Daily Macro Brief. Thursday 21 September 2017 Kjersti Haugland, DNB Markets

Transcription

1 Daily Macro Brief Thursday 21 September 2017 Kjersti Haugland, DNB Markets

2 Overview Key events today Norway: Norges Bank announces the policy rate decision and releases its Monetary Policy Report at 10:00 CEST. We expect that the policy rate will be kept unchanged at 0.5%, and that the Bank s rate path will be roughly unchanged from the June Report. USA: Philadelphia Fed releases its Business sentiment index for September. According to Reuters the consensus expectation is a decline from 18.9 to The weekly initial claims figures are thus expected to show a rise from 284k to 300k, as hurricanes have lifted unemployment temporarily. EMU: ECB s Draghi speaks at a conference on financial stability. The flash estimate for September consumer confidence is expected to be unchanged at -1.5, a level significantly above the historical average. Sweden: Minutes from the recent Riksbank meeting are released. The rate path was unchanged at the meeting, but we will look for signs that some members where doubtful about this, arguing a favour of a higher rate path due to strong key data. See the attached calendar for details Back to index Daily Macro Brief page 2

3 Overview Key events since last report USA: FOMC has decided to keep the policy rate interval unchanged at 1-1¼%. In October, the Committee will initiate the balance sheet normalization program, as outlined at the June meeting. The decisions were unanimous, and well in line with consensus. The dot chart, indicating that the FOMC sticks to its view that another 2017 hike will be appropriate, is the news that moved markets. UK: Retail sales volumes rose by 1.0% m/m in August, well above expectations. The growth was fairly broad based, and private consumption seems set to rise solidly in Q3. Such a development points to a rate hike this year, but as real wages are falling and savings have dropped markedly lately, be expect spending to slow significantly down going forward. Thus, we expect the rate to be kept unchanged. Japan: Bank of Japan announced today that it is keeping both policy stance and guidance unchanged. This was well in line with expectations. For details on market developments, see here See the attached calendar for other key figures Back to index Daily Macro Brief page 3

4 Preview: Thursday 21 September at 10:00 CEST Norges Bank s Monetary Policy Meeting June meeting: Sight deposit rate unchanged at 0.50%, as widely expected Flatter rate path: Short-term downside risk removed, and current level unchanged throughout Rate path gradually increasing from 2019 to 1.28% in Q current assessment of the outlook and the balance of risks suggests that the key policy rate will remain at today's level in the period ahead This time we expect Norges Bank to: Keep policy rates unchanged Keep the rate path roughly unchanged We expect Norges Bank to keep policy rate at 0.50% for the next two years Norway: Key policy rate Percent Actual MPR 2/17 DNB Markets Source: Thomson Datastream/Norges Bank/DNB Markets Back to index Daily Macro Brief page 4

5 Preview: Thursday 21 September at 10:00 UTC+2 Summary Meeting on Wednesday 20 September with press statement due at 10:00 CEST on Thursday 21 September. Press conference starts 10:30 CEST Norges Bank's Executive Board started in June to publish the minutes of monetary policy meetings, including voting records of the Executive Board. The content of the minutes will be included in the Executive Board's assessment, which will be published at the same time as the interest rate decision is announced Our expectations: Norges Bank s assessment of global outlook probably little changed, but inflation outlook dampened A little bit lower interest rates abroad and stronger NOK than expected are arguments for a few basis points lower rate path The drop in money market premiums are counteracted by higher bank margins, but might on the margin add to higher rate path High household credit growth, but housing prices are falling. Demand for homes are still solid Back to index Daily Macro Brief page 5

6 Preview: Thursday 21 September at 10:00 CEST Assessment Norges Bank has forecasted inflation to 1½% over the next years. Longterm forecasts will probably not be much changed in today s report. Inflation expectations seem well anchored with slightly higher downside risk Capacity utilisation has increased, but not much more than Norges Bank had expected At the June meeting Norges Bank repeated that it responds less to shocks when rates are low Conclusion: We expect no changes in rates now, and that the rate path will be roughly unchanged Norway: Policy rate Norges Bank's rate paths, quarterly average, % 0.00 Q1 17 Q1 18 Q1 19 Q1 20 PR2/17 Forecast MPR 3/17 Source: Thomson Datastream/Norges Bank/DNB Markets Back to index Daily Macro Brief page 6

7 FOMC meeting September 2017 USA: Fed continues to expect another 2017 hike Decision: FOMC decided to keep the policy rate interval unchanged at 1-1¼%. In October, the Committee will initiate the balance sheet normalization program (as outlined at the June meeting). The decisions were unanimous, and well in line with consensus. The dot charts, indicating that the FOMC sticks to its view that another 2017 hike will be appropriate, is the news that moved markets. Description of the developments not much different than in July (some of the changes are noted in red below): ( ) the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have remained solid in recent months, and the unemployment rate has stayed low (July: has declined). Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters (July: Household spending and business fixed investments have continued to expand). On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined this year (July: this year not included) and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance. Back to index Daily Macro Brief page 7

8 FOMC meeting September 2017 USA: Unchanged language on inflation Hurricane will affect real economy and inflation, but effect is transitory: Hurricanes Harvey, Irma, and Maria have devastated many communities, inflicting severe hardship. Storm-related disruptions and rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Higher prices for gasoline and some other items in the aftermath of the hurricanes will likely boost inflation temporarily; apart from that effect, inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. (The underlined text is unchanged from the July statement) Risks assessment unchanged from July meeting: Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely. Back to index Daily Macro Brief page 8

9 FOMC meeting September 2017 USA: Inflation and long-run rate estimates down Back to index Daily Macro Brief page 9

10 FOMC meeting September 2017 USA: Still expects rate hike in 2017 The majority of members sees another rate hike in The median expects three hikes in 2018, as in June, while the expectations for 2019 has been lowered from three to two hikes, indicating a peak around 2.75%. This is in line with the new estimate of the long-term rate, which is 0.25pp lower than in June. After the announcement, the market pricing indicates a 64% probability of a December hike, up from 53% on Tuesday. Back to index Daily Macro Brief page 10

11 FOMC meeting September 2017 USA: Balance reductions begins in October Back to index Daily Macro Brief page 11

12 FOMC meeting September 2017 USA: Market corrects after Fed Dec guiding Back to index Daily Macro Brief page 12

13 UK: Surge in retail sales in August Retail sales volumes rose by 1.0% m/m in August. Consensus expected 0.2%. July revised up 0.3pp to 0.6% Annual growth rose to 2.4% and the 3m/3m annualised rate rose to 4.7%. Assessment: Private consumption looks set to grow solidly in Q3. Such a development points to a rate hike this year, but as real wages are falling and savings have dropped markedly lately, be expect spending to slow significantly down going forward. Thus, we expect the rate to be kept unchanged. Relevance: Explains about half of the y/y-variation in private consumption (66% of UK GDP) UK: Retail Sales & Car Sales Volume, sa, 2010= Aug-07 Aug-09 Aug-11 Aug-13 Aug-15 Aug-17 Retail sales Source: Thomson Datastream/DNB Markets Car sales, 12m sum (rha) UK Per cent, m/m sa Per cent y/y 3m/3m a.r. May-17 Jun-17 Jul-17 Aug-17 Jun-17 Jul-17 Aug-17 Aug-17 Retail sales New car registrations Source: Thomson Datastream/DNB Markets Back to index Daily Macro Brief page 13

14 BoJ meeting September 2017 Japan: No changes in policy or guidance Yield curve control: Short-term rate unchanged at -0.1% (8-1 vote). 10y JBG yield unchanged at ~0%. The Bank will conduct purchases of JGBs at more or less the current pace (JPY80trn a.r.) Asset purchases: Unchanged purchases of ETFs and J-REITs for JPY6trn a.r. and JPY90bn a.r. Positive activity outlook: Economy likely to continue its moderate expansion. Inflation likely to continue on an uptrend and increase toward 2 percent, mainly on the back of an improvement in the output gap and a rise in medium- to long-term inflation expectations. Assessment: As expected by BoJ. We expect unchanged rates in coming years, and that asset purchases will be tapered very gradually Japan: Key signal rate Actual/forecast 23-Aug Aug-02 Aug-07 Aug-12 Aug-17 Source: Thomson Datastream/DNB Markets Japan: BoJ govt securities purchases 3m sum annual rate, trn yen Source: Thomson Datastream/DNB Markets Back to index Daily Macro Brief page 14

15 OSEBX OMX DAX Stoxx 600 FTSE 250 Dow Jones NASDAQ S&P 500 Nikkei 225 Hang Seng Shanghai USA Germany EURUSD EURGBP France Japan Norway Sweden EURCHF EURSEK USDGBP USDJPY USDSEK USDCNY EURNOK USDNOK SEKNOK CHFNOK JPYNOK Italy Spain Markets: Overview Dollar climbs after Fed s message The dollar has strengthened on a broad basis in the wake of Fed s monetary policy announcement yesterday, which confirmed that the FOMC still plans to hike the policy rate this year, despite low inflation. The 10-year sovereign bond yield has climbed modestly, by 3 basis points. After a initial fall, US stock markets rebounded again, and ended little changed from the day before FX, change in percent since 20 September 07:32* Equity indices year sov. bond yield, change in bp since 20 September 07:32* EUR USD NOK** **Note that higher bars indicate weaker NOK % from previous to last close % since last close **Norway, Sweden, Italy, Spain: Change in bp from previous to last close Source: Thomson Datastream/DNB Markets Back to index Daily Macro Brief page 15

16 Markets Equities Sep-14 17:55 Sep-15 13:20 Sep-15 17:55 Sep-18 13:20 Oslo Stock Exchange Europe Sep-18 17:55 Sep-19 13:20 Sep-19 17:55 13:20 EURO STOXX 50 (rha) : Sep-18 14:15 Sep-18 21:15 S&P 500 Sep-19 14:50 USA Sep-19 21:50 15:40 Dow Jones (rha) : Sep-15 05:45 Sep-15 09:45 Sep-18 08:05 Sep-19 03:55 Hang Seng Asia Sep-19 07:55 03:45 07:45 Nikkei 225 (rha) Sep-21 03: Sep-21 07: Sep-18 14:15 Sep-18 21:15 Sep-19 14:50 VIX Sep-19 21:50 15:40 22:25 Back to index Daily Macro Brief page 16

17 Markets FX Sep-15 09:40 EURUSD and USDJPY Sep-18 07:40 Sep-19 07:40 07: Sep-21 07: Sep-15 09:40 Sep-18 07:40 EURCHF and EURGBP Sep-19 07:40 07: Sep-21 07:40 EURUSD USDJPY (inv,rha) EURCHF EURGBP (rha) EURNOK and USDNOK EURSEK and SEKNOK Sep-15 09:40 Sep-18 07:40 Sep-19 07:40 07: Sep-21 07: Sep-15 09:40 Sep-18 07:40 Sep-19 07:40 07: Sep-21 07:40 EURNOK USDNOK (rha) EURSEK SEKNOK (inv,rha) Back to index Daily Macro Brief page 17

18 Change in bp since 20 September Dec Mar Jun Sep Dec Mar Jun Sep Markets Fixed income :00 12:30 10 sovereign bond yields USA 16:00 19:30 Germany (rha) Sep-21 01: Sep-21 07: :00 12:30 10 sovereign bond yields Italy 16:00 19:30 Spain (rha) Sep-21 01: Sep-21 07: FRA: NOK and EUR Change in bp left axis NOK, change in bp NOK 21-Sep EUR, change in bp EUR 21-Sep % 3m Nibor Jun 21-Jul 21-Aug 21-Sep Back to index Daily Macro Brief page 18

19 Markets Miscellaneous Japan: 10 year sovereign bond yield EURUSD 3m basis swap Jun 21-Jul 21-Aug 21-Sep Jun 21-Jul 21-Aug 21-Sep 250 Spread over Bunds 10y, basis points Crude oil and gold Oct 22-Jan 22-Apr 22-Jul 22-Oct 22-Jan 22-Apr 22-Jul France Italy Spain 54.0 Sep-15 02:05 Sep-18 02:15 Sep-19 02:25 02:35 Crude, $/barrel Gold, $/ounce (rha) 1280 Sep-21 02:45 Back to index Daily Macro Brief page 19

20 Markets Spot rates and forecasts Spot rates and forecasts FX 0700 Last Today % In 1m Dec-17 Mar-18 Sep-18 FX 0700 USD NOK USD/JPY AUD USD/CNY CAD EUR/USD CHF EUR/GBP CNY EUR/DKK CZK EUR/SEK GBP EUR/CHF ZAR EUR/NOK HKD USD/NOK KRW JPY/NOK BRL SEK/NOK NZD DKK/NOK RUB GBP/NOK SEK CHF/NOK SGD Back to index Daily Macro Brief page 20

21 Markets Interest rates NOK Prior Last SEK Prior Last USD Prior Last EUR Prior Last 1m m m m m m m m m m m m y m m y y y y y y y y y y y y y y y y Norw ay Prior Last SEK Prior Last US Prior Last Germany Prior Last NST479/d y y y y yld y yld y yld y yld US sprea US sprea y yld US spread Norw ay 3m nibor Interest rates Governm ent bonds Interest rate forecasts 10y sw ap Sw eden 3m libor 10y USA 3m libor sw ap 10y sw ap Germany 3m euribor 10y sw ap Dec Dec Dec Dec Mar Mar Mar Mar Sep Sep Sep Sep Back to index Daily Macro Brief page 21

22 Markets Miscellaneous Miscellaneous NOK sov. Prior Last Change Maturity year rem. NOK-index TWI Prior NST 38/d Last NST 39/d Oil price: (Ldn,cl) 1m NST 40/d SPOT NST473/d Gold price PM NST474/d AM: NST479/d Equities Today 0700 % last NST479/d S&P % NST479/d Dow Jones % NOK FRA 3 mnd 6 mnd NOK NIBOR FTSE % Dec m 0.71 Stoxx % Mar m 0.81 DAX % Jun m 0.87 Nikkei % Sep OSEBX % Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets Back to index Daily Macro Brief page 22

23 Calendar Wednesday Thursday Importance GMT+2 Country Event Period Unit Last Cons. DNB Actual Wednesday 20 September 01:50 Japan Trade Balance Aug bn JPY 421.7r :30 UK Retail Sales Ex-Fuel Aug m/m % 0.7r :30 UK Retail Sales Aug m/m % 0.6r :00 Sweden Deputy Governor Floden talks about current monetary policy 16:00 USA Existing Home Sales Aug m :00 USA Fed Funds Target Rate % :30 USA Fed Press conference Thursday 21 September Japan Bank of Japan Policy Balance Target % Japan Bank of Japan 10y Yield Target % :30 Sweden Minutes from Riksbanken 10:00 Norway Norges Bank rate meeting & MPR % :30 Norway Norges Bank Press conference 14:30 USA Initial Jobless Claims w/e :30 USA Philly Fed Business Sentiment Sep Index :00 USA Monthly Home Prices Jul y/y % :30 EMU ECB s Draghi speaks at a conference on financial stability 16:00 EMU Consumer Confidence, Flash Sep Index Back to index Daily Macro Brief page 23

24 DNB Markets Macro Research Contact details Kjersti Haugland Chief Economist, Euro area / kjersti.haugland@dnb.no Jeanette Strøm Fjære Economist, Norway and Sweden / jeanette.strom.fjare@dnb.no Ole A. Kjennerud Economist, China and Japan / ole.kjennerud@dnb.no Knut A. Magnussen Senior Economist, USA, UK and Brazil / knut.magnussen@dnb.no Magne Østnor FX Strategist / magne.ostnor@dnb.no Marit Øwre-Johnsen FX Analyst / marit.owre-johnsen@dnb.no Kyrre Aamdal Senior Economist, Norway, Sweden, interest rates / kyrre.aamdal@dnb.no Back to index Daily Macro Brief page 24

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