While recent market attention has been on the ECB and Fed, the rise in the Swiss franc has ratcheted up the pressure on the SNB. As a result, investors have come around to our view that the Bank will push the boundaries of monetary easing by cutting rates …
23rd July 2019
The rise of speculative investment in base metals has resulted in high levels of overall price correlation. Beyond this, copper seems to provide a fairly reliable gauge of the general direction of base metals prices. But despite following similar trends, …
Despite his hard-line stance on the campaign trail, there is no way of knowing how Boris Johnson will handle Brexit once he becomes Prime Minister tomorrow. But it’s going to be turbulent and the chances of a no deal Brexit (and a general election and/or …
Since last July, the development pipeline in Brussels has grown and prospects for economic growth and thus, occupier demand have nudged lower. While the low availability of Grade A stock will support prime office rental values, Brussels has lost its …
22nd July 2019
The surge in the participation rate that has boosted employment by nearly a tenth since 2012 and thereby underpinned stronger economic growth is running out of steam. This will have a big impact, shaving close to a percentage point off Japan’s sustainable …
It is becoming harder for the Riksbank to brush aside mounting signs of weakness in domestic demand. We expect it to turn more dovish, and the krona to weaken, over the second half of the year. The Riksbank’s reasonably upbeat assessment about the outlook …
The federal government has urged state governments to step up infrastructure spending. But given the deterioration in their finances, we suspect that states are more likely to reduce capital spending. Urban Infrastructure Minister Alan Tudge indicated …
The price of palladium has surged amid higher demand for the metal from the Chinese auto sector, due to the ‘Blue Sky Protection Plan’, and investor buying. But our in-house demand proxy suggests the rally isn’t justified by underlying demand. As a …
19th July 2019
Despite the run of stronger activity data in recent weeks, the deterioration in the survey evidence, lingering uncertainty over trade policy and the prospect of a prolonged period of below-target inflation all suggest there is still a decent case for the …
18th July 2019
With bond yields falling, euro-zone property yield spreads have widened and remain high by historical standards. Admittedly, not all markets enjoy low bond yields, but even in Italy, where spreads have narrowed the most, we do not see any immediate upward …
The Bank of Canada’s economic forecasts suggest it is closer to making a dovish tilt than is widely thought. The key relationship in the Bank of Canada’s forecasting models is the link between inflation and the output gap. Absent any other factors, such …
Policymakers in South Africa will probably follow today’s 25bp cut with another 25bp of loosening at their next meeting in September. We expect that South African inflation will ease in Q3, while cuts from key central banks elsewhere – notably the US Fed …
A bill which recently passed the House to cut the FHA upfront mortgage premium by 25 bps for first-time buyers who take a financial management course is too small to halt the downward trend in the FHA market share. While a weaker labour market will slow …
Bank Indonesia (BI) today cut its benchmark interest rate from 6.0% to 5.75% and hinted that further easing is on the horizon. But the uncertain outlook for the currency means that this is unlikely to be the beginning of a prolonged easing cycle. Today’s …
The Bank of Korea (BoK) today cut interest rates by 25bp to 1.50% and signalled that further easing is on the way. Given the poor outlook for growth and the change in sentiment by the central bank, we now think interest rates will be cut a further two …
Net capital outflows from emerging markets look to have persisted last month, suggesting that the US-China trade war continued to weigh on investor sentiment. The truce announced at the late-June G20 meeting should have eased investors’ worries, but we …
17th July 2019
Reaching a bipartisan deal to raise the debt ceiling by early September should be a relatively straightforward exercise, but the increasingly confrontational relationship between President Donald Trump and House Democrats means that the odds of another …
Activity data for May suggest that South Africa returned to growth in Q2. We estimate that GDP rose by about 1.0% q/q saar in the three months to May, and that activity strengthened further in June. The economy will receive another boost if, as we expect, …
Household consumption in Saudi Arabia expanded at its fastest pace in more than three years in Q1 but the prospect of fresh subsidy cuts and tax hikes means that this recent strength won’t last. The latest quarterly national accounts data, which now …
The government’s hopes of hitting the record asset sales target that has been set in the budget for FY19/20 appear to be dependent on the smooth sale of a large stake in Air India. That seems unlikely. The government may choose to deploy some creative …
The improvement in some of the recent economic data suggests that the risk of an imminent recession is low. But it does not suggest that the economy is about to rebound. We expect growth to remain subdued over the rest of the year, with quarterly GDP …
Early indicators suggest that GDP growth slowed sharply across Emerging Asia in the second quarter. Although most countries should stage a gradual recovery over the coming year, growth is likely to remain much weaker than the consensus and the IMF expect. …
One key point contained in the IMF’s latest quarterly review of Argentina’s bailout programme is that the Fund is now expecting the government to run a primary deficit this year (having expected a balanced budget previously). While this will have little …
16th July 2019
An initial round of US sanctions on Turkey, if approved by President Trump, would probably generate some financial market turbulence and this could ultimately cause major strains on banks’ balance sheets. US officials have reportedly prepared a list of …
Several timely economic indicators have lurched down recently, suggesting that even our below-consensus global growth forecasts might be too optimistic. But some are not as reliable as is often assumed while others paint a more encouraging picture. …
Pakistan’s central bank (SBP) today raised its benchmark interest rates by a further 100bp amid continued concerns about high inflation and the country’s current account deficit. With inflation set to rise further over the coming months and the external …
A further sharp rise in EU structural fund inflows will support strong Polish fixed investment growth over the next couple of years. But that won’t be enough to prevent overall GDP growth from slowing. Since the start of 2018, fixed investment growth has …
The Czech economy has slowed over the past 18 months, which, alongside strong new development, has kept industrial rents in check. But, with signs of renewed vigour in occupier demand and rents already coming under upward pressure due to rising land and …
New regulations from the central bank will probably do little to encourage lending to the private sector. So long as government bond yields remain elevated, banks will prefer to park their money in treasuries. The Central Bank of Nigeria (CBN) has issued …
India’s merchandise trade deficit narrowed for the first time in five months in June. Looking ahead, a limited exposure to a more protectionist US, as well as low oil prices, will help to keep the trade deficit contained over the coming months. Data …
With budget deficits still large in Brazil and Argentina, fiscal policy there will continue to be tightened over the coming years. But small budget deficits in Mexico, Chile and Peru mean that governments there now have scope to loosen the purse strings. …
15th July 2019
Strong domestic demand means that Romania’s current account deficit, which is already among the largest of any major EM, is likely to widen further. This makes the leu increasingly vulnerable to a deterioration in investor sentiment and is likely to …
While we are lowering our end-2019 and end-2020 forecasts for the 10-year BTP yield, we remain pessimistic about the near-term prospects for government bonds in Italy. Back in January, when the yield of 10-year Italian government bonds (BTPs) was roughly …
The July Financial Stability Report (FSR) noted weak foreign investment and sharp outflows from open-ended property funds as two key risks for commercial property this year. In fact, estimates of the sensitivity of property fund redemptions to price …
Japan’s government will probably expand the number of operating nuclear reactors from nine now to 17 by 2030. While the impact on the trade balance will be tiny, electricity prices may fall significantly. Japan has made steady progress in restarting its …
China’s trade data for June painted a fairly downbeat picture of its demand for commodities. Given that we expect the Chinese economy to slow further over the coming months, a pick-up in China’s commodities imports looks unlikely . Continuing a run of …
12th July 2019
We expect refined zinc output to grow at its fastest pace for nine years in 2019 and this, combined with ailing demand, suggests zinc prices should continue to fall to our end-2019 forecast of $2,300 per tonne . We have long been of the view that zinc …
We think that the OPEC+ production cuts will fail to reduce global crude stocks. Instead, we expect soft demand growth and rising global supply, particularly from the US, to push stocks higher in the remainder of this year, which underpins our forecast of …
As demand fears have taken centre stage, persistently low exchange stocks have stayed under the radar. We think this is unlikely to change this year. But in 2020, looser monetary conditions and rising risk appetite could shift market attention to waning …
11th July 2019
A lot has happened since the Governing Council’s policy meeting on 6 th June, so the account published today has arguably been superseded by events. But it does confirm that even five weeks ago the Bank was gearing up for action. The account also hints at …
It is inevitable that housing starts will drop back from June’s elevated level and we expect the decline over the next 12 months to be steeper than others anticipate. The surge in housing starts in June to 246,000 annualised, from 197,000, would seem to …
Activity data for May added to the evidence that the economy rebounded following its contraction in Q1. Even so, we think that the Reserve Bank will cut its policy rate from 6.75% to 6.50% next week. Figures released today showed that manufacturing output …
The large margin of victory for Brazil’s pension bill in its first vote in the lower house last night is likely to result in a rally in local markets later today, and makes an interest rate cut at the Copom meeting this month a done deal. We have also …
Although the tone of Bank of Canada’s monetary policy statement remained fairly neutral, its updated forecasts suggest that the Bank is losing faith in the economy’s short-term prospects. We continue to expect the Bank to cut interest rates in October. As …
10th July 2019
Leading economic indicators underline that most of the recent weakness has been confined to the export-orientated industrial sector, suggesting the risks of an outright recession are contained for now . The Conference Board leading index, which combines …
Chair Jerome Powell’s semi-annual testimony to Congress indicates that, despite the trade truce following the recent G20 meeting and the strength of employment growth in June, the Fed intends to push ahead with a rate cut at the FOMC meeting at the end of …
The global industrial downturn so far has been fairly broad-based, but cars have fared particularly badly. While some temporary factors have been to blame, the longer-term drivers of the slowdown point to prolonged weakness in the auto sector. Needless to …
IPF Consensus office rent forecasts for 2019 were generally upgraded in their latest iteration, with central Europe seeing a particularly large rise. We also made widespread upgrades to our forecasts in the same six-month period. While our overall …
The Czech economy has underperformed its regional peers in recent years due to its larger exposure to the euro-zone and weaker household spending. However, the Czech slowdown is close to bottoming out. In contrast, slowdowns elsewhere in Central Europe …
