A win for Marine Le Pen would need to be followed by a strong showing for her party in June’s legislative elections if she is to implement most of her programme. A government of national unity or “cohabitation” would clip her wings, at least on domestic …
20th April 2022
The Aussie and the Kiwi have been amongst the best performing G10 currencies against the US dollar so far this year but, while we expect both to remain resilient in 2022, we eventually expect them to weaken. Both the Aussie and the Kiwi have outperformed …
China and private bondholders have become increasingly important creditors to governments of many frontier markets, including some of those that are now finding themselves in debt distress. This is likely to make any debt restructuring talks more complex …
Despite calling on banks to nudge down borrowing costs, the PBOC stopped short of requiring that they lower the Loan Prime Rate (LPR) benchmarks this month. For now, policymakers are mostly relying on targeted measures to help support firms hit by the …
The expansion of the government’s “Home Guarantee Scheme” will only result in a modest boost to housing demand. And with affordability set to worsen sharply as the RBA hikes interest rates, it won’t prevent house prices from falling next year. After …
Saudi Arabia’s economic recovery has strengthened in recent months and, with oil output set to be raised further, the economy will record its fastest rate of growth in over a decade in 2022. Final GDP figures for Q4 confirmed that the Saudi economy grew …
19th April 2022
Bank Indonesia (BI) left its main policy rate unchanged at 3.5% at its meeting today, and the relatively benign outlook for inflation means the tightening cycle is likely to be very gradual. The decision to leave rates on hold came as little surprise …
Despite facing very strong demand housebuilders appear reluctant to commit to new sites. This is because a shortage of materials is delaying completions, while rising interest rates and the end of the Help to Buy Equity Loan scheme mean demand is …
The People’s Bank (PBOC) has just announced a cut to the reserve requirement ratio (RRR). This will help nudge down bank lending rates. But in order to make much difference to credit growth it needs to be followed up by cuts to policy rates and a …
15th April 2022
This Update was originally sent to clients as a Rapid Response immediately after the announcement by the PBOC. The People’s Bank (PBOC) forwent the opportunity to lower its policy rates today. That’s somewhat surprising given the sharp economic downturn …
Investor interest in the life sciences sector has jumped since the onset of the pandemic. Increased investment and employment opportunities are expected to continue to support demand for related office space, with UK centres, notably Oxford and Cambridge, …
14th April 2022
Today’s ECB statement and press conference indicate that policymakers expect to end their net asset purchases early in Q3 and raise interest rates soon after that. With inflationary pressures still rising, we think they will lift the deposit rate sooner, …
While the long-running underperformance of US value stocks relative to growth stocks seems linked in part to lower interest rates and structural weakness in the economy, much of it is hard to attribute to such macroeconomic fundamentals. This insight …
The war in Ukraine and the start of the US Fed’s hiking cycle have exposed macro imbalances in some frontier economies, but do not appear to have had a significant impact on capital flows into many of the major EMs. In any case, most EMs should be able to …
The sharp rally in the Brazilian real against the US dollar since the start of the year has shown tentative signs of ending, and we think that it will weaken a bit through the end of 2022. The Brazilian real has appreciated by nearly 19% against the US …
Strong demand for LNG exports should lead to a higher average price of US natural gas this year. But we expect prices to ease back in the coming months as demand falls over the summer and output stays high . The price of US natural gas (Henry Hub) has …
While economic growth is forecast to slow, limited supply and further strong growth in e-commerce-related demand mean Belgium industrial rental growth is expected to outperform its pre-pandemic average as well as most other euro-zone markets. Industrial …
Today’s decision by the Bank of Korea (BoK) to hike its policy rate by 25bp to 1.50% is unlikely to mark the end of its tightening cycle given the strength of inflationary pressures. We expect at least two more 25bp rate hikes in the coming quarters, …
The Monetary Authority of Singapore (MAS) tightened monetary policy again at its meeting today. With growth set to remain strong and core inflation likely to stay elevated, we expect the MAS to maintain its tight policy stance for at least the next couple …
South Africa’s headline inflation rate will stay close to the upper bound of the central bank’s 3-6% target range in the coming months before falling sharply in the second half of the year. Some MPC members are in a hawkish mood, but we think that …
13th April 2022
The narrowing in India’s goods trade deficit in March was due in large part to a sharp drop in gold imports. Even if gold imports remain low, we still expect the trade and current account deficits to widen this year given the jump in prices of other …
Structural changes to working patterns and the resultant shifts in office demand will vary by industry and job type. Occupations like life and physical sciences are likely to see a low adoption of remote work, whereas IT sector jobs and those in financial …
The Bank moved into full-blown hawkish mode today, hiking its overnight policy rate by 50bp to 1.00% and announcing that quantitative tightening will start later this month, with no caps on the value of maturing bond principal allowed to roll off each …
We held a Drop-In on the political and economic problems facing Pakistan earlier today (see an on-demand recording here ). This Update answers some of the most common questions that we received. Question 1: What have we learned about the new prime …
The surge in mortgage rates means home buyers with a mortgage preapproval from late January will see a rise in mortgage payments of 15% if they can’t find a home before their approval expires at the end of April. That is making them desperate to find a …
The latest trade data out of China suggest that recent restrictions imposed to contain the surge in new cases of COVID-19 are hitting commodity demand hard. And we think it will remain weak in the months ahead as activity in the commodity-intensive …
Most EMs are not heavily dependent on Russia or Ukraine for their domestic food supplies, but there are key pockets of vulnerability due to large wheat, corn and vegetable seed/oil exports to Turkey, most of the Middle East and North Africa and parts of …
The RBNZ’s decision to accelerate its hiking cycle shows it is willing to move decisively to get a hand on surging inflation. That’s in line with our forecast that it will hike the OCR to 3.0% by the end of this year. The Bank’s decision to hike rates by …
Supply fears stemming from the war in Ukraine and risks to mine output in Latin America have pushed up the copper price. But we expect a recovery in supply and ongoing weakness in Chinese demand to send prices lower by year-end . The price of copper has …
12th April 2022
Depending on which activity survey you look at, Brazil’s economy either staged a rapid recovery in March or slowed. A comprehensive look at the latest figures suggests that the latter is more likely. One clearer message is that price pressures remain very …
The valuations of mid- and large-cap equities in Japan have become even more attractive compared to those of their US counterparts following a further period of substantial underperformance in common-currency terms. That may bode well for their relative …
Sri Lanka’s decision today to suspend payments to bond holders is designed to pave the way for a deal with the IMF and an orderly rescheduling of its debts. The diverse array of creditors to Sri Lanka could make a debt restructuring programme difficult to …
Egyptian inflation rose to a near-three year high in March and will continue to pick up on the back of the spillovers from the war in Ukraine and last month’s devaluation. We now think interest rates will be hiked by a further 350bp, to 12.75%, by …
11th April 2022
The Bank of Israel kick-started its tightening cycle today with a 25bp interest rate hike to 0.35% and we think it will deliver further hikes at its upcoming meetings, taking rates to around 2.00% in the first half of next year. This is currently more …
The main challenge facing Shehbaz Sharif, who today replaced Imran Khan as prime minister of Pakistan, is stabilising the economy. The key to achieving this is a deal with the IMF. The price for any further support will be a further tightening of fiscal …
The RBI’s policy announcement and the introduction of the Standing Deposit Facility has prompted a number of questions from clients on its intended purpose and what it means for monetary policy. This Update aims to provide further clarity on the new …
A solid result for incumbent Emmanuel Macron in yesterday’s first round of the French presidential election has helped to allay fears of a Le Pen presidency. But the latest polls still point to a very tight race and the momentum is still with Marine Le …
While prime industrial rental growth in the German markets is expected to slow in the next couple of years, it will remain above its past averages. But the risks are to the upside given the rise in land and construction costs, which are likely to further …
Earnings expectations for listed euro-zone companies look, as a whole, a bit optimistic to us given the economic impact of the Russia-Ukraine war and Western sanctions. This feeds into our view that the region’s benchmark equity indices will, in general, …
8th April 2022
Lebanon has secured a staff-level agreement with the IMF, but we think that it is highly unlikely that policymakers will push through the long list of reforms that are needed to unlock that financing. An end to the country’s crisis is still nowhere in …
A full embargo on Russian energy would force Germany to ration gas supplies to its most gas-intensive companies. This would have unpredictable knock-on effects which would cause a recession. While the short-term fallout for the wider economy would be …
Ghana’s economic recovery will remain sluggish over the next couple of years as policy is tightened in a bid to shore up the public finances and tackle high inflation. The risk of an imminent sovereign default appears low but, if fiscal consolidation …
We think that a rebound in employment will help prime office rental growth in Barcelona and Madrid to outperform the euro-zone this year. But this is likely to be short-lived, as the shift to remote working weighs more heavily on office demand in Spain …
The MPC’s unanimous decision to keep the repo rate unchanged at 4.00% today came as no surprise but the introduction of a new policy rate that sets a higher floor for the interest rate corridor indicates a less accommodative policy stance. And with …
The government announced a smorgasbord of new policies in the 2022 Budget, but the total increase in the budget deficit, at just $7bn, was arguably far lower than some feared. Moreover, as most of the funds are being allocated to new investments, rather …
7th April 2022
While the prospect of a euro-zone break-up looks more remote than during the 2017 French presidential campaign, the possibility of Marine Le Pen taking power is still a major risk to euro-zone financial markets. As we discussed here and here , the recent …
Rising interest rates have put the outlook for property prices back under the spotlight. But, with lending practices much more restrained in this cycle and the market level loan-to-value ratio well below 50%, we don’t feel overly concerned at the prospect …
Although China’s Omicron wave means that its economy is facing its sharpest slowdown since early 2020, so far it looks like disruptions to global supply chains will be milder than those experienced during China’s Delta wave. But if supply chains were to …
Timely indicators suggest that Russian manufacturing contracted by around 20% y/y in March and that consumer spending fell by 10% y/y at the start of April. Russia’s economic downturn looks set to deepen in the coming months as the effects of sanctions, …
Pandemic-related effects and higher energy prices have played a significant part in pushing up inflation in the euro-zone, but domestically-generated “underlying” price pressures have increased too. That should make policymakers more confident that …
6th April 2022
