13 November 2024
The recent US election news is likely to dominate headlines for coming weeks – with the second term of President Trump set to add to global policy uncertainty. Which policies are implemented, to what degree and when, remains uncertain – with trade policy likely to be a key area of focus.
Despite this uncertainty, many central banks across the world are continuing (or starting) their interest rate cutting cycles. The Federal Reserve lowered rates for a second time in November – and we expect further easing in December – while the Bank of England and European Central Bank have also delivered rate cuts in recent weeks (charts 1 & 2). There is also a growing group of central banks seemingly in a race to neutral – with Sweden’s Riksbank and the Reserve Bank of New Zealand joining the Bank of Canada in stepping up the pace of monetary easing.
Source: Macrobond
Source: Macrobond
In the emerging world, more central banks in Asia are starting to ease – with Thailand the latest to join in. In Latin America, Brazil stands out in turning back towards rate increases and is worth watching – potentially a warning sign of what could happen elsewhere if growth and/or inflation pick up.
The global economic data are also faring reasonably well. Although the outlook is still decidedly mixed between geographies and sectors, we saw a pick-up in the latest set of global PMI data and the latest rounds of stimulus appear to be having a positive impact on some of the Chinese data (charts 3 & 4). Weak spots remain in Europe, but even there we saw some upside surprises to Q3 GDP and some better survey data.
Source: Wind
Source: Macrobond. Note: FAI is Fixed Asset Investment
Sectorally, one area yet to recover is property. As rate cuts build, we could see house prices – which have already begun to rise in major developed markets – push higher, and we could see transaction volumes and construction activity improve from very depressed levels further down the line.
Inflation data have continued along a more favourable trajectory across the world, but risks are still there. Many commodity prices have risen in recent months and labour markets are showing more resilience than they were a few months ago. Although things are clearly softening a touch, a more resilient labour market and demand outlook could make policy makers question the pace and magnitude of their easing cycles in the coming months.
Source: Bloomberg, HSBC
⬆Positive surprise – actual is higher than consensus, ⬇ Negative surprise – actual is lower than consensus, ➡ Actual is in line with consensus
Source: LSEG Eikon, HSBC
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1. This report is dated as at 13 November 2024.
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