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08 November 2013
Fixed Income Research

The Global Macro Pulse
Overnight Price Action*
After the 1.3% fall in the S&P 500 overnight, futures are up 0.2% and the US
10yr yield is flat in Asian trading. All Asian equity markets are down, led by a
1.3% fall in the Nikkei and a 1.1% fall in the Shanghai Composite. Kospi and
Taiex are down 0.8% while the Hang Seng Index is off 0.6%.
The major currencies are basically flat at their New York closes: EURUSD is at
1.3409, USDJPY is 95.15, and AUDUSD is at 0.9464. The standout in EM Asia
dollar pairs has been USDCNY, which fixed 95pips lower to 6.13550 ahead of
better than expected October trade data. USDKRW gapped up at the open but
has traded flat at 1063 since. USDMYR rose to a high of 3.1923, but has come
back down to 3.1840 where it opened.
JGBs barely moved today. Yields in most Asian rates markets are down 1 – 2bps.
Korean yields have outperformed, falling 4 – 5bps. In contrast China’s 7-day rate
is up 9bps to 4.04%.
(*) Prices are taken as of noon SGT .

What Happened Overnight
China exports stronger than expected, trade surplus widened
 Exports rebounded in October, rising 5.6%yoy after falling 0.3%yoy in
September. Export growth exceeded the consensus estimate of 1.7%yoy.
Import growth was in line with expectations at 7.6%yoy vs. consensus of
7.4%yoy. The trade surplus widened to $31.1bn from $15.2bn in September.

RBA cut growth forecast for 2014, keeps rate-cut scope
 The RBA lowered its GDP projection for 2014 to the 2% to 3% range in its
November statement of monetary policy from 2.5% to 3.5% in August. The
downward revision was attributed to mining investment declining more than
previously anticipated. In addition, the appreciation of AUD since August
also meant that the traded goods sector will be “a bit more constrained” than
was envisaged.
 The central bank reiterated that it was appropriate to hold the cash rate
steady, but not to close off the possibility of reducing it further, should that be
needed to support economic activity.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS

BEYOND INFORMATION®
Client-Driven Solutions, Insights, and Access

08 Nov ember 2013

Malaysia’s trade beat consensus
 Malaysia’s trade balance unexpectedly rose to MYR8.7bn in September from MYR7.1bn
in August, against consensus for a decline to MYR6.5bn. Exports were slightly better
than expected, rising 5.6%yoy vs. 5%yoy consensus, but the surprise came from the
weak import growth at 2.8% compared to market expectation of 5.4%.
 We think improved fundamentals in Malaysia will help counter somewhat the impact of
higher US yields into Fed’s taper on the ringgit. Seasonality also points to better trade
and current account balance through 1Q next year.

Japan’s official reserve assets climbed
 Japan’s official reserve assets climbed to $1276.8bn in October from $1273.5bn in the
previous month.

What to Watch Today
US: Payrolls, Personal Income, Consumer Sentiment, Fedspeak
 The impact of the government shutdown probably reduces the reliability of the October
jobs report and increases the uncertainty around forecasts. Our payroll forecast is 120K.
We would have forecast 145K payrolls without the shutdown, so our projection assumes
a shutdown effect of -25K. The unemployment rate should rise three-tenths to 7.5%
because of the government shutdown. We assume a -500K effect from federal
employees and contractors who were off work during the Household Survey reference
week. Nominal consumer spending should be up 0.4% in September, as should
personal income. We expect consumer sentiment to stabilize at 75 in early November,
after taking a hit from the government shutdown in October.
 Atlanta Fed President Lockhart (non-voter, neutral) speaks on the economy at 12pm.
Chairman Bernanke (voter, dove) will speak on a panel about financial crises a the IMF
conference at 3:30pm. San Francisco Fed President Williams (non-voter, dove) speaks
on monetary policy at 4pm.
 The Fed will buy about $5.2bn 4.75-5.75y Treasuries, a reduction in supply worth about
$3.1bn 10y equivalents.
 Although we believe the stronger ISM and GDP readings should keep the USD generally
supported, in the absence of new signs of strength, we think the recent USD surge could
lose some momentum. Given the speed of some of the recent FX moves, our expectation
for a soft payrolls print could see some near-term retracement in the USD trend.

Euro Area: German & French Trade Balance, French IP
 German trade balance surplus is expected to increase, reaching the amount of EUR
15.4bn in September from EUR 13.1bn in August. In France, the trade balance deficit is
likely to improve slightly from EUR -4.9bn to EUR -4.8bn. French Industrial Production
will be in the limelight, because a potential strong printing would bode well for the Euro
Area IP figure next week, after a weak IP reading in Germany. In our view it should
increase, albeit moderately.
 We reduced our EURUSD forecasts to 1.30 and 1.28 in three and 12 months given likely
ECB dovishness driven by below-target inflation and the stabilization of US yields
supporting USD (see here).

UK: Trade Balance
 In the UK, the visible trade balance for September is likely to improve from £ -9.6bn to
£ -9.2bn this month. Same trend for the Non-EU figure. It should improve to £ -4.0bn
from £ -4.4bn last month.
 We are bearish sterling against the dollar (see here) but bullish against the euro around
the ECB and MPC policy decisions.
The Glob al Macro Pulse

2

08 Nov ember 2013

Sweden: Unemployment Rate, IP
 In Sweden, IP was weak last month owing in part to a fall in the mining sector. We think
a small increase on the month in September seems plausible. Therefore, we expect an
increase in the figure by 0.4% mom compared with a decrease by -2.3% mom last
month. Moreover, PES Unemployment Rate in October is expected to fall for the second
month in a row to 4.5%mom, from 4.6% in September and 4.8% in August.
 We remain modestly bearish on SEK and recommend GBPSEK longs (see here).

Canada: Housing Starts, Employment
 We expect employment to increase by 20K, above consensus for 11K, and the
unemployment rate to increase from 6.9% to 7%, in line with consensus. We also expect
a 195K print on housing starts, up slightly from 193.6K in September.
 Although we remain fundamentally bearish on CAD, we believe the currency can benefit
near term from the improvement in US data, causing it to outperform most of the G10
ex-USD complex. An employment report in line with our estimates would further this
trend. We nonetheless would look at a dip in USDCAD as an occasion to build longs.

Switzerland: Unemployment, Retail Sales
 Swiss unemployment is expected to remain unchanged at 3.2% (sa), while retail sales
should pick up from 2.4% yoy to 2.7%. We see further potential near-term upside to
USDCHF and potential downside to EURCHF.

Russia: Rate Decision
 Our economists forecast the central bank will keep the key policy rate on hold at 5.50%,
in line with consensus. The stronger-than-expected 6.3% yoy inflation print for October
is likely to limit the scope for more dovish innovations in the statement. Nevertheless, we
continue to believe that the inflation outlook will allow limited rate cuts in 2014.
 Structural growth weakness combined with recent changes to the intervention
mechanism leave us bearish on RUB.

Mexico: Minutes
 We expect the minutes to reiterate that further rate cuts would not be recommendable in
the foreseeable future. Moreover, we will be on the lookout for policy guidance, following
the 25 bp cut and the shift to a neutral stance.
 While we think MXN is better poised to benefit from a strong domestic story, in the near
term, we think the peso could remain weak in the event of further data strength in the
US. We would still expect it to outperform the rest of EM, even in the event of broad EM
weakness.

Chile: Inflation
 Consensus for CPI is for a decline from 2.0% yoy to 1.9% yoy, in line with the central
bank’s recent dovish shift. Our near-term bias on CLP is neutral to slightly bearish.

The Glob al Macro Pulse

3

08 Nov ember 2013

Daily Calendar
Significant Events
Friday, 8 November
DM
SWI Unemp Rate (Oct)
SWI Retail Sales (Sep)
SWE PES Unemp Rate (Oct)
SWE Industrial Prod (Sep) m/m% y/y%
GER Trade Balance (Sep)
FRA Trade Balance (Sep)
FRA Industrial Prod (Sep) m/m% y/y%
UK Trade Bal Visible/Non EU (Sep)
CAN Housing Starts (Oct)
CAN Unemployment Rate (Oct)
US Nonfarm/Private Payrolls (Oct)
US Unemployment Rate/Avg Hrly Earn (Oct)
US Personal Income/Spending (Sep)
US Univ of Michigan Conf (Nov Pre)
US Atlanta Fed’s Lockhart on the economic outlook
US Fed Chairman Bernanke on "Policy Responses to Crises"
US San Francis co Fed’s Williams on the economy and monetary policy
3-y ear LTRO payback announcements

Previous

Median

3.2%
2.4%
4.6%
-2.3%/-6.9%
13.1B
-4907M
0.2%/-2.9%
-9.6B/-4.4B
193.6K
6.9%
148K/126K
7.2%/0.1%
0.4%/0.3%
73.2

3.2%
2.7%
4.5%
1.3%/-0.1%
15.4B
-4800M
0.1%/-0.9%
-9.2B/-4.0B
190.8K
7.0%
125K/130K
7.3%/7.2%
0.3%/0.2%
74.2

0.9%
5.6%
-0.1%

1.7%

0.85%
0.5%
2.0%

0.60%
0.1%
1.5%

CS Est.

Comment

0.4%/-0.7%

0.0%/-1.1%
195K
7.0%
120K/120K
7.5%/0.2%
0.4%/0.4%
75.0

State Treasury buys 5-6Y ($4.75–5.75 bn)
EM

EEMEA
Hungary: IP wda, y/y (Sep)
Romania: IP, y/y (Sep)
Turkey: IP, y/y (Sep)
LATAM
Brazil: 1st preview of IGP-M Inflation Ind
Chile: CPI, m/m (Oct)
Chile: CPI, y/y (Oct)
Colombia: Monetary Policy Minutes
Mexico: CB Monetary Policy Minutes

0.6%

2.1%
0.05%

Abbreviations: wda (work day adjusted); sa (seasonally adjusted); nsa (not seasonally adjusted); saar (seasonally adjusted, annualized rate); * Credit Sui sse estimates; ** on that date or before;
*** on that date or after. In local currency if not otherwise stated
Source: Credit Suisse, the BLOOMBERG PROFESSIONAL™ service

The Glob al Macro Pulse

5


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