Global daily insight 15 october 2015

Page 1

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)

Find out more about Group Economics at: https://insights.abnamro.nl/en/ This document has been prepared by ABN AMRO. It is solely intended to provide financial and general information on economics. The information in this document is strictly proprietary and is being supplied to you solely for your information. It may not (in whole or in part) be reproduced, distributed or passed to a third party or used for any other purposes than stated above. This document is informative in nature and does not constitute an offer of securities to the public, nor a solicitation to make such an offer. No reliance may be placed for any purposes whatsoever on the information, opinions, forecasts and assumptions contained in the document or on its completeness, accuracy or fairness. No representation or warranty, express or implied, is given by or on behalf of ABN AMRO, or any of its directors, officers, agents, affiliates, group companies, or employees as to the accuracy or completeness of the information contained in this document and no liability is accepted for any loss, arising, directly or indirectly, from any use of such information. The views and opinions expressed herein may be subject to change at any given time and ABN AMRO is under no obligation to update the information contained in this document after the date thereof. Before investing in any product of ABN AMRO Bank N.V., you should obtain information on various financial and other risks and any possible restrictions that you and your investments activities may encounter under applicable laws and regulations. If, after reading this document, you consider investing in a product, you are advised to discuss such an investment with your relationship manager or personal advisor and check whether the relevant product –considering the risks involved- is appropriate within your investment activities. The value of your investments may fluctuate. Past performance is no guarantee for future returns. ABN AMRO reserves the right to make amendments to this material. © Copyright 2015 ABN AMRO Bank N.V. and affiliated companies ("ABN AMRO").


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