Global daily insight 29 september 2015

Page 1

Group Economics

Daily Insight

Macro & Financial Markets Research Aline Schuiling, Kim Liu & Nick Kounis

Spain’s political uncertainties

+31 20 343 5616

29 September 2015   

Catalonia’s election did not result in a majority of votes for the pro-independence parties … … but Spanish bonds will continue to be driven by political uncertainty until the general election ECB officials send mixed signals on how quickly QE plus decision might come

No majority of votes for Catalan independence parties… The regional elections in the Spanish state of Catalonia did not

Spain: polls general elections

result in a majority of the votes for the pro-independence

% (average eight most recent polls)

parties. Combined, the Junts pel Si and CUP won just under 48% of the votes, although they did win an absolute majority of

35 30

the number of seats (72 out of 135) in Catalonia’s regional

25

parliament. The pro-independence parties are wide apart in the

20

political spectrum (from far-left to centre-right), so there is not a

15

lot that binds them together besides their aim for

10

independence. Therefore, this goal should stay high on the

5

agenda of the new regional government. Still, the chances of a

0 Jun-13

unilateral declaration of independence seem limited at the moment, given the lack of a majority of votes and the financial

Jan-14

Jan-15

People's Party

Socialist Workers' Party

Podemos

Citizens

difficulties of such a step. Moreover, according to the Spanish constitutional court, this act would be illegal, while the Spanish government will not work with Catalonia to make it a happy

Source: Various polling institutes

divorce. More likely, the way forward will be that the new Catalan government tries to negotiate with the central

ECB officials grapple on timing of move

government about a more favourable tax treatment and/or

Various ECB Governing Council members have given

some extra decentralisation of power towards the region.

speeches over recent days. In general they point to the

These negotiations will probably start after December, when

likelihood of further monetary easing, but there are mixed

the general elections will be held.

messages on how quickly this may come. In general, some Executive Board members (Draghi, Praet and Coeure) are

… but political uncertainty to remain until general election

suggesting that there will be no hesitation and that they will act

As we mentioned in our Fixed Income Watch, ‘Catalonian

with force. On the other hand, some national central bank

catastrophe?’ Of 25 September (Euro Rates Watch -

governors (Nowotny, Vasiliauskas) have said they need more

Catalonian catastrophe? - Insights), the real political test for

time, with no discussion of new measures until December. The

Spain will be in December during the nationwide general

exception to this rule is Executive Board member Sabine

elections. We think the most likely outcome is that the next

Lautenschlaeger, who also said it was ‘too early’ to talk about

government will either be a Partido Popular (PP)-minority

broadening QE on Monday. Having said that, she is clearly on

government or PP-led coalition. That said, during the rest of

the extreme hawkish side of the spectrum of the Governing

this year the Spanish government bond market will probably

Council.

continue to be driven by political uncertainty, implying that there will remain a political risk premium in SPGBs. In the long

October versus December

run we are still supportive of Spanish bonds. The fundamental

Our base case is that the ECB will step up QE before the end

economic outlook is strongly in favour of SPGBs and we think

of this year, by increasing the size of monthly purchases by

that relatively benign political outcomes are the most likely

EUR 20bn. We see October as more likely than December at

scenario. In addition, we expect the ECB to announce an

this stage, though the mixed messages from officials have

expansion of its QE programme by increasing its monthly

made us less certain about this. So the chances of a delay to

purchases before year end (see below). This should support

December have increased over recent days.

credit spreads and should revive the scarcity trade.


2

Spain’s political uncertainties – 29 September 2015

Financial markets Currency markets

Close

Change 1 day

Change 5 days

Change YTD

EUR/USD USD/JPY

1.1251

0.0623

1.1781

119.64

-0.2335

-0.4245

-0.1169

AUD/USD

0.6963

-0.3720

-1.7774

-14.8257

USD/CHF

0.9731

-0.0616

-0.2051

-2.1322

NZD/USD

0.6301

-0.4424

0.1112

-19.1869

GBP/USD

1.5164

-0.0659

-1.3082

-2.6513

USD/SGD

1.4318

0.2310

1.0659

8.0196

USD/CAD

1.3399

0.0149

0.9569

15.2999

Bond markets

Close

Change 1 day

Change 5 days

-7.0012

Change YTD

2-year German Govt Bond yield

-0.2570

-0.0130

-0.0230

10-year German Govt Bond yield

0.5870

-0.0620

-0.0970

-0.1590 0.0460

Yield curve Germany

0.8440

-0.0490

-0.0740

0.2050

2-year US Treasury Bond yield

0.6683

0.0000

-0.0055

0.0038

10-year US Treasury Bond yield

2.0878

-0.0071

-0.0459

-0.0834

Yield curve US

1.4195

-0.0071

-0.0404

-0.0872

US 2-year sw ap rates

0.7692

-0.0012

-0.0162

-0.1251

US 10-year sw ap rates

2.0483

-0.0167

-0.0820

-0.2378

US sw ap curve

1.2791

-0.0155

-0.0658

-0.1127

EU 2-year sw ap rates

0.0580

0.0000

0.0130

-0.1170

EU 10-year sw ap rates

0.9554

-0.0006

-0.0176

0.1434

0.8974

-0.0006

-0.0306

0.2604

-0.0410

0.0000

-0.0030

-0.1190

EU sw ap curve Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month

0.3261

-0.0003

0.0069

0.0705

JPMorgan EMBI Plus Sovereign S

454.4500

22.3100

50.1400

67.0100

Equity markets

Close

Change 1 day % Change 5 days %Change YTD%

Nikkei 225

17,645

-1.32

-4.27

1.11

Hang Seng Index

21,186

0.43

-3.35

-10.25 -20.63

Hang Seng China Enterprises Index

9,512

0.45

-5.15

Australian Stock Exchange S&P/ASX 200 Index

5,002

-2.18

-1.99

-7.56

Singapore Straits Times Index

2,792

-1.44

-3.04

-17.03

Euro Stoxx 50 Index

3,039

-2.37

-4.56

-3.40

S&P 500 Index

1,882

-2.57

-4.33

-8.60

MSCI World Daily Total Return Gross USD

707

-1.97

-4.13

-7.94

AEX Index

412

-2.48

-4.73

-2.86

28

16.98

37.19

43.91

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 Source: Bloomberg

Close

Change 1 day % Change 5 days %Change YTD%

193

-1.49

-2.05

1,133

0.08

0.72

-16.14 -4.39

45

0.16

-2.90

-16.46

47

0.02

-3.52

-17.41

4,965

-1.15

-5.77

-21.19

507

0.20

2.22

-14.12


3

Spain’s political uncertainties – 29 September 2015

Day

Date

Time

Country

Key Economic Indicators and Events

Monday Monday Monday Monday Monday

28/09/2015 28/09/2015 28/09/2015 28/09/2015 28/09/2015

. 14:30:00 14:30:00 15:45:00 16:00:00

CH US US EC US

Total Sight Deposits bn PCE deflator core - % mom PCE deflator core - % yoy ECB announces weekly QE details Pending home sales - % mom

Tuesday Tuesday Tuesday Tuesday Tuesday

29/09/2015 29/09/2015 29/09/2015 29/09/2015 29/09/2015

07:30:00 11:00:00 14:00:00 15:00:00 16:00:00

IN EC DE US US

Repo rate - % Economic sentiment monitor - index CPI - % yoy S&P/Case Shiller house price index Conference Board cons. confidence - index

Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday

30/09/2015 30/09/2015 30/09/2015 30/09/2015 30/09/2015 30/09/2015 30/09/2015 30/09/2015 30/09/2015

01:50:00 09:55:00 09:55:00 10:30:00 11:00:00 11:00:00 11:00:00 14:15:00 15:45:00

JP DE DE GB EC EC EC US US

Industrial production - % mom Unemployment - % Unemployment change - thousands GDP - % qoq Core inflation - % yoy CPI - % yoy Unemployment - % ADP nat. employment report - thousands Chicago Fed - business confidence - index

Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday

01/10/2015 01/10/2015 01/10/2015 01/10/2015 01/10/2015 01/10/2015 01/10/2015 01/10/2015 01/10/2015

01:50:00 03:00:00 03:45:00 10:00:00 10:30:00 14:30:00 15:45:00 16:00:00

JP CN CN EC GB US US US RU

Tankan business conditions large enterprises PMI manufacturing - index (official) PMI manufacturing - index (HSBC) - flash PMI manufacturing - index PMI manufacturing - index Initial jobless claims - thousands Markit - Flash PMI ISM manufacturing - index GDP - % yoy

Friday Friday Friday Friday

02/10/2015 02/10/2015 02/10/2015 02/10/2015

01:30:00 14:30:00 14:30:00 14:30:00

JP US US US

Unemployment - % Change in employment private employment - thousands Change in employment total - thousands Unemployment - %

Period

Latest outcome

Consensus

Aug Aug

465 0.0 1.3

0.1 1.3

Aug

-1.4

0.3

0.4

Sep 29 Sep Sep P Jul Sep

7.3 104.2 0.2 -0.1 101.5

7.0 104.1 0.0 0.1 96.1

104.3 0.0 0.2 96

Aug P Sep Sep 2Q F Sep A Sep Aug Sep Sep

-0.8 6.4 -7.0 0.7 0.9 0.1 10.9 190.3 54.40

0.9 6.4 -4.3 0.7 0.9 0.0 10.9 183.6 53.20

0.9 -0.1 10.9 180.0 52.0

3Q Sep Sep F Sep F Sep Sep 25 Sep F Sep 2Q F

15.0 49.7 47.0 52.0 51.5 267.0 53.0 51.1 -4.6

13.0 49.6 47.1 52.0 51.4

50.7 -4.6

50 -4.6

Aug Sep Sep Sep

3.3 140.0 173.0 5.1

3.3 195.0 201.0 5.1

190 195 5.1

ABN AMRO

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").


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