Daily Insight
Group Economics Macro & Financial Markets Research Nick Kounis, Aline Schuiling & Maritza
Another day, another Eurogroup
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25 June 2015 • • •
Eurogroup meeting to resume Thursday amid differences between Greece and creditors Germany’s Ifo business climate indicator declines, but economic prospects still good US GDP growth contracted more modestly in Q1, while Q2 bounce is on the cards
Eurogroup to resume Thursday after overnight talks
US GDP growth less contraction in first quarter
Another day, another Eurogroup, but still no deal between Greece and its creditors. Wednesday evening’s Eurogroup ended with little progress made towards an agreement amid ongoing significant differences between Greece and the institutions. It was planned that meetings would continue into the night between Greece and its creditors. The ultimate aim
% contribution
6 4 2 0
would be to have the paperwork ready by tomorrow morning to
-2
facilitate an agreement by the Eurogroup, which meets again
-4
tomorrow afternoon (13:00 CET). Earlier on Wednesday it
Q2 2013
Q4 2013
Q2 2014
Q4 2014
already became clear that there remained a lot of work to do.
Consumption
Investment
Government
Gaps remain on a number of issues, but the IMF is particularly
Inventory
Net trade
GDP growth
concerned that not enough is being proposed to reform the
Source: Thomson Reuters Datastream
pension system, while fiscal consolidation would rely too much on tax hikes (which it sees as bad for growth) and improved tax collection (too optimistic) rather than spending cuts. We expect a deal eventually, but time is running out. It will be a close shave as to whether there will be a deal in time to get Greece the funding to pay the IMF on 30 June.
US GDP growth contracted less in Q1 in last estimate The third estimate showed GDP declining by 0.2% in the first quarter, this is less than the previous estimate of -0.7%. The revision showed that consumer spending was stronger than previously estimated and that firms stocked up more
Germany’s Ifo business climate declines The Ifo business climate indicator declined to 107.4 in June, down from 108.5 in May. The expectations component fell to 102.0 from 103.0, while the current conditions component declined to 113.1 from 114.3. The fall in the Ifo is in conflict
inventories. Still this report highlights a historical pattern of a recurrent weakness in the first quarter GDP growth, followed by stronger growth thereafter.
Indeed, further revisions are
possible when the Bureau of Economic Analysis issues its annual revisions in July.
with the composite PMI in June, which increased to 54 from 52.6 in May. Historical patterns in the Ifo, the PMI and GDP growth show that the Ifo’s expectations component tends to have a slightly better relationship with GDP growth than the PMI, but that the relationship can be unstable occasionally. Indeed, recent data suggest that since the start of 2014 changes in the Ifo expectations are lagging behind changes in GDP growth. Therefore, it seems that the decline in the Ifo expectations during the April-June period reflects the slowdown in GDP growth in Q1 (to 0.3% qoq, down from 0.7% in 2014Q4). Consequently, we think we should not draw too strong conclusions from the decline in the Ifo, especially since the PMI is moving in the other direction. We still think that there is still good reason to expect a pick-up in GDP growth from the 0.3% recorded in Q1 on the back of the weak euro and low energy prices and interest rates.
US economic activity to strengthen going forward, boosted mainly by consumption The underlying data that has been released so far for the second quarter, suggest that GDP growth will improve. Retail sales and the housing market are stronger, while business investment has been showing a modest pickup. We expect consumption growth, which represents more than two-thirds of the economy, to continue improving on the back of a firm labour market and higher wages. In addition, households have not yet spent all the windfall from lower oil prices. We expect GDP to grow by 2.7% in 2015.
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Another day, another Eurogroup – 25 June 2015
Financial markets Currency markets
Close
Change 1 day
Change 5 days
Change YTD
EUR/USD USD/JPY
1.1200
0.1341
-1.5298
-7.4380
123.86
-0.1451
0.6746
3.3545
AUD/USD
0.7705
0.0000
-1.3697
-5.6338
USD/CHF
0.9340
-0.1710
1.1589
-6.0268
NZD/USD
0.6889
0.0581
-0.5486
-11.6228
GBP/USD
1.5696
0.0829
-1.0839
0.7381
USD/SGD
1.3437
-0.0521
0.7951
1.4419
USD/CAD
Bond markets
1.2395
Close
0.0323
Change 1 day
1.3657
Change 5 days
6.7155
Change YTD
2-year German Govt Bond yield
-0.1970
-0.0080
-0.0020
-0.0990
10-year German Govt Bond yield
0.8440
-0.0280
0.0360
0.3030
Yield curve Germany
1.0410
-0.0200
0.0380
0.4020
2-year US Treasury Bond yield
0.6802
0.0023
0.0310
0.0157
10-year US Treasury Bond yield
2.3726
-0.0361
0.0561
0.2014
Yield curve US
1.6924
-0.0384
0.0251
0.1857
US 2-year sw ap rate
0.9027
-0.0058
-0.0103
0.0084
US 10-year sw ap rate
2.4660
-0.0098
0.0211
0.1799
US sw ap curve
1.5633
-0.0040
0.0314
0.1715
EU 2-year sw ap rate
0.1200
-0.0090
-0.0280
-0.0550
EU 10-year sw ap rate
1.1850
-0.0065
0.0000
0.3730
EU sw ap curve
1.0650
0.0025
0.0280
0.4280
Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
-0.0140
0.0000
0.0000
-0.0920
0.2808
-0.0015
-0.0055
0.0252
-6.5500
-29.0100
-12.1500
JPMorgan EMBI Plus Sovereign S
375.2900
Equity markets
Close
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
20,868
0.28
3.21
19.58
Hang Seng Index
27,405
0.26
2.43
16.10
Hang Seng China Enterprises Index
14.19
13,685
0.55
2.01
Australian Stock Exchange S&P/ASX 200 Index
5,687
0.04
1.63
5.10
Singapore Straits Times Index
3,351
0.35
0.76
-0.41
Euro Stoxx 50 Index
3,611
-0.41
5.31
14.76
S&P 500 Index
2,113
-0.55
0.58
2.61
MSCI World Daily Total Return Gross USD
816
0.05
1.95
6.30
AEX Index
493
-0.37
4.47
16.06
7.18
-10.48
-32.40
Chicago Board Options Exchange Volatility Index
Commodity markets Reuters/Jefferies CRB Total Return
13
Close
Change 1 day % Change 5 days %Change YTD%
225
0.50
0.38
-2.43
1,174
-0.36
-0.94
-0.88
Generic first NYMEX Crude Light future
60
-1.21
0.58
13.14
Generic first Brent Crude Oil future
64
-1.33
-0.44
10.92
5,739
-0.71
-0.10
-8.90
518
-0.67
5.45
-12.17
Gold spot USD/Oz
LME Copper 3 Months Rolling Forw ard Generic first Wheat future Chicago Board of Trade Source Bloomberg
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Another day, another Eurogroup – 25 June 2015
Day
Date
Time
Country
Key Economic Indicators and Events
Monday Monday
6/22/2015 6/22/2015
16:00:00 19:00:00
US EC
Existing home sales - % mom Euro area leaders hold emergency meeting on Greece
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
6/23/2015 6/23/2015 6/23/2015 6/23/2015 6/23/2015 6/23/2015 6/23/2015 6/23/2015 6/23/2015 6/23/2015 6/23/2015
03:45:00 08:45:00 10:00:00 10:00:00 10:00:00 13:00:00 14:00:00 14:30:00 15:00:00 15:45:00 16:00:00
CN FR EC EC EC TR HU US US US US
PMI manufacturing - index (HSBC) - flash Business confidence manuf. - index PMI services - index Composite PMI output PMI manufacturing - index Repo rate - % Base rate -% New durable goods orders - % mom FHFA house price index - % mom Markit - Flash PMI New homes sold - % mom
Wednesday Wednesday Wednesday Wednesday
6/24/2015 6/24/2015 6/24/2015 6/24/2015
09:30:00 10:00:00 14:30:00 18:00:00
NL DE US FR
Producer confidence manufacturing - index Ifo - business climate - index GDP - % qoq annualised Total jobseekers - thousands
Thursday Thursday Thursday Thursday
6/25/2015 6/25/2015 6/25/2015 6/25/2015
13:00:00 14:30:00 14:30:00 14:30:00
CZ US US US
Repo rate - % Initial jobless claims - thousands PCE deflator core - % mom PCE deflator core - % yoy
Friday Friday Friday Friday
6/26/2015 6/26/2015 6/26/2015 6/26/2015
01:30:00 01:30:00 10:00:00 16:00:00
JP JP EC US
CPI - % yoy Unemployment - % M3 growth - % yoy Univ. of Michigan cons. confidence - index
Period
Latest outcome
Consensus
ABN AMRO
May
-3.0
4.2
4.8
Jun P Jun Jun P Jun P Jun P Jun-23 Jun-23 May Apr Jun P May
49.2 103.0 53.8 53.6 52.2 7.5 1.65 -1.0 0.3 54.0 7.0
49.4 102.0 53.7 53.6 52.2 7.5 1.50 -0.7 0.5 54.2 -0.7
53.9 53.8 52.4 7.5 1.50 -0.3 0.5 54.0 -0.5
Jun Jun 1Q T May
4.0 108.5 -1.0 26.0
108.1 -0.2
Jun-25 Jun-20 May May
0.05 267.0 0.0 1.0
0.05
May May May Jun F
1.0 3.0 5.0 95.0
0.4 3.3 5.4 94.6
3.8 108.0
0.05
0.1 1.2
5.5 96.0
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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