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The recent floods in Spain have inflicted huge personal and financial costs. But in terms of GDP, the effect is likely to be quite small as the temporary loss in activity will probably be offset by increased government expenditure. Similarly, while the …
12th November 2024
Residential’s growing share of investor portfolios speaks to the buzz around its potential to keep providing outsized returns. But will the sector continue to deliver? Join our Commercial Real Estate team for a special online briefing all about the …
8th November 2024
Watch a recording of our post-MPC online briefing here . While cutting interest rates from 5.00% to 4.75% today, the Bank of England implied that the Budget means rates will continue to fall only gradually. We agree and due to the Budget (and not the US …
7th November 2024
The collapse of its coalition government, triggered by disagreement over fiscal policy, means Germany will probably have a CDU-led government by mid-2025. This may be more stable and functional than the outgoing coalition, but would face the same …
Today’s 50bp cut is likely to be the only one in the cycle for the Riksbank, and we expect it to cut by just 25bp at its next two meetings to take the policy rate to its “terminal” level of 2.25% in January. This is less than the four cuts that market …
Alongside its decision to leave interest rates unchanged today, Norges Bank reiterated that it expects to remain on hold in December too. It is likely to start cutting in Q1 next year and we suspect that it will then loosen policy a little more quickly …
Data released last week showed that the euro-zone’s unemployment rate was unchanged at a record low in September. But a broader assessment of the labour market suggests that it is cooling, and the latest surveys suggest that it will continue to do so. …
5th November 2024
Inflation figures out of Turkey – including those published for October yesterday – have surprised on the upside and forward-looking indicators suggest that the disinflation process will be slow in the coming months too. Consensus expectations for the …
We expect interest rates to be cut to around the equilibrium of 3% or so in the US, UK and Australia. But rates in the euro-zone and Canada seem likely to fall below their equilibria next year, troughing at 1.5% and 2%, respectively. This judgement …
4th November 2024
Euro-zone investment has been weak since the pandemic. And despite the recent downward revision to our ECB interest rate forecasts, we don’t think it will pick up substantially, given the sluggish outlook for both economic growth and the competitiveness …
1st November 2024
While the market fallout from yesterday’s UK budget announcement is still a very long way from the 2022 “mini-budget” debacle, the surge in Gilt yields and fall in sterling over the past couple of days has some similarities to that episode. A meltdown of …
31st October 2024
The policies announced in yesterday’s Budget won’t have a significant bearing on the housing market. But the prospect that interest rates are a bit higher may soften demand and creates some downside risk to our forecast for house price growth of 5.0% next …
Despite the Riksbank reopening the door to a 50bp cut at its last meeting, we think it will proceed gradually and cut by 25bps next week to 3.0%. This is because the policy rate is approaching the neutral rate and the risks of over loosening are …
We doubt the sell-off in gilts following the Budget will gather momentum and cause another step down in commercial property values. However, given the current narrow spread between risk-free interest rates and property yields, the latter are likely to …
Norway’s economy is struggling and inflation keeps falling faster than Norges Bank expects, yet the Bank has not started loosening policy. Next week we think it will open the door to a December rate cut. At its last meeting in September, Norges Bank said …
The Q3 RICS commercial survey painted a somewhat mixed picture of the market. There was a slight improvement in investment and capital value expectations, but rental expectations were revised down. That highlights that the road to recovery for commercial …
This is a revamped version of our quarterly Financial Risk Monitor to include commentary and analysis of our latest EM risk indicators. Currency risks ease further, regional divergence among fiscal risks Financial vulnerabilities have declined further …
30th October 2024
Softer rental prospects, less scope for yields to fall and lower income returns look set to weigh on French residential property returns compared to Germany, the UK and the US in the coming years. This Update uses a similar methodology to our recent Focus …
29th October 2024
In light of the worsening outlook for economic growth and inflation in the euro-zone, we are making major downward revisions to our ECB interest rate forecast. We now think the Bank will implement back-to-back 50bp rate cuts in December and January, and …
28th October 2024
The possibility of looser fiscal policy than previous planned in the upcoming UK Budget on 30 th October suggests the risks to our forecast that the 10-year gilt yield will fall to 3.50% by end-2025 are skewed to the upside, even if a repeat of the …
New bank lending has risen recently as the interest rates on loans have begun to edge down, but it is still weak. While it will probably continue to increase gradually in the coming months, the ECB might need to cut its policy rates substantially to give …
25th October 2024
A victory for Donald Trump in the US election would probably result in higher US Treasury yields and a stronger dollar. That’s an environment in which central banks in EMs with strained balance sheets (notably Turkey) could hike rates and others that are …
24th October 2024
We expect Spain’s public debt ratio to continue falling for the next three or four years, helping to support demand for Spanish government bonds. However, further ahead its debt-to-GDP ratio is likely to rise again as population ageing and a lack of …
23rd October 2024
There is growing concern about how the green transition may create stranded real estate assets, impacting negatively on both lenders and investors. We can get some idea of the scale of the problem in Dutch markets where EPC targets have been more …
A Trump victory in the US election would accelerate the structural shifts that are a major challenge for Europe including rising protectionism, reduced export opportunities to China and the US, and the need to spend more on defence at a time when fiscal …
22nd October 2024
Following a record high in August, our proprietary measure of China’s green export volumes edged down in September. Meanwhile, China’s exports of EVs to Europe surged despite the recent EU tariffs, and we expect continued strong performance in China’s …
We expect Swiss inflation to average less than 0.5% next year and there are several key downside risks that could push inflation over the edge, namely lower oil prices than we expect, a stronger franc and lower housing rent. These risks will encourage the …
The strong recovery in property equities prices across the UK, euro-zone and US implies larger rises in commercial property capital values by the end of the year than we are currently forecasting. However, property equities have been boosted by the …
Although corporate credit spreads in the US and the UK have nearly reached multi-decade lows, we think they will remain near those levels over the next year or so. And we don’t see spreads in the euro-zone widening either, despite dim economic prospects. …
18th October 2024
Before the global financial crisis, 50bp interest rate cuts by the ECB were more common than 25bp reductions. Circumstances today are different, but if ECB policymakers are convinced that they need to keep cutting, we think they would not shy away from a …
17th October 2024
Christine Lagarde’s message in today’s ECB press conference was distinctly dovish and supports our view that the ECB will cut interest rates by 25bp at each of the next few meetings, at the very least. It wouldn’t be surprising if the Bank opted for a …
Dutch prime logistics rent growth is set to be among the highest in the region over the next few years. That reflects both strong prospects for leasing, thanks to a bright economic outlook and greater e-commerce penetration, and relatively tight supply. …
The detailed breakdown of September’s inflation data, published this morning, showed that underlying price pressures softened slightly. We think that core inflation – and services inflation in particular – will keep falling over the rest of this year and …
We are nudging down our forecast for economic growth in France next year from 1.0% to 0.7% because of the government’s plan to tighten fiscal policy. That said, we think the deficit will come down much less than the government plans, from 6.1% of GDP this …
16th October 2024
Surveys of banks, developers and surveyors all point to a recovery in capital values over the next few months. As does the behaviour of investors. The strength of that recovery is more uncertain, with the indicators pointing to annual price growth …
Israel’s economy is under strain from the conflicts in Gaza and Lebanon, with supply constraints both holding back growth and causing inflation concerns to build. The softer-than-expected inflation figures for September released today will provide some …
15th October 2024
Italy’s 2025 budget, set to be approved by cabinet today, suggests Italy will bring its deficit below the 3% of GDP limit imposed by EU fiscal rules much sooner than France. But Italy’s debt-to-GDP ratio is still likely to remain much higher than …
The BRICS+ summit in Russia next week is likely to see another push on expansion, mainly to close allies of China and Russia. But limited economic benefits for potential new members, divisions among existing members, and concerns (for some) about …
The ECB’s latest Bank Lending Survey suggests that demand for credit is recovering, but the rebound in housing loans is much stronger than in consumer or enterprise loans. The Bank Lending Survey for Q3 provides grounds for optimism that the housing …
We expect sterling to weaken by ~4% against the euro and ~1% against the dollar by end-2025 . This reflects our view that the Bank of England will loosen monetary policy by more than what investors are anticipating, GBP’s high valuation and stretched …
11th October 2024
China’s policy stimulus measures have generated large market moves but it is the fiscal element, which hasn’t been detailed yet, that has the potential to lift the economy. We’re not expecting a huge fiscal package and it may be less commodity-intensive …
10th October 2024
The Bank of England’s Q3 Credit Conditions Survey suggests house prices will rise further in Q4 and supports our view that a mild slowdown in GDP growth this year is more likely than another recession. Despite the fall in the average quoted mortgage …
Prime high street rental growth in Barcelona has outpaced Madrid since late 2022. However, we think rental growth will converge in the coming years as tourism numbers fall back to pre-pandemic levels in Barcelona and stronger domestic spending prospects …
In contrast to offices, there is less evidence of a ‘flight to quality’ in the overall retail sector. Shopping centres are the exception, where the spread between both prime and non-prime yields, and floorspace and financial vacancy rates has widened in …
Surge in supply ahead of Budget may temporarily dampen prices A leap in the number of homes being put up for sale in September, perhaps due to fears of second-homes and rented properties being subject to higher capital gains tax after the Budget, may …
Sweden’s economy is likely to see a strong rebound next year as consumption will benefit from fiscal stimulus and lower household interest expenditure. We think that the recovery will encourage the Riksbank to only cut its policy rate from 3.25% to 2.5% …
9th October 2024
While electric vehicle (EV) rollouts in Europe and the US have stalled and are set to remain sluggish over the next few years, the uptake of EVs in China has surged beyond expectations. So, for all the focus on the near-term supply risks to oil, the …
Data published today show that the euro-zone’s household saving rate rose even further in Q2 this year. The increase since late 2022 can be attributed to low consumer confidence and high interest rates, but the extent of the rise and the fact that it has …
4th October 2024
The 2025 draft budget recently outlined by Russia’s finance ministry shows that, rather than falling next year as initially planned, defence spending will rise by more than 20% to hit 6.2% of GDP. While personal income and corporate tax hikes will help to …
3rd October 2024
