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Policymakers’ hopes of creating a new euro “safe asset” are likely to be unfulfilled for many years to come. The supply of safe bonds issued by national governments and EU institutions will rise in the coming years, but increased issuance by …
12th August 2025
Solid tourism flows and a pick-up in consumer spending growth mean we believe both Rome and Milan prime retail rents will continue to outpace the euro-zone average over the next couple of years. While Milan prime retail rents held steady in Q2, rents in …
Decent rental growth expectations and a narrowing risk premium imply that industrial is only marginally overvalued, despite an historically narrow gap between industrial yields and alternative asset yields. In turn, that implies industrial yields can …
Our new CE UK Unemployment Proxy extracts the overall signal from a range of measures of labour market slack and suggests that the labour market has loosened further than the Labour Force Survey (LFS) unemployment rate implies. Given the well-known issues …
We expect the Switzerland-Germany 10-year government bond yield spread to widen a little further, even though it’s already the largest it has been in about three decades. Long-dated Swiss and German government bonds, once seemingly tightly linked, have …
This page has been updated with additional analysis since first publication. Labour demand still cooling, but at a slower pace The further falls in payroll employment and job vacancies suggest that the labour market is still cooling, albeit only …
The announcement that Presidents Trump and Putin will meet in Alaska on Friday has increased the possibility of a scenario in which the Ukraine war ends on terms favourable to Russia. That could ultimately result in an easing of some sanctions, providing …
11th August 2025
The Bank of England’s hawkish tone at its policy meeting on Thursday has inevitably led to questions about whether interest rates will be cut again this year and whether the Bank’s rate-cutting cycle will soon end. (See here .) In some ways, the Bank’s …
8th August 2025
NBR unlikely to cut until (at least) mid-2026 The National Bank of Romania (NBR) left its policy rate on hold today, at 6.50%, as expected, and its communications suggest a restart of the easing cycle remains some way off. We expect rates to remain on …
EU protected from higher chip and pharma tariffs President Trump this week threatened a 100% tariff on semiconductor imports produced by firms that do not plan to invest in the US. We wrote about the global implications here . But in principle, the EU has …
Trump-Putin meeting in the spotlight Expectations that the touted Trump-Putin meeting could lead to a breakthrough in talks to halt fighting in Ukraine are likely to be fairly low. After all, little progress has been made towards ending the war so far. …
The surprisingly hawkish tone struck by the Bank of England today has increased the chances it will slow down the pace of rate cuts from one per quarter. But our view remains that Bank Rate will be cut further than investors anticipate, driving the …
7th August 2025
German carmakers’ recent disappointing earnings reports are as much about their continued struggles in China as US tariffs. And though sales in Europe have been more encouraging recently, that is unlikely to last. Overall, the prospects for the German …
Next week, we expect Norges Bank to leave the policy rate unchanged at 4.25% but reiterate that it is likely to loosen policy later this year. We forecast two 25bp cuts by year-end. At its last meeting, Norges Bank cut its policy rate by 25bp, to 4.25%, …
Property valuations were unchanged in Q2, with both property and alternative asset yields steady over the quarter. We still think the 10-year gilt yield will see a gradual fall over the next couple of years. That will improve valuations and argues against …
Although the Bank of England cut interest rates today by 25 basis points (bps), from 4.25% to 4.00%, it showed some signs that it may cut rates slower and/or not as far as our forecast of a decline to 3.00% in 2026. We are sticking to our view that …
Further rate cuts unlikely this year The Czech National Bank (CNB) left its policy rate on hold again today, at 3.50%, and in contrast to most other analysts, we think that further monetary easing is unlikely this year. The decision to leave the policy …
For an updated and more detailed version of this analysis, click here . Rates cut to 4.00%, but BoE appears in no rush to cut again soon Although the Bank of England cut interest rates today by 25 basis points (bps), from 4.25% to 4.00%, it showed some …
Economic growth has been fairly resilient to tariffs so far and, as long as tariffs stay around the 15% agreed in the EU-US trade deal, the hit to activity should be small. But growth will be sluggish this year as low confidence and slowing income growth …
Swedish residential total returns have underperformed the European average over the past three years, but a bright rental outlook in particular means we think returns will slightly outperform Europe over the next five years. Residential investment has …
Revisions erase German industrial resilience The sharp drop in German industrial production in June and the big downward revision to the figures for May mean that, rather than holding up well in the face of tariffs as the data previously suggested, German …
This page has been updated with additional analysis since first publication. House prices recovering, but the rebound won’t meet consensus expectations The rise in Halifax house prices in July provides another indication that the housing market is …
Relatively high inflation will encourage Riksbank to keep rates on hold The increase in Sweden’s CPIF inflation rate to its highest level since the start of 2024 is likely to encourage the Riksbank’s officials to keep the policy rate on hold at their …
If the extra 25% tariff that President Trump has announced on imports from India remains in place, India’s attractiveness as an emerging manufacturing hub will be hugely undermined. Global oil prices would probably rise if India responded by curtailing …
6th August 2025
With Swiss President Karin Keller-Sutter in the US trying to head off the 39% tariff, this note answers some key questions on the topic. Overall, we think Switzerland has limited room to offer concessions to the US and may well have to accept a less …
Retail sales likely to remain sluggish Euro-zone retail sales edged up in June but remained slightly below the peak reached early in the pandemic and well below the pre-pandemic trend (See Chart 1). Looking forward, we expect spending growth to remain …
Despite the unexpected rise in CPI inflation in June, we still think the weakness in the labour market means it’s only a matter of time before wage growth and inflation slow to rates consistent with the 2% inflation target. We think the Bank of England …
Construction activity drops to a post-COVID low The headline CIPS construction PMI dropped back in July to 44.3, the lowest since May 2020 when COVID lockdowns impacted activity. The drop was driven by the housing component, which after jumping to 50.7 in …
India could in principle find suppliers other than Russia to meet its energy needs relatively easily with little economic impact. Indeed, Indian oil refiners are reportedly reducing their purchases from Russia. But we doubt that India would make a …
5th August 2025
Disinflation paves the way for easing cycle to continue in large steps The larger-than-expected fall in Turkish inflation in July, to 33.5% y/y, will encourage the central bank to continue its easing cycle next month. For now, we maintain our forecast for …
4th August 2025
Tariff agreement reduces downside risks for CEE US President Trump and EU Commission President von der Leyen closed a trade deal this week which will impose a 15% tariff on most EU goods to the US. This was broadly in line with what we had expected, and …
1st August 2025
The surveys published this week have sent vastly different signals on the health of the economy in Q3. The backward-looking balance of the CBI’s Growth Indicator fell to a record-low in July (the series began in October 2003), barring the Global Financial …
Tariffs are now firmly back in the driver’s seat when it comes to commodity prices, with this week bringing fresh news on reciprocal, metals and energy tariffs. Arguably the most straightforward to digest was the confirmation of 50% copper tariffs. While …
Although European equities declined significantly this week, it seems unlikely that this is due to the US-EU trade agreement that was announced last Sunday and confirmed in the US Executive Order towards the end of the week. After all, the deal was in …
We think the surprisingly high tariff rate on Switzerland of 39% that the US announced yesterday is likely be negotiated down in future and, importantly, pharmaceutical goods still appear to be exempt for the time being. However, if this tariff were to …
Inflation at the target, ECB in no rush to cut again Headline inflation remained at the target in July and core inflation was only a touch higher. Both were broadly in line with the ECB’s forecasts. So there was little in the data to suggest that the Bank …
President Trump’s latest flurry of tariffs implies that the US effective tariff rate will rise to about 17%, from 2.3% last year. That is a little higher than we assumed and so presents modest downside risks to our forecast for global GDP growth and a …
Industry continuing to struggle across Emerging Europe The weak July manufacturing PMIs out of Emerging Europe suggest that industry remains a drag on regional growth, and we expect that incoming tariffs will keep external demand conditions subdued over …
This page has been updated with additional analysis since first publication. Recovering, but not off to the races The bigger-than-expected rebound in the Nationwide measure of house prices in July shows that the recovery in the housing market after the …
The latest RICS survey indicated that the recovery in occupier and investor demand in the euro-zone was muted in Q2. While the reduction in tariff uncertainty should support demand further ahead, the survey is consistent with our view that euro-zone …
31st July 2025
UK spending pledges still insufficient for net-zero The UK’s seventh round of Contracts for Difference (CfD) auctions is set to open next month and, ahead of that, the government has announced increases to the maximum guaranteed price, or strike price. By …
This quarterly Financial Risk Monitor includes commentary and analysis of our latest EM risk indicators. We’ll be discussing EM risk in a 20-minute online Drop-In at 10am EST/3pm BST on Wednesday 6th August. (Register here .) Currency risks stabilise …
A 25 basis point (bps) rate cut at August’s meeting, from 4.25% to 4.00%, is nailed on Risk of second-round effects means the MPC won’t speed up the pace of rate cuts But we still think rates will fall further than most expect, to 3.00% in 2026 The …
The RICS survey showed that occupier demand was still weak in Q2, with firms reluctant to expand in the face of higher costs and an uncertain economic outlook. In line with that, rental and capital value expectations are subdued, with the former pointing …
Emerging Markets Capital Flows Monitor (Jul. 2025) …
30th July 2025
Faster growth in earnings per share (EPS) is the main reason why equities in the US have fared better in local-currency (LC) terms than those in the euro-zone since the Global Financial Crisis (GFC). With than in mind, today’s GDP releases for the US and …
Households are still saving an unusually large share of their incomes and the latest surveys suggest that the saving rate will remain high in the near term, weighing on consumption. And while we suspect that the saving rate will decline sooner or later, …
Sentiment weakens, but points to robust growth The EC’s Economic Sentiment Indicators for Central and Eastern Europe (CEE) suggest that regional GDP growth maintained a moderate pace, at 2.0-2.5% y/y, at the start of Q3. The prices components of the …
Economy resilient to tariffs so far, but growth will be weak in H2 The slowdown in euro-zone GDP growth in Q2 came as no surprise as the boost from tariff front-running waned. We expect growth to remain weak in the second half of the year. The 0.1% …
Euro-zone GDP to have slowed sharply in Q2 National data available so far suggests that euro-zone GDP growth slowed from 0.6% q/q in Q1 to either 0.1% or 0.0% in Q2, in part due to the reversal of tariff front-running. (Our projection was 0.2%.) GDP …
