ECB officials have stressed that evidence of easing wage growth will be key in determining the timing of the first rate cut. Accordingly, this Update assesses which of the euro-zone’s numerous wage measures investors should keep their eyes on. The main …
3rd April 2024
After a very weak 2023, Saudi Arabia’s economy should see a modest recovery this year as the Kingdom’s non-oil economy sustains its strong momentum and more than offsets the drag from the extended oil output cuts. Last month, the General Authority for …
We expect the RBNZ to hold rates steady at its meeting next Wednesday. But with the economy in a deep slump and inflation clearly on the way down, the Committee is likely to tone down its tightening bias. As inflation risks continue to recede, we expect …
The rise in the aggregate EM manufacturing PMI to a three-year high in March was largely driven by strength in Asian industry, with activity elsewhere weaker. While slower growth in DMs should weigh on activity in the months ahead, strength in domestic …
2nd April 2024
The February JOLTS data suggest that labour market conditions are now easing at a more gradual pace, but that isn’t a surprise when most indicators of slack have already returned to pre-pandemic norms. At 5.3% in February, the job openings rate has been …
March’s manufacturing PMIs provided further evidence that global industry is past the worst. And although higher industrial output has caused price pressures to increase in some advanced economies, it won’t prevent central banks from cutting interest …
The universal tariff which Donald Trump has proposed, along with other likely spillovers from his trade policies, may result in a hit to the euro-zone economy of up to half a percent of GDP. The damage would be bigger if this triggered a transatlantic or …
The strong showing for the opposition in Turkey’s local elections on Sunday highlights the extent of voter frustration with high inflation and we think that it should be interpreted as a positive for investors by strengthening policymakers’ commitment to …
China’s PMI surveys in March are consistent with some improvement in economic activity and solid commodities demand. We think that government stimulus will continue to boost economic activity in the coming months and in turn support the prices of most …
While the number of “green” jobs in the UK rose strongly in 2022, it’s worth noting that green workers were still outnumbered by estate agents! Market forces are facilitating the transition to a greener workforce, but policies to make the labour market …
Slowdown in house price growth has further to run Australian house prices continued to pare their gains last month. And a further loss of momentum appears likely in the near term, especially given that the RBA is unlikely to come to the housing market’s …
Once the Bank of Japan starts to reduce its huge holdings of Japanese Government Bonds (JGBs) in earnest, we think that commercial banks will once again become major holders of JGBs. Insurance firms may lift their holdings a touch further as well, but we …
The Bank of Canada’s quarterly business and consumer surveys remain consistent with weak GDP growth and generally show that inflation expectations are normalising, but the latter are still too high and raise the risk that the Bank will wait to see …
1st April 2024
The PMIs from Emerging Asia remained weak in March. We think manufacturing sectors across most of Asia will struggle in the near term but activity in Korea and Taiwan is likely to remain strong. The weighted average headline PMI for Emerging Asia rose …
This report was first published on Monday 1 st April covering the official PMIs and the Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on Wednesday 3 rd April. More signs of a cyclical upturn Sizeable rises in the …
Click below to visit our Shipping Disruption Dashboard, which we have updated and extended to include analysis of the Baltimore port closure. Explore the dashboard … Shipping Disruption Dashboard: New Charts on …
28th March 2024
The collapse of the Francis Scott Key bridge in Baltimore this week is unlikely to have a large impact on global energy flows. For oil, flows of crude and refined products to or from Baltimore are tiny. More coal is exported from Baltimore, but the scale …
February’s money and credit data suggest that the effect of tighter monetary policy has eased slightly. But the data are still very weak and we think that rate cuts later in the year will lead to only a gradual rebound. The narrow (M1) money supply …
We continue to think that policymakers in China and Japan will do enough to keep their currencies from weakening much further, but the risk of a break lower in one, or both, is increasing. Push-back from the authorities in China and Japan has stabilised …
27th March 2024
We expect the spreads between the yield of the 10-year German bund and its ‘riskier’ counterparts in other euro-zone economies to narrow only a little further this year. If anything, we think that the fiscal outlooks in France and Italy mean that the …
We still expect the Canadian dollar to depreciate against the US dollar as interest rate differentials relative to the US widen and Canada’s terms of trade worsen. The Canadian dollar has held up well against the greenback relative to other G10 currencies …
Note: We will be discussing the outlook for European commercial real estate markets in a 20-minute online briefing at 10am BST on Wednesday 10th of April. (Register here .) After a solid 2023, we expect Paris prime office rental growth to slow markedly …
The South African Reserve Bank left its repo rate unchanged at 8.25% for a fifth consecutive meeting today and the continued hawkish rhetoric from Governor Kganyago supports our view that rate cuts will only happen after May’s election. Even then, a …
We think investors are underestimating the extent of rates cuts that the Riksbank will make this year. Policymakers are, rightly in our view, increasingly confident that inflation will soon return sustainably to the 2% target. Accordingly, we think they …
We wouldn’t be surprised if the “non-tech” sectors of the S&P 500 continued to make gains over the rest of 2024, but we don’t expect them to keep pace with the tech giants as well as they have lately. It’s been a second consecutive great quarter for the …
Data released today showed that Spanish inflation picked up from 2.9% in February to 3.2% in March. We think it is likely to increase further over the coming months due to base effects in energy inflation, higher VAT rates on energy and foods, and …
Software increasingly driving productivity gains We still believe that the current productivity boom is mainly a cyclical phenomenon, as tight labour market conditions have forced firms to expand output by boosting the efficiency of their existing …
26th March 2024
The drivers of industrial rental growth were turned on their head during the pandemic, but we expect the pre-COVID-19 relationships will soon be reestablished. That points to consumer spending as an important factor, reflecting the growing importance of …
The Central Bank of Sri Lanka today cut interest rates by a further 50bps and hinted at further rate cuts to come. With inflationary pressures under control and the economic recovery struggling, more policy easing is likely before the end of the year. …
The government’s plan to cut temporary resident numbers over 2025 to 2027 will result in the weakest three years for population growth in Canada’s 157-year history. While it might not be enough to persuade the Bank of Canada to start its loosening cycle …
25th March 2024
Note: We’ll be covering our views on residential market winners and losers in both the for-sale and rental markets in a Drop-In Tuesday 16th April 1100 EST/1600 BST . Register here for the 20-minute session. As mortgage rates fall, we think the …
We held an online Drop-In session last week to discuss the outlook for monetary policy following the US Fed and Bank of England policy meetings and comments by the ECB’s Christine Lagarde. (See a recording here .) This Update answers several of the …
Production records a bright start to 2024 The robust increase in global steel production since the beginning of the year probably has a bit further to run since there are few signs that the two largest producers – China and India – will slow their supply …
22nd March 2024
Japan’s exit from negative interest rates could place some upward pressure on bond term premia elsewhere, but we don’t think it will prove too disruptive to markets even if the BoJ ultimately hikes a lot more than we expect. Investors largely took the …
The flash PMIs for March suggest that the euro-zone economy is still flatlining, while the UK and Japan seem to be pulling out of recession heading into Q2. The survey indicators of price pressures moved in different directions, but in general remain a …
21st March 2024
With the Bank of England striking a slightly more dovish tone whilst keeping interest rates at 5.25% and inflation likely to fall further and faster than the Bank expects, we still think a rate cut in June is possible and that rates will fall to 3.00% in …
Despite the booming economy, inflationary pressures in Taiwan are likely to remain subdued. Accordingly, we think today’s unexpected rate hike by the central bank (CBC) will prove to be a case of one and done. Today’s decision to raise the policy rate by …
In the wake of this week’s FOMC and BoJ policy announcements we are revising our forecast for the Japanese yen. While we still expect the Japanese yen to rebound over the course of 2024, we now project it to reach 140 by the end of the year and 135 by …
The tailwinds that have underpinned the rebound in the dollar this year seem, to us, to have run their course. While we wouldn’t be surprised if the dollar stayed firm over the coming months, we still think the greenback will edge lower – particularly …
The SNB under Chairman Thomas Jordan has never shied away from making big calls, so it was fitting that it surprised markets with a 25bp rate cut today, to 1.5%, only three weeks after Mr Jordan announced he would leave his post in September. We expect …
Despite upward revisions to the median projections for both GDP growth and core PCE inflation, the Fed’s median forecast for interest rates still shows a cumulative 75bp of policy loosening this year. In contrast, we continue to believe that …
20th March 2024
China to drive output growth in coming months The drop in global aluminium production in February should be a blip now that output curbs in China’s Yunnan province due to power constraints have been lifted. According to the International Aluminium …
We think Emerging Market (EM) dollar bond yields will fall in general by the end of this year, thanks both to lower US Treasury yields and, in some cases, narrower spreads. But the sovereign dollar bonds of some EM economies, such as South Africa and …
South Africa’s latest hard activity data show that the economy continued to struggle at the start of 2024, which will hardly help the ANC’s hopes of keeping its majority in parliament after May’s election. That said, we still think that easing electricity …
The latest monthly trade data from China highlight how the huge expansion in local manufacturing capacity is pushing down green technology prices and will only add to western concerns about trade “dumping”. Although shipments to developed markets in the …
We think the Riksbank will leave its policy rate unchanged at 4.0% next week but cut it by 25bp at the following meeting, in May. Beyond that, our forecast is for rates to come down much faster than the Riksbank’s own forecasts imply but broadly in line …
Credit spreads aren’t bound to fall further if a bubble continues to inflate in the stock market, judging by what happened in the US in the second half of the 1990s. Admittedly, the option-adjusted spreads (OAS) over underlying Treasuries of ICE BofA’s …
19th March 2024
The latest data suggest that global industry may be coming back to life. Much of the improvement so far has related to China, where policy will continue to support domestic production. But falling energy prices, loosening financial conditions and …
The Bank of Japan today called time on more than a decade of ultra-loose policy settings, but we don’t think it will lift its policy rate any further over the coming months. A Reuters survey conducted at the end of last week still showed that a majority …
The RBA sounded a touch less hawkish at today’s meeting and we think the Bank will start to lower interest rates by August. The Bank’s decision to keep the cash rate unchanged at 4.35% was correctly anticipated by all analysts polled by Reuters, ourselves …
