Group Economics
Daily Insight
Macro & Financial Markets Research Maritza Cabezas & Georgette Boele
US economy set to rebound
+ 31 20 343 5618
27 May 2015
US business spending strong and consumer confidence stabilising…. …confirming our view that the US economy will bounce back in the second quarter The dollar rally is gaining momentum
US business spending climbs for second month in a row US durable goods orders declined by 0.5% in April after a strong jump of 5.1% the previous month. In March the large gains in orders was related to civilian aircraft and defence goods, which are particularly volatile. The more closely watched parts of this report, which provide a good indication of business spending, rose solidly in April. Core capital goods, excluding defence and aircrafts rose 1%, down from 1.5%.
Rate hike expectations are crucial for the US dollar US dollar index
102
4
100
5 6
98
7
96
8
Meanwhile core capital good shipments, used by the BEA to
94
estimate investment in durable equipment in the National
92
Accounts, rose 0.8%, down from 1% the previous month.
90 Jan 15
These series had been weak at the beginning of the year, likely as a result of the port disruptions and there is some
Months before Fed rate hike (reverse order)
9 10 11 Feb 15
Mar 15
US Dollar index (lhs)
Apr 15
May 15
Months before Fed rate hike (rhs)
payback now. This data suggest that the temporary headwinds are behind and that there is quite some momentum
Source: Bloomberg
for investment at the moment. Indeed, a drop in business investment and weak exports have held back economic growth
The dollar rally is gaining momentum
in the past few months. We expect the economy to bounce
Investor sentiment towards the US dollar has improved
back in the coming quarters. Given the weak start, GDP
significantly over the recent days. The higher-than-expected
growth should be around 2.7% in 2015.
US consumer inflation data published last Friday has resulted in some upward adjustments in US fed rate hike expectations
Other US data solid, suggesting improvement ahead
this year and next. This was reflected in a few basis points
Other reports released yesterday, including the Conference
increase in the Fed Funds futures and Eurodollar futures for
Board’s consumer confidence index for May showed that
December 2015 and 2016. In addition, investors according to
sentiment remains firm. The index edged up to 95.4 from 95.2.
some measures, on average expect less than 7 months
According to this survey, consumers’ outlook for the labour
before the first Fed rate hike, which was more than 9 months
market improved. Separately, new home sales in the US
some weeks ago. The US dollar has appreciated, while
increased by 6.8% in April, up from -10% the previous month.
financial markets adjusted their expectations (see graph
Meanwhile, the S&P Case Schiller home price index increased
above). USD/JPY has even set a new high since 2007. It is
slightly in March by 0.95%, from a February gain which was
likely that the Fed will start the hiking cycle in September and
revised up by 0.3pp to 1.2%. Over the past year the home
will hike at a faster pace than financial markets currently
price index rose by 5%. Higher home prices are a result of a
anticipate. Later this week, the second estimate of US GDP
housing market that is gradually recovering. The increasing
will be released. Expectations are for a 0.9% drop in Q1
demand for housing should boost construction and support
compared to the 0.2% rise for the first estimate. We are not as
residential investment in the coming time.
negative as current market consensus, so there is room for the US dollar to rally.
2
US economy set to rebound – 27 May 2015
Financial markets Currency markets
Close
Change 1 day
Change 5 days
Change YTD
EUR/USD USD/JPY
1.0887
0.1288
-1.8659
122.99
-0.0894
1.3515
-10.0099 2.6799
AUD/USD
0.7745
0.1293
-1.6508
-5.2599
USD/CHF
0.9519
-0.1573
1.5685
-4.2643
NZD/USD
0.7243
0.1660
-0.8759
-7.1053 -1.1684
GBP/USD
1.5395
0.0650
-0.9076
USD/SGD
1.3490
-0.0815
0.8900
1.7729
USD/CAD
1.2424
-0.0804
1.7693
6.9099
Bond markets
Close
Change 1 day
Change 5 days
Change YTD
2-year German Govt Bond yield
-0.2260
-0.0150
-0.0170
10-year German Govt Bond yield
0.5470
-0.0590
-0.0480
-0.1280 0.0060
Yield curve Germany
0.7730
-0.0440
-0.0310
0.1340
2-year US Treasury Bond yield
0.6446
0.0323
0.0596
-0.0199
10-year US Treasury Bond yield
2.1390
-0.0702
-0.1496
-0.0322
Yield curve US
1.4944
-0.1025
-0.2092
-0.0123
US 2-year sw ap rates
0.8860
0.0062
0.0302
-0.0083
US 10-year sw ap rates
2.2293
0.0082
-0.0747
-0.0568
US sw ap curve
1.3433
0.0020
-0.1049
-0.0485
EU 2-year sw ap rates
0.1040
0.0010
0.0010
-0.0710
EU 10-year sw ap rates
0.9002
-0.0038
-0.0388
0.0882
EU sw ap curve
0.7962
-0.0048
-0.0398
0.1592
-0.0130
-0.0010
-0.0010
-0.0910
0.2845
0.0025
0.0080
0.0289
JPMorgan EMBI Plus Sovereign S
373.6000
10.4700
6.9900
-13.8400
Equity markets
Close
Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
20,437
0.12
1.19
17.12
Hang Seng Index
28,250
0.92
2.39
19.68
Hang Seng China Enterprises Index
14,802
2.55
6.29
23.51
Australian Stock Exchange S&P/ASX 200 Index
5,773
0.91
2.91
6.70
Singapore Straits Times Index
3,460
-0.03
0.17
2.82
Euro Stoxx 50 Index
3,619
-0.99
-1.40
15.03
S&P 500 Index
2,104
-1.03
-1.17
2.20
MSCI World Daily Total Return Gross USD
811
-1.21
-1.21
5.71
AEX Index
496
-0.96
-0.57
16.93
14
15.91
10.45
-26.77
Chicago Board Options Exchange Volatility Index
Commodity markets Reuters/Jefferies CRB Total Return
Close
Change 1 day % Change 5 days %Change YTD%
222
-1.70
-3.88
-3.57
1,188
0.10
-1.77
0.30
Generic first NYMEX Crude Light future
58
0.55
1.90
9.54
Generic first Brent Crude Oil future
64
-2.75
-0.47
11.15
6,107
-0.89
-4.29
-3.07
494
-4.22
-5.41
-16.32
Gold spot USD/Oz
LME Copper 3 Months Rolling Forw ard Generic first Wheat future Chicago Board of Trade Source: Bloomberg
3
US economy set to rebound – 27 May 2015
Day
Date
Time
Country
Key Economic Indicators and Events
Period
Latest outcome
Monday
25/05/2015
01:50:00
JP
Merchandise trade exports - % yoy
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
26/05/2015 26/05/2015 26/05/2015 26/05/2015 26/05/2015 26/05/2015 26/05/2015
09:30:00 14:00:00 14:30:00 15:00:00 15:00:00 16:00:00 16:00:00
NL HU US US US US US
Wednesday
27/05/2015
16:00:00
Thursday Thursday
28/05/2015 28/05/2015
Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday
29/05/2015 29/05/2015 29/05/2015 29/05/2015 29/05/2015 29/05/2015 29/05/2015 29/05/2015 29/05/2015 29/05/2015 29/05/2015
Consensus
Apr
8.0
Producer confidence manufacturing - index Base rate -% New durable goods orders - % mom S&P/Case Shiller house price index FHFA house price index - % mom Conference Board cons. confidence - index New homes sold - % mom
May May 26 Apr Mar Mar May Apr
3.3 1.80 -1 1.0 0.3 95.4 7
1.65 -0.1 1.1 0.7 95.0 4.5
CA
Policy rate - %
May 27
0.8
0.8
11:00:00 16:00:00
EC US
Economic sentiment monitor - index Pending home sales - % mom
May Apr
103.7 1.1
103.6 1.1
01:30:00 01:30:00 01:50:00 08:45:00 10:00:00 10:30:00 14:00:00 14:00:00 14:30:00 15:45:00 16:00:00
JP JP JP FR EC GB BR IN US US US
CPI - % yoy Unemployment - % Industrial production - % mom Consumer spending - % mom M3 growth - % yoy GDP - % qoq GDP - % yoy GDP - % yoy GDP - % qoq annualised Chicago Fed - business confidence - index Univ. of Michigan cons. confidence - index
Apr Apr Apr P Apr Apr 1Q P 1Q 1Q 1Q S May May F
2.3 3.4 -0.8 -0.6 4.6 0.3 -0.3 7.5 0.2 52.3 88.6
4.8 0.4 -1.6 7.3 -0.9 53.4 91.2
ABN AMRO
3.0 1.65
0.8 94.0 5.0
103.5 1.5
-0.6 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").