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April 07, 2015
Global Markets Roundup
NBG Economic Research Division
Slowing US job growth increases the possibility that the Fed’s first interest rate hike –
September – will be delayed
See disclosures and analyst certification on last page.
US nonfarm payrolls growth posted weak gains in March, undershooting consensus estimates by a
wide margin, and raising concerns over the strength of the US economic recovery. Specifically,
NFPs increased by 126k, the lowest gain since end-2013, from 264k in February (consensus
estimates: +245k), whereas net revisions for the previous two months were a negative 69k. In
addition, the unemployment rate remained at a seven-year low of 5.5%, albeit due to a declining
labor force participation rate that decreased by 0.1 pp to 62.7%.
Paul Mylonas, PhD
NBG Group
Chief Economist
210-3341521
[email protected]
In addition to the recent dovish shift among Fed officials (FOMC March meeting, remarks by Chair
Yellen), the anemic report increased further the likelihood of the Fed staying “low-for-longer”.
Specifically, financial markets revised their estimates for the first interest rate increase (see graph
below) and, as a result, 2-Year Treasury yields and 10-Year Treasury yields fell by 12 bps to 0.48%
and 1.84%, respectively, whereas the US Dollar depreciated across the board (-0.8% to 1.10
against the euro).
Albeit some of the softness may have been related to adverse weather conditions in February, that
th
may be hurting employment with a lag, NFP data for April (due on May 8 ) and weekly indicators,
such as initial jobless claims, should provide more clarity on how the labor market is progressing.
Looking forward, assuming that gains in nonfarm payrolls revert to their 3-month average (197k),
the unemployment rate is expected to decline below 5.1% (Fed’s NAIRU estimate) by September
2015, assuming a steady LFPR at 62.7% and population growth of 0.9% per annum. This
development should put further pressure on wages, supporting the Fed’s view for an increase in the
official rate sometime this year. Regarding wage pressures, average hourly earnings rose by 0.3%

m-o-m in March following a gain of 0.1% m-o-m in February, and the annual pace rebounded to
2.1% y-o-y from 2.0% y-o-y in February. Note, however, that if we assume NFP gains of 150k, the
unemployment rate will reach the NAIRU only in March 2016 (see graph below).
Ilias Tsirigotakis
Head of
Global Markets
Research
210-3341517
tsirigotakis.hlias
@nbg.gr
Panagiotis Bakalis
210-3341545
[email protected]
Lazaros Ioannidis
210-3341553
ioannidis.lazaros
@nbg.gr
The downward shift of the Fed fund futures curve and the accompanying weakness in the USD
(down by 1.0% in nominal terms week over week) supported emerging market equities that
overperformed their advanced economy peers by a wide margin in local currency terms during the
past week. Specifically, emerging market equities increased by 3.2% (6.0% y-t-d), whereas
developed market equities rose by 0.4% (4.7% y-t-d).
Note that emerging markets in general, and particularly those with sizeable external imbalances
(such as South Africa, Turkey, Brazil) based on historical precedent, could face a reversal in capital
flows in the event of monetary policy normalization by the Fed. Therefore, any delay in the timing of
the Fed’s tightening supports EM assets. Moreover, emerging market equity market valuations
remain slightly below their long-term averages (MSCI EM 12-month PE of 13.0 vs a long-term
average of 13.3) and appear cheap compared with advanced economy markets (current ratio of 12month EM PE relative to MSCI 12-month DM PE of 0.70 relative to a long-term average of 0.76).
On the other hand, i) decelerating growth (Chinese real GDP is expected at 7.0% in 2015 from
7.5% in 2014 with risks tilted to the downside and Brazil is heading towards recession in 2015);
increasing leverage, with EM Asia private sector debt to GDP at circa 170% from 120% in 2009;
and iii) increased geopolitical risks (Russia, Middle East) increases the risks of being long in EM
equities.
%
2,50
2,00
1,75
US Unemployment Rate
%
10,0
%
10,0
Fed Officials (March 2015)
9,5
9,5
Futures (6 March 2015)
9,0
9,0
Futures (20 March 2015)
8,5
8,5
Futures (3 April 2015)
8,0
8,0
7,5
1,50
1,25
Scenario 2
7,0
6,5
Scenario 1
6,5
6,0
0,75
5,5
5,0
0,50
7,5
7,0
1,00
4,5
6,0
5,5
Fed officials: NAIRU Estimates
as of March 2015: 5.1%
5,0
4,5
4,0
4,0
0,00
3,5
3,5
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
0,25
Apr15
May15
Jun15
Jul15
Aug15
Sep15
Oct15
Nov15
Dec15
Jan16
Feb16
Mar16
Apr16
May16
Jun16
Jul16
Aug16
Sep16
Oct16
Nov16
Dec16
Jan17
Feb17
Mar17
Apr17
May17
Jun17
Jul17
Charts of the week
2,25
Fed Funds Interest Rate Projections
Source: Bloomberg, NBG Estimates
1
NBG Economic Research Division
Economics
The US labor market report for March disappointed, adding to the
recent weak economic data and posing additional challenges to the
Fed’s monetary policy. Recall that the Fed modified its forward
guidance at its March meeting, stating that it will seek further
improvement in the labor market, inter alia, before raising interest
rates. Specifically, nonfarm payroll gains slowed considerably to
126k (the worst outcome since December 2013) from 264k in
February, undershooting, by a wide margin, consensus estimates of
245k, albeit the less volatile six-month average gain of NFPs
remains high at 261k. In addition, net revisions for the previous two
months were a negative 69k. Government payrolls declined by 3k,
after being broadly flat in February, and the private sector added
129k jobs in March (from 264k in the previous month) versus
consensus estimates of 235k. The sectors that disappointed were
the goods-producing sector (-13k from +20k in February), the mining
and logging sector (-11k vs a 12-month average of c. zero net
change) and the construction sector (-1k vs a 12-month average of
24k). The service-providing sectors also experienced a slowdown in
job creation, adding 142k jobs, compared with +244k in the previous
month and a 12-month average of +221k. The unemployment rate
remained unchanged at a 7-year low of 5.5% in March, albeit the
labor force participation rate declined slightly to 62.7% from 62.8% in
February. On a positive note, wages improved in March, suggesting
that the long run of exceptionally strong labor market data is finally
starting to have an impact on wages. Specifically, average hourly
earnings rose by 0.3% m-o-m (+2.1% y-o-y) in March from 0.1%
m-o-m (+2.0% y-o-y) in February. In Q1:15, average hourly earnings
increased by 2.8% q-o-q saar from 1.7% q-o-q saar in Q4:14.
The ISM manufacturing index for March disappointed, amplifying the
concerns over US growth momentum, as it declined to 51.5 (the
lowest outcome since May 2013) from 52.9 in February. The
deterioration was broad based, with the new orders index declining
to 51.8 compared with 52.5 in February. In addition, the exports
index fell to its lowest level since November 2012, remaining well
below the 50.0 threshold, as it declined to 47.5 versus 48.5 in
February, apparently affected by the strong USD. Note that the
challenges emerging from the dollar appreciation were underlined in
reporting business comments as well.
On the other hand, housing market data were positive, as house
prices continued to advance at a strong pace. Specifically, the
S&P/Case-Shiller 20-City home price index rose by 4.6% y-o-y
(+0.9% m-o-m) in January from +4.4% y-o-y (+0.9% m-o-m) in
December, above consensus estimates (+0.7% m-o-m). In addition,
pending home sales -- based on sales of existing homes for which
there is a signed contract -- increased by 3.1% m-o-m (+12.0% y-oy) in February compared with an increase of 1.2% m-o-m (+6.1% yo-y) in January, above consensus estimates of 0.3% m-o-m. The
housing market recovery will provide significant support to US growth
prospects.
In the euro area, growth is expected to pick up reflecting the
favorable impact from lower oil prices, the weaker effective exchange
rate and the impact of ECB’s monetary policy measures with real
GDP growth at 1.4% in 2015 from 0.9% in 2014. At the same time,
inflation is expected to remain subdued in 2015 (0.2% in 2015 on
average) as the negative effect from lower oil prices fades only
gradually. Note that the flash estimate for the headline CPI came at
-0.1% y-o-y in March from -0.3% y-o-y in February, and following a
trough of -0.6% y-o-y in January, as low energy prices recover
(average daily Brent price advanced by 23.8% in euro terms
between March and January). Indeed, the energy component of the
CPI declined by only 5.8% y-o-y from -7.9% y-o-y in
April 07, 2015
February and -9.3% y-o-y in January. On the other hand,
core CPI decelerated to 0.6% y-o-y from 0.7% y-o-y in
February, undershooting consensus expectations (0.7%
y-o-y). The decline in the core CPI rate resulted from a
slowdown in services (down by 0.2 pps to 1.0% y-o-y in
March) and a decline in non-energy industrial goods (-0.1%
y-o-y) components, likely reflecting pass-through effects
from energy prices. In addition, the unemployment rate
dropped to 11.3% in February from 11.4% in January. Τhe
unemployment rate has steadily declined by 0.5 pps since
February 2014, or by 0.64mn persons to 18.2 mn.
Additionally, euro area employment rose by 0.1% q-o-q
(0.9% y-o-y) in Q4:14 from 0.2% q-o-q (0.7% y-o-y) in
Q3:14 while the activity rate increased by 0.2 pps to 74.6%
in Q4:14, pointing to a gradual labor market recovery.
In the UK, GDP growth for Q4:14 was revised up,
surprising positively relative to consensus expectations.
According to the ONS’ final estimate, GDP rose by 0.6% qo-q (3.0% y-o-y) in Q4:14 from 0.5% q-o-q (2.7% y-o-y) in
the previous estimate, mainly due to stronger growth in
private consumption. Private consumption should continue
to be supported by the ongoing labor market tightening and
the pass-through effects from lower oil prices -- that
increase disposable income. Indeed, real household
disposable income (RHDI) rose by 1.4% q-o-q (2.3% y-o-y)
in Q4:14 following a decline of -0.5% q-o-q (-0.4% y-o-y) in
Q3:14, as household real wages and salary income
advanced by 1.1% q-o-q (4.0% y-o-y) in Q4:14 from 0.7%
q-o-q (2.6% y-o-y) in Q3:14, whereas gross household
saving to total disposable income remained broadly
unchanged at 5.9% in Q4:14 (the long term average rate
stands at 8.6%). Furthermore, UK households continue to
deleverage with the household debt-to-GDP ratio declining
marginally to 93% in Q4:14 from 94% in Q4:13 (having
peaked at 109% in Q1:09) and approaching its long term
average of 90%. Nevertheless, the strengthening of the
British pound (4.2% in REER terms since November), the
record low inflation becoming embedded in inflation
expectations and the rising uncertainty ahead of the May 7
general elections remain the major downside risks for the
UK economy entering Q2:15.
In Japan, growth is expected to accelerate in Q1:15
following average real GDP growth of -2.5% q-o-q saar in
Q2/Q4:2014 as private consumption will find support from
lower oil prices and modestly higher wages. However, the
latest data point to a rather slow economic recovery.
Indeed, the Tankan survey that assesses business
conditions remained positive for an eighth consecutive
quarter, albeit below consensus expectations. Specifically,
the Tankan current conditions index for large manufacturers
in March remained stable compared with December to +12,
below estimates for +14. Regarding three months ahead,
the Tankan outlook index improved to +10 in March
compared with +9 in December, although undershooting by
a wide margin consensus expectations for +16. The overall
corporations’ inflation expectations were revised down
slightly, remaining at levels that reveal increased skepticism
over the BoJ effort to achieve its 2.0% inflation target.
Specifically, the prices index outlook for 1-year and 3-years
ahead came out at 1.4% and 1.6%, respectively,
unchanged from December.
2
NBG Economic Research Division
Equity Indices
(3-months before = 100)
03-Apr-15
23-Mar-15
125
123
121
119
117
115
113
111
109
107
105
103
101
99
97
95
12-Mar-15
US
01-Mar-15
Japan
18-Feb-15
UK
07-Feb-15
Euro Area
27-Jan-15
16-Jan-15
125
123
121
119
117
115
113
111
109
107
105
103
101
99
97
95
05-Jan-15
In an effort to stimulate domestic demand and to support housing market
activity (residential investment was circa 10% of GDP in 2014 while sales
of residential buildings declined by 16.7% y-o-y in February/January) the
Chinese authorities announced a comprehensive set of tax and credit
measures in order to support the housing sector. Specifically, the People’s
Bank of China (PBoC), the Ministry of Housing (MHURD) and the
country’s banking regulatory body (CBRC) decided to cut the downpayment ratio required for second home mortgages to 40% -- from 6070% previously -- and to lower the minimum down-payment for second
home buyers that utilize public housing funds (PHF) to 30% (for first home
buyers the same ratio was lowered to 20%). In addition, the Ministry of
Finance announced the exemption (from a tax in capital gains of 5.6%) for
home sellers that had been property owners for at least 2 years (down
from 5 years previously) prior to the transaction.
Meanwhile, the official manufacturing PMI rose to 50.1 in March from 49.9
in February, above consensus expectations of 49.7, indicating that
manufacturing activity increased for the first time in Q1:15. Having said
that, despite the increasingly accommodative PBoC stance – through RRR
and interest rates cuts – during the past few months, the Chinese
economy seems to be missing growth estimates in Q1:15, whereas
authorities are further pressured to ease monetary policy in order to
remain on the path of the Government set 2015 GDP growth target
(7.0%).
April 07, 2015
10-Year Government Bond Yields
%
2,70
2,50
%
US (left)
Euro Area (left)
UK (left)
Japan (right)
0,80
0,75
0,70
0,65
0,60
0,55
0,50
0,45
0,40
0,35
0,30
0,25
0,20
0,15
0,10
0,05
2,30
2,10
1,90
1,70
1,50
1,30
1,10
0,90
0,70
0,50
0,30
03-Apr-15
23-Mar-15
12-Mar-15
01-Mar-15
10-Year Government Bond Spreads
bps
Greece (left)
Portugal (right)
Ireland (right)
1200
1150
1100
1050
1000
950
900
850
800
750
700
650
600
550
500
450
400
350
300
bps
Italy (right)
Spain (right)
350
325
300
275
250
225
200
175
150
125
100
75
50
EUR/USD (left)
03-Apr-15
23-Mar-15
12-Mar-15
01-Mar-15
18-Feb-15
07-Feb-15
27-Jan-15
16-Jan-15
05-Jan-15
25
USD/JPY (right)
1,26
122
1,24
121
1,22
120
1,20
119
118
1,18
117
1,16
116
1,14
115
1,12
114
1,10
113
03-Apr-15
23-Mar-15
12-Mar-15
01-Mar-15
18-Feb-15
110
07-Feb-15
111
1,04
27-Jan-15
112
1,06
16-Jan-15
1,08
05-Jan-15
Global equity markets were broadly flat during the past week, with
emerging equity markets (+3.2%) strongly outperforming their developed
peers (+0.4%) as the prospect for the Fed staying “low-for-longer” boosted
emerging market assets. The EuroStoxx was up 1.1% during the week,
having gained 18.2% in Q1:15, whereas the S&P500 remained broadly
unchanged, up by 0.3% on a weekly basis and by 0.4% in Q1. In the UK,
the FTSE100 was down slightly by 0.3% over the week, due to the
upcoming general elections (May 7). Looking forward, a steady pick-up in
advanced economies growth (apart from the weak Q1 US outcome) due to
the decline in oil prices and an ongoing accommodative monetary policy
stance from most major central banks is expected to support equities.
However, with most valuation multiples having returned to (or exceeding)
their long-term averages, earnings growth needs to be the catalyst for the
equity market performance this year. The major risk could stem from a
disorderly re-pricing of the Fed’s interest rate hiking cycle and/or the ECB
failing to cope with deflationary pressures. Moreover, the ongoing
Ukraine/Russian conflict (as well as developments in the Middle East) will
continue to prevail, as well as political risks (Greece, Spain, the UK).
US Government bond yields declined over the week on the back of a
disappointing labor market report, as well as weaker-than-expected
leading indicators (ISM manufacturing). Specifically, the US 10-year
Treasury yield declined by 12 bps to 1.84% on a weekly basis. In the UK,
the UK 10-year Gilt yield rose by 5 bps to 1.59% with the upcoming
elections weighing negatively on investor confidence. In foreign
exchange markets, the US dollar declined across the board, as the
disappointing labor market report delayed the normalization of monetary
policy in the US, according to market participants (down by 0.8% to 1.10
against the euro). In commodities, the initial agreement between Iran and
the P5+1 (US, Russia, China, Germany, France and the UK) that should
help lift sanctions and allow Iran to export its output, pushed down the
price of Brent on Wednesday/Thursday by 2.8%. On the other hand, safehaven demand for precious metals continued this week, with gold rising by
0.3% (1.5% ytd) and silver up by 1.7% (9.9% ytd).
18-Feb-15
Markets
07-Feb-15
27-Jan-15
16-Jan-15
0,10
05-Jan-15
Quote of the week: “debt is like oxygen: indispensable for economic life, but
when you overdose on it, you first get high, and then you faint.”Jens
Weidmann, President of the Deutsche Bundesbank, on March 31st 2015.
3
NBG Economic Research Division
April 07, 2015
Economic News Diary: March 31 - April 13, 2015
Day
Current Week
Tuesday 31
Wednesday 1
Region
Release
Period
Survey
Actual
Prior
US
S&P Case/Shiller house price index 20 (YoY)
JANUARY
4,60%
US
Consumer Confidence Index
MARCH
96,4
-
4,56%
4,44%
+
101,3
JAPAN
Construction Orders YoY
FEBRUARY
..
98,8
1,0%
27,5%
EURO AREA
Unemployment Rate
FEBRUARY
11,2%
EURO AREA
CPI Estimate YoY
MARCH
-0,1%
11,3%
11,4%
-0,1%
EURO AREA
Core CPI (YoY)
MARCH
0,7%
-0,3%
-
0,6%
GERMANY
Retail sales (MoM)
FEBRUARY
0,7%
-0,7%
+
-0,5%
GERMANY
Retail sales (YoY)
2,3%
FEBRUARY
3,4%
+
3,6%
US
5,0%
ADP Employment Change (k)
MARCH
225
-
189
US
214
ISM Manufacturing
MARCH
52,5
-
51,5
52,9
-
UK
Markit UK PMI Manufacturing SA
MARCH
54,4
54,4
54,0
JAPAN
Tankan - large manufacturers current index
Q1:15
14,0
-
12,0
12,0
JAPAN
Tankan - large manufacturers outlook index
Q1:15
16,0
-
10,0
9,0
CHINA
Manufacturing PMI
MARCH
49,7
+
50,1
49,9
US
Initial Jobless Claims (k)
MARCH 28
286
+
268
288
US
Continuing Claims (k)
MARCH 21
2.405
+
2.325
2.413
US
Trade Balance SA (€ bn)
FEBRUARY
-41,2
+
-35,4
-42,7
UK
Markit/CIPS UK Construction PMI
MARCH
59,8
-
57,8
60,1
US
Change in Nonfarm Payrolls (k)
MARCH
245
-
126
264
US
Change in Private Payrolls (k)
MARCH
235
-
129
264
US
Unemployment rate
MARCH
5,5%
5,5%
5,5%
US
Average Hourly Earnings MoM
MARCH
0,2%
+
0,3%
0,1%
US
Average Hourly Earnings YoY
MARCH
2,0%
+
2,1%
2,0%
US
Average weekly hours (hrs)
MARCH
34,6
-
34,5
34,6
US
Underemployment Rate
MARCH
..
10,9%
11,0%
US
Change in Household Employment (k)
MARCH
245
-
34
96
US
Labor Force Participation Rate
MARCH
62,8%
-
62,7%
62,8%
JAPAN
Leading Index
FEBRUARY
105,1
+
105,3
105,5
JAPAN
Coincident Index
FEBRUARY
110,7
-
110,5
113,3
Tuesday 7
UK
Markit/CIPS UK Services PMI
MARCH
57,0
..
56,7
Wednesday 8
US
FOMC Minutes
Thursday 2
Friday 3
Monday 6
Next Week
Thursday 9
Friday 10
Monday 13
JAPAN
Eco Watchers Current Survey
MARCH
50,5
..
50,1
JAPAN
Eco Watchers Outlook Survey
MARCH
53,5
..
53,2
JAPAN
Bank of Japan annual rise in Monetary Base (¥ tn)
APRIL 8
80
..
80
EURO AREA
Retail sales (MoM)
FEBRUARY
-0,2%
..
1,1%
EURO AREA
Retail sales (YoY)
FEBRUARY
2,8%
..
3,7%
US
Initial Jobless Claims (k)
APRIL 4
282
..
268
US
Continuing Claims (k)
MARCH 28
2.345
..
2.325
UK
BoE Asset Purchase Target (£bn)
APRIL
375
..
375
UK
BoE announces its intervention rate
APRIL 9
0,50%
..
0,50%
GERMANY
Industrial Production (sa, MoM)
FEBRUARY
0,1%
..
0,6%
GERMANY
Industrial Production (wda, YoY)
FEBRUARY
0,6%
..
0,9%
UK
Industrial Production (MoM)
FEBRUARY
0,3%
..
-0,1%
1,3%
UK
Industrial Production (YoY)
FEBRUARY
0,3%
..
CHINA
CPI (YoY)
MARCH
1,2%
..
1,4%
CHINA
New Yuan Loans (RMB bn)
MARCH
1.025
..
1.020
CHINA
Aggregate Financing (RMB bn)
MARCH
1.501,3
..
1.353,2
CHINA
Money Supply M0 (YoY)
MARCH
4,3%
..
17,0%
CHINA
Money Supply M1 (YoY)
MARCH
6,0%
..
5,6%
CHINA
Money Supply M2 (YoY)
MARCH
12,4%
..
12,5%
CHINA
Exports (YoY)
MARCH
9,4%
..
48,3%
CHINA
Imports (YoY)
MARCH
-11,5%
..
-20,5%
Source: Bloomberg
4
NBG Economic Research Division
April 07, 2015
Financial Markets Monitor
Equity Market Returns (%)
Developed Markets
1
World Equity Market Sector Returns (%)
1-w eek
Current Level change (%)
Year-to-Date
1-Year
change (%) change (%)
2-year
change (%)
in US Dollar terms
1-w eek
Current Level change (%)
Year-to-Date
1-Year
change (%) change (%)
2-year
change (%)
US
S&P 500
2067
0,3
0,4
9,4
33,0
Energy
228,7
0,9
-3,8
-18,8
Japan
NIKKEI 225
19435
0,8
11,4
28,9
57,2
Materials
226,4
-0,3
1,5
-7,2
1,9
UK
FTSE 100
6833
-0,3
4,1
2,8
6,4
Industrials
203,4
0,1
2,1
0,3
22,8
Canada
S&P/TSX
15027
1,4
2,7
4,3
21,0
Consumer Discretionary
197,9
0,8
6,3
10,2
37,1
Hong Kong
Hang Seng
25276
3,2
7,1
12,0
13,2
Consumer Staples
205,9
0,7
3,0
8,3
14,3
Euro area
EuroStoxx
380
1,1
18,9
16,0
42,1
Healthcare
214,6
-0,9
7,3
18,5
46,3
-7,3
Germany
DAX 30
11967
0,8
22,0
24,3
52,0
Financials
104,1
0,9
1,3
1,1
19,5
France
CAC 40
5074
0,8
18,8
14,0
35,1
IT
143,1
-0,2
1,3
13,8
43,1
Italy
FTSE/MIB
23309
1,4
22,6
6,0
53,3
Telecoms
70,2
0,5
2,8
-1,2
15,5
Spain
IBEX-35
11634
1,8
13,2
9,9
47,2
Utilities
116,9
0,5
-5,0
-0,7
9,5
51247
3,2
6,0
8,9
11,4
Energy
230,0
1,0
-1,2
-13,8
-2,1
766
2,9
6,5
11,9
16,4
Materials
215,8
0,0
5,5
3,0
13,7
China
73
6,1
11,1
22,3
23,2
Industrials
203,7
0,3
4,5
8,6
33,6
Korea
561
0,4
4,6
-3,4
-1,7
Consumer Discretionary
192,9
0,9
8,4
17,8
47,2
68884
4,0
3,1
0,6
-5,2
Consumer Staples
203,9
0,8
5,2
16,0
20,5
196728
6,0
5,3
-0,8
-4,5
Healthcare
211,6
-0,9
8,7
24,8
52,2
42211
1,5
2,4
9,1
2,5
Financials
104,1
1,2
4,5
10,2
31,5
4786
4,6
8,0
3,0
-0,6
IT
139,5
-0,1
2,0
16,7
47,7
Russia
801
7,6
20,9
12,6
7,3
Telecoms
73,1
0,7
6,4
9,5
26,6
Turkey
1171512
2,6
-4,1
14,2
-2,4
Utilities
119,4
0,7
-2,2
7,2
16,8
Emerging Markets
1
MSCI Emerging Markets
in local currency
MSCI Asia
MSCI Latin America
Brazil
Mexico
MSCI Europe
As of April 3, 2015, 1) in local currency
As of April 3, 2015, MSCI Indices
Bond Markets (%)
10-Year Government Bond
Yields
Foreign Exchange & Commodities
Current
Last w eek
Year Start
One Year
Back
10-year
average
US
1,84
1,96
2,17
2,80
3,26
Germany
0,19
0,21
0,54
1,60
2,77
Japan
0,37
0,38
0,33
0,65
1,18
EUR/USD
1,10
UK
1,59
1,54
1,76
2,75
3,45
EUR/CHF
1,05
Greece
12,06
11,01
9,75
6,13
9,25
EUR/GBP
0,74
Ireland
0,76
0,78
1,25
3,00
5,07
EUR/JPY
130,51
Italy
1,30
1,35
1,88
3,25
4,25
EUR/NOK
Spain
1,22
1,32
1,61
3,23
4,22
Portugal
1,71
1,76
2,69
3,97
US Treasuries 10Y/2Y
136
137
151
US Treasuries 10Y/5Y
59
53
52
Bunds 10Y/2Y
45
45
Bunds 10Y/5Y
28
30
1-month
change (%)
1-Year
change (%)
0,8
-1,0
-20,0
-9,3
-0,2
-2,1
-14,5
-13,1
0,5
1,3
-11,0
-5,3
0,6
-1,6
-8,5
-9,9
8,74
0,7
1,4
6,1
-3,1
EUR/SEK
9,38
0,4
1,7
4,6
-0,7
5,61
EUR/AUD
EUR/CAD
USD-based cross rates
1,44
1,37
2,3
-0,3
1,4
-0,5
-3,3
-9,6
-3,0
-2,6
234
152
USD/CAD
1,25
-1,0
0,5
13,2
7,5
100
80
USD/AUD
1,31
1,5
2,4
20,9
6,9
64
142
114
USD/JPY
118,98
-0,1
-0,6
14,5
-0,6
52
94
66
-6,6
Government Bond Yield
Spreads (in bps)
Foreign Exchange
Year-to-Date
change (%)
Euro-based cross rates
Commodities
Corporate Bond Spreads
(BofA/ML Indices, in bps)
Agricultural
506
2,2
1,4
-27,0
42096
0,0
0,1
0,9
0,2
49
0,6
-4,6
-51,0
-7,8
54
-0,2
-9,7
-48,4
-2,7
1204
-0,3
1,0
-7,8
-4,8
1488
-0,2
0,3
-8,0
1,8
Gold ($)
1203
0,3
0,2
-6,5
1,5
Silver ($)
17
1,7
6,2
-13,1
9,9
Global Inv. Grade (IG)
166
173
184
148
180
Global High yield
517
516
538
391
514
US IG
159
162
171
141
191
US High yield
482
476
504
364
487
Industrial Metals
Euro area IG
150
152
153
171
215
Euro area High Yield
395
388
409
305
534
Precious Metals
US Mortgage Market
30-Year FRM1 (%)
1-w eek
Current Level change (%)
Energy
West Texas Oil ($)
Crude brent Oil ($)
3,89
3,89
4,04
4,56
4,98
Baltic Dry Index
588
-1,3
5,2
-52,4
-24,8
140
135
129
93
104
Baltic Dirty Tankers Index
795
-0,7
-5,8
15,6
-7,8
vs 30Yr Treasury (bps)
As of April 3, 2015, 1. Fixed-rate mortgage rate
As of April 3, 2015, Goldman Sachs Indices for Commodities
5
NBG Economic Research Division
April 07, 2015
NBG Economic & Markets Forecasts
Euro area & US: GDP Growth & Inflation Forecasts
2013a
1
GDP (%)
2014f
2015f
2013a
Q1a
Q2a
Q3a
Q4a 2014a
Q1f
Q2f
Q3f
Q4f
2015f
Euro area
-0,5
0,3
0,1
0,2
0,3
0,9
0,4
0,4
0,5
0,5
1,4
US
2,2
-0,5
1,2
1,3
0,6
2,4
0,5
0,7
0,7
0,7
3,0
Euro area
1,4
0,7
0,6
0,4
0,2
0,4
-0,3
0,0
0,3
0,7
0,2
US
1,5
1,4
2,1
1,8
1,3
1,6
-0,1
-0,3
0,6
0,7
0,3
2
HICP Inflation (%)
a: Actual, f: Forecasts
1. Seasonally adjusted q-o-q grow th rates, 2.Year-to-year average percent change
Interest Rates & Foreign Exchange Forecasts
Current (*)
3-month
10-year government bond yield (%)
Germany
0,19
0,35
US
1,84
2,20
Official rate (%)
Euro area
0,05
0,05
US
0,25
0,25
Currency
EUR/USD
1,10
1,04
EUR/GBP
0,74
0,71
EUR/JPY
131
128
6-month
12-month
0,45
2,40
0,55
3,00
0,05
0,50
0,05
0,75
1,00
0,71
126
1,00
0,69
128
(*) As of April 03 2015, end of period
6
NBG Economic Research Division
April 07, 2015
NBG View and Key Factors for Global Markets
Euro area
Foreign Exchange
 Reduced short-term tail

▬
▬
▬
▬
Government Bonds

risks
Current account surplus
Sluggish growth
Deflation concerns
The ECB’s monetary
policy to loosen further
(LTROs, step-up of
ABSs and covered bank
bond purchases,
Quantitative Easing)
Overvalued on a tradeweighted basis
Lower euro 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
 Periphery spreads
Equities


▬
▬
▬
▬

tightening
Declining equity risk prem
Bottoming out corporate
earnings
Tight credit conditions &
bank de-leveraging
process
Ongoing, albeit milder,
fiscal austerity
Sovereign debt crisis
Political uncertainty
Neutral stance on
equities
US
 The Fed is expected to

▬

increase its policy rate
(currently at 0.00%-0.25%)
in Η2:2015
Above-trend GDP growth in
2015
Structural weakness due to
twin deficits
Higher US dollar against its
major counterparts
Japan
 Safe haven demand
 More balanced economic
▬
▬

 Lower fiscal deficit
 Fed’s commitment on low

▬
▬
▬



▬
▬
▬

▬
▬

Higher yields expected
yields
Strong EPS growth
Cash-rich corporates lead to
share buybacks and higher
dividends (de-equitization)
Slightly demanding
valuations
Peaking profit margins
Disorderly re-pricing of
expectations for the first
interest rate-hike by the Fed
Neutral-to-positive stance on
equities
Lower yen against the US
dollar
 Safe haven demand
 Extremely dovish
policy rates (qualitative
forward guidance)
Safe haven demand
Valuations appear rich
Growth prospects improve
The Fed is expected to
increase its policy rate
(currently at 0.00%-0.25%)
in H2:2015
 Very low government bond
growth recovery (longterm)
Additional Quantitative
Easing by the Bank of
Japan if inflation does not
approach 2%
Strong appetite for foreign
assets
central bank
Fiscal deficits
Restructuring efforts
brightens growth
prospects
Higher yields expected
 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 stance on equities
UK
 The Bank of England is

▬
▬
expected to increase its
Bank Rate (currently at
0.50%) in H2:2015
Solid economic growth
with real GDP at c. 3% for
2014-2015
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 H2:2015
▬

Higher yields expected
 Growth recovery
 Strong EPS growth
▬ The BoE increases
▬
▬

interest rates faster-thanexpected due to labor
market tightening
Strong trade links with
euro area economy
High UK exposure to the
Energy sector
Neutral stance on equities
7
NBG Economic Research Division
April 07, 2015
NBG 6-Month View and Key Factors for South Eastern European Markets
Emerging Markets Research Team, tel:210-3341211, email: [email protected]
Turkey
Foreign Exchange
 High domestic debt yields
 Narrowing current account
deficit
▬
▬
Sizable external financing
requirements
Romania
 Precautionary Stand-By
 Small current account deficit
▬

Domestic Debt
Stubbornly high inflation
Stable to lower yields
 Narrowing current
 Appropriate policy mix
▬
Foreign Debt
▬

Sizeable external
financing requirements
 Low public debt-to-GDP

Stable to lower yields
 Precautionary Stand-By
reserves and fiscal
reserves
 Small current account
deficit
▬

Large external financing
requirements
Stable to narrowing
spreads
 Attractive valuations
 Attractive valuations
▬
Weak foreign investor
appetite for emerging
market assets
▬
Neutral stance on equities

 High domestic debt yields
 Staff-level agreement on a
Precautionary Stand-By
Agreement with the IMF
Sizable external financing
requirements
▬
Sizable external financing
requirements

Stable BGN against the
EUR

Weaker to stable RSD
against EUR
 Very low public debt-toGDP ratio and large fiscal
reserves
Weak foreign investor
appetite for emerging
market assets
Neutral/Positive stance on
equities
 Positive inflation outlook
 Staff-level agreement on
a Precautionary Stand-By
Agreement with the IMF
 Low inflation

Stable to lower yields
 Solidly-based currency
board arrangement, with
substantial buffers
▬
Large public sector
borrowing requirements

Stable to lower yields
 Ongoing EU membership
negotiations
 Strengthening foreign
 Balanced current account
▬

Large external financing
requirements
Stable to narrowing
spreads
 Attractive valuations
Low-yielding
 Stable
spreadsdomestic debt
investor sentiment
 Staff-level agreement on a
Precautionary Stand-By
Agreement with the IMF
▬
Sizable external financing
requirements
▬
Slow progress in structural
reforms

Stable to narrowing
spreads
 Attractive valuations
▬
Weak foreign investor
appetite for emerging
market assets

Neutral/Positive stance on
equities
and deposits
▬
Weak foreign investor
appetite for emerging
market assets

Neutral/Positive stance on
equities
Equities

negotiations
▬
Agreement with the IMF
Weak foreign investor
appetite for emerging
market assets
Stable to narrowing
spreads
 Large foreign currency
Agreement with the IMF
account deficit
Foreign Debt
Stable to stronger RON
against the EUR
ratio

 Ongoing EU membership
arrangement
Sizable external financing
requirements
 Precautionary Stand-By
ratio
▬
Serbia
 Balanced current account
against the EUR
 Low public debt-to-GDP
 Currency board
Agreement with the IMF
Political noise ahead of
June 2015 parliamentary
elections
 Weaker to stable TRY
Bulgaria
8
NBG Economic Research Division
April 07, 2015
NBG South Eastern Europe Economic Forecasts
SEE Economies
2011 2012 2013 2014 2015f 2016f
Real GDP Growth (%)
Turkey
8,8
2,1
Romania
1,1
0,6
Bulgaria
2,0
0,5
Serbia
1,4 -1,0
Headline Inflation (eop,%)
Turkey
10,4
6,2
Romania
3,1
5,0
Bulgaria
2,8
4,2
Serbia
7,0 12,2
Current Account Balance (% of GDP)
Turkey
-9,7 -6,2
Romania
-4,6 -4,5
Bulgaria
0,1 -1,1
Serbia
-10,9 -11,6
Fiscal Balance (% of GDP)
Turkey
-1,4 -2,1
Romania
-4,2 -2,5
Bulgaria
-2,0 -0,4
Serbia
-4,7 -6,1
4,1
3,4
1,1
2,6
2,9
2,9
1,7
-1,8
3,4
3,1
1,6
0,0
4,0
3,0
2,2
2,0
7,4
1,6
-1,6
2,2
8,2
0,8
-0,9
1,7
6,5
1,5
0,2
2,4
6,0
2,5
1,4
3,5
-7,9
-0,8
1,0
-6,1
-5,7
-0,5
0,0
-6,0
-4,9
-0,5
1,3
-4,2
-5,3
-1,1
0,3
-3,6
-1,2
-2,5
-1,8
-4,7
-1,3
-1,9
-3,7
-4,8
-1,1
-2,5
-3,3
-4,3
-1,2
-2,0
-2,7
-4,0
e: NBG estimates, f : NBG f orecasts
SEE Financial Markets
April
3rd
3-month 6-month 12-month
forecast forecast forecast
1-m Money Market Rate (%)
Turkey
10,6
10,4
Romania
1,3
1,4
Bulgaria
0,2
0,2
Serbia
7,2
7,0
Currency
TRY/EUR
2,82
2,88
RON/EUR
4,41
4,42
BGN/EUR
1,96
1,96
RSD/EUR
120,0
119,8
Sovereign Eurobond Spread (bps)
Turkey (EUR 2017)
126
124
Romania (EUR 2018)
96
92
Bulgaria (EUR 2017)
99
80
Serbia (USD 2021)(*)
289
250
10,0
1,6
0,2
6,2
9,0
2,0
0,2
6,0
2,84
4,41
1,96
120,1
2,80
4,40
1,96
120,0
115
88
78
225
100
80
70
180
(*) Spread ov er US Treasuries
SEE Stock Market Returns1
April
3rd
Last w eek
return (%)
YTD (%)
2-year
change (%)
82.994
1.319
517
680
2,6
0,0
0,9
2,1
-3,2
0,8
-1,1
1,9
-2,2
17,8
35,2
16,3
Index
Turkey
Romania
Bulgaria
Serbia
ISE100
BET-BK
SOFIX
BELEX15
1. In local currency
9
NBG Economic Research Division
April 07, 2015
DISCLOSURES:
This report is provided solely as a sheer reference for the information of experienced and sophisticated investors who are
expected and considered to be fully able to make their own investment decisions without reliance on its contents, i.e. only
after effecting their own independent enquiry from sources of the investors’ sole choice, and on condition that it will not be
reproduced or provided to any other person without the written permission of the National Bank of Greece. Under no
circumstances is it to be used or considered as an offer to sell, or a recommendation, or a solicitation of any offer to buy.
Any data provided in this report has been obtained from sources believed to be reliable. Because of the possibility of error
on the part of such sources, National Bank of Greece does not guarantee the accuracy, timeliness or usefulness of any
information. The National Bank of Greece and its affiliate companies, its representatives, its managers and/or its personnel
or other persons related to it, accept no responsibility, or liability as to the accuracy, or completeness of the information
contained in this report, or for any loss in general arising from any use of this report including investment decisions based on
this report.
ANALYST CERTIFICATION:
Each individual contributing to this report and whose name is listed on page 1 hereby certifies that all of the views expressed
in this research accurately reflect his or her personal views solely, about any and all of the subject securities, issuers,
currencies, commodities, futures, options, economies or strategies. Further, each of these individuals also certifies that no
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10