Daily Insight
Group Economics Macro & Financial Markets Research Nick Kounis & Arjen van Dijkhuizen
QE helping eurozone growth
+31 20 343 5616
9 September 2015 • • •
Eurozone GDP growth was revised up in Q1 and Q2, painting a picture of ongoing recovery The ECB’s QE and measures to repair the credit channel have contributed to this picture China trade continues to shrink – authorities likely to allow further moderate CNY weakness
What has QE ever done for us?
Eurozone economy in recovery mode
Speculation has risen recently that the ECB will step up its QE
% qoq annualised rates
programmes. This is a topic we have discussed at length in
2.5 2.1
previous editions of this publication. A typical (and understandable) reaction to this is that all this simply means
2.0
that the initial QE programme has been unsuccessful and what
1.5
1.6
is the point of doing more. Tuesday’s revised eurozone GDP
1.0
data provided some answer to these skeptical voices: QE
1.0
seems to have contributed to better economic growth rates.
0.5
Eurozone economic growth revised up in Q1 – Q2
1.4
0.8 0.3
0.0 Q1 14
Q2 14
Q3 14
Q4 14
Q1 15
Q2 15
Eurozone GDP growth was revised up by 0.1 percentage points in each of the previous two quarters, to 0.4% qoq in Q2
Source: Thomson Reuters Datastream, ABN AMRO Group Economics
and 0.5% in Q1. In annualised terms this equates to 1.4% and 2.1% respectively. Given that eurozone trend growth is likely a little above 1%, this is consistent with an economy growing about its modest potential. This view is supported by falling unemployment and signs that core inflation has bottomed out. QE has supported the recovery Economic growth has picked up since the first half of last year, when the economy was growing at below-trend rates. The ECB’s monetary easing – including QE – as well as other
Chinese imports continue to disappoint… Meanwhile, Chinese foreign trade continued to disappoint. Imports contracted by -13.8% yoy in August (July: -8.1% yoy). This marked the 10th consecutive month of contraction. This poor performance reflects weak domestic demand in the first place, but also lower import (including commodity) prices driving down import values. Imports from the EU were particularly weak, contracting by -21.7% yoy in August.
policies to get bank lending going – have contributed to better economic growth. Although QE was only announced in January of this year and implemented in March, the effects started to kick in well before that as financial markets anticipated the policy. This pricing in seems to have become really significant around a year ago after ECB President Draghi’s speech at Jackson Hole.
… but exports did slightly better than expected Chinese exports in August contracted for the second month in a row (-5.5%), but less sharply than in July (-8.3% yoy). While lower export prices drive down export values, the ongoing contraction suggests that demand remains subdued. Exports to the EU did relatively poorly, contracting by 7.5% yoy (Germany -9.9%), although Chinese and EU trade figures do
Lower interest rates and euro The resulting decline in market interest rates across the curve also pushed down bank lending rates, especially in the periphery. In addition, the euro fell sharply. Bank lending conditions have also eased. Of course other important factors have also contributed to the recovery, such as the fall in oil prices, and the virtual ending of austerity.
not always seem to match. This also shows that past strength of the yuan may still be a negative. The recent devaluation is not enough to significantly change this. In fact, the authorities intervened to stabilise the yuan after their initial devaluation last month. We expect that after an initial stabilisation phase, the authorities will allow some more CNY weakness, although we do not expect a sharp depreciation.
2
QE helping eurozone growth – 9 September 2015
Financial markets Currency markets
Close
Change 1 day
Change 5 days
Change YTD
EUR/USD USD/JPY
1.1208
0.2146
-0.2403
-7.3719
119.86
0.0417
-0.2331
0.0167
AUD/USD
0.7024
-0.0711
-0.0569
-13.9743
USD/CHF
0.9791
-0.0918
1.0110
-1.4891
NZD/USD
0.6349
0.1104
-0.0315
-18.5504
GBP/USD
1.5394
0.1366
0.5487
-1.2002
USD/SGD
1.4176
-0.0705
0.1625
7.0210
USD/CAD
Bond markets
1.3214
Close
-0.0756
Change 1 day
-0.4145
Change 5 days
13.7667
Change YTD
2-year German Govt Bond yield
-0.2230
0.0020
-0.0100
-0.1250
10-year German Govt Bond yield
0.6760
0.0010
-0.1210
0.1350
Yield curve Germany
0.8990
-0.0010
-0.1110
0.2600
2-year US Treasury Bond yield
0.7327
0.0260
0.0287
0.0682
10-year US Treasury Bond yield
2.1917
0.0673
0.0393
0.0205
Yield curve US
1.4590
0.0413
0.0106
-0.0477
US 2-year sw ap rate
0.8545
-0.0055
0.0094
-0.0398
US 10-year sw ap rate
2.2209
-0.0090
0.0039
-0.0652
US sw ap curve
1.3664
-0.0035
-0.0055
-0.0254
EU 2-year sw ap rate
0.0820
0.0040
-0.0090
-0.0930
EU 10-year sw ap rate
1.0120
-0.0020
-0.0895
0.2000
EU sw ap curve Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
0.9300
-0.0060
-0.0805
0.2930
-0.0350
-0.0010
-0.0020
-0.1130
0.3330
0.0010
0.0040
0.0774
JPMorgan EMBI Plus Sovereign S
425.0500
4.3700
5.4000
37.6100
Equity markets
Close
Change 1 day % Change 5 days %Change YTD%
Nikkei 225
17,427
-2.43
-4.07
-0.14
Hang Seng Index
21,259
3.28
-1.90
-9.94
Hang Seng China Enterprises Index
9,479
4.13
-2.69
-20.90
Australian Stock Exchange S&P/ASX 200 Index
5,115
1.69
0.37
-5.47
Singapore Straits Times Index
2,885
1.15
0.09
-14.26
Euro Stoxx 50 Index
3,234
1.12
1.41
2.78
S&P 500 Index
1,970
2.56
-0.09
-4.30
MSCI World Daily Total Return Gross USD
721
0.05
-3.01
-6.09
AEX Index
439
0.91
1.37
3.54
25
-11.58
-13.54
28.02
Chicago Board Options Exchange Volatility Index
Commodity markets Reuters/Jefferies CRB Total Return Gold spot USD/Oz
Close
Change 1 day % Change 5 days %Change YTD%
197
-0.91
-2.67
-14.45
1,122
0.21
-1.63
-5.33
Generic first NYMEX Crude Light future
46
-0.30
-6.69
-13.82
Generic first Brent Crude Oil future
49
3.86
-0.18
-13.71
5,345
3.83
5.44
-15.16
475
1.55
-1.55
-19.46
LME Copper 3 Months Rolling Forw ard Generic first Wheat future Chicago Board of Trade Source: Bloomberg
3
QE helping eurozone growth – 9 September 2015
Day
Date
Time
Country
Monday Monday Monday
07/09/2015 07/09/2015 07/09/2015
08:00:00 09:00:00 15:45:00
DE CH EC
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
08/09/2015 08/09/2015 08/09/2015 08/09/2015 08/09/2015 08/09/2015 08/09/2015
01:50:00 11:00:00 12:00:00 21:00:00
Wednesday Wednesday Wednesday Wednesday
09/09/2015 09/09/2015 09/09/2015 09/09/2015
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Friday Friday Friday Friday Friday Friday Friday
Key Economic Indicators and Events
Period
Latest outcome
Consensus
ABN AMRO
Industrial production - % mom Foreign currency reserves - CHF mln ECB announces weekly QE details
Jul Aug
-1.4 531820
1.1
1.0
JP EC US US CN CN RU
GDP - % qoq GDP - Q2 final estimate and components, % qoq NFIB small business optimisme - index Fed Reserve consumer credit - USD bn Exports Imports GDP - % yoy
2Q F 2Q P Aug Jul Aug Aug 2Q P
-0.4 0.3 95.4 20.7 -8.3 -8.1 -4.6
-0.5 0.3 95.9 18.9 -6.5 -8.0 -4.5
10:30:00 16:00:00 16:00:00 23:00:00
GB US CA NZ
Trade balance - GDP mln US Job Openings by Industry Policy rate - % Policy rate - %
Jul Jul Sep 9 Sep 10
-1601.0 5249 0.5 3.0
-1866.7 5323 0.50 2.76
10/09/2015 10/09/2015 10/09/2015 10/09/2015 10/09/2015 10/09/2015 10/09/2015 10/09/2015
01:50:00 03:30:00 09:30:00 13:00:00 13:00:00 15/09/2015 15/09/2015 15/09/2015
JP CN NL GB GB CN CN CN
Machinery orders private sector - % mom CPI - % yoy CPI - % yoy Policy rate - % BoE size of asset purchase programme - GBP bn New Yuan loans - CNY bn Aggregate financing - CNY bn M2 growth - %yoy
Jul Aug Aug Sep 10 Sep Aug Aug Aug
-7.9 1.6 1.0 0.5 375 1480 718.8 13.3
3.9 1.9 0.5 375 850 1035.0 13.3
11/09/2015 11/09/2015 11/09/2015 11/09/2015 11/09/2015 11/09/2015 11/09/2015
08:00:00 12:30:00 14:30:00 14:30:00 16:00:00
DE RU US US US KR EC
CPI - % yoy Key rate % Prod. prices index - % mom Prod. prices index excl food and energy - % mom Univ. of Michigan cons. confidence - index Policy rate - % Euro finance ministers, central bankers meet in Luxembourg
Aug F Sep 11 Aug Aug Sep P Sep 11
0.2 11.0 0.2 0.3 91.9 1.50
0.2 11.0 -0.1 0.1 91.5 1.50
96.0
-4.5
0.25 2.75
0.8
10.5
92.0 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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