China’s bond market seems to be caught between the country’s slowing economy and the PBOC’s desire to push long-end yields higher. The announcements from the Third Plenum this week probably won’t help the central bank, and we still think yields will fall …
19th July 2024
The South African Reserve Bank’s decision to leave its repo rate unchanged at 8.25% was of little surprise but there was increased optimism on the MPC that inflation is moving towards the 4.5% mid-point of the target and that inflation expectations are …
18th July 2024
With the share of non-performing CMBS loans on the rise, and plenty of loans set to refinance onto a higher rate this year, recent data provide further evidence that distress will rise both this year and next as we expected. However, while there is still …
Today’s decisions to leave interest rates on hold and give no clear signals about the future path of interest rates were in line with expectations. The overall tone was arguably slightly dovish, making a September cut more likely. But the risks to our …
The latest polls suggest that the opposition is on track to win Venezuela’s election later this month but President Maduro is likely to do all he can to cling on to power. If he manages to do so, Venezuela’s nascent economic recovery would be nipped in …
Newfound political stability in the UK contrasts with the now more uncertain political backdrop in France. A better relative outlook for economic growth and risk-free rates had already led to a narrowing in the premium on UK over French property in recent …
China’s leadership has promised to continue comprehensively deepening reform in a wide range of areas. But there are few signs that the just concluded Third Plenum marks a major change in the direction of policymaking. And there still appears to be a …
While the global monetary policy loosening cycle is now well underway, there is more nuance than you might assume. Recent data have made us more confident that cuts (or further cuts) are to come in the US and Canada. But in Australia, the UK and large …
The policy shift underway in Nigeria has kept economic growth subdued – something that continued in Q2 according to the latest PMI and confidence data. Tight monetary policy will still remain a constraint on the economy. But with inflation soon set to …
Gold jewellery demand has been highly sensitive to price changes in the past and so will come under pressure from the current backdrop of record high gold prices. Income growth in key markets will offset some of the demand destruction. But jewellery …
17th July 2024
Japan’s intervention in support of the yen is not enough in itself to generate a sustained rebound in the yen. But with the FOMC (finally) nearing its first rate cut while the BoJ continues to tighten its policy stance gradually, we think the tide is now …
South Africa is struggling to emerge from its recent trend of sluggish economic activity, with stronger outturns in the retail sector being offset by weakness in industry. Nonetheless, we think momentum will build over the coming quarters on the back of …
The ~10% fall in EU carbon prices since the end of May has mirrored a similar-sized fall in European natural gas prices, and we forecast both to fall by a further 25-30% by year-end. That said, the fundamentals still point to large gains in the EU carbon …
Housing market turning a corner Further interest rate cuts from the Bank of Canada should breathe some life into the housing market in the coming months, but the dimmer outlook for rent growth and apartment prices present downside risks to construction. …
16th July 2024
Many households have left western metros in favor of those in the South over the past two years. With remote working looking like a permanent fixture of office-based jobs and affordability significantly stretched in the West, we do not expect to see a …
The downward revisions to global population growth in the UN’s latest projections won’t have a major bearing on our long-term GDP growth forecasts. That’s because a lot of the revision was driven by lower population projections in China, where we had …
The Bank Lending Survey suggests that there was a pick-up in demand for bank loans in the second quarter particularly for residential mortgages and consumer credit. This is consistent with the consensus and our own view that the economy is recovering and …
The upside surprise to headline consumer price inflation last month has all but ended hopes of a rate cut at the RBI’s August policy meeting. But we think that the conditions will be in place for policy loosening to begin in December. To recap, headline …
Newly-published data show that the Philippines has entered a demographic sweet spot that could provide a big boost to economic growth. But this will only happen if enough new jobs can be created for the wave of young people that will enter the workforce …
The Bank of Canada’s business and consumer surveys point to weak GDP growth, show that firms’ wage expectations are now lower than their pre-pandemic peak, and suggest that consumers are increasingly concerned about the health of the labour market. All …
15th July 2024
Disinflation in the services sector seems to have stalled in several advanced economies this year. That’s partly because the easiest wins related to food and energy effects are behind us and also reflects some temporary factors. Much now depends on the …
12th July 2024
We think Spain’s economy will grow strongly over the next few years, substantially outperforming the euro-zone. This is partly due to strong domestic demand which has been supported by the rapid expansion of the labour force driven by high immigration. …
Recent protests in Kenya have dealt a heavy blow to President Ruto’s fiscal consolidation plans and, with the president dismissing the cabinet yesterday as he tries to cling on to power, it looks increasingly likely that the government will struggle to …
It is not clear that Donald Trump, if elected, would gain much from trying to force Fed Chair Jerome Powell out of the role only a year before his term expires anyway. Trump might instead focus his efforts on securing Senate approval for future …
11th July 2024
Net capital inflows into EMs remained positive over the past month, largely reflecting continued strong inflows into EM bonds, particularly Turkey, while there were out flows post-election in Mexico and South Africa. Policy turnarounds in some EMs and …
The continued weakness of the renminbi and the yen against the US dollar despite the narrowing of interest rate differentials via-a-vis the US is something of a conundrum, but our sense remains that both currencies will rebound against the dollar later …
We anticipate the spread between 10-year Swiss and German government bond yields, which has widened significantly since 2022, will narrow only slightly over the next couple of years. The spread between 10-year Swiss and German government bond yields has …
Saudi Arabia’s GDP growth is likely to pick up, and markedly so in 2025. But that will be driven by rising oil output. We think that activity in the non-oil economy will slow. Indeed, there are signs in the low-profile data that this has already started …
A narrowing of the current account deficit and a decline in the share of government bonds held by non-residents means the rupiah is much less exposed to sudden shifts in global risk appetite than in the past. This should ensure that the currency performs …
The downgrading of Sweden’s SBB to selective default last week is the latest development for a property market that has faced some of the most acute debt refinancing pressure in Europe. The saga will rumble on as large debt maturities loom, but the risk …
While the debate around China’s manufacturing overcapacity has centred around politically sensitive topics such as electric vehicles, its industrial metals sector is no exception. Whereas the focus of the broader macro debate revolves around market share, …
Revival unlikely to materialise as soon as surveyors hope While demand continued to slip back in June, surveyors were optimistic it would soon pick up. Given elevated mortgage rates we suspect the market will disappoint those expectations in the near …
The Bank of Korea left its policy rate unchanged today at 3.5%, but dropped clear hints that interest rate cuts would be coming soon. With growth set to struggle and inflation likely to fall further, we are maintaining our view the central bank will cut …
UK employment has faltered of late and, though growth is expected to improve, no return to the buoyancy of the recent past is in prospect. While headcount has become a weaker indicator of office floorspace needs, the jobs outlook reinforces our view of a …
10th July 2024
At first sight, the latest CPI data out of Central and Eastern Europe (CEE) might seem to provide central banks reason for comfort. But a look under the surface paints a more worrying picture: underlying core price pressures in some countries have re …
Hydrogen could play a key role in reducing emissions in hard-to-abate sectors such as steelmaking and be a boon for countries and regions that are well placed to produce a surplus of renewable power. But hydrogen is not the best option in many …
Exports from Taiwan, Korea and Vietnam have surged over the past 18 months, thanks to strong demand for AI-related products and friendshoring. In contrast, shipments from the rest of the region have struggled. We expect this divergence to continue over …
While there are tentative signs that Japan’s economy is becoming more dynamic, this has yet to produce significant improvements in aggregate productivity. We still think that a more meaningful pick-up in productivity growth will only happen towards the …
The legacy of the post-pandemic industrial construction boom is now being felt in rising supply across most markets. With the demand outlook stabilising, we think the evolution of supply will shape rental trends in the near term and that markets like …
9th July 2024
Turkey’s economy has maintained strong external price competitiveness since the pandemic (mirrored by rapid export growth). But measures of competitiveness have shown a noticeable decline in the past year and will deteriorate further against a backdrop of …
Much of the strength of India’s external position over recent years can be explained by robust growth in its services exports, in particular its business process outsourcing (BPO) sector. The near-term outlook for the sector is bright. But the sector also …
The results of France’s parliamentary elections mean it should avoid the large, unfunded fiscal expansion that two of the three major political groups were advocating. But it also means France is very unlikely to be able to reduce the deficit as required …
8th July 2024
The budget deal struck by the governing coalition in Germany reduces the risk of the country being forced into early elections. But it does little to address Germany’s structural problems, in part because of the strict cap on borrowing imposed by the …
Brazil’s President Lula has renewed his attacks on the central bank and high interest rates in recent weeks, raising fears that there could be more political influence on monetary policy from next year after he has appointed three new Copom members. …
The slower adjustment to past rises in interest rates and sharper hit to office demand mean US property is set to underperform European property over the next five years. But unlike equities, we think US economic outperformance will translate into …
A La Niña could bring with it favourable growing conditions for crops in South East Asia, and help to put downward pressure on food prices across the region. It adds to the reasons to think the upcoming rate-cutting cycle in the region will be more …
The Monthly Household Spending Indicator is often revised several months later so the plunge in spending in May won’t deter the Reserve Bank of Australia from hiking rates next month if inflation remains hot. According to the Monthly Household Spending …
With the public finances in the UK in decent shape relative to France and the US, and the new UK government committing to greater fiscal discipline, we think investors are right not to worry as much about the UK’s public debt. But there is little room for …
5th July 2024
We’re holding a 20-minute online briefing today (9.30am BST 5 th July) to discuss what a Labour government means for the economy and the financial markets. (Register here .) The big shift in the political landscape that has delivered the first Labour …
Timely estimates of trade through Europe’s busiest seaports so far this year have broadly mirrored relative economic performance across Europe, as volumes through Iberia’s ports have recovered while the major northern ports have seen further falls. With …
4th July 2024
