Filtered by Region: Europe Use setting Europe
Although the economy weathered the cost of living crisis much better than most expected, the full force of the cost of borrowing crunch has yet to be felt. And with it looking as though interest rates need to rise further to quash inflation, we think the …
1st June 2023
In contrast to the deceleration across the rest of Europe, the rise in CEE yields in Q1 was bigger than in Q4, driven predominantly by the industrial sector. As the yield gap with the euro-zone is still narrow and valuations are more stretched that …
We think that the slump in demand for mortgages will more than offset the support from the high backlog of work and result in a sizeable contraction in euro-zone construction output in the coming quarters. Euro-zone construction output – which accounts …
30th May 2023
High net immigration helps explain why rental growth accelerated to its fastest pace on record last year. Immigration won’t be as high this year, adding to the reasons to think that rental growth has peaked. But strong pay growth, high mortgage rates and …
The upward revision to our Bank Rate forecast suggests that mortgage rates will return to a similar peak as last autumn by the end of the year. That would undermine the recent pick-up in mortgage approvals and lead to renewed falls in house prices. Higher …
The labour markets in Norway and Sweden remain very tight, in line with conditions in the euro-zone. This is likely to keep services inflation high over the coming months and encourage the Norges Bank and Riksbank to raise rates further. The labour market …
26th May 2023
President Erdogan looks set to secure victory in the second round of Turkey’s presidential election on 28 th May. This Update sets out how we think this would play out in Turkey’s financial markets this year: in short, we think that measures of Turkey’s …
25th May 2023
While it is a hot political potato, well targeted migration could be one part of the solution to the UK’s labour shortages problem. That could help inflation and interest rates be lower than otherwise. Net migration of 606,000 in the year to December 2022 …
The increase in mortgage rates has been the main determinant of the size of house price falls in developed market economies. Very tight supply in the US, and to a lesser extent the UK, has also supported prices in those markets. Employment, incomes, …
History suggests that in the absence of a major financial shock, central banks usually leave interest rates at their peak for a year or more. That’s consistent with our view that the ECB is unlikely to start cutting interest rates until around the middle …
24th May 2023
The most troubling aspect of April’s inflation data, released earlier today, was evidence that price pressures are becoming increasingly domestically generated. Accordingly, we now expect the Bank of England to raise interest rates further than we …
National GDP data released so far suggest that euro-zone exports rose in Q1. However we suspect they will be more subdued in the coming quarters as a result of weak global growth. We have recently investigated the reasons behind the strength of euro-zone …
22nd May 2023
More convincing evidence of a loosening in the labour market and an easing in labour costs growth has started to emerge. It may not prevent the Bank of England from raising interest rate above 4.50%. But it does tentatively support our view that the peak …
Our best guess is that the impact of monetary policy tightening on euro-zone economic activity will be less than five percent of GDP, which is the lower end of a range estimated in an ECB Economic Bulletin paper this week. However, even that could be …
18th May 2023
Economies across Central and Eastern Europe (CEE) have significantly underperformed the euro-zone and the rest of the world in recent quarters, which has its roots in the scale of the inflation shock that the region suffered and the impact on domestic …
The aggregate supply of labour in the euro-zone has recovered comparatively well from the pandemic, albeit with big differences between the major economies. But despite this, the labour market is very tight throughout the region and wage growth looks set …
After stalling at the end of last year export growth seems to have provided a boost to the euro-zone economy in the first quarter of 2023. However, we doubt that exports will be a major source of growth over the rest of the year given our downbeat …
17th May 2023
May’s IPF Consensus Forecasts highlighted another upgrade to short-term euro-zone office rental expectations. Our figures remain significantly weaker for 2023. From next year, our view is closer to the IPF average, though we still think the consensus …
Borrowing over a longer period significantly reduces monthly mortgage payments. So the accelerated shift towards loans with a term of 35 or 40 years rather than 25 has probably helped to mitigate the drag on buyer demand from higher interest rates. Higher …
15th May 2023
We think that investors are underestimating the scale of interest rate cuts in the UK next year. If we’re correct, that could propel Gilts to the top of the class for local-currency returns over the rest of 2023. Local-currency returns from ICE BofA’s …
12th May 2023
We doubt sterling’s strong run will continue; we still think that an economic downturn in the UK and other advanced economies will lead to renewed downward pressure on sterling later this year. Despite falling back a bit, to ~1.25 against the US dollar, …
The recent downgrading of Swedish property company SBB’s credit rating to “junk” and the ensuing market fallout have highlighted financing fragilities in the Swedish property market. But, while SBB is not alone in facing a sizeable financing challenge, we …
11th May 2023
Today’s 25 basis point (bps) rise in interest rates from 4.25% to 4.50% takes rates to our long-held forecast and may be the last hike, although one or two more hikes are possible. We suspect the subsequent holding phase will be fairly long, lasting until …
Greece has arguably been the positive surprise in the euro-zone over the past few years and near-term prospects look good. However, the forthcoming election may usher in a coalition government which is less committed to reforms and fiscal stability than …
10th May 2023
Note: We discussed Turkey’s election in an online briefing on 10th May. Watch it here . There’s a lot of optimism that the opposition will emerge victorious in Turkey’s elections, which would pave the way for a return to orthodox economic policy. Were …
Our central scenario is that Italy’s public debt-to-GDP ratio will decline gradually in the long-run. However, the government will need to maintain sizeable primary budget surpluses to make that happen. The European Commission has recently made a series …
5th May 2023
Although rent growth has been resilient, as the Swedish economy enters recession and employment contracts, we think the recent slowdown in Stockholm office occupier demand will persist. And with new office supply set to reach record highs in the next few …
We think that the tailwinds supporting the rebound in the euro against the US dollar have largely run their course, and still forecast the EUR/USD rate to return to parity as advanced economies fall into recessions later this year. Even after falling …
We forecast small further falls in the yields of long-dated US Treasuries and euro-zone sovereign bonds between now and the end of next year, as disinflation picks up steam and central banks turn more dovish. Investors largely shrugged off this week’s …
4th May 2023
Today’s 25bp decision was in line with market expectations and the views of most forecasters polled by Reuters – though we had been in the minority forecasting 50bp. The move marks a slowing in the pace of policy tightening and suggests at face value that …
The Czech central bank (CNB) left its main policy rate on hold at 7.00% as expected today, but it looks like policymakers set out to strengthen their hawkish rhetoric and downplay expectations of an imminent cut in interest rates. The message was loud and …
3rd May 2023
Note: We'll be discussing Turkey's election in an online briefing at 09:00 EDT/14:00 BST on 10th May . Register here . Parliamentary and presidential elections on 14 th May will make or break macroeconomic stability in Turkey. As things stand it looks …
A combination of the falls in global agricultural commodity prices, energy prices and wage growth will soon drag down food CPI inflation from a 46-year high of 19.6% in March perhaps to around 4.5% by the end of the year. Food inflation will soon become a …
Available data for Q1 suggest that the global economy had a better start to the year than previously feared. That seems to have reflected the post zero-COVID rebound in China and its effects, a boost to spending from a mild winter in the US and ongoing …
Berlin offices have been outperforming those in other German markets for some time. But Q1 data suggest that growth has begun to falter, and we think that the recent strength of the market won’t last. Berlin office rents have risen rapidly over …
The slowdown in European investment intensified in Q1 as transactions more than halved year-on-year. This was perhaps unsurprising given the ongoing price correction amid one of the sharpest tightenings of financial conditions on record. But, with …
28th April 2023
In our view, the role of UK pension funds in deterring firms from listing on the London Stock Exchange has been overstated of late. To the extent that higher valuations are the reason firms find a US listing more attractive, we think there is good reason …
Alongside the publication of our Q2 UK Housing Outlook this week, we held a series of roundtable meetings for clients in London. Here we sum up our thoughts on three key questions which recurred throughout the day: What is the biggest risk to our …
Wage growth in the euro-zone is likely to remain above the level compatible with 2% core inflation this year and only gradually return to a more sustainable level thereafter. For the past year, wage growth has run well above the 3% y/y or so compatible …
27th April 2023
Spain’s underperformance since the pandemic can be explained in part by the incomplete recovery in its tourism sector and in part by the sharp fall in real household disposable incomes. That said, we think the economy will outperform at least in the first …
26th April 2023
Industrial occupier demand in Spain is set to slow sharply this year and next, as the economy falls into recession. And with both Madrid and Barcelona poised to see a record level of speculative development in the same period, we think Spain’s prime rent …
25th April 2023
A fall in consumption this year will weigh on the retail sector, but an earlier correction in yields and rents mean it is less vulnerable to the recession. Indeed, it was the only sector to see a fall in yields in Q1. While some further rise in yields …
24th April 2023
The physical risks facing commercial property are substantial with extreme weather events like floods and wildfires set to increase in both the US and Europe over the coming decades. Property markets have yet to fully price these in, especially in areas …
21st April 2023
The Norwegian krone has been the worst G10 performer against the US dollar by some way in recent months. Though lower energy prices and weakening risk sentiment have likely played a role, we suspect foreign exchange transactions by Norges Bank are also …
Listed markets in Europe have been surprisingly downbeat about prospects for real estate relative to other regions. While we think that largely reflects mis-pricing in equity markets, it provides a reminder of the potential downsides as long as the …
20th April 2023
As mortgage lenders’ net interest margins are already very narrow, the increase in market interest rates over the past fortnight means that the decline in mortgage rates from their spike after the “mini” budget is now over. It was unusual for swap rates …
We think euro-zone equities will struggle as the region’s economy weakens more than investors expect. Euro-zone equities have continued their strong year-to-date gains this month, with the short-lived dip on the back of the banking turmoil now fully …
19th April 2023
This Update was originally published on 19 th April. We have updated the data, charts and text to reflect the growing divergence between inflation in the UK and elsewhere evident after today’s release of the UK inflation figures for May. Clients can read …
Romania's economy has outperformed its peers in Central and Eastern Europe (CEE) over the past year, but domestic demand looks unsustainably strong and a period of weaker growth will be needed to reduce the large current account deficit. We forecast the …
While US equity REITs are a long way from discounting the “best of times” for US commercial real estate (CRE) over the coming quarters, listed real estate stocks in Europe appear braced for something not far off the “worst of times”. That is a difference …
17th April 2023
