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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 …
22nd July 2019
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
Developments this week make us more confident in our view that the ECB will change its forward guidance at its meeting on 27 th July, before cutting its deposit rate in September and announcing in October that it will re-launch QE. The first of these …
The latest economic data, together with the nomination of Christine Lagarde for ECB president, make us more confident in our view that the ECB will cut interest rates and re-launch QE before the year is out. All of the activity data point to a slowdown in …
4th July 2019
Paris office take-up is likely to drop back a little this year, but with economic growth staying steady, it’s unlikely to fall off a cliff. A fairly restricted supply outlook means that vacancy can stay close to current lows over the next few years, …
June surveys round off a disappointing Q2 While the Composite PMIs for June were flat for Spain and edged up for Italy, the overall picture remains one of weak economic growth in the second quarter. And with price pressures remaining weak, there is every …
3rd July 2019
Yesterday’s announcement that Christine Lagarde will succeed Mario Draghi leaves us even more confident that the ECB will loosen monetary policy in the coming months. We think the Bank is likely to cut its deposit rate in September and re-launch QE before …
The jump in euro-zone core inflation in June seems to have largely reflected temporary factors. More generally, a range of measures of underlying inflation suggest that price pressures remain subdued. This should encourage the ECB to loosen policy sooner …
2nd July 2019
The preliminary trade deal between Mercosur (Brazil, Argentina, Uruguay and Paraguay) and the EU, if implemented in full, would boost potential growth in the bloc, perhaps by as much as 0.75-1.0%-pt. But with a lengthy phase-in period for some measures, …
1st July 2019
Economy lost momentum in Q2 Business surveys released this week provided more evidence that the economy slowed again in Q2. The German Ifo Business Climate Index, released on Monday, fell to a 55-month low, and was followed on Thursday by the euro-zone …
28th June 2019
Following Mario Draghi’s more dovish comments earlier in the month, we now think the Governing Council is more willing to loosen policy further and have revised our already more-dovish-than-consensus interest rate and QE forecasts. Next week, the European …
14th June 2019
Investors are now even more dovish that we have long been about the outlook for monetary policy in the US. As such, we doubt that Treasury yields will drop further. However, we don’t expect looser monetary policy to avert a drop in global stock markets. … …
President Draghi’s comments at this week’s press conference were consistent with our view that the ECB will eventually re-start its QE programme. Meanwhile, Italy looks set for another collision with the EU, which we expect to push bond yields higher. … …
7th June 2019
We do not think that the valuations of equities are unsustainably high. Nonetheless, we still expect that stock markets in the US and in the rest of the developed world will slump later this year. This is because we anticipate earnings to come under …
Concerns about rental growth prospects appear to be behind rising prime shopping centre yields. While we anticipate high street yields to rise also, a smaller correction will see the yield spread widen further. … Shopping centre yield spread over high …
5th June 2019
This week saw a fresh escalation of the tensions between Italy and the European Commission, and the publication of some fairly downbeat survey data. Combined with the very low inflation data we expect to be published next Tuesday, this will add to the …
31st May 2019
Lower government bond and equity dividend yields improved the relative valuation of commercial property assets in Q1. Indeed, less than half of the 93 property markets now appear overvalued, with the office sector recording the largest improvement. With …
29th May 2019
The small increase in the euro-zone’s Economic Sentiment Indicator (ESI) is a welcome bit of good news. But it is not enough to fully reverse its fall in April, and does not change our view that economic growth probably dropped back to around 0.2% q/q in …
28th May 2019
Projections of the results of the European elections confirm that pro-European parties will continue to have a clear majority in the European Parliament (EP) itself, so little will change at EU level. But there will be some fallout for national politics, …
27th May 2019
This week saw the release of another set of underwhelming business surveys, suggesting that the pick-up in GDP growth in Q1 will not be sustained, and some further evidence that price pressures remain very weak. The stage is therefore set for a dovish …
24th May 2019
Occupier demand is strong in all three sectors, with solid economic growth supporting expansion, although we expect this to slow through the course of the year, dampening rental growth in all sectors. Retailers are facing pressures on costs and, with …
Car sales in the world’s largest markets have slumped since mid-2018. In this Metals Watch we explain our forecast for sales to begin recovering later this year. … Recent drags on car sales are set to …
22nd May 2019
We suspect that the European Parliament (EP) elections will not cause much reaction on bond markets, even if populist parties perform even better than expected. Recent elections in the EU suggest that politics trigger sell-offs only when those parties …
20th May 2019
Developments this week suggest that Italy’s government is on another collision course with the European Commission. Meanwhile, the risk of US car tariffs has eased, but it has not disappeared. Finally, German Bund yields have continued to decline, partly …
17th May 2019
Although equities in the euro-zone have fallen sharply in the past week as the US-China trade dispute has flared up again, they are still much higher than they were at the start of the year. This suggests that a lot of good news about trade is still …
15th May 2019
This week saw further signs that the German economy regained some momentum at the end of Q1, as industrial production rose and exports picked up in March. But with the business surveys for March and April still looking grim, we doubt that the improvement …
10th May 2019
The rebound in euro-zone GDP growth to a respectable 0.4% q/q in the first quarter of this year has been greeted by many as proof that the economy is back on track. But we suspect that the expansion will slow again in the coming months, given that Q1 was …
3rd May 2019
A surge in support for populist parties in European parliamentary elections later this month should have little bearing on economic policy in the near term. After all, moderate parties are still likely to control a majority of seats, and parliament’s …
We doubt that bond markets will be negatively affected by the European Parliament (EP) elections this month, as the rise of anti-EU parties is already widely anticipated and would not necessarily complicate EU policymaking. In fact, a strong showing by …
2nd May 2019
Western European office rents grew by 5.3% p.a. in 2016-18. We expect them to grow by little more than that over the next three years combined , as occupier demand slows and development completions pick up. This will see the sector’s rental growth …
April’s decline in the euro-zone’s Economic Sentiment Indicator adds to the evidence from other surveys that the economy got off to a slow start to Q2. So even if GDP data for Q1, published tomorrow, show a pick-up in growth as we expect, this seems …
29th April 2019
Following this weekend’s election, we suspect that Spain’s next government will tighten fiscal policy slightly, contributing to slower GDP growth over the coming years. But the country still looks set to grow more quickly than the euro-zone as a whole. … …
Spain’s economy is performing well in the run-up to Sunday’s general election, but we expect growth there to slow. Meanwhile, although we have revised up our oil price forecasts, energy inflation still looks set to drag the headline rate down below 1% …
26th April 2019
