Filtered by Region: Europe Use setting Europe
Hungary’s central bank (MNB) stepped up the pace of tightening today with a 100bp increase in its base rate, to 4.40%, and the hawkish communications underline the view that the central bank will respond to the deterioration in the inflation outlook with …
22nd March 2022
Just as the supply problems facing euro-zone manufacturers showed tentative signs of easing, the war in Ukraine has created new headwinds. It would not be surprising if industrial output fell in the coming quarters. But rising services demand should mean …
A close look at banking sector linkages in Central and Eastern Europe provides encouragement that there is little direct exposure to Russia and Ukraine and that any indirect exposure through a Western European parent bank is likely to have minimal …
21st March 2022
The post-meeting speech by Russia’s central bank (CBR) governor Elvira Nabiullina made clear that policymakers think sanctions and autarky are here to stay for the long term. But at the same time, officials at the CBR appear to want to revert back to …
18th March 2022
While Cyprus’s strong ties to Russia make it is vulnerable to recession, the country’s public finances and banking sector are in better shape than they were before the crisis which took place a decade ago. And any problems in Cyprus are very unlikely to …
17th March 2022
Their net fall since the invasion of Ukraine means the valuations of European equities are now even lower relative to those of US stocks. While valuations have a mixed track record at predicting returns over short periods, they are key to our view that …
Mortgage rates have been slow to respond to rising market interest rates, with lenders choosing to take a hit to their margins rather than fully offset increased funding costs. But we don’t think there is any more scope for rises in Bank Rate to be …
Russia’s banking sector has held up better than might have been expected through the initial stage of the crisis due to large, timely and widespread policy support. But banks will now face the challenge of rising loan losses. While the capital buffers of …
16th March 2022
Food inflation in the euro-zone is on the rise and the war in Ukraine will make matters worse. While policymakers might normally “look through” a period of high food inflation, with the headline rate already high there is a risk that rapid increases in …
The latest surveys show that the war in Ukraine has severely dented euro-zone investors’ and companies’ perceptions of the outlook. This is consistent with our view that the war will cause a significant hit to economic activity, but for now, we still …
15th March 2022
Russia’s government appears to be heading towards a default on its foreign currency debts for the first time since the Bolshevik revolution. This won’t affect the Russian government’s ability to finance itself (beyond what sanctions have already done) and …
14th March 2022
Cyprus is by far the most exposed euro-zone economy to the collapse in Russia’s economy and it now looks very likely to fall into recession in the coming quarters. In this Update , we take a look at the economic and financial links between the two …
11th March 2022
Although a gap between euro-zone corporate and peripheral sovereign spreads opened up after the start of the Russia-Ukraine war, it has begun to close recently and we think that it will shrink further . The spreads between the yields of long-dated …
At the start of the Ukraine crisis, we felt the direct property impact would be modest, based on limited Russian ownership and capital flows. But as the conflict extends into a third week, concerns have risen about the macroeconomic impacts of the …
Even if the West bans crude imports from Russia entirely, the Iranian experience suggests that there will still be ways for Russia to get its oil onto global markets. But any workarounds would take time to translate into a pick-up in exports, and at best …
In today’s monetary policy statement, the ECB said the Russian invasion of Ukraine was a watershed moment for Europe, but it concluded that it does not require a big change in monetary policy. Indeed, the Bank announced an acceleration in the pace at …
10th March 2022
The US and UK energy embargos will reduce Russian exports by just 0.6% of GDP, but adding in the EU’s plan to reduce Russian natural gas imports takes the total loss of export revenues closer to 2% of GDP. Coming alongside growing evidence of a more …
It is highly likely that the war in Ukraine will accelerate Russia’s shift towards isolation and into autarky. (See here .) This will prevent Russia from catching up with more advanced economies, while the West will face some difficult choices as higher …
There has been some discussion of possible FX intervention by the ECB to support the euro, but there is next to no chance of that being announced at today’s press conference, and unless the single currency falls much further we think likely the Bank will …
The South East jobs market turned a corner during the second half of 2021. But while occupier activity has picked up, vacancy has also risen. As a result of this, and the effects of economic headwinds and remote working, we only expect to see modest …
The EU is considering more joint bond issuance, reportedly of around €200bn or 1.4% of EU GDP. If this is agreed, the devil will be in the detail and the amounts involved may fall short of some expectations. But it could cover much of the additional …
9th March 2022
While the plan to reduce Europe’s reliance on Russian gas this year seems achievable, it will only lock in higher-for-longer gas prices and prolong the squeeze on household incomes. The centrepiece of the European Commission’s “REPowerEU” package, …
The growing list of countries imposing restrictions on Russia’s energy exports has raised the likelihood of a deeper contraction in Russia’s economy this year and a wave of corporate defaults. This Update provides a primer on the composition of …
While we don’t think that 2021’s strong pace of prime office rental growth in Amsterdam will be sustained, we still expect growth to outperform the euro-zone over the next couple of years, averaging around 3% a year. Prime office rents in Amsterdam …
The war in Ukraine has triggered renewed outflows from EM financial markets as risk aversion has taken hold, but there are few signs of severe financial contagion. And even if outflows were to intensify over the coming months, the macroeconomic fallout in …
8th March 2022
The National Bank of Poland (NBP) stepped up the pace of tightening today with a 75bp interest rate hike, to 3.50%, and the marked deterioration in the inflation outlook due to the war in Ukraine is likely to mean that rates rise much further in the …
In response to the news that the US is considering banning imports of Russian oil, which means that commodity prices will probably be higher for longer, we have raised our CPI inflation forecast and will soon cut our UK GDP growth forecast. To reflect the …
7th March 2022
We think that a complete ban on Russian energy imports would cause the prices of Brent crude oil and European natural gas to surge to $160pb and €300/MWh in the near term and settle at still very high levels into next year. The Russian economy would …
The 10-year/2-year gilt yield curve is closer to inverting than at any point since March 2020, supporting our view that GDP growth will slow this year. And while a yield curve inversion isn’t a good leading indicator of a recession in the UK, it’s clear …
The constraints on Russian supply will work in tandem with an improving demand-side picture from auto production to keep palladium prices elevated. As a result, we have revised up our price forecasts . Palladium prices have rocketed by almost 51% since …
4th March 2022
The EU’s decision to suspend its debt reduction rule for another year gives countries the green light to ramp up spending on defence and cushion the blow from higher energy prices. Depending on how long the conflict lasts, and how severe the side effects, …
3rd March 2022
While supply-chain links between the EU and Russia and Ukraine are small, shortages of seemingly obscure inputs can cause significant disruption, and add to price pressures, if alternatives cannot be sourced quickly. Aside from the most energy-intensive …
The sharp downturn in consumer confidence in February showed that the cost of living crisis was starting to bite even before the war in Ukraine began. But despite the worrying correlation between house prices and sentiment, our base case remains that …
While the war in Ukraine may well push down the yields of long-dated developed market (DM) government bonds further in the near term, we think that a sustained rally in bonds is unlikely unless the war causes a sharp fall in output in major DMs, which, …
2nd March 2022
While gilt yields could drop further if the war in Ukraine escalates much further and/or it becomes clear that it is significantly reducing economic activity in the UK, at the moment we think gilt yields are more likely to rise over the next two years. …
One immediate effect of the war in Ukraine will be to push Russia several places down the league table of the world’s largest economies. However, the impact on the global economy over the long run will depend to a large extent on its political and …
As fears over Russian oil supply mount, negotiations between Iran and world powers on reviving the Iran nuclear deal have been advancing in Vienna. If the nuclear deal is revived, we think there will be an immediate increase in Iranian supply, but fears …
Russia has already suspended the transfer of coupon payments on local-law sovereign debt to foreign investors, and the likelihood that the government and companies are unable or unwilling to make external debt repayments (besides those already affected) …
The spread of Russian interbank interest rates over the central bank’s policy rate – which was hiked aggressively on Monday – has widened pointing to some stress in the banking sector. But for now it is far from the levels recorded during 2008/09 and …
The EU would have a number of options to help compensate if Russian gas supplies were to be turned off, but in practice we suspect that some degree of power rationing would be needed. Past episodes of energy rationing were not as damaging as one might …
1st March 2022
February's manufacturing PMIs point to decent industrial growth last month and support our view that the impact from Omicron waves on EM industry will be limited. However, the surveys suggest that supply chains remain stretched. And looking ahead, the war …
The ratcheting up of Western sanctions, alongside a tightening of financial conditions and the prospect of a banking crisis, mean that Russia’s economy is likely to experience a sharp contraction this year. The outlook of course remains incredibly …
The impact of the war in Ukraine on energy prices will have a bigger effect on inflation in Italy and Spain this year than in Germany and France. Since the beginning of 2021, energy inflation has surged across the euro-zone, and the latest legs up in oil …
We expect that the rise in the gold price so far this year will continue in the near term as safe-haven demand builds. That said, we expect that the price will fall when/if tensions cool. But the extent to which the Central Bank of Russia (CBR) might …
The war in Ukraine and the ratcheting up of sanctions on Russia will have knock-on effects on the rest of the emerging world mainly through its impact on supply chains and commodity prices. Some EMs (e.g. Gulf oil producers) stand to benefit from higher …
New sanctions on Russia have led to a sharp plunge in the ruble, and an effective freeze of most of the country’s financial markets. We think that the outlook now depends mainly on the extent to which this marks the start of an enduring break in Russia’s …
28th February 2022
In this Update , we answer the key questions about what the exclusion of Russian banks for SWIFT means for Russia and the rest of the world. What is SWIFT? SWIFT (“The Society for Worldwide Interbank Financial Telecommunication”) provides payments …
The sanctions imposed on Russia’s central bank freeze a significant portion of its foreign currency assets, rendering at least half largely unusable. The sharp tightening of capital controls today will remain the order of the day for some time, but …
The Russian invasion of Ukraine has added significant new uncertainty for investors. We expect Moscow property will take a substantial hit, but the impact on the wider European property market will be limited. We have outlined our initial thoughts about …
As it stands at the moment, we still think that the Russian/Ukraine conflict is more likely to boost inflation in the UK by more than it reduces GDP growth and that the Bank of England will continue to raise interest rates at the next few policy meetings. …
