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Bond market rally complicates life for ECB More policy loosening is on the way in the euro-zone, but it will not be supported by all of the ECB Governing Council. After holding his tongue for several months, Bundesbank boss, Jens Weidmann, said this week …
30th August 2019
Unchanged inflation supports case for more ECB loosening With headline and core inflation unchanged in August, at 1.0% and 0.9% respectively, and unemployment also unchanged at 7.5% in July, the scene is set for the ECB to loosen policy further. After …
GDP growth in Finland and Denmark set to slow in H2 Although today’s release of GDP data for Finland and Denmark shows that both economies grew solidly in Q2, we suspect that quarterly growth will slow in both in the coming quarters. Meanwhile, the Swiss …
Q2 GDP growth may be as good as it gets for Norway This morning’s release of Q2 GDP data from Norway confirms that the economy remains a bright spot in the Nordics. But given that oil prices are now in line with our end-year forecast of $60pb, we think …
29th August 2019
Germany could have taken the UK’s departure from the EU in its stride a couple of years ago but it will be hit quite badly if a no-deal Brexit occurs in two months’ time. There is still enormous uncertainty about how and whether the UK will leave the EU, …
28th August 2019
Plummeting bond yields in 2019 have dramatically improved property valuations, supporting the outlook for property prices. Indeed, we now think that euro-zone prime office yields can extend their falls over the next few years, taking the total shift in …
A second consecutive quarter of sharp falls in bond yields has driven improved valuations in 90 of the 93 markets that we cover. As a result, less than a third of all markets look overvalued, the lowest proportion since the end of 2017. With bond yields …
23rd August 2019
Italy heading for caretaker government? The fall of another Italian government comes as no surprise, given that their average lifespan over the past few decades has been just over a year. But it is a bit surprising that Italian government bonds rallied …
Uptick in Composite PMI won’t stop ECB easing next month The trivial increase in the euro-zone Composite PMI in August still leaves it consistent with feeble GDP growth this quarter and won’t put the ECB off easing policy next month. The rise in the …
22nd August 2019
Slower growth in both developed and emerging economies has started to filter through into property occupier markets, with office demand generally lower than a year ago and fewer cities registering rental value increases in the retail and industrial …
19th August 2019
German yield curve not a good guide to recessions With all the talk of inverted yields curves predicting a recession in the US, it is worth taking a closer look at what yield curves are telling us in the euro-zone. The most obvious place to start is …
16th August 2019
No end in sight to the downturn in Sweden The latest data releases for June from Sweden show that the flash estimate of a contraction in the economy in Q2 was no rogue reading. We learned on Tuesday morning that private sector production fell for the …
9th August 2019
Bigger budget deficits on the way Italy now looks set for an early election. Relations between the two coalition partners have broken down, and the leader of the junior partner has called for a vote of confidence in the government. That said, even if it …
The risk to the euro-zone from the US-China trade war is rising. And it seems increasingly likely that the US will raise tariffs on auto imports from the EU, which could tip Germany into recession. There is also a chance that higher auto tariffs would be …
8th August 2019
Norges Bank to raise rates in September, but this will be the end of the tightening cycle. It is now a question of when, not if, the SNB cuts rates further into negative territory. Expected dovish shift by the Riksbank will ensure that the krona stays the …
The recent sell-off in global equity markets has hit the euro-zone harder than the US, but we doubt that this will continue. Equities in Germany have performed particularly poorly, which is unsurprising given that the economy is struggling – with GDP …
7th August 2019
The latest data for German offices suggest a better-than-expected start to 2019, as a result of solid employment growth and tightening supply. This has led us to revisit our office forecasts for the top cities, though we still expect a slowdown of …
5th August 2019
July surveys point to continued weak growth The slowdown in euro-zone GDP growth from 0.4% q/q in Q1 to 0.2% in Q2 was in line with our forecast and the ECB’s. (See here .) We don’t yet have an expenditure breakdown for the euro-zone as a whole, but the …
2nd August 2019
Retail sales growth likely to slow further The jump in retail sales in June follows a fairly sharp contraction in May and feeble growth in April, and means that retail sales growth slowed in Q2 overall. With the boost from falling inflation now behind us …
Fall in Swiss inflation adds to pressure on the SNB The unexpected fall in Swiss inflation in July, and signs of a deepening downturn in the industrial sector, will only strengthen the resolve of the SNB to resist the rising franc. There is a growing …
Commercial property investment activity looks likely to drop back slightly from the highs seen last year. But, rather than pointing to a downturn in pricing, we believe that this reflects investors re-evaluating the implications of the softer …
1st August 2019
In this Update we are launching our coverage of the European TTF natural gas price. In short, we think that surging global supply of liquefied natural gas will keep EU markets amply supplied over the next few years. As such, we expect only a modest rise …
Losing pace into Q3 The sharp fall in Norway’s manufacturing PMI in July adds to signs that the economy is losing momentum and lends support to our view that the Norges Bank will hike rates by less than investors expect this year. Meanwhile, the weak PMI …
Another weak survey supports the case for an ECB rate cut in September July’s decline in the euro-zone Economic Sentiment Indicator (ESI) is consistent with our view that, after probably slowing to 0.2% q/q in Q2, GDP growth in the currency union will …
30th July 2019
The decline in Swedish GDP in Q2 will make it harder for the Riksbank to sit on the fence. With the economy unlikely to find much support in H2, the rising prospect of a recession lends further support to our forecast that the krona will fall sharply by …
Dovish ECB to make life difficult for the SNB Having seen the Swiss franc post multiple fresh two-year highs against the euro early in the week, the SNB will have welcomed the drop in the currency after the ECB meeting on Thursday. The fall was mirrored …
26th July 2019
At Thursday’s press conference, the ECB laid the groundwork for policy easing in September. The change to its forward guidance suggests that a rate cut is pretty much a done deal. But the Bank also “tasked the relevant committees” with looking into other …
The apparent confirmation this afternoon that the ECB is inching towards loosening policy lends further support to our view that more rate cuts are on the cards in Denmark and Switzerland too. As we had expected, the ECB left its policy settings unchanged …
25th July 2019
The market reaction to today’s ECB press conference suggests that President Draghi was not as dovish as some investors had hoped for. But the big picture is that it seems clear that policy loosening is coming. We expect the Bank to cut its deposit rate in …
Fall in Ifo adds to evidence of prolonged economic weakness July’s decline in the Ifo Business Climate Index is consistent with the message from the PMI that the German economy made a very slow start to Q3. We still suspect that the ECB will wait until …
Survey won’t change the ECB’s mind about loosening policy The latest ECB Bank Lending Survey adds to the evidence that the euro-zone economy will remain sluggish. The euro-zone does not seem to be on the brink of recession, but continued slow growth …
23rd July 2019
Since last July, the development pipeline in Brussels has grown and prospects for economic growth and thus, occupier demand have nudged lower. While the low availability of Grade A stock will support prime office rental values, Brussels has lost its …
22nd July 2019
It is becoming harder for the Riksbank to brush aside mounting signs of weakness in domestic demand. We expect it to turn more dovish, and the krona to weaken, over the second half of the year. The Riksbank’s reasonably upbeat assessment about the outlook …
Franc leaves exporters with a mountain to climb The widening in Switzerland’s trade surplus in June (data released on Thursday) was driven in large part by weakness in imports and masked a continued slowdown in export growth. The rise in the value of the …
19th July 2019
What are investors expecting from the ECB? Next week, we think that the ECB will alter its forward guidance in two ways. First, it is likely to say that interest rates will remain “at present or lower ” levels at least through the middle of next year. And …
With bond yields falling, euro-zone property yield spreads have widened and remain high by historical standards. Admittedly, not all markets enjoy low bond yields, but even in Italy, where spreads have narrowed the most, we do not see any immediate upward …
18th July 2019
The ECB is likely to change its forward guidance to signal that a rate cut is coming... … and it might also add an explicit reference to the possibility of re-launching QE. All this would confirm investors’ expectations that looser policy is on the way. …
Markets Overview – We think that a combination of policy loosening by major central banks, an increase in investor risk aversion, and mounting trade tensions will lead to bond yields in Switzerland and the Nordics staying lower for longer and equities …
17th July 2019
The improvement in some of the recent economic data suggests that the risk of an imminent recession is low. But it does not suggest that the economy is about to rebound. We expect growth to remain subdued over the rest of the year, with quarterly GDP …
Overview – Economic growth is likely to remain anaemic this year and to slow further in 2020 even if downside risks, such as a US auto tariff or no-deal Brexit, do not materialise. The downturn in the German manufacturing sector is spreading to other …
16th July 2019
The Riksbank has fallen well behind the curve The minutes of the Riksbank’s July monetary policy meeting, released this morning, offered little in the way of surprises. As was the case in the February meeting, the decision to hold the repo rate unchanged …
12th July 2019
France defies the gloom While the German and Italian economies are in the doldrums, France seems to be doing much better – for now at least. We think GDP expanded by around 0.4% q/q in Q2, following a decent 0.3% increase Q1. Industrial production rose by …
A lot has happened since the Governing Council’s policy meeting on 6 th June, so the account published today has arguably been superseded by events. But it does confirm that even five weeks ago the Bank was gearing up for action. The account also hints at …
11th July 2019
Irish economy slowing as no-deal Brexit risk increases After strong growth in Q1, economic growth in Ireland appears to have slowed a touch, which is likely to in part reflect concerns about Brexit. While Ireland looks set to continue growing more quickly …
Core inflation likely to fall back into 2020 While core inflation in Sweden edged up once again in June, we expect weak domestic demand to weigh on underlying price pressures over the second half of the year and into 2020. Having risen to a seven-month …
IPF Consensus office rent forecasts for 2019 were generally upgraded in their latest iteration, with central Europe seeing a particularly large rise. We also made widespread upgrades to our forecasts in the same six-month period. While our overall …
10th July 2019
Above-target core inflation supports Norges Bank’s hawkish bias The larger-than-expected fall in the headline Norwegian inflation rate in June is unlikely to change the Norges Bank’s hawkish bias. With core price pressures still running above target, it …
New Democracy’s clear victory in Greece’s parliamentary elections yesterday will be welcomed by investors. But it will not be a game changer for the economy, not least because the government will still be constrained by its membership of the single …
8th July 2019
Slump in German manufacturing continues The small increase in output in May does not signal the end of the Germany’s manufacturing downturn. On the contrary, it now looks almost certain that production declined in Q2 overall, contributing to a sharp …
With euro-zone bond yields falling, this creates the potential for a further compression of property yields. In our view, there will not be much of an immediate impact, though it is becoming more likely that any upturn in euro-zone property yields further …
5th July 2019
