Daily Insight
Group Economics Macro & Financial Markets Research Nick Kounis, Arjen van Dijkhuizen & Aline
‘Better Tuesday’ for markets
Schuiling, +31 20 343 5616
26 August 2015 • • •
Investor sentiment improved on Tuesday following Monday’s rout… …as China finally delivered cuts in policy rates and banks’ reserve requirements… …and August economic surveys in the Eurozone and US point to ongoing recovery
Market sentiment improved Tuesday, but we may not be
banks with additional resources to finance infrastructure
out of the woods yet
spending.
After Black Monday on the global financial markets, we saw a
China cuts key policy rate by another 25 bps
‘Better Tuesday’. Investor sentiment improved and Monday’s moves partially reversed with equity markets outside of China recovering, while the yen and Treasuries headed lower as safe haven support eased. The EUR/USD fell back following the sharp rise seen at the start of the week. Commodities and EM
%
10 8 6
currencies also firmed. The VIX declined after surging on
4
Monday. However, in a reminder that we may not be out of the
2
woods yet, it remained at historically high levels and US
0
equities fell back into the red at the end of the session. -2 08
The better sentiment reflected a sense that Monday’ hysteria
09
10
11
12
Key policy rate
13
14
15
Headline inflation
may have been overdone and policy easing by the Chinese authorities (see below). In addition, a string of good data
Source: Thomson Reuters Datastream
provided some re-assurance on the global economic outlook (also below).
Germany’s Ifo unexpectedly rises There was also a timely reminder in the data that the economic
Chinese authorities easy policy
recovery is continuing in many big economies. Germany’s Ifo
With market concerns on China’s growth rising and the
business climate indicator increased to 108.3 in August, up
country’s stock markets having suffered further blows, the
from 108.0 in July. The details of the report show that the
Chinese authorities finally reacted on Tuesday. The PBoC
expectations component was almost unchanged at a level of
decided to cut the benchmark 1-year lending and deposit rates
slightly above 102, which is consistent with GDP growth above
by another 25 bps, to 4.6% and 1.75%, respectively. The
the trend growth rate. The current conditions index increased
PBoC also decided to cut banks’ reserve requirements ratio by
to the highest level since April 2014. Although concerns about
50 bps, to 18%.
China are a risk to sentiment, domestic fundamentals for the German economy are good, and the past fall in the euro
We expect more stimulus measures
should support exports.
The steps were in line with our view that the authorities will keep adding stimulus to keep growth on track to reach the
US consumer confidence jumps
2015 target of 7%. The PBoC’s policy statement also
Meanwhile, consumer confidence in the US jumped in August.
confirmed this. It adopted a more dovish tone, stressing the
It rose to 101.5 from 91 in July. It was driven by optimism on
need to use monetary policy tools more flexibly. Overall, we
the outlook for the labour market. It must be said that the
expect more monetary easing to come. We also expect the
survey was of course take before the recent market turmoil,
authorities to allow more CNY weakness and to add more
and if lower equity prices persist, this will be a negative for
targeted (fiscal) stimulus, for instance by providing policy
confidence going forward. But again the survey is consistent with good macro fundamentals.
2
‘Better Tuesday’ for markets – 26 August 2015
Financial markets Currency markets
Close
Change 1 day
Change 5 days
Change YTD
EUR/USD USD/JPY
1.1482
0.5165
3.8343
-5.1074
118.95
-0.8171
-4.1267
-0.7427
AUD/USD
0.7145
-0.5290
-2.4307
-12.4923
USD/CHF
0.9414
-0.6018
-2.9084
-5.2822
NZD/USD
0.6488
-0.5670
-1.2781
-16.7672
GBP/USD
1.5691
-0.0319
0.2876
0.7060
USD/SGD
1.4045
0.0926
-0.2061
6.0320
USD/CAD
Bond markets
1.3339
Close
0.1802
Change 1 day
1.2986
Change 5 days
14.8429
Change YTD
2-year German Govt Bond yield
-0.2380
0.0140
0.0160
-0.1400
10-year German Govt Bond yield
0.7300
0.1380
0.0880
0.1890
Yield curve Germany
0.9680
0.1240
0.0720
0.3290
2-year US Treasury Bond yield
0.6127
0.0447
-0.1053
-0.0518
10-year US Treasury Bond yield
2.0942
0.0908
-0.0983
-0.0770
Yield curve US
1.4815
0.0461
0.0070
-0.0252
US 2-year sw ap rate
0.8095
-0.0157
-0.1213
-0.0848
US 10-year sw ap rate
2.1606
-0.0153
-0.0756
-0.1255
US sw ap curve
1.3511
0.0004
0.0457
-0.0407
EU 2-year sw ap rate
0.0935
-0.0035
0.0085
-0.0815
EU 10-year sw ap rate
1.0500
-0.0175
0.0870
0.2380
0.9565
-0.0140
0.0785
0.3195
-0.0330
-0.0010
-0.0050
-0.1110
EU sw ap curve Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
0.3316
0.0025
-0.0013
0.0760
JPMorgan EMBI Plus Sovereign S
466.7800
17.8800
45.0800
79.3400
Equity markets
Close
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
17,807
Hang Seng Index
-3.96
-13.37
2.04
21,405
0.72
-8.82
-9.32
Hang Seng China Enterprises Index
9,514
-0.92
-11.66
-20.62
Australian Stock Exchange S&P/ASX 200 Index
5,137
2.72
-3.13
-5.06
Singapore Straits Times Index
2,886
1.51
-5.36
-14.23
Euro Stoxx 50 Index
3,218
4.71
-7.94
2.27
S&P 500 Index
1,891
-0.09
-9.80
-8.13
MSCI World Daily Total Return Gross USD
716
-3.84
-9.14
-6.73
AEX Index
437
4.05
-8.84
2.88
-15.73
148.95
78.80
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
34
Close
Change 1 day % Change 5 days %Change YTD%
187
-2.68
-5.36
-19.00
1,139
-1.35
1.94
-3.83
39
1.75
-8.70
-26.96
43
0.77
-11.86
-24.96
5,065
2.30
0.60
-19.60
495
-1.64
0.15
-16.07
3
‘Better Tuesday’ for markets – 26 August 2015
Day
Date
Time
Country
Monday Monday
24/08/2015 24/08/2015
09:00:00 15:45:00
CH EC
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
25/08/2015 25/08/2015 25/08/2015 25/08/2015 25/08/2015 25/08/2015 25/08/2015 25/08/2015
08:00:00 09:30:00 10:00:00 14:00:00 15:00:00 15:00:00 16:00:00 16:00:00
Wednesday
26/08/2015
Thursday Thursday Thursday Friday Friday Friday Friday Friday Friday Friday Friday Friday
Key Economic Indicators and Events
Period
Latest outcome
Consensus
ABN AMRO
Total sight deposits in bn CHF ECB announces weekly QE details
21-Aug
463
DE NL DE HU US US US US
GDP - % qoq, Q2 final and details Producer confidence manufacturing - index Ifo - business climate - index Base rate -% S&P/Case Shiller house price index FHFA house price index - % mom New homes sold - % mom Conference Board cons. confidence - index
2Q F Aug Aug Aug 25 Jun Jun Jul Aug
0.4 3.7 108.0 1.4 -0.2 0.4 -6.8 90.9
0.4
0.4 3.7 107.7
107.5 1.4 0.2 0.4 6.7 92.8
14:30:00
US
New durable goods orders - % mom
Jul
3.4
-0.4
27/08/2015 27/08/2015 27/08/2015
10:00:00 14:30:00 16:00:00
EC US US
M3 growth - % yoy GDP - % qoq annualised Pending home sales - % mom
Jul 2Q S Jul
5.0 2.3 -1.8
4.9 3.2 1.7
5.0 3.1 1.5
28/08/2015 28/08/2015 28/08/2015 28/08/2015 28/08/2015 28/08/2015 28/08/2015 28/08/2015 28/08/2015
01:30:00 01:30:00 10:30:00 11:00:00 14:00:00 14:00:00 14:30:00 14:30:00 16:00:00
JP JP GB EC DE BR US US US
CPI - % yoy Unemployment - % GDP - % qoq Economic sentiment monitor - index CPI - % yoy GDP - % yoy PCE deflator core - % mom PCE deflator core - % yoy Univ. of Michigan cons. confidence - index
Jul Jul 2Q P Aug Aug P 2Q Jul Jul Aug F
0.4 3.4 0.7 104.0 0.2 -1.6 0.2 1.3 92.9
0.2 3.4 0.7 103.6 0.2
0.7 103.8 0.2
0.1 1.3 93.5
93.0
0.2 0.3 6.0 92.0
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").