The ECB looks set to announce an increase in the size of its Pandemic Emergency Purchase Programme in December and to extend the time for which it pledges to make net purchases and reinvestments. As a reminder, the Pandemic Emergency Purchase Programme, …
25th November 2020
We anticipate that MSCI’s benchmark index of mid- and large-cap equities in the US will underperform its index of those in other developed markets, as investors continue to focus more on the roll-out of effective COVID-19 vaccines than on the current …
The launch of a new copper futures contract in China should help shift pricing power in metals markets towards Asia, but the contract will not immediately become a new global benchmark . Last week, the Shanghai International Energy Exchange (INE) launched …
The huge amount of personal savings built up during the pandemic, if unleashed, represents perhaps the biggest upside risk to the economy over the coming year or two. But even once the spread of the virus is brought under control, there are reasons to …
24th November 2020
Policymakers in Nigeria kept their benchmark rate unchanged at 11.50% today, highlighting the dilemma they face due to high inflation and a weak economy. But we think that the central bank will, on balance, opt to provide more monetary stimulus in early …
The US election outcome and positive vaccine news has triggered a jump in EM net portfolio inflows to their highest level since 2014. These inflows are likely to remain robust over the coming quarters. Our total EM Capital Flows Tracker is constructed …
Zambia became the first African government to default during the current crisis and debt risks are high in several other Frontier Markets, including Ghana and Kenya. The G20’s recently-announced ‘Common Framework’ to provide debt relief is a step in the …
23rd November 2020
As expected, today’s batch of flash PMIs confirmed that manufacturing has fared better than services in the face of the renewed virus wave. The strength of the US surveys was surprising and indicates that the economy has shrugged off the latest …
Nigeria’s Q3 GDP data showed that ongoing weakness in the oil sector was more than offset by a rebound in the non-oil economy and we expect this two-speed recovery to continue over the coming quarters. Figures released over the weekend showed that …
Although India’s economy has struggled more than most in the COVID-19 pandemic, its equity market has performed relatively well lately. We expect the contrast between the economy and the equity market in India to continue over the next couple of years. …
20th November 2020
US equity real estate investment trusts ( REITs) have underperformed ordinary US equities considerably in 2020 despite a plunge in US Treasury yields, which usually provides more of a boost to the former than the latter. However, we expect US REITs to …
The Treasury’s decision not to extend the majority of the Fed’s emergency lending facilities beyond the end of the year is unlikely to have a major impact on the economy given that those facilities made just $25bn of loans. At the margin, however, it …
The platinum market should move into a small surplus in 2021 as demand falls and production in South Africa rebounds strongly in the wake of lighter virus-related restrictions . In its latest quarterly report, the World Platinum Investment Council (WPIC) …
We have revised up our forecast for the euro against the US dollar, as we expect that conditions driving the euro’s appreciation will persist over the next few years despite near-term headwinds. The euro has appreciated more than 10% against the greenback …
With the benefit of hindsight, the stamp duty holiday was not necessary to get the housing market moving again. And the end of the holiday in March will insert a cliff edge in demand at the exact moment we expect employment and incomes to be suffering …
At its December meeting, the ECB is very likely to announce additional TLTRO operations and it may well make their terms even more favourable for banks. In this Update , we review the ways that the ECB could alter TLTROs so that they provide greater and …
The surge in the price of cocoa this week has come as a number of large risks hang over the supply outlook. But if these risks fail to materialise, we expect prices to fall back over the coming months . The price of cocoa soared by close to 25% this week …
Commercial banks left the Loan Prime Rate (LPR) on hold today, after the PBOC moved to mitigate the impact of corporate bond defaults on interbank liquidity. With growth now back to its pre-virus path and attention turning to financial risks, we think the …
The recovery in oil demand across Emerging Asia has been highly uneven. Oil consumption in China is already back to pre-virus levels, and we think it will rise further in the year ahead. But consumption elsewhere is unlikely to return to pre-virus levels …
19th November 2020
Argentina’s central bank (BCRA) is running out of FX reserves to prop up the peso and it may soon devalue the currency. Even so, it would take an overhaul of the monetary policy setup, probably under the guise of a new IMF agreement, to prevent a more …
A striking development in the past few months is how well housing markets in developed markets have generally been doing. We expect this to peter out next year, although in most cases house price falls will be avoided. In the meantime, the strength of …
Policymakers in South Africa kept their benchmark rate unchanged at 3.50% today, but the close decision underlines lingering concerns about a weak recovery and subdued inflation. Even if the Reserve Bank refrains from further rate cuts over the coming …
After underperforming the MSCI USA Index for most of 2020, the MSCI Japan Index has started to outperform it in recent days. Provided COVID-19 is brought under control in most major economies, we think that this trend will continue over next couple of …
The decision by Turkey’s central bank to hike its one-week repo rate by 475bp, to 15.00%, and pledge to provide all funding through this facility appears to have done enough to convince investors that there really is a positive shift in policymaking …
The high-frequency data suggest the targeted restrictions imposed last month have not weighed much on broader activity, but worsening COVID-19 outbreaks raise the risk that “circuit breaker” lockdowns will be imposed. This would greatly increase the …
Bank Indonesia (BI) cut its main policy rate today by 25bps to 3.75%, and further gradual easing is likely provided the currency continues to perform well against the US dollar. Of the 26 economists polled by Bloomberg, 14 expected rates to remain …
The central bank in the Philippines (BSP) cut its key policy rate today for the first time since June, and the weakness of the recovery means further easing is likely. Today’s 25bp cut takes the policy rate to just 2.0% - a fresh all-time low. The BSP has …
Rising rental vacancy rates in large cities have not been accompanied by a surge in first-time buyers (FTBs). Indeed, 2020 saw the lowest share of FTBs since 1987. That implies many of those rental households who left large cities are either renting in …
18th November 2020
Ongoing policy stimulus in China should continue to boost investment and industrial output in the coming months. However, we expect economic activity to gradually slow by end-2021 which is why we think that prices will start to ease back next year . …
Policymakers across the region have drawn down foreign exchange reserves this year in order to prop up currency pegs and, in the Gulf countries at least, this can be sustained for some time to come. Even in Bahrain and Oman, financial support from their …
The expiry of the remaining enhanced unemployment insurance programs at the end of the year would hit the incomes of the unemployed but would be unlikely to deal a major blow to the economy. With another stimulus deal possible early next year, it is the …
Relatively few EMs have signed large-scale advance purchase arrangements with pharmaceutical companies and the roll-out of vaccines is, in large part, likely to be slower than in DMs. This Update answers five questions on vaccine distribution in EMs and …
South Africa’s hard activity data for September point to a lacklustre economic recovery in Q3 but this is unlikely to prompt the Reserve Bank to deliver further monetary stimulus at tomorrow’s MPC meeting – we expect the policy rate to be left unchanged …
A widespread rollout of an effective vaccine next year should allow a fairly swift return to normality for Spain’s hard-hit tourism sector and would transform the short-term economic outlook. We currently forecast the economy to grow by 4.5% next year, …
The Bank of Thailand’s (BoT) decision to leave interest rates unchanged at an all-time low of just 0.5% came as no surprise. Given the poor outlook for the economy, rates are likely to remain very low for a long time to come. The recent strength of the …
Given that Japan doesn’t have existing free trade agreements with either China or Korea, it is set to benefit more than other participants from the recently signed RCEP deal. However, tariffs will only be lowered gradually so the impact on GDP growth will …
The news about effective vaccines has improved the global economic outlook and we think that most restrictions on activity in advanced economies will be removed by around Q2 next year. But distribution to many EMs including large parts of Latin America, …
17th November 2020
There is still a lot of uncertainty about the rollout of a COVID-19 vaccine in Europe, but it now seems likely that it will be delivered to those most vulnerable to the disease by Q2 next year, which would help to reduce the risk of damaging runs on …
Growth in narrow measures of the money supply has continued to edge higher as demand and saving deposits continue to accumulate but, with growth in broader measures of money and bank lending dropping back, there is little threat of that pushing inflation …
Hungary’s central bank left its key interest rates unchanged today but the recent appreciation of the forint and signs that disinflationary forces have picked up has given the central bank scope to reduce the interest rate on its one-week deposit back to …
History suggests that large falls in employment can lead to big falls in house prices. The furlough scheme, mortgage holidays, and a moratorium on possessions have insulated the housing market from the effects of this crisis so far. But after that support …
The COVID pandemic will leave a profound economic legacy. But unlike previous crises, this will not necessarily manifest itself in much weaker rates of long-term economic growth. Instead, the economic legacy of the pandemic will be felt in changes to …
Moscow offices rents were under pressure even before the onset of COVID-19 and a further steep decline is expected this year. Domestic economic factors will be more supportive in 2021, but this is unlikely to deliver much more than marginal growth over …
Daily mobility data suggest that, compared to “normal”, the current lockdowns will cause GDP to fall less than half as far as in April. Mobility has fallen most sharply in France and has held up best in Germany. The official data only run up until …
The rebound in investment in India appears to have been stronger than anticipated over the past few months and we are revising up our estimates of Q3 GDP growth as a result. But the recovery faces several headwinds, meaning that investment will remain …
