May 10, 2016 Global Markets Roundup NBG Economic Research ... · Q1:2016 (1.6% yoy) from 0.3% qoq...
Transcript of May 10, 2016 Global Markets Roundup NBG Economic Research ... · Q1:2016 (1.6% yoy) from 0.3% qoq...
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US nonfarm Payrolls monthly change
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Source: Bloomberg
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Corporate loans
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Net % of Banks reporting tightening in credit standards% %
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Source: Fed, data as of Q1:16
May 10, 2016
Global Markets Roundup NBG Economic Research Division
Equities suffer due to mixed economic data and heightened policy uncertainty
Paul Mylonas, PhD NBG Group
Chief Economist 210-3341521
Ilias Tsirigotakis Head of
Global Markets Research
210-3341517 tsirigotakis.hlias
@nbg.gr
Panagiotis Bakalis 210-3341545 mpakalis.pan
@nbg.gr
Lazaros Ioannidis 210-3341553
ioannidis.lazaros @nbg.gr
Vasiliki Karagianni
210-3341548 karagianni.vasiliki
@nbg.gr
Ch
art
s o
f th
e w
eek
See disclosures and analyst certification on last page.
US job growth decelerated in April, with nonfarm payrolls (NFPs) increasing by a still strong 160k from 208k in March and a 12-month average of 224k. Lower NFPs in the government sector accounted for the lion’s share of the deceleration (-11k in April following average gains of +16k in Q1:2016).
The unemployment rate remained unchanged at 5.0%, despite the fact that the participation rate declined to 62.8% in April from 63.0% a month earlier, as household employment -- which also includes self-employed and agricultural workers -- declined by 316k (+1.7% yoy).
Wage increases for all employees in the private nonfarm sector picked up. Average hourly earnings increased by 0.3% mom in April from a gain of 0.3% mom in March. As a result, the annual change in earnings was 2.5% yoy.
Overall, the pace of job growth, albeit decelerating, remains consistent with a further decline in the unemployment rate by the end of 2016, assuming that the participation rate remains around its current levels. The biggest risk, however, is a lagged response by companies to the weakness in economic activity.
US GDP weakened in Q1:2016 (0.5% qoq saar), following growth of 2.4% qoq saar, on average, during the past three quarters. Private consumption decelerated to 1.9% qoq saar from 2.4% qoq saar, while business investment contracted by 5.9% qoq saar -- the worst quarterly outcome since Q2:09 -- mainly due to cutbacks in the energy and mining sectors.
More worryingly, according to the Fed’s Senior Loan Officer Opinion Survey (SLOOS), US banks tightened standards for corporate loans for a third consecutive quarter in Q1:2016 (+12% from +8% in Q4:15), due to a less favorable economic outlook and industry-specific headwinds (e.g. in the energy sector) (see graph). Banks have also tightened standards for commercial real estate (CRE) loans.
On the other side of the Atlantic, euro area real GDP surprised on the upside, increasing by 0.6% qoq in Q1:2016 (1.6% yoy) from 0.3% qoq (1.6% yoy) in Q4:2015. Available details to date reveal broad based gains, with domestic demand remaining the main driver of the recovery. Spain (+0.8% qoq) and France (+0.5% qoq) reported strong gains, while Q1:16 GDP reports for Germany and Italy are expected on Friday.
Euro area domestic demand has found support, inter alia, from improving bank credit conditions. The annual change of euro area bank loans to households (1.6% yoy) and non-financial corporates (1.1% yoy) in March accelerated to the highest level since Q4:2011. A slightly expansionary fiscal policy (in 2015 and 2016), following years of consolidation, also acts as a tailwind.
However, heightened policy uncertainty -- the UK referendum on June 23rd, Spanish elections on June 26th following the inconclusive elections of December 2015, Italian banking sector woes -- alongside unexpected weakness in earnings performance have worsened euro area sentiment for equities (Eurostoxx Q1:2016 EPS at -10% yoy, with 64% of firms having reported so far). Indeed, the Eurostoxx index declined by 2.6% during the past week (-8.6% y-t-d).
Japanese equities followed suit, with the Nikkei 225 declining by 3.4% wow (-15.4% y-t-d) in the aftermath of the BoJ decision to remain on hold, despite its weaker inflation and GDP projections. Increasing doubts over the stabilization of Chinese growth (CSI 300 down by 5% cumulatively on Friday/Monday), amplified by weak imports (-10.9% yoy) and a decline in the PMI (by 0.3 pts to 49.4), hurt sentiment as well.
The S&P500 overperformed in relative terms (-0.4% wow / +0.6% y-t-d) with the earnings season, so far, broadly in line with consensus estimates (S&P500 Q1:2016 EPS at -8% yoy).
As risk-off sentiment prevailed, government bond yields fell across the board, with 10-Yr US yields down by 5 bps to 1.78% and German 10-Yr yields declining by 13 bps to 0.14%. UK Gilts declined by 18 bps to 1.42% as a poor PMI confirmed the loss of momentum, increasing at the same time the likelihood of a “low-for-longer” BoE.
Greek Government Bond yields (10Yr) fell by 13 bps wow, and by a further 71 bps on Tuesday to 7.72%. The Government passed crucial pension and tax reforms on Sunday (153 votes out of 300), opening the door for the conclusion of the first review of the programme and setting a productive stance for the debt relief discussion.
NBG Economic Research Division May 10, 2016
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Economics
US real GDP growth was subdued in Q1:16, increasing by
0.5% q-o-q saar (2.0% y-o-y) from 1.4% q-o-q saar (2.0% y-o-y)
in Q4:15. A weak outcome had been expected, as soft retail
sales data in the recent months signaled a deceleration in
consumption. Moreover, poor capital expenditure data due to
low oil prices pointed to weaker business fixed investment.
Finally, weak external demand combined with the strong dollar
weighed on exports. Private consumption rose by 1.9% q-o-q
saar (2.7% y-o-y), from 2.4% q-o-q saar (2.7% y-o-y) in Q4:15,
adding 1.3 pps to overall growth. The ongoing housing market
recovery supported residential investment, which remained solid at
14.8% q-o-q saar (10.6% y-o-y) compared with 10.1% q-o-q saar
(9.4% y-o-y) in Q4:15, adding 0.5 pps to growth. Government
consumption increased by 1.2% q-o-q saar (1.4% y-o-y) from
+0.1% q-o-q saar (+1.1% y-o-y), contributing 0.2 pps to overall
growth. On the other hand, business fixed investment fell sharply
by 5.9% q-o-q saar (-0.4% y-o-y) compared with a decline of 2.1%
q-o-q saar (+1.5% y-o-y) in Q4:15, subtracting 0.8 pps from overall
growth. Excluding the oil and mining sectors, business investment
would have declined by 1.3% q-o-q saar (+3.3% y-o-y). The
correction in inventories continued, subtracting 0.3 pps from growth
versus -0.2 pps in Q4:15. The strong dollar and soft external
demand continue to take their toll on exports (-2.6% q-o-q saar
from -2.0% q-o-q saar in Q4:15). Imports improved, albeit at a still
weak +0.2% q-o-q saar (from -0.7% q-o-q saar), due to weak
domestic demand and the continuing inventory correction. As a
result, net trade subtracted 0.3 pps from overall growth versus -0.1
pp in Q4:15.
Business surveys were mixed entering Q2:2016. The ISM
manufacturing index declined to 50.8 in April from 51.8 in March
(consensus: 51.4), albeit remaining above the expansion/
contraction threshold of 50 for a second consecutive month. The
new orders component led the decline (-2.5 pts to 55.8), albeit
remaining at healthy levels. At the same time, the outlook for the
services sector appears more positive as the ISM non-
manufacturing index overshot expectations, rising by 1.2 pts to
55.7 in April (consensus: 54.8). Importantly, the new orders
component led the increase (+3.2 pts to 59.9).
The US labor market report for April was weaker than
expected. Nonfarm payrolls rose by 160k in April from 208k in
March, undershooting consensus estimates of 200k, while net
revisions to the previous 2 months were a negative 19k. The
slowdown was mainly due to the government sector shedding 11k
jobs (from adding 24k in March). Indeed, the private sector added
171k jobs in April (+184k in March), with the services sector being
the main contributor (+174k), led by the subsectors of professional
& business services (+65k) and education & health services (+54k).
Despite the slowdown in job creation, the unemployment rate (U-3)
held steady at 5.0%, albeit due to a renewed decline in the labor
force participation rate, by 0.2 pps to 62.8%. The U-6
unemployment rate, a broader measure of labor market slack,
which includes the unemployed, part-time workers for economic
reasons, and those workers marginally attached to the labor force,
fell to 9.7% in April, compared with 9.8% in March, remaining
however, well above its pre-crisis level (8.8% as of December
2007). Indeed, involuntary part-time workers declined by 161k to
5.96mn in April and, as a result, the ratio of involuntary part-time
workers to total employment fell to 3.95%, from 4.05% in the
previous month. Wages recorded satisfactory gains for a
second consecutive month, suggesting their so far contained
positive trend could be firming. Average hourly earnings growth
remained at 0.3% m-o-m in April, in line with consensus
estimates. The annual change in earnings accelerated to
+2.5% y-o-y vs +2.3% y-o-y in March and a long-term average
of 2.4% y-o-y. The positive outcome was exacerbated by the
average weekly hours increasing to 34.5 hrs in April, from 34.4
hrs in March.
In the euro area, real GDP growth in Q1:16 surprised on
the upside, increasing by 0.6% q-o-q (1.6% y-o-y), from
0.3% q-o-q (1.6% y-o-y), above consensus estimates for
0.4% q-o-q. Although detailed data for the region as a whole
will not be available until June 7th, the data available for France
(22% of euro area GDP) and Spain (11% of euro area GDP),
suggest that private consumption remains the main driver of
growth, supported by credit expansion, improving labor market
conditions and low oil prices. A modest fiscal easing also
provides support. At the same time, external trade appears to
remain a drag.
Regionally, French GDP increased by 0.5% q-o-q (1.3% y-o-y)
in Q1:16, from 0.3% q-o-q (1.4% y-o-y) in Q4:15, above
consensus expectations (0.3% q-o-q). According to Insee (the
French Statistical Agency), the improvement came mainly on
the back of household consumption, while net trade was a drag
on growth. Specifically, household consumption increased by
1.2% q-o-q from -0.1% q-o-q in Q4:15 (when terrorist attacks
contributed negatively), gross fixed capital formation
accelerated in Q1:16 (0.9% q-o-q), compared with 0.7% q-o-q
in Q4:15, while government consumption decelerated slightly
to 0.4% q-o-q from 0.5% q-o-q previously. At the same time,
net trade subtracted 0.2 pps from overall growth, as imports
slowed sharply (+0.5% q-o-q in Q1:16 from 2.1% q-o-q in
Q4:15), while exports decreased slightly (-0.2% q-o-q in Q1:16
from +1.0% q-o-q in Q4:15). In Spain, according to provisional
estimates by INE (the Spanish Statistical Agency), GDP rose
by 0.8% q-o-q (3.4% y-o-y) in Q1:16, the same as in Q4:15,
with economic activity demonstrating increased resilience in
the face of political uncertainty.
On the inflation front, euro area headline CPI returned to
negative territory in April, declining by -0.2% y-o-y, from a
flat outcome in March that was influenced by seasonal
factors (Easter was in March this year compared with April
in 2015). The energy subcomponent declined by 8.6% y-o-y in
April, from a decline of 8.7% in March, as Brent prices
remained flat (-32.8% y-o-y in April from -31.9% y-o-y in
March, in EUR terms). Food, alcohol and tobacco prices
remained stable at 0.8% y-o-y in April. Core CPI decelerated to
0.7% y-o-y in April from 1.0% y-o-y previously, as growth in
services decelerated (down by 0.5 pps to 0.9% y-o-y in April).
Meanwhile, the euro area unemployment rate continues on a
downward path, declining to 10.2% in March from 10.4% in
February, the lowest rate since August 2011.
NBG Economic Research Division May 10, 2016
3
The Bank of Japan maintained its “QQE with a Negative Interest Rate”
policy, despite acknowledging the deterioration in activity. The BoJ lowered
its (median) projection for GDP growth in fiscal year 2015 (FY2015 accounts for
April 1st 2015 – March 31st 2016) to 0.7% y-o-y from 1.1% y-o-y in its January
projections and to 1.2% y-o-y from 1.5% y-o-y for FY2016. The BoJ attributed the
downward revision mainly to weaker exports on account of softer external
demand. At the same time, the projection for achieving the 2.0% inflation target
was pushed back further from “around the first half of fiscal 2017” to “during fiscal
2017”, reflecting the lower estimated GDP growth and the weaker – than
previously expected - wage increases. Note that the CPI ex-food & energy (the
core-core index) declined to 0.7% y-o-y in March from 0.8% y-o-y in February.
Following the lack of action by the BoJ, market attention has turned to the
Government, at least in the near term, for fiscal stimulus measures to support the
economy’s recovery. Quote of the week: “...continued expansionary policies until excess slack in the economy has been reduced and inflation dynamics are sustainably consistent again with price stability. There is simply no alternative to this today”, ECB President, Mario Draghi, May 2nd 2016.
Markets
Global equity markets recorded losses during the past week, as mixed economic
data, political uncertainty (Turkey, Spain and the UK) and weak company earnings
contribute negatively to investors’ risk appetite. Indeed, the MSCI World index
declined by 1.4% on a weekly basis, while in the US, the S&P500 was down by
0.4% as investors monitor closely the US earnings season. Out of the 355 firms
that have released earnings results for Q1:16, circa 76% have exceeded analyst
estimates. The Nikkei 225 underperformed its peers, falling by 3.4% on a weekly
basis, whereas the EuroStoxx index fell by 2.6% as major peripheral equity
markets were particularly downbeat (IBEX35: -3.6%, FTSEMIB:-4.1%). The
Turkish ISE 100 index lost ground (-8.2% wow) on the back of PM Davutoglou’s
announcement to step down later this month. In China, the CSI300 Index (largest
A-shares in Shanghai and Shenzhen exchanges) declined by 2.5% on Monday
following weak economic data. Brazil’s Bovespa index declined by 4.1% on a
weekly basis (+19.3% ytd) and the Brazilian real depreciated by 1.9% against the
US dollar to BRL/$3.50 with Fitch downgrading, in the past week, Brazil’s
sovereign debt further (to BB from BB+), citing a worse-than-expected contraction
of activity and changing fiscal target that contribute negatively to credibility.
Government bond yields declined over the week amid soft economic data and
weak risk sentiment. The US 10Yr Treasury yield fell by 5 bps to 1.78% and the
2Yr yield by 5 bps to 0.74%. Similarly, the UK’s 10Yr Gilt Yield declined by 18 bps
to 1.42%, while the Japanese government 10Yr bond yield decreased by 4 bps to
-0.11%. In the euro area, the German 10Yr Bund yield declined by 13 bps on a
weekly basis to 0.14%, while periphery bond spreads over the Bund rose in most
countries (+13 bps for Italian 10Yr BTPs to 135 bps, +13 bps for Spanish 10Yr
Bonos to 145 bps and +28 bps for the Portuguese government 10Yr bond yield to
317 bps).
In foreign exchange markets, the Japanese yen lost ground on a weekly basis,
declining by 0.7% against the US dollar to ¥/107.1 and by 0.3% against the euro to
¥/122.2, partially reversing the previous week’s strengthening of the yen when the
Bank of Japan undershot expectations for further easing (+5.0% wow against the
USD, +3.0% wow against the euro). The US dollar was higher over the week, up
by 0.5% against the euro to €/1.14, and by 1.3% in NEER terms. Turkey’s lira
recorded losses (-4.7% wow against the US dollar), as sentiment deteriorated
following PM Davutoglou’s announcement to step down.
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12 month forward EPS Estimates (YoY)
S&P500 EuroStoxx FTSE 100 Nikkei 225
Source: Factset - Data as of May 6th
%%
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Foreign Exchange
Source: Bloomberg - Data as of May 6th
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US
Europe excl. UK
UK
Japan
Emerging Markets
% %Cumulative Flows into Equity ETFs as % of AUM
Source: Bloomberg, NBG Estimates, AUM = Assets Under Management Data as of May 6th
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Greece (left) Italy (right)
Portugal (right) Spain (right)
Ireland (right)
10- Year Government Bond Spreadsbps
Source: Bloomberg - Data as of May 6th
bps
NBG Economic Research Division May 10, 2016
4
Day Region Release Period Survey Actual Prior
Current Week
Tuesday 3 UK Markit UK PMI Manufacturing SA APRIL 51.2 - 49.2 51.0
CHINA Caixin PMI Manufacturing APRIL 49.8 - 49.4 49.7
Wednesday 4 US ADP Employment Change (k) APRIL 195 - 156 200
US Trade balance ($bn) MARCH -41.2 + -40.4 -47.1
US ISM non-manufacturing APRIL 54.8 + 55.7 54.5
US Factory Goods Orders MARCH 0.6% + 1.1% -1.7%
UK Markit/CIPS UK Construction PMI APRIL 54.0 - 52.0 54.2
EURO AREA Retail sales (MoM) MARCH -0.1% - -0.5% 0.2%
EURO AREA Retail sales (YoY) MARCH 2.6% - 2.1% 2.4%
Thursday 5 US Initial Jobless Claims (k) APRIL 30 260 - 274 257
US Continuing Claims (k) APRIL 23 2.124 + 2.121 2.130
UK Markit/CIPS UK Services PMI APRIL 53.5 - 52.3 53.7
Friday 6 US Change in Nonfarm Payrolls (k) APRIL 200 - 160 215
US Change in Private Payrolls (k) APRIL 195 - 171 195
US Unemployment rate APRIL 5.0% 5.0% 5.0%
US Average Hourly Earnings MoM APRIL 0.3% 0.3% 0.3%
US Average Hourly Earnings YoY APRIL 2.4% + 2.5% 2.3%
US Average weekly hours (hrs) APRIL .. 34.5 34.4
US Underemployment rate APRIL .. 9.7% 9.8%
US Labor Force Participation Rate APRIL .. 62.8% 63.0%
Monday 9 EURO AREA Eurogroup/ECOFIN finance ministers’ meeting
CHINA Exports (YoY) APRIL 0.0% - -1.8% 11.5%
CHINA Imports (YoY) APRIL -4.0% - -10.9% -7.6%
Next Week
Tuesday 10 US Wholesale trade MARCH -0.2% .. -0.5%
CHINA CPI (YoY) APRIL 2.3% .. 2.3%
Wednesday 11 UK Industrial Production (MoM) MARCH 0.5% .. -0.3%
UK Industrial Production (YoY) MARCH -0.4% .. -0.5%
CHINA New Yuan Loans (RMB bn) APRIL 800.0 .. 1370.0
Thursday 12 US Initial Jobless Claims (k) MAY 7 270 .. 274
US Continuing Claims (k) APRIL 30 2.120 .. 2.121
UK BoE announces its intervention rate MAY 12 0.50% .. 0.50%
UK BoE Asset Purchase Target (£bn) MAY 12 375 .. 375
UK Bank of England releases MPC Minutes
UK Bank of England Inflation Report
EURO AREA Industrial Production (sa, MoM) MARCH 0.0% .. -0.8%
EURO AREA Industrial Production (wda, YoY) MARCH 1.1% .. 0.8%
Friday 13 US Retail Sales Advance MoM APRIL 0.8% .. -0.3%
US Retail sales ex-autos (MoM) APRIL 0.5% .. 0.2%
US University of Michigan consumer confidence MAY 89.5 .. 89.0
EURO AREA GDP (QoQ) Q1:16 0.6% .. 0.6%
EURO AREA GDP (YoY) Q1:16 1.6% .. 1.6%
GERMANY GDP (QoQ) Q1:16 0.6% .. 0.3%
GERMANY GDP (wda, YoY) Q1:16 1.5% .. 1.3%
Monday 16 US Empire Manufacturing MAY .. .. 9.56
US NAHB housing market confidence index MAY .. .. 58
US Net Long-term TIC Flows ($ bn) MARCH .. .. 72.0
CHINA Industrial production (YoY) APRIL 6.8% .. 6.8%
CHINA Retail sales (YoY) APRIL 10.6% .. 10.5%
Source: Bloomberg
Economic News Diary: May 3 - May 16, 2016
NBG Economic Research Division May 10, 2016
5
Equity Market Returns (%)
Developed Markets1
Current Level
1-w eek
change (%)
Year-to-Date
change (%)
1-Year
change (%)
2-year
change (%)
US S&P 500 2057 -0,4 0,6 -1,5 9,5
Japan NIKKEI 225 16107 -3,4 -15,4 -16,5 14,8
UK FTSE 100 6126 -1,9 -1,9 -11,1 -9,9
Canada S&P/TSX 13701 -1,8 5,3 -9,2 -6,5
Hong Kong Hang Seng 20110 -4,5 -8,2 -26,3 -7,5
Euro area EuroStoxx 315 -2,6 -8,6 -13,9 -1,9
Germany DAX 30 9870 -1,7 -8,1 -13,5 3,7
France CAC 40 4301 -2,9 -7,2 -13,4 -3,3
Italy FTSE/MIB 17843 -4,1 -16,7 -21,9 -16,0
Spain IBEX-35 8702 -3,6 -8,8 -22,2 -16,4
Emerging Markets1
MSCI Emerging Markets 44180 -2,8 -0,7 -15,8 -5,4
MSCI Asia 638 -2,5 -3,7 -18,6 -4,7
China 54 -4,3 -9,1 -32,0 -5,5
Korea 531 -0,5 0,9 -7,2 -5,6
MSCI Latin America 66568 -2,9 12,3 -7,2 -5,8
Brazil 184450 -4,1 17,3 -12,0 -10,7
Mexico 42744 -1,5 5,4 0,6 7,6
MSCI Europe 4477 -3,9 5,4 -9,1 -3,4
Russia 846 -3,4 9,2 3,0 19,2
Turkey 1106665 -8,8 9,2 -4,2 3,2
As of May 6, 2016, 1) in local currency, Source Bloomberg
Financial Markets Monitor
World Equity Market Sector Returns (%)
in US Dollar terms Current Level
1-w eek
change (%)
Year-to-Date
change (%)
1-Year
change (%)
2-year
change (%)
Energy 193,9 -3,8 8,7 -19,2 -35,1
Materials 199,0 -4,0 7,7 -15,1 -19,1
Industrials 197,6 -1,7 3,0 -3,5 -1,7
Consumer Discretionary 188,7 -1,1 -2,6 -4,8 8,6
Consumer Staples 216,3 0,4 3,8 5,5 10,5
Healthcare 197,5 -1,8 -6,1 -8,1 9,6
Financials 90,6 -2,7 -6,6 -13,7 -10,8
IT 140,2 -0,6 -4,2 -3,6 14,2
Telecoms 71,1 -1,0 4,7 -0,7 -1,7
Utilities 119,3 -0,6 6,9 2,3 -1,5
in local currency
Energy 195,1 -3,2 7,5 -18,1 -30,5
Materials 186,7 -3,2 4,6 -14,8 -10,6
Industrials 193,0 -1,4 0,0 -4,9 4,8
Consumer Discretionary 180,2 -0,9 -4,9 -5,9 14,5
Consumer Staples 212,4 0,9 2,2 6,0 18,4
Healthcare 193,2 -1,5 -7,4 -7,9 15,2
Financials 89,7 -2,0 -8,6 -13,3 -2,9
IT 135,4 -0,5 -5,2 -4,3 16,4
Telecoms 72,6 -0,5 1,8 -1,2 7,9
Utilities 120,5 -0,3 5,2 2,2 6,0
As of May 6, 2016, MSCI Indices, Source Bloomberg
Foreign Exchange & Commodities
Current Level
1-w eek
change (%)
1-month
change (%)
1-Year
change (%)
Year-to-Date
change (%)
EUR/USD 1,14 -0,4 0,1 1,2 5,1
EUR/CHF 1,11 1,2 1,9 6,9 2,0
EUR/GBP 0,79 1,0 -2,1 7,0 7,2
EUR/JPY 122,19 0,2 -2,4 -9,4 -6,5
EUR/NOK 9,35 1,5 -1,4 11,5 -2,6
EUR/SEK 9,28 0,9 -0,1 -0,3 1,2
EUR/AUD 1,55 2,7 3,2 8,7 3,9
EUR/CAD 1,47 2,4 -1,3 7,7 -2,1
USD/CAD 1,29 2,8 -1,4 6,4 -6,7
USD/AUD 1,36 3,2 3,1 7,3 -1,1
USD/JPY 107,12 0,6 -2,4 -10,5 -10,8
Agricultural 461 -2,9 4,6 -3,0 2,5
Energy 383 -3,7 13,5 -42,4 4,1
West Texas Oil ($) 45 -2,7 18,3 -24,2 20,6
Crude brent Oil ($) 45 -3,3 15,3 -30,1 25,5
Industrial Metals 996 -4,5 3,0 -22,8 4,3
Precious Metals 1591 0,1 6,8 8,8 22,5
Gold ($) 1288 -0,4 5,4 8,7 21,3
Silver ($) 17 -2,1 15,9 7,0 26,1
Baltic Dry Index 631 -10,2 26,2 10,1 32,0
Baltic Dirty Tankers Index 715 -2,1 -7,6 -3,9 -17,7
As of May 6, 2016, Goldman Sachs Indices for Commodities, Source Bloomberg
Commodities
Foreign Exchange
Euro-based cross rates
USD-based cross rates
Bond Markets (%)
Current Last w eek Year Start
One Year
Back
10-year
average
US 1,78 1,83 2,27 2,18 3,01
Germany 0,14 0,27 0,63 0,59 2,45
Japan -0,11 -0,08 0,27 0,43 1,05
UK 1,42 1,60 1,96 1,92 3,17
Greece 8,52 8,58 8,29 10,89 9,93
Ireland 0,92 0,97 1,15 1,28 4,82
Italy 1,49 1,49 1,59 1,77 4,03
Spain 1,59 1,59 1,77 1,75 4,04
Portugal 3,32 3,16 2,52 2,40 5,52
US Treasuries 10Y/2Y 104 105 122 155 165
US Treasuries 10Y/5Y 55 54 51 62 85
Bunds 10Y/2Y 66 76 97 79 114
Bunds 10Y/5Y 52 56 67 50 67
EM Inv. Grade (IG) 212 209 235 189 263
EM High yield 765 777 882 673 790
US IG 156 152 173 133 197
US High yield 648 624 695 455 626
Euro area IG 125 121 133 121 121
Euro area High Yield 475 456 535 390 652
30-Year FRM1 (%) 3,87 3,87 4,19 3,93 4,70
vs 30Yr Treasury (bps) 124 119 117 102 101
As of May 6, 2016, 1. Fixed-rate mortgage rate, Source Bloomberg
10-Year Government Bond
Yields
Government Bond Yield
Spreads (in bps)
Corporate Bond Spreads
(BofA/ML Indices, in bps)
US Mortgage Market
NBG Economic Research Division May 10, 2016
6
NBG Economic & Markets Forecasts
Euro area & US: GDP Growth & Inflation Forecasts
GDP (%)1
2014a Q1a Q2a Q3a Q4a 2015a Q1a Q2a Q3a Q4f 2016f
Euro area 0,9 0,6 0,4 0,3 0,3 1,5 0,6 0,4 0,5 0,5 1,5
US 2,5 0,2 1,0 0,5 0,3 2,4 0,1 0,5 0,6 0,6 1,9
HICP Inflation (%)2
Euro area 0,4 -0,3 0,2 0,1 0,1 0,0 0,0 -0,1 0,3 0,8 0,3
US 1,6 -0,1 0,0 0,1 0,5 0,1 1,1 1,0 1,0 1,5 1,1
a: Actual, f: Forecasts
1. Seasonally adjusted q-o-q grow th rates, 2.Year-to-year average percent change
2014a 2015a 2016f
Interest Rates & Foreign Exchange Forecasts
Current (*) 3-month 6-month 12-month
Germany 0,14 0,40 0,45 0,70
US 1,78 2,05 2,20 2,50
Official rate (%)
Euro area 0,00 0,00 0,00 0,00
US 0,50 0,50 0,75 1,00
Currency
EUR/USD 1,14 1,08 1,06 1,05
EUR/GBP 0,79 0,77 0,75 0,74EUR/JPY 122 122 120 119
10-year government bond yield (%)
(*) As of May 06 2016, end of period
NBG Economic Research Division May 10, 2016
7
NBG View and Key Factors for Global Markets
Euro area US Japan UK
Fo
reig
n E
xc
ha
ng
e
Go
ve
rnm
en
t B
on
ds
E
qu
itie
s
Reduced short-term tail
risks
Higher core bond yields
Current account surplus
▬ Sluggish growth
▬ Deflation concerns
▬ The ECB’s monetary
policy to remain extra
loose (LTROs, ABSs
and covered bank bond
purchases, Quantitative
Easing)
Lower euro against the
US dollar
The Fed is expected to
increase its policy rate
towards 1.0%-1.25% in 2016
Growth to remain above-
trend in H1:2016
▬ Mid-2014 rally probably
ahead of fundamentals
Higher US dollar against its
major counterparts
Safe haven demand
More balanced economic
growth recovery (long-
term)
Inflation is bottoming out
▬ Additional Quantitative
Easing by the Bank of
Japan if inflation does not
approach 2%
▬ Strong appetite for foreign
assets
Lower yen against the US
dollar
Weak growth outlook
Medium-term inflation
expectations are
drifting lower
Ultra accommodative
monetary policy
▬ Upside risk in US
benchmark yields
▬ Valuations appear
excessive compared
with long-term
fundamentals
Higher yields expected
Global disinflation pressures
Fed’s commitment on only
gradual tightening policy
Safe haven demand
▬ Valuations appear rich
▬ Growth prospects improve
▬ The Fed is expected to
increase its policy rate
towards 1%-1.25% in 2016
▬ Halting US Treasuries and
agency MBSs by end-2016
Higher yields expected
Periphery spreads
tightening
Declining equity risk
premium
EPS estimates are
improving
Credit conditions gradual
turn more favorable
Fiscal loosening due to
the influx of refugees
▬ Sovereign debt crisis
could re-emerge
▬ Political uncertainty
Neutral-to-positive stance
on equities
Very low government bond
yields
Strong EPS growth
Cash-rich corporates lead to
share buybacks and higher
dividends (de-equitization)
▬ Demanding valuations
▬ Peaking profit margins
▬ Disorderly re-pricing of
expectations for the first
interest rate-hike by the Fed
Neutral stance on equities
Upward revisions in
corporate earnings
Aggressive QE by the BoJ
Japanese Yen depreciation
favors export companies
▬ Signs of policy fatigue
regarding structural reforms
and fiscal discipline
▬ Strong appetite for foreign
assets
Neutral-to-positive stance on
equities
The Bank of England is
expected to increase its
Bank Rate (currently at
0.50%) in Q3:2016
Solid, albeit slowing
economic growth with real
GDP at c. 2.5% for 2015-
2016
▬ Current account deficit
▬ Backloaded fiscal
adjustment
Higher British Pound
against the euro
Fiscal consolidation
Safe haven demand
▬ Rich valuations
▬ Relatively sticky inflation
feeds through inflation
expectations
▬ The Bank of England is
expected to increase its
Bank Rate (currently at
0.50%) in Q3:2016
Higher yields expected
Growth recovery
▬ The BoE increases
interest rates faster-than-
expected due to labor
market tightening
▬ High UK exposure to the
commodities sector
Neutral stance on equities
Safe haven demand
Extremely dovish
central bank
▬ Fiscal deficits
▬ Restructuring efforts
brightens growth
prospects
Higher yields expected
NBG Economic Research Division May 10, 2016
8
NBG 6-Month View and Key Factors for South Eastern European Markets Emerging Markets Research Team, tel:210-3341211, email: [email protected]
Turkey Romania Bulgaria Serbia
Fo
reig
n E
xc
ha
ng
e
Do
me
sti
c D
eb
t
Fo
reig
n D
eb
t
Currency board arrangement
Large foreign currency reserves and fiscal reserves
Current account surplus
▬ Sizable external financing requirements
Stable BGN against the
EUR
Fo
reig
n D
eb
t E
qu
itie
s
Attractive valuations
▬ Weak foreign investor appetite for emerging market assets
Neutral stance on equities
Attractive valuations
▬ Weak foreign investor appetite for emerging market assets
Neutral/Positive stance on
equities
Attractive valuations
Low-yielding domestic debt and deposits
▬ Weak foreign investor appetite for emerging market assets
Neutral/Positive stance on
equities
Attractive valuations
▬ Weak foreign investor appetite for emerging market assets
Neutral/Positive stance on
equities
High domestic debt yields
Narrowing current account deficit
▬ Sizable external financing requirements
▬ Weak foreign investor appetite for emerging market assets
▬ Increasing geopolitical
risks and security
concerns
Weaker to stable TRY against the EUR
Small current account deficit
▬ Sizable external financing requirements
Stable to stronger RON against the EUR
Ongoing EU membership negotiations
High domestic debt yields
Precautionary Stand-By Agreement with the IMF
▬ Sizable external financing requirements
Weaker to stable RSD against EUR
Low public debt-to-GDP ratio
Tight fiscal stance
▬ Stubbornly high inflation
Stable to lower yields
Low public debt-to-GDP ratio
▬ Easing fiscal stance
▬ Envisaged tightening in
monetary policy
Stable to higher yields
Very low public debt-to-GDP ratio and large fiscal reserves
Low inflation
Stable to lower yields
Positive inflation outlook
Precautionary Stand-By
Agreement with the IMF
▬ Large public sector
borrowing requirements
Stable to lower yields
Narrowing current account deficit
High foreign debt yields
▬ Sizeable external financing requirements
▬ Weak foreign investor appetite for emerging market assets
Stable to narrowing spreads
Small current account deficit
▬ Large external financing requirements
Stable to narrowing spreads
Solidly-based currency board arrangement, with substantial buffers
Current account surplus
▬ Large external financing requirements
Stable to narrowing
spreads
Stable spreads
Ongoing EU membership negotiations
Precautionary Stand-By Agreement with the IMF
▬ Sizable external financing requirements
▬ Slow progress in structural reforms
Stable to narrowing spreads
NBG Economic Research Division May 10, 2016
9
NBG South Eastern Europe Economic Forecasts
SEE Economies
2012 2013 2014 2015 2016f 2017f
Real GDP Growth (%)
Turkey 2,1 4,2 3,0 4,0 3,6 3,8
Romania 0,6 3,5 3,0 3,8 4,5 3,4
Bulgaria 0,2 1,3 1,5 3,0 2,6 2,6
Serbia -1,0 2,6 -1,8 0,7 2,6 3,0
Headline Inflation (eop,%)
Turkey 6,2 7,4 8,2 8,8 7,8 7,0
Romania 5,0 1,6 0,8 -0,9 0,5 2,0
Bulgaria 4,2 -1,6 -0,9 -0,4 0,7 1,4
Serbia 12,2 2,2 1,7 1,5 2,4 2,8
Current Account Balance (% of GDP)
Turkey -6,2 -7,7 -5,5 -4,5 -4,8 -5,2
Romania -4,8 -1,1 -0,5 -1,1 -1,9 -2,4
Bulgaria -0,9 1,3 0,9 1,4 2,8 2,1
Serbia -11,6 -6,1 -6,0 -4,8 -4,8 -5,3
Fiscal Balance (% of GDP)
Turkey -2,1 -1,2 -1,3 -1,2 -1,6 -1,2
Romania -2,5 -2,5 -1,7 -1,5 -3,3 -2,5
Bulgaria -0,4 -1,8 -3,7 -2,9 -2,0 -1,4
Serbia -6,8 -5,5 -6,6 -3,8 -4,0 -3,0
f :NBG f orecasts
SEE Financial Markets
9/5/20163-month
forecast
6-month
forecast
12-month
forecast
1-m Money Market Rate (%)
Turkey 10,6 10,6 10,2 9,8
Romania 0,6 0,9 1,2 1,5
Bulgaria 0,0 0,1 0,1 0,2
Serbia 3,1 3,2 3,4 3,8
Currency
TRY/EUR 3,35 3,32 3,32 3,30
RON/EUR 4,49 4,48 4,49 4,50
BGN/EUR 1,96 1,96 1,96 1,96
RSD/EUR 122,7 123,2 124,0 125,0
Sovereign Eurobond Spread (bps)
Turkey (EUR 2019) 215 205 190 170
Romania (EUR 2024) 229 210 180 150
Bulgaria (EUR 2022) 197 180 160 130
Serbia (USD 2021)(*) 311 290 240 180
(*) Spread ov er US Treasuries
SEE Stock Market Returns1
9/5/2016Last w eek
return (%) YTD (%)
2-year
change (%)
Index
Turkey ISE100 79.062 -5,7 8,0 4,6
Romania BET-BK 1.192 -1,6 -11,1 -1,5
Bulgaria SOFIX 444 0,4 -3,6 -26,5
Serbia BELEX15 619 0,3 -1,9 6,4
1. In local currency
NBG Economic Research Division May 10, 2016
10
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