1
0,00
0,25
0,50
0,75
1,00
1,25
1,50
1,75
2,00
2,25
2,50
2,75
3,00
Sep
15
Oct
15
No
v15
Dec
15
Jan
16
Feb
16
Mar
16
Ap
r16
May
16
Jun
16
Jul1
6
Au
g16
Sep
16
Oct
16
No
v16
Dec
16
Jan
17
Feb
17
Mar
17
Ap
r17
May
17
Jun
17
Jul1
7
Au
g17
Sep
17
Oct
17
No
v17
Dec
17
Fed Forecasts (three months ago)
Fed Forecasts (September 2015)
Futures (three months ago)
Futures (September 2015)
%
down by 25bps
down by 25bps
Fed Funds Interest Rate Projections
down by 25bps
Source: Federal Reserve, Bloomberg
0,65
0,67
0,69
0,71
0,73
0,75
0,77
0,79
0,81
0,83
0,85
2,10
2,15
2,20
2,25
2,30
2,35
9/14
/15
3:00
9/14
/15
11:2
0
9/14
/15
19:5
7
9/15
/15
7:12
9/15
/15
15:4
8
9/16
/15
3:04
9/16
/15
11:4
0
9/16
/15
20:1
7
9/17
/15
7:32
9/17
/15
16:0
9
9/18
/15
3:24
9/18
/15
12:0
1
9/18
/15
20:3
8
10Yr Yield (left)
2Yr Yield (right)
Intraday US Treasury Yields% %Intraday US Treasury Yields
Source: Bloomberg
Sept 14 Sept 15 Sept 16
Sept 17(FOMC
Meeting)
Sept 18
September 22, 2015
Global Markets Roundup NBG Economic Research Division
The timing of the Fed interest rate hike remains uncertain
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.
The Fed maintained unchanged its target for the Federal Fed funds rate at 0.0%-0.25%, signaling at the
same time increasing concerns regarding global economic growth (China and other emerging market
economies) and the resulting tighter financial conditions in the US.
The FOMC notes the strength of US domestic demand, however, the above-mentioned external
developments, combined with lower oil prices, are expected to put downside pressures on inflation. Thus,
further evidence is required that inflation is moving towards its target.
The “median” forecast of the Fed funds rate for end-2015 declined by 25 bps to 0.375% (or a target
range of 0.25%-0.50%), implying one rate hike before end-year, compared with two rate hikes at the
June meeting. Futures now price in a later hike (March 2016).
The pace of tightening remains unchanged post-2015 (by 100 bps in 2016 and 150 bps in 2017), more
aggressive than the level of tightening expected by investors. Market estimates for the normalization path
are 50 bps for 2016 and 50 bps for 2017 (see graph). Unless this gap closes gradually, the risk of a
disorderly sell-off in rates (DM and EM) increases.
Overall, the meeting was dovish, as reflected in: i) greater emphasis on external developments; ii) slightly
lower US GDP and inflation forecasts for 2016/2017; and more importantly, iii) no evidence by Chair
Yellen that an interest rate increase is likely by end-year (despite the “median” forecast for 2015).
However, equity markets reacted poorly to the prospective 3-month extension of the zero interest rate
policy. DM equities were hurt by: i) the lack of transparency regarding the future policy path; and ii) the
Fed reinforcing the case for downside global growth risks.
The MSCI Developed Markets Index retreated by 1.4% following the FOMC meeting (Thursday/Friday),
with the S&P500 and the Eurostoxx indices declining by circa 2%. In contrast, EM equities were up 0.5%
in relative terms, due to the Fed’s hesitancy to raise rates.
Fixed income markets, especially US Treasuries, saw prices rise, in view of a more dovish Fed and rising
risk aversion. Specifically, 2-Year US Treasury yields declined by 13 bps to 0.62%, and 10-Year US
Treasury yields were down by 17 bps to 2.13% in two days (see graph).
The FOMC meeting also led to a weakness of the USD -- down 1.3% against the euro on Thursday --
albeit the US dollar recovered from a 20-day low on Friday due to increasing global risk aversion, ending
the week broadly unchanged at USD 1.13/€.
If September is just a transitory adjournment of the Fed’s first interest rate hike, the diverging monetary
policy path between the Fed and the ECB is expected to result in a stronger USD against the EUR over
the next 12 months (in the range of USD 1.05-1.00/€).
The Greek parliamentary elections resulted in a win for the “Syriza” party, with 35.4% of the vote and 145
seats. A repeat of the outgoing coalition is expected, with a majority of 155 seats (out of 300). Equity
market reaction was muted (ASE index down by -1.0%), albeit GGBs maturing in 2017 and 2019 were up
-- yields fell by 30 bps and 10 bps to 9.9% and 8.8%, respectively.
NBG Economic Research Division September 22, 2015
2
Economics In the US, the Fed remained on hold, as negative developments in
EMs (especially China), and subdued inflation data, more than
offset strong domestic developments (labor market). It also
maintained the same forward guidance, stating that it will need to
be “reasonably confident” that inflation will revert to its 2% target
over the medium term, in order to raise rates, thus providing no
clear evidence that a rate hike is looming. Regarding the economic
outlook, the Fed set a more dovish tone, adding to the official
statement that “global economic and financial developments may
constrain economic activity, and are likely to put further downward
pressure on inflation”, adding at the same time that it will “monitor
developments abroad” and that “market-based measures of
inflation moved lower”. Indeed, the 5Y/5Y breakeven inflation rate
has declined by 30 bps to 1.85% since end-June.
For 2015, the economic outlook remains positive, with the median
GDP forecast for 2015 (Q4:YoY) increasing to 2.1% (from 1.9% in
June). However, GDP forecasts for 2016 declined by 0.2 pps to
2.3% and by 0.1 pp to 2.2% for 2017. The median PCE inflation
forecasts for Q4:2015 (YoY average) were down 0.3 pps to 0.4%,
on the back of lower oil and import prices. For 2016 and 2017, the
forecasts were both down by 0.1 pp, to 1.7% and 1.9%,
respectively, with the Fed projecting that inflation will reach its 2.0%
target by 2018. On the other hand, the Fed lowered significantly its
median unemployment rate forecasts for Q4:2015 and Q4:2016
(YoY average) by 0.3 bps to 5.0% and 4.8%, respectively, and by
0.2 bps to 4.8% for 2017, reflecting the lower starting point (UR is
currently at 5.1% compared with 5.5% in May) and less optimistic
views about the labor force participation rate. However, the longer-
term projection (or NAIRU) also was lowered by 0.1 bp to 4.9%.
The FOMC members’ individual estimates for the official rate were
lowered, with the median FOMC forecast for end-2015 declining to
0.375% (from 0.625% in June), and signaling one rate increase by
end-year-end (compared with two rate increases in June). The
monetary policy tightening path was revised down (by 25 bps), with
the median forecast for end-2016 at 1.375% and at 2.625% for
end-2017. For end-2018, the FOMC members project the official
rate at 3.375%, while the longer-term projection also fell by 25 bps
to 3.50%.
Inflation data for August remained soft, corroborating the Fed’s
hesitancy to raise rates. Specifically, core CPI remained
unchanged at 0.1% m-o-m in August. The annual change of core
CPI was also unchanged at 1.8% y-o-y in August, below
expectations for 1.9% y-o-y. Headline inflation was negative on a
monthly basis (-0.1% m-o-m from +0.1% m-o-m), due to
decreasing energy prices (-2.0% m-o-m), with the annual rate of
CPI unchanged at 0.2% y-o-y. Recall that the PCE deflator (the
Fed’s preferred measure of gauging inflation pressures) for July
stood at 0.3% y-o-y (unchanged from June), while the core figure
declined to 1.2% y-o-y from 1.3% y-o-y in June.
US retail sales data in August were positive, with the underlying
trend remaining solid, corroborated by upward revisions to previous
months. The latest data suggest that consumption (c. 70% of US
GDP) will remain supportive of growth in Q3:2015. Specifically,
retail sales (in value terms) rose by 0.2% m-o-m (2.2% y-o-y) in
August, from an increase of 0.7% m-o-m (2.6% y-o-y) in July.
Moreover, retail sales excluding autos, gas, food services and
building materials -- the so-called “control group” since they feed
into the calculation for GDP -- increased by 0.4% m-o-m
(+3.5% y-o-y) in August, from an upwardly revised (by 0.3 pps)
increase of 0.6% m-o-m (+3.5% y-o-y) in July. It should be
noted that on a 3m/3m annualized rate basis, retail sales
“control group” growth stands at a solid 5.7% in August.
Industrial production in August disappointed, consistent with
the latest weak business surveys. Recall that the ISM
manufacturing index declined to a 27-month low of 51.1 in
August from 52.7 in July. It should be noted, however, that
upward revisions in the previous months alleviated the
negative outlook. Specifically, industrial production decreased
by 0.4% m-o-m (+0.9% y-o-y), from an upwardly revised (by
0.3 pps) +0.9% m-o-m (+1.3% y-o-y) in July. On a 3m/3m
annualized rate basis, industrial production was 0.4% in
August, up from -1.3% in July, whereas manufacturing
production (75% of total industrial production) was up +1.3%.
On the housing market front, data were mixed, albeit still
suggesting that the ongoing recovery remains. Specifically,
housing starts declined by 3.0% m-o-m (+16.6% y-o-y) to
1126k in August, from +4.1% m-o-m (+6.0% y-o-y) in July,
while building permits rose by 3.5% m-o-m (12.5% y-o-y) to
1170k in August, following a sharp decline of 15.5% m-o-m in
July (+8.6% y-o-y). More importantly, the NAHB survey index –
that captures homebuilders’ confidence for new home sales –
increased to a post-recession high (since October ‘05) of 62 in
September, up 1 point compared with August.
In the euro area, industrial production data was mixed and
business surveys came out slightly weaker than expected.
Specifically, industrial production increased by 0.6% m-o-m
(1.9% y-o-y) in July from -0.3% m-o-m (1.5% y-o-y) in June,
albeit on a 3m/3m annualized basis, industrial production
hovers at -1.4% in July, the lowest rate in over a year.
Furthermore, the ZEW expectation indicator for the German
economy weakened further in September, mostly reflecting
external factors (i.e. the slowdown in emerging markets).
Specifically, the ZEW forward-looking survey came out at 12.1
in September (from 25.0 in August), a 10-month low,
undershooting consensus expectations of 18.3, and below the
15-year average of 21.1 (since January 2000).
On a positive note, euro area employment posted its sixth
consecutive quarterly increase, up by 0.3% q-o-q in Q2:15,
following an increase of 0.2% in Q1:15, reflecting, inter alia, the
improving economic outlook during recent quarters and labor
market reforms. The annual rate in employment remained
unchainged at 0.8% y-o-y for a fourth consecutive quarter.
Recall that the unemployment rate in the euro area fell to
10.9% in July, the lowest reading since 2012. Regarding
developments by country, Spain posted the strongest pace of
job creation, as employment increased by 0.9% q-o-q (2.9%
y-o-y) from 0.8% q-o-q (2.9% y-o-y) in Q1:15.
In the UK, incoming data suggests that the labor market
remains solid, with the unemployment rate declining (by 0.1
pp) to 5.5% in July and wages recording further gains.
Specifically, the number of employed rose by 42k on a 3m/3m
basis (+1.4% y-o-y) in July, following a decline of 63k (+1.2%
y-o-y) in June. In addition, earnings growth accelerated, as
regular pay (average weekly earnings ex. bonuses) increased
by 2.9% y-o-y from 2.8% y-o-y in June, in line with consensus
estimates. However, on the inflation front, low energy prices
NBG Economic Research Division September 22, 2015
3
continue to weigh on, UK CPI growth, which was flat again in August (0.0% y-o-y),
down from 0.1% y-o-y in July. Core inflation decelerated to 1.0% y-o-y from 1.2%
y-o-y previously. Weak inflation pressures appear to offset strong wages for now, as
the Bank of England is expected to remain on hold at least until the second half of
2016. A more dovish-than-expected Fed could reinforce the case for the BoE to hold
its Bank rate low for even longer (currently at 0.50%).
The Bank of Japan maintained its policy unchanged, as expected, during the past
week, reiterating its goal to increase the monetary base at an annual rate of ¥80tn.
Nevertheless, the assessment of the economy’s outlook was downgraded, as the
Bank of Japan stated that “export and production are affected by the slowdown in
emerging economies”, jeopardizing at the same time the improvement in the trade
balance which has improved to -1.1% of GDP in August (on a 12-month rolling
basis) compared with -3.0% in the same period one year ago.
On a positive note, Chinese house prices rose for a fourth consecutive month,
suggesting that the Government’s measure to support the housing market is
gradually bearing fruit. Specifically, 35 out of 70 cities (50%) monitored by China’s
National Bureau of Statistics (NBS), reported a monthly increase in prices of new
residential buildings in August, compared with 44% of cities in July and only 3% in
January. On average, prices for new residential buildings rose by 0.2% m-o-m (+0.2
m-o-m in July), whereas the annual rate of decline slowed to 3.2% y-o-y from -4.4%
y-o-y in July, from a trough of -6.3% y-o-y in April. Quote of the week: ”I expect that we’ll reach our maximum employment mandate in the near future and inflation will gradually move back to our 2 percent goal. In that context, it will make sense to gradually move away from the extraordinary stimulus that got us here…I view the next appropriate step as gradually raising interest rates, most likely starting sometime later this year.” J. Williams, President of the Fed San Francisco, on September 19th 2015.
Markets
Global equity markets declined slightly during the past week, as the Fed’s decision
to defer the normalization of its monetary policy reheated global growth concerns.
The MSCI World index was flat for the week, as EM equities out-performed their
developed market peers (+2.3% vs -0.2%), with US equity markets shedding
cumulatively 1.9% on Thursday and Friday alone. Similarly, the rest of the major
developed equity markets weakened. In Japan, the Nikkei225 fell by 1.1% over the
week due to a stronger yen. Finally, Chinese equity markets ended the week down,
with the CSI300 (largest A-shares in Shanghai and Shenzhen exchanges) down by
2.9%. Nevertheless, the CSI300 rose on Monday (up by 1.8%).
Government bond yields were lower by the end of the week as the Fed’s more-
dovish-than-expected projections and rhetoric weighed on investors’ sentiment. The
US 10Yr Treasury yield fell by 6 bps to 2.13% and the Japanese government 10Yr
bond yield fell by 3 bps to 0.31% (lowest level since April). Note that S&P
downgraded the Japanese debt rating by one notch to A+ due to concerns over the
success of the government’s economic policies (Abenomics). In Europe, the decline
in government bond yields in the aftermath of the Fed was significant, with both the
UK’s 10Yr Gilts and the Germany’s 10Yr Bunds yield down by circa 12 bps on a
daily basis (on Friday). Moody’s downgraded France’s government bond rating by
one notch to Aa2, citing a weaker medium-term growth outlook and political
constraints that pose challenges in reducing the debt in the coming years. French
government 10Yr bond yields, however, remain unperturbed declining by 3 bps over
the week to 1.03%. Finally, periphery government bond spreads over Bund
narrowed, with Italy’s 10Yr BTPs spread declining by 7 bps to 110 bps and Spain’s
10Yr Bonos spread down by 17 bps to 128 bps. Market attention will now turn to
regional elections in Catalonia (September 27th). The parties (Together for Yes) that
support independence from Spain are struggling for an outright majority (68 seats).
Nevertheless, the parliamentary majority alone (and not a minimum of 50%-55% in
the share of vote) would weaken their call for Catalonia’s independence.
In foreign exchange markets, the US dollar weakened across the board amid the
more-dovish-than-expected Fed projections. Nevertheless, the US dollar gained
ground on Friday (up by 1.2% against the euro), benefiting from increased investor
risk aversion. The ongoing ECB QE, along with improving US fundamentals in
H2:15, should put further pressure on the euro/US dollar in the coming months.
Thus, we expect the exchange rate to reach 1.05-1.00 by Q2:2016, unless the Fed
delays further its monetary policy normalization.
25
50
75
100
125
150
175
200
225
250
275
300
400
500
600
700
800
900
1000
1100
1200
1300
1400
1500
1600
1700
1800
1900
22
-Ju
n
29
-Ju
n
6-J
ul
13
-Ju
l
20
-Ju
l
27
-Ju
l
3-A
ug
10
-Au
g
17
-Au
g
24
-Au
g
31
-Au
g
7-S
ep
14
-Se
p
Greece (left)
Italy (right)
Portugal (right)
Spain (right)
Ireland (right)
Source: Bloomberg - Data as of September 18th
10- Year Government Bond Spreadsbps bps
118
119
120
121
122
123
124
125
126
1,08
1,09
1,1
1,11
1,12
1,13
1,14
1,15
1,16
1,17
22
-Ju
n
29
-Ju
n
6-J
ul
13
-Ju
l
20
-Ju
l
27
-Ju
l
3-A
ug
10
-Au
g
17
-Au
g
24
-Au
g
31
-Au
g
7-S
ep
14
-Se
p
EUR/USD (left) USD/JPY (right)
Foreign Exchange
Source: Bloomberg - Data as of September 18th
-15
-10
-5
0
5
10
15
20
25
30
35
-15
-10
-5
0
5
10
15
20
25
30
35
Jan
-14
Feb
-14
Mar
-14
Ap
r-1
4
May
-14
Jun
-14
Jul-
14
Au
g-1
4
Sep
-14
Oct
-14
No
v-1
4
Dec
-14
Jan
-15
Feb
-15
Mar
-15
Ap
r-1
5
May
-15
Jun
-15
Jul-
15
Au
g-1
5
Sep
-15
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 September 18th
NBG Economic Research Division September 22, 2015
4
Day Region Release Period Survey Actual Prior
Current Week
Tuesday 15 US Retail Sales Advance MoM AUGUST 0.3% - 0.2% 0.7%
US Retail sales ex-autos (MoM) AUGUST 0.2% - 0.1% 0.6%
US Empire Manufacturing SEPTEMBER -0.50 - -14.67 -14.92
US Industrial Production (MoM) AUGUST -0.2% - -0.4% 0.9%
UK CPI (YoY) AUGUST 0.0% 0.0% 0.1%
UK CPI Core (YoY) AUGUST 1.0% 1.0% 1.2%
JAPAN Bank of Japan annual rise in Monetary Base (¥ tn) SEPTEMBER 15 80 80 80
EURO AREA Trade Balance SA (€ bn) JULY 21.4 + 22.4 21.9
EURO AREA Employment (QoQ) Q2:15 .. 0.3% 0.2%
EURO AREA Employment (YoY) Q2:15 .. 0.8% 0.8%
GERMANY ZEW survey current situation SEPTEMBER 64.0 + 67.5 65.7
GERMANY ZEW survey expectations SEPTEMBER 18.3 - 12.1 25.0
Wednesday 16 US CPI (YoY) AUGUST 0.2% 0.2% 0.2%
US Core CPI (YoY) AUGUST 1.9% - 1.8% 1.8%
US NAHB housing market confidence index SEPTEMBER 61 + 62 61
US Net Long-term TIC Flows ($ bn) JULY .. 7.7 103.1
UK ILO Unemployment Rate JULY 5.6% + 5.5% 5.6%
Thursday 17 US Housing starts (k) AUGUST 1.160 - 1.126 1.161
US Building permits (k) AUGUST 1.159 + 1.170 1.130
US Initial Jobless Claims (k) SEPTEMBER 12 275 + 264 275
US Continuing Claims (k) SEPTEMBER 5 2.258 + 2.237 2.263
US Philadelphia Fed Business Outlook SEPTEMBER 5.9 - -6.0 8.3
US Fed announces its intervention rate SEPTEMBER 17 0.25% 0.25% 0.25%
UK Retail sales Ex Auto MoM AUGUST 0.1% 0.1% 0.3%
JAPAN Exports YoY AUGUST 4.3 - 3.1 7.6
JAPAN Imports YoY AUGUST -2.5 - -3.1 -3.2
EURO AREA ECB publishes its economic bulletin
Monday 21 US Existing home sales (mn) AUGUST 5.50 - 5.31 5.58
Next Week
Tuesday 22 EURO AREA Consumer Confidence Indicator SEPTEMBER -7.0 .. -6.9
Wednesday 23 US Markit US Manufacturing PMI SEPTEMBER 52.8 .. 53.0
EURO AREA Markit Eurozone Manufacturing PMI SEPTEMBER 52.0 .. 52.3
EURO AREA Markit Eurozone Services PMI SEPTEMBER 54.2 .. 54.4
EURO AREA Markit Eurozone Composite PMI SEPTEMBER 54.0 .. 54.3
CHINA Caixin PMI Manufacturing SEPTEMBER 47.5 .. 47.3
Thursday 24 US Initial Jobless Claims (k) SEPTEMBER 19 275 .. 264
US Continuing Claims (k) SEPTEMBER 12 2.237 .. 2.237
US Durable goods orders (MoM) AUGUST -2.3% .. 2.2%
US Durable goods orders ex transportation (MoM) AUGUST 0.1% .. 0.4%
US New home sales (k) AUGUST 515 .. 507
JAPAN Markit/JMMA PMI manufacturing SEPTEMBER 51.2 .. 51.7
GERMANY IFO- Business Climate Indicator SEPTEMBER 107.9 .. 108.3
GERMANY IFO- Current Assesment SEPTEMBER 114.7 .. 114.8
GERMANY IFO-Expectations SEPTEMBER 101.4 .. 102.2
Friday 25 US GDP (QoQ, annualized) Q2:15 3.7% .. 3.7%
US Personal Consumption Q2:15 3.2% .. 3.1%
JAPAN CPI (YoY) AUGUST 0.1% .. 0.2%
JAPAN Core CPI (YoY) AUGUST -0.1% .. 0.0%
EURO AREA M3 money supply (YoY) AUGUST 5.3% .. 5.3%
Monday 28 US Personal income (MoM) AUGUST 0.4% .. 0.4%
US Personal spending (MoM) AUGUST 0.3% .. 0.3%
US PCE Core Deflator (YoY) AUGUST 1.3% .. 1.2%
US PCE Deflator (YoY) AUGUST .. .. 0.3%
US Pending home sales (MoM) AUGUST 0.4% .. 0.5%
UK Nationwide House Px NSA YoY SEPTEMBER .. .. 3.2%
Source: Bloomberg
Economic News Diary: September 15 - September 28, 2015
NBG Economic Research Division September 22, 2015
5
Equity Market Returns (%)
Developed Markets1Current Level
1-w eek change
(%)
Year-to-Date
change (%)
1-Year change
(%)
2-year change
(%)
US S&P 500 1958 -0,2 -4,9 -2,7 13,5
Japan NIKKEI 225 18070 -1,1 3,5 12,5 24,6
UK FTSE 100 6104 -0,2 -7,0 -10,5 -6,9
Canada S&P/TSX 13647 1,4 -6,7 -11,8 5,5
Hong Kong Hang Seng 21921 1,9 -7,1 -9,3 -5,2
Euro area EuroStoxx 331 -0,6 3,7 1,2 12,4
Germany DAX 30 9916 -2,0 1,1 1,2 14,8
France CAC 40 4536 -0,3 6,2 1,6 8,8
Italy FTSE/MIB 21515 -1,1 13,2 1,8 20,8
Spain IBEX-35 9847 1,1 -4,2 -10,4 8,7
Emerging Markets1
MSCI Emerging Markets 45439 2,3 -6,0 -9,7 -2,5
MSCI Asia 667 2,6 -7,3 -8,5 -0,4
China 60 2,9 -9,2 -7,6 -3,0
Korea 519 3,2 -3,2 -10,1 -10,7
MSCI Latin America 63215 1,7 -5,4 -16,5 -11,1
Brazil 173229 2,1 -7,3 -21,3 -16,8
Mexico 41473 1,8 0,6 -6,0 3,9
MSCI Europe 4486 1,5 1,2 -5,8 -8,0
Russia 786 1,1 18,6 6,8 -0,2
Turkey 1069306 5,6 -12,5 -3,4 0,7
As of September 18, 2015, 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 187,3 1,0 -21,2 -35,4 -28,7
Materials 189,6 -0,6 -15,0 -22,4 -19,1
Industrials 185,9 -0,6 -6,7 -8,2 -0,8
Consumer Discretionary 190,7 0,9 2,4 5,6 12,9
Consumer Staples 197,9 2,0 -1,0 0,4 7,6
Healthcare 211,1 0,7 5,6 7,0 32,3
Financials 95,4 -0,6 -7,2 -9,2 -1,3
IT 137,2 -0,2 -2,9 -0,7 23,0
Telecoms 66,7 -1,2 -2,4 -6,8 1,8
Utilities 109,9 1,6 -10,7 -8,1 0,5
in local currency
Energy 187,2 0,5 -19,6 -32,4 -24,8
Materials 179,3 -1,3 -12,4 -16,3 -10,8
Industrials 184,5 -1,1 -5,3 -3,5 6,7
Consumer Discretionary 184,4 0,6 3,6 10,0 20,0
Consumer Staples 193,8 1,4 0,0 4,6 13,0
Healthcare 207,0 0,3 6,3 10,3 37,5
Financials 94,9 -1,2 -4,7 -3,3 7,1
IT 133,4 -0,3 -2,5 0,9 26,2
Telecoms 68,6 -1,7 -0,2 -0,5 10,8
Utilities 111,0 1,2 -9,1 -3,8 6,7
As of September 18, 2015, 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 1,13 -0,4 1,6 -12,5 -6,6
EUR/CHF 1,09 -0,4 1,9 -9,3 -9,0
EUR/GBP 0,73 -1,0 2,6 -7,7 -6,3
EUR/JPY 135,55 -0,9 -1,5 -3,5 -6,5
EUR/NOK 9,23 -0,3 0,1 12,9 2,4
EUR/SEK 9,33 -0,1 -1,7 1,9 -1,3
EUR/AUD 1,57 -1,8 3,8 9,3 6,0
EUR/CAD 1,49 -0,7 2,3 5,7 6,2
USD/CAD 1,32 -0,3 0,7 21,0 13,8
USD/AUD 1,39 -1,4 2,2 25,1 13,6
USD/JPY 120,00 -0,5 -3,1 10,4 0,3
Agricultural 451 -1,6 -2,4 -11,7 -16,7
Energy 487 -2,1 1,0 -53,6 -22,6
West Texas Oil ($) 45 0,1 9,5 -52,0 -16,1
Crude brent Oil ($) 46 -2,7 1,9 -52,1 -17,2
Industrial Metals 1038 -2,3 2,7 -24,4 -17,9
Precious Metals 1398 3,3 0,7 -9,1 -4,3
Gold ($) 1139 2,8 0,5 -7,0 -3,9
Silver ($) 15 3,9 -0,9 -18,1 -3,3
Baltic Dry Index 960 17,4 -6,9 -11,8 22,8
Baltic Dirty Tankers Index 666 4,9 3,4 8,3 -22,7
As of September 18, 2015, 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 2,13 2,19 2,17 2,62 3,17
Germany 0,66 0,65 0,54 1,08 2,65
Japan 0,31 0,35 0,33 0,57 1,14
UK 1,83 1,83 1,76 2,58 3,34
Greece 8,23 8,64 9,75 5,81 9,61
Ireland 1,26 1,28 1,25 1,84 4,98
Italy 1,76 1,83 1,88 2,44 4,17
Spain 1,94 2,11 1,61 2,28 4,16
Portugal 2,51 2,61 2,69 3,22 5,56
US Treasuries 10Y/2Y 145 148 151 205 158
US Treasuries 10Y/5Y 69 68 52 78 82
Bunds 10Y/2Y 90 89 64 114 113
Bunds 10Y/5Y 62 63 52 84 66
Global Inv. Grade (IG) 155 155 131 109 171
Global High yield 594 594 538 426 622
US IG 167 167 144 114 192
US High yield 562 562 504 398 604
Euro area IG 126 126 97 94 156
Euro area High Yield 477 477 409 360 639
30-Year FRM1 (%) 4,09 4,09 4,04 4,36 4,85
vs 30Yr Treasury (bps) 115 114 129 101 103
As of September 18, 2015, 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 September 22, 2015
6
NBG Economic & Markets Forecasts
Euro area & US: GDP Growth & Inflation Forecasts
GDP (%)1 2013a Q1a Q2a Q3a Q4a 2014a Q1a Q2a Q3f Q4f 2015f
Euro area -0,3 0,2 0,1 0,3 0,4 0,9 0,5 0,4 0,4 0,5 1,3
US 1,5 -0,2 1,2 1,1 0,5 2,4 0,2 0,9 0,6 0,7 2,5
HICP Inflation (%)2
Euro area 1,4 0,7 0,6 0,4 0,2 0,4 -0,3 0,2 0,2 0,7 0,2
US 1,5 1,4 2,1 1,8 1,3 1,6 -0,1 0,0 0,3 1,0 0,4
a: Actual, f: Forecasts
1. Seasonally adjusted q-o-q grow th rates, 2.Year-to-year average percent change
2013a 2014a 2015f
Interest Rates & Foreign Exchange Forecasts
Current (*) 3-month 6-month 12-month
Germany 0,66 0,75 0,85 1,00
US 2,13 2,50 2,75 3,00
Official rate (%)
Euro area 0,05 0,05 0,05 0,05
US 0,25 0,50 0,75 1,00
Currency
EUR/USD 1,13 1,08 1,05 1,00
EUR/GBP 0,73 0,69 0,68 0,68EUR/JPY 136 134 131 126
10-year government bond yield (%)
(*) As of September 18 2015, end of period
NBG Economic Research Division September 22, 2015
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)
▬ Overvalued on a trade-
weighted basis
Lower euro against the
US dollar
The Fed is expected to
increase its policy rate by
end-2015 (currently at
0.00%-0.25%) for the first
time in nine years
Growth to accelerate in
H2:2015
Halting US Treasuries and
agency MBSs reinvestments
in H1:2016
▬ Structural weakness due to
twin deficits
▬ 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
Lower fiscal deficit
Fed’s commitment on low
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%)
by end-2015
Higher yields expected
Periphery spreads
tightening
Declining equity risk prem
EPS are bottoming out
▬ Tight credit conditions &
bank de-leveraging
process
▬ Ongoing, albeit milder,
fiscal austerity
▬ Sovereign debt crisis
▬ Political uncertainty
Neutral stance on
equities
Very low government bond
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
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 Q2:2016
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 Q2:2016
Higher yields expected
Growth recovery
Strong EPS growth
▬ The BoE increases
interest rates faster-than-
expected due to labor
market tightening
▬ Strong trade links with
euro area economy
▬ High UK exposure to the
Energy 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 September 22, 2015
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
▬ Protracted political uncertainty ahead of the formation of a new government following the June 7th general elections
Weaker to stable TRY against the EUR
Precautionary Stand-By Agreement with the IMF
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
▬ Stubbornly high inflation
Stable to lower yields
Precautionary Stand-By Agreement with the IMF
Low public debt-to-GDP ratio
▬ Easing fiscal stance
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
Appropriate policy mix
▬ Sizeable external financing requirements
▬ Weak foreign investor appetite for emerging market assets
Stable to narrowing spreads
Precautionary Stand-By Agreement with the IMF
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
Strengthening foreign investor sentiment
Precautionary Stand-By Agreement with the IMF
▬ Sizable external financing requirements
▬ Slow progress in structural reforms
Stable to narrowing spreads
NBG Economic Research Division September 22, 2015
9
NBG South Eastern Europe Economic Forecasts
SEE Economies
2011 2012 2013 2014 2015f 2016f
Real GDP Growth (%)
Turkey 8,8 2,1 4,2 2,9 2,9 3,2
Romania 1,1 0,6 3,4 2,8 3,4 4,0
Bulgaria 2,0 0,5 1,1 1,7 2,2 2,6
Serbia 1,4 -1,0 2,6 -1,8 0,8 2,0
Headline Inflation (eop,%)
Turkey 10,4 6,2 7,4 8,2 8,2 6,8
Romania 3,1 5,0 1,6 0,8 -0,8 0,5
Bulgaria 2,8 4,2 -1,6 -0,9 0,2 1,4
Serbia 7,0 12,2 2,2 1,7 2,4 3,5
Current Account Balance (% of GDP)
Turkey -9,7 -6,2 -7,9 -5,8 -5,6 -5,8
Romania -4,6 -4,5 -0,8 -0,4 -0,5 -1,1
Bulgaria 0,9 -0,3 1,9 0,9 2,5 1,5
Serbia -10,9 -11,6 -6,1 -6,0 -4,1 -3,6
Fiscal Balance (% of GDP)
Turkey -1,4 -2,1 -1,2 -1,3 -1,4 -1,2
Romania -4,2 -2,5 -2,5 -1,9 -1,9 -2,8
Bulgaria -2,0 -0,4 -1,8 -3,7 -2,5 -2,0
Serbia -4,8 -6,8 -5,5 -6,7 -5,2 -4,2
f: NBG forecasts
SEE Financial Markets
September
18th
3-month
forecast
6-month
forecast
12-month
forecast
1-m Money Market Rate (%)
Turkey 12,0 11,0 10,5 10,5
Romania 1,1 1,2 1,5 1,8
Bulgaria 0,2 0,2 0,2 0,2
Serbia 4,1 5,0 5,4 5,5
Currency
TRY/EUR 3,40 3,30 3,25 3,20
RON/EUR 4,42 4,42 4,41 4,40
BGN/EUR 1,96 1,96 1,96 1,96
RSD/EUR 120,2 119,8 120,1 120,0
Sovereign Eurobond Spread (bps)
Turkey (EUR 2017) 134 130 120 100
Romania (EUR 2018) 81 84 82 80
Bulgaria (EUR 2017) 62 78 74 70
Serbia (USD 2021)(*) 274 270 240 180
(*) Spread over US Treasuries
SEE Stock Market Returns1
September
18th
Last w eek
return (%) YTD (%)
2-year change
(%)
Index
Turkey ISE100 75.099 5,3 -12,4 0,6
Romania BET-BK 1.335 -0,9 2,0 20,0
Bulgaria SOFIX 444 -1,6 -14,9 -2,8
Serbia BELEX15 617 -2,8 -7,5 18,0
1. In local currency
NBG Economic Research Division September 22, 2015
10
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