Daily Insight
Group Economics Macro & Financial Markets Research Nick Kounis & Maritza Cabezas
Global liquidity holding up
+31 20 343 5616
10 September 2015 • • •
Real global money supply growth has held up well over recent months at moderate rates… …but this masks big differences, with strength in the developed economies, and weakness in EM Meanwhile, rising US job openings point to further improvement in labour market going forward
Focus on global liquidity has sharpened
Global money supply growth
Focus on global liquidity conditions has intensified recently.
Real M1 money supply, % yoy
Capital outflows from emerging markets and declines in
30
currency reserves, as well as approaching Fed tightening have
25
triggered concern that global liquidity is declining. It is feared
20
that such a development would spell trouble for risky assets. In
15
this Daily we introduce a measure of global liquidity, while we
10
will expand the analysis to look at the relationship with economic activity and financial markets in future editions.
5 0 -5 03 04 05 06 07 08 09 10 11 12 13 14 15
Real M1 money supply growth a good place to start
Global
Developed
Emerging
There are various potential measures of liquidity, but we start with M1 money supply growth, as it is the measure that
Source: Thomson Reuters Datastream, ABN AMRO Group Economics
includes the most liquid components. Using the data from the largest developed market (DM) and emerging market (EM) economies, we have created real M1 money supply measures for the global economy, as well as DM and EM aggregates.
Positive outlook for US labour market The number of US job openings broke a new high in July, reaching 5.8 million. The expansion was broad based across
Global liquidity holding up well On the global level, real M1 money supply growth has been expanding at a steady albeit moderate pace over recent months, with little sign of a sharp slowdown. In July, it grew by 5.6% yoy, which is below the recent historical average (since 2003) of 7.7%. Granted the situation may have deteriorated in August given the market turmoil, but early data from a few countries is not signaling such a development.
most industries, particularly professional business services and accommodation and food services. Other details of the report showed that the hiring rate edged down to 3.5% from 3.7%, while the quit rate was unchanged at 1.9%. Hiring will likely improve in the coming time, as a result of the increase in job openings. This positive report adds to a string of strong labour market data released in the past days. On Friday, August’s labour market report showed that the unemployment rate is now at 5.1%, the lowest since 2008. The nonfarm payrolls has
Big differences between DM and EM This relatively benign global picture masks big differences between advanced economies and emerging markets. Real M1 money supply growth has been expanding rapidly in
registered an average monthly increase of 240K in the past year. Meanwhile, the Federal Reserve’s Labor Market Conditions Index released this week showed the largest monthly improvement since January.
developed markets compared to the historical trend. This is particularly the case in the eurozone. On the other hand, EM money supply growth has been extremely weak, with the pace slowing through 2014. This is likely one of the factors behind the weak evolution of EM economic growth over recent quarters. Tightening financial conditions are a significant risk to the EM growth outlook.
Less slack in labour market versus external risks Overall, the labour market data showed further improvement, one of the Fed’s preconditions for a rate hike this year. Despite this solid data, instability in financial markets and risks in emerging markets will likely delay the first Fed rate hike to the December FOMC meeting.
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Global liquidity holding up – 10 September 2015
Financial markets Currency markets
Close
Change 1 day % Change 5 days %Change YTD%
EUR/USD USD/JPY
1.1205
0.4032
0.7916
120.52
-0.4625
0.4000
0.5674
AUD/USD
0.7014
-0.1139
-0.1566
-14.0968
USD/CHF
0.9750
-0.2251
-0.0103
-1.9016
NZD/USD
0.6394
-0.0938
-0.1406
-17.9731
GBP/USD
1.5364
0.0000
0.7145
-1.3927
USD/SGD
1.4167
0.0918
-0.0705
6.9530
USD/CAD
1.3248
0.1663
0.4245
14.0594
Bond markets
Close
Change 1 day
Change 5 days
-7.3967
Change YTD
2-year German Govt Bond yield
-0.2250
-0.0020
-0.0160
-0.1270
10-year German Govt Bond yield
0.6980
0.0220
-0.0840
0.1570
Yield curve Germany
0.9230
0.0240
-0.0680
0.2840
2-year US Treasury Bond yield
0.7369
0.0042
0.0288
0.0724
10-year US Treasury Bond yield
2.1864
0.0036
0.0021
0.0152
Yield curve US
1.4495
-0.0006
-0.0267
-0.0572
US 2-year sw ap rate
0.8572
-0.0167
0.0240
-0.0371
US 10-year sw ap rate
2.1950
-0.0542
-0.0299
-0.0911
US sw ap curve
1.3378
-0.0375
-0.0539
-0.0540
EU 2-year sw ap rate
0.0800
0.0010
0.0060
-0.0950
EU 10-year sw ap rate
1.0240
-0.0090
-0.0210
0.2120
EU sw ap curve Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
0.9440
-0.0100
-0.0270
0.3070
-0.0350
0.0000
-0.0020
-0.1130
0.3320
-0.0010
-0.0020
0.0764
JPMorgan EMBI Plus Sovereign S
418.5600
-6.4900
-4.9000
31.1200
Equity markets
Close
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
18,771
7.71
3.73
7.56
Hang Seng Index
22,131
4.10
4.46
-6.24
Hang Seng China Enterprises Index
9,976
5.23
5.52
-16.76
Australian Stock Exchange S&P/ASX 200 Index
5,221
2.07
2.35
-3.51
Singapore Straits Times Index
2,928
1.49
1.74
-12.99
Euro Stoxx 50 Index
3,270
1.12
2.22
3.93
S&P 500 Index
1,946
-1.21
1.66
-5.50
MSCI World Daily Total Return Gross USD
734
1.77
1.40
-4.43
AEX Index
444
1.09
2.47
4.66
26
4.66
-17.01
35.73
Chicago Board Options Exchange Volatility Index
Commodity markets Reuters/Jefferies CRB Total Return Gold spot USD/Oz
Close
Change 1 day % Change 5 days %Change YTD%
199
0.86
1.22
-13.71
1,108
-1.20
-2.30
-6.48
Generic first NYMEX Crude Light future
44
-3.57
-2.44
-16.84
Generic first Brent Crude Oil future
48
-3.80
-5.66
-16.90
LME Copper 3 Months Rolling Forw ard Generic first Wheat future Chicago Board of Trade Source: Bloomberg
5,365
0.37
4.79
-14.84
472
-0.58
-2.88
-19.92
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Global liquidity holding up – 10 September 2015
Day
Date
Time
Country
Monday Monday Monday
07/09/2015 07/09/2015 07/09/2015
08:00:00 09:00:00 15:45:00
DE CH EC
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
08/09/2015 08/09/2015 08/09/2015 08/09/2015 08/09/2015 08/09/2015 08/09/2015
01:50:00 11:00:00 12:00:00 21:00:00
Wednesday Wednesday Wednesday Wednesday
09/09/2015 09/09/2015 09/09/2015 09/09/2015
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Friday Friday Friday Friday Friday Friday Friday
Key Economic Indicators and Events
Period
Latest outcome
Consensus
ABN AMRO
Industrial production - % mom Foreign currency reserves - CHF mln ECB announces weekly QE details
Jul Aug
-1.4 531820
1.1
1.0
JP EC US US CN CN RU
GDP - % qoq GDP - Q2 final estimate and components, % qoq NFIB small business optimisme - index Fed Reserve consumer credit - USD bn Exports Imports GDP - % yoy
2Q F 2Q P Aug Jul Aug Aug 2Q P
-0.4 0.3 95.4 20.7 -8.3 -8.1 -4.6
-0.5 0.3 95.9 18.9 -6.5 -8.0 -4.5
10:30:00 16:00:00 16:00:00 23:00:00
GB US CA NZ
Trade balance - GDP mln US Job Openings by Industry Policy rate - % Policy rate - %
Jul Jul Sep 9 Sep 10
-1601.0 5249 0.5 3.0
-1866.7 5323 0.50 2.76
10/09/2015 10/09/2015 10/09/2015 10/09/2015 10/09/2015 10/09/2015 10/09/2015 10/09/2015
01:50:00 03:30:00 09:30:00 13:00:00 13:00:00 15/09/2015 15/09/2015 15/09/2015
JP CN NL GB GB CN CN CN
Machinery orders private sector - % mom CPI - % yoy CPI - % yoy Policy rate - % BoE size of asset purchase programme - GBP bn New Yuan loans - CNY bn Aggregate financing - CNY bn M2 growth - %yoy
Jul Aug Aug Sep 10 Sep Aug Aug Aug
-7.9 1.6 1.0 0.5 375 1480 718.8 13.3
3.9 1.9 0.5 375 850 1035.0 13.3
11/09/2015 11/09/2015 11/09/2015 11/09/2015 11/09/2015 11/09/2015 11/09/2015
08:00:00 12:30:00 14:30:00 14:30:00 16:00:00
DE RU US US US KR EC
CPI - % yoy Key rate % Prod. prices index - % mom Prod. prices index excl food and energy - % mom Univ. of Michigan cons. confidence - index Policy rate - % Euro finance ministers, central bankers meet in Luxembourg
Aug F Sep 11 Aug Aug Sep P Sep 11
0.2 11.0 0.2 0.3 91.9 1.50
0.2 11.0 -0.1 0.1 91.5 1.50
96.0
-4.5
0.25 2.75
0.8
10.5
92.0 1.50
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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