Most central banks across Sub-Saharan Africa raised interest rates over the past month and, in contrast to many other parts of the emerging world, we think tightening cycles will last a while longer. Interest rates were hiked in Nigeria, South Africa, …
29th November 2022
Most countries in the region have now reported GDP figures for the third quarter, and growth was generally faster than we (and the consensus) had expected. One factor behind this resilience was the strength of private consumption, which held up well in …
Most developed market (DM) government bonds and equity benchmarks have rallied over the past month or so, but we doubt this twin rally will persist. While we think bond yields will end 2023 lower than they are now as inflationary pressures ease, we expect …
25th November 2022
The big surprise so far this year has been the resilience of housing starts which, despite falling from their 10-month high of 300,000 annualised in September, remained at a relatively strong 267,000 in October. While developers have largely shrugged …
24th November 2022
Growing domestic and external headwinds have taken a bigger toll on the region’s economies in recent months, with growth slowing sharply in Turkey and Israel in Q3 and GDP contracting outright in Czechia, Hungary and Latvia. Admittedly, there have been …
Having surged for the best part of two years, EM inflation appears to have passed the peak in this cycle. Our measure of aggregate EM inflation dropped from 7.8% y/y in September to 7.4% y/y in October. (See Chart 1.) Looking ahead, we think that …
23rd November 2022
Property yield rises stepped up in Q3, causing all-property capital values to fall on a quarterly basis in the CEE markets except for Bucharest. (See Chart 1.) This was despite solid office and industrial rental growth. Looking ahead, stretched …
Economies across North Africa have endured severe balance of payments strains this year and governments in Egypt and Tunisia finally secured staff-level agreements with the IMF over the past month. Markets have welcomed the news with sovereign dollar bond …
The sharp rise in Treasury yields this year has finally begun to feed through to the property data. Q3 investment activity fell by more than 20% on both a q/q and y/y basis, with loan originations also falling back notably. And valuers have begun to …
22nd November 2022
The resilience of consumer spending is keeping hopes of a soft landing alive. Although GDP growth looks to have slowed in the fourth quarter, and most leading indicators of recession are flashing red, solid retail sales and a jump in vehicle sales …
Prime property yields rose significantly in Q3. (See Chart 1.) This caused a sharp slowdown in capital value growth, even though rental growth was solid in the Scandinavian office and industrial sectors. Stockholm and the Swiss markets fared worst, with …
The RBI has hiked interest rates by 190bps since May and, while that is relatively benign compared to the moves seen in many other EMs, this tightening is now feeding through to the economy. Purchases of big ticket items such as passenger vehicles have …
21st November 2022
Headline inflation shot up to 3.7% y/y in October , the strongest since December 1990 while inflation excluding fresh food and energy rose from 1.8% to 2.5%. Although this puts inflation well above the Bank of Japan’s target, the case for tightening is …
Higher interest rates and a weaker outlook for economic activity led to a more significant rise in property yields in Q3. While quarterly rental rises remained solid, particularly for offices and industrial, this meant that all-property capital values …
18th November 2022
Data released over the past month or so suggest that most economies across the region fared well in Q3. GDP growth in Mexico and Colombia came in well above expectations and hard activity data from Brazil point to another solid expansion last quarter too. …
17th November 2022
Many of the Q3 GDP releases of early-reporting economies have beaten consensus expectations in the past few weeks, especially in Europe. Not only did energy-crisis-laden Germany grow in Q3, rather than contract as expected, but the economy managed to …
11th November 2022
While the risk premium that pushed gilt yields up and the pound down after the mini-budget has mostly been reversed under the stewardship of Sunak and Hunt, the fear that the markets will baulk at any fiscal indiscipline means that the Chancellor will …
10th November 2022
The latest activity indicators show that the economy contracted in October, and the forward-looking measures of new orders and expectations suggest that the downturn will get worse. We have pencilled in a contraction in GDP of 0.5% q/q for the fourth …
8th November 2022
With inflation surprising to the upside in Q3, the Reserve Bank of Australia was forced to revise up its near-term forecasts for inflation in its latest Statement on Monetary Policy. (See Chart 1.) What’s more, the Bank’s forecasts were based on the …
7th November 2022
On some measures China’s current COVID situation is about as bad as it has ever been. While far fewer infections are being found daily than at the peak of the Omicron wave, new cases are geographically spread just as wide, with the result that the …
1st November 2022
Central banks across the region have been stepping up the pace of intervention in foreign exchange markets to support their currencies, resulting in a drop in FX reserves. In most countries, reserves are down by around 10% from their recent peaks, and …
31st October 2022
The past month has brought further signs that economies across Sub-Saharan Africa are in the midst of a slowdown. The latest activity data out of South Africa suggest that, after GDP contracted in Q2, its economy fell into a technical recession in Q3. …
Current account deficits have widened to alarming levels in Poland, Hungary, Turkey and, most of all, Romania, in recent months which has contributed to the downward pressure on currencies this year – the Turkish lira, Hungarian forint and Polish zloty …
26th October 2022
OPEC+ cut its oil production quotas by 2mn bpd in November and strong compliance with the agreement will hit GDP growth in the Gulf economies harder than other members of the group. The result is that the region is now set to endure a sharper economic …
The reversal of Truss/Kwarteng’s fiscal policies and Rishi Sunak’s appointment as the UK’s new Prime Minister has ushered in a period of calm in UK financial markets after the recent storm. Indeed, much of the extra political risk premia on gilts that …
Brazilians head to the polls on Sunday to decide who’ll become the country’s next president in a heated run-off election between incumbent Jair Bolsonaro and his left-wing rival Lula. Lula is still the front runner, but the race is looking much tighter …
25th October 2022
The rebound in global oil prices over the past month has not been matched by those in Canada, with Western Canadian Select (WCS) instead trading closer to $60 per barrel, as the discount between WCS and the US WTI benchmark has widened to a …
While interest rates are unlikely to rise as high as investors expected in the immediate aftermath of the “mini budget”, those hoping that the surge in mortgage rates since will be reversed are likely to be disappointed. Admittedly, the peak in Bank …
21st October 2022
Total returns see worst month since Brexit vote The rise in interest rates and upcoming recession are leading to a rapid turnaround in commercial property performance. Rental growth is starting to ease, particularly in consumer-facing sectors such as …
EM tightening cycles have continued apace but, having started raising rates much earlier than their DM (and Asian) peers, some central banks in Latin America ( Brazil , Chile ) and Emerging Europe (Czech Republic, Poland) are drawing their hiking cycles …
19th October 2022
The continued strength of core inflation in September has sealed another 75bp rate hike from the Fed at the November FOMC meeting and raises the chances of that aggressive pace of tightening continuing in December too. Nevertheless, the more hawkish the …
The RBI continued frontloading policy tightening in its late-September meeting with another 50bp hike to the repo rate (to 5.90%) but communications since then suggest that some MPC members are ready to ease off the brakes. The minutes to that meeting …
With the yen currently trading just below 149, it now appears to be a question of when and not if policymakers step in again. But as recent weeks and the Asian Financial Crisis have shown, such interventions alone can’t reverse yen weakness. An even …
17th October 2022
A deterioration in the economic outlook and renewed rise in mortgage rates to a 16-year high in September means the housing market is set for a further slowdown. We estimate that mortgage payments as a share of median income rose to 26% in September. …
14th October 2022
The latest data suggest that the labour market strength, which has been a key feature of advanced economies this year, might be coming to an end. Admittedly, unemployment rates have generally been stable at very low levels. However, falling job vacancy …
A recession has looked unavoidable for some time and we now think it will be deeper than most anticipate. Manufacturing output is already declining and services activity is slowing. What’s more, inflation is in double-digit territory and does not seem …
6th October 2022
While the dollar has dropped back sharply over the past week, we continue to think that its rally has further to run as the global economy slows further and safe-haven demand intensifies. After a strong run since the middle of August, during which the …
4th October 2022
With monetary tightening cycles approaching their ends in many emerging markets (EMs), we think local-currency (LC) sovereign bond yields will, in general, be much lower in a couple of years than they are now. But we anticipate a significant amount …
It has been five years since the People’s Bank last dipped into its own foreign exchange reserves on a significant scale to support the currency. Since then, it is widely believed …
3rd October 2022
As has been the pattern for much of this year, a sharp rise in government bond yields in September heaped yet more downward pressure on stock markets, with the S&P 500 reaching its lowest level since late 2020 earlier this week. Since central banks in …
30th September 2022
While the Bank of England’s temporary U-turn on its balance sheet has caused Gilts to rally strongly, we suspect their yields will remain high for some time yet. The Bank of England dramatically intervened in the Gilt market on Wednesday in response …
29th September 2022
The Bank of England appears to have prevented the financial market fallout from the loose fiscal plans revealed in the Chancellor’s mini-budget from escalating into a full financial crisis. Since it committed to buy £65bn of long-dated gilts on …
The Egyptian pound has continued to weaken as the central bank (CBE) has taken tentative steps towards a more flexible exchange rate, and we think that the currency needs to weaken further to address the country’s external imbalances. Measures to tackle …
Just like their peers in advanced economies, monetary policymakers across Sub-Saharan Africa have turned more hawkish recently. Central banks in South Africa and Nigeria hiked interest rates aggressively this month. Reining in inflation is clearly the …
The fall in headline inflation to 7.0% in August, from 7.6%, was largely due to energy price effects, but there were also some encouraging signs that underlying inflationary pressures are easing. The number of individual CPI components that rose by more …
28th September 2022
The ramping up of the US Fed’s hawkish rhetoric has turbocharged the dollar’s appreciation against EM currencies, with most falling by 2-6% against the greenback since the start of the month. (See Chart 1.) Reluctant to allow currencies to slide too …
27th September 2022
Latin American currencies have come under pressure this month which will put further upward pressure on inflation, but the bigger picture is that headline rates are at, or close to, a peak across the region. Indeed, headline rates in Brazil and Peru are …
Inflation now seems to be approaching a peak across the region. Commodity prices have fallen, supply constraints have eased, pipeline price pressures have softened and firms’ selling price expectations have declined across CEE. CPI inflation has already …
22nd September 2022
All-property yields saw a large rise in August, as concerns around valuations increased. (See Chart 1.) And, with the energy support package set to boost interest rates and the economy probably already in a mild recession, yields will see further …
The 1.7% q/q rise in New Zealand’s production GDP and the 0.9% q/q rise in Australia’s GDP in Q2 were among the strongest increases among major advanced economies. (See Chart 1.) However, GDP growth will slow sharply over coming quarters. Recent output …
