China overcapacity fears coming to industrial metals China’s dominant role in the world of commodities is evolving subtly. This is particularly the case for gold, where increased demand by the PBoC and Chinese retail investors has weakened the importance …
3rd July 2024
Recent developments have brought the global spotlight onto sovereign bonds in India and China. We expect the former to fare the best of the two. We’ve written lately about the relative prospects for equities in India and China, arguing in favour of the …
This chartpack is a new addition to our suite of commercial property analysis, which pulls together our views across the three regions we forecast and provides important context for investors. The slower adjustment to past rises in interest rates and a …
The US dollar has edged higher over the past quarter or so, driven by the twin tailwinds of rising Treasury yields and US equity outperformance. We think these factors may continue to support the greenback over the near term, and the looming prospect of a …
Surveys consistent with softer growth and inflation The decline in the ISM services index to 48.8 in June, from 53.8, takes it to its lowest since the lockdowns in 2020. Alongside a decline in the ISM manufacturing index, these surveys suggest that GDP …
External trade continues to drag on GDP growth The trade deficit widened slightly to $75.1bn in May, from $74.5bn, as exports fell by 0.7% m/m, outpacing a 0.3% m/m decline in imports. Nevertheless, the decline in exports was more modest than the advance …
Exporters still struggling The fall in exports in May was largely due to lower commodity exports, which should have performed better in June thanks to the boost to oil exports from the completion of the Trans Mountain pipeline expansion. Cutting through …
No rate cuts for another year or so The decision by Poland’s central bank (NBP) to leave its policy rate at 5.75% today came as no surprise and we doubt that policymakers will have scope to lower interest rates until the middle of next year. The NBP …
The outperformance of the US economy has supported stronger commercial real estate returns there over recent decades than either mainland Europe or the UK. But will this continue? On the back of the release of our updated global CRE forecasts and newly …
Despite rising in June, mortgage applications consistent with weak home sales The decline in mortgage rates back below 7% helped mortgage applications for home purchase to rise by 5.1% m/m in June. That gain was tiny in the context of the ongoing …
Egypt’s government faces a likely further rise in debt servicing costs over the coming year. But the good news is that the budget for the 2024/25 fiscal year (which started this week) reaffirmed the commitment to fiscal consolidation. So long as the …
One of the takeaways from our latest Emerging Markets Outlook is that the EM business cycle is unusually unsynchronised. We expect some convergence as the effects of the enormous macro shocks of recent years wash out. But by the same token, we shouldn’t …
Inflation on a (bumpy) path down The larger-than-expected decline in Turkish inflation in June marks the start of a new phase of the disinflation process, and we are likely to see much steeper falls in the y/y inflation rate in July and August. But …
We expect the RBNZ to leave rates on hold for a seventh consecutive time at its meeting next Wednesday. To be sure, the Bank will probably strike a hawkish tone out of an abundance of caution. However, with the economy in tatters and inflation on its way …
This page has been updated with additional analysis since first publication. Uptick in retail sales not a gamechanger for the RBA The upside surprise in the May retail sales numbers primarily reflected consumers taking advantage of end-of-financial year …
The rebound in residential investment over the past year will go into reverse in Q2, as housing starts and home sales slump again. We expect this weakness to persist thanks to a coming slump in new multi-family construction, which will soon gradually feed …
2nd July 2024
Despite the continued depreciation of the yen so far this year, we still expect it to rebound against the greenback supported by its relatively low valuation and the start of the easing cycle in the US. Although the yen has remained stable today against …
Despite the modest rise in job openings in May, the big picture remains that labour market conditions continue to slowly normalise, and the low quits rate still points to a sharp slowdown in wage growth. After the sharp fall in April, the marginal rise in …
Across the 17 metros we cover, most will see higher vacancy over the next year or so due to a surge in completions. Atlanta and Houston will be the key exceptions. There new construction has plummeted in response to falling apartment values and higher …
The recently-published fiscal plans of Colombia’s government seem to have alleviated some near-term fiscal concerns, but we think the medium-term budget and debt projections are based on rosy assumptions around growth and oil prices. Policymakers’ (and …
The consensus is still downbeat on the outlook for retail rents, with growth expected to underperform even the struggling office sector. But with a decent consumer recovery on the horizon we think that pessimism is misplaced. As inflation falls back and …
This page has been updated with additional analysis since first publication. Continued strength of services inflation all but rules out July ECB cut It already seemed unlikely that the ECB would cut interest rates at its meeting in July, and June’s …
Concerns about the economy will keep RBA from hiking The minutes of the RBA’s June meeting revealed that the Bank’s tightening bias remains intact. The Board noted that there were a number of factors that supported the case for a rate hike last month. …
We continue to expect equities to outperform most other assets through the end of next year, as the hype around AI builds and lower inflation facilitates more monetary easing in some places than investors are discounting. The tech-heavy US stock market …
1st July 2024
The latest manufacturing PMIs suggest that the recovery in global industry lost some momentum at the end of Q2. While activity in emerging markets continued to grow strongly, industry was still struggling in some large advanced economies. Nonetheless, …
The EM manufacturing PMI rose to a three-year high in June, driven by improvements in the surveys in much of Asia which have continued to benefit from strong export demand. Manufacturing recoveries are progressing more slowly in parts of Europe. The PMIs …
Investors have welcomed the broadly unsurprising results of the first round of the French legislative elections, but the discount on French financial assets is still there and, in our view, likely to stay. The final results of the election’s first round …
More signs that the economy is struggling for momentum The ISM manufacturing index was little changed in June, leaving it consistent at face value with a small fall in GDP. While the ISM has not been a good leading indicator of GDP growth in recent years, …
Much of the recent focus has been on France’s political turmoil, but Germany has had its own troubles with disagreement over the 2025 budget threatening the survival of the governing coalition. While we think an agreement will eventually be found, budget …
Saudi Arabia’s Crown Prince Mohammed bin Salman’s (MbS) ultimate succession to become king is inevitable and a formality. Having been the de-facto leader of the Kingdom for several years it may not result in much of a deviation in economic policymaking. …
Disinflation resumes, but services inflation stays high Inflation figures for Germany and other major euro-zone economies suggest that, after rising in May, euro-zone headline and core inflation edged back down in June. But services inflation remained …
In the aftermath of Joe Biden’s poorly received debate performance, Group Chief Economist Neil Shearing explains the market response and highlights potential economic risks around a second Trump presidency. He also reviews the latest US inflation data and …
There have been two major developments in markets over the past week. The first is the initial round of voting in France’s parliamentary election, which was won by Marine Le Pen’s far-right National Rally party but where a strong turnout and the formation …
PMI still weak, but at least its improving South Africa’s manufacturing PMI remained weak in June but improving electricity supply conditions and reduced political uncertainty should support a modest pick-up in activity. That said, the economy is in a …
Net lending to property shows early signs of a recovery Net lending to property increased for the second consecutive month in May, rising by £1.0bn. The increase was entirely due to a rise in lending to standing investments, with development lending …
This page has been updated with additional analysis since first publication. Further evidence the drag on activity from higher interest rates is fading May’s money and lending data provided a bit further evidence that the drag from higher activity is …
Surveys point to Turkey rebalancing, Russia overheating The manufacturing PMIs for June provide encouraging signs that a rebalancing of Turkey’s economy is underway, with domestic demand weakening and inflation pressures softening. But in Russia, the …
House prices flat in Q2 Although house prices rose slightly in June, an earlier dip means they were flat on the quarter in Q2. With signs mortgage rates are causing demand to falter and that supply is improving, we think that house prices will flatline at …
The PMIs from Emerging Asia picked up strongly last month, but we doubt this will last given the subdued outlook for global demand. Meanwhile, the decline in inflation in Indonesia last month supports our view that the central bank will cut interest rates …
With unhedged yield gaps still very much in favour of overseas bonds and hedged returns set to improve as overseas central banks slash borrowing costs, Japanese investors won’t respond to higher JGB yields by repatriating capital. And while we expect …
Housing market will cool in earnest Australian house price gains softened just a smidge in June as housing demand held up reasonably well. However, as strained affordability takes its toll, we still think that house price growth will ease markedly in the …
Surveys likely understate health of manufacturing sector This report was first published on Monday 1 st July covering the official PMIs and the Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on Wednesday 3 rd July. …
This website has been updated with additional analysis since first publication. Tankan points to renewed strengthening in price pressures The Q2 Tankan survey suggests that economic activity will remain sluggish but the most striking development was the …
Final results still uncertain but fiscal outlook will be worse after the election The preliminary results of the first round of voting are broadly in line with the final opinion polls, showing that Emmanuel Macron’s centrist coalition has lost out to both …
30th June 2024
Incumbent President Biden’s uneven performance during the debate yesterday with his predecessor and challenger, Donald Trump, has reduced Biden’s perceived chance of winning re-election significantly. Financial markets have not reacted much to this …
28th June 2024
The US dollar index looks set to end the week broadly unchanged after core PCE came in line with expectations today. Yesterday’s presidential debate in the US also does not seem to have had much impact on the dollar despite the sizable change in election …
The May CPI data were a step back after the run of soft core price readings in the first quarter. The broader evidence stills seems supportive of a July interest rate cut, but the next CPI release for June, to be released in the run up to that meeting, …
This page brings together our analysis of how Donald Trump's return to the White House will affect the outlook for emerging economies. Use the Table of Contents on the right to navigate. All of our analysis on the election, including the implications for …
