The price of lumber has surged in recent months. We think that prices will continue to rise in 2020 primarily on the back of ongoing strength in US housing starts and falling lumber supply from Canada . To recap, the price of US lumber has rallied by …
20th November 2019
Labour would probably borrow a lot more than the Conservatives if it won the election, but we doubt gilt yields would soar. Labour’s fiscal plans wouldn’t bring debt sustainability into question, inflation expectations are unlikely to leap and relatively …
While the Riksbank’s plans for an official digital currency are still in the early stages, we think it is more likely than not that it will launch the e-krona by the mid-2020s. Moreover, we suspect that it will opt for a design which has the potential to …
We estimate that net capital outflows from emerging markets (EMs) eased in October, and more timely data point to a further improvement so far this month. But we doubt that, on a net basis, capital will flow in to EMs anytime soon. Capital flows play a …
US Treasury yields have rebounded over the past few weeks, as worries about the US-China trade war and the outlook for the global economy have eased somewhat. But while we don’t expect them to revisit their lows, we also think that Treasury yields are …
A sharp fall in the rupee and a series of aggressive interest rate hikes has led to a welcome fall in Pakistan’s external imbalances. However, with growth slowing sharply and inflation close to multi-year highs, the country is not out of the woods yet. …
The tensions between Korea and Japan are unlikely to end anytime soon. That suggests that tourist arrivals may fall further and Koreans will continue to boycott Japanese consumer goods. However, Japan’s shipments to Korea are dominated by intermediate …
November’s “Black Friday” boost to retail sales volumes will actually show up in December’s retail sales figures this year. More importantly, consumers may not be in the mood to spend freely over the Christmas period. As a result, retailers may find just …
The latest Loan Prime Rate (LPR) reductions confirm that banks are lowering lending rates on new loans in response to the recent cuts to the PBOC’s lending facilities. And policymakers’ willingness to embrace lower rates on long-term loans hints at a …
The price of zinc has risen a little since its recent low in September on the back of unanticipated disruptions to supply. But we expect it to fall back again next year, premised on a rebound in supply at a time of subdued demand growth . The price of …
19th November 2019
Pressure is growing on Lebanon’s dollar peg and, in the event of a devaluation, the pound could fall by as much as 50% against the dollar. A messy sovereign default and a deep recession would follow. But over a longer horizon, a more competitive currency …
Optimism about trade has been a factor behind the rally in global equities in the past month. But with a “mini-deal” now largely discounted in the markets, and economic growth unlikely to do better than stagnate over the next couple of years, we suspect …
Asian export growth should start to pick up over the coming months. However, the recovery will mainly reflect a more favourable base for comparison following the collapse in electronics exports at the end of last year, than an improvement in underlying …
While GDP growth picked up in Q3, activity data for September indicates that the economy had already slowed significantly prior to the protests beginning. GDP is likely to contract in Q4. That said, events of recent days have raised hopes of the protests …
18th November 2019
The euro-zone’s services sector has held up relatively well so far this year. However, we expect spill-overs from the industrial recession and slowing employment growth to take a toll in the coming months. The latest business surveys point to a sharp …
The lessons for the UK from the election of a Labour government in New Zealand in 2017 are that businesses and financial markets will probably put more weight on policies that could restrain economic growth than the prospect of much looser fiscal policy. …
We couldn’t agree more with recent comments from RBI Governor Shaktikanta Das that much better governance is needed to improve the long-term health of the banking sector. The problem stems in large part from the outsized role of the state. Privatisation …
The monthly goods trade deficit was virtually unchanged in October and we think that it will remain small over the coming quarters as low oil prices continue to keep a lid on imports. Data released on Friday evening show that India’s monthly goods trade …
For the first time this easing cycle, the People’s Bank has cut the rate it charges banks for short-run liquidity. We expect further cuts in the coming months, which will open the door to lower interbank rates and make banks less reluctant to cut lending …
The recent surge in stock buybacks has largely been driven by mining and financial firms and therefore can’t explain the weakness in non-mining investment. Non-mining profit growth should rebound a little over coming quarters as domestic demand picks up a …
One reason to think that the relentless outperformance of the US stock market since the Global Financial Crisis (GFC) will not continue for another decade is its valuation, which has become comparatively stretched over the past year . Admittedly, …
15th November 2019
Although volatility in the US stock market is expected to remain very low, we don’t think that this is a worrying sign that investors are being complacent. That is because big stock market corrections are usually the cause , rather than the symptom, of an …
Housing completions have reached their highest level in over three decades. But timelier data on housing starts point to a weakening pipeline of construction. On that basis, we think housing completions could fall by 10% over the next three or four years. …
After loosening policy again yesterday, Mexican policymakers will probably cut rates by another 75bp over the coming six months. Given that the US loosening cycle now seems to be at an end, market expectations – which point to 150bp of cuts – seem to have …
The 100bp interest rate cut delivered by Egypt’s central bank today is likely to be followed by further easing in the coming months. While we expect inflation to edge up in the near term, it will remain below the central bank’s target. As such, we …
14th November 2019
Tight supply of affordable homes, and a relatively large increase in their price, are encouraging builders back to the starter home sector. But a slowing economy and tighter credit conditions rule out a substantial shift to cheaper homes. Instead, we …
We have just returned from two days of client meetings in Stockholm from which the key takeaway is that we are not alone in being puzzled by the Riksbank’s stance. Policymakers seem determined to raise the repo rate in December, but we remain confident …
While policy loosening has caused a marked easing of financial conditions around the world, lending growth is still quite subdued. We doubt that this will change, particularly since demand for loans is now weakening again. This is another reason to expect …
A new wave of structural reforms, if implemented, could plausibly lift average EM GDP growth by over 1%-pt in the 2020s. But we doubt that these reforms will be forthcoming. Even if they are, EM GDP growth would still be much weaker than the 6% average …
We think that aluminium consumption figures are being flattered by a resurgence in off-exchange stockpiling. As such, and contrary to consensus expectations of a market deficit in 2019, we think that the aluminium market is currently comfortably supplied …
Downbeat activity figures suggest that South Africa’s economy contracted again in Q3. This adds to the evidence that the risks to our below-consensus growth figures are heavily weighted to the downside. Figures released this morning showed that mining …
It was no surprise that the central bank in the Philippines (BSP) left its main policy rate at 4.00% today, and it is unlikely to adjust rates at its December meeting either. But with growth likely to disappoint and inflation set to remain subdued, we …
Palm oil prices have soared recently in part because of unfavourable weather, which has clouded the outlook for supply. At the same time, we think that demand from the world’s top consumers is set to rise strongly. As a result, we expect prices to …
13th November 2019
The boom in credit in Qatar since the turn of the year has caused a renewed build-up of vulnerabilities in the banking sector. Severe balance sheets strains should be avoided, but the recent pace of credit growth won’t be sustained, which will add to the …
The recent softening of hiring intentions implies that average monthly employment gains will slow further, to below the sustainable rate. While base effects will keep annual hourly wage growth above 4% in November and December, we expect it to decline to …
More EMs’ income levels have fallen relative to the US’s than have risen this year, the first time this has happened since the 1990s. This is likely to be a sign of things to come in the 2020s. There are lots of ways of defining catch-up growth, but our …
Our forecast of a downturn in China’s property sector bodes ill for the price of Chinese steel. Moreover, falling iron ore prices and a bleak outlook for China’s steel exports will add to the downward pressure . The price of Chinese steel rebar has ticked …
There is no immediate threat of any country in Emerging Asia falling into a prolonged period of deflation, but persistently weak price pressures are likely to remain a worry for central banks and will tip the balance towards more easing over the coming …
The Angolan currency’s recent fall will push up inflation and increase the debt-to-GDP ratio even further. While we don’t think that default is an imminent risk, the government will have to tighten fiscal policy. Consequently, GDP is likely to contract …
The Reserve Bank of New Zealand sounded cautious when it left rates on hold today and we believe that a deterioration in the economy will force the Bank to 0.5% by early next year. We were one of the five forecasters polled by Bloomberg who correctly …
Households frustrated by the lack of affordable single-family homes for sale will find conditions are no better in the rental market, where the number of homes available for under $1,250 a month has dropped 40% since 2013. That will boost investor demand …
12th November 2019
The sharp fall in the Chilean peso today amid widespread strikes will push up inflation although, with the central bank focused more on the hit to the economy, further interest rate cuts are still likely. There is a growing risk that the unrest lasts for …
The recent pick-up in bank lending in Turkey probably has further to run over the coming months, which will provide some support to the economic recovery. But the pace and composition of new lending indicates that vulnerabilities in the banking sector and …
The latest activity and confidence indicators point to continued near-stagnation in the Italian economy. While household consumption is likely to keep growing, prospects for investment and exports are bleak. Italy’s GDP has increased by 0.1% q/q in each …
GDP growth in Sri Lanka is likely to remain weak whichever of the two main candidates wins the presidential election on Saturday. Sri Lanka’s presidential election will take place on 16 th November. A record 35 candidates have filed nominations for …
The loss of the South African government’s final investment grade credit rating is already largely priced in, but there are still reasons to be downbeat on the country’s government bonds, and the rand . Concerns about the South African government’s large …
11th November 2019
The Dutch retail sector is grappling with changing consumer habits and will struggle to provide a positive return to investors. But, with online sales set to grow rapidly and supply chains still adjusting, we expect logistics property to perform well in …
The decline in Egyptian inflation to a 14-year low of 3.1% y/y in October raises the risk that the central bank lowers interest rates by more than the 100bp that we have pencilled in for Thursday’s meeting. Inflation is likely to rise from here, but we …
If the Conservative Party wins an outright majority in the upcoming general election on 12 th December, as polls suggest is the most likely outcome, there is potentially significant upside for UK equities. Since the 2016 referendum, UK mid- and large-cap …
