Interest rate increases, rotation to real estate and heightened hotel investment
Discover key economic and financial metrics, and what to look out for in the week ahead.
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Here we look at the leading indicators in the world of economics. Download the dashboard for in-depth analysis into commodities, trade, equities and more.
Central banks hike rates, again
The BoE increased its interest rate by 25bps to 1.0%, its highest level since February 2009 and the central bank’s fourth successive rate hike since December. Meanwhile, the US Federal Reserve was more aggressive, increasing its base rate by 50bps to a range of 0.75% to 1.0%. Subsequently, sterling has depreciated to $1.23, its lowest level in two years and ING forecast it could fall to $1.20. This is positive for dollar denominated investors, who may find it cheaper to buy in the UK.
Weaker growth outlook weighs on global equities
Yesterday the FTSE All-World equites barometer had its sharpest daily decline since June 2020, contracting by 3% to its lowest level since December 2020. The S&P 500 and Nasdaq Composite both registered their fifth weekly decline last week and the CBOE VIX, a measure of equity market volatility, remains elevated. This comes amid expectations of weaker global growth in the face of higher inflation, tightening monetary policy, lower manufacturing output in key European centres and constrained activity out of China due to Covid-19 lockdowns. In an environment of softer equity markets and economic outlook, we could see increased polarisation of performance, potentially even for real estate. However, real estate which offers one or more of; inflation hedge properties, growth potential, diversification benefits, income and / or relative stability, is expected to see strengthened interest from investors looking to achieve these aims.
Hotel investment rallies
UK Hotel investment in the first four months of the year is already 40% higher than it was in the first half of 2021, with two months still to go. Private Equity buyers have largely driven this increase in investment, spending £1bn year to date and their presence in the market is expected to remain. According to our Active Capital, capital gravity model, we forecast PE buyers to represent 77% of cross border investment into UK Hotels this year, with PE investors from the US expected to be particularly active.
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