We think that energy commodities will claw back a bit of the ground that they have lost relative to industrial metals over the next two years or so, as some cyclical factors linked to COVID-19 which have weighed more heavily on the former unwind. However, …
3rd November 2020
We suspect that the rapid recovery in Asia LNG prices will run out of road in the coming months, as supply returns and LNG cargoes are potentially diverted away from Europe . Asia LNG prices plummeted earlier this year as the plunge in economic activity …
We think that the latest activity surveys for October may be overstating growth in Brazil, although they reinforce the view that its economy remains ahead of Mexico at this stage of the recovery. The recently-released October activity surveys can give us …
Lockdowns in Q2 this year caused global GDP to drop by 7% q/q, with the hospitality, recreation, and transport sectors suffering most. The hit from second lockdowns should be much smaller since activity is below normal levels to start with, restrictions …
We estimate that the second England-wide lockdown will cause GDP to fall by around 8% m/m in November, prompt the unemployment rate to climb to a peak of 9% next year, contribute to the government borrowing around £420bn (21.7% of GDP) this year and lead …
In the past, La Niña weather conditions in the Pacific Ocean have had a significant impact on agricultural crops and prices. In this Update we consider the risks that the development of La Niña over the coming months pose to our current agricultural price …
The Turkish lira has continued to fall sharply over the past couple of days and pressure is mounting on the central bank (CBRT) to deliver aggressive policy rate hikes at the MPC meeting later this month (if not before). But the political backdrop means …
Bank Negara Malaysia (BNM) left its main policy rate on hold at 1.75% today, but with a new set of restrictions to combat a second outbreak of the virus dragging on the economy, we doubt this marks the end of the central bank’s easing cycle. Of the 21 …
Commercial property transactions are likely to end the year around 40% down on 2019 totals. And with the prospect of an extended lockdown this winter, a slower economic recovery and falling capital values, this will weigh on transactions well into 2021. …
The RBA didn’t disappoint when it cut interest rates and launched quantitative easing today. And even though it turned more optimistic about the economic outlook, we suspect it will expand its government bond purchases beyond the planned six months . The …
India’s banks entered the crisis in worse shape than other major EMs, although large state involvement in the financial sector means the government is unlikely to remain idle if loan losses start to mount. Elsewhere, we have concerns in Brazil, Mexico, …
October’s headline manufacturing PMIs released so far for EMs were generally encouraging across the board, but they do not fully reflect the very latest surge in global COVID-19 cases and restrictions imposed across much of Europe. We think that these …
2nd November 2020
Manufacturing PMIs generally held their ground in October, suggesting that the industrial recovery made further headway, despite a resurgence of infections taking hold in the US and Europe. Manufacturing will succumb to weaker demand as restrictions …
The result of Tuesday’s US election is unlikely to be as important for Mexico as it was four years ago, with domestic factors remaining key to its bleak economic outlook. However, Biden’s climate change agenda could raise tensions with Brazil, and dampen …
We think that the Swedish krona will appreciate a little further against the euro and the dollar in 2021, but doubt that it will remain one of the best-performing G10 currencies, as it has been this year. The Swedish krona has been the …
The latest fall in the price of oil increases the chances that current OPEC+ production quotas are extended beyond the end of this year and reinforces our view that governments across the Gulf are unlikely to row back on recent austerity measures. …
Wealthy buyers seeking homes during the pandemic have driven the share of existing homes sold for over $500,000 to a record high. A lack of inventory has prevented a similar rise in the new home sector, and that may persuade builders to refocus on …
China’s October PMI data add weight to our view that Chinese economic growth will continue to accelerate, even though we estimate that the economy is already back to its pre-virus trend. This will support the prices of commodities in the months ahead, in …
With the race for control of Congress close and unprecedented numbers voting early this year, the results on election night are likely to be unusually volatile . If the polls are accurate and Democrats win back the White House and Senate, hopes would …
The Finance Ministry’s response to the pandemic has been even smaller than we initially thought. Announced stimulus measures were already meagre in size. It now appears that their impact has been partially offset by a pullback in other forms of government …
Although uncertainty about the US election result might temporarily support the dollar, we expect it will continue to decline over the next few years given our forecast for loose fiscal and monetary policy. The ~5% rise in the dollar following the 2016 …
30th October 2020
Commodity prices have largely shrugged off the conclusion of China’s Fifth Plenum and discussion of the 14 th Five-Year Plan (FYP). This is not so surprising as the main takeaway from the event is that we will have to wait until March for any detail. But …
Greater remote working looks set to be a legacy of the pandemic. However, given that working from home was already relatively prevalent in Sweden and Denmark, the scope for significant further rises there is limited, reducing the risks to office demand …
A Biden presidency would probably result in a tougher US foreign policy stance against both Russia and Turkey, paving the way for a further deterioration in relations, an increased risk of tighter sanctions, and an acceleration in both countries’ recent …
The ECB left its policy settings unchanged at today’s meeting, but explicitly stated that it would “recalibrate” them in December. We think this will include an increase in the size and duration of the PEPP and lower TLTRO interest rates. More radical, …
29th October 2020
European investment activity is likely to remain subdued into 2021, as pricing has been slow to adjust and investors continue to push back investment decisions in the current uncertain environment. CBRE data showed that there were no signs of a recovery …
We think the one-month national “lockdowns” will result in GDP contracting by around 2.5% q/q in France in Q4 while in Germany GDP will be flat at best. There is obviously a big risk that the lockdowns stay in place for much longer than a month, are …
The tone of the Brazilian central bank’s statement from yesterday’s meeting (at which the Selic rate was kept at 2.00%) was a little less dovish than the previous one. But it still provides plenty of reason to expect the Selic rate to remain unchanged for …
Out of all the banking sectors in major economies, India’s warrants the most concern. It came into the crisis in the worst shape, and the scale of damage to private balance sheets means it will be one of the hardest hit from rising defaults. Policymakers …
We estimate that firms deferred around ¥17tn in tax and social security contributions during the state of emergency. Most of those deferrals will have to be paid back by mid-2021 but we suspect that the government will extend the deadline for struggling …
The Bank of Japan today revised up its outlook for GDP growth for the next couple of years, reducing the already scant chances of additional easing even further. As widely anticipated, the Bank kept its short-term policy rate at -0.1% and its target for …
While the Bank of Canada today trimmed the pace of its QE purchases, we agree with its claim that the program should be as stimulative as before providing those purchases are focused on longer-term bonds as it signalled. Moreover, the Bank’s enhanced …
28th October 2020
Recent developments point to a weaker short-term economic outlook in the UK. In our view, this will weigh most heavily on next year’s office sector recovery and suggests that the turnaround that we expected in all-property capital values is now in the …
It is looking increasingly likely that the Brazilian government will violate its constitutional spending cap, or at least the spirit of it. While this could lead to some ructions in the real and Brazil’s bond market, we think its equity market should …
Despite issues with sampling due to COVID-19, the third quarter HVS survey did provide some interesting information on the impact of the virus. A surge in median asking rents was caused by a jump in the share of expensive multifamily units on the market, …
South Africa’s Finance Minister Tito Mboweni today fleshed out harsh austerity plans for the next few fiscal years. But the emphasis on spending cuts, including a three-year public wage freeze, will be politically difficult to push through. The debt …
The Turkish lira has fallen sharply in recent days amid concerns about the central bank’s decision making, rising geopolitical tensions, and the backdrop of a dire external position. The experience from previous sell-offs is that most of the fall in the …
We expect TIPS to continue to perform quite well, and better than conventional Treasuries, in the next few years. But we see a risk of higher inflation thereafter. That would, however, probably only cause TIPS to perform poorly, even if not as badly as …
With headline labour market figures affected by the various government support schemes, survey measures may provide a better indication of the true amount of slack in the labour market. These suggest that wage growth in the coming months is likely to be …
Asian exports have continued to defy gravity. Despite the biggest slump in the global economy since the Second World War, regional exports are already back to their pre-crisis level. The resilience of exports in much of Asia has helped offset some of the …
A Democratic clean sweep in the US election is probably the scenario that would be most beneficial for Canada’s GDP, but the effects would still be far outweighed by other factors. The US election has the potential to impact the Canadian economy through …
27th October 2020
While the COVID crisis has prompted an unprecedented fiscal response worldwide, there have been major differences between economies. The US saw large and immediate support, which has already expired without disastrous consequences. China’s infrastructure …
We think that MSCI’s indices of emerging market (EM) equities in Latin America and EMEA will reverse some of their recent underperformance relative to the MSCI EM Asia index over the next few years, just as they did following their sharp falls during the …
26th October 2020
The overwhelming vote in favour of rewriting Chile’s constitution will set the ball rolling towards entrenching a larger role of the state in the economy. And it may cause the central bank to adopt a more dovish stance in the medium term. This is likely …
