This Update was originally sent to clients as a Rapid Response immediately after the ruling by the Supreme Court on the legality of the Prime Minister’s decision to suspend Parliament until 14 th October. The ruling by the Supreme Court that the Prime …
24th September 2019
With attention focused on the impact of tariffs on goods trade, the recent decline in services exports has gone largely unnoticed. But that has already knocked a few tenths off GDP growth and, with the weakness concentrated in sectors in which the US has …
23rd September 2019
President Nicolas Maduro’s attempts to control inflation have had some effect, but without more severe measures we think that price pressures will probably remain extremely high over the coming months. After peaking at 350,000% y/y in January, Venezuelan …
We think that this year’s joint surge in the prices of US equities and government bonds is on its last legs, given the outlook for monetary policy and corporate earnings. Share prices get a boost when there is a reduction in the rate at which investors …
Lower production in Saudi Arabia and the lower-than-expected US output growth have led us to revise down our global oil supply growth estimates. We now expect the market surplus to be smaller than we had previously expected in 2020, which will support …
Protests in Egypt over the past few days have ignited concerns that the country is on the cusp of another period of political upheaval. Past experience suggests that this would be disruptive for the economy and government efforts to quell unrest, such as …
The UK has significant financial ties to Hong Kong, and the recession and correction in house prices we are forecasting there will put the territory’s financial sector under pressure. However, only a couple of UK banks are vulnerable. And as they appear …
The use of retail CVAs may have peaked. However, given that CVAs lower the overall market rent and that those retailers who have been subject to a CVA are still at risk of insolvency, we think that retail rental values have further to fall. Since early …
The deterioration in the external environment and willingness of the Hungarian MPC to look through above-target inflation means that monetary conditions are unlikely to change over the next twelve months. That said, we think that the central bank will …
20th September 2019
Given our view that the US economy will avoid a recession, we doubt that the Fed will deliver as many rate cuts as investors anticipate. As such, we think that Treasury yields will rise substantially next year. To re-cap, the Fed voted this week to cut …
We estimate that 190,000 tonnes of refined nickel have flowed into unreported stocks since 2017. In other words, nickel stocks are much higher than official numbers indicate. This supports our view that nickel prices will decline next year even if …
Fiscal loosening measures announced by Finance Minister Nirmala Sitharaman today are likely to provide a small boost to economic growth over the coming quarters, but significantly increase the chances of the ministry missing its budget deficit target this …
Increased competition among lenders has caused mortgage interest rates to fall in recent months. But funding costs are set to remain pretty stable. That, combined with already tight interest margins and increased regulation, leaves limited scope for rates …
The changes to the SNB’s tiering system, announced yesterday, are even more generous to domestic banks than they initially appear, and will help to ‘sugar the pill’ ahead of a probable rate cut. The main point of interest at yesterday’s SNB meeting was a …
The decision to reform the RPI measure of inflation at some point between 2025 and 2030 could reduce RPI inflation by a little under 1ppt a year. That could give the Government a windfall of about £3.2bn per annum at the expense of bondholders and …
The newly-revamped Loan Prime Rate (LPR), the reference point against which banks now price loans, came in slightly lower for September. We think that more decisive cuts will materialize before long. The one-year LPR was set at 4.20%, down from the …
US production of light crude oil will continue to grow in the coming years, and we expect that this will lead to the US becoming a net exporter of crude oil by 2021 . US oil production has grown sharply from 5.5m bpd in 2010 to 12.4m bpd currently, owing …
19th September 2019
Although the oil price has fallen back since the weekend’s attacks on production facilities in Saudi Arabia, it could surge again if there are further strikes or if tensions in the Middle East escalate into a full-blown conflict. In that event, we think …
Given policymakers’ decision to keep their key rate on hold at 6.50% today, we now think that South African interest rates will remain unchanged over the coming quarters. Policymakers do not seem inclined to take the opportunity to boost the economy, and …
Given the drop in GDP in Q2, the fall in core inflation to an almost 3-year low in August and the ongoing Brexit drama, there was never much chance that the MPC would raise interest rates from 0.75% today. And even though the tone of the minutes was …
The surprisingly low uptake of the ECB’s TLTROs today was probably a one-off, and uptake in December is likely to be stronger. But even if it is, we doubt that this will provide much of a boost to the economy. At just €3.4bn, uptake in the first TLTRO-III …
Taiwan’s central bank (CBC) left its key policy rate unchanged today at 1.375%, and with growth picking up we doubt it will be in any rush to join the region’s rate cutting cycle. We expect interest rates to be left on hold until at least the end of next …
This morning’s decision by the Norges Bank to raise its key policy rate by 25bps, to 1.50%, was is in stark contrast to the rate cuts delivered by the Fed and the ECB over the past week. Nonetheless, given the dovish shift in the Bank’s tone, we agree …
Sri Lanka’s economy held up better than we had expected last quarter given the drag from the recent terrorist attacks on the country. But we suspect that the published figures overstate the real strength of the economy. With the tourist sector likely to …
The ability of monetary easing to stimulate credit growth in China has diminished and we think this will lead the People’s Bank to pull down interbank rates further than most anticipate. But even this probably wouldn’t avert a further economic slowdown …
The Bank of Japan’s pledge today “to reexamine economic and price developments” at its next policy meeting has further fuelled speculation of a rate cut in October. Governor Kuroda added in his press conference that the Board “has become more eager to …
Today’s rate cut by Bank Indonesia (BI) clearly signals that its main priority at the moment is supporting the struggling economy. While we think further easing is likely, the central bank is likely to tread cautiously over the coming months. The rate …
Given that the Swiss National Bank last changed its policy stance in January 2015, this morning’s decision to leave its policy rate on hold at -0.75% came as no surprise to us. But its tweak to make its tiering system more generous to banks lends further …
Stamp duty changes previously hinted at by the Prime Minister could affect over half of all home buyers, with more expensive homes seeing substantial savings. While the effect on house prices would be minimal, it could provide a modest boost to …
While far from certain, there is a growing chance that the German government announces a fiscal stimulus in the coming weeks or months. However, even if it does, we think any boost to demand would be too small to make much difference to short-term growth …
The Brazilian central bank’s decision to cut the Selic rate by 50bp last night was accompanied by a statement clearly signalling that policymakers intend to ease monetary policy further. As a result, we now expect another 25bp cut in October. The 50bp cut …
The Fed voted to cut its key policy interest rate by an additional 25bp today, to between 1.75% and 2.00%, but the FOMC is more split than ever over what to do next. Close to one-third of the FOMC is projecting another rate cut before year-end, while …
18th September 2019
Rent controls usually discourage new rental developments. But the Californian bill that is set to be signed into law may in fact boost the construction of new units. New rental buildings are exempt from the restrictions and, by ruling out any new local …
We expect French industrial production growth to slow in the coming year or so. But it should continue to outperform German industry thanks to its focus on less cyclical products such as food, energy and aerospace, and on euro-zone rather than global …
The Brazilian government’s tax and budget reform plans would, if implemented, significantly improve the country’s longer-term fiscal health and productivity growth. But the proposals will face more opposition than the government’s recent efforts to …
Activity data for July suggest that South Africa’s recovery lost steam at the start of Q3. We remain comfortable with our below-consensus growth forecast of 0.5% for this year as a whole. Data released today showed that retail sales rose by 2.0% y/y in …
The “citizenship income” payment will boost Italy’s GDP growth next year by only about 0.1%, in part because take-up has been lower than predicted. While this also lowers the cost of the policy, the government will need to find much bigger savings to …
Smelter outages in China have led to a surge in the ShFE price of aluminium, and there is mounting speculation that the LME price will soon follow suit. We disagree. In contrast, our in-house model suggests that aluminium prices will fall in the coming …
The sharp rise in Swedish unemployment in August serves as further evidence that the Riksbank is unlikely to be able to tighten policy later this year, as it forecasts. The increase in Sweden’s seasonally-adjusted unemployment rate in August, from 7.1% in …
17th September 2019
The euro-zone’s manufacturing downturn has dragged services growth lower this year. And with both employment and wage growth weakening, services will probably slow a little further next year. While the euro-zone slowdown has been concentrated in the …
Turkey’s central bank looks set to cut interest rates further over the coming months, but past experience suggests that the easing cycle will be short and that renewed lira weakness will eventually force policymakers to reverse course. We expect rate …
There is still a lot of uncertainty surrounding the attacks on Saudi Arabia’s Abqaiq oil facility but, so long as the worst of the disruption to oil supplies lasts no more than a few days, the hit to global energy markets and the Saudi economy should be …
16th September 2019
The attack on Saudi oil is unlikely to be a disaster for the global economy. Saudi production might resume quite quickly and even if it doesn’t, the implications for oil prices and developed economy inflation should be limited. But growing tensions in the …
Given the uncertainty about the impact on supply of this weekend’s attack on Saudi Aramco, we are not changing our oil price forecasts yet. However, in this Update , we outline three possible scenarios that could develop and what they would mean for …
The divergence between Central London office rental value growth and vacancy rates appears to have reflected a combination of the rising share of take-up by flexible office providers and weak landlord bargaining power. This is consistent with our forecast …
The implementation of a change to how student loans are classified in the public finances, on top of a jump in government spending so far this year and the 2019 Spending Round, means the Government’s fiscal target is dead in the water. But this shouldn’t …
The goods trade deficit was virtually unchanged in August and, even if export growth stays weak, we think that the shortfall will remain small over the coming quarters. Data released on Friday evening show that India’s monthly goods trade deficit widened …
The sharp rise in the spread between the 10-year Treasury yield and 30-year mortgage rate primarily reflects the speed at which yields dropped back. But tighter credit conditions also look to be playing a role. We expect the spread to ease back over the …
13th September 2019
Despite what Mr Trump’s tweet yesterday appears to suggest, we don’t think that the ECB is “trying, and succeeding, in depreciating the Euro”. And although we expect the euro to weaken further against the dollar this year, we think that appetite for risk, …
Vietnam’s decision to cut interest rates today is something of a surprise given that growth appears to be holding up well at the moment. Given the decent outlook for the economy, we don’t think the central bank will rush into cutting rates again soon. The …
