Group Economics
Daily Insight
Macro & Financial Markets Research Nick Kounis, Aline Schuiling, & Arjen van
Euro inflation back in the red
Dijkhuizen +31 20 343 5616
30 September 2015
Eurozone inflation looks likely to turn negative again in September – flash out today Eurozone economic sentiment rises, price expectations fall in industry and retail sector RBI joins Asia central banks in cutting policy rates, contrasting with EM central banks in other regions
Eurozone inflation looks set to go negative
HICP inflation Germany versus eurozone
Today’s flash estimate should show eurozone inflation falling back into negative territory again in September. This was the message from inflation numbers published by member states
% yoy
5
on Tuesday. Spanish HICP inflation fell to -1.2% yoy from
4
-0.5% yoy in August. Meanwhile, German HICP inflation fell to
3
-0.2% yoy from +0.1%.
2 1
Energy prices the main culprit The decline in oil prices is probably the main driver of the fall in inflation in September. However, there are some signs of
0 -1 06
07
weakening external inflationary pressures as well. For
08
09
10
Germany
11
12
13
14
15
Eurozone
instance, German ex. energy import prices fell by 0.7% mom in August, a sign that the influence of the past weakness of the euro is waning. At the same time, global manufactured goods
Source: Thomson Reuters Datastream
prices are falling. On the other hand, domestic price pressures seem to be firming, given the strengthening recovery.
Reserve Bank of India (RBI) cuts policy rates by 50 bps… On Tuesday, the RBI joined the Asian central banks opting for
ECB set to ease further
further monetary easing to support growth, contrasting to
We think that the ECB will step up QE before long. A particular
central banks in other regions such as Latin America that have
concern at the ECB is that inflation expectations may become
been forced to hike rates recently. Following central banks in
dislodged given the major undershooting of the target. Buried
China, Korea, Taiwan and Thailand, the RBI cut the main
in the strong economic sentiment report for September,
policy rate (repo rate) by 50 bps, to 6.75%. This was more than
companies’ inflation expectations are declining (see below).
the 25 bp cut expected by markets (and us). Earlier this year,
Bond market inflation expectations have also come down.
the RBI cut the policy rate by a total of 75 bps in three separate moves. The RBI also lowered the reverse repo rate
Eurozone economic sentiment jumps higher
by 50 bps, to 5.75%, and took other supportive measures,
Economic sentiment jumped higher in September. It increased
such as increasing limits on foreign investment in local
to 105.6, up from 104.1 in August, reaching the highest level in
currency bonds.
more than four years. Sentiment in industry, services and retail trade all increased noticeably. In the construction sector it
… with India relatively resilient to market turmoil
declined somewhat, while consumer confidence was roughly
The rate cut follows the sharp drop in inflation. CPI has fallen
unchanged. The rise in sentiment adds to the evidence that the
to a - by Indian standards – low level of 3.7% yoy in August, far
eurozone economy is growing robustly and is rather resilient to
below the RBI target of 5% by 2017. We think the RBI will keep
the slowdown in China and other emerging markets. The
rates on hold for a while now. In our view, India and the INR
details of the report show that the employment expectations
are proving quite resilient to the current market turmoil.
increased noticeably in industry and retail trade and edged
Prudent policies, improved external finances and better growth
higher from an already high level in services. Finally, the EC’s
prospects make India less vulnerable to contagion from a Fed
survey revealed that expectations about selling prices dropped
lift-off now than it was during the taper tantrum in 2013, when it
sharply in the industrial and the retail sector, while in services
was classified as one of the so-called fragile five.
they rose a touch.
2
Euro inflation back in the red – 30 September 2015
Financial markets Currency markets
Close
Change 1 day
Change 5 days
Change YTD
EUR/USD USD/JPY
1.1258
0.0800
0.6437
119.89
0.1253
-0.3242
0.0918
AUD/USD
0.7013
0.4009
0.1428
-14.2141
USD/CHF
0.9712
-0.0617
-0.8676
-2.3232
NZD/USD
0.6365
0.2994
1.4504
-18.3660
GBP/USD
1.5157
0.0396
-0.5772
-2.6963
USD/SGD
1.4270
-0.0700
0.0771
7.6575
USD/CAD
1.3422
0.0000
0.7658
15.4978
Bond markets
Close
Change 1 day
Change 5 days
-6.9433
Change YTD
2-year German Govt Bond yield
-0.2520
0.0050
0.0100
-0.1540
10-year German Govt Bond yield
0.5830
-0.0040
-0.0070
0.0420
Yield curve Germany
0.8350
-0.0090
-0.0170
0.1960
2-year US Treasury Bond yield
0.6486
0.0000
-0.0507
-0.0159
10-year US Treasury Bond yield
2.0614
0.0106
-0.0883
-0.1098
Yield curve US
1.4128
0.0106
-0.0376
-0.0939
US 2-year sw ap rates
0.7523
0.0071
-0.0437
-0.1420
US 10-year sw ap rates
2.0084
-0.0009
-0.1392
-0.2777
US sw ap curve
1.2561
-0.0080
-0.0955
-0.1357
EU 2-year sw ap rates
0.0515
-0.0005
-0.0015
-0.1235
EU 10-year sw ap rates
0.9543
0.0013
-0.0187
0.1423
EU sw ap curve
0.9028
0.0018
-0.0172
0.2658
-0.0410
0.0000
-0.0020
-0.1190
Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
0.3266
0.0005
0.0006
0.0710
JPMorgan EMBI Plus Sovereign S
459.6100
5.1600
36.6200
72.1700
Equity markets
Close
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
16,931
-4.05
-6.31
-2.98
Hang Seng Index
20,557
-2.97
-5.52
-12.91
Hang Seng China Enterprises Index
9,231
-2.96
-6.76
-22.98
Australian Stock Exchange S&P/ASX 200 Index
4,963
0.90
-0.70
-8.28
Singapore Straits Times Index
2,788
-0.14
-3.27
-17.15
Euro Stoxx 50 Index
3,030
-0.32
-1.50
-3.70
S&P 500 Index
1,884
0.12
-3.02
-8.49
MSCI World Daily Total Return Gross USD
702
-0.62
-3.13
-8.51
AEX Index
412
-0.05
-1.87
-2.91
27
-2.90
19.56
39.74
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%
194
0.40
-0.64
1,127
-0.04
-0.29
-15.80 -4.88
45
-0.88
0.79
-15.84
48
-0.60
0.40
-16.38
4,970
0.10
-2.13
-21.11
504
-0.05
-0.79
-14.62
3
Euro inflation back in the red – 30 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
6.8 105.6 0.0 -0.2 103.0
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
-0.5 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)
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