eur/usd 1.095 -3.57% 0.85% economic research 110.66 · pdf filethis economic backdrop of even...
TRANSCRIPT
Economic Research
Afrifocus is a registered member of the JSE and a level one contributor with a BEE procurement level of 135%
Daily Drivers
24/06/2016
UK first to head for the exit
The UK finally chose to leap into the unknown with a fairly clear majority. Financial markets
opened on a very dramatic note with falls of a historical magnitude. Japanese indices fell by
8% while the JPY soared, acting as a safe haven in light of all the uncertainty. The GBP
has already lost 9% against the USD while the EUR fell below the USD1.11=EUR1
threshold. The challenge now lies in how central banks initially react to contain the shock
waves across financial markets (injections of liquidity and activation of existing swap
agreements between central banks to avoid loss of access to some currencies), followed by
European political leaders’ responses. The latter will have to handle the UK leaving the EU
but also the need to tighten the links between remaining EU countries to avoid a domino
effect. In several countries, voices called for a referendum over belonging to the EU, while
for Scotland and Northern Ireland the question has been raised over whether they will
remain in the UK. Pending clarifications over the future of Europe, uncertainty may weigh
on consumer and corporate confidence. The danger lies in seeing a fall in investments
which will compromise growth prospects and thus force central banks to step up their
presence over time, preventing a rate hike. We will be examining this subject in more detail
in a report published today (“A leap into the unknown”), looking at the consequences that
we expect, with mainly an underweighting of European assets that will go on for much
longer than a single day.
A leap into the unknown. With a 51.8% majority, the British chose to leave the European
Union in the end. This decision signals the beginning of a long period of instability during
which the UK and its ex-European partners will negotiate the terms of an agreement to
define their new relations. This phase of uncertainty is likely to hit UK growth hard as from
this year, due to a wait-and-see attitude, and to a much lesser extent the euro zone,
followed with an even smaller impact on the rest of the world.
This economic backdrop of even more uncertainty will automatically upset the analysis of
central banks:
Bank of England: it will be faced with a major economic slowdown which will force it
adjust its monetary policy to one that is more accommodating;
European Central Bank: risks of contagion and loss of confidence, with a potential
spread to the banking system, will oblige the institution to take new measures;
Fed: the greenback will serve as a safe haven, pushing up the effective dollar exchange
rate (the euro represents 17% and the pound sterling 3%), resulting in involuntary
monetary tightening. The central bank is therefore likely to delay raising its key rates
until September at best, and probably December if market upset persists;
Bank of Japan: the yen has already risen sharply since the start of the year and is
hitting new highs, putting the growth and inflation outlook at risk. The authorities are
therefore likely to intervene on forex markets ahead of new measures being
implemented for monetary easing.
This context will be propitious to a fresh slide in sovereign yields for the ‘safest’ countries in
Europe, which will also benefit from a fall-back on ‘safe haven’ assets. Bonds for periphery
Benoit Rodriguez
[email protected] Economiste
+33 1 53 48 80 99
Camille Macaire
[email protected] Economiste
+33 1 53 48 80 98
Price % 1D %YTD
Stock Index
Stoxx Europe 600 346.3 1.47% -5.32%
CAC 40 4,466 1.96% -3.69%
DAX 30 10,257 1.85% -4.52%
S&P 500 2,113 1.34% 3.39%
Nasdaq 4,910 1.59% -1.94%
TSX 60 824 1.04% 7.8%
Nikkei 15,742 -3.05% -17.29%
Hang Seng 20,101 -3.68% -8.28%
Sensex 27,002 0.88% 3.22%
KOSPI 1,910 -3.84% -2.59%
Exchange Rates
EUR/USD 1.095 -3.57% 0.85%
EUR/YEN 110.66 -7.82% -15.59%
EUR/GBP 0.816 6.43% 10.63%
EUR/CHF 1.070 -1.70% -1.56%
EUR/CAD 1.429 -1.56% -5.04%
Commodities
CRB 193.5 0.89% 9.87%
Brent (USD/b) 48.35 -3.07% 15.64%
Gold (USD/Ounce) 1321.6 4.63% 24.40%
Overview of recent events:
Financial markets reacted to Brexit as they
did during the period of doubt between 9 and
15 June, but to a sharper extent:
The Nikkei fell 8% with the yen soaring as
it serves as a safe haven;
FTSE expected down 9% via futures;
30bp decline for 10-year US yields to
1.45%, i.e. 10bp lower than for the
benchmark period;
Pound sterling has already lost 10%
against the dollar, which the euro has
fallen below EUR1=USD1.10;
Gold rose 5% to USD1,326/oz and oil fell
5% to below USD49/b.
Markets Focus (at 7:30 AM)
Daily Drivers
Friday 24 June 2016
countries are to be impacted by fears of a domino effect after the exit of the UK. US yields
will remain under pressure, but embark on a slight uptrend due to the Fed’s monetary
tightening still expected by the end of the year. Following last night’s shockwave, pound
sterling is set to slide further on ECB action to respond to the shock on growth, and the
euro hit a downtrend out to the end 2016 on ECB action and widespread capital outflows
from Europe due to the halting of the European project. This will fuel rises in safe haven
currencies the dollar, yen and Swiss franc. European equity markets have adjusted down
sharply, but this movement will be contained by their still attractive returns, especially as
sovereign yields for the safest countries will head south again.
Will Spain strike a blow of its own? The latest polls published this week show Spain’s
Popular Party still in the lead with 35% of the total number of seats in Parliament. A
comparable result emerged from the elections held on 20 December 2015, but this remains
too low to allow the party to govern on its own. The Socialist party (PSOE), hurt by its
inability to form a new government, has lost ground in the polls (24% vs. 26% in the latest
elections). This resulted in a rise in intentions to vote for Podemos, which also draws
support from Communist party supporters following their alliance in May. Against this
backdrop, unless there is a surprise on the results, the challenge facing the negotiations will
essentially be the same, as the parties are struggling to areas of compromise. It is unlikely
that the centre-left alliance (PSOE / Ciudadanos) will re-start its negotiations with the
Podemos party. This party had blocked the vote of investiture of the head of the party,
Pedro Sanchez, in Parliament in early May. The centre-left alliance seems more inclined to
negotiate with the Popular Party, but this would require the resignation of the head of one
or the other of the main parties.
Spain’s political deadlock raises questions on whether the EC recommendations
concerning measures to correct the fiscal deficit (5.1% of 2015 GDP) will be implemented
and creates a risk of tension on Spain’s sovereign bonds. Nevertheless, they will remain
at a low level for the moment thanks to the additional measures implemented by the ECB.
Today, we will be looking at: at 8:45, in France, the final Q1 GDP figure; at 14:30, in the
US, changes in durable goods orders in May; at 18:00, in France, changes in the number
of job seekers in May.
Daily Drivers
Friday 24 June 2016
KEY ECONOMIC INDICATORS
Date time Country Event
Period Actual Forecast Previous
Monday 20 June 01:01 UK Rightmove House Prices MoM/YoY Jun 0.8% / 5.5% - 0.4% / 7.8%
01:50 Japan Exports YoY May -11.3% -10.0% -10.1% 01:50 Japan Imports YoY May -13.8% -13.8% -23.3% 08:00 Germany PPI MoM/YoY May 0.4%/-2.7% 0.3%/-2.9%-- 0.1% / -3.1% 10:00 Spain Trade balance M Apr -EUR0.64bn -EUR0.50bn -EUR759.9m 11:00 Euro zone Construction Output MoM/YoY Apr -0.2%/-0.4% -- / -- -0.9% / -0.5%
Tuesday 21 June 11:00 Germany ZEW Survey Current Situation M Jun 54.5/19.2 53.0/4.8 53.1/6.4
11:00 Euro zone ZEW Survey Current situation M Jun 20.2
16.8
Wednesday 22 June 13:00 US Initial House Loans Claims W Jun-17 2.9% -- -2.4%
15:00 US FHFA House Price Index MoM Apr 0.2% 0.6% 0.7% 16:00 Euro zone Consumer Confidence M Jun A -7.1 -7.0 -7.0 16:00 US Existing Home Sales M/MoM May 5.53m/1.8% 5.55m/1.1% 5.45m/1.7%
Thursday 23 June 01:50 Japan Japan Buying Foreign Bonds W Jun-17 -JPY457.7bn -- -JPY867.9bn
01:50 Japan Japan Buying Foreign Stocks W Jun-17 -JPY72.4bn -- -JPY129.5bn 04:00 Japan Nikkei Japan PMI Mfg M Jun P 47.8 -- 47.7 07:00 Japan Leading Index CI M Apr F 100.0 -- 100.5 08:45 France Business Confidence M Jun 100 103 102 08:45 France Manufacturing Confidence M Jun 102 103 104 08:45 France Production Outlook Indicator M Jun 1 5 08:45 France Own-Company Production Outlook M Jun 9 -- 7 09:00 France Markit France Manufacturing PMI M Jun P 47.9 48.8 48.4 09:00 France Markit France Services PMI M Jun P 49.9 51.7 51.6 09:00 France Markit France Composite PMI M Jun P 49.4 51.0 50.9 09:30 Germany Markit/BME Germany Manufacturing PMI M Jun P 54.4 52.0 52.1 09:30 Germany Markit Germany Services PMI M Jun P 53.2 55.0 55.2 09:30 Germany Markit/BME Germany Composite PMI M Jun P 54.3 54.1 54.5 10:00 Italy Industrial Orders MoM Apr 1.0% -- -3.4% 10:00 Euro zone Markit Eurozone Manufacturing PMI M Jun P 52.6 51.4 51.5 10:00 Euro zone Markit Eurozone Services PMI M Jun P 52.4 53.2 53.3 10:00 Euro zone Markit Eurozone Composite PMI M Jun P 52.8 53.0 53.1 14:30 US Chicago Fed Nat Activity Index M May -0.51 0.11 0.10 14:30 US Initial Jobless Claims M/MoM Jun-18 259k 270k 277k 14:30 US Continuing Claims M/MoM Jun-11 2142k 2150k 2162k 15:00 Russia Gold and Forex Reserve M Jun -17 394.7bn -- 393.9bn 15:45 US Bloomberg Consumer Comfort M Jun -19 44.2 -- 42.1 15:45 US Markit US Manufacturing PMI M Jun P 51.4 50.9 50.7 16:00 US New Home Sales M/MoM May 551k/-6.0% 565k/-8.7% 619k/16.6% 16:00 US Leading Index MoM May -0.2% 0.1% 0.6% 17:00 US Kansas City Fed Manf. Activity M Jun 2 -5 -5
Friday 24 June 08:00 Germany Import Price Index MoM/YoY May 0.4%/-2.7% 0.3% / -2.8% -0.1% / -6.6%
08:45 France GDP QoQ/YoY 1Q F -- 0.6%/1.4% 09:00 Spain PPI MoM/YoY May -0.1%/-6.1% 10:00 Germany IFO Business Climate M Jun -- 107.7 10:00 Germany IFO Current Assessment M Jun -- 114.2 10:00 Germany IFO Expectations M Jun -- 101.6 10:00 Italy Retail Sales MoM/YoY Apr -- / -- -0.6% / 2.2% 10:30 UK BBA Loans for House Purchase M May -- 40.104 11:00 Italy Hourly Wages MoM/YoY May -- / -- 0.0% / 0.6% 14:30 US Durables MoM May P -0.8% 3.4% 14:30 US Durables Ex Transportation MoM May P 0.1% 0.5% 14:30 US Durable goods orders excl. defence and aerospace MoM May P -- -0.6% 16:00 US U. of Mich. Sentiment M Jun F 94.3 94.3 16:00 US U. of Mich. Current Conditions M Jun F -- 111.7 16:00 US U. of Mich. Expectations M Jun F
-- 83.2
18:00 France Total Jobseekers M/MoM May -- 3511.1k/-19.9
W: Weekly data /M: monthly data / yoy: year-on-year / mom: month on month / qoq: quarter on quarter
Daily Drivers
Friday 24 June 2016
KEY INDICATORS S&P 500 / NASDAQ Stoxx Europe 600 / CAC 40 DAX / FTSE
NIKKEI / Hang Seng MSCI Emerging Countries Brazil / Canada
Euro / US dollar – Euro / CAD Euro / GBP Euro / Yen
Interest Rates French yields (2 yrs and 10 yrs) UK yields (2 yrs and 10 yrs)
Rate Last changed on Date
Euro zone 0.00% 03/2016 -0.05%
US 0.50% 12/2015 +0.25%
UK 0.50% 03/2009 -0.50%
Japan 0.10% 12/2008 -0.20%
China 4.35% 10/2015 -0.25%
India 6.50% 04/2016 -0.25%
Brazil 14.25% 07/2015 +0.50%
US yields (2 yrs and 10 yrs) German yields (2 yrs and 10 yrs) 10-yr – 2-yr rates
4200
4420
4640
4860
5080
5300
5520
5740
1800
1900
2000
2100
2200
2300
2400
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
S&P 500 (l) Nasdaq (r)
US_Pr ice
3890
4090
4290
4490
4690
4890
5090
5290
300
320
340
360
380
400
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
Stoxx Europe 600 (l) CAC 40 (r)
EU_pr ice
5500
5700
5900
6100
6300
6500
6700
6900
7100
7300
7500
8750
9350
9950
10550
11150
11750
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
Dax 30 (l) FTSE 100 (r)
Dax
18300
20300
22300
24300
26300
14900
15900
16900
17900
18900
19900
20900
21900
22900
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
Nikkei (l) Hang Seng (r)
Asie_pr ice
650
710
770
830
890
950
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
M SCI _Em ergent s
37000
42000
47000
52000
650
700
750
800
850
900
950
1000
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
STX 60 (l) Bovespa (r)
STX
1.37
1.41
1.45
1.49
1.53
1.57
1.051.071.091.111.131.151.171.191.211.231.251.271.291.311.331.351.371.391.411.43
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
euro / Dollar EUR/CAD
Chg_USD
0.69
0.74
0.79
0.84
0.89
0.94
20
/06/1
5
20
/07/1
5
20
/08/1
5
20
/09/1
5
20
/10/1
5
20
/11/1
5
20
/12/1
5
20
/01/1
6
20
/02/1
6
20
/03/1
6
20
/04/1
6
20
/05/1
6
20
/06/1
6
Chg_G BP
110
118
126
134
142
150
20
/06/1
5
20
/07/1
5
20
/08/1
5
20
/09/1
5
20
/10/1
5
20
/11/1
5
20
/12/1
5
20
/01/1
6
20
/02/1
6
20
/03/1
6
20
/04/1
6
20
/05/1
6
20
/06/1
6
Chg_Yen
-0.5
0
0.5
1
1.5
2
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
2 years 10 years
Taux_f r
%
-0.5
0
0.5
1
1.5
2
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
2 years 10 years
t aux_en
%
Itraxx Sub Financials-0.2
0.3
0.8
1.3
1.8
2.3
2.8
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
Rates 2 years (US) Rates 10 years (US)
Tx_Lt _Ct
%
-0.7
0
0.7
1.4
2.1
2.8
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
2 years 10 years
Tx_All
%
0
0.4
0.8
1.2
1.6
2
2.4
2.8
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
Spread German rates Spread US rates
Tx_Spr ead
%
Daily Drivers
Friday 24 June 2016
KEY INDICATORS CDS Itraxx Commodities
Europe growth forecast* US growth forecast* China growth forecast*
* Bloomberg consensus
30
90
150
210
270
330
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
Spain Portugal Irlande Italy
CDS_per iph
50
70
90
110
130
150
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
Itraxx Europe Itraxx HiVol
I t r axx
30
40
50
60
70
30
40
50
60
70
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
WTI (l) Brent (r)
G old
$ $
10
18
26
34
42
50
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
France UK Germany
CDS
60
110
160
210
260
310
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
Itraxx Financials Itraxx Sub Financials
I t r axx_fin
190
205
220
235
250
265
1050
1100
1150
1200
1250
1300
1350
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
Gold (l) Copper (r)
Cuivr e
$ $
15
20
25
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
USA
CDS_US
260
300
340
380
420
460
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
Itraxx Xover
I t r axx_Xover
390
405
420
435
450
465
150
165
180
195
210
225
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
CRB (l) CRB Raw Materials (r)
CRB
$ $
1.4
1.5
1.6
1.7
1.8
1.9
2
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
2016 2017
Cr oissance_EU
%
1.7
1.9
2.1
2.3
2.5
2.7
2.9
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
2016 2017
Cr oissance_US
%
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
20/0
6/1
5
20/0
7/1
5
20/0
8/1
5
20/0
9/1
5
20/1
0/1
5
20/1
1/1
5
20/1
2/1
5
20/0
1/1
6
20/0
2/1
6
20/0
3/1
6
20/0
4/1
6
20/0
5/1
6
20/0
6/1
6
2016 2017
Cr oissance_CN
%
Johannesburg Cape Town Durban
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