If Hong Kong’s special treatment under US law were revoked, the city would lose access to sensitive US technology and face an increased threat of US tariffs. The short-term economic damage would be manageable, but it would accelerate the erosion of Hong …
11th November 2019
GDP figures this week are likely to show that Central and Eastern Europe recorded another strong quarter of growth in Q3, despite ongoing weakness in the euro-zone. But more timely data suggest that this strength won’t last, supporting our view that …
The prospect of further political stalemate in Spain, following yesterday’s inconclusive election result, does not alter the short-term economic outlook. But it does mean that there is little chance of a fiscal stimulus, or of making progress in reforming …
The People’s Bank is powerless to stop consumer price inflation jumping above its target without undermining its broader mandate to support growth and employment. Given this trade-off we expect the central bank to prioritise the latter and ease monetary …
Despite steadily rising supply, strong demand growth and expanding export opportunities should ensure that the average price of US natural gas (Henry Hub) will be higher in 2020 than 2019 . The year-to-date average Henry Hub price is 14% lower than in …
8th November 2019
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 …
The statement accompanying yesterday’s decision by Peru’s central bank to cut interest rates made it clear that this did not mark the beginning of a prolonged easing cycle. With inflation and economic activity likely to gradually rise, we expect the …
China’s commodity imports were generally weak in October, and we expect volumes to remain subdued in the coming months given our forecast of a further slowdown in China’s economy . The contraction in China’s imports and exports in US dollar terms eased …
We have revised up our end-2020 forecasts for the prices of gold and silver as we now expect a smaller rise in US Treasury yields next year. That said, we retain our view that a softening in safe-haven and consumer demand will cause the prices of gold and …
Moody’s decision to cut its outlook on India’s sovereign rating is based in part on the government’s struggle to rein in the fiscal deficit. This is justifiable if a little behind the curve. But the ratings agency’s decision is also based on its …
By signalling that inflation will remain below the lower end of its 2-3% target band for the foreseeable future, the RBA signalled that further easing is on the cards. Our view remains that the Bank will cut rates to 0.25% and launch quantitative easing …
There is a good chance that protests caused GDP to contract in Q4. While we expect growth to strengthen by next year, the weak starting point from Q4 has prompted us to revise down our 2020 growth forecast from 3.5% to 2.5%. We are currently forecasting …
7th November 2019
Many of the non-oil producing countries in the region have tended to support their dollar pegs by maintaining a level of FX reserves sufficient to cover the monetary base. In Egypt and Jordan, reserves are more than enough to cover the monetary base. But, …
The statement following today’s MPC meeting confirmed that the Czech central bank is still concerned about above-target inflation and the need to hike interest rates. But with the economy likely to slow sharply next year and inflationary pressures to …
Polls suggest that the general election in Spain this weekend will not end the political deadlock there. That is the key reason why, despite brighter growth prospects, we doubt that bonds and equities in Spain will do better than those elsewhere in the …
The Monetary Policy Committee’s (MPC) dovish shift at its November meeting leaves the Committee unsure in which direction the next change in interest rates will be. As well as softening its language on the chances of rate hikes if there were a Brexit …
We think that the forthcoming Saudi Aramco IPO is unlikely to have much of an impact on Saudi Arabia’s oil policy or on global oil prices either now, or in the future. Instead, Saudi output in the coming decades is likely to be dictated by a need to sell …
With the Conservatives and the Labour Party now competing on fiscal profligacy rather than fiscal prudence, it is unsurprising that the Chancellor Sajid Javid announced today a full rewrite of the fiscal rules. But the new rules still allow a big fiscal …
Against a backdrop of stubbornly-low inflation and rising unemployment, we now think that the RBA will launch quantitative easing (QE) in 2020. Here, we consider the implications for Australia’s assets. Assessments of the impact of QE elsewhere are not …
We expect most major EMs to loosen fiscal policy further next year. Weak public finances mean that a few major EMs, notably Brazil and South Africa, will need to tighten policy. But aside from Argentina, the risk of messy sovereign debt crises is …
Headline consumer price inflation is likely to have risen above the RBI’s 4.0% target for the first time in 15 months in October due to another jump in food inflation. This won’t dissuade the central bank from loosening policy further in the near term. …
The National Bank of Poland (NBP) left interest rates on hold at 1.50% today and with external headwinds mounting and the economy likely to slow sharply over the coming quarters, calls for interest rate cuts are likely to grow. But we think that …
6th November 2019
Although occupier demand appears to be holding up in Germany, a combination of structural and cyclical factors has weighed on retail rents. And with meagre economic growth expected until at least the middle of next year, the prospects for retail rents are …
We think that markets are underestimating the chance of the Bank of Canada cutting interest rates in December, but we would change our view if the US and China agreed to roll back tariffs meaningfully. Based on the Bank’s forecasts alone, it wouldn’t have …
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 …
The fiscal package presented to Brazil’s congress yesterday shows that the government is not resting on its laurels after its successful pension reform. However, the good news on fiscal reform already seems to be priced in, suggesting that there’s little …
The Bank of Thailand (BoT) cut its key policy rate to 1.25% today, and with economic growth set to remain weak and concerns about the strength of the baht mounting, we think the central bank will loosen policy again next year. Today’s decision was …
This Update clarifies the tweaks to our forecasts for the economy and the financial markets triggered by the delay to Brexit to 31 st January and the recent changes to our forecasts for the global financial markets. Although the numbers are slightly …
5th November 2019
One reason to think that US equities will outperform US corporate bonds over the next couple of years is a larger-than-average wedge between their valuations. Comparing the valuations of US equities and US corporate bonds is not straightforward. One …
With Brexit delayed and a general election ahead, all our Brexit scenarios remain on the table. However, recent developments mean that, under each scenario, we think that all-property capital values will fall by less than previously expected, but most …
The Fed’s latest Senior Loan Officer survey points to a continued drop off in demand for commercial and industrial loans, consistent with business equipment investment contracting again in the fourth quarter. And while looser policy has prompted a surge …
Economic growth in Finland outpaced the euro-zone average before the global financial crisis but has been broadly in line with it in recent years. We think that this trend will continue and that Finnish GDP growth will slow to around 1% in 2020-2021 – a …
Spain’s fourth general election in as many years looks likely to result in further political stasis, but we doubt that this will have a detrimental effect on the economy. Nevertheless, weaker consumer spending and investment are likely to cause GDP growth …
Bank Negara Malaysia (BNM) left its policy rate unchanged at 3.00% today, but with growth set to slow sharply over the next few quarters and inflation likely to remain subdued, we think the central bank will ease policy again early next year. 16 of the 25 …
The RBA reiterated its view that the economy had reached a gentle turning point when it left rates unchanged today. However, we think that the Bank’s forecasts for GDP growth and the labour market remain too optimistic and we expect the Bank to cut rates …
After keeping interbank rates broadly stable for most of this year, the People’s Bank (PBOC) is starting to take more direct steps to push down borrowing costs. We think this could mark the beginning of a series of PBOC rate cuts. Today, the PBOC cut the …
The EM manufacturing PMI stabilised in October and the breakdown provides further evidence that the downturn in EM export growth may have bottomed out. That said, any recovery is likely to be slow going. Having risen to a six-month high in September, the …
4th November 2019
Colombia’s economic recovery since 2017 has been in large part due to strength in private consumption, but we think it will likely slow in the coming quarters. This is one reason why our 2020 growth forecast sits at the bottom of the consensus range . …
The upcoming sale of a stake in Saudi Aramco would probably make the government less inclined to implement fresh austerity. The long-term impact on the Saudi economy will depend on whether this leads to renewed impetus behind reform, although we are …
Manufacturing PMIs for October suggest that global industry remained weak at the start of Q4. However, we take some comfort from the fact that, at the world level, the surveys have stopped deteriorating. The release of Markit’s global manufacturing PMI …
1st November 2019
Office-to-residential conversions in the Nordic capitals have started to lose their appeal given the pick-up in office capital values and softening in house prices. However, we don’t think that this poses a major risk to our forecast for relatively strong …
The Riksbank appears determined to raise interest rates into an economic slowdown. While higher policy rates may provide some support for the Swedish krona, we still think that it will continue to depreciate. To the surprise of most analysts, ourselves …
There was a marked divergence between China’s October official and unofficial PMIs, which makes it difficult to gauge the underlying strength of the manufacturing sector. The rise in the Caixin PMI suggests that China’s economy may have started Q4 on a …
The Brexit extension and general election leaves the housing market outlook even more uncertain than a week ago. What’s more, given the vast distance between the two main political parties’ approach to the housing market, the December election could prove …
The number of vacant single-family homes for sale has dropped 25% since the start of 2012. But the situation is far worse at the cheaper end of the market, where the inventory of homes priced under $250,000 has halved over the same period. That will …
31st October 2019
Output cuts by Chinese smelters mean that the price of tin is unlikely to fall further in the coming quarters. But with growth in major consumers set to slow and tin particularly exposed to “List 4” US tariffs on China, we see little upside for prices in …
Further progress towards the establishment of what would be the world’s biggest trade deal, the Regional Economic Comprehensive Partnership (RCEP), is expected over the weekend. Given the protectionist threat facing Asia, a deal would provide a boost to …
Turkey’s economy has made a strong recovery from its recession last year, but investment has continued to fall and is unlikely to make a quick turnaround over the next couple of years. GDP rose by 1.6% q/q in Q1 and 1.2% q/q in Q2 (see Chart 1), supported …
With England and South Africa battling for the right to lift the Webb Ellis Cup in the Rugby World Cup final this weekend, we’ve been pondering which of the two economies would come out on top in a head-to-head, while we think England will take the …
