Weekly change (%) Brazil. China. India. Mexico.

Transcription

1 23 April 2012 Equity markets were volatile but the main markets ended the week with modest gains as Spain managed to sell its debt US data was mixed and Spanish bond yields remained high but across the week US earnings tended to beat expectations Brazil and India cut rates, with Brazil cutting by an additional 75bps and India cutting by more than expected Next week, markets are likely to focus on Q1 GDP releases in the US and UK, monetary policy decisions in Japan and the US The result of the 1 st round of the French presidential election is also likely to be a focus for the early part of the week Movers and Shakers Equities Currencies (vs. USD) Best Japan China UK Germany Weekly index change in local currency for G20 markets. Worst South Korea Argentina 2.00 Best S.Africa Euro UK Weekly change versus USD for G20 markets. Japan Worst India Brazil Govt bond yields (10 yr) Major currencies (vs. USD) Yield (%) Yield (%) /04 15/04 16/04 17/04 18/04 19/04 US (lhs) UK (lhs) Germany (lhs) Italy (rhs) /04 15/04 16/04 17/04 18/04 19/04 EUR (lhs) GBP (lhs) JPY(rhs) All values versus USD 80.0 Developed equities Eurozone France Germany Japan UK US Weekly index change in local currency term. Emerging equities Brazil China India Mexico Russia Turkey Weekly index change in local currency term. Source: Bloomberg, HSBC Global Asset Management. Data as at close of business 20 th April All the above charts relate to16/04/ /04/2012

2 Macro Data and Key Events Past Week Date Country Indicator Date as of Survey Actuals Prior Monday 16th April US Empire Manufacturing APR US Advance Retail Sales (MoM %) MAR 0.4% 0.8% 1.0% India Wholesale Prices YoY% MAR 6.7% 6.9% 7.0% US NAHB housing market Index APR Russia Industrial Production (YoY) MAR 5.0% 2.0% 6.5% India India REPO rate APR 8.25% 8.0% 8.50% Tuesday 17th April Germany ZEW Survey (Econ. Sentiment) APR UK Consumer Price Inflation (YoY) MAR 3.4% 3.5% 3.4% US Industrial Production (MoM) MAR 0.3% 0.0% 0.0% Wednesday 18th April UK Bank of England publishes monetary policy meeting minutes UK ILO Unemployment Rate (3mths) FEB 8.4% 8.3% 8.4% Thursday 19th April Brazil Selic Target - Central Bank APR 9.00% 9.0% 9.75% Russia Retail Sales (Real) (YoY) MAR 8.0% 7.3% 7.8% Friday 20th April Germany IFO - Business Climate APR US retail sales rose more than expected in March (up 0.8%) driven by higher gasoline prices, as well as an increase in the sales of building materials. Core retail sales were also stronger than expected. The better than expected numbers gave investors hope that the economic recovery in the US is continuing, though data later in the week was softer. The Reserve Bank of India (RBI) cut the repurchase rate more than expected by 50bps to 8% (25bps cut expected) though in the accompanying statement it said room to cut further is limited. This comes on top of an initial easing move via cuts in the cash reserve rate for banks. The cut should provide support for the equity market but with inflation still sticky and the current account deficit already stretched it could damage the credibility of the RBI and weaken the rupee, which did fall this week vs. the US dollar. As expected, Brazil s central bank rate setting committee cut the benchmark Selic policy rate by 75bps to 9%, the lowest level in two years in an attempt to revive sluggish economic growth. The accompanying statement signalled that rates may be cut further but the minutes released this coming week will provide better guidance. UK CPI inflation increased for the first time in six months to 3.5% in March (consensus forecast was 3.4%) whilst the retail price index fell in line with expectations to 3.6%. The largest upward contributors to annual CPI inflation came from food, clothing and recreation and culture. High oil prices also continued to feed through into the cost of petrol, with both unleaded and diesel prices reaching new records in March. The UK BOE Monetary Policy Committee (MPC) minutes also struck a hawkish tone, noting "unwelcome" news about the near-term path for inflation and downside news on growth. The MPC now seem somewhat more concerned about inflation than growth and seem willing to look through weak activity, which they expect to be driven by one-off or erratic factors. The vote was 8-1 against additional QE with Adam Posen unexpectedly changing his vote. The IFO survey of 7,000 German businesses increased slightly in April to from in March, underpinning the favourable outlook for companies in Germany despite the adverse effects of the crisis in southern Europe. Coming Week Date Country Indicator Date as of Survey Prior Monday 23rd April France Presidential election results (1 st round) Eurozone PMI Manufacturing APR P Eurozone PMI Services APR P China HSBC Flash China Manufacturing PMI APR Tuesday 24th April UK PSNB ex financial interventions (GBP) MAR 16.0bn 15.2bn US S&P/Case Shiller Composite 20 home price index (YoY) FEB -3.50% -3.78% Brazil IBGE Consumer Price Inflation (YoY) APR % Wednesday 25th April UK GDP (QoQ) (first estimate) 1Q 0.1% -0.3% US Durable Goods Orders MAR -1.5% 2.4% US FOMC interest rate decision APR 0.25% 0.25% Thursday 26 April Germany Consumer Price Index (YoY) APR P 2.1% 2.1% Brazil COPOM monetary policy meeting minutes Friday 27th April Japan BOJ interest rate decision APR 0.1% 0.1% Japan National Consumer Price Inflation YoY MAR 0.4% 0.3% Japan Industrial Production YOY MAR P 15.5% 1.5% Germany Import Price Index (YoY) MAR 3.4% 3.5% US GDP QoQ (Annualized) 1Q A 2.5% 3.0% P Preliminary, F- Final, A - Actual 23/04/2012 Investment Weekly 2

3 After a strong start to the year, US economic growth appears to have cooled off in recent weeks. However, we do not see enough of a change in economic momentum or in the inflation outlook to prompt any change in monetary policy at the Federal Open Market Committee (FOMC) meeting on Wednesday. The FOMC appears likely to repeat its commitment to keeping the fed funds rate close to zero at least through to The first estimate of US Q1 GDP is released at the end of the week and is likely to have expanded at a 2.5% annual rate, following 3% growth in Q Stronger consumer spending and exports may have helped make up for a smaller contribution from inventories and less business investment. The UK also releases the first estimate of Q1 GDP and the figure is likely to be weighed down by sharp contractions in construction output and industrial production. Monthly output indices have also shown that oil and gas extraction fell sharply in January and December. Public sector net borrowing (excluding financial interventions) was higher than expected in February, suggesting that many government departments went on a last-minute spending campaign before the end of the fiscal year. However, the government will still be able to meet its borrowing target if the budget deficit for March this year is not too far off the deficit in March The eurozone s manufacturing PMI Index fell to 47.7 in March from 49.0 in February. The renewed weakness was not restricted to the periphery either, as Germany and France also saw their manufacturing PMIs contract. With weak demand stemming from the sovereign debt crisis in the eurozone and rising input costs putting a strain on margins, the Index is expected to remain below the significant 50 level that separates expansion and contraction. While inflation remains below the Bank of Japan s (BOJ) 1% target, improvements in domestic demand and export growth may allow it to postpone additional easing. The BOJ has come under increased pressure from government officials to take a more proactive stance on combating deflationary forces which led to an announcement of the 1% inflation target in February and an expansion of the asset purchase programme. Rising government pressure introduces a wildcard for this meeting that may lead to further easing, regardless of improving economic conditions. Brazil s Inflation rate as measured by the mid-month reading of its benchmark IBGE consumer price index, is expected to have fallen from last month s 5.6% driven by lower food prices. Market Moves Main equity markets see modest gains Markets ended the week slightly higher with the S&P 500 gaining 0.6% to 1,379 while Euro Stoxx 50 ended up 2.4% to 2,425. However, within the eurozone, Spanish stocks were the worst performing market as sovereign debt concerns continued to weigh. The IBEX 35 ended the week down 2.9% to 7,041. Of the major markets, Chinese stocks performed relatively well on speculation that policy makers will ease monetary policy further to increase liquidity and boost economic growth. The Shanghai composite gained 2% this week to 2,521. Successful Spanish bond auctions but yields still high, investors will watch first round of French elections with interest Spanish bond yields remained high during the week, trading above 6% on Monday. Successful auctions of debt on Tuesday and Thursday provided some reassurance for investors, but the market remains a source of concern for investors. French 10-year government bond yields crept up by around 15bps over the course of the week, though they remain well below the levels for Italy or Spain. The first round of the French presidential elections on Sunday will be an area of focus of investors. French presidential candidate and favourite to win, Francois Hollande, has said previously that he would like to renegotiate the European fiscal compact saying that "If the pact contains no measures for growth, I can't recommend it for ratification." Safe haven bonds remained well bid. US Treasury yields stayed below 2% most of the week, and German bund yields remained close to their record lows during the week. However, UK 10-year bond yields backed up almost 15bps, as the release of the MPC minutes and higher than expected inflation reduced the chances of a further round of quantitative easing from the Bank of England. Indian Rupee and Brazilian Real fall on interest rate cuts The Indian rupee and Brazilian real both fell against the US dollar this week, after their central banks cut rates. The rupee fell to a three-month low and the real fell close to the levels reached at the end of November last year. The yen also weakened against the dollar this week, on speculation the BOJ may relax monetary policy further when it meets next week. Sterling, however, rose to its highest level in six months against the dollar, on reduced expectations of further quantitative easing in the UK. Commodities: Brent crude continues to slide Brent crude oil declined for the second week amid signs that the US economy may be slowing and tensions with Iran over its nuclear programme eased. Brent was down 1.9% to end the week at USD 119 per barrel. 23/04/2012 Investment Weekly 3

4 Market Data 1-week 1-Month 3-Month 1-Year YTD 52-Week 52-Week Fwd Close Change Change Change Change Change High Low P/E Equity Indices (% ) (% ) (% ) (% ) (% ) (X) World MSCI AC World Index (USD) North America US Dow Jones Industrial Average 13, ,297 10, US S&P 500 Index 1, ,422 1, US NASDAQ Composite Index 3, ,134 2, Canada S&P/TSX Composite Index 12, ,089 10, Europe MSCI AC Europe (USD) Europe Dow Jones STOXX 50 Index 2, ,675 1, UK FTSE 100 Index 5, ,104 4, Germany DAX Index 6, ,600 4, France CAC-40 Index 3, ,138 2, Spain IBEX 35 Index 7, ,928 6, Asia Pacific MSCI AC Asia Pacific ex Japan (USD) Japan Nikkei-225 Stock Average 9, ,255 8, Australian Stock Exchange 200 4, ,931 3, Hong Kong Hang Seng Index 21, ,261 16, Shanghai Stock Exchange Composite Index 2, ,176 2, Hang Seng China Enterprises Index 11, ,721 8, Taiwan TAIEX Index 7, ,100 6, Korea KOSPI Index 1, ,231 1, India SENSEX 30 Index 17, ,697 15, Indonesia Jakarta Stock Price Index 4, ,233 3, Malaysia Kuala Lumpur Composite Index 1, ,609 1, Philippines Stock Exchange PSE Index 5, ,219 3, Singapore FTSE Straits Times Index 2, ,227 2, Thailand SET Index 1, , Latam Argentina Merval Index 2, ,503 2, Brazil Bovespa Index 62, ,970 47, Chile IPSA Index 4, ,885 3, Colombia IGBC Index 15, ,406 12, Mexico Index 39, ,964 31, EEMEA Russia MICEX Index 1, ,814 1, South Africa JSE Index 34, ,601 28, Turkey ISE 100 Index 60, ,336 48, week 1-Month 3-Month 1-Year YTD Close Change Change Change Change Change Bond indices (% ) (% ) (% ) (% ) (% ) BarCap GlobalAgg (Hedged in USD) JPM EMBI Global BarCap US Corporate Index (USD) BarCap Euro Corporate Index (Eur) BarCap Global High Yield (USD) JPM Asian Investment grade (USD) HSBC Asian Bond Index /04/2012 Investment Weekly 4

5 Market Data (cont) 1-week 1-Month 3-Months 1-Year Year End 52-Week 52-Week Currencies (vs USD) Close Ago Ago Ago Ago 2011 High Low Developed markets EUR USD/GBP CHF CAD JPY AUD NZD Asia HKD CNY INR MYR KRW 1, , , , , , , , TWD Latam BRL COP 1, , , , , , , , MXN EEMEA RUB ZAR TRY week 1-Month 3-Months 1-Year Year End Bonds Close Ago Ago Ago Ago 2011 US Treasury yields (%) 3-Month Year Year Year Year Developed market 10-year bond yields (%) Japan UK Germany France Italy Spain week 1-Month 3-Month 1-Year YTD 52-Week 52-Week Commodities Change Change Change Change Change High Low Close (% ) (% ) (% ) (% ) (% ) Gold 1, ,921 1,462 Brent Oil WTI Crude Oil R/J CRB Futures Index LME Copper 8, ,905 6,635 23/04/2012 Investment Weekly 5

6 Market Trends Government bond yields (%) Major currencies (vs.usd) /11 06/11 08/11 10/11 12/11 02/ /11 05/11 06/11 07/11 08/11 09/11 10/11 11/11 12/11 01/12 02/12 03/12 75 US (lhs) Germany (rhs) Italy (rhs) Yields based on 10 year government bonds EUR (lhs) GBP (lhs) JPY (rhs) All values versus USD Global equities Emerging Asian equities US Dow Jones Index (lhs) Europe Stoxx 50 Index (rhs) China Shanghai Index (lhs) Hong Kong Hang Seng (rhs) India Sensex Index (rhs) Other emerging equities Russia MICEX Index (lhs) Brazil Bovespa Index (rhs) Global credit indices BarCap EU corporate Index (lhs) BarCap US corporate Index (rhs) Emerging markets spreads (USD indices) Commodities (USD) HSBC Asian Bond Index (lhs) JP Morgan EMBI global spread index (rhs) USD /11 05/11 06/11 07/11 08/11 09/11 10/11 11/11 12/11 01/12 02/12 03/12 Gold (lhs) Brent Oil (rhs) USD 23/04/2012 Investment Weekly 6

7 Issued by HSBC Bank Malaysia Berhad (Company No V) ( HSBC ). The information in this newsletter has been obtained from reports (relevant reports) issued by HSBC Global Asset Management (GAM). HSBC Global Asset Management is a part of HSBC Group. Whilst every care has been taken in preparing and issuing this document, HSBC, GAM and the HSBC Group make no guarantee, representation or warranty and accept no responsibility or liability as to its accuracy or completeness. Some of the information in this document is derived from third party sources as specified at the relevant places where such information is set out. GAM believes such information to be reliable but it has not independently verified. All opinions and estimates constitute GAM judgment as of the date(s) of the relevant reports issued by GAM and are subject to change without notice. The information contained in this document is not directed at and is not intended for the residents of the United States, Canada or Australia. The information contained in this document has not been reviewed in the light of your personal financial circumstances. HSBC, GAM and the HSBC Group are not providing any financial or investment advice. The information is not and should not be construed as an offer or solicitation, or recommendation, to acquire or dispose of any investment and should not be considered as investment advice. Any person considering an investment should seek independent advice on the suitability or otherwise of the particular investment. Investment involves risk, value of investment may move up or down, and may become valueless. Past performance figures shown are not indicative of future performance. The relevant product offering documents should be read for further details. 23/04/2012 Investment Weekly 7