Daily Insight Fed doves show preferences
Group Economics Macro & Financial Markets Research Maritza Cabezas, Arjen van Dijkhuizen, Aline Schuiling +31 20 343 5616
15 October 2015 • • •
Fed doves set scene for rate hike in 2016, while US consumers hold back in September China trade data remain weak in annual terms, but monthly trade figures point to stabilisation/recovery Eurozone industrial sector slows down
Fed doves set scene for rate hike in 2016
China trade data weak in annual, but less so in monthly terms
The uncertainty around the Fed rate hike is increasing. This week,
Last Tuesday, Chinese annual trade data looked weak. The
two Fed board governors signaled their reservations for a rate hike
contraction of imports deepened to -20.4% yoy in September
this year, challenging Chair Yellen who had mentioned earlier that
(August: -13.8%), below market expectations. Exports contracted
a rate hike this year was likely. Mr. Tarullo said that right now he
for the third month in a row (-3.7% yoy), but less than in previous
didn’t expect it was appropriate to raise rates. Meanwhile, Ms.
months (July: -5.5%). However, if we look at monthly trade
Brainard indicated that ‘the risks to the near term outlook for
patterns, the emerging picture is less dark. Chinese imports fell
inflation appear to be tilted to the downside…’. On Sunday, Vice
sharply in January and February, but recovered in March (with
Chair Stanley Fischer showed a cautious tone, indicating that
volatility also reflecting the timing of the Chinese New Year) and
‘…more time is needed to appraise recent developments in the
have been quite stable since. It is clear that the sharp drop in early
global economy before beginning normalization of interest rates’.
2015 is still affecting the year-on-year numbers. This pattern is
The influential President of the New York Fed, Bill Dudley, a voting
more or less valid for various trade partners, including the US, EU
member, will speak today about monetary policy. The tone of
and Asia. Exports have even showed monthly gains since April.
FOMC participants in upcoming interventions will be critical to
Meanwhile, Chinese inflation data show that there is further room
assess any shifts on the timing of the first rate hike.
for stimulus, in our view. After rising to a 12-month high of 2% yoy in August, headline inflation fell again to 1.6% yoy on the back of
US consumers hold back in September
lower food price inflation.
September’s US retail sales were below expectations. Retail sales increased by 0.1% after being flat the previous month. Meanwhile,
Eurozone industrial production declines …
core retail sales, which are more closely related to the consumer
Industrial production in the eurozone declined in August. It fell by
spending component of GDP declined by 0.1% after rising 0.2% in
0.5% mom in August, down from a 0.8% rise in July (revised
August. On the positive side, discretionary spending, including
higher from 0.6%). Compared to a year ago, total production
hobbies, restaurants and clothing remained strong though. We
increased by 0.9% (down from 1.7% in July). Despite this
think that despite this soft report, that consumption growth will
slowdown in overall growth, there was a marked rise in growth in
continue to have a favourable trajectory, mainly on the back of low
production of capital goods (to 2.8% yoy from 1.7% in July) and
gasoline prices and higher disposable income.
durable consumer goods (to 4.5% from 1.6%), which underlines that domestic demand in the eurozone and its main export markets
US retail sales soft in September
(the US and the UK) is expanding robustly.
% 3mmav
… but overall GDP growth should be more resilient
12 10 8 6 4 2 0 -2 -4 -6
Looking ahead, we think that the slowdown in China and emerging markets more generally will continue to weigh on the eurozone’s industrial sector. Moreover, the positive impact of the depreciation of the trade-weighted exchange rate of the euro in the first half of this year seems to be waning. Having said that, we expect the slowdown in overall GDP growth to remain limited, as domestic demand should be more resilient, as it is being supported by low 09
10
11
Retail sales
Source: Bloomberg
12
13
14
Retail sales ex-gas and vehicles
15
interest rates, easing bank lending standards and a gradual labour market recovery.
2
Fed doves show preferences – 13 October 2015
Financial markets Currency markets
Close
Change 1 day
Change 5 days
Change YTD
EUR/USD USD/JPY
1.1475
0.0087
1.7648
118.92
0.0757
-0.8422
-5.1496 -0.7180
AUD/USD
0.7321
0.2877
0.8402
-10.4465
USD/CHF
0.9496
-0.0105
-1.7079
-4.4956
NZD/USD
0.6809
0.2946
2.1299
-12.6715 -0.6356
GBP/USD
1.5478
0.0065
0.8470
USD/SGD
1.3768
-0.1306
-1.9722
3.8702
USD/CAD
1.2915
-0.1623
-0.7760
11.1350
Bond markets
Close
Change 1 day
Change 5 days
Change YTD
2-year German Govt Bond yield
-0.2600
-0.0080
-0.0100
-0.1620
10-year German Govt Bond yield
0.5410
-0.0460
-0.0520
0.0000
Yield curve Germany
0.8010
-0.0380
-0.0420
0.1620
2-year US Treasury Bond yield
0.5527
0.0040
-0.0803
-0.1118
10-year US Treasury Bond yield
1.9806
0.0088
-0.1234
-0.1906
Yield curve US
1.4279
0.0048
-0.0431
-0.0788
US 2-year sw ap rates
0.6745
-0.0100
-0.0959
-0.2198
US 10-year sw ap rates
1.9200
-0.0371
-0.1553
-0.3661
US sw ap curve
1.2455
-0.0271
-0.0594
-0.1463
EU 2-year sw ap rates
0.0430
0.0020
-0.0050
-0.1320
EU 10-year sw ap rates
0.9218
-0.0002
-0.0602
0.1098
EU sw ap curve
0.8788
-0.0022
-0.0552
0.2418
-0.0490
0.0000
-0.0030
-0.1270
Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
0.3205
-0.0003
0.0025
0.0649
JPMorgan EMBI Plus Sovereign S
413.5500
3.1900
3.7600
26.1100
Equity markets
Close
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
17,891
-1.89
-2.36
2.52
Hang Seng Index
22,440
-0.71
-0.34
-4.94
Hang Seng China Enterprises Index
-13.77
10,334
-0.99
-0.58
Australian Stock Exchange S&P/ASX 200 Index
5,209
0.23
-0.02
-3.73
Singapore Straits Times Index
2,984
-0.03
0.75
-11.33
Euro Stoxx 50 Index
3,192
-0.92
-1.08
1.43
S&P 500 Index
1,994
-0.47
-0.08
-3.14 -2.14
MSCI World Daily Total Return Gross USD
751
-0.49
-0.02
AEX Index
434
-0.90
-1.42
2.32
18
2.04
-7.06
-6.09
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%
200
0.18
-0.15
1,185
0.08
4.04
-13.08 0.01
46
-0.79
-6.39
-13.14
49
-0.28
-7.62
-14.51
5,299
0.49
2.16
-15.89
507
-0.20
-0.83
-13.99
3
Fed doves show preferences – 13 October 2015
Day
Date
Time
Country
Monday Monday Monday Monday Monday
12/10/2015 12/10/2015 12/10/2015 12/10/2015 12/10/2015
14:00:00 09:00:00 15:45:00 14:10:00 16:30:00
IN CH EC US US
CPI - % yoy Total Sight Deposits bn ECB announces weekly QE details Fed Lockhart speaks on US outlook Fed Evans speaks on policy and the economy
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
13/10/2015 13/10/2015 13/10/2015 13/10/2015 13/10/2015 13/10/2015
08:00:00 10:30:00 11:00:00 12:00:00
DE GB DE US CN CN
CPI - % yoy CPI - % yoy ZEW index (expectation economic growth) NFIB small business optimism - index Exports - % yoy Imports - % yoy
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
14/10/2015 14/10/2015 14/10/2015 14/10/2015 14/10/2015 14/10/2015 14/10/2015 14/10/2015 14/10/2015
03:30:00 03:30:00 10:30:00 10:30:00 11:00:00 14:30:00 14:30:00 14:30:00 16:00:00
CN CN GB GB EC US US US US
CPI - % yoy PPI - % yoy Claimant count unemployment rate - % Change in claimant count - thousands Industrial production - % mom Prod. prices index - % mom Prod. prices index excl food and energy - % mom Retail sales - % mom Business inventories - % mom
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
15/10/2015 15/10/2015 15/10/2015 15/10/2015 15/10/2015 15/10/2015 15/10/2015 15/10/2015 15/10/2015 15/10/2015 15/10/2015
16:30:00
CN CN CN US US US US US US KR US
Friday Friday Friday Friday
16/10/2015 16/10/2015 16/10/2015 16/10/2015
11:00:00 15:15:00 16:00:00 16:00:00
EC US US US
14:30:00 14:30:00 14:30:00 14:30:00 14:30:00 16:00:00
Key Economic Indicators and Events
Period
Latest outcome
Consensus
Sep
4.4 465
4.4
Sep F Sep Oct Sep Sep Sep
0.0 -0.1 1.9 96.1 -3.7 -20.4
Sep Sep Sep Sep Aug Sep Sep Sep Aug
1.6 -5.9 2.3 4.6 -0.5 -0.5 0.8 0.1 0.0
-0.2 0.1 0.2 0.1
Aggregate financing - CNY bn Sep New yuan loans - CNY bn Sep Money supply M2 - % yoy Sep Empire State PMI - Manuf. general business conditions - index Oct Inflation excl food and energy - % mom Sep Inflation excl food and energy - % yoy Sep Inflation (CPI) - % mom Sep Inflation (CPI) - % yoy Sep Philadelphia Fed - business confidence - index Oct Policy rate - % Oct 15 Fed Dudley speaks on appropriate level of interest rates
1082.3 809.6 13.3 -14.7 0.1 1.8 -0.1 0.2 -6.0 1.5
1200.0 900.0 13.1 -6.8 0.1 1.8 -0.2 -0.1 -0.8 1.4
Trade balance external EU - EUR bn Industrial production - % mom Univ. of Michigan cons. confidence - index US Job Openings by Industry
22419.5 -0.4 87.2 5753
-0.3 88.0
Aug Sep Oct P Aug
6.8
ABN AMRO
0
-6.0 -15.9 1.8 -5.9 2.3 0.5
0.3
0.1 1.8 -0.2 -0.1 -1.0
89.0
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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