The statement accompanying the Brazilian central bank’s decision (to keep the Selic rate at 2.00%) suggests that it is starting to consider interest rate hikes. But we think the shift towards monetary tightening will be much more gradual than most …
10th December 2020
We expect the recent rise in US inflation compensation to continue as the economy recovers, but doubt that it will be matched by a similar increase in nominal bond yields. As such, we think real yields may fall further. To recap, the 10-year US Treasury …
The capital ratios of Australian banks may decline a bit as loan deferrals come to an end and other policy support is withdrawn. But with capital ratios having almost doubled since the GFC and underlying profitability sound, the banking sector won’t be a …
The key change to the Bank of Canada’s policy statement today was its commitment to “keep interest rates low across the yield curve”. This is in line with our view that, even as the economy rebounds strongly next year, the Bank will prevent the 10-year …
9th December 2020
The recent tightening in coronavirus restrictions means that Greece’s recovery will shift into reverse in Q4 and the start of 2021 is also likely to be weak. However, the rollout of a vaccine by mid-year should pave the way for a strong rebound in …
Failure of Poland and Hungary to reach an agreement with the EU over the veto of the bloc’s budget would have severe political and economic consequences if funds were withheld. Even if a deal is agreed, perhaps as soon as the EU Council meeting on 10-11 …
The confirmation of an effective vaccine in recent weeks has improved the economic outlook. But rising unemployment, a higher exposure to smaller retailers and ongoing travel restrictions will result in standard shop rents continuing to fall next year. …
8th December 2020
The third supplementary budget announced by PM Suga today raises fresh government spending in response to the pandemic to around 12% of GDP. That lifts Japan back up the global fiscal support rankings and lends further support to our view that the economy …
We have now factored the rollout of an effective COVID-19 vaccine into our forecasts and, as a result, we are slightly more positive on the demand outlook for some agricultural commodities. That said, we still expect most agricultural prices to fall over …
An important driver of the surge in home sales over recent months has been households leaving apartments in cities to escape COVID-19 and acquire more space to work from home. But a fall in the share of single-family and completed new homes in total home …
7th December 2020
Brexit is going to get a lot of airtime over the next few hours, days and weeks, especially once the outcome of the call between Boris Johnson and Ursula von der Leyen later this afternoon is made public. But most of the coverage about a deal or no deal …
China’s commodity import volumes should hold up well in the coming months in part because ongoing fiscal support should continue to boost domestic demand . China’s exports surged by 21.1% y/y in US dollar terms to a record high last month, but imports …
A rebound in global economic activity triggered by COVID-19 vaccines will lift the oil market and, in turn, the Gulf economies over the coming quarters. But one legacy of the crisis is that these countries will have to contend with peak oil demand being …
The surge in capital goods shipments in October and solid profit data for Q3 suggest that capital spending is ending the year on a strong note. We’re revising up our forecast for business investment this quarter. The budding rebound also bolsters our view …
Industrial metals prices have surged in recent weeks owing in large part to strong economic activity in China. And while prices should hold up during the first quarter next year, we think that they will ease back by end-2021 as demand growth in China …
4th December 2020
We think the dispute with Hungary and Poland over the EU’s multiannual budget will be resolved one way or another and the EU will start to disburse the Recovery Fund during the first half of next year. This will lift GDP a little in some countries over …
The RBI kept the repo and reverse repo rates on hold today and made an explicit commitment to keep policy “accommodative” for the foreseeable future. Markets are too hawkish in expecting modest rate hikes within the next 12-18 months. The MPC’s unanimous …
China’s rebound from the COVID-19 shock has been swifter and stronger than most anticipated. We think its economy will continue to surprise to the upside for a while, paving the way for PBOC rate hikes and further renminbi appreciation. But the property …
Given the recent positive vaccine developments, we are revising up our GDP forecasts across the region. Among the major economies, Chile and Mexico are likely to be the biggest beneficiaries while Colombia and Peru will be the smallest. Nonetheless, the …
3rd December 2020
Our upcoming Outlook will detail major upgrades to our capital value expectations. Rather than a total fall of around 10% at the all-property level, we now expect the cumulative decline to be just 5%. In mid-November we published an Update which noted a …
With positive news on COVID-19 vaccines increasing the chances of a strong global economic recovery next year, risky assets have rallied over the past month. While we think the stage is set for them to continue to do so, in this Update we identify five …
The distribution of effective COVID-19 vaccines is likely to be much slower in Africa than in many other parts of the world and the “vaccine bounce” in domestic economic activity will probably also be more muted. Those countries that will benefit the most …
In Q3, the balance sheets of developed market banks were in good shape and credit losses stayed ultra-low. Defaults are likely to rise as policy support recedes, but we think the banks are well-placed to cope. Most banks in the US, Japan, and developed …
A weaker CEE rental outlook, coupled with tighter policy and investors’ reassessment of the sector, suggest that the recent widening between CEE and euro-zone office yields has further to go. As the severity of the pandemic became clear, we argued that …
We think that the limited reaction of developed market government bonds to positive vaccine news is a sign of things to come. While the introduction of effective vaccines should help drive a stronger economic recovery early next year, it does not …
2nd December 2020
News about a vaccine has boosted financial markets and we have revised up our global economic expectations for the next two years or so. But while we think that this bodes well for the medium term, next year is still likely to be tough for most property …
The recovery is set to go into reverse in December amid the latest coronavirus restrictions, and we now think GDP will stagnate over the first quarter. But the high effectiveness of the first COVID-19 vaccines increases the chance that economic activity …
November’s headline manufacturing PMIs were generally encouraging and suggest that EM industrial sectors are faring well, even in Central & Eastern Europe where overall GDP will slump in Q4. We expect industrial sectors to continue to lead the EM recovery …
1st December 2020
The global manufacturing PMI rose for the seventh consecutive month in November. Restrictions seem to have weighed on industry in parts of Europe, but nowhere near as much as in March and April. And with recoveries elsewhere still strong, global …
A fresh rise in COVID-19 cases in Brazil and Mexico threaten to derail their recoveries in late-Q4 and Q1. On the flipside, the near-term outlook is relatively bright in Argentina, Peru and Chile. By the end of Q3, Brazil’s economy was relatively close to …
The distribution of effective COVID-19 vaccines is likely to be relatively quick in Emerging Europe, paving the way for robust economic recoveries that will leave economies much closer to their pre-virus trend by end-2022 than most other EMs. Poland is …
The ECB has said it is prepared to reduce its deposit rate further below zero. However, since any economic benefits would be small and it would be politically unpalatable to some on the Governing Council, we expect the Bank to instead focus on the TLTROs …
China’s November PMI readings surprised on the upside but were consistent with the rally in industrial metals prices last month. Given that fiscal stimulus is ongoing and export growth remains robust, metals demand and prices should remain supported in …
The RBA still sounded cautious when it left policy settings unchanged today. But if our more optimistic forecasts for GDP growth and inflation are realised, the Bank may not decide to expand QE in April. The Bank kept both its cash rate target as well as …
The government announced today that it expects to spend an additional $50bn this fiscal year to combat the damage from the second wave of the coronavirus. It also laid out plans for an investment-focused stimulus of between $70bn to $100bn, or up to 4.3% …
30th November 2020
We think that the outperformance of equities in EM EMEA and Latin America relative to those in EM Asia in November is a sign of things to come, as the world recovers from COVID-19. The outperformance of the MSCI EM EMEA and Latin America indices relative …
The recent surge in coronavirus infections means that economic growth will be slower than we previously assumed in both the fourth quarter and the first quarter of next year. As the associated restrictions on activity are eased early next year, however, …
The prospect of effective COVID-19 vaccines has prompted us to raise our forecast of global economic activity in 2021, which has positive implications for commodity demand. We think oil demand and prices, in particular, will rise sharply next year. But …
New Zealand is likely to be one of the few countries where output had recovered to pre-virus levels in Q3. Taken together with the recent positive news on the vaccine, we no longer expect the RBNZ to cut rates into negative territory. New Zealand removed …
The Bank of Japan’s new special deposit facility won’t lift the profitability of struggling banks meaningfully, nor should it result in a rise in money market rates. However, it is another sign that the Bank is becoming more worried about the impact of …
The distribution of an effective COVID-19 vaccine in India would significantly improve the near-term economic outlook, and we have revised up our GDP forecasts for 2021 and 2022. But the economy will still suffer repercussions from the crisis over the …
We think that the withdrawal of fiscal stimulus in China will offset any vaccine-induced boost to metals demand in 2021. And with supply bouncing back, we expect the prices of industrial metals to dip next year. By contrast, we expect that the price of …
27th November 2020
With widespread vaccination against COVID-19 now increasingly likely, we are revising up our oil demand forecasts for next year. And while OPEC+ will probably raise output a little faster in response, we still think that the oil market will remain in a …
While a difficult few months lie ahead for many economies, the news of effective vaccines has led us to revise up our world GDP growth forecast by 0.8%-pt and 0.5%-pt, to 6.8% and 4.6%, in 2021 and 2022. The positive effects will be biggest in DMs, while …
