early rate cuts South Africa’s headline inflation rate fell back further to 5.1% y/y in December but this is unlikely to be enough to convince the Reserve Bank to start an easing cycle tomorrow. November’s …
The central bank (BNM) left the overnight policy rate unchanged (at 3.0%) today and we think monetary policy is set for an extended pause as policymakers attempt to strike a balance between supporting the economy and combating inflation. The decision …
This page has been updated with additional analysis since first publication. Positive signs for this quarter The composite PMI rose for the second consecutive month in January, driven by rises in both manufacturing and services components. And with the …
This page has been updated with additional analysis since first publication. Export growth will be sluggish this year The trade deficit widened in December as import values rose more strongly than export values. But the weakness in net goods trade will be …
This page has been updated with additional analysis since first publication. Inflation continues its rapid descent With inflation falling rapidly, risks are tilted towards the RBNZ cutting rates sooner than Q3, as we’re currently predicting. Consumer …
23rd January 2024
The new cap on international student visas is another reason to expect population growth to slow sharply. That will give the Bank of Canada confidence that CPI rent inflation will ease later this year, providing a clearer path for headline inflation to …
EM GDP growth weakened over the second half of 2023, and we expect growth to remain subdued this year. Some EMs that underperformed last year will see modest recoveries, but many of the economies where growth was surprisingly strong last year will slow by …
Central banks will probably continue to push back on expectations of rate cuts at their scheduled policy announcements in the coming weeks. But with inflation and wage pressures clearly moderating, we still think the Fed, ECB and Bank of England will cut …
Although the Bank of Japan (BoJ) stood its ground at its meeting today, we still expect it to hike its policy rate before long; that, we think, could contribute to a higher 10-year JGB yield. The BoJ didn’t make much of a splash in markets earlier today …
Saudi Arabia’s government returned to running budget deficits last year and is likely to continue doing so. But these should be easily financed. Oil prices would probably have to fall sharply, to below $65pb, and remain there before the authorities need …
Our China Activity Proxy (CAP) suggests that economic output ended 2023 above the high it reached before growth spluttered in the middle of the year. With policy support still flowing, a further recovery is likely in the near-term. But we think momentum …
History suggests that when one Monetary Policy Committee (MPC) member votes to cut interest rates, a majority of the nine members will agree about two meetings later. There have been 14 turning points in Bank Rate since the MPC’s inception in 1997, by …
India is certain to become the world’s third-largest economy within the next decade, but the emergence of generative artificial intelligence (AI) will hamper rather than help its rise. This is in large part because of the detrimental impact it could have …
The Bank of Japan sounds increasingly confident that it will be able to achieve its inflation target on a sustained basis. With Mr Ueda at the post-BOJ-meeting press conference again emphasising the importance of the spring wage negotiations, we think the …
The Central Bank of Sri Lanka left its deposit rate on hold (at 9.00%) today, and gave no hints at what its next move would be. However, with inflation set to remain low and growth likely to struggle, we expect the central bank to resume its rate-cutting …
This page has been updated with additional analysis since first publication. More wiggle room for a pre-election splash December’s better-than-expected public finances figures brought some cheer for the Chancellor after the recent run of poor outturns and …
Policy normalisation is in sight Although the Bank of Japan stood pat at its meeting today, we’re sticking with our view that policymakers will soon call time on negative rates. The Bank’s decision to leave its policy rate unchanged at -0.1% was correctly …
While Australian households are as indebted as ever and mortgage payments have hit fresh record-highs, lending standards continue to be sound, loan defaults remain subdued and banks are well capitalised. Accordingly, there’s no compelling case to tighten …
Judging by the latest rally in some ‘big-tech’ sectors, renewed hype around Artificial Intelligence (AI) seems to explain why the S&P 500 has just racked up a new record high despite a recent rebound (if not today) in the 10-year Treasury yield. (See …
22nd January 2024
We expect evidence of distress to ramp up this year as loan extensions end. Many borrowers will be forced to either inject new capital, return assets to lenders or sell into a soft market. Those assets returned to lenders will also ultimately end up on …
If we are right to think that the Bank of England will begin lowering interest rates in June, the recent fall in mortgage rates should be sustained. The resulting drop in the cost of borrowing will boost demand as some first-time buyers who put their …
As core PCE inflation is on track to return to the 2% target by the middle of this year, we expect the Fed to cut interest rates by 25bp at every meeting from March onwards, with rates eventually falling to between 3.00% and 3.25% in early 2025. The …
Despite repeated talk about the need to rebalance China’s economy over the past decade and a half, there has so far been little meaningful reduction in its dependence on investment and on exports. In fact, repeated efforts to shore up short-run growth …
Production growth will probably soften further in 2024 Global aluminium production growth slowed to 2.3% in 2023 from 2.9% in 2022. We think softening output growth in China will cause global growth to fall back again this year. According to the …
This page has been updated with additional analysis since first publication. Recovery continues in Q4 Poland’s retail sales data for December suggest that consumer spending weakened at the end of last year, although the industrial sector held up better …
It’s become almost too easy to knock Davos in a post-pandemic, fracturing world. The World Economic Forum may not be part of the solution to the world’s problems that its marketing team would have us believe, but it at least gives a fairly good steer of …
Why are markets pushing back on rate cut expectations? How will the ECB play its upcoming meeting? What’s really happening to China’s economy? Group Chief Economist Neil Shearing tackles the big macro and market questions in our latest episode of The …
19th January 2024
SARB to stay on sidelines until after the election? Remarks by South African Reserve Bank (SARB) Governor Kganyago this week have increased the risk of rates staying higher for longer, particularly if fiscal risks build ahead of the election. Governor …
The US dollar’s rebound has gained momentum this week amid hawkish rhetoric from Fed officials and more evidence out of the US – notably retail sales and jobless claims – of continued resilience in the economy there. So far this year, currency markets …
US large caps have vastly outperformed UK ones over the past year or so, but that is skewed by the performance of the biggest names on both sides of the Atlantic. Indeed, there is little difference between the two markets on an equal-weighted basis over …
Why are natural gas markets so sanguine? Qatar’s decision to avoid sending LNG tankers through the Red Sea, and the continued exchange of military strikes between the US and Houthis did little to stop natural gas prices falling this week. In Europe prices …
After a subdued 2023, we think the copper price will fare much better this year. We expect supply growth to moderate, while demand growth will be bolstered by the green transition. The copper price ended 2023 almost flat on the year. Consumption growth, …
We argued last week that there was little to support the idea that the “last mile” of getting inflation back to 2% will somehow be the hardest. But new data on rent inflation released this week raise the possibility that the disinflationary process won’t …
