While not our base case, continued strength in the US economy would probably be a tailwind for the US dollar over the coming months. But even in that event, we think the dollar would eventually weaken as bond yields fell in the US relative to elsewhere as …
7th February 2024
Saudi Arabia’s economy contracted by 0.9% over the course of 2023 on the back of the Kingdom’s oil output cuts. But the recession ended in Q4 and we think that a gradual recovery will ensue over 2024 as fiscal policy is kept loose, interest rates are …
The large rise in the Brazilian government’s budget deficit, to 8.9% of GDP, over 2023 as a whole should partially reverse this year. But the key point is that the underlying sovereign debt dynamics are worsening. And unless the government pulls out all …
We have argued that most of the inflation battle is already won and fears that “ the last mile will be the hardest ” are overdone. But during our online Drop-In session last week, clients asked whether inflation in the major advanced economies might …
While the overall incidence of sovereign debt distress in the emerging world has fallen back since last year, sovereign debt distress in frontier markets hasn’t. And, if anything, things have taken a turn for the worse in recent weeks in some of the more …
Distress in the US commercial property market is once again in the news, but the risk of that spreading to the UK is low. The rise in aggregate loan-to-value ratios to date looks manageable and with interest rates also trending down we doubt there will be …
6th February 2024
With the Reserve Bank of Australia still striking a hawkish tone at its meeting today, we’re pushing back our forecast for the Bank’s first rate cut from May. But we still think that incoming data will show enough of a drop in inflation alongside …
Credit conditions normalising The Fed’s latest Senior Loan Officer Opinion Survey suggests that banks have put last year’s SVB regional bank crisis firmly behind them and, with long-term interest rates markedly lower than the peaks reached last October, …
5th February 2024
Recent headlines have drawn attention to the immediate risks facing multifamily investors and lenders. While we think this concern is appropriate, we think the biggest risks face assets financed at historically low fixed rates in 2020-21. Problems are …
The news this morning that the unemployment rate is lower than previously thought increases the chances that interest rate cuts start a little later and are slower. After publishing experimental labour market data for the five months to November due to a …
Given the rise in rents and the recent decline in mortgage rates, the financial benefit of buying over renting is increasing. This will boost buyer demand and cause tenant demand to soften this year. As housing is a necessity, households must either rent …
To mark the addition of Canada to our Regional Climate Databank , this Update takes a closer look at the sub-national climate-related data in the country. Our Global Climate Databank and Green Transition Scores are the places to go to compare climate …
January’s batch of PMIs showed that activity across non-hydrocarbon sectors in the Gulf eased a touch at the start of the year, but activity remains robust and will support the broader economic recovery in 2024. In contrast, the disruption in the Red Sea …
Euro-zone investment improved a little in Q4, but that did not prevent it experiencing its worst year in a decade. While we have raised our forecast for through-year growth, we still expect a weak start to 2024 and think that by historic standards it will …
Events in Egypt yesterday, including a large interest rate hike and comments that a disbursement of more IMF funding is close, suggest that a shift towards more orthodox policy is nearing. If a new, enhanced IMF deal is agreed, that will almost certainly …
2nd February 2024
We expect big tech to drive the S&P 500 higher still in 2024, despite a mixed performance from the shares of most of the so-called ‘Magnificent 7’ over the last ten days in the wake of a flurry of earnings reports. To re-cap, six of the Magnificent 7 have …
At face value, the rebound in European equity REIT prices over recent months suggests that capital values could be nearing their trough. But the past relationship is weak and REITs have benefited from the stock market rally. We therefore don’t see the …
We don’t expect the Australian and New Zealand dollars – which have been two of the worst-performing G10 currencies this year – to fall much further. It’s been a rough start to the year for the aussie and the kiwi: although all the non-US G10 currencies …
The big picture from January’s manufacturing PMIs was the growing outperformance of industry in major EMs compared to their advanced economy peers. The surveys also highlighted that Red Sea disruptions are causing delivery times to lengthen. For now, …
1st February 2024
While the emerging market manufacturing PMIs for January generally edged up, we think that weak global demand will weigh on EM industry over the coming months. The good news is that price pressures remain in check, supporting our view that the EM easing …
China's PMI surveys showed some signs of strengthening in January. But we still think they understate the strength of metals demand, which we expect to hold up fairly well this year. The latest China PMI surveys continue to tell slightly different …
Inflation in Mexico has dropped back over the past year but rapid wage growth continues to fuel strong underlying price pressures and means that the headline rate won’t return to Banxico’s 2-4% tolerance band until late-2024. Coming alongside pushback …
While leaving interest rates at 5.25% for the fourth meeting in a row today, the Bank of England sent a signal that the next move will be a cut, but it pushed back strongly against the idea that rates will be cut soon or far. Our forecast that inflation …
World goods trade looks to have had one of its weakest years in over 40 years in 2023. While shipping diversions may weigh on trade in the very near term, we think that they are unlikely to dent trade activity over a longer period. The bigger headwind is …
While Latin American central banks seemed to act in unison when raising interest rates (albeit with Brazil a bit ahead of the pack), the raft of interest rate decisions in the region yesterday highlighted that, on the way down, policymakers have very …
The Riksbank signalled unequivocally in today’s policy statement that interest rates may be cut sooner than they previously anticipated. While a March rate cut is possible, particularly if the January and February inflation data come in below …
Finance Minister Nirmala Sitharaman appears to have successfully demonstrated a long-term commitment of reining in the fiscal deficit in the Interim Budget announcement for FY24/25. There is always a chance of fiscal slippage as the general election …
Leading indicators still point to weaker house price growth Although house price gains remained firm in January, we still expect them to soften in the months ahead. While rate cuts are on the horizon, they will do little to improve homebuying capacity. In …
The PMI data for Emerging Asia offered some encouraging signs but remained quite weak overall for most economies. While parts of the region are likely to see an improvement in activity, we expect global growth to slow in the near term and remain cautious …
Powell suggests first rate cut more likely to be May Based on the surprisingly explicit steer provided by Fed Chair Jerome Powell halfway through today’s press conference, we now expect the first Fed rate cut to come at the early-May FOMC meeting rather …
31st January 2024
We think the recent divergence between the BLS measure of apartment rents and other sources is due to reliability issues with the former, which we expect will be revised higher in future releases. Therefore, while it currently points to a downside risk to …
Panama’s time as a Latin American growth star is set to come to an end this year. This will have a knock-on effect on the government’s revenues and means that the public debt ratio is set to rise further. That could put Panama’s coveted investment grade …
Typically, US REIT price indices have been a good indicator of the growth path for capital values in the direct market. That said, even though REIT prices rebounded in Q4 2023, we don’t expect the direct market to follow any time soon as the property …
30th January 2024
The December JOLTS data show a continued painless normalisation in the labour market – with job openings on a downward trend, layoffs unusually low and wage growth set for a sharp slowdown. Job openings have rebounded over the past couple of months …
MNB errs on the side of caution The Hungarian central bank’s (MNB’s) communications following its meeting today confirm that the decision not to accelerate the pace of its easing cycle was due to the recent ratcheting up of tensions between the government …
January’s European Commission business and consumer survey, released this morning, supports our view that the euro-zone economy will stagnate in Q1. But recent increases in services firms’ price expectations could prompt policymakers to wait a little …
Saudi Arabia has cut oil output significantly over the past year or so but that hasn’t prevented global oil prices from falling. Despite Aramco’s announcement today that it is postponing plans to raise production capacity to 13mn bpd, we think looming …
The Reserve Bank of New Zealand launched a consultation on changes to its macroprudential framework last week. In our view, the proposed tweaks are unlikely to have a meaningful impact on the housing market one way or the other. The big picture continues …
The worsening in total returns to -3.0% q/q in Q4 was consistent with our expectations of bigger-than-average year-end markdowns. But the major takeaway was that the data and NCREIF’s release notes support our view that there will be growing distress and …
29th January 2024
We think the recent falls in long-dated government bond yields across developed market (DM) economies will extend over the remainder of this year, as central banks generally cut by more than investors currently expect. We project most of those yields to …
The EM monetary easing cycle began to broaden out late last year. Mexico’s central bank will probably be the next to cut rates later this quarter, and many Asian central banks will join the fray in April and May, which is sooner than most expect. India is …
JODI data on global oil and natural gas consumption paint a nuanced picture of global energy demand. While oil demand growth slowed towards the end of last year, consumption of natural gas was recovering from the worst of the energy price crisis. We …
Were the EU to block Hungary’s access to funds (if it vetoes financing for Ukraine at this week’s summit), as reports on Sunday suggested, this would probably have a smaller direct impact on Hungary’s economy and financial markets than most would think. …
The Monetary Authority of Singapore (MAS) kept monetary policy settings unchanged today but weaker growth and easing concerns about inflation are likely to prompt the central bank to loosen policy in April. The decision to remain on hold today, for the …
Data released this morning suggest that the collapse in the euro-zone’s money supply might be over. But we expect money and lending growth to remain fairly weak. Since the ECB started raising interest rates, the narrow (M1) money supply has plummeted as …
26th January 2024
The stock prices of companies in the energy sector (mostly oil & gas firms) have largely underperformed the rest of the stock market recently, and we doubt they’ll do much better in the foreseeable future. The energy sector is the only one in the MSCI All …
We think the “tech” sectors of China’s stock market are the best prospects to lead a continued rebound in it, even if we doubt they’ll fare as well as many of their global tech peers over the next couple of years. China’s benchmark equity indices have …
Output stagnant last year, more of the same in 2024 Global steel production reportedly stagnated last year. We think it probably will again in 2024 as a drop in production in China should offset increasing output by most other producers. According to the …
25th January 2024
The Q4 RICS survey suggested that occupier and investment sentiment remained pessimistic in Q4. We expect sentiment will be subdued in at least the first half of 2024, with credit conditions staying tight and growing signs of distress, particularly in the …
The Riksbank is set to leave its key policy rate unchanged next week but we think it will begin to cut rates in the second quarter and reduce them faster than policymakers are forecasting. As a reminder, the Riksbank left its policy rate at 4.0% at its …
