any case, next week sees a big data dump that will shed significant light on whether .... which meets bi-monthly to disc
GLOBAL MARKET UPDATE 25 to 31 May 2015
On low volumes, global equities fell back this week, with no meaningful bright spots. Although we think growth can pick up later in the year, markets are in a risky place. In the US, good data would bring the Fed to the table and therefore create the uncertainty of higher rates. In Europe, the chance of contagion from a Greek default is very real. If the Greeks fail to agree funding for the next few months, the actions of the ECB and Eurozone partners will set a precedent.
UNITED STATES
EUROPE
S&P 2,107 -0.88%, 10yr Treasury 2.13% -8.78bps, HY Credit
Eurostoxx 3,592 -3.50%, German Bund 0.50% -11.70bps,
Index 338 0bps, Vix 13.84 +1.71Vol
Xover Credit Index 288 -9bps, EURUSD 1.092 -0.54%
US equities finished marginally lower on the week as
European equities were volatile and closely followed
US GDP for Q1 was revised downwards to -0.7% (the
Greek headlines, ultimately finishing over 3% lower. Bond
economy contracted in the first 3 months of the year).
markets split between core and periphery; Italy, Spain
Incoming data, however, is improving and both durable
and Portugal wider, whilst German Bunds dropped back
goods and housing data were better than expected. In
below 0.5% yield.
any case, next week sees a big data dump that will shed significant light on whether the Fed’s “weakness was
The Greek newsflow was erratic – Greek negotiators
transitory” story holds up.
claiming a deal was close, but their counterparts suggesting significant disagreements remain. What is for
The USD continued its rebound from recent lows and
certain is that over the next 3 weeks there will either be a
is now 4% better since mid-May. Treasuries also moved
deal (that tides the country over until September), or IMF
higher.
payments will be missed. The connotations of missing an IMF payment date are complex – a cross-default only
We support the idea that the US economy will pick up
occurs when the Managing Director of the IMF makes
as the oil price stabilises and the enormous recent round
a formal notification to the Executive Board. Moreover,
of global stimulus feeds through. However, any such
how the ECB reacts (the Greek Banking system is entirely
strength unleashes the Fed and promotes a stronger
dependent on ECB funding) is probably most important.
USD. With valuations expensive, we therefore see limited
Hence, this is all hugely political and represents a real risk
upside for stocks.
to global markets.
THIS WEEK’S GLOBAL EQUITY MARKET MOVERS (25 to 31 MAY) DEVELOPED EMERGING FRONTIER
Top 3: Bottom 3: Top 3: Bottom 3: Top 3: Bottom 3:
Australia -0.24%, Ireland -0.55%, Japan -0.65% Portugal -4.84%, Germany -3.95%, Luxembourg -3.91% Hungary -0.15%, Taiwan -0.60%, India -0.64% Russia -8.06%, Brazil -6.34%, Turkey -5.76% Venezuela 37.35%, Cyprus 3.60%, Mongolia 2.25% Namibia -6.82%, Argentina -5.97%, Qatar -4.37%
Chris Wehbé
Aaron Armstrong
Global Market Strategist
Investment Analyst
[email protected]
[email protected]
Twitter: @cswehbe
1
It’s probably marginally more likely that the situation
More broadly Asian markets fell, with even rampant
doesn’t unravel this time but we will repeat that each
mainland Chinese markets pausing for breath. Indeed,
week that passes creates collateral damage. The Greek
after a strong start to the week, the Shanghai and
Depression is now longer and deeper (peak to current
Shenzhen markets dropped around 6% on Thursday
trough) than the US Great Depression. Moreover, April
as extreme valuations start to engender heightened
bank deposits fell by another EUR 5.6bn to EUR 139.4bn -
volatility. Elsewhere, the IMF announced that they no
the lowest level in over 10 years. Reports suggest outflows
longer see the Chinese Renminbi as undervalued. The
accelerated last week. Whatever deal is struck, Greece
currency has gained 25% over the last decade and has
will not repay its debts in full.
moved in line with a strong USD over the last 12 months.
Whilst we expect contagion from a Greek blow up, it will
On the data front, Singapore and India GDP were revised
be much more contained than it would have been in 2011.
upwards (to 3.2% and 7.5% respectively) for Q1. The RBI
Then, Greek debt sat within the banks and the private
in India is likely to cut rates further next week, with lower
sector and other European countries were still deep in
inflation allowing the central bank to lend support to
recession. A default would have bankrupted a number of
Government reforms.
banks and started a vicious circle. However, almost all the exposure is with the ECB, IMF and
LATIN AMERICA
Governments - direct losses are minimal and the banking
MSCI Lat Am 2,496 -4.44%
sector won’t blink. The real risk is longer term, where ECB and EU politicians set precedents for countries that get
Despite growth that is already weak across the board, the
into trouble. Moreover, if the Greek economy has its own
Brazilian Central Bank is expected to raise rates again
currency or is able to shed its debt load, it will fly. This
next week to fight inflation. Ahead of the meeting, equity
would send a message that restructuring and external
and currency markets were weak, the BRL shedding 3%
adjustment (through weaker currency) is much easier
against the USD. We continue to expect the economy to
than internal adjustment. That, in turn, demonstrates that
deteriorate through the rest of the year (Q2 GDP circa
the EUR really doesn’t work. There is an ECB meeting on
-1%), with a depressed consumer and weak business
Wednesday.
confidence weighing on growth.
The 2nd estimate of UK Q1 GDP was unchanged at 0.3%.
In Mexico, credit data for April improved with private
UK data has moderated slightly of late and GfK consumer
sector credit growing at the fastest rate in over 2 years. This
confidence surprised negatively.
contrasted with a higher than expected unemployment number at 4.3%. Meanwhile Argentina reported a larger
In Russia inflation is easing, following recent strength in
than expected fiscal deficit as the country leans on fiscal
the currency. However this week saw weakness ahead
stimulus to support demand ahead of elections.
of larger external debt repayments in June. In Hungary, the NBH cut interest rates as expected by 0.15% to 1.65%, retaining a loosening bias, whilst Israel remained on hold
AFRICA
at 0.1%.
MSCI Africa 920 -5.75% This week the African Development Bank released its
ASIA PACIFIC
updated outlook, expecting growth to rise from last year
HSCEI 1,429 -2.31%, Nikkei 2,056.00 -0.65%, 10yr JGB
and touch 4.5% for 2015.
0.41% 0bps, USDJPY 124.100 +2.13% South African Q1 GDP came in below consensus at 1.3%, A heavy data week for Japan failed to suggest
with the slowdown in growth centred on agriculture and
a
manufacturing, where power shortages have been a real
meaningful
acceleration
in
the
economy,
with
consumption particularly weak. The JPY touched new
problem.
multi-year lows above 124 against the USD. Nigeria’s new president, Muhammadu Buhari, was
Chris Wehbé
Aaron Armstrong
Global Market Strategist
Investment Analyst
[email protected]
[email protected]
Twitter: @cswehbe
2
officially sworn in as President on 29th May (Friday) in
THE WEEK AHEAD Date
Abuja, the capital of the country. The ceremony marked the first peaceful and constitutional transfer of power in Nigeria’s history. The new President admitted that the country’s economy was in a precarious state as a result of falling oil prices, depleted foreign reserves and mounting debts. However with careful management he believes these issues can be turned around and brought under control. Another key aspect of his speech was in tackling Islamic insurgents of Boko Haram, who have terrorised the population in the impoverished northeast of the country. The Monetary Policy Committee (MPC) in Kenya has brought forward its periodic meeting to 9th June 2015, about 4 weeks earlier. The Monetary Policy Committee, which meets bi-monthly to discuss the monetary policy stance such as the Central Bank Rate (CBR), held its last meeting on 6th May 2015. It retained the CBR at 8.50% citing lack of demand-driven inflation and a stable shilling. However, the recent move raises expectations given the steady weakening of the shilling.
UNITED STATES ISM Manufacturing (MAY) 01-Jun Factory Orders (APR) MOM % 02-Jun ISM Non-Manufacturing (MAY) 02-Jun Non-Farm Payrolls (MAY) k 05-Jun Unemployment (MAY) % 05-Jun EUROPE Russia Manufacturing PMI (MAY) 01-Jun Germany Unemployment (MAY) % 02-Jun Eurozone HICP Inflation (MAY) YOY % ECB Meeting Poland Repo Rate % Greece Unemployment (MAR) % UK MPC Meeting German Factory Orders (APR) MOM % ASIA PACIFIC China HSBC Manufacturing PMI (MAY) Indonesia CPI Inflation (MAY) YOY %
6.40 0.20
03-Jun 03-Jun 04-Jun 04-Jun
1.50 25.30 -
05-Jun
0.50
01-Jun
49.20
01-Jun
7.00
02-Jun
2.00
India RBI Repo Rate % 02-Jun Australia GDP (Q1) % 03-Jun LATIN AMERICA Brazil Industrial Production (APR) 02-Jun YOY % Brazil SELIC Overnight Rate % 03-Jun Mexico Fixed Investments (MAY) 03-Jun YOY % Mexico Overnight Rate % 04-Jun AFRICA South Africa Manufacturing PMI 01-Jun (MAY)
7.25 0.60
Chris Wehbé
Aaron Armstrong
Global Market Strategist
Investment Analyst
[email protected]
[email protected]
Twitter: @cswehbe
52.00 -0.20 57.00 215.00 5.40
02-Jun
Australia RBA Cash Rate %
PLEASE CONTINUE FOR MARKET DATA
Consensus
13.75 3.00 -
3
GLOBAL MARKET DATA 25 to 31 May 2015 Market Summary Name
Equities
Data: Country
Price
S&P 500 INDEX RUSSELL 2000 INDEX NASDAQ COMPOSITE INDEX S&P/TSX COMPOSITE INDEX S&P 500 FINANCIALS INDEX S&P 500 CONS DISCRET IDX S&P 500 INFO TECH INDEX S&P 500 HEALTH CARE IDX S&P 500 ENERGY INDEX S&P 500 ECO SECTORS IDX S&P 500 INDUSTRIALS IDX S&P 500 CONS STAPLES IDX S&P 500 UTILITIES INDEX S&P 500 MATERIALS INDEX S&P 500 TELECOM SERV IDX
US US US Canada US US US US US US US US US US US
2,107.39 1,246.53 5,070.03 15,014.09 330.53 604.41 723.41 864.75 571.41 2,107.39 479.48 500.09 224.68 316.72 157.11
Euro Stoxx 50 Pr CAC 40 INDEX DAX INDEX Athex Composite Share Pr FTSE MIB INDEX AEX-Index PSI All-Share Index GR MICEX INDEX IBEX 35 INDEX OMX STOCKHOLM 30 INDEX SWISS MARKET INDEX BIST 100 INDEX FTSE 100 INDEX
Europe France Germany Greece Italy Netherlands Portugal Russia Spain Sweden Switzerland Turkey UK
3,592.36 5,043.84 11,454.06 825.38 23,696.46 496.06 2,681.18 1,631.37 11,313.40 1,652.17 9,313.31 82,003.91 7,002.84
MSCI AC ASIA x JAPAN S&P/ASX 200 INDEX HANG SENG CHINA ENT INDX SHANGHAI SE COMPOSITE HANG SENG INDEX NSE CNX NIFTY INDEX JAKARTA COMPOSITE INDEX NIKKEI 225 KOSPI 200 INDEX Laos Composite Index FTSE Bursa Malaysia KLCI KARACHI 100 INDEX PSEi - PHILIPPINE SE IDX STRAITS TIMES INDEX STI SRI LANKA COLOMBO ALL SH TAIWAN TAIEX INDEX STOCK EXCH OF THAI INDEX HO CHI MINH STOCK INDEX
MSCI Asia Ex Australia China "H" China "A" HK India Indonesia Japan Korea Laos Malaysia Pakistan Philippines Singapore Sri Lanka Taiwan Thailand Vietnam
614.06 5,735.40 14,299.45 4,828.74 27,597.16 8,454.85 5,192.22 20,569.87 258.74 1,374.06 1,743.17 33,344.21 7,670.37 3,392.11 7,209.96 9,625.69 1,496.05 574.98
MSCI ACWI MSCI EM MSCI Fronter Market Index DFM GENERAL INDEX MSCI EM LATIN AMERICA ARGENTINA MERVAL INDEX MSCI BRAZIL CHILE STOCK MKT SELECT IGBC GENERAL INDEX MEXICO IPC INDEX Bolsa de Panama General S&P/BVLPeruGeneralTRPEN VENEZUELA STOCK MKT INDX MSCI EFM AFRICA EGYPT HERMES INDEX GSE Composite Index Nairobi SE 20 Share MASI Free Float Index NIGERIA STCK EXC ALL SHR FTSE/JSE AFRICA TOP40 IX
MSCI World MSCI EM MSCI FM Dubai Latin America Argentina Brazil Chile Colombia Mexico Panama Peru Venezuela Africa Egypt Ghana Kenya Morocco Nigeria South Africa
434.51 1,004.22 2,832.77 3,964.99 2,496.37 10,800.86 1,585.59 4,045.62 10,205.17 44,703.62 425.88 13,180.61 11,091.85 919.82 789.24 2,362.63 4,786.74 9,711.36 34,310.37 46,580.67
Average Top 25% Bottom 25%
Last Calendar Week
1 Week North America -0.88% -0.45% -0.38% -2.49% -1.03% -0.87% -0.49% -0.02% -2.06% -0.88% -1.92% -0.91% -0.28% -1.02% -0.46% Europe -3.50% -3.18% -3.95% -2.33% -1.77% -2.22% -4.02% -8.06% -3.47% -2.16% -1.17% -5.76% -2.04% Asia Pacific -2.29% -0.24% -2.31% -0.89% -2.06% -0.64% -2.45% -0.65% -3.89% -1.46% -3.88% 1.45% -2.84% -2.64% -1.09% -0.60% -2.46% 1.32% Rest of the World -1.54% -3.22% -2.52% -2.87% -4.44% -5.97% -6.86% -2.08% -5.21% -1.34% -0.05% -1.95% 37.35% -5.75% -2.21% -0.72% -2.51% -0.03% 0.15% -5.55% -1.56% -0.76% -2.86%
Return (USD) MTD YTD
