Daily Insight China cuts policy rates further
Group Economics Macro & Financial Markets Research Arjen van Dijkhuizen, Maritza Cabezas, Aline Schuiling + 31 20 628 8052
12 May 2015
Chinese authorities react to ongoing weak data with another round of policy rate cuts Impact of lower oil prices on US labour market manageable ECB steps up the pace of asset purchases somewhat
Ongoing weak Chinese data …
Impact lower oil prices on US job market manageable…
After economic growth fell to 7% yoy in Q1-2015 from 7.3%
On Friday, the US released April’s job market report (see US
yoy in the second half of 2014, recent data show that Q2
Watch – US employers shake off winter effects). Looking at the
started quite weak as well, despite recent easing measures.
details, the mining & logging industry saw employment decline
Early this month, the manufacturing PMIs pointed to ongoing
to -15K, of which -3K was oil & gas extraction. Since the
weak domestic demand, although the services PMIs were
beginning of the year, employment in mining has declined by
more resilient, highlighting the rebalancing from industry
49K, with losses concentrated in support activities for mining.
towards services. Recent trade data do not bode well either,
This is not significant and represents around 0.03% of total
with both exports and imports contracting further. Meanwhile,
nonfarm payrolls.
CPI inflation rose marginally to 1.5% yoy in April (from 1.4% in February/March), remaining far below the 2015 target of 3%.
…knock-on effects modest It is difficult to estimate the knock-on effects of lower energy
… trigger further rate cuts by the PBoC
prices on the job market in other industries. However, during
In reaction, the Peoples Bank of China (PBoC) cut policy rates
the energy price collapse of 1986, which saw the largest
further last weekend, aiming to drive bank lending rates down.
decline in oil prices, the Dallas Fed calculated that for every
The 1-year best lending rate was reduced by another 25bp to
job lost in the oil & gas sector, 2.6 jobs were lost in various
5.10%, following similar moves in November and February.
non-energy sectors. This suggests that lower job growth in
The PBoC also cut the benchmark deposit rate by 25bp to
energy related activities will not derail overall job growth in any
2.25%, but left banks’ room to manoeuvre unchanged as the
meaningful way. We think that the US labour market will
“variation margin“ was raised to 1.5 times the bench-mark rate.
remain solid in the coming time.
The latest policy cuts, which followed a 100bp drop in banks’ overall reserve requirements last month, did not surprise us, as
The ECB stepped up the pace of purchases somewhat
our baseline scenario assumes ongoing ‘measured’ monetary
The ECB reported the amounts of settled purchases under its
easing and targeted (fiscal) stimulus to prevent growth from
PSPP programme during the week of 4-8 May yesterday.
falling significantly below the 2015 target of 7%.
These include purchases of euro area government bonds as well as securities issued by national and European agencies.
Inflation is bottoming out, remaining below target
The total amount outstanding came out at EUR 108.7bn at the end of last week, implying that the ECB settled EUR 13.6bn of
% yoy / %
10
purchases, which compared to EUR 10.1bn the week before.
8
This implies that the central bank bought around EUR 2.7bn a
6
day, which slightly higher than the amounts of the previous couple of weeks. By doing so, the ECB is still running ahead of
4
schedule. We have estimated that the ECB needs to buy EUR
2
2.4bn a day in order to reach its announced target. So,
0
currently, the central bank has bought around EUR 4bn above
-2
target. 08
09
10
Headline inflation Source: Bloomberg
11
12
13
Core inflation
14
15
Key policy rate
2
China cuts policy rates further – 30 April 2015
Financial markets Currency markets
Close
Change 1 day
Change 5 days
Change YTD
EUR/USD USD/JPY
1.1147
-0.0717
-0.3397
120.13
0.0416
0.2253
-7.8608 0.2922
AUD/USD
0.7897
0.0760
-0.5666
-3.4006
USD/CHF
0.9344
0.0214
0.8527
-6.0243
NZD/USD
0.7340
0.0682
-2.8844
-5.8612
GBP/USD
1.5582
-0.0257
2.6347
0.0321
USD/SGD
1.3372
-0.0075
0.3753
0.8827
USD/CAD
Bond markets
1.2096
Close
-0.0578
Change 1 day
0.2237
Change 5 days
4.0874
Change YTD
2-year German Govt Bond yield
-0.2050
0.0000
0.0110
10-year German Govt Bond yield
0.6100
0.0630
0.1570
-0.1070 0.0690
Yield curve Germany
0.8150
0.0630
0.1460
0.1760
2-year US Treasury Bond yield
0.6160
0.0000
-0.0070
-0.0485
10-year US Treasury Bond yield
2.2707
-0.0090
0.0854
0.0995
Yield curve US
1.6547
-0.0090
0.0924
0.1480
US 2-year sw ap rates
0.8889
0.0176
0.0074
-0.0054
US 10-year sw ap rates
2.3400
0.0452
0.0720
0.0539
US sw ap curve
1.4511
0.0276
0.0646
0.0593
EU 2-year sw ap rates
0.1063
0.0113
0.0063
-0.0687
EU 10-year sw ap rates
0.9237
0.0087
0.0907
0.1117
EU sw ap curve
0.8174
-0.0026
0.0844
0.1804
-0.0090
0.0000
-0.0020
-0.0870
0.2799
0.0010
0.0001
0.0243
JPMorgan EMBI Plus Sovereign S
358.6700
-6.8000
-11.9500
-28.7700
Equity markets
Close
Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
19,621
1.25
0.52
12.44
Hang Seng Index
27,718
0.51
-1.44
17.42
Hang Seng China Enterprises Index
14,183
0.95
-1.91
18.34
Australian Stock Exchange S&P/ASX 200 Index
5,635
0.18
-3.28
4.15
Singapore Straits Times Index
3,471
0.54
-0.34
3.14
Euro Stoxx 50 Index
3,624
-0.69
-0.23
15.19
S&P 500 Index
2,105
-0.51
-0.43
2.26
MSCI World Daily Total Return Gross USD
814
-0.23
-0.09
6.05
AEX Index
493
0.40
0.32
16.09
14
7.70
7.78
-27.86
Chicago Board Options Exchange Volatility Index
Commodity markets Reuters/Jefferies CRB Total Return Gold spot USD/Oz Generic first NYMEX Crude Light future Generic first Brent Crude Oil future LME Copper 3 Months Rolling Forw ard Generic first Wheat future Chicago Board of Trade Source: Bloomberg
Close
Change 1 day % Change 5 days %Change YTD%
229
-0.39
0.19
1,184
-0.03
-0.81
-0.73 -0.10
59
-0.07
-1.97
11.15
65
-0.73
-2.32
13.22
6,365
-0.35
-0.55
1.03
476
-0.05
1.49
-19.25
3
China cuts policy rates further – 30 April 2015
Day
Date
Time
Country
Key Economic Indicators and Events
Period
Latest outcome
Consensus
Saturday
09/05/2015
03:30:00
CN
CPI - % yoy
Apr
1.5
1.6
Monday Monday
11/05/2015 11/05/2015
13:00:00 13:00:00
GB GB
Policy rate - % BoE size of asset purchase programme - GBP bn
May 11 May
0.5 375.0
0.5
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
12/05/2015 12/05/2015 12/05/2015 12/05/2015 12/05/2015 12/05/2015
14:00:00 15:00:00 16:00:00
CN CN CN IN US US
M2 money growth - % yoy Aggregate financing - CNY bn New loans - CNY bn CPI - % yoy NFIB small business optimisme - index US Job Openings by Industry
Apr Apr Apr Apr Apr Mar
11.6 1181.6 1180 5.2 95.2 5133
12.1 1300.0 860
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
13/05/2015 13/05/2015 13/05/2015 13/05/2015 13/05/2015 13/05/2015 13/05/2015 13/05/2015 13/05/2015 13/05/2015 13/05/2015 13/05/2015 13/05/2015
07:30:00 07:30:00 07:30:00 07:30:00 08:00:00 08:00:00 09:30:00 10:30:00 10:30:00 11:00:00 11:00:00 14:30:00 16:00:00
CN CN CN FR DE DE NL GB GB EC EC US US
Fixed investments - % yoy Industrial production - % yoy Retail sales - % yoy GDP - % qoq CPI - % yoy GDP - %qoq GDP - % qoq Claimant count unemployment rate - % Change in claimant count - thousands Industrial production - % mom GDP - % qoq Retail sales - % mom Business inventories - % mom
Apr Apr Apr 1Q P Apr F 1Q P 1Q P Apr Apr Mar 1Q A Apr Mar
13.5 5.6 10.2 0.1 0.4 0.7 0.8 2.3 -20.7 1.1 0.3 0.9 0.3
13.5 5.8 10.4 0.4 0.4 0.6
Thursday Thursday Thursday
14/05/2015 14/05/2015 14/05/2015
08:30:00 14:30:00 14:30:00
IN US US
Wholesale price index - % yoy Prod. prices index - % mom Prod. prices index excl food and energy - % mom
Apr Apr Apr
-2.3 0.2 0.2
Friday Friday Friday Friday
15/05/2015 15/05/2015 15/05/2015 15/05/2015
14:30:00 15:15:00
US US KR RU
Empire State PMI - Manuf. general business conditions - index May Industrial production - % mom Apr Policy rate - % May 15 1Q A GDP - % yoy
-1.2 -0.6 1.75 0.4
ABN AMRO
4.9
0.1 0.5
0.4 0.6 0.7
-0.4 0.6 0.3
-2.3
-1.0
-2.5
-3.0
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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