Daily Insight ECB report cools QE hopes
Group Economics Macro & Financial Markets Research Nick Kounis & Maritza Cabezas +31 20 343 5616
21 October 2015 • • •
Robust ECB bank lending survey leads to some scaling back of QE hopes… …report was more mixed than headlines suggest, and further ECB stimulus still looks likely No hints from Fed officials on rate hike, while markets remain unconvinced of rate hike this year
ECB Bank Lending Survey holds back equities and bonds
Demand for eurozone bank loans (ECB survey of banks)
A relatively robust ECB Bank Lending Survey triggered some
Net balance
scaling back of expectations that the central bank would step up its QE programme in the coming months. This led to a typical reversal of the QE-trade, with Bund and equity prices falling in unison and the euro firming. However, the moves were not really large.
60 40 20 0 -20
BLS report was robust, but some soft spots The ECB’s Bank Lending Survey was certainly consistent with an ongoing economic recovery, which is in line with our base case scenario. However, there were also some soft spots. Granted banks continued to ease credit standards on loans to companies
-40 -60 -80 03 04 05 06 07 08 09 10 11 12 13 14 15 Companies
Mortgages
Consumer
(-4 in Q3 vs -3 in Q2) and on consumer credit (-3 in Q3 vs -4 in Q2), but they tightened credit standards on mortgages (+5 vs -9).
Source: ECB and ABN AMRO Group Economics
Demand for loans rising, but at a slower pace At the same time, although corporate demand for loans accelerated, the pace slowed for mortgages and consumer credit, albeit from high levels (see chart). That might be consistent with some easing of the momentum in the pace of economic recovery. The rising demand for bank loans from companies was partly driven by investment needs, inventories and working capital, but also some other factors, such as the low level of interest rates, debt refinancing and M&A activity.
No hints from Fed officials on rate hike in latest speeches Fed officials are split, with some putting more weight on the consequences of too early tightening, while others are more concerned about being behind the curve. The most recent interventions from Fed officials are not giving a clearer picture. The President of the Federal Reserve Bank of San Francisco, John Williams, declined to say when he saw the appropriate timing to begin interest rate normalization. He mentioned that ‘with good arguments for and against raising rates’, the decision remained a
QE seen as helping to ease credit standards The ECB also added a special question on the impact of QE. The additional liquidity was reported to have partly been used to step
‘close call’ for him. Meanwhile, Fed Chair Yellen and Governor Powell shed no light on policy in remarks on Tuesday. All of a sudden it has gone remarkably quiet at the Fed.
up bank loans, while it also had a net easing effect on credit standards.
Markets still unconvinced of rate hike this year The Fed has two scheduled policy meetings this year, in late
A stepping up of QE still looks likely
October and mid- December. Futures markets now see a 6%
Despite signs that the economic recovery is continuing, we still
probability of a rate hike in October and a 32% probability that the
think that the ECB will step up QE (most likely in December) given
Fed will move in December. Soft retail and labour market reports
the likelihood that inflation will otherwise under-shoot its inflation
are not giving markets the confidence they would want to
target over the medium term. The ECB’s confidence that QE is
speculate on a rate hike this year. Meanwhile, housing data
having a positive impact, could also be seen as showing that this is
released on Tuesday are pointing to a moderate recovery of the
a tool that is working, and therefore encourage the central bank to
housing market. Housing starts were stronger than expected in
continue to use it.
September (6.5% was -1.7%), after two consecutive declines in Q3. Building permits were, however, subdued (-5% after 2.7%).
2
ECB report cools QE hopes – 21 October 2015
Financial markets Currency markets
Close
Change 1 day
Change 5 days
Change YTD
EUR/USD USD/JPY
1.1340
-0.1057
-0.9174
119.90
0.0417
0.6041
0.0501
AUD/USD
0.7255
-0.0826
-0.1376
-11.1451
USD/CHF
0.9569
0.1570
0.5781
-3.7227
NZD/USD
0.6745
-0.1480
-0.2367
-13.4702
GBP/USD
1.5445
-0.0906
-0.0647
-0.8729
USD/SGD
1.3920
0.1295
0.6508
5.0883
USD/CAD
Bond markets
1.2986
Close
0.0848
Change 1 day
0.1234
Change 5 days
-6.2810
11.8037
Change YTD
2-year German Govt Bond yield
-0.2440
0.0230
0.0080
-0.1460
10-year German Govt Bond yield
0.6260
0.0610
0.0390
0.0850
Yield curve Germany
0.8700
0.0380
0.0310
0.2310
2-year US Treasury Bond yield
0.6290
0.0424
0.0120
-0.0355
10-year US Treasury Bond yield
2.0652
0.0424
0.0213
-0.1060
Yield curve US
1.4362
0.0000
0.0093
-0.0705
US 2-year sw ap rate
0.7395
-0.0021
0.0550
-0.1548
US 10-year sw ap rate
2.0284
0.0000
0.0713
-0.2577
US sw ap curve
1.2889
0.0021
0.0163
-0.1029
EU 2-year sw ap rate
0.0430
-0.0010
0.0000
-0.1320
EU 10-year sw ap rate
0.9970
-0.0020
0.0670
0.1850
EU sw ap curve
0.9540
-0.0010
0.0670
0.3170
-0.0530
0.0010
-0.0040
-0.1310
Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
0.3167
-0.0005
-0.0041
0.0611
JPMorgan EMBI Plus Sovereign S
398.0200
1.8800
-0.8400
10.5800
Equity markets
Close
Change 1 day %Change 5 days %Change YTD%
Nikkei 225
18,207
0.42
-0.15
Hang Seng Index
22,989
-0.37
1.72
-2.61
Hang Seng China Enterprises Index
10,649
-0.37
2.03
-11.14
Australian Stock Exchange S&P/ASX 200 Index
5,236
-0.65
0.63
-3.24
Singapore Straits Times Index
3,019
-0.18
1.14
-10.29
Euro Stoxx 50 Index
3,256
-0.50
1.07
3.47
S&P 500 Index
4.33
2,027
-0.31
1.18
-1.54
MSCI World Daily Total Return Gross USD
764
-0.17
0.34
-0.50
AEX Index
447
-0.45
2.06
5.37
7.54
-8.83
-16.09
Chicago Board Options Exchange Volatility Index
Commodity markets Reuters/Jefferies CRB Total Return
16
Close
Change 1 day %Change 5 days %Change YTD%
197
-1.36
-1.37
-14.43
1,176
0.47
0.63
-0.73
Generic first NYMEX Crude Light future
46
-0.81
-2.44
-14.55
Generic first Brent Crude Oil future
48
-0.41
-1.69
-15.56
5,201
-0.10
-1.37
-17.44
491
1.13
-5.35
-16.70
Gold spot USD/Oz
LME Copper 3 Months Rolling Forw ard Generic first Wheat future Chicago Board of Trade Source: Bloomberg
3
ECB report cools QE hopes – 21 October 2015
Day
Date
Time
Country
Key Economic Indicators and Events
Period
Latest outcome
Consensus
ABN AMRO
Monday Monday Monday Monday Monday Monday Monday Monday
19/10/2015 19/10/2015 19/10/2015 19/10/2015 19/10/2015 19/10/2015 19/10/2015 19/10/2015
04:00:00 04:00:00 04:00:00 04:00:00 04:30:00 09:00:00 15:45:00 16:00:00
CN CN CN CN CN CH EC US
GDP - % yoy Retail sales - % yoy Industrial production - % yoy Fixed asset investment - % yoy Bloomberg GDP Monthly Estimate - % yoy Total Sight Deposits bn ECB announces weekly QE details NAHB home builders' confidence index
Q3 Sep Sep Sep Sep
7.0 10.8 6.1 10.9 6.64
6.8 10.8 6.0 10.8
6.8
Oct
62.0
61.0
60.0
Tuesday Tuesday Tuesday
20/10/2015 20/10/2015 20/10/2015
06:30:00 14:00:00 14:30:00
NL HU US
Consumer confidence - index Base rate -% Housing starts - % mom
Oct Oct 20 Sep
5.0 1.35 -3.0
1.35 1.2
1.35 1.0
Wednesday Wednesday Wednesday Wednesday
21/10/2015 21/10/2015 21/10/2015 21/10/2015
01:50:00 13:00:00 16:00:00
JP TR CA BR
Merchandise trade exports - % yoy Repo rate - % Policy rate - % Policy rate - %
Sep Oct 21 Oct 21 Oct 21
3.1 7.5 0.5 14.25
7.5 0.5 14.25
7.5
Thursday Thursday Thursday Thursday Thursday Thursday Thursday
22/10/2015 22/10/2015 22/10/2015 22/10/2015 22/10/2015 22/10/2015 22/10/2015
08:45:00 10:30:00 13:45:00 13:45:00 15:00:00 16:00:00 16:00:00
FR GB EC EC US EC US
Business confidence manuf. - index Retail sales - % mom ECB refinancing rate - % ECB Deposit rate - % FHFA house price index - % mom Consumer confidence Existing home sales - % mom
Oct Sep Oct 22 Oct 22 Aug Oct Sep
104.0 0.2 0.05 -0.20 0.6 -7.10 -4.8
0.05 -0.20 0.5 -7.50 0.7
0.05 -0.20
Friday Friday Friday Friday Friday
23/10/2015 23/10/2015 23/10/2015 23/10/2015 23/10/2015
10:00:00 10:00:00 10:00:00 15:00:00 15:45:00
EC EC EC BE US
PMI manufacturing - index PMI services - index Composite PMI output Business confidence - index Markit - Flash PMI
Oct P Oct P Oct P Oct Oct P
52.0 53.7 53.6 0.0 53.1
51.8 53.2 53.5
51.5 53.5 53.3
-7.80 0.5
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