The Philippines (BSP) left its main policy rate at 4.00% today, but with growth likely to disappoint and inflation set to remain below the mid-point of the BSP’s target, we expect more easing next year. Today’s decision to leave the main policy rate on …
12th December 2019
The Fed called time on its easing cycle today by leaving the fed funds target range unchanged at 1.50%-1.75% and striking a more upbeat tone in the policy statement. With economic growth stabilising and inflation set to remain subdued, we expect interest …
11th December 2019
Regardless of the outcome of US-China trade talks, we think lower Chinese consumption will weigh on the price of soybeans next year . China typically consumes just under one-third of the global soybean crop and accounts for about two-thirds of the trade …
As business credit growth slowed further in October and business confidence fell to an eight-month low in November, the jump investment in the third quarter does not seem to be a sign of things to come. In last week’s policy statement, the Bank of Canada …
On a net basis, capital continued to flow out of Emerging Markets (EMs) last month, and we think that 2020 will be the seventh consecutive year of outflows. Capital flows play a major role in EMs, as they finance spending and affect financial market …
There is a growing expectation that Russia’s government will adjust the way the National Welfare Fund invests next year. In this Update , we take a closer look at what this means and explain why, contrary to hopes in some quarters, it is unlikely to …
Our election preview contains detailed analysis of the potential impact of the election on the economy and markets. Here we focus on what to watch on Thursday night to get a sense of the result and its implications. When will we know who’s won? The first …
After cutting rates by 150bps since April, the Central Bank of Iceland kept its deposit rate at its current record low of 3.00% today. We suspect that in the absence of a sharp and sustained fall in inflation expectations, the Bank will keep rates …
Our calculations suggest that an average of the Bank of Canada’s three core inflation measures edged up to a fresh 10-year high in November. But given GDP growth has been below potential for much of the past year and firms report that they are raising …
10th December 2019
Given the government’s tendency to overspend in election years, we think that Ghana’s budget deficit will rise to about 8% of GDP next year. This will heighten investor concerns and put pressure on the currency and sovereign bonds. After narrowing as part …
Alberto Fernández’s government, which takes office today, will soon begin to implement its economic agenda and outline its proposals to resolve the debt crisis. This Update outlines four key things to watch. The first is an extension of capital controls . …
As the markets have priced in a high chance of this Thursday’s election delivering a Conservative majority there is little immediate upside left for the pound or gilt yields, although equities might still get a boost. There is, however, lots of scope for …
Severe power cuts in will weigh on the economy in Q4, and raise the serious risk of another technical recession. Even if the economy does manage to return to growth this quarter, recent weakness has set the stage for a disappointing 2020. Our …
We think that GDP growth in both Australia and New Zealand will fall short of expectations, forcing both the RBNZ and the RBA to cut interest rates more sharply than most expect. The consensus is that both the Kiwi and the Aussie dollar will strengthen …
Saudi Arabia’s 2020 budget makes clear that the authorities are preparing for a prolonged period of low oil prices by introducing fresh fiscal austerity. This, combined with the deeper oil production cuts agreed with OPEC+ last week, has prompted us to …
9th December 2019
In our view, the outlook for copper prices over the next twelve months is positive. Supply is unlikely to recover nearly as quickly as many assume following major disruptions this year, and demand should at least stabilise. In addition, exchange stocks of …
The WTO looks set to lose its power to rule on trade disputes this week. This will not immediately transform the economic or policy outlook since the body had been effectively side-lined already. But the failure of world leaders to get it back on track is …
China’s commodity imports were relatively strong in November, perhaps reflecting some front-loading of regional spending on infrastructure. But our view that growth in China’s property sector is set to slow suggests the strength in commodity imports will …
The continued weakness of core inflation that we expect in November’s consumer price data will probably give the MPC scope to ease policy again in the near term. But the big picture is that the inflation backdrop is set to turn more difficult over the …
The peso has rebounded over the past year due in large part to a sharp narrowing of the current account deficit. But with the deficit set to widen again next year as infrastructure spending picks up, the currency is likely to come under renewed downward …
The OPEC+ oil quota cuts announced today are unlikely to have a significant economic impact on most Gulf economies, but they will on Saudi Arabia. The direct impact of the output cuts means GDP growth in Q1 there might be some 0.6%-pts weaker than we …
6th December 2019
France’s public sector strikes will probably dampen economic activity this quarter, but experience from previous, similar walkouts suggests that the hit to GDP will be small. Moreover, while protests have occasionally caused governments to abandon planned …
In view of the wider interest, this Global Markets Update is made available to clients of the UK Markets service as well. A surprise win for Labour at Thursday’s election could be a major shock to UK equity markets. There are few recent examples of an …
A surprise win for Labour at Thursday’s election could be a major shock to UK equity markets. There are few recent examples of an unexpected sharp left-ward political turn in a developed economy. But there are some historical precedents that help put a …
Assuming a Brexit deal is agreed by the 31st January, the improved economic outlook is unlikely to support a rebound in commercial property investment in 2020. Indeed, we predict that a rise in yields will cause capital values to fall next year. And given …
While employment tends to lag changes in economic activity, the labour market figures will be crucial in leading the MPC’s decision about whether to cut interest rates or not in the coming months, even if there is a clear Conservative election victory and …
Given that employment growth has probably peaked, we expect office occupier demand to slow further over the next year or so, which will act as a drag on rental value growth. But the labour market may not be as tight as it first appears, so the risks to …
5th December 2019
While a Conservative election win followed by a Brexit deal would boost the economy, the lingering uncertainty generated by Boris Johnson’s pledge not to extend the transition period beyond 2020 will limit the rise in GDP growth and will probably negate …
House price inflation in Spain is now slowing but we do not envisage a slump in property prices that would derail GDP growth. After all, economic and financial conditions are supportive and there is little evidence that valuations are particularly …
The statement accompanying the Chilean central bank’s decision to hold interest rates at 1.75% yesterday signalled that policy rates will be left unchanged over Q1, but we still think it’s most likely that rates will be lowered over the next 12 months. We …
The Reserve Bank unexpectedly left interest rates unchanged for the first time this year, following five successive rate cuts. Nevertheless, the MPC has left the door open for further easing in the near term and a rate cut in February now looks likely. In …
Inflation in the Philippines rose last month for the first time since May and is set to climb higher over the coming year. However, with inflation set to remain low by past standards, we are sticking with our view that the central bank will loosen policy …
The fiscal stimulus package unveiled today will include much less fresh spending than the headline suggests. And the bulk of the spending will merely offset the unwinding of previous stimulus measures rather than result in a major fiscal expansion. Even …
The Reserve Bank of New Zealand’s decision to leave mortgage lending restrictions unchanged and tighten capital requirements means that lending and house prices are unlikely to surge in 2020. As such, concerns about financial stability won’t prevent the …
The political situation in Lebanon shows little sign of improving and the risk of a disorderly devaluation, sovereign default and banking crisis are rising by the day. Our sense is that the authorities will eventually turn to the IMF, probably before …
4th December 2019
Recent payroll employment growth is likely to be revised down in the annual revision early next year, which is unquestionably a negative. But the flip-side is that productivity growth must have been stronger than the current data suggest. As we’ve flagged …
Our baseline assumption is that the returns in common currency from mid- and large-cap equities will be similar in the euro-zone and the US in 2020, after a decade in which those in the US have outperformed substantially. The elections there next year, …
President Trump’s decision to impose tariffs on imports of steel and aluminium from Brazil and Argentina is likely to have little impact on prices. And while this could be interpreted as a sign that tariffs on the remaining “List 4” imports from China …
While there is likely to be more turbulence ahead for the Chilean peso, the big falls are probably behind us. Indeed, with the central bank intervening and copper prices likely to rise, we think it’s more likely than not that the peso will strengthen by …
Given our pessimistic view of China’s economy and the trade war, we think that the underperformance of developed market (DM) companies exposed to China will continue. Admittedly, the MSCI index that tracks those firms has actually done pretty well this …
Concerns about foreign currency debts in emerging markets have flared up again in recent weeks, but we think that the worst of these fears are probably overdone. FX debt burdens in most EMs have fallen as a share of GDP in recent years and balance sheet …
3rd December 2019
While the resignation of the Finnish Prime Minister today is unlikely to lead to a collapse in government, elections may well take place before 2023, when they are due. If so, the nationalist Finns Party could end up in power which could lead to fiscal …
With mortgage rates set to remain close to their current low level over the next couple of years, refinancing activity will be strong in 2020. Tighter credit conditions will constrain demand to some extent, but a decline in the number of households who …
Our economic forecasts for Italy are based on the assumption that the coalition government holds together, at least for the next two years. But in our view, the economic impact would be small if it fell apart. Bond yields would probably rise, but not as …
The sharp contraction in South African output in Q3 strengthened our view that trend growth in the country is flagging, and that GDP will only rise by a meagre 0.5% in 2020. Figures released today showed that South African GDP contracted by 0.6% in Q3 at …
The RBA turned more optimistic when it kept rates unchanged today but we think that further stimulus will be required before long. We reiterate our long-held view that the Bank will cut rates to 0.25% next year and will launch quantitative easing in the …
The IMF has suggested that the Bank of Japan could target shorter bond yields in order to steepen the yield curve and support the profitability of financial institutions. But the benefits to insurance firms and pension funds wouldn’t compensate for the …
The November manufacturing PMIs point to diverging prospects for EM manufacturers at a regional level, with conditions improving in most of Emerging Asia but deteriorating in Emerging Europe. The EM manufacturing PMI stayed at 51.0 in November for the …
2nd December 2019
Manufacturing PMIs for November suggest that industrial activity strengthened in most regions. This provides another welcome sign that the global industrial downturn may be bottoming out. In November, the global manufacturing PMI picked up slightly from …
We doubt that recent developments in Hong Kong will prevent the US and China reaching a “phase one” trade deal in the coming weeks. But it would do little to boost global growth. And given the fundamental differences between the two sides, tensions will …
