Global | Coronavirus Watch: Delta risks mount
Concerns within markets about the impact of the Delta variant on the economy is in our view warranted. We have long warned that vaccinations would be unlikely to trigger a smooth transition to normalcy.
The sharp rise in case numbers in the UK and to a lesser extent Israel suggests that the Delta variant could wreak havoc in economies where vaccination rollouts are significantly less advanced and thus generally pose the biggest downside risk to emerging markets.
For those economies where vaccination rates are higher, comfort can be drawn from the muted rise in new hospitalisation within the UK and Israel. It may be that exit waves are a necessary evil for economies that wish to open before the vast bulk of the population have full vaccine protection.
Nonetheless if economies reopen and allow cases to surge, the economic gains could prove illusory if Covid-related absences triggers major disruption to businesses and higher cases prompt greater voluntary social distancing. Ongoing developments in the UK could provide more insight into this risk. But for now, the evidence is inconclusive.
High debt costs suggest European office price correction
Our analysis suggests a 10% correction is needed on average for the major office markets in Europe to compensate for the higher cost of debt, with prime yields required to soften by 10bps-75bps to generate a low-risk interest coverage ratio at a reasonable LTV.Find Out More
Why an ageing population doesn’t mean soaring inflation
What’s the future for inflation? Joachim Nagel, the new president of Germany's central bank, believes the rapidly ageing global population will play a key role – ramping up pressure on prices in the medium term. While we agree slowing labour supply will stifle output growth, in his recent discussion Nagel failed to fully consider the demand side of the argument.Find Out More