We expect the euro-zone economy to grow at only a sluggish pace this year, with southern economies outperforming the core. Germany’s election will lead to only a modest loosening of its restrictive “debt brake”. France’s budget deficit will remain very …
10th January 2025
Oil market rally on shaky foundations The recent rise in oil prices has dominated proceedings so far this year; at the time of writing, Brent crude is currently at $79.8pb – up more than 3.5% on the day and more than 11% higher than its December low. For …
Strong across the board The larger-than-expected 256,000 gain in non-farm payrolls in December and drop back in the unemployment rate to 4.1% supports the Fed’s decision to slow the pace of rate cuts and has heightened speculation that the loosening cycle …
This page has been updated with additional analysis since first publication. Jump in employment raises chance of Bank pause The huge gain in employment in December supports our view that labour market conditions are strengthening, despite the recent …
ECB to keep cutting rates gradually With data this week revealing that services inflation remained stuck at 4% in December, ECB policymakers will feel in no hurry to slash interest rates. (See here .) We have taken out the 50bp rate reduction that we had …
PBOC will retreat if tariffs are imposed Shortly after Trump’s election victory, the PBOC began to hold the daily fixing rate steady at 7.19/$, thereby keeping the weak edge of the currency’s trading band at 7.33/$ and suggesting to us that it was …
Copom to press ahead with more hikes despite fall in inflation The fall in Brazil’s headline inflation rate in December, to 4.8% y/y, coupled with the rebound in the real over the past couple of weeks, won’t be enough to stop Copom following through with …
Mozambique and the return of Mondlane Post-election unrest in Mozambique threatens to re-escalate with Daniel Chapo set to be inaugurated as the country’s next president on Wednesday and opposition leader Venâncio Mondlane returned to the country this …
In this Focus , we explain why we expect the S&P 500 to continue to thrive in 2025, after correctly predicting that it would soar in 2024 . We are sticking to our forecast that it will end this year at 7,000. One reason we expect the S&P 500 to rally this …
Greater rupee volatility hints at shift in FX strategy The Indian rupee was one of the most stable EM currencies against the US dollar in 2024. (See Chart 1.) That is in large part by design – the Reserve Bank of India (RBI) has a policy of intervening …
Signs that political crisis is weighing on growth With inflation under control and signs the political crisis is weighing on the already-weak economy, we expect the Bank of Korea to cut interest rates by a further 25bps at its meeting on Thursday. …
Tight labour market muddies the waters Financial markets are becoming increasingly optimistic that the RBA’s next easing cycle is right around the corner. They are now pricing in a 70% chance that the Bank will hand down a 25bp cut at its meeting in …
Bank will probably wait until March While the Bank of Japan refrained from hiking interest rates at its December meeting, the case for further policy tightening remains intact. For a start, the “Summary of Opinions” of that meeting showed that at least …
With long-dated gilt yields hitting multi-decade highs, we held an online Drop-In session on Wednesday to discuss the outlook for the gilt market and the implications for government policy and the UK macro and housing market outlook. (See a recording here …
9th January 2025
While upside risks to energy prices have garnered plenty of attention in recent months, there are several downside risks that are worth noting. Although we would characterise the downside risks – Saudi Arabia performing a major pivot in oil policy and …
UK Gilts have not only been embroiled in a global government bond sell-off, but they have fared worse than others. However, we think that bonds will recover before long, with yields in the UK falling particularly sharply by the end of this year. The …
Saudi’s bumper debt sale now a regular event Saudi Arabia’s National Debt Management Centre (NDMC) outlined its 2025 Borrowing Plan this week and the government has already got its debt issuance in motion. With budget deficits likely over the coming …
We originally published an Update ahead of the general election on 4 th July on what taxes the next government could raise. In light of the recent rise in gilt yields putting the Chancellor on course to break her fiscal rule, we have refreshed this …
Whilst Donald Trump is threatening to slam the brakes on the green transition in the US, state-level officials have the tools to continue making progress on the climate front. This Update uses our Regional Climate Databank to highlight the extreme …
As the president-elect again prepares to take office, our US team held a special briefing to walk clients through what to expect in the opening phase of the second Trump administration. … US Drop-In: Inauguration Day special – Knowns and unknowns around …
2024 likely marked the bottom in all-property values in Europe, but we expect further falls in the US in 2025. That said, US performance should improve further ahead, outpacing the euro-zone over the 2025-29 period. By sector, stronger rental growth will …
US President-elect Donald Trump’s increasingly aggressive rhetoric against Canada suggests we should take his tariff threats seriously. We already assume that Trump includes Canada in a likely 10% universal import tariff, but we remain relatively sanguine …
Fall in inflation paves the way for further easing The larger-than-expected fall in Mexico’s headline inflation rate, to 4.2% y/y in December keeps the door open for another 25bp cut at Banxico’s February meeting. But a lot will hinge on moves on the …
2025 has started with a bang as bonds have sold off amid growth and inflation fears – and the operating environment may only get more tricky from here. With Donald Trump just days away from returning to the White House, our Macro and Markets teams held …
The troubling start to 2025 is casting doubt over our key non-consensus forecasts for 2025. But we still think other forecasters are underestimating how fast the economy will grow, how far inflation will fall and how many times the Bank of England will …
Weak retail sales at the end of last year The 0.1% m/m increase in euro-zone retail sales in November was a little worse than expected (CE +0.7%, consensus +0.4%) and follows a fall in sales of 0.3% in October (previously estimated at -0.5%). This …
The outperformance of the peripheral economies since early 2022 is likely to continue over the next year, supported by high immigration, tourism growth and Next Generation EU funding. That said, growth in the periphery will not be particularly strong by …
Inflation to continue on its downward path, rate cuts on the way Egypt’s headline inflation rate slowed from 25.5% y/y in November to 24.1% y/y in December, its slowest pace in two years. With earlier falls in the pound falling out of the annual price …
Our Japan Chart Pack has been updated with the latest data and our analysis of recent developments. With real household incomes set to fall again this year, the rebound in consumer spending will start to lose momentum in 2025. Even so, with the yen set …
November pick-up but outlook still poor German industrial production picked up in November. But the level of output was still very low by past standards and with industry facing several structural headwinds we expect the sector to continue to struggle …
Uptick in underlying inflation consistent with demand recovery Headline CPI inflation fell last month but this was driven by weather-related volatility in food prices. More important is that core CPI and PPI both picked up, adding to signs that policy …
This page has been updated with additional analysis since first publication. Consumer spending showing tentative signs of life Although the boost from November Black Friday sales disappointed expectations a bit, consumer spending does appear to have been …
Regular earnings growth will hold strong at just under 3% this year Growth in base pay rose to its highest figure since 1992 in November, and we think that it will continue to hold strong through to this year. According to today’s preliminary estimate, …
8th January 2025
Fed worried by potential impact of Trump policy agenda After Chair Jerome Powell made a big fuss about claiming in last November’s press conference that the Fed wouldn’t speculate about what policies the incoming Trump administration will adopt, the …
Brazil’s recent period of rapid growth is likely to come an end this year. Sovereign debt concerns will almost certainly rumble on, but further piecemeal austerity measures will probably prevent another rise in bond yields or leg down for the real. In a …
The improvement in Egypt’s macroeconomic stability since March’s policy shift has resulted in a surge in capital inflows on a similar scale to that which followed the 2016 devaluation. But if signs emerge that the authorities are delaying reforms, there’s …
Overview – The potentially inflationary policy mix of the incoming Trump administration will limit the decline in mortgage rates this year, squashing hopes for a major recovery in home sales. We expect transactions to remain depressed, reaching just 4.3m …
Weak mortgage demand supports our gloomy home sales forecast The small decline in purchase mortgage applications in December is worse than it looks, as it masks a collapse in demand in the final few weeks of the month, driven by mortgage rates climbing …
We think Nigeria’s interest rate hiking cycle is over. The CBN is likely to be confident that moderating petrol prices and a more stable naira will quickly see the disinflation process resume. Still, we think the CBN will be wary of the inflationary risks …
Against a backdrop of lower interest rates and weak economic growth in much of Europe, we think the recovery in property values will continue at a gradual pace in 2025. Our forecast for euro-zone total returns of almost 9% is a notable improvement on the …
Compared to our end-2023 forecasts, property yields look set to end 2024 a bit higher than we anticipated and rental growth stronger. Overall, that means our call for all-property total returns of just over 6% in 2024 will prove correct. Our non-consensus …
This page has been updated with additional analysis since first publication. EC survey points to economy stagnating and price pressures remaining sticky The EC survey is broadly consistent with euro-zone GDP stagnating in Q4. It also suggests that …
Although the Korean won has strengthened this year, we think its rally will unwind before long. The Korean won appears to have embarked on a relief rally lately, bucking the trend of broad US dollar strength. Admittedly, it edged down slightly against the …
Commodities Chart Pack (Jan. 2025) …
Rachel Reeves’ room for manoeuvre is rapidly shrinking as long-end gilt yields rise. Amid a worldwide bond sell-off, should the government brace for its borrowing costs to keep increasing – and what are the implications for fiscal policy if they do? Our …
Inflation lower than expected, Riksbank to cut in January The fall in inflation in December will ease policymakers’ concerns about upside risks to inflation. We had previously been expecting them to wait until March before cutting the policy rate for a …
We now expect underlying inflation to remain above the Bank of Japan’s 2% target for most of 2025 and the Bank to hike rates to 1.25%. However, we believe that it’s too early for the Bank to declare victory in its quest to lift inflation sustainably to …
This page has been updated with additional analysis since first publication. Disinflation gathering momentum The RBA is unlikely to pay much heed to the slight pickup in headline inflation in November. In fact, with underlying price pressures showing …
Though we think the market has bottomed, we expect a very weak recovery this year, unlike in other cycles. In fact, we think valuation falls still have further to go, leaving our forecasts generally below consensus, particularly for the industrial sector. …
7th January 2025
