LatAm rate cut outlook intact despite hawkish Fed - LatinFinance Fed officials are casting doubt on a December cut, but analysts see space for Mexico to keep easing and for Brazil to start cutting its 15% policy rate

Fed officials have cast doubt on a December cut, but analysts still see space for lower rates in Mexico and a cutting cycle in Brazil

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Could tariffs still reignite inflation? Capital Economics weighs in Investing.com - The impact on the U.S. economy from President Donald Trump aggressive tariffs has been limited so far, but is expected to gradually build over time, according to analysts at Capital Economics. Observers have long argued that Trump’s elevated levies will push prices higher and weigh on growth, although data this week suggested that the inflationary pressures in the U.S. remain muted. Still, concerns remain that the full effect of the duties has yet to be felt. In a note, the Capital Economics analysts led by Simon MacAdam predicted that the levies will have a growing -- and upward -- influence on the pace of price gains in "the months ahead." "So far, there has been very little pass-through to consumer prices, but this can’t last," the analysts wrote, referring to a potential move by some companies to transfer expenses incurred from the tariffs on to customers. Some economists have suggested that the relatively tepid pace of inflation in July was partly due to firms still whittling down inventories that were expanded by a rush of orders prior to Trump’s "reciprocal" tariff announcement in early April. Others have argued that businesses may have also chosen to eat more of the costs of the tariffs in a bid to protect market share. "While U.S. retailers seem to have been very willing to absorb the initial hit of tariffs via lower margins, this is not sustainable," the Capital Economics analysts said. "With many trade deals agreed, there is now greater certainty about where tariffs will end up, which should allow retailers to finally raise their prices." They estimated that the U.S. tariff rate now stands at 17% following the implementation of Trump’s heightened "reciprocal" trade taxes earlier this month, adding that the figure could climb further should the White House follow through on threats to slap levies on imports of semiconductors and pharmaceuticals. These tariffs, coupled with an ongoing White House crackdown on immigration, are anticipated by Capital Economics to keep core inflation -- an underlying gauge stripping out volatile items like food and fuel -- above 3% "well into 2026."

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Are investors worried about the U.S. economy? Here’s what Capital Economics says. Investing.com - Despite increasing concerns in some corners over the state of the U.S. economy, neither equity analysts nor investors seem to be particularly worried, according to analysts at Capital Economics. Weak employment data for July, coupled with steep revisions for payrolls in June and May, reignited some worries that President Donald Trump’s policies, especially a crackdown on immigration, could be feeding into a wider slowdown in labor demand. Subsequent figures this week showed a U.S. services sector that has all but stalled, with little change in orders and a further softening in employment. Prices paid by these firms also rose by the most in almost three years, painting a picture of a possible period of tepid growth and elevated inflation dubbed "stagflation." Stock markets, however, have seem relatively unperturbed. After slumping in the wake of the jobs data last Friday, the benchmark S&P 500 clawed back those losses this week, as sentiment was spurred on by solid corporate earnings and ongoing enthusiasm over the applications of artificial intelligence. Hopes are also high that the Federal Reserve, keen to quell any downturn in the labor market despite wariness over persistently above-target price gains, will move to slash interest rates at its upcoming meeting in September. In a note, the Capital Economics analysts led by John Higgins flagged that equity analysts’ forward-twelve-month projections for earnings per share indicate that much of the growth in the S&P 500 has been in the so-called "Big Tech" sectors like information technology and communication services. Much of this is due to the hype around AI, the analysts said. Meanwhile, after flatlining in recent years, the same figure for the rest of the index has risen by around 8% since the end of 2023. "That doesn’t scream impending recession," the analysts wrote. They added that investors do not seem to be "remotely concerned" about the trajectory of the economy either, citing a data showing marked outperformance in cyclical and defensive sector stocks against a gross domestic product-weighted index of headline manufacturing and services activity surveys from the Institute for Supply Management. "One interpretation is that [investors] are being complacent. Another is that the economic outlook is better than the ISM surveys suggest," the analysts said. With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record. With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.

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Is weaker payrolls growth here to stay? Capital Economics weighs in Investing.com - July’s weak employment report is a "taste of what is to come," as payroll gains slow in the coming quarters due to Trump administration policy moves, according to analysts at Capital Economics. Concerns over the trajectory of the U.S. labor market intensified after last month’s all-important nonfarm payrolls data came in under expectations. Averaged over the last three months, employment gains stood at 35,000, versus 123,000 in the corresponding period a year ago. Perhaps even more crucially, the payrolls figures from the Bureau of Labor Statistics for June and May were both revised sharply lower, indicating that the U.S. added 258,000 fewer roles than had initially been reported during those months. Markets tumbled in the wake of the data, and were further dented after U.S. President Donald Trump dismissed the commissioner of the BLS, citing, without providing evidence, of falsifying the data. But in a note, the Capital Economics analysts led by Stephen Brown argued that the market’s reaction to the BLS numbers may have been "overdone." "The large downward revisions to May and June look unusual outside of recession, but two-month revisions on that basis are not a reliable recession indicator," they wrote. "The mid-1980s saw several slightly smaller downward revisions, even as gross domestic product growth was strong. The latest revisions are arguably even less concerning given that half of the downgrade was due to a re-assessment of state and local education payrolls, which had originally looked abnormally strong[.]" Still, the analysts flagged that BLS’s diffusion index, which gauges whether payrolls are rising or falling across 254 sectors, is below 50 -- "meaning that more segments are cutting jobs than adding them." Meanwhile, the jobless rate in July increased slightly to 4.2%, as household employment dropped -- suggesting that cracks may be forming in a jobs picture that has been partly responsible for holding up the wider economy in the face of headwinds from an immigration crackdown and an aggressive trade stance under Trump. The White House’s push to limit immigration has led to a "dramatic slowdown in labor supply" and is the "key reason why we continue to expect payroll gains" to average 50,000 per month in the second half of the year, the analysts said. Nonfarm payrolls stood at 73,000 in July. Capital Economics also anticipates that the unemployment rate will finish 2025 at 4.3%. Traders are now turning their focus to August’s employment report, which could prove to be a major factor in whether the Federal Reserve opts to resume cutting interest rates next month. A loosening in labor market conditions could prompt such a reduction, the Capital Economics analysts said, but noted that this would only be the case if Trump’s tariffs do not trigger an acceleration in consumer price growth. With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record. With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.

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India’s inflation drop unlikely to trigger RBI rate cut, says Capital Economics Investing.com - The Reserve Bank of India (NSE:BOI) (RBI) is expected to maintain its repo rate at 5.50% during its upcoming Monetary Policy Committee meeting on August 6, despite a sharp decline in headline inflation in June, according to Capital Economics. The significant drop in inflation has prompted speculation about potential additional interest rate cuts following the RBI’s substantial 50 basis point reduction in June. However, Capital Economics believes the central bank will likely keep rates unchanged. Capital Economics noted that the RBI had clearly signaled after its June meeting that the easing cycle was complete, establishing what the research firm describes as a "high bar" for further rate cuts. This stance suggests the recent inflation data may not be sufficient to trigger additional monetary easing. The economic research firm projects that the repo rate will remain at its current level of 5.50% not only at next week’s meeting but "well into 2026," indicating an extended period of rate stability ahead for India’s economy. The RBI’s decision comes amid a balancing act between responding to lower inflation figures and maintaining its previously communicated policy trajectory, with the central bank having already implemented significant monetary easing through its June rate cut. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. AI computing powers are changing the stock market. Investing.com's ProPicks AI includes 6 winning stock portfolios chosen by our advanced AI. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. Which stock will be the next to soar?

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U.S.-EU trade deal seen reducing European growth by 0.5% - Capital Economics Investing.com - A trade deal with the U.S. has helped the European Union avoid the worst of a tariff war with the world’s largest economy, but it remains to be seen how long this truce will last for, according to analysts at Capital Economics. In a note, the analysts led by Jack Allen-Reynolds flagged that the average tariff rate on U.S. imports from the EU will now rise to around 17% from just 1.2% in 2024 -- an increase that they predicted will reduce growth in the bloc by around 0.5%. Washington and Brussels reached a landmark trade agreement on Sunday that includes a 15% tariff on EU goods entering the U.S. The tariff applies to a wide range of items, including semiconductors and pharmaceuticals. However, there are some exceptions, such as a 50% levy on steel and aluminum that will remain in place. The broad-strokes deal encompasses significant EU purchases of U.S. energy and military gear, along with substantial investments in the American economy. U.S. President Donald Trump said the European Union has committed to purchasing $750 billion worth of energy from the United States. He also stated that the EU has agreed to make $600 billion in investments in the U.S. "They are agreeing to open up their countries to trade at zero tariff," Trump told reporters. He added that the EU would "purchase a vast amount of military equipment" from the U.S. European Commission President Ursula von der Leyen confirmed the agreement would include 15% tariffs across the board, noting that this measure would help "rebalance" trade between the two major trading partners. Of the $3.3 trillion in goods imported by the U.S. last year, more than $600 billion came from the 27-member EU. The pact could help bring some calm to investors, who had been wary that both sides could fail to reach a deal before August 1, when Trump’s sweeping "reciprocal" tariffs are due to come into effect. The EU had been facing heightened levies of 30%, and had reportedly been pushing for a zero-for-zero agreement with the White House. "[F]or now the deal has avoided a much bigger and more damaging increase in U.S. tariffs, as well as EU retaliation. This will reduce uncertainty in the near term and has understandably been greeted positively by the markets this morning," the Capital Economics analysts said. European stocks have risen to a four-month high, while U.S. stock futures pointed higher on Monday. However, the fine details of the agreement have yet to be ironed out, the analysts flagged, adding that Trump could "still change his mind even after the deal has been finalized and signed." "So uncertainty is likely to remain high for the foreseeable future," they said.

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The Bank of Japan to resume its tightening cycle in October- Capital Economics Investing.com -- The recent trade agreement between the United States and Japan has eliminated a key downside risk, potentially leading the Bank of Japan to present a more positive assessment of economic prospects at its upcoming meeting next week. With inflation continuing to exceed the Bank’s pessimistic forecasts, analysts expect the central bank to resume its tightening cycle with another interest rate hike in October. The Bank of Japan had adopted a more negative stance on GDP growth and inflation outlooks during its May meeting in response to growing trade tensions, maintaining this cautious position at its June meeting. The trade deal finalized between the US and Japan this week has reduced some of these downside risks. According to press reports, the Bank had already begun showing increased optimism about economic conditions even before the latest developments regarding US tariffs. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record. With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.

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Tariffs not seen reversing U.S. manufacturing decline, Capital Economics says Investing.com - U.S. President Donald Trump’s aggressive trade agenda may bring some manufacturing jobs back into the country, although the scale of the reshoring is likely to be limited, according to analysts at Capital Economics. Trump has argued that his move to slap heigthened duties on a range of trading partners will help to bolster domestic job growth in the manufacturer sector, which has seen a multi-year shift in jobs out of the United States. In a note, the strategists led by Thomas Ryan flagged that the past three presidential administration’s prior to Trump’s second term in the White House have all "attempted and failed" to enhance job reshoring. The latest effort, made through the expanded use of tariffs, will "be no different," the analysts said. The analysts suggested that some segments of manufacturing -- such as automotive and pharmaceutical production -- appear to be more conducive to reshoring and could see a boost from the levies. In both cases, capacity utilization is relatively low, meaning there are fewer immediate production constraints, they noted, adding that these industries are also not directly competing with "ultra-low-cost manufacturing locations." A large share of drug imports are made by subsidiaries of U.S. firms in countries like Ireland, Switzerland and the Netherlands, chiefly for tax reasons, the analysts said. Auto imports also come from a tightly-integrated North American supply chain, "implying that shifting production to the U.S. could occur with relatively limited disruption," they added. But, on the whole, "a tariff-led approach to attracting foreign manufacturers to the U.S. faces major constraints -- namely, a tight labor market and signficantly lower production costs overseas -- that even the promise of preserving tariff-free access to the U.S. consumer market cannot overcome," they wrote. Although the tariffs "at the margin" may cause some jobs to come back to the U.S., these structural barriers are seen limiting the scale of reshoring and keeping factory employment well below its late-1970s peak, the analysts said. AI computing powers are changing the stock market. Investing.com's ProPicks AI includes 6 winning stock portfolios chosen by our advanced AI. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. Which stock will be the next to soar?

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Trump tariff impact may be seen in Q2 earnings, Capital Economics says Investing.com - The impact of U.S. President Donald Trump’s sweeping tariff agenda is likely to be seen in the upcoming second-quarter corporate earnings season, according to analysts at Capital Economics. Despite having largely delayed the implementation of his punishing "reciprocal" levies first unveiled in April, Trump has left a baseline 10% tariff in place, as well as heightened duties on items like steel, aluminum and autos. The effective U.S. tariff has in turn increased compared to its level at the beginning of Trump’s second term earlier this year, analysts have suggested. This week, Trump has embarked on a new chapter of his tariff drive, issuing letters to more than a dozen nations threatening them with elevated duties if they are unable to reach a trade deal with Washington. However, Trump has paused the date for his reciprocal tariffs to take effect to August 1. They were previously slated to kick in on Wednesday, after having initially been postponed in April. Trump has also said he will slap 50% duties on U.S. copper imports and hinted that other sector-specific tariffs could be coming on semiconductors and pharmaceuticals. Economists have predicted that the tariffs could drive up consumer prices and, eventually, weigh on activity. In a note to clients, the Capital Economics analysts said "there has not been big effect" on prices so far, although they flagged that they anticipate the uptick in inflation will be reflected in the upcoming consumer price index report for June. "While that could partly be the result of a winding down of stockpiles accumulated before higher tariffs came into effect, we now suspect U.S. firms will eat more of their cost, if only in the short run for political reasons," the analysts wrote. Notably, Trump previously took aim at Amazon (NASDAQ:AMZN), after reports said the e-commerce giant was planning to outline the cost of trade tariffs to its customers. The higher tariffs could become more apparent in companies’ next quarterly results, with the levies particularly threatening to dent gross profit margins, the Capital Economics analysts said. They noted that Wall Street estimates for forward twelve-month gross margin expectations were already pared back following Trump’s "Liberation Day" tariff event on April 2. The analysts added there has also not been "big downgrading" to margin predictions across the U.S. stock market. "A glass-half-empty view would that there is plenty of margin for error," they said.

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Ireland’s economy likely to withstand potential Trump policy impacts - Capital Economics Investing.com -- Ireland’s economy appears well-positioned to navigate potential risks from U.S. policy changes, according to a new analysis by Capital Economics on Thursday. Despite concerns about Ireland’s close economic ties to the United States, which accounts for 30% of Irish goods exports and significant inward investment, the research suggests the impact of potential U.S. tariffs on pharmaceuticals and tax policy changes may be less severe than initially feared. The analysis indicates that more than half of Ireland’s pharmaceutical exports would remain unaffected by U.S. tariffs as they are destined for other countries. Additionally, the sector is expected to maintain its international competitiveness even if faced with new U.S. trade barriers. On the tax front, while changes to U.S. tax policies could reduce Ireland’s attractiveness for multinational tax optimization and potentially decrease GDP figures and corporate tax revenues, more meaningful economic indicators such as modified domestic demand (MDD) and employment would likely see less impact. Ireland’s strong fiscal position provides further insulation against these risks. The country currently runs a large budget surplus and maintains a low debt burden, which should help sustain public finances even if corporate tax revenue declines. The Irish economy has significantly outperformed the euro-zone since the pandemic according to MDD, which excludes spending with little relation to domestic activity. This growth has been accompanied by rapid employment increases. Capital Economics projects Ireland’s average growth rate, measured by MDD, will continue to exceed the euro-zone’s for the foreseeable future, with expectations of over 2% annual growth through the rest of this decade compared to around 1% for the rest of the euro-zone. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. AI computing powers are changing the stock market. Investing.com's ProPicks AI includes 6 winning stock portfolios chosen by our advanced AI. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. Which stock will be the next to soar?

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Tariff uncertainty unlikely to derail US markets, says Capital Economics Investing.com -- The lack of clarity around US tariff policy is not expected to hold back US markets, according to Capital Economics, which maintains its outlook for US equities and the dollar to rally through the remainder of the year. The US tariff situation has impacted markets in two key ways over recent months. First is the direct effect on US inflation, economic growth, and potential central bank responses. With the administration extending the pause on additional "reciprocal" tariffs until next month, market participants must wait longer for clarity on the final tariff structure. Treasury Secretary Bessent has indicated that without deals, "Liberation Day" tariffs would begin in early August, but progress toward many of these agreements remains unclear. The second major question is how much trade policy uncertainty will affect US markets. The unpredictable development of the policy appeared to trigger early-April sell-offs in US assets and the dollar, raising concerns that policy uncertainty might deter investors from US markets for an extended period. However, these concerns seem to have diminished. The weekend’s announcement about the tariff pause extension did not cause any significant reaction in equity futures or the dollar. The US equity market is trading near all-time highs, and equity risk premiums have returned to levels close to recent lows. While Treasury bonds have recovered since April, this appears to reflect higher "term premia" being offset by increased expectations for rate cuts. This could indicate compensation for greater policy uncertainty, particularly regarding inflation effects, though it may also reflect concerns about the federal deficit. The dollar’s ongoing weakness could reflect some concern about US trade policy implementation, but might also stem from other factors, such as possible deliberate appreciation of certain currencies against it or changes in foreign exchange hedging behavior. Capital Economics maintains that tariff uncertainty alone is unlikely to severely impact the US economy or dampen investor enthusiasm for US equities. However, the firm believes the uncertainty will significantly influence the Federal Reserve, as many FOMC members appear reluctant to cut rates until the inflationary effects of tariffs become clearer. Capital Economics doubts the Fed will cut rates this year, which could negatively impact Treasury bonds but potentially boost the dollar eventually. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record. With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.

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ECB likely to wait until September to ease rates again - Capital Economics Investing.com - The European Central Bank is expected to wait until September to cut its key policy rate again as officials eye ongoing trade uncertainty and the recent appreciation of the euro, according to analysts at Capital Economics. In June, the ECB slashed borrowing costs for the eighth time in a year, bringing its key deposit rate down by 25 basis points to 2.0%, although policymakers did not provide outright guidance for changes later this year. In a statement, the ECB said its latest decision to lower rates came as the euro area economy faces waning inflation but persistent uncertainty around the impact of global trade tensions. The cut was widely anticipated by markets, meaning that much of the debate among analysts heading into the announcement swirled around the central bank’s plans for rates over the rest of the year. Given an easing in inflation back down to the ECB’s 2% target, some investors have bet that policymakers will push pause on the rate-reduction cycle in July and potentially roll out one more drawdown before the end of 2025. But, writing in a note to clients, the Capital Economics analysts led by Franziska Palmas argued that the ECB is "much more likely to wait until September to ease policy further." The comment comes as murkiness surrounds U.S. President Donald Trump’s tariff plans, with a pause to his sweeping "reciprocal" tariffs is due to expire on on July 9. The White House has previously targeted the European Union -- which includes several euro zone countries -- with these levies, hitting out at the bloc for perceived unfair trade practices. European trade officials met with their Trump administration counterparts in Washington this week. But a trade agreement has yet to be reached, with the EU pushing for a deal "in principle" that would include immediate tariff relief for key sectors. Media reports have suggested that a pact could see the European Commission -- the chief trade negotiator for the EU -- accept a baseline 10% U.S. tariff in exchange for reduced duties on those industries. Yet some in Brussels are calling on the EU to take a stronger stance and insist on a reduction to the 10% levy rate. The ECB warned that the uncertainty may weigh on business investment and exports in the short term, although medium-term growth is tipped to be bolstered by increased government spending on defense and infrastructure. "We think the most likely outcomes are an extension of talks or a quite vague preliminary deal," the Capital Economics analysts predicted. Along with the ongoing trade negotiations, some ECB insiders have also become more concerned over a steep jump in the euro against the U.S. dollar this year, according to the Financial Times. Bolstered by a shift by investors into European assets earlier this year during a time of increased U.S. policy uncertainty, the euro has surged by almost 14% so far this year. The ECB may need to signal that too much strengthening in the euro could be issue, as it might lead inflation to hover below targets, the paper reported, quoting a senior European central banker. A stronger euro can pull down price gains and make imports cheaper, but also dent make exported products more expensive abroad and weigh on overall economic activity. Coupled with signs of tepid growth in the eurozone, along with possible headwinds from U.S. tariffs, some central bankers have become uneasy, the FT reported. Earlier this week, ECB Vice President Luis de Guindos told Bloomberg TV that this type of "overshooting" of the euro should be avoided. Although the euro exchanging hands at roughly $1.18 may be acceptable, it would be "complicated" for policymakers to wave off levels above $1.20, de Guindos warned.

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How might India push back against Chinese imports? Capital Economics weighs in Investing.com - India’s goods trade deficit with China now stands at a record high, rising to over $100 billion in the year to May, stemming in part from increased low-cost imports. In a note to clients, analysts at Capital Economics said that elevated goods imports from China may bring benefits to some areas of India’s economy. "Chinese imports span a huge variety of goods but electronics components are the single largest category," the Capital Economics analysts noted. "Imports of components are encouraging if they are manufactured into final goods in India and then sold abroad." Imports of low-end manufactured products have also helped to keep a cap on household goods inflation over the past few years, they added, flagging that more cheap Chinese products could continue to exert disinflationary pressure. Yet the trend could also pose threats to India’s domestic industries, especially manufacturing. "That is true both in terms of serving India’s enormous domestic market, but also further afield too. After all many major economies have experienced rising imports from China, making it harder for Indian firms to compete abroad," the analysts said. They flagged that, for all its gains in capturing global export market share of high-end manufactured goods in recent years, India’s export share of low-end items like textiles and toys is now lower than a few years ago. Several policymakers and industry bodies have raised some concerns over the inflow of Chinese goods, with the Confederation of Indian Industry highlighting the nation’s over-reliance on Chinese imports and the Ministry of Steel and Directorate General of Trade Remedies voicing worries over the "threat from China," the analysts said. In response, they predicted that India may move to erect stronger tariff barriers against Chinese products, although these levies would likely not be as broad as sweeping U.S. duties imposed on China under President Donald Trump. "Given India’s low reliance on demand from China and India’s precedent in enacting anti-dumping measures, there is a good chance that policymakers will raise tariffs further and potentially introduce more industrial policies if low-cost imports from China continue to rise," they wrote.

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U.S.-China trade deal "positive" but risks remain - Capital Economics hereremove ads peter kumar Edward Field Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks. Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed. Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website. It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website. Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

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An audience of tenants and housing professionals listens to Mark Pragnell of Capital Economics make the economic case for social housing

Our Panel of speakers to respond to the report's findings

Colin Wiles of SHOUT holding a copy of the Parker Morris report Homes for today and tomorrow outside the Parker Morris Hall in the Abbey Centre.

The front cover of the SHOUT NFA report Building New Social Rent Homes

OTD ten years ago this happened
@martinhwheatley.bsky.social introduced our distinguished panel in the #ParkerMorris Hall of the Abbey Centre in Westminster to launch the SHOUT #CapitalEconomics Report. Our costed modest proposal of 250,000 new homes a year with 100,000 at #SocialRent #BuildToSave

Capital Economics looks at "limited" stock market reaction to Israel-Iran conflict Investing.com - The economic and financial impact of the conflict between Israel and Iran will likely be muted unless there is "actual disruption" to the flow of energy supplies, according to analysts at Capital Economics. Despite the heightened violence between the regional rivals, the effect on major global financial markets has been "relatively limited," the analysts led by Jonas Goltermann argued in a note. Oil prices have seen some volatility due to in part to increased worries that the violence could spil over into shipping lanes out of the Middle East, particularly the crucial Strait of Hormuz. No disruptions have yet to be reported. Meanwhile, the main averages on Wall Street ended higher on Monday, while bond yields and currencies were relatively muted, with analysts noting some moderation in fears over the implications of several days of airstrikes between Israel and Iran. "The lack of further volatility on account of the conflict appears to reflect a view that, as proved the case with other escalations in the region over recent years, this one will not result in significant damage to energy production or transportation infrastructure," the Capital Economics analysts said. "Ultimately, that is the primary channel through which the conflict could have a major impact on the global economy." Still, they flagged that the intensification of Middle East tensions comes at a "tricky time" for investors already grappling with murkiness around U.S. trade and fiscal policies. "An unpredicatable environment" has become "even more so," the analysts said. On Tuesday, Israel’s military said that it had carried out "several extensive strikes" on military targets in western Iran, including on surface-to-surface missile storage sites and launch infrastructure. A senior Iranian general "in the heart of Tehran" was killed overnight, Israel’s Air Force also claimed. Iran has not yet confirmed the statement. Meanwhile, the Trump administration is discussing with Iran the possibility of holding talks this week on a potential nuclear deal and an end to the conflict with Israel, Axios has reported. U.S. stock futures pointed lower as the fighting entered its fifth day. Which stock should you buy in your very next trade? With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record. With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.

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Is the risk of U.S. fiscal crisis rising? Investing.com - The U.S. federal debt pile is "undoubtedly" on an unsustainable path, with ballooning obligations potentially leading to higher inflation and denting the wider economy, according to analysts at Capital Economics. Treasury Department data shows that U.S. federal debt currently stands at $36.22 trillion, a burden that the Capital Economics analysts led by Paul Ashworth said is "already close to 100% of gross domestic product." Ashworth added that, should the U.S. budget shortfall remain around 6% of GDP for the foreseeable future, the total debt-to-GDP ratio could climb to 120% within in the next decade. "Concerns about ballooning supply have driven up the term premium component of Treasury yields further this year and there is a risk of a vicious cycle developing -- with fears about the long-term sustainability of the federal debt raising borrowing costs, which add to the deficit and make the debt path even more unsustainable," Ashworth said. Although the U.S. government can avoid bankruptcy by printing its own money, Ashworth flagged that this tactic could result in rising inflation and "the crowding out of private investment and consumption" that may have a "negative impact on broader economic performance." The comments come as U.S. President Donald Trump and his Republican allies in Congress are racing to approve a massive fiscal package that would include deep tax cuts and spending increases on defense and border security. Republicans in the U.S. Senate are currently looking to release an updated version of Trump’s "big, beautiful bill," with the GOP facing a self-imposed July 4 deadline to pass the sweeping measure. Yet lawmakers remain at odds over the spending cuts and borrowing increases that will be needed to fund tax relief and elevated expenditures proposed by the bill. Slashes to the Medicaid program for low-income Americans and clean energy tax breaks are among the most pressing points of contention. The House of Representatives previously passed its version of the multitrillion legislation by a thin margin, with Republicans in control of the lower chamber just about overcoming party holdouts and Democratic opposition. Should the Senate pass its version, the House would then need to approve it before a final bill is sent to Trump’s desk to be signed into law. Tesla (NASDAQ:TSLA) CEO and former close associate of Trump Elon Musk has been among the most outspoken conservative figures to come out against the net $2.4 trillion price tag of the more than 1,000-page legislation, calling it a "disgusting abomination." The tech billionaire’s statement sparked a heated online row with Trump earlier this month. The official Congressional Budget Office and outside economists have flagged that the bill could further increase the U.S. debt load. Financial markets have also flagged concerns over the U.S. debt load, with Moody’s in particular citing these worries as a motive for its decision to cut its once-pristine "Aaa" U.S. credit rating. The legislation would raise the U.S. debt ceiling by $5 trillion, a move that Congress must adopt or risk the U.S. defaulting on its debt obligations. However, Trump and other Congressional Republicans have largely shrugged off these fears, with Senate Finance Committee Chairmain Mike Crapo arguing that any argument that the bill will increase the U.S. deficit is "absolutely wrong." Should you invest $1,000 in TSLA right now? Don't miss out on the next big opportunity! Stay ahead of the curve with ProPicks AI – 6 model portfolios powered by AI stock picks with a stellar performance in 2024. Unlock ProPicks to find out

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Capital Economics breaks down the latest U.S.-China trade deal Investing.com - The economic relationship between the U.S. and China is in "far worse shape" than it was a few months ago despite a trade deal announced earlier this week, Capital Economics have argued. U.S. President Donald Trump has called the deal struck with Beijing after marathon talks in London this week "great," adding that it has "everything we need." Along with a framework covering tariff rates, the agreement will also see China lift restrictions on exports of rare earths minerals considered to be crucial in a range of industries. Chinese students will be allowed to access U.S. universities as well. "We’re very happy with it," Trump said ahead of an event on Wednesday evening. Both the president and Chinese counterpart Xi Jinping need to approve the deal. Still, markets on Wednesday had a relatively tepid reaction to the latest signs of détente in trade tensions between the world’s two biggest economies, with analysts noting that the announcement was short of details. "[W]e shouldn’t lose sight of the fact that the economic relationship is in concrete terms in far worse shape than a few months ago," analysts at Capital Economics led by Mark Williams said in a note to clients. Any rolling back of non-tariff barriers between the U.S. and China will likely lead to U.S. firms trying to amass stockpiles of rare earths, they added. However, the anlaysts flagged that the state of the relationship hangs to "such an unusual degree on the judgment" of Trump. "A breakdown in the relationship is only a Truth Social post away," they said. Which stock should you buy in your very next trade? AI computing powers are changing the stock market. Investing.com's ProPicks AI includes 6 winning stock portfolios chosen by our advanced AI. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. Which stock will be the next to soar?

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US-China trade talks in London may impact Chinese equities and currency: Capital Economics Investing.com – Ongoing U.S.-China trade negotiations in London could potentially impact financial markets, particularly in China, according to analysts at Capital Economics, who on Tuesday highlighted two key areas of focus in the discussions. The first aspect is the potential impact of a trade agreement or progress towards one on China’s equity market. China’s equity market has been underperforming globally since "Liberation Day". However, Capital Economics does not anticipate a major rebound due to possible trade advancements. They point out that the tariff impact on China’s equities has not been particularly significant, with domestic policy playing a more critical role. They also cast doubt on the possibility of the US fully retreating from its position, which may limit any relief rally. While a broad market rally may not be in the cards, eased access to high-end semiconductors, a topic reportedly on the negotiation table, could potentially benefit China’s tech stocks. However, Capital Economics advises caution here as well. They note that while the 2018 trade war did lead to a drop in valuations relative to global counterparts, the more significant dip occurred during subsequent regulatory actions by China’s authorities starting around late-2020. The recovery of these tech stocks partly reflects a softer policy approach, and a belief, fueled by DeepSeek, that Chinese tech firms can compete in the artificial intelligence race without reliance on US semiconductors. Capital Economics believes these stocks will continue to perform well, provided the authorities maintain their supportive approach. While access to US chips might not be a key factor, it could provide marginal benefits. The second area of focus is the potential implications of the trade talks on the renminbi, China’s currency. Exchange rates have reportedly been a topic of discussion in negotiations with other Asian countries. The renminbi has remained relatively stable against the US dollar recently, but it is weaker than it was a few years ago, especially in trade-weighted terms. This coincides with a surge in China’s goods exports, a point of contention with the US. However, Capital Economics does not expect China to agree to let its currency appreciate significantly as a result of any agreement with the US. They cite China’s reluctance to be seen as being influenced by US foreign exchange policy, and concerns about the health of the manufacturing sector, given its recent capacity expansion. One potential solution could be fiscal stimulus, which theoretically could boost both China’s domestic economy and exchange rate. However, Capital Economics does not believe China’s authorities see much need for this, based on last year’s fiscal policy discussions. They would be surprised if China’s stance on this issue has changed significantly. They anticipate that symbolic offerings to the US, like agreed purchases of specific US goods, are more probable. In this scenario, Capital Economics predicts that the renminbi is more likely to weaken slightly against the dollar over the remainder of this year. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. Which stock should you buy in your very next trade? AI computing powers are changing the stock market. Investing.com's ProPicks AI includes 6 winning stock portfolios chosen by our advanced AI. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. Which stock will be the next to soar?

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Capital Economics sees bond yields steady by year-end Investing.com -- Capital Economics, a leading economic research firm, maintains its projection that by the end of this year, yields on 10-year government bonds will likely remain at or fall below their current levels, despite the recent significant fluctuations in global sovereign bond markets. The firm also anticipates that corporate bonds will generally continue to perform well. The decline in long-dated U.S. Treasury yields over the past week indicates a relaxation of concerns regarding U.S. fiscal policy. However, the concerns have not fully dissipated, as evidenced by the 10-year Treasury yield remaining over 30 basis points higher since April. This increase coincided with the advancement of President Trump’s deficit-increasing legislation through the House of Representatives. Analysts attribute the rise primarily to an uptick in the Treasury 10-year term premium and a steepening of the U.S. yield curve. Capital Economics suggests that U.S. term premia might decrease slightly, despite the troubling state of U.S. public finances. This forecast is based on the current dislocation in the U.S. Treasury market following "Liberation Day," a reference to a past event affecting the market. The firm notes that Treasury term premia were already elevated before the recent fiscal concerns arose and anticipates that if trade deals progress, the increased term premia may continue to unwind. In addition, 10-year government bond yields in other developed markets have generally tracked the uptrend of U.S. Treasuries this month. The rise in Treasury term premia is believed to have also contributed to higher term premia internationally, as suggested by steeper yield curves globally. In conclusion, Capital Economics expects a decrease in the 10-year Treasury term premium, which could align with a slight reduction in term premia for other high-grade 10-year government bonds in developed markets. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. Which stock should you buy in your very next trade? With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record. With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.

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U.S. Treasury markets "not fully healed" after April sell-off - Capital Economics Investing.com - The benchmark 10-year U.S. Treasury yield is now at levels not much higher than prior to the announcement of President Donald Trump’s aggressive "reciprocal" tariffs, but it may be "too soon to conclude" that the bond market is "back to normal", according to analysts at Capital Economics. Bond yields, which tend to move inversely to prices, rose sharply following Trump’s announcement of heightened levies on dozens of countries in early April. The sell-off in the bond markets, coupled with deep ructions in stocks, were viewed as reasons motivating Trump’s later decision to delay the tariffs for 90 days. Yields on 10-year U.S. Treasury have since eased back after at points touching its highest level since 2001 -- ructions at the time that were seen as indications the tariffs had shaken confidence in the U.S. economy. "That peak came alongside commentary about ’dislocation’ in the Treasury market, speculation of foreign ’dumping’ of Treasuries, and worries about a ’U.S. risk premium’ emerging in the country’s assets," said Thomas Mathews, Head of Asia Pacific Markets at Capital Economics, in a note to clients. "But we suspect it’s too soon to conclude from the now-lower yield that the Treasury market is back to normal." In particular, Mathews flagged a "sense" that Treasury term premia -- the extra return investors demand for holding longer-dated debt -- "are still higher than they were and the late-April fall in yields reflected instead expectations" for more interest rate cuts by the Federal Reserve. If this is case, Mathews added that there could be implications for how Treasuries might evolve over the rest of 2025, especially if projections for upcoming Fed reductions are dashed. On Wednesday, the Federal Reserve left interest rates unchanged, flagging higher risks from inflation and unemployment. Fed Chair Jerome Powell also said it was "not at all clear" what the appropriate response for monetary policy should be at this time given the uncertainty around the tariffs. Weighing the Fed’s statement and Powell’s commentary, the Capital Economics analysts said they suspect that investors are "overestimating how fast the central bank will be willing to cut inthe face of tariff-induced inflation, even if it’s temporary". As a result, they anticipate that the 10-year Treasury yield will be at 4.50% at the end of the year. Early on Thursday, the 10-year yield stood at 4.31%.

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Capital Economics deciphers Canada’s post-election economy Investing.com -- The Canadian federal election commenced on Monday, with the Liberal Party securing 168 seats in the expanded 343-seat parliament. Despite falling short of a majority, the Liberals, led by Prime Minister Mark Carney, emerged victorious. Significant shifts were also noted in the political landscape, with the Conservatives increasing their hold with 144 seats. Yet, this gain was somewhat marred by the likelihood of party leader Pierre Poilievre losing his seat. Notably, the New Democratic Party (NDP) experienced a painful loss, retaining only 7 seats. According to Capital Economics, Canada’s economic outlook post-election navigates a path of cautious optimism. Though an expected GDP slowdown is on the horizon, Capital Economics believes the nation seems poised to narrowly dodge a recession. In confronting these economic challenges, Capital Economics projects the Bank of Canada (BoC) will reduce its policy rate to 2.0% by the end of the year. This move, indicating an additional three 25-basis-point cuts, seeks to balance the short-term inflation pressures from the US-imposed retaliatory tariffs. To further stimulate the economy, the Liberal government has earmarked a $35 billion budget for new spending and tax cuts, presenting solutions that outpace the $15 billion in revenues generated from US tariffs. However, risks loom on the horizon, particularly with fiscal and monetary policies. Critical reliance on NDP or Bloc Québécois support could create economic turbulence due to potential inflationary pressures from larger-than-anticipated deficits. Despite this, the markets responded with relative calm to the election results. The USD/CAD remained steady, suggesting investor expectations had already factored in a Liberal minority government outcome with an injection of fiscal stimulus. Capital Economics suggests such stability may underscore confidence in Carney’s leadership and the market’s faith in his administration’s commitment to growth. Yet, uncertainty persists, particularly surrounding trade tensions, infrastructure plans, and inflation management.

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How could Trump’s tariffs impact Vietnam? Capital Economics weighs in Investing.com - Vietnam’s economy stands to take a "severe hit" from U.S. President Donald Trump’s tariffs should they stay in place despite overtures from the country to secure concessions from the White House, according to analysts at Capital Economics. Vietnam, a long-time manufacturing hub for a slew of Western companies which counts the U.S. as its biggest export market, had a 46% tariff rate placed on it last week by Trump. In a note to clients, the analysts said that Trump could still be "open to doing deals," adding that "most countries" -- including Vietnam -- will eventually end up facing tariffs of between 10% to 20%. "But even if a deal [...] is agreed soon, the shock to domestic and foreign investor confidence from the tariff announcements mean economic growth is likely to be weaker" in Vietnam, the analysts said. They projected that, at its current level, the tariff could reduce demand for Vietnamese exports by "between a quarter and a half" in the near term. Given that U.S. demand makes up roughly 8% of Vietnam’s economy, this would suggest a fall in the country’s gross domestic product of up to 4%, all else being equal, the analysts said. On Monday, Vietnamese Prime Minister Pham Minh Chinh reportedly said that the southeast Asian nation will buy more American goods, including security and defense products, and has asked the Trump administration for a 45-day reprieve from the levies. Hanoi has also pledged to push for faster deliveries of commercial planes that Vietnamese carriers ordered from the U.S., Chinh told a cabinet meeting, Reuters reported. Vietnam was hoping to reach a deal with the U.S. that would delay the 46% U.S. duty and create a system of "balanced and sustainable trade," a statement quoted by Reuters said. Top White House trade advisor Peter Navarro, however, noted concerns in an interview with CNBC on Monday over Vietnam’s alleged role in intellectual property issues and transhipping from China, as well as the dumping of several goods. Chinh said Vietnam would move to review issues like monetary policy, exchange rates, non-tariff barriers and crack down on the origin of goods. It would also add more content on tax and intellectual property to a trade agreement with the U.S. Trump previously said that he had spoken with Vietnamese leader To Lam about a deal to remove the tariffs. Markets are still attempting to understand if the Trump administration plans to impose the tariffs permanently or use them as a cudgle during negotiations with trading partners. On Monday, Trump said "both can be true." (Reuters contributed reporting.)

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