Today’s slump in S&P 500, following the release of a hotter-than-expected US CPI report for March, underscores the US stock market’s vulnerability to disappointing news on inflation. (See Chart 1.) Nonetheless, even though the pull-back was accompanied by …
10th April 2024
Governor Tiff Macklem sounded relatively dovish in the Bank of Canada’s press conference today, leaving the door open to an interest rate cut at the next meeting in June. While the Bank left the policy rate at 5.0% today, the policy statement and …
After a period of relative calm, Italy’s fragile public finances are likely to come under the spotlight again before long. Budget deficits will be much higher than the latest government projections imply and Italy will probably face official EU procedures …
Bank leaves the door open for a June interest rate cut The acknowledgment by the Bank of Canada today that “the data since January have increased our confidence that inflation will continue to come down” leaves the door open to an interest rate cut at the …
Third consecutive 0.4% m/m gain in core CPI kills June rate cut hopes Alongside the pick-up in monthly payroll employment gains, the third consecutive 0.4% m/m rise in core CPI in March pretty much kills off hopes of a June rate cut from the Fed. The …
Underlying services prices still providing cause for concern The slightly softer-than-expected Brazilian inflation figure for March of 3.9% y/y keeps the door open to 50bp interest rate cuts at the Copom meetings both next month and in June. But with …
The incidence of sovereign debt distress has continued to decline across the emerging world in recent weeks, driven mainly by an improvement in global risk appetite and the corresponding narrowing of credit spreads. But in some cases, things appear to …
In light of our China team’s new non-consensus view that an aggressive slowdown in property sector construction seems almost inevitable in the years ahead, we have revised our price forecasts. We now expect prices to generally flatline in 2025, before …
A resurgence in hydropower in China this year combined with the continued rapid expansion of its wind, solar and nuclear power capabilities may pave the way for 2024 to mark the start of a steady decline in China’s coal demand. But a contraction in demand …
BoT on hold, but cuts likely later in the year Thailand’s central bank (BoT) today resisted pressure from the government to loosen monetary policy, but with growth set to remain weak and inflationary pressures very subdued, we still think rate cuts are …
The Reserve Bank of New Zealand didn’t drop any hints as to when it might pivot to looser policy at its meeting today. However, as inflation risks recede, we still expect the Bank to start cutting rates by August. The RBNZ’s decision to leave rates on …
RBNZ remains on the sidelines The RBNZ didn’t drop any hints as to when it might pivot to looser policy at its meeting today, but we still think that it will start cutting rates by August. The RBNZ’s decision to leave rates on hold at 5.50% was correctly …
The latest consensus figures have moved closer to our own total returns forecasts for the next three years. But they continue to expect a lower path for Treasury yields implying a smaller cap rate rise than us, which we think underpins the divergence …
9th April 2024
Wheat prices have been in decline for most of the past two years. We think that they are now near their trough, but the prospect of another good global harvest in 2024/25 means that we shouldn’t see a notable uptick in prices any time soon. Wheat prices …
We think the price of gold will have eased back from current record highs by end-2024, but falling US Treasury yields and some softness in the US dollar will keep the price elevated. We had always expected the price of gold to fare well this year given …
The bigger-than-expected fall in CPI inflation in February was the second in as many months, and together with the Bank of England’s clearer hints that it is getting close to cutting interest rates, it gives us a bit more confidence in our forecast that …
Taiwan will be one of the main beneficiaries of a lengthy global AI investment boom. We expect its economy to growth much faster over the rest of this decade than it did during the 2010s. It already appears that global excitement about the possibilities …
Media reports that Brazil’s government is already seeking to water down the latest fiscal rule (which has been in place for less than a year) reinforces the point we made when the rule was first unveiled that the Lula administration would be unable to hit …
After a historically weak 2023, there are early signs of a modest turnaround in world goods trade which we expect to endure. Meanwhile, global container shipping costs have halved – and those for commodity freight more than halved – from recent peaks, …
We think that reports of a wave of new resale supply coming onto the market are overblown. While the number of homes being listed for sale has increased compared to last year, it is still low by historical standards, as mortgage rate ‘lock-in’ continues …
Further rise in core services inflation shifts odds in favour of a hold Mexico’s headline inflation rate held steady at 4.4% y/y in March, but the further rise in core services inflation to a 10-month high last month adds weight to our view that Banxico …
The Q1 ECB Bank Lending Survey suggests that the drag on lending growth from tight monetary policy continued to ease. But the data remain consistent with broadly stagnant consumption and declines in investment. For the first time since late 2021, banks …
The slump in the yen has resulted in Germany overtaking Japan as the world’s 3 rd largest economy at market exchange rates. We expect Japan to overtake Germany yet again in the early 2030s as the yen strengthens and Japan benefits from higher productivity …
We expect Japanese equities to do quite well this year, as hype around artificial intelligence proves a more powerful catalyst than the headwind we anticipate from a stronger yen. Despite bouncing back a bit today, Japanese equities have fared poorly …
8th April 2024
Falling full-time employment not a sign of weakness The rise in part-time employment is not a sign of economic weakness, but instead reflects the large inflow of prime-age women into the labour force, who have been the big beneficiaries of the …
Uganda’s strong recent economic recovery is facing domestic and external headwinds, including international condemnation of the government’s Anti-Homosexuality Bill – and the associated impact on financing and trade – and upcoming EU deforestation …
Door for rate cuts closing The decision by the Bank of Israel (BoI) to leave its policy rate unchanged at 4.50% (rather than cut) for the second meeting in a row underscores policymakers’ concerns about the large budget deficit, above-target inflation and …
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. Our latest office metro forecasts highlight …
The Bernanke review of the Bank of England’s forecasting and communications will probably recommend the Bank illustrates the risks around its forecasts using alternative scenarios rather than fan charts and places greater emphasis on supply and monetary …
Downside inflation surprise keeps 75bp cut on the table The larger-than-expected fall in Chile’s inflation to 3.7% y/y in March has increased the chances of the central bank delivering another 75bp cut at its next meeting in May, although we still think …
The latest data are consistent with our view that the euro-zone will remain close to recession in the near term. With the labour market softening and inflation continuing to fall, the ECB is very likely to start cutting rates in June. Elsewhere, the SNB …
Oman and Bahrain both recorded sharp increases in their government debt-to-GDP ratios in the second half of the last decade, but while Oman’s public finances have improved dramatically since then, Bahrain’s have not. In Bahrain, significant tightening …
Three developments over the past fortnight have rekindled concerns about rising levels of government debt and the sustainability of public finances across advanced economies. First, France reported a larger-than-expected budget deficit of 5.5% of GDP for …
Inflation eases even after currency plunge Egypt’s headline inflation rate slowed to 33.3% y/y in March despite the near 40% fall in the pound’s official exchange rate last month. That said, the effects of the currency fall will continue to feed through …
Forecast change after hawkish BSP meeting The central bank in the Philippines (BSP) today left its main policy rate unchanged (at 6.50%), but sounded more hawkish than we had expected on inflation. Accordingly, we are pushing back the timing of when we …
Some signs of life from German industry, but outlook still poor The second consecutive large monthly rise in German industrial production in February confirms the sector has started the year on a better note. But we still expect it to struggle over the …
This page has been updated with additional analysis since first publication. Virtuous cycle will continue to gain momentum in Q2 Regular wage growth spiked in February, which suggests that the virtuous cycle between prices and wages is in full swing. And …
Economy running hot in Q4, momentum continues into 2024 The 4.9% y/y rise in Russian GDP in Q4 was slightly below expectations but it followed an upwards revision to growth in Q3 (to 5.7%) and suggests that the economy continued to run hot at the end of …
5th April 2024
Another robust US non-farm payrolls report has seen the dollar rebound a bit, unwinding some of its losses earlier in the week and putting the DXY index on track to end the week near its highest level on the year. With FOMC members continuing to signal …
The prices of oil and gold increased sharply this week . The price of Brent rose to over $90 per barrel on fears that Iran could start to play a greater role in the Israel-Hamas conflict. And earlier in the week, OPEC+ reaffirmed its output restraint in …
Continued strength in the US labour market may keep US Treasury yields elevated and the greenback strong in the short term, but we think the upside for both is limited from here. And the backdrop for US equities looks favourable to us, even if the Fed …
The insolvency data released this week show the toll that high interest rates are putting on consumers and businesses. That is unlikely to be enough to persuade the Bank of Canada to cut interest rates next week but, with the cracks in the labour market …
Supercore inflation fundamentals still improving Inflation fundamentals improving This week brought more good news on the outlook for so-called supercore inflation. Core services (ex-housing) prices, aka supercore, are the most labour-sensitive component …
SA’s weak demand is holding back its recovery South Africa’s March PMI numbers were disappointing and support our view that, while the drags from loadshedding and austerity are easing, the recovery this year will be subdued. The ABSA/BER manufacturing …
RBI policy pivot creeping closer The RBI kept the repo rate on hold at 6.50% today as expected but the more interesting aspect was the slight dialling down of its hawkish rhetoric. With inflation grinding down towards the central bank's 4% target, we …
Banxico: hawks still rule the roost The hawkish tone of the minutes to Banxico’s March meeting, at which it kicked off its easing cycle with a 25bp cut, adds weight to our view that the easing cycle will be very gradual. We already knew that one member …
The further slump in housing starts in Q4 was a surprise, but timelier data and leading indicators suggest activity has since begun to recover. We are therefore happy with our forecast of a gradual recovery in new home supply over the next two years. (See …
Cracks growing in the labour market The jump in the unemployment rate in March, together with evidence of easing wage pressures, raises the chance of the Bank of Canada surprising markets with a rate cut next week, although our base case remains that the …
Blockbuster report another reason for the Fed to take its time The blockbuster 303,000 increase in non-farm payrolls in March supports the Fed’s position that the resilience of the economy means it can take its time with rate cuts, which might now not …
