Filtered by Region: G10 Use setting G10
We think the Fed will raise rates by 75bp next week…(Wed.) …while the Bank of England may hike by 100bp (Thu.) We expect a smaller gain in US non-farm payrolls in October (Fri.) Key Market Themes We don’t think growth stocks ’ relative struggles are …
28th October 2022
The reports that the Chancellor, Jeremy Hunt, will unveil in his Autumn Statement on 17 th November a fiscal tightening of up to £50bn by 2026/27 (1.7% of GDP) suggest that after a period in which fiscal policy has provided the economy with support, it is …
The 2.6% annualised rise in third quarter GDP was a lot worse than it looked, with growth in underlying demand grinding to a near-halt. At the same time, there are mounting signs that economic weakness will soon feed through to disinflation in core …
Strong inflation prints will keep ECB in tightening mode Renewed inflation shockers in Germany, France and Italy in October pour cold water on expectations that the ECB’s softer tone on rate hikes yesterday will pave the way for a “pivot”. We continue to …
Wage growth gradually slowing, even as economy holds up Although core PCE inflation rebounded to 5.1% in September and real consumption looks to have more momentum than previously thought, the Fed may still draw some encouragement from the more modest …
MoF likely intervened again We revised up our inflation forecasts last week to reflect the further weakening of the yen to 150 against the dollar last week. As it happens, the yen jumped from a low-point of 152 against the dollar to 146 late on Friday, …
Recession postponed The unexpected resilience of Germany’s economy in Q3, with GDP rising 0.3% q/q, has probably only postponed the recession which we now expect to begin in the fourth quarter. Business surveys show that activity has already begun to …
The Bank of Japan revised up its medium-term inflation forecasts while keeping policy unchanged today, but we still think that it won’t snuff out the budding virtuous cycle between incomes and wages . As widely anticipated, the Bank kept its interest rate …
Window for tighter policy is closing The Bank of Japan revised up its medium-term inflation forecasts while keeping policy unchanged today, but we still think that it won’t snuff out the budding virtuous cycle between prices and wages. As widely …
Tokyo inflation to start falling next month The unemployment rate rose slightly in September on the back of a large jump in the labour force and a continued rise in the job-to-applicant ratio suggests that the labour market will continue to tighten. …
Rising price/wage expectations will prompt the MPC to hike rates aggressively on Thursday It’s almost 50-50 between a 75bps and 100bps hike, but we are going for 100bps Our forecast that rates will peak at 5.00% remains higher than the consensus …
27th October 2022
We are pencilling in a further step down in non-farm payroll growth to 225,000 in October and we expect that payrolls will be falling outright by early 2023. Payroll gains have been slowing from their unusually rapid clip earlier in the year, with the …
Our Global Economics team held a 20-minute online briefing on the outlook for the global economy and policy on Tuesday, 8 th November. During this session, the team answered client questions as they highlighted key takeaways from their recently published …
Occupier demand falls as economy slows The slowing economy and cost-of-living crisis are now having a clear impact on occupier demand, with surveyors reporting the first drop since the start of 2021. That has fed through to rent and capital value …
Governor Tiff Macklem shifted his tone notably today, reassuring that the Bank was “trying to balance the risks of over- and under-tightening”, whereas previously the emphasis had stressed that it was better to tighten too much rather than too little. …
26th October 2022
Leading indicators suggest sales have further to fall The 10.9% m/m fall in new home sales in September partly reversed last month’s surprise jump. But they are still out of lockstep with both buyer traffic and mortgage applications. Those indicators …
Industrial demand is relatively well-placed to weather the upcoming recession. Vacancy is low going into the downturn and the gradual shift to online shopping will continue. It should therefore be the only sector to avoid a fall in rents. However, …
Returns falling sharply and set to turn negative in Q4 As expected, NCREIF all-property total returns dropped back significantly in Q3, to just 0.6% q/q, as investor demand pared back in response to higher alternative asset yields and the poor outlook …
As the recent breakdown of the UK Gilt market illustrates, policymakers face an increasingly difficult trade-off between combating inflation, supporting economic growth and maintaining financial stability. With core bond and currency markets facing very …
The reversal of Truss/Kwarteng’s fiscal policies and Rishi Sunak’s appointment as the UK’s new Prime Minister has ushered in a period of calm in UK financial markets after the recent storm. Indeed, much of the extra political risk premia on gilts that …
Bank won’t make a U-turn and will opt for another 25bp hike next week But the upside surprise in Q3 inflation points to a higher peak in interest rates With GDP growth slowing sharply next year, we still expect rate cuts from late-2023 While the …
Inflation will approach 8% by year-end Inflation was stronger than expected last quarter and will rise further in Q4. That’s consistent with our forecast that the Reserve Bank of Australia will hike rates more aggressively than most anticipate. The 1.8% …
Inflation hasn’t peaked yet The stronger-than-expected rise in consumer prices in Q3 is consistent with our forecast that the Reserve Bank of Australia will hike rates more aggressively than most anticipate. The 1.8% q/q increase in consumer prices last …
Prospects for economic activity have deteriorated further in recent months as headwinds to growth have become stronger. Inflation looks set to remain high for longer, eroding households’ real incomes; monetary policy is being tightened further and …
25th October 2022
House price falls gain momentum Both Case-Shiller and the FHFA reported an acceleration in month-on-month house price falls in August. With mortgage rates rising to a 20-year high in October and the economy set to enter a recession, we expect house …
The rebound in global oil prices over the past month has not been matched by those in Canada, with Western Canadian Select (WCS) instead trading closer to $60 per barrel, as the discount between WCS and the US WTI benchmark has widened to a …
Despite stabilising a bit recently, the valuation of UK mid- and large-cap equities in general has fallen recently in both absolute terms and relative to comparable indices elsewhere. While that doesn’t imply that they are bound to outperform in the …
Table of Key Forecasts Global Overview – Persistently high inflation and more aggressive monetary policy tightening now seem set to cause a global recession. While we had previously anticipated contractions in several economies, the gloom has spread …
Yet more evidence of recession The Ifo Business Climate Index held up better than expected in October but was still extremely low. With other business surveys also persistently weak, we think Germany will experience the deepest recession among euro-zone …
German Ifo may point towards a deep recession (09.00 BST) We expect Hungary’s central bank to leave its main policy rate on hold (13.00 BST) Clients can sign up here for a Drop-In on the outlook for the euro-zone (15.00 BST) Key Market Themes Given all …
24th October 2022
The outperformance of wage growth for those moving jobs is not a signal that overall wage growth is set to accelerate. The decline in job quits and in the share of firms planning pay rises suggests the recent slowdown evident in most measures of annual …
The dollar looks set to end the week lower against most major currencies after an article today by the WSJ’s often well-informed Fed reporter, Nick Timiraos, suggesting some FOMC officials favour a (somewhat) less aggressive pace of tightening sent …
21st October 2022
Revenues in the hotel sector have recovered to near pre-pandemic levels after being the hardest hit by COVID-19. Although there are few signs yet of momentum slowing, we expect growth in the sector to stall until the end of 2023 as economic weakness …
While interest rates are unlikely to rise as high as investors expected in the immediate aftermath of the “mini budget”, those hoping that the surge in mortgage rates since will be reversed are likely to be disappointed. Admittedly, the peak in Bank …
Consumers shrug off higher interest rates The stronger-than-expected gain in retail sales in August and preliminary estimate of only a small decline in September show that higher interest rates are yet to weigh on consumption, which is another reason to …
This week’s data releases painted a mixed picture of activity: from the good, to the bad, and the just plain ugly. Manufacturing sector holding up well First the good; manufacturing output increased by 0.4% m/m in September, following decent monthly gains …
German economy overtakes Japan’s With the yen weakening to 150 against the dollar this week, we estimate that Germany has overtaken Japan as the world’s third largest economy in dollar terms. (See Chart 1.) Chart 1: Nominal GDP (US$bn, 4Q Sum) Sources: …
Minutes signal RBA not done yet The RBA this week signalled that even though it slowed the pace of tightening at its last meeting, it is not done yet. In a speech on Wednesday, Deputy Governor Bullock showed that the higher frequency of the RBA’s policy …
Higher inflation from weaker yen won’t prompt BoJ tightening Headline inflation remained at a three-decade high in September and will climb slightly higher by early 2023. That said, the Bank of Japan will remain steadfast in maintaining its ultra-easy …
Weaker yen means higher inflation for longer Headline inflation remained at a three-decade high in September and will climb slightly higher by early 2023. That said, the Bank of Japan will remain steadfast in maintaining its ultra-easy monetary policy. …
We expect to see a fall in retail sales volumes in the UK in September… (07.00 BST) … and a rise in Poland over the same period… (09.00 BST) … but we think retail sales values were broadly unchanged in Canada in August. (13.30 BST) Key Market Themes UK …
20th October 2022
Although the extra risk premia on the UK’s sovereign bonds and currency that emerged in the wake of the UK’s “mini”-budget have partly unwound, this doesn’t necessarily mean Gilts and sterling are set to return to where they were before Liz Truss’s …
Relentless fall in sales continues The 1.5% m/m fall in existing home sales in September showed that rising mortgage rates continued to weigh on housing market activity. Given the recent step-down in mortgage applications as mortgage rates approached …
While the UK government’s apparent U-turn on fiscal policy offers some hope of relief for sterling, we think the outlook remains precarious. We continue to expect that sterling will lose further ground against the US dollar in the near term. But while …
Overview – The drag on the economy from CPI inflation being stuck at 10% for a year and interest rates rising to 5.00% will be enough to trigger a recession that involves real GDP declining by around 2.0% from its peak to its trough. What’s more, …
Board will lift FY2022 inflation forecasts but signal below-target inflation further ahead High inflation is triggering larger pay hikes but that won’t last Even a hawkish successor for Kuroda would struggle to tighten during a global recession The …
Unemployment rate will remain low for now Australia’s labour market is starting to sputter but with unemployment set to remain low, the RBA will continue to hike interest rates. The number of employed people rose by just 900 last month, well below the …
Weaker yen an obstacle to deficit narrowing again The trade deficit narrowed from its record high in August, but with the yen weakening dramatically in recent days, any further narrowing of the deficit will likely be delayed. Export values accelerated to …
China’s central bank will probably keep its Loan Prime Rate unchanged… (02.15 BST) …but we think Indonesia’s will hike by 50 bp (08.20 BST) We expect Turkey’s central bank to cut interest rates by 50 bp (12.00 BST) Key Market Themes Although corporate …
19th October 2022
