Filtered by Region: Europe Use setting Europe
With much of the global economy holding up surprisingly well and inflation not coming down as quickly as expected, investors are weighing up the risk that policy rates remain elevated for much longer than previously thought. This Update discusses what …
3rd March 2023
Another inflation surprise… The focus this week was on yet another higher-than-expected inflation print. The headline inflation rate edged down in February, but only to 8.5%, whereas a much bigger fall had been anticipated. And the core measure rose …
PMIs point to resilience, especially in services February’s final Composite PMIs suggests that economic activity in the euro-zone has been fairly resilient in February, with the indices for Spain and Italy, and for the services sector, particularly …
We think inflation in Turkey eased slightly to 54% in February (07.00 GMT) Final PMIs in Europe may confirm that activity is holding up better than expected (09.00 GMT) We expect the US ISM services index to have fallen back in February (15.00 GMT) …
2nd March 2023
The current economic downturn will mean that short-to-medium term property performance is under-par. But over a longer horizon, we expect real estate returns to reassert their traditional position somewhere between bonds and equities. Last year was an …
The account of the ECB’s last meeting is consistent with our view that the ECB will raise its deposit rate to 3.0% a fortnight today and continue hiking beyond that. In light of the data released since the last meeting, there are growing upside risks to …
A sharp increase in property yields in Q4 helped European property valuations improve for the first time in two years. That said, spreads over alternative assets remained very narrow by past standards and all markets besides Istanbul were still …
Strength of core inflation means ECB has a long way to go February’s increase in core inflation will reinforce ECB policymakers’ conviction that significant rate increases are needed. For some time we have been forecasting a 50bp hike at the meeting in …
Euro-zone HICP (Feb.) Strength of core inflation means ECB has a long way to go February’s increase in core inflation will reinforce ECB policymakers’ conviction that significant rate increases are needed. For some time we have been forecasting a 50bp …
The Israeli shekel has been amongst the worst performing currencies over the past month amid a rise in risk premia in Israel. We think it may remain under pressure against the US dollar over the coming months; but we doubt it will keep underperforming its …
1st March 2023
Terrible 2022 helps boost outlook for 2023 The latest IPF Consensus Survey showed a modest upgrade to forecasts for total returns in 2023, driven by an uplift to the capital value view. That looks to reflect the larger-than-expected fall in capital values …
Renewed rise in inflation will worry ECB The renewed rise in headline inflation in Germany, France and Spain in February suggests euro-zone inflation edged up this month, rather than falling as had been expected. With signs that underlying inflationary …
Higher interest rates hurt housing, but other borrowing remains strong While January’s money and credit figures suggest that higher interest rates are continuing to act as a drag on the housing market, they appear to be having less influence in other …
Net lending holds up as even as investment collapses Net lending to property was once again positive in January, even as commercial property investment collapsed in the final quarter of last year. Investors may be preparing to re-enter the market and …
Q4 spike in mortgage rates continues to depress approvals The spike in mortgage rates in October and November last year ensured that mortgage approvals remained at a similar level to the depths of the 2007-09 financial crisis in January. That could mark …
Higher interest rates hurt housing but not other borrowing January’s money and credit figures suggest that higher interest rates are continuing to act as a drag on the housing market, but they appear to be having less influence in other areas of the …
Industrial downturns in CEE bottoming out The manufacturing PM Is for February suggest that industrial sectors in Central and Eastern Europe are continuing to struggle, but there are tentative signs that the region may now be past the worst of its …
House prices continue to slide The further fall in house prices in February will keep optimism based on reports that demand has recovered in check. Indeed, even if buyer volumes have recovered, the amount they can spend on a new home has been reduced by …
We think Australia’s GDP growth softened a touch in Q4 (00.30 GMT) Germany’s HICP inflation probably fell in January (13.00 GMT) We expect the ISM manufacturing index for February to have remained weak (15.00 GMT) Key Market Themes We think the recent …
28th February 2023
Pandemic savings won’t rescue the economy The value of savings that households built up during the pandemic has been wiped out by inflation. Rising interest rates, together with a desire to rebuild the spending power of their savings, suggest that …
A widening in profit margins could mean that inflation is slower to fall back to the Bank of England’s 2.0% target than we expect. That would cause the Bank to raise interest rates even further than we currently anticipate and/or keep them higher for …
Energy Performance Certificates (EPCs) are the main benchmark for environmental standards in UK housing. There is evidence that they are improving efficiency in new-builds and new regulations will enforce change on rental properties, but this progress …
27th February 2023
Recovery in business sentiment falters The stabilisation of the EC’s economic sentiment indicator in February contrasts with the significant increases in the PMIs and provides some support for our view that the economy will struggle this year. It also …
The effects of tighter monetary policy are clear in the money and credit data. Households and firms have continued to lock their money up in longer-term deposits which are less likely to be spent, and lending growth has slowed very sharply. This paints …
The rise in prime property yields accelerated in Q4. Despite gains in all-property rents in most markets, this meant capital values fell across all sectors. Declines were particularly sharp in offices and industrial in Scandinavia and retail in …
24th February 2023
Russia’s economy defied expectations in 2022 Russia’s war in Ukraine, which marks its one year anniversary this week, fundamentally changed the geopolitical and economic landscape in the region. From a macroeconomic perspective, one of the more surprising …
The more hawkish tone in financial markets this week is justified. Prior to this week, investors seemed to be optimistic that the previous increases in interest rates would be enough to bring inflation back down to the Bank of England’s 2.0% target, and …
Overview – The surge in yields seen in 2022 will not be repeated in 2023. With much of the repricing occurring last year we think all-property equivalent yields will see only a modest rise of 30bps this year. But rents will be hit, as the dual drags of …
After the US and the UK, it was the euro-zone’s turn to release better-than-expected activity data this week. Admittedly, we learned that German GDP fell by 0.4% q/q rather than 0.2% in Q4. This means the euro-zone economy probably stagnated in Q4 …
Economy much weaker than thought in Q4 The downward revision to German Q4 GDP means the hit to activity at the end of last year was closer to our original expectation. It also suggests a technical recession in Germany during Q4 and Q1 is likely. Today’s …
CEE yields continued to rise in Q4, but very strong rental growth prevented all-property capital values from falling for a second successive quarter. (See Chart 1.) This turnaround was driven by retail and industrial performance, while office rents …
23rd February 2023
Last week’s European Court of Justice (ECJ) opinion on Poland’s Swiss franc mortgage dispute dealt yet another blow to Poland’s banking sector and will expose those banks with large FX loan portfolios. The sector as a whole looks strong, but many banks …
The surprise upward revision to euro-zone core inflation in January, to a new record high, will embolden the majority of ECB policymakers who want to press on with significant further rate hikes. The upward revision to January’s euro-zone headline …
Higher interest rates have begun to reduce the size of mortgage that buyers take out. As two-thirds of buyers rely on a mortgage, that will decrease most buyers’ budgets and put further downward pressure on house prices. The average mortgage rate on …
Turkey’s central bank will probably cut its policy rate by 100bp (11.00 GMT) We think Mexico’s CPI edged down to 7.6% in the first half of February (12.00 GMT) We expect policymakers in Korea to keep interest rates on hold Key Market Themes We doubt …
22nd February 2023
There is mounting evidence that households’ pandemic savings will no longer be able to support real spending. That implies from now on, real consumer spending will have to evolve in line with real incomes. The conventional wisdom is that households and …
German inflation mystery continues The final release of German HICP for January confirmed that the headline rate fell but, disappointingly, still didn’t reveal what happened to the core rate. That said, there was some evidence that underlying price …
The sharp fall in European electricity prices sets the stage for a recovery in metals output across the region. As power prices are still historically high and unlikely to fall that much further, however, the potential for a full and rapid recovery is …
Further improvement, but headwinds still strong The further rise in the Ifo in February confirms that the German economy may have been a bit more resilient than we had expected in Q1. But with the index still in recessionary territory and the drag from …
We think the RBNZ will hike rates by an above-consensus 75bp (01.00 GMT) Final German HICP data will offer more clarity on inflation’s drivers there (07.00 GMT) February FOMC minutes may give more insight into the Fed’s thinking (19.00 GMT) Key Market …
21st February 2023
The euro-zone’s Composite PMI was much stronger than expected in February, but it excludes the construction sector where prospects are weaker. Tighter financial conditions and softer demand in the region as a whole, together with the removal of generous …
Russia’s budget deficit has widened sharply in recent months and is likely to remain under pressure amid lower oil prices and rising military spending. The government is unlikely to experience severe fiscal strains this year, but the public finances are …
Sentiment continues to improve The ZEW indicators point to a further improvement in sentiment towards Germany and, along with other recent surveys, suggest that the economy is holding up better than we had anticipated. The rise in the ZEW economic …
PMIs suggest activity rebounded in February, but we doubt it will last The sharp rebound in the flash UK composite PMI in February suggests that the economy remained resilient to the dual drags from high inflation and high interest rates at the start of …
PMIs suggest activity rebounded in February, but we doubt it will last The sharp rebound in the flash UK composite PMI in February suggests the economy continued to remain resilient to the dual drags from high inflation and high interest rates. But we …
Economy growing, price pressures remain strong February’s chunky rise in the euro-zone Composite PMI suggests that the economy will grow in Q1. With the labour market still very tight and price pressures strong, the survey will reinforce ECB …
Economy growing, price pressures remain strong February’s chunky increase in the flash euro-zone Composite PMI highlights the continued resilience of activity and suggests that the economy will grow in Q1. With the labour market still very tight and price …
Tighter fiscal policy probably still on its way despite borrowing undershoot January’s public finances figures suggest the Chancellor will have scope for some giveaways in his Budget on 15 th March. But with the OBR poised to slash its medium-term GDP …
Tighter fiscal policy probably still on its way despite big borrowing undershoot January’s public finances figures suggest the Chancellor may have scope for some giveaways in his Budget on 15 th March. But with the OBR poised to slash its medium-term …
