Group Economics
Daily Insight
Macro & Financial Markets Research Aline Schuiling, Maritza Cabezas & Arjen
Markets rebound
van Dijkhuizen, +31 20 343 5616
28 August 2015
It was ‘Happy Thursday’ with strong economic data and rebounding markets US GDP rebounded more strongly in Q2, while eurozone bank lending is on the up Meanwhile, we expect China to ease monetary policy further this year
Markets rebound and data beat estimates
Eurozone money supply signals recovery
Investor sentiment improved on Thursday, with global equity
% yoy
markets rallying strongly to be roughly at or above start of the week levels. Volatility indexes have also moved down further, though they are still above historical averages. Meanwhile, economic data have beat estimates. Q2 US GDP growth stronger than expected Indeed, the second estimate of Q2 US GDP growth was revised up to 3.7% from 2.3%. Stronger growth in consumption of durable goods together with higher growth in residential investment were important drivers. A strong labour market and
Index
65
13 11 9 7 5 3 1 -1 -3 -5
60 55 50 45 40 35 00
02
04
06
08
Real M1 money supply (lhs)
10
12
14
Composite PMI (rhs)
cheaper gasoline prices are boosting consumption and are supporting a firmer recovery of the housing market. US GDP is
Source: Thomson Reuters Datastream, ABN AMRO Group Economics
expected to continue growing at above trend rates in the second half of the year. The Fed will have to weigh the strong
China’s recent easing measures …
economic data against the recent market turmoil. Although our
Earlier this week, the PBoC reacted to the recent turmoil by
base case is for a September rate hike, instability in markets
cutting its key policy rate by another 25 bps (to 4.6%), marking
could delay the rate hike.
the fifth such move since November 2014. Bank reserve requirements (RRRs) were cut by another 50 bps. The
Eurozone money growth and bank lending accelerate
accompanying statement had a more dovish tone, stressing
Money growth in the eurozone accelerated in July. The annual
the need to use monetary tools more flexibly. It was also
growth rate in the broad monetary aggregate M3 increased to
announced this week that the PBoC will provide banks with
5.3%, up from 4.9% in June. Meanwhile, growth the narrower
around US 28bn in additional short-term liquidity.
aggregate M1 increased to 12.1% from 11.7%. Real M1 growth, which tends to move ahead of changes in GDP
… will likely be followed by more action
growth, has accelerated sharply since the start of this year,
While we expect some more CNY weakening, we assume the
signaling a pick-up in growth in the second half of this year.
PBoC will stand firm to prevent a sharp depreciation. This
Meanwhile, bank lending to the private sector strengthened as
would lead to a tightening of domestic liquidity through FX
well. Annual growth in loans to non-financial companies
interventions, but these effects can be compensated by further
(adjusted for sales and securitisation) jumped to 0.9% in July,
RRR cuts. For now, we expect further RRR cuts of 50 bps in
up from 0.2% in June. The monthly flow in loans to non-
2015 and another 150 bps in 2016. We expect the PBoC to be
financial companies has been on a clear upward trend since
more cautious with cutting policy rates further and pencil in a
the start of this year, reflecting historically low levels of interest
25 bp cut in Q4-2015. We expect the PBoC to use more parts
rates, improved corporate profitability and business confidence
of its monetary toolkit as well, including its standing facilities
and an easing of bank lending conditions. The data underline
and targeted lending to policy banks. We also expect more
that the eurozone economic recovery was gaining momentum
fiscal stimulus, particularly in the form of infrastructure
before the recent turmoil in financial markets began.
investment financed by policy banks.
2
Markets rebound – 28 August 2015
Financial markets Currency markets
Close
Change 1 day % Change 5 days %Change YTD%
EUR/USD USD/JPY
1.1362
-0.2020
1.5008
119.63
0.2346
-3.0944
-6.0992 -0.1752
AUD/USD
0.7095
0.1270
-3.4300
-13.1047
USD/CHF
0.9499
0.1793
-1.2886
-4.4270
NZD/USD
0.6422
-0.0467
-3.1373
-17.6139
GBP/USD
1.5474
-0.0839
-1.3138
-0.6867
USD/SGD
1.4076
-0.0426
0.2636
6.2660
USD/CAD
1.3328
0.1127
1.7793
14.7482
Bond markets 2-year German Govt Bond yield
Close
Change 1 day
Change 5 days
Change YTD
-0.2290
0.0090
0.0280
-0.1310
10-year German Govt Bond yield
0.7040
-0.0260
0.0850
0.1630
Yield curve Germany
0.9330
-0.0350
0.0570
0.2940
2-year US Treasury Bond yield
0.6720
0.0715
0.0146
0.0075
10-year US Treasury Bond yield
2.1663
0.0949
0.0407
-0.0049
Yield curve US
1.4943
0.0234
0.0261
-0.0124
US 2-year sw ap rate
0.8120
0.0170
-0.0864
-0.0823
US 10-year sw ap rate
2.2148
0.0307
0.0463
-0.0713
US sw ap curve
1.4028
0.0137
0.1327
0.0110
EU 2-year sw ap rate
0.0900
0.0000
0.0100
-0.0850
EU 10-year sw ap rate
1.0415
0.0025
0.1145
0.2295
EU sw ap curve
0.9515
0.0025
0.1045
0.3145
-0.0330
0.0000
-0.0040
-0.1110
Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
0.3270
-0.0046
-0.0059
0.0714
JPMorgan EMBI Plus Sovereign S
451.8200
-14.9600
30.3900
64.3800
Equity markets
Close
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
18,377
3.20
-9.13
5.31
Hang Seng Index
21,080
-1.52
-9.01
-10.70
Hang Seng China Enterprises Index
9,428
-0.91
-11.41
-21.33
Australian Stock Exchange S&P/ASX 200 Index
5,173
0.69
-3.86
-4.40
Singapore Straits Times Index
2,873
-0.46
-5.53
-14.62
Euro Stoxx 50 Index
3,171
-1.47
-7.55
0.77
S&P 500 Index
1,902
1.86
-8.52
-7.60
MSCI World Daily Total Return Gross USD
715
-0.11
-8.96
-6.83
AEX Index
429
-1.82
-8.63
1.00
33
-8.08
117.11
72.45
Chicago Board Options Exchange Volatility Index
Commodity markets Reuters/Jef f eries CRB Total Return Gold spot USD/Oz Generic f irst NYMEX Crude Light f uture Generic f irst Brent Crude Oil future LME Copper 3 Months Rolling Forw ard Generic f irst Wheat f uture Chicago Board of Trade Source: Bloomberg
Close
Change 1 day % Change 5 days %Change YTD%
188
0.77
-3.14
1,127
-1.17
-0.60
-18.38 -4.88
39
-0.74
-4.36
-26.75
43
0.62
-7.80
-24.16
4,935
-2.57
-1.20
-21.67
490
-1.01
-1.26
-16.91
3
Markets rebound – 28 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
0.4 107.5 1.4 0.2 0.4 6.7 92.8
0.4 3.7 107.7
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").