Daily Insight Greek proposal a litmus test
Group Economics Macro & Financial Markets Research Nick Kounis, Maritza Cabezas & Arjen van
Dijkhuizen, +31 20 343 5616
9 July 2015
Greece submitted a letter on Wednesday, but today’s reform proposal will be the litmus test FOMC needs more signs of stronger economy, but points to risks associated with a delay of rate hike Sharp stock market correction, despite large-scale support, adds downside risks to Chinese economy
Greek letter asks for ESM programme The Greek government sent a letter to the ESM on
Greece crisis calendar Key events coming up
Wednesday requesting a 3-year loan facility tied to a
09-Jul
Greece submits reform proposal
programme. It stated that Greece is committed to carry out
09-Jul
Eurogroup conference call
reforms ‘in the areas of fiscal sustainability, financial stability,
10-Jul
T-bills mature, EUR 2bn
and long-term economic growth’. This included tax-reform and
11-Jul
Eurogroup meeting
pension-related measures. It also welcomed the opportunity to
12-Jul
EU Summit
explore ‘potential measures’ to make its official sector debt
13-Jul
IMF payment due, EUR 450m
burden becomes sustainable.
14-Jul
Samurai bond matures, JPY 11.67bn
16-Jul
ECB Governing Council meets
Today’s reform proposal will be key
17-Jul
Coupon and T-bills, EUR 1.071bn
The letter was made up of only a page and contained no
20-Jul
ECB-held government bonds, EUR 3.5bn
details on reforms. Greece will present detailed proposals for a ‘comprehensive and specific reform agenda’ today for assessment by the institutions to be presented to the
Source: ABN AMRO Group Economics, Bloomberg
Eurogroup. This will be the real litmus test of how serious Greece is about reaching a deal. Early reactions from officials
Support does not halt China’s stock market correction
to the proposals could shape market sentiment. We think that
After having more than doubled since October 2014, Chinese
reaching a deal will be tough and there is a big risk of failure.
equities lost more than 30% over the past weeks. In view of China’s gradual economic slowdown, a stock market correction
ECB leaves limit on ELA for Greek banks unchanged
was to be expected, but the sell-off has been overly
The ECB was said to have left the limit on ELA lending to
aggressive. Authorities efforts to support the stock markets
Greek banks by the Bank of Greece unchanged at EUR
have proved in vain so far. They have for instance cut interest
88.6bn on Wednesday. The Greek banks should just about
rates and RRRs, injected liquidity into banks, eased margin
make Monday, when it will be reviewed again.
requirements, halted IPOs and suspended the trading of shares for hundreds of companies. Brokers and mutual funds
FOMC needs more evidence of strength of economy
also took action to support the markets.
The Minutes of the June 16-17 FOMC meeting showed that members were divided on the views of the US economy. Some were concerned about the weak economic momentum and the apparent weakness in productivity, while others viewed the strength of the labour market in recent months as potentially signalling a stronger than expected bounce back in economic activity. At the same, some members pointed to the risk of
… adding to downside risks for the economy Contagion to the real economy could particularly work through confidence effects. Wealth effects might still play a limited role, as overall equity holdings are still relatively moderate in GDP terms (and China’s stock markets are still one of the best performing year-to-date). Its large-scale interventions lead to the question how serious the government is with regard to
delaying the rate hike – the need to tighten more rapidly.
financial liberalisation. The sell-off might also complicate the
Although the US economy should continue to improve, there is
strategy to use equity issuance to reduce debt levels. All in all,
a risk that if any Greece or China related stress affects
although hard to estimate at this stage, the stock market crash
incoming US data, that the Fed could delay its rate hike which
has added further downside risks to the economic outlook.
we expect in September.
2
Greek proposal a litmus test – 9 July 2015
Financial markets Currency markets
Close
Change 1 day
Change 5 days
Change YTD
EUR/USD USD/JPY
1.1071
-0.0542
-0.1173
120.73
0.0166
-1.9014
0.7931
AUD/USD
0.7411
-0.2423
-2.9084
-9.3456
USD/CHF
0.9456
0.0317
0.2226
-4.8979
NZD/USD
0.6714
-0.2229
-0.1190
-13.8900
GBP/USD
1.5361
0.0000
-1.5888
-1.3867
USD/SGD
1.3515
0.1111
0.2671
1.9615
USD/CAD
1.2738
-0.0628
1.5789
9.6119
Bond markets
Close
Change 1 day
Change 5 days
-8.4890
Change YTD
2-year German Govt Bond yield
-0.2630
-0.0010
-0.0230
-0.1650
10-year German Govt Bond yield
0.6710
0.0280
-0.1420
0.1300
Yield curve Germany
0.9340
0.0290
-0.1190
0.2950
2-year US Treasury Bond yield
0.5414
0.0000
-0.0856
-0.1231
10-year US Treasury Bond yield
2.1887
-0.0035
-0.1936
0.0175
Yield curve US
1.6473
-0.0035
-0.1080
0.1406
US 2-year sw ap rates
0.8038
-0.0184
-0.0831
-0.0905
US 10-year sw ap rates
2.3087
-0.0378
-0.1688
0.0226
US sw ap curve
1.5049
-0.0194
-0.0857
0.1131
EU 2-year sw ap rates
0.1115
-0.0045
-0.0105
-0.0635
EU 10-year sw ap rates
1.0662
-0.0108
-0.1898
0.2542
EU sw ap curve Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
0.9547
-0.0063
-0.1793
0.3177
-0.0180
0.0000
-0.0040
-0.0960
0.2833
-0.0010
0.0001
0.0277
JPMorgan EMBI Plus Sovereign S
406.3900
4.0600
21.3400
18.9500
Equity markets
Close
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
19,423
-1.60
-5.36
11.30
Hang Seng Index
23,517
-5.84
-10.41
-0.37
Hang Seng China Enterprises Index
11,107
-6.09
-14.44
-7.32
Australian Stock Exchange S&P/ASX 200 Index
5,396
-1.35
-3.64
-0.28
Singapore Straits Times Index
3,285
-1.67
-1.39
-2.38
Euro Stoxx 50 Index
3,328
1.01
-4.83
5.75
S&P 500 Index
2,047
-1.67
-0.80
-0.59
MSCI World Daily Total Return Gross USD
773
-1.21
-2.76
0.73
AEX Index
459
0.53
-4.93
8.14
22.19
7.84
2.40
Chicago Board Options Exchange Volatility Index
Commodity markets Reuters/Jefferies CRB Total Return
20
Close
Change 1 day % Change 5 days %Change YTD%
216
-0.13
-5.24
-6.38
1,158
-0.02
-0.69
-2.25
Generic first NYMEX Crude Light future
52
0.37
-8.99
-2.68
Generic first Brent Crude Oil future
57
0.32
-7.80
-0.17
5,520
3.38
-4.42
-12.38
572
-1.25
-6.91
-2.97
Gold spot USD/Oz
LME Copper 3 Months Rolling Forw ard Generic first Wheat future Chicago Board of Trade Source Bloomberg
3
Greek proposal a litmus test – 9 July 2015
Day
Date
Time
Country
Monday Monday Monday
06/07/2015 06/07/2015 06/07/2015
08:00:00 15:45:00 16:00:00
DE EC US
Tuesday Tuesday Tuesday Tuesday
07/07/2015 07/07/2015 07/07/2015 07/07/2015
08:00:00 09:00:00 14:30:00 16:00:00
Wednesday Wednesday
08/07/2015 08/07/2015
21:00:00
Thursday Thursday Thursday Thursday Thursday Thursday
09/07/2015 09/07/2015 09/07/2015 09/07/2015 09/07/2015 09/07/2015
Friday Friday Friday Friday
10/07/2015 10/07/2015 10/07/2015 10/07/2015
Key Economic Indicators and Events
Period
Latest outcome
Consensus
ABN AMRO
Manufacturing orders - % mom ECB announces weekly QE details ISM non-manufacturing, index
May
1.4
-0.1
0.3
Jun
55.7
56.3
57.0
DE CH US US
Industrial production - % mom Foreign currency reserves - CHF mln Trade balance - USD bn US Job Openings by Industry
May Jun May May
0.9 517488 -40.9 5376
0.1
0.3
US PL
Fed Reserve consumer credit - USD bn Reference rate - %
May Jul 8
20.5 1.5
18.7 1.5
01:50:00 03:30:00 09:30:00 13:00:00 13:00:00
JP CN NL GB GB KR
Machinery orders private sector - % mom CPI - % yoy CPI - % yoy Policy rate - % BoE size of asset purchase programme - GBP bn Policy rate - %
May Jun Jun Jul 9 Jul Jul 9
3.8 1.2 1.1 0.5 375 1.50
-4.1 1.3 0.5 375 1.50
10:30:00 15/07/2015 15/07/2015 15/07/2015
GB CN CN CN
Trade balance - GDP mln M2 money growth - % yoy Aggregate Financing - CNY bn New loans - CNY bn
May Jun Jun Jun
-1202 10.8 1219.6 900.8
-2160 11.0 1400.0 1050.0
-42.0
1.5
0.8 0.5 375 1.50
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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