The People’s Bank (PBOC) has taken yet another step to help banks and borrowers weather the economic disruption from the coronavirus outbreak. But more easing will probably be needed. The PBOC has just cut the one-year rate at which it lends to banks via …
17th February 2020
India’s merchandise trade deficit widened to a seven-month high in January, but we think that a low level of commodity imports will help to prevent the external shortfall from ballooning to unsustainable levels over the coming months. India’s monthly …
The worst commercial real estate busts have tended to follow a ramping-up in lending activity, driven by the availability of debt rising and its cost falling. However, regularly updated Fed lending data suggest that there is no real evidence of this …
14th February 2020
The outbreak of the coronavirus appear to have caused a pull back of net capital inflows to EM bond and equity markets on a similar scale to that seen during flare-ups in the US-China trade war last year. But the most recent figures suggest that inflows …
The post-election housing market recovery is likely to last a few more months, and we have upgraded our 2020 forecasts in response. But the housing market fundamentals were unchanged by the election. As a result, we expect the surge in activity to subside …
The latest MSCI data confirmed the gloom in UK commercial property showed no signs of abating during Q4 2019. But one of the few surprises was that City offices did better than expected, mirroring a pick-up in sentiment since the election. While we don’t …
President Cyril Ramaphosa’s State of the Nation Address contained a few promising announcements, relating to independent power firms. But his continued stress on the need for consensus strengthened our view that he won’t take the bold steps needed to …
Softer office occupier demand is expected to weigh on German prime office rents this year. But we still think that rents can grow at a decent pace because, even though office supply is expected to increase significantly, office occupier demand will still …
We had already expected something big on fiscal policy in the Budget. But the change in Chancellor increases the chances that new, less restrictive fiscal rules are announced, and that government policy boosts the economy by more over the next few years …
We think that the recent rebound in the yields of many developed and emerging market government bonds will generally continue in the rest of this year, if the coronavirus epidemic is contained. By contrast, we expect EM currencies, which have not …
13th February 2020
Although Japan’s stock market has persistently underperformed its US counterpart since the financial crisis, there are several reasons why it may not continue to lag during the rest of this year and beyond. Chart 1 shows the cumulative returns in US …
The sharp fall in job openings over the past year appears to be a lagged response to the earlier slowdown in hiring intentions rather than a sign that labour market conditions are about to deteriorate. We still expect solid jobs growth to help drive a …
Spain’s new government has downgraded its forecasts for economic growth and eased up on the planned pace of budget deficit reduction. But we think that GDP growth this year will be even slower than it expects, due to weakening domestic demand and the …
We think that a recent string of on-target inflation data and a less accommodating external environment will delay further interest rate cuts in Ghana. But monetary loosening will probably resume in 2021. Data released this week showed that headline …
This Update was originally sent to clients as a Rapid Response immediately after the announcement that Sajid Javid was being replaced as Chancellor by Rishi Sunak at 12pm on 13 th February 2020. The unexpected resignation of Sajid Javid as Chancellor and …
LNG prices should recover from their current coronavirus-related lows by end-year. But given the significant oversupply in the market, prices are likely to remain historically weak . We had always expected average LNG prices to fall this year owing to …
Measures to contain the spread of coronavirus in China have already dealt a heavy blow to metals demand. But the longer China’s economy remains part-suspended, the greater the chance that supply is also curtailed substantially. The scale of any supply …
Factory shutdowns in China are starting to have significant knock-on effects on the rest of the region as companies struggle to source intermediate goods. The garment and electronics sectors are likely to experience the worst of the disruption, while …
Lebanon’s new government appears to be warming to the idea of going to the IMF, which would reduce the risk of a disorderly debt default that causes severe strains in the local banking sector. But even if the authorities go to the Fund, any deal is still …
Indicators suggest that Irish industrial rental growth will remain healthy in Q1. However, as economic growth slows and uncertainty about the UK’s future relationship with the EU continues to impact decision making, we expect that industrial rental value …
December’s misleadingly strong mining figures shouldn’t distract from evidence that GDP probably contracted in Q4, tipping the country into a recession and creating a very weak starting point for 2020. Figures released today showed that mining output …
A jump in reported cases and deaths appears to reflect the official figures getting a better grip on the true extent of past infections, rather than indicate a recent acceleration in the spread of the virus. If anything, the latest data continue to hint …
The New Zealand government’s $12 billion infrastructure package should contribute to a pick-up in business investment and GDP growth from the second half of this year. That supports our view that interest rates have now reached a trough in New Zealand. We …
The coronavirus is contained in the US, and with Chinese construction imports and non-resident buyers too small to have a meaningful impact, the housing market has so far escaped the virus largely unscathed. But if a widespread outbreak occurred, a …
12th February 2020
Given the rising economic toll from the coronavirus, worries about rising property prices and high levels of household debt are unlikely to stop the Bank of Korea (BoK) from cutting interest rates at the end of the month. With the economic costs of the …
This morning’s decision by the Riksbank to leave its repo rate on hold at zero percent was never in doubt. While policymakers appear happy to stay in wait-and-see mode for the time being, we suspect that they will come under pressure to loosen policy …
Cash is still widely used in Japan and amid concerns about the impact on financial stability, a central bank digital currency for retail transactions is unlikely to be introduced anytime soon. There’s a case for an e-yen in wholesale funding markets but …
The Reserve Bank of New Zealand sounded confident when it left rates on hold today and we think the improvement in underlying economic conditions means the RBNZ’s easing cycle is now over. The Bank’s decision to keep rates on hold was correctly …
Latin American dollar bonds have performed relatively well since fears related to the coronavirus started to weigh on the region’s financial markets. But if commodity prices and currencies in the region remain weak, dollar bond spreads are likely to widen …
11th February 2020
The economic disruption from the coronavirus outbreak will lead to further rate cuts in much of Emerging Asia. And in those countries where currencies have fallen sharply, the moves have not been big enough to worry policymakers. As thing stand then, this …
Chinese imports of gold surged in December, while India’s foreign purchases remained in the doldrums. Looking ahead, we expect high local-currency prices in India coupled with a slowdown in Chinese economic growth to curb physical demand for gold in 2020. …
The economic disruption caused by the coronavirus means that we now expect the oil market to be in a surplus in Q1 2020, as opposed to the deficit that we had previously envisioned. However, providing that the virus is contained, we think that demand will …
Rapid employment growth in the technology and information industries has been behind a surge in demand for office space in San Francisco. Even if this growth were to slow somewhat, we expect absorption to exceed new supply over the next three years, …
Efforts to contain the virus are becoming less draconian but with many factories struggling to re-open and households not spending, it will be a while before the drag on growth fades. Reuters reported today that President Xi warned officials last week not …
Severe weather contributed to January’s jump in the average hourly wage by limiting the hours that salaried employees were able to work. As their hours return to normal, annual wage growth is likely to drop from January’s 4.2% to 3.4% in February and we …
While Chinese equities and bond yields might return to their levels of early-January if the coronavirus epidemic is contained, our bearish view of China’s economy suggests to us that they and the renminbi will go back down before the end of the year. It …
The Turkish authorities have kept a tight grip on the lira in recent weeks but we don’t think that this can continue for much longer and expect the currency to fall by 20% against the dollar by end-2020. The longer that policymakers intervene to prop up …
10th February 2020
Ireland’s general election result does not change our view on the near-term outlook for the economy, which should maintain a decent pace this year and next. But it does raise questions about the longer-term risks to public finances, particularly if Irish …
The RBA may yet cut rates to 0.25% in response to the drag on economic activity from the bushfires and the coronavirus. But with domestic demand rebounding as the housing slump has turned to boom, the urgency to support the economy has diminished. The RBA …
For now, our best guess is that the economic disruption related to the coronavirus will cost the world economy over $280bn in the first quarter of this year. If we’re right, then this will mean that global GDP will not grow in q/q terms for the first time …
7th February 2020
The Russian central bank governor’s post-meeting press conference reinforced the message that, following today’s 25bp interest rate cut to 6.00%, further easing lies in store. We maintain our view that there will be another 50bp of rate cuts in the …
Bernie Sanders is still a long way from the White House, but several of his policies look very negative for US equities. If his support continues to climb that could start to weigh on the US stock market. It remains up for debate whether Bernie Sanders or …
After a severe drought in 2019, Kenya is now facing the worst desert locust outbreak in 70 years. The impact on livelihoods could be devastating, but the economy-wide cost is likely to be limited. Locust outbreaks can inflict significant economic damage …
Headline consumer price inflation is likely to have edged up in January, in large part due to a continued increase in food inflation. Further ahead, food inflation is likely to ease, but we expect core inflation to rise over the coming quarters as the …
Provided that the coronavirus is brought under control reasonably soon, the consequences for the euro-zone economy should be quite small. Nonetheless, with growth likely to be very sluggish in any case, it could be enough to cause the euro-zone economy to …
6th February 2020
The Brazilian government’s plans to enshrine full central bank independence in law would help to both keep longer-term inflation expectations low and bring down real interest rates. This adds to the reasons to think that local currency bond yields will …
We wouldn’t be surprised if the recent recovery of EM equities continued over the coming weeks, with the stock markets of those countries that fell furthest following the outbreak of the coronavirus making up lost ground. Nonetheless, we wouldn’t expect …
The statement and press conference following today’s Czech MPC meeting confirmed that the surprise decision to hike interest rates by 25bp, to 2.25%, will be a one-off. Policymakers will probably maintain a hawkish tone over the next few months but, as …
Over the next two years we expect US property to produce total returns of over 7.5% p.a. This would be stronger than any of the last three years and, more importantly, would be a better outturn than we expect for US equities and far stronger than the …
While several central banks are undertaking reviews of their monetary policy frameworks this year, the result is likely to be only small tweaks to the existing inflation-targeting frameworks. But this doesn’t rule out a potential widening of central …
