After the Fed recently delivered its first rate cut, we look at previous US loosening cycles to analyse how emerging markets assets have performed. This time around we expect the US to skirt a recession, and our view is that most of the easing cycle is …
20th September 2024
Our proprietary measure of China’s green export volumes continued to rise in August to a new record high. Given that the EU tariffs have so far barely made a dent into China’s electric vehicle exports, and the fact that US and Canada tariffs will only …
The Bank of Japan today signalled that it’s in no rush to tighten monetary policy any further and we’re pushing back our forecast for a final rate hike to 0.5% from October to December. As widely anticipated, the Bank kept its policy rate unchanged at …
We think SNB Chairman Thomas Jordan will probably use his last meeting to once again surprise markets by cutting the policy rate by 50bp to 0.75%. Policymakers will be unhappy with the franc’s recent appreciation and will use rate cuts to try and stifle …
19th September 2024
In the months ahead, there are five themes to watch for in the world of trade and shipping, the most immediate of which is the risk of strikes at US East and Gulf coast ports in October. The upshot is that, after a nascent recovery in the first half of …
The South African Reserve Bank finally joined the EM easing cycle today, lowering its repo rate by 25bp to 8.00%. While the MPC clearly has some lingering concerns about the inflation outlook, we think sluggish growth and at-target inflation will provide …
While UK Gilt yields might rise a bit further in the near term, we think that they will fall back before long, as the Bank of England eventually delivers more rate cuts than most anticipate. After delivering a first cut in August, the Bank of England left …
We’ll be discussing the differences in the policy outlook for the Bank, the ECB and the Fed in a 20-minute online briefing at 3pm BST today. (Register here .) By leaving interest rates at 5.00% the Bank of England showed it is more like the ECB than the …
The Norges Bank left rates unchanged today and shifted its guidance only very slightly in a dovish direction. Whereas the Bank does not expect to cut rates until Q1 next year, we think it is likely to do so in December and to then cut rates fairly rapidly …
An acceleration in fiscal spending during the final months of the year should mean the 2024 growth target of “around 5.0%” is met, but only just – we now expect growth of 4.8% this year. China’s slowdown is likely to continue over the coming years as …
Fed opts to start loosening cycle with a bang The Fed did cut its policy rate by a bigger 50bp today, to between 4.75% and 5.00%, but the vote was not unanimous and the new rate projections point to smaller 25bp cuts at the remaining two FOMC meetings …
18th September 2024
Unlike their counterparts in the Fed, policymakers at the Riksbank have ruled out making a bumper 50bp rate cut anytime soon. Instead, they are likely to cut their key policy rate by 25bp at next week’s meeting. Further ahead, we think the Riksbank will …
While media attention has been on the soaring prices of coffee and cocoa, the prices of many grains have slid lower since the start of the year. We think that prices will fall further by the end of 2025 as the market looks set to be amply supplied. …
South Africa’s mixed recovery South Africa’s economy is enduring a clear divergence in its economic recovery. Consumer-facing sectors appear to be performing better but industry, particularly mining, continues to struggle. We think interest rate cuts will …
Clients may also be interested in a recent podcast on 'Retail’s return from the dead and what to expect from its recovery'. See here . We doubt the announcement by Amazon that it is requiring office-based workers to return full-time marks the start of a …
The US Federal Reserve looks certain to start its loosening cycle this evening and, by virtue of their dollar pegs and open capital accounts, central banks across the Gulf will follow suit. Lower interest rates may provide relief to firms and households …
Rent growth slowing rapidly Increased supply and weaker demand are pushing down rents in several cities. That raises the risk of another leg down for apartment prices, despite the recent drop in mortgage rates. The housing market is struggling for …
17th September 2024
Despite the US being a net oil exporter, the recent plunge in the oil price will be a tailwind for the economy, as lower gasoline prices support consumer confidence and real consumption. The Fed will largely look through the impact on headline inflation, …
Despite the peso’s recent rebound, we suspect that an unstable political and economic outlook means that it, and Mexican financial assets more generally, will perform poorly over the next year or so. Since early April, when the MXN/USD rate hit its lowest …
We recently held a series of EM-focused client meetings in Switzerland and Germany which covered a wide range of topics, including the impact of global fracturing , AI and the green transition on emerging markets. This Update answers several of the …
16th September 2024
Low saving rate not a major concern The continued decline in the saving rate, which is now close to a 16-year low, is not a major concern given the recent surge in household net wealth. Furthermore, as the saving rate is calculated from two different …
A disappointing outturn Activity growth slowed last month, falling short of expectations across the board. The service sector is still faring reasonably well and the fiscal support that’s already in the pipeline should help to stabilise wider growth over …
The US is moving to limit the de minimis tariff exemption that has supported a surge in low value shipments from China over recent years. Only a subset of the roughly 8% of China’s exports to the US that are currently tariff-exempt would be at risk under …
13th September 2024
By making life harder for unscrupulous landlords, the Renters’ Rights Bill may help drive tenant demand toward institutional landlords who are already complying with most aspects of the proposed legislation. That said, an apparent ‘win-win’ ability for …
A large part of the decline in euro-zone industry over recent years shown by the monthly data appears to be due to mismeasurement. Nevertheless, the sector is struggling with a loss of international competitiveness and the medium-term outlook is poor. …
We now think the RBNZ will be one of the few central banks to cut rates below neutral this cycle, which would be bad news for the New Zealand dollar. New Zealand markets have so far shrugged off the RBNZ’s dovish tilt – and rate cut – last month. While …
A second Trump term would bring greater uncertainty to US-China relations, challenges to a global economic order that has helped China prosper, higher tariffs (probably) on Chinese goods, and (possibly) a global retreat from free trade. All of this would …
12th September 2024
Inflation keeps falling more quickly than Norges Bank’s forecasts but policymakers will be uneasy about the renewed weakening of the krone. We expect them to repeat that the policy rate will be unchanged “for some time ahead”, but we think they will opt …
There was never any doubt that the ECB would cut its deposit rate by 25bp today, to 3.5%. Meanwhile, the policy statement and press conference were largely as expected and do not change our view that the next rate cut is most likely to be in December – …
New data released in the past week show that global greenhouse gas emissions rose by almost 2% y/y in 2023. Most of this increase was driven by growth in China’s emissions as its economy recovered from pandemic-related disruptions. Looking ahead, we …
The Fed’s upcoming monetary easing cycle will probably provide less of a tailwind to EMs than is widely thought. While it’s likely to give some central banks (such as in the Gulf, Mexico and Indonesia) a green light to lower interest rates, EM rate …
Rising demand points to faster house price growth August’s RICS survey provided further evidence that housing demand is picking up in response to the recent falls in mortgage rates. What’s more, our view that Bank Rate will be lowered by more than …
There was little impact on GDP from the completion of the Trans Mountain pipeline expansion because the jump in exports was supported by a drawdown of inventories from elevated levels, rather than higher production. There is scope for production to rise …
11th September 2024
Saudi Arabia has cut oil output aggressively in the past two years but this has failed to prevent a slide in the Kingdom’s oil revenues. Officials are facing a tough choice over what to do next and, for now, we think that they will follow through with …
The sell-off in oil markets so far in September, which gathered pace on Tuesday, has largely been driven by market concerns over demand. Although investors are correct to be worried about the structural headwinds facing China’s oil demand, they seem to …
The swearing in of a new congress next month gives Mexico’s outgoing president, Amlo, a one month window to re-start plans to pass controversial planned constitutional amendments. At the very least, some form of judicial reform seems quite likely which …
It’s possible that the bubble in Artificial Intelligence (AI) equities has burst, and that the US stock market’s broad-based strength will end soon. Nonetheless, this isn’t our baseline scenario, partly because demand for AI hardware doesn’t seem to be …
Milan office take-up has held up well in recent quarters, but this has not translated into stronger prime rental growth. With the outlook for jobs growth pointing to a slowdown in take-up while downsizing and affordability concerns are rising, we think …
Our rental growth forecasts for the industrial and retail sectors are notably above the consensus, particularly over the next couple of years. That primarily reflects our relatively optimistic forecasts for GDP growth, where a recovery in consumer …
10th September 2024
Granular data showed that mortgage lending continued to recover in Q2, supported by a decline in the average mortgage rate on new lending. Our view that mortgage rates will fall further next year suggests demand will continue to pick up and housing …
Note: we will be hosting an online Drop-in on Wednesday 11th September at 3pm BST to discuss the outlook for gold prices. Sign up here . With a long and varied list of supportive drivers to choose from, we have raised our end-2025 gold price forecast to …
The new US controls on exports of semiconductor manufacturing equipment will slow China’s ability to expand its advanced chip-making capacity. While the immediate economic impact will be small, it will leave China’s hi-tech industry reliant on foreign …
9th September 2024
In principle, an increase in EU integration and cooperation, as proposed by Enrico Letta in April and Mario Draghi today, could increase output in the long run. But any progress will be slow, and the proposals are unlikely to be implemented in full. …
The latest IPF Consensus Survey showed forecasters are finally coming around to our long-held view that retail will preform relatively well over the next five years. Total returns for all the retail subsectors over 2024-28 saw significant upgrades, with …
6th September 2024
Even though the PBOC is trying to prop up local government bond yields while the Fed is gearing up to cut rates, we think bonds in China will fare a bit better than those in the US. The PBOC has been flagging for some time that it is uncomfortable with …
The tightening of Brazil’s labour market and pick-up in wage growth over the first half of the year has supported a consumer boom. We expect conditions to cool over the coming quarters but, for now, the buoyant labour market is adding to the central …
5th September 2024
We held online Drop-In sessions earlier this week to discuss the outlook for major DM and EM economies and the risks that they face as we look forward to 2025. (See a recording here .) This Update answers some of the questions that we received, including …
The most recent European industrial take-up figures were slightly more encouraging. We expect activity will continue to slowly improve over the next couple of years, supported by the consumer recovery and increasing online penetration, though no return to …
While the risks of a more severe downturn in industry have increased in advanced economies, we still expect manufacturing output to slow rather than crash in the coming months. Even if output were to fall sharply, it wouldn’t necessarily have big …
4th September 2024
Although job openings fell sharply in July, the totality of the JOLTS data points to a labour market that continues to normalise, rather than one rapidly deteriorating. That leaves it up to the August Employment Report to determine whether the Fed kicks …
