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
Following his disastrous debate performance last week, President Joe Biden’s odds of getting re-elected have gone from bad to worse. Former President Donald Trump is now unequivocally the favourite to win this November, even if the Democrats replace Biden …
3rd July 2024
The overarching theme of the Labour government’s housing policies will be a rebalancing of rights in favour of tenants and aspiring homeowners at the expense of landowners and landlords. That said, given the incoming government’s commitment to creating a …
Egypt’s government faces a likely further rise in debt servicing costs over the coming year. But the good news is that the budget for the 2024/25 fiscal year (which started this week) reaffirmed the commitment to fiscal consolidation. So long as the …
One of the takeaways from our latest Emerging Markets Outlook is that the EM business cycle is unusually unsynchronised. We expect some convergence as the effects of the enormous macro shocks of recent years wash out. But by the same token, we shouldn’t …
We expect the RBNZ to leave rates on hold for a seventh consecutive time at its meeting next Wednesday. To be sure, the Bank will probably strike a hawkish tone out of an abundance of caution. However, with the economy in tatters and inflation on its way …
The rebound in residential investment over the past year will go into reverse in Q2, as housing starts and home sales slump again. We expect this weakness to persist thanks to a coming slump in new multi-family construction, which will soon gradually feed …
2nd July 2024
Despite the modest rise in job openings in May, the big picture remains that labour market conditions continue to slowly normalise, and the low quits rate still points to a sharp slowdown in wage growth. After the sharp fall in April, the marginal rise in …
The recently-published fiscal plans of Colombia’s government seem to have alleviated some near-term fiscal concerns, but we think the medium-term budget and debt projections are based on rosy assumptions around growth and oil prices. Policymakers’ (and …
The consensus is still downbeat on the outlook for retail rents, with growth expected to underperform even the struggling office sector. But with a decent consumer recovery on the horizon we think that pessimism is misplaced. As inflation falls back and …
The latest manufacturing PMIs suggest that the recovery in global industry lost some momentum at the end of Q2. While activity in emerging markets continued to grow strongly, industry was still struggling in some large advanced economies. Nonetheless, …
1st July 2024
The EM manufacturing PMI rose to a three-year high in June, driven by improvements in the surveys in much of Asia which have continued to benefit from strong export demand. Manufacturing recoveries are progressing more slowly in parts of Europe. The PMIs …
Much of the recent focus has been on France’s political turmoil, but Germany has had its own troubles with disagreement over the 2025 budget threatening the survival of the governing coalition. While we think an agreement will eventually be found, budget …
Saudi Arabia’s Crown Prince Mohammed bin Salman’s (MbS) ultimate succession to become king is inevitable and a formality. Having been the de-facto leader of the Kingdom for several years it may not result in much of a deviation in economic policymaking. …
The PMIs from Emerging Asia picked up strongly last month, but we doubt this will last given the subdued outlook for global demand. Meanwhile, the decline in inflation in Indonesia last month supports our view that the central bank will cut interest rates …
Housing market will cool in earnest Australian house price gains softened just a smidge in June as housing demand held up reasonably well. However, as strained affordability takes its toll, we still think that house price growth will ease markedly in the …
Surveys likely understate health of manufacturing sector This report was first published on Monday 1 st July covering the official PMIs and the Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on Wednesday 3 rd July. …
The slight increase in mortgage rates since the beginning of the year appears to have reached a tipping point for demand. At the same time, the supply of homes being put up for sale has increased. This combination of softening demand and more ample supply …
27th June 2024
News that some top-rated CMBS in both the US and Europe are set to make losses is in line with our previous view that distress will ramp up in 2024. But, to date, the troubled securities have all been backed by some of the worst-performing assets across …
If the polls are correct and Labour wins the election, the policies it implements and when it implements them will depend in part on the ‘headroom’ against the fiscal rules it is given by the Office for Budget Responsibility (OBR). We suspect the next …
Monday marks the 30 th anniversary of the introduction of Brazil’s currency, the real, as part of a stabilisation plan (the Plano Real ) which successfully tamed runaway inflation. For other EMs facing similar problems, most notably Argentina, the key …
CNB cuts by larger-than-expected 50bp, but delivers hawkish guidance The decision by the Czech National Bank (CNB) to deliver another 50bp cut to its policy rate today, to 4.75%, was a dovish surprise to most analysts (although not ourselves). That said, …
The upcoming French election continues to loom over euro-zone financial markets and the euro. We think it would take a worst case scenario in which France’s fiscal outlook worsens materially to generate a sustained fall in the euro. That is a plausible …
May’s data show a continued gradual increase in money and lending growth, though both remain slow. While the ECB’s loosening cycle is now underway, money and lending growth are set to remain subdued. The ECB’s previous monetary tightening caused the …
