Overview – Non-energy commodities prices generally fell in June on the back of concerns about the outlook for demand amid global monetary tightening and slower economic growth. Energy prices may also fall a little from here, but constrained supply will …
6th July 2022
The latest data suggest that underlying inflationary pressures in the euro-zone remain intense. Although core inflation edged down from 3.8% in May to 3.7% in June, this appeared to be down to temporary policy changes in Germany that will weigh on …
We expect the yields of emerging market (EM) local-currency (LC) and dollar sovereign bonds to rise further and EM equities to lose more ground as “risk-free” rates continue to climb and global economic growth disappoints . EM bonds and equities have come …
30th June 2022
The hawkish turn by DM central banks over the past month has further soured investor risk appetite, and capital inflows into African economies are likely to have slowed. Countries with large external financing requirements, and heavy debt burdens …
While the strength of the US dollar already reflects expectations that the Fed will continue its aggressive policy tightening, we think that disappointing global growth and weak risk sentiment will underpin further strength in the greenback this year. …
The period since the publication of our last Asset Allocation Chart Book on 31 st May has brought yet more pain for investors. Between then and 28 th June, the returns from all the headline indices that we track, bar USD cash, were negative. That includes …
Inflation has continued to beat expectations across Emerging Europe over the past month, reaching rates not seen in decades in most countries. It is now weighing more heavily on consumer confidence, and the surprise inflation releases for May prompted …
29th June 2022
The tight labour market is putting upward pressure on wages, with the Labour Force Survey showing a strong 1.0% m/m rise in average hourly earnings in May. While the annual rate of wage growth, at 3.9% y/y, remained lower than before the pandemic, base …
We think developed market (DM) government bond yields will rise further while equity and corporate bond prices fall further, as central banks press ahead with tightening and the global economy slows. The past few weeks have brought hawkish surprises from …
High inflation seems to be causing growing unrest in the region, which threatens to be economically disruptive and raise fiscal concerns. Recent protests in Ecuador have hit its oil sector hard, while truck drivers in Peru are about to embark on a strike. …
28th June 2022
The Omicron virus wave in China appears to have eased global shipping bottlenecks rather than worsened them as many had feared. Firms were able to re-route shipments through other ports to avoid disruption in Shanghai. And weaker goods demand domestically …
After more than two years in the doldrums, Thailand’s tourism sector is finally showing signs of life. Arrivals in May reached 520,000 – a 77% increase from the previous month and 19% of the level reached in the same month of 2019. Spending by foreign …
27th June 2022
Risk-off sentiment and the sell-off in EM financial markets have hit the Middle East and North Africa hard. Having been the top regional performer earlier in the year, the MSCI Arabian Markets Index has fallen by nearly 20% since mid-April. Sovereign …
24th June 2022
The surge in interest rates, plunge in the stock market and weakness of consumer confidence have fuelled fears of an impending recession, but there is still little sign of that in the incoming economic data. The coincident indicators used by the NBER to …
23rd June 2022
Having surged in recent months, there are some tentative signs that EM inflation is nearing a peak. Our measure of aggregate EM inflation was steady at 7.0% y/y between April and May and some indicators of pipeline price pressures have eased. But even so, …
We haven’t changed our forecast that the Bank of England will raise interest rates from 1.25% now to a peak of 3.00% by the middle of next year. But we do now think that a number of other central banks will raise interest rates faster and to higher levels …
Annual all-property rental growth reached a five-year high in May, while returns rose to levels last seen in mid-1994. But signs of a slowdown also emerged, especially in the red-hot industrial sector, where capital value growth and total returns eased …
22nd June 2022
The rupee has held up better than most EM currencies this month and the recent drop in FX reserves strongly indicates that this is in part because the RBI has once again ramped up its FX interventions. (See Chart 1.) RBI Governor Shaktikanta Das has made …
While inflation is still far lower in Japan than in most places, rapid increases in the prices of some everyday purchases have made it a political focus. A Nikkei poll following the Bank of Japan’s meeting at the end of last week found that nearly half of …
21st June 2022
The rise in mortgage rates from a low of 1.5% last November to 1.8% in April is beginning to weigh on home purchase demand, with the new buyer enquiries balance of the RICS survey dropping into negative territory in May. Supply is also improving according …
20th June 2022
Global economic activity might have contracted slightly in Q2, which would be the weakest outcome in recent history aside from the height of the pandemic and the Global Financial Crisis. Part of the weakness reflects a likely slump in Russian GDP, but we …
15th June 2022
Housing activity is slowing in the face of higher mortgage interest rates. Mortgage applications for home purchase dropped to a two-year low in May, existing homes sales have declined in each of the three months to April and new home sales recorded their …
9th June 2022
Hawkish shifts by the RBA and the RBNZ in recent weeks have prompted us to forecast an even more aggressive hiking cycle by both central banks in the months ahead. Both central banks hiked rates by 50bp at their latest meeting and we have now pencilled in …
Real economic growth is slowing rather than collapsing in the face of the twin drags of higher inflation and rising interest rates. The Chancellor’s latest fiscal handout will help support GDP in the second half of the year. And with the Prime Minister …
8th June 2022
With some important exceptions, including the German manufacturing sector, economic activity seems to have held up a little better than we had feared so far in Q2. We don’t think this will last. The recent strength has been helped by the re-opening of …
7th June 2022
Overview – Energy and agricultural prices continued to rise in May as concerns about supply more than offset signs that demand, at least for energy, could soften. We expect prices to remain historically high but to start to ease back later in the year as …
For much of this year, expectations of tighter Fed policy have driven up Treasury yields, weighing on the US stock market’s valuation in the process. That has changed since we published our last Asset Allocation Outlook , as Treasury yields have dropped …
31st May 2022
While the yields of emerging market (EM) local-currency (LC) and dollar-denominated sovereign bonds have dropped back in recent weeks, we expect them to resume their rise before long . After trending up for most of this year, the yields of 10-year LC …
GDP across Central Europe expanded strongly in Q1 and the latest figures for March and April suggest that activity has remained resilient since the war in Ukraine started. Russia’s economy has not (yet) fallen off a cliff as had been expected. Industry in …
African central banks have turned up their hawkish noises over the past month. Policymakers in Nigeria and Kenya delivered their first interest rate hikes following pandemic-era cuts. In South Africa, the Reserve Bank stepped up the pace of its tightening …
The first round of Colombia’s presidential election has set up a close race between left-wing Gustavo Petro and populist Rodolfo Hernández in the second round vote on 19 th June. The vote was a major repudiation of the pro-business governments that have …
30th May 2022
Talks between Pakistan and the IMF ended last week without agreement, but the subsequent decision by the government to cut back fuel subsidies has cleared one of the major hurdles towards a deal being agreed. Financial markets in the country reacted well …
China’s beleaguered property developers may soon see some respite both from their inability to borrow at reasonable rates and from sliding property sales. Last week, PBOC Governor said that the government would “correct the contraction in credit to …
While the US dollar has fallen back over the past couple of weeks after a strong run, we think that the key underlying drivers of the greenback’s appreciation this year remain in place. Although there has been a small rebound this week, the past month or …
27th May 2022
The RBI kicked off its tightening cycle this month with a 40bp hike to the repo rate (to 4.40%) in an unscheduled policy announcement. The minutes to that meeting show that several MPC members are keen to frontload policy tightening to keep a lid on …
With core CPI inflation still rising, the Bank of Canada has no choice but to continue hiking its policy rate “forcefully’ back toward neutral. All three of the core measures tracked by the Bank are now above the 3% ceiling of the target range. (See Chart …
26th May 2022
A majority of central banks in the region hiked interest rates over the past month. In the Gulf, central banks raised interest rates in line with the Federal Reserve, although this won’t necessarily curb demand in the region. Credit growth tends to …
We think “risky” assets will continue to struggle over the next year or so, even if a recession is avoided in most major developed markets (DMs) . Risky assets, which had already come under significant pressure earlier this year, have continued to …
24th May 2022
The metro level data confirmed another strong quarter for commercial real estate in Q1, though with the usual wide range of performance across sectors and cities. For offices, rents in the larger coastal markets continued to trail for the most part, while …
The recovery continued in the Scandinavian and Swiss economies and their property markets in Q1. It was a record first quarter for investment in Scandinavia. And annual capital value growth was robust for office and industrial, while retail values …
Upside surprises to inflation coupled with a hawkish Fed have prompted aggressive monetary policy responses by central banks across the emerging world over the past month. Policymakers in Czechia , Romania, Chile and Egypt raised interest rates by more …
23rd May 2022
The Bank of Japan’s attempt to relieve pressure on the Yield Curve Control framework by offering to buy an unlimited amount of 10-year Japanese government bonds (JGBs) at yields of 0.25% for as long as necessary appears to have done the trick so far. …
Setting aside the drag from net exports on GDP growth, Q1 was another strong quarter for both the domestic economy and commercial real estate markets, highlighted by a record first quarter for investment volumes. But occupier demand is slowing in all four …
20th May 2022
CEE economies and property markets started the year on a solid footing. Strong quarterly increases in office and industrial rents supported CEE all-property values in Q1, though yield compression slowed. (See Chart 1.) However, rental growth is likely to …
19th May 2022
The strength of the hard activity data for April refutes the recent message from financial markets that the economy is at risk of imminent recession. The solid gain in control group retail sales, together with upward revisions to past months leaves the …
18th May 2022
Euro-zone commercial property values made further gains in Q1. Quarterly rental growth was strongest for industrial, though office and retail rents also rose. However, the pace of yield compression reduced, limiting capital value growth. (See Chart 1.) …
We now expect Australia’s inflation to rise by more than 6% this year. Even allowing for an acceleration in earnings growth and a further solid rise in employment as immigration resumes, that will result in the first annual fall in real household …
17th May 2022
Just as policymakers at the ECB are becoming more concerned about inflation expectations (see here ), the rise in expectations in Sweden is giving the Riksbank plenty to fret about too. The Bank’s preferred measure – gleaned from a survey of money market …
13th May 2022
Recent data have shown the firmest evidence yet that high inflation is damaging real consumer spending in advanced economies. Real retail sales fell in the US, UK, and euro-zone in March, while increases in Australia and Japan reflected temporary rebounds …
The weaker economic outlook triggered by the surge in CPI inflation to a 30-year high of 7.0% in March has yet to put a dent in businesses own expectations for their selling prices. The Bank of England’s Decision Maker Panel survey found that in April …
10th May 2022
