Filtered by Region: Europe Use setting Europe
Fading domestic price pressures could mean yesterday’s rate hike is the last The flash PMIs suggest the economy’s strong start to the year was sustained in March. But with the full drag from high interest rates yet to be felt, our hunch is still that …
24th March 2023
Strong PMIs point to further ECB hikes The strong batch of euro-zone flash PMIs for March suggests that the economy expanded in Q1 and that both employment conditions and price pressures remained very strong. That adds to the reasons to think that, as …
Activity remains resilient, despite global banking issues The flash PMIs suggest the economy’s strong start to the year was sustained in March. But with the full drag from high interest rates yet to be felt, our hunch is still that the economy will enter …
Strong PMIs point to further ECB hikes The strong batch of euro-zone flash PMIs for March means it is now all but certain that the economy expanded in Q1 while both employment conditions and price pressures remained very strong. With the banking turmoil …
Too soon to conclude February’s rebound will be sustained The further rebound in retail sales volumes in February suggests the recent resilience in activity hasn’t yet faded. But we doubt this will last as the drag on activity from higher interest rates …
Too soon to conclude February’s rebound will be sustained The 1.2% m/m rise in retail sales volumes in February was much better than the consensus forecast of a +0.2% m/m rise (CE +0.5% m/m). That suggests the recent resilience in activity hasn’t yet …
The turmoil in the global banking sector has not spread to Emerging Europe, but the focus is back on the health of the region’s banks given the not-so-distant memory of the 2008/09 banking crises that swept across the region. The good news is that banks …
23rd March 2023
The Bank of England followed the Fed’s example by forging ahead today with a 25 basis point (bps) interest rate hike, taking rates from 4.00% to 4.25%. This could prove to be the last hike of the tightening cycle. But if wage growth and CPI services …
A degree of calm has returned to markets, but investors remain nervous about where the next blow-up could occur – and attention is increasingly focused on commercial real estate. But are the concerns about real estate justified and – if so – where in the …
Bank of England may not yet be finished in its battle with inflation The Bank of England followed the US Fed’s example by forging ahead today with a 25bps interest rate hike and signalling that it may not yet be finished in its battle with inflation. As a …
CBRT keeps rates on hold after one-off cut in February Turkey’s central bank (CBRT) left its key policy rate on hold at 8.50% today as policymakers kept monetary conditions loose to support activity after the earthquakes in February. Interest rates are …
Turkey’s banking sector has been one of the weak links in the EM world in recent years due to its very high external debt burden. The good news is that banks have paid down these external debts and built up their FX liquidity buffers since 2018. This has …
22nd March 2023
The UK commercial real estate (CRE) debt market seems to be in a better position than the US, where troubled regional banks were the main providers of finance. That said, credit conditions are also set to tighten in the UK which will make refinancing more …
The Help to Buy: Equity Loan scheme was designed to counter an alarming drop in housebuilding and home ownership among young adults. It succeeded to some extent on both fronts, so the loss of the policy when the housing market is in the midst of a …
Reacceleration in inflation supports the case for another rate hike The reacceleration in CPI inflation in February may be enough to tilt the Bank of England towards raising interest rates from 4.00% to 4.25% tomorrow despite the recent turmoil in the …
Reacceleration in inflation may force 25bps rate hike The reacceleration in overall CPI inflation from 10.1% in January to 10.4% in February (consensus 9.9%, BoE 10.2%) and core inflation from 5.8% to 6.2% (consensus 5.7%) may be enough to tilt the Bank …
Spillovers from the global banking crisis to EMs appear limited so far. Encouragingly, too, most EM banks appear to be well placed to weather a period of rising non-performing loans resulting from weaker growth and higher interest rates. That said, there …
21st March 2023
Pre-election tax cuts in prospect, but risks to the fiscal outlook growing Despite February’s worse-than-expected public finances figures, we still think the Chancellor may have more headroom to cut taxes/raise spending later this year. But the big risk …
Pre-election tax cuts in prospect, but risks to the fiscal outlook growing The news on the public finances may have raised the Chancellor’s hopes that he will be able to announce a pre-election giveaway later this year. But the big risk is that a further …
Clients can access all our latest research on the banking sector crisis here … … and catch-up on today’s Drop-in on the topic here Canada’s CPI inflation probably fell to 5.4% in February, from 5.9% in January (12.30 GMT) Key Market Themes Financial …
20th March 2023
Markets remain in a febrile state despite the weekend deal for UBS to buy Credit Suisse and a joint central bank statement pledge to beef up dollar liquidity support. What will it take to restore confidence and end this crisis? Economists from across our …
Credit Suisse solution raises new questions The uncertainty over the long-term viability of Credit Suisse ended over the weekend when it was acquired by UBS – the solution which at face value offers the best chance of re-establishing stability in the …
We expect the Fed to press ahead with a 25bp hike next week (Wed.) The Bank of England and Norges Bank will probably also hike by 25bp (Thu.) But we think the SNB may raise rates by 50bp (Thu.) Key Market Themes Despite a better day for financial …
17th March 2023
The past week has provided a worrying reminder of the fragility of banking systems to rising interest rates. All our analysis on this can be found on our key themes page . Many metrics of financial market functioning have deteriorated worryingly fast and …
Euro-zone bank equities have come under severe pressure this week after troubles at some US regional banks and at Credit Suisse raised concerns about the health of banking systems more generally. At the time of writing, the Eurostoxx bank index is down …
While the backdrop has shifted dramatically, we still think there’s a strong case for our existing forecasts of a further rally in long-dated bonds by the end of the year, and some near-term strength in the US dollar and weakness in equities. The Swiss …
Core inflation and wage growth strong The strength of wage growth and core inflation will reinforce ECB policymakers’ conviction that, provided the region’s banks don’t come under further sustained pressure, their tightening cycle is not over. It came as …
We don’t think the collapse of SVB, problems at Credit Suisse and volatility in markets will deter the Norges Bank from raising its policy rate by 25bp next week, to 3.0%. If anything, the risks are skewed towards a 50bp hike. And we think the policy rate …
The ghosts of 2008 have made a sudden reappearance. Many metrics of core market functioning have worsened worryingly fast, but the overall situation is still long way short of the type of strains seen during the worst parts of the Global Financial …
16th March 2023
We expect Russia’s central bank to leave its policy rate on hold (10.30 GMT) US industrial production probably fell back in February (13.15 GMT) Clients can watch today’s Drop-In on banking sector turmoil and central banks here Key Market Themes The ECB …
Investors have taken today’s 50bp rate hike by the ECB as dovish, and the peak deposit rate now priced into markets is between 3% and 3.25%. We think the risks are skewed towards rates going higher than this and the economy performing much worse than …
Close call, but if the situation doesn’t deteriorate further we think there will be a 25bps hike Beyond that, fading of banking worries and stronger data required for more hikes Markets may be underestimating how far interest rates will be cut next year …
How will the Bank of England play its March rate decision following recent turmoil in the US and European banking sectors? Paul Dales, Ruth Gregory and Ashley Webb held an online briefing for clients shortly after the MPC announcement. During this …
We think Japan’s exports rebounded by 7.0% y/y on February (23.50 GMT) The ECB may not hike rates tomorrow due to fears of a banking crisis (13.15 GMT) Sign-up here for our US Drop-in on our outlook for the US economy (15.00 GMT) Key Market Themes The …
15th March 2023
The Budget has taken a bit of a backseat given the renewed worries about the health of the global banking system, but the Chancellor, Jeremy Hunt, was a bit more generous than we expected and probably plans to splash more cash ahead of the 2024/25 …
Just when financial markets appeared to be calming down after the SVB saga, the sell-off in European bank shares has resumed this morning due to concerns about the viability of Credit Suisse. At this stage, a huge amount is unclear, but a few points are …
Chancellor a bit more generous, but may fall short on long-term growth Today’s Budget has taken a bit of a backseat given the renewed worries about the global banking system, but the Chancellor was a bit more generous than we expected and we suspect he …
Resilience in January unlikely to last The rise in industrial production in January was entirely due to strong growth in Germany and Ireland, with all other major euro-zone economies recording a fall in output. We expect industry to struggle this year as …
Even as the economy has slowed nominal all-property rental growth has held up relatively well. But that largely reflects the impact of high inflation, which is now falling. In any event, underlying supply and demand conditions are ultimately the more …
Starting with the ECB today, some major central bank decisions are due in the shadow of recent banking sector turmoil. Will policymakers press ahead with their fight to rein in inflation, or will the risk of financial instability inject caution into their …
14th March 2023
Latest figures confirm plummeting demand during Q4 The detailed mortgage lending data for Q4 showed a slump in demand, as rising mortgage rates began to bite. The latest MLAR data confirmed the sharp turnaround in market conditions and suggest that, with …
This checklist helps clients keep track of the key forecasts announced during the Spring Budget at 12.30pm (GMT) on Wednesday 15 th March. Our more detailed preview is here . We will send a Rapid Response shortly after the speech, we are hosting a “Drop …
Wage growth eases despite labour market remaining tight The labour market remained tight in January. Even so, the Bank of England will breathe a sigh of relief as wage growth is easing. Together with the collapse of a couple of US banks having tightened …
Wage growth eases despite labour market remaining tight The labour market remained tight in January. Even so, the Bank of England will breathe a sigh of relief as wage growth is easing. But the fallout from Silicon Valley Bank’s collapse suggests that the …
Economy continues to boom in early 2023 The large increases in industrial production and retail sales in Turkey in January suggest that the economy got off to a strong start in early 2023. Activity will have been disrupted from the earthquakes last month, …
13th March 2023
Broad-based falls in inflation last month Russian inflation came in slightly softer than expected in February, at 11.0% y/y, and it will fall to the central bank’s 4% target in March as base effects pass through. We don’t think there’s been enough …
10th March 2023
There were some surprises in the Q4 commercial real estate data from the euro-zone, in particular in how swiftly yields have risen. Taken together with changes to our economic view these imply further downgrades to our forecasts. Notably we now think that …
The view that interest rates in developed markets may rise further and stay higher for longer than previously anticipated gained further traction this week following US Fed Chair Jerome Powell’s hawkish comments on Tuesday. Our US Economics team revised …
GDP shrank in Q4 (to two decimal places) The third estimate of euro-zone GDP in Q4, released earlier this week, strengthened our conviction that the economy will underperform most forecasters’ expectations. The 0.1% q/q expansion in GDP in the fourth …
