Why Thomson Reuters Eikon? Accessing Fathom Charts in Thomson Reuters Eikon. Search for DATASTREAM and select the Chartbook or type DSCHART or CBOOK

Transcription

1 A selection of charts presented at Fathom Consulting s Global Economic & Markets Outlook Seminar on 2 nd August 2017

2 Why Thomson Reuters Eikon? Whether you re doing top-down macro analysis, sector research or asset allocation strategy, Thomson Reuters Eikon has the content and tools you need, all in one place, to help you outperform. Eikon helps you see the complete picture by combining one of the most comprehensive economics databases in the industry, powered by Thomson Reuters Datastream, with our world-class company information and cross asset market data. Track daily news and events Compare and analyze key economic indicators Establish whether stock prices are over or under-valued Access unique economics point in time data Track market expectation Generate ideas and present them clearly Access a pre-built library of charts built by Fathom Consulting including the charts shown in this booklet Accessing Fathom Charts in Thomson Reuters Eikon Search for DATASTREAM and select the Chartbook or type DSCHART or CBOOK The Datastream Chart Studio in Eikon Includes full editing, customization and publishing capabilities Access the slides from this presentation under Global Economic and Market Outlook 2017 Q3 View an extensive library of example charts and pre-built topical charts from Fathom Consulting in the Chartbook Access Fathom Consulting s Macroeconomic Policy Indicator by searching for FMPI in the Chartbook 2

3 Fathom Consulting Global Economic and Markets Outlook Q Selected charts All commentary and opinion is that of Fathom Consulting and any views expressed are not those of Thomson Reuters. The full set of charts presented are available in Thomson Reuters Eikon along with many of the data sources. UK MPC tries to have its cake and eat it On Wednesday August 2nd, Fathom Consulting presented an overview of their Global Economic and Markets Outlook for 2017 Q3. The focus of the event, which was hosted by Thomson Reuters in London, was the UK economy, for which Fathom s outlook is considerably more pessimistic than most. Fathom were joined by former Bank of England policymakers Sir Charlie Bean and Sir John Gieve, both of whom share Fathom s concern about the UK s deteriorating growth prospects. UK GDP growth forecasts Quarterly percentage change View and refresh chart in Thomson Reuters Eikon Fathom 2017 Q3 central forecast In Fathom s view, with the Bank of England s Monetary Policy Committee having failed to pull the trigger at the August 3rd meeting, and with economic growth set to soften further through the second half of this year, Bank Rate will be on hold more or less indefinitely. But this did not stop the Committee from trying to have its cake and eat it. It voted not to tighten policy at a time when inflation was significantly above target, and was expected to Source: Thomson Reuters Datastream / Fathom Consulting remain so for the duration of the Bank s forecast horizon, while simultaneously trying to persuade investors that they had failed to price in a sufficiently aggressive policy tightening. But having made that same complaint last quarter, and with more hawkish rhetoric from several members having falsely motivated expectations of a potential rate hike, markets have grown wise to these siren voices and have ignored the Bank s message. Sterling closed Thursday, August 3rd, down 0.6% against the US dollar, while the gilt curve flattened. 3 Available on Thomson Reuters Eikon

4 Market-implied paths for short-term rates Per cent Source: Thomson Reuters Datastream / Fathom Consulting On Wednesday August 2nd, the panellists and audience concurred that the Bank of England was unlikely to raise rates this week. John Gieve considered there to be a strong case for reversing the post-brexit cut, but considered it unlikely. 23% of Wednesday s audience agreed, while 44% felt that Bank Rate would be increased within one to two years on the back of improving economic growth momentum. Others, accounting for almost a third of the audience, considered it to be only a matter of time before a majority forms and Bank Rate is hiked. Which of the following statements is closest to your own beliefs about the outlook for Bank Rate? Per cent of responses View and refresh chart in Thomson Reuters Eikon Source: Thomson Reuters Datastream / Fathom Consulting 4 Available on Thomson Reuters Eikon

5 UK inflation and MPC votes Twelve-month percentage change Per cent of MPC members Source: Thomson Reuters Datastream / Fathom Consulting However, Fathom s analysis of past episodes of dissent reveals that, more often than not, since the Bank was granted operational independence in 1997, those voting for a hike have given up or left the Committee. In fact, with a success rate of 75%, a majority is far more likely to form behind those pushing for a rate cut! In addition, as Fathom s chart highlights, it is not the first time that the Committee has looked through above-target inflation, with the relationship between consumer price growth and rate decisions surprisingly poor. The optimism expressed by those that considered a rate hike to be on the cards was also reflected in their answers to Fathom s first question, with a majority (64%) deeming it more likely than not that the UK would avoid recession within the next year. That being said, at 36% a surprisingly high proportion sided with Fathom, believing that there is a greater-then-evens chance of a contraction ahead. What is the probablity that the UK will suffer a technical recession within the next year? Per cent of responses View and refresh chart in Thomson Reuters Eikon Source: Thomson Reuters Datastream / Fathom Consulting 5 Available on Thomson Reuters Eikon

6 This was a concern shared by the panellist, Charlie Bean, although he said that trying to predict a recession is a mug s game. He is right. With trend growth now significantly weaker, at around 0.3% a quarter in Fathom s view, the prospect of dipping into negative growth at any point in time has risen. It is for this reason, and with households under the cosh, that Fathom thinks there is a greater-than-evens chance of recession. At the August 2nd event, Fathom s Managing Director Erik Britton set out Fathom s view on the UK economy, which they have shared with clients in a series of presentations over the past few weeks. In summary, the UK consumer weathered the Brexit storm better than the majority of forecasters, Fathom included, anticipated. The broad-based failure to predict the strength of consumer spending has been rationalised in numerous ways, but the most persuasive explanation is that households were surprisingly rational, bringing forward expenditure in anticipation of sterling weakness ahead. Unfortunately, such an explanation carries ominous connotations for an economy dependent on the consumer for growth, as reflected in the data for the first half of this year. Looking ahead, Fathom believe that there is now a greater-than-evens chance of a technical recession in the UK over the next twelve months. They take that view for several reasons. Not only are wages failing to keep pace with the rising cost of living, resulting in an erosion of consumers real purchasing power, but household finances are already stretched as indicated by the household savings ratio having slumped to its lowest level since the 1950s. Having already dipped into their savings, which a recent survey commissioned by the Bank revealed to be consumers preferred means of preserving real consumption, there is little to cushion consumers from the intensifying squeeze ahead. Indeed, Fathom see inflation peaking at 3.2% later this year. Recognising that highly indebted households are more sensitive to changes in their financial situation, official bodies have also threatened to crack the whip if banks do not tighten their lending standards. They may not need to. UK saving ratio Share of disposable income, per cent Source: Thomson Reuters Datastream / Fathom Consulting 6 Available on Thomson Reuters Eikon

7 UK GfK consumer confidence Z-score View and refresh chart in Thomson Reuters Eikon Four-quarter percentage change Source: Thomson Reuters Datastream / Fathom Consulting Only a small proportion of those surveyed (4%) said that they would rely on additional bank credit to shore up spending, and it is not uncommon for households to spend less and save more in periods of heightened uncertainty. In the past, as Fathom s chart highlights, a deterioration in consumer sentiment has been a good predicator of slowing household consumption growth. Notably, June s inconclusive general election appears to have reignited concerns about the nation s economic and political prospects. Both panellists, Charlie Bean and John Gieve, agreed with Fathom that neither investment- nor export-orientated growth was likely to save the day. One reason for this, as highlighted in the chart below, is that exporters have increased the sterling price of their exports by nearly the same amount as the fall in sterling over the past year. Having broadly maintained the price in foreign currency terms, UK exporters have been able to build their profit margins, albeit at the expense of growth in volumes. As Charlie Bean highlighted, this increase UK export prices and the exchange rate Index, May 2016 = 100 View and refresh chart in Thomson Reuters Eikon Source: Thomson Reuters Datastream / Fathom Consulting in profits would normally promote investment in export capacity, feeding through to the UK economy via this mechanism as opposed to net trade. But with Brexit-related uncertainty likely to weigh on firms investment plans, this is unlikely to feed through as hoped. 7 Available on Thomson Reuters Eikon

8 If the UK were to enter recession, which of the following would be the most likely trigger? Per cent of responses View and refresh chart in Thomson Reuters Eikon As a consequence, and given we are starting from a position where the saving ratio is unusually low, Charlie Bean concluded that it is not impossible to think you might get quite a sharp slowdown. Wednesday s audience echoed this concern. As the chart shows, when asked to vote the majority chose further falls in real household incomes as prices continue to rise as the most likely trigger for a UK recession. Source: Thomson Reuters Datastream / Fathom Consulting 8 Available on Thomson Reuters Eikon

9 Want to know more about Thomson Reuters Eikon? Here are just a few of the features in Thomson Reuters Eikon that we also think you ll be interested in. To request a free trial go to financial.thomsonreuters.com/eikon 9

10 Macro Explorer To access, type Macro Explorer or MACROX The Macro Explorer App offers compelling macroeconomic data visualization features to help you identify investment opportunities This intuitive app offers highly interactive market selection filters, that allow you to: Access hundreds of indicators to gain historical insight across markets Screen for markets meeting a wide range of performance or risk criteria View natural language generated insights with contextualised summaries of the data in view Display an interactive sector heat map with dozens of aggregate fundamentals available to choose from Search for deeper trends and multiple indicator comparisons using moving grids and scatter plots Visualize the real-time performance of your watchlists, portfolios and a selection of cross asset benchmarks on our world map view Navigate to country overview pages for further investigation Export data to Microsoft Excel for further analysis The Macro Explorer App provides access to hundreds of indicators spanning historical and forecast data from 1990 to Indicators are grouped into five main categories: Key Indicators Oxford Economics World Bank WDI Premium Content from Fathom Consulting, IFO and Ipsos Thomson Reuters international comparable economics The world map view allows you to compare multiple countries within the selected regions or groups. 10

11 Looking for Insight on the Trump Presidency? Access everything you need to know in the Trump Administration App in Eikon including The latest news The US Election Chartbook developed by Fathom Consulting Tools to help you monitor companies and also the macro view To access type TRUMP ADMINISTRATION 11

12 Polls Thomson Reuters Polls for FX, Central Banks, Economics and asset allocation To access type FX POLLS Uncover opportunities with more accurate forecasts The SmartEstimate, places more weight on the most accurate forecasters, against consensus. See which contributors rank highest. 12

13 Economic Monitor To access type in ECON MONITOR or EM Track all global macroeconomic indicator updates in a simple calendar interface Easily set up calendar updates in MS Outlook and create alerts for all economic events Quickly compare and contrast results with consensus estimates to identify marketmoving positive/negative surprises Reuters economic polls allow you to track market expectations covering foreign exchange rates, macroeconomic indicators, interest rates, asset allocation and commodities & energy instruments, providing a context for developing your own economic and market scenarios 1,300 real-time economic indicators covered across 49 countries plus Euro Area and European Union aggregates Surprise readings can be used to anticipate market-moving announcements Click on the Indicator name to view a historical chart Actuals are shown next to Reuters Poll Results Shockwave indicators appear when the actual is outside the range of expectations Thomson Reuters StarMine SmartEstimates can help you better predict the direction of macro surprises relative to the consensus forecast 13

14 Cross Asset Guides Click > Markets > select the guide of interest or use free text search or the codes in orange below Eikon offers access to cross asset content with guides for Equities Fixed Income (FING) FX (FXG) Money Markets (MMG) Commodities Funds Overview and more From the broad market overview you can navigate down to key details on a specific instrument Get easy access to calculators and models via the Market Data and Tools tab 14

15 Mobile Get real-time, breaking headlines from all over the world Real-time pricing from anywhere on the instruments you cover and markets of interest through personalized lists and comprehensive asset class overview screens Use the Briefcase feature to read news articles, research reports, transcripts and more, even when offline Access Eikon via a web browser at eikon.thomsonreuters.com/login for access to the key data and apps you need if you are out of the office Google Chrome extension Use the powerful Analyze this capability to scan through a webpage and extract related content from Eikon for Companies, Industries, Countries and People profiles Download the Universal Eikon App for iphone and ipad from the Apple App Store. For BlackBerry, go to BlackBerry World. For Android, go to the Google Play App Store. The Google Chrome extension is available for install from the Google Chrome Web Store: simply type EIKON and click on the +FREE button to install. 15

16 Collaboration Next generation collaboration Thomson Reuters Eikon Messenger provides you with secure, compliant access to the world s largest directory of financial professionals. Instant message across networks, regardless of technology You can also send IMs directly to Share real-time data quickly and easily with your contacts Message people on the move from your mobile device Gain even more insight on news and events by joining our exclusive invitation-only industry forums each of which are led by expert Reuters journalists Share ideas and content with colleagues including workspaces, charts, and more Global Markets Forum To access search for GMF The Global Markets Forum (GMF) is an exclusive real-time Reuters news editorial forum community designed for financial markets professionals. It offers: Exclusive coverage and unique views from the Reuters news desk and other market professionals Real-time market news, idea discussion and analysis with thousands of members globally Live Q&A with weekly special guests industry thought leaders (world leaders, C-level executives, policy-makers, academia and more) 16

17 The solution for top-down macro analysis, sector research and asset allocation strategies To request a free trial go to financial.thomsonreuters.com/eikon S043833/8-17.