Global Markets Update QNB Economics 1 May 16
Executive Summary Key Takeaways Weaker than expected US GDP led to lower US sovereign bond yields while better than expected Eurozone GDP led to higher European sovereign yields USD weakened against the Yen after the Bank of Japan (BoJ) refrained from easing, against GBP on lower risk of Brexit and against EUR on strong Eurozone GDP Japanese equities fell as the Yen strengthened; US equities fell on poor earnings, particularly Apple, also depressing stock markets elsewhere Commodity prices rose across the board, mainly as they are priced in dollars and the dollar weakened US nonfarm payrolls and China PMIs are likely to dominate markets this week Sources: Bloomberg and QNB Economics 2
- - - - - Weaker than expected US GDP led to lower US sovereign bond yields while better than expected Eurozone GDP led to higher European sovereign yields Global Benchmark Yields (%, local currencies) Maturity 22-Apr 29-Apr Change in Yield (bps) Advanced Economies Week MTD* YTD* US 1 yrs 1.89 1.83-5.5. -43.6 Germany 1 yrs.23.27 4.. -35.8 France 1 yrs.57.63 6.9. -35.4 Italy 1 yrs 1.47 1.49 1.5. -1.7 Japan 1 yrs -.11 -.8 3.5. -34. UK 1 yrs 1. 1. -.4. -36.4 Emerging Markets Bahrain*** 7 yrs 6.26 6.18-8.3. 33.3 Brazil 1 yrs 12.97 12.47-49.5. -4.2 China 1 yrs 2.95 2.92-3.. 6. Egypt 9 yrs 7.18 7.35 17.2. 328.6 India 1 yrs 7.46 7.44-2.2. -32.5 Indonesia 1 yrs 7.61 7.74 13.. -.5 Nigeria 1 yrs 12.84 12.89 6.. 185. Qatar*** 14 yrs 3.81 3.83 1.8. -46.9 Russia 11 yrs 9.19 8.88-31.. -69. Saudi Arabia** 1 yrs 3.61 3.47-13.8. -62.1 South Africa 1 yrs 9.6 8.98-7.5. -81.5 Turkey 1 yrs 9.17 9.24 7.. -15. Abu Dhabi*** 3 yrs 1.35 1.5 15.2. -12.4 Dubai*** 4 yrs 3.1 3. -1.8. 9.7 US Q1 GDP was weaker than expected (5%; consensus.7%) Eurozone Q1 GDP beat expectations at 1.6% (vs. consensus 1.4%), returning to its pre-crisis levels and effectively outpacing growth in the US Heat Map Legend Rising Yields Falling Yields Sources: Bloomberg and QNB Economics; *Month to Date and Year to Date; **1-year swap rate; ***USD denominated 3
- - - - - USD weakened against the Yen after the BoJ refrained from easing, against GBP on lower risk of Brexit and against EUR on strong Eurozone GDP Global Exchange Rates vs USD 22-Apr 29-Apr Change (%) Advanced Economies Week MTD YTD US Dollar Index 95.12 93.8-2.1. -5.6 Euro Area* 1.12 1.15 2.. 5.4 Japan 111.79 16.5 4.7. 12.9 UK* 1.44 1.46 1.5. -.8 Emerging Markets Brazil 3.57 3.44 3.7. 15.3 China 6.5 6.48.3..2 Egypt 8.88 8.87.1. -11.8 Indonesia 13,194 13,1.1. 4.6 India 66.48 66.33.2. -.3 Kuwait.3.3.3..8 Nigeria 198.97 198.99...2 Russia 66.53 64.77 2.7. 12. Turkey 2.85 2. 1.9. 4.4 South Africa 14. 14.23 1.2. 8.7 UAE 3.67 3.67 Bahrain.38.38 Oman.39.38 PEGGED Qatar 3.64 3.64 Saudi Arabia 3.75 3.75 Economists had expected the BoJ to act and ease policy, but no further stimulus measures were announced last week The BoJ governor said he was waiting for the effects of quantitative easing with a minus interest rate [to] sink in Brexit fears subside as the latest polling data indicate a tilt towards a Remain vote majority ahead of the referendum in June Heat Map Legend Stronger Currency vs USD Weaker Currency vs USD Sources: Bloomberg and QNB Economics; * Exchange rate quoted as amount of USD per currency unit in line with market convention, other exchange rates are amount of currency per USD 4
- - - - - Japanese equities fell as the Yen strengthened; US equities fell on poor earnings, particularly Apple, also depressing stock markets elsewhere Global Equity Indices 22-Apr 29-Apr Change (%) Advanced Economies Week MTD YTD US (S&P 5) 2,92 2,65-1.3. 1. Europe (STOXX 5) 3,141 3,28-3.6. -7.3 Japan (Nikkei 225) 17,572 16,666-5.2. -12.4 UK (FTSE ) 6,31 6,242-1.1.. Emerging Markets Bahrain (BB) 1,122 1,111-1.. -8.7 Brazil (IBOVESPA) 52,98 53,911 1.9. 24.4 China (Shanghai ) 2,959 2,938 -.7. -17. Egypt (EGX 3) 7,781 7,773 -.1. 11. India (CNX NIFTY) 7,899 7,85 -.6. -1.2 Indonesia (Jakarta) 4,915 4,839-1.5. 5.3 KSA (Tadawul) 6,588 6,6 3.3. -1.5 Kuwait (KSE) 5,347 5,392.8. -4. Nigeria (All Share) 24,85 25,62.9. -12.5 Oman (Muscat 3) 5,817 5,943 2.2. 9.9 Qatar (Doha ) 1,396 1,186-2.. -2.3 Russia (MICEX) 1,967 1,953 -.7. 1.9 S.Africa (J'burg ) 46,55 46,471 -.1. 1.5 Turkey (Istanbul ) 85,829 85,328 -.6. 19. UAE (Abu Dhabi) 4,637 4,544-2.. 5.5 UAE (Dubai) 3,584 3,492-2.6. 1.8 Earnings in the US tech sector were especially disappointing with Apple s Q1 earning missing expectations by 4.9% Heat Map Legend Higher Equity Index Lower Equity Index Sources: Bloomberg and QNB Economics 5
- - - - - Commodity prices rose across the board, mainly as they are priced in dollars and the dollar weakened Commodity Prices* 22-Apr 29-Apr Change (%) Energy Week MTD YTD Brent 45.1 47.4 5.. 27.1 WTI 43.7 45.9 5.. 24. LNG 4.3 4.4.3. -37.2 Precious Metals Gold 1,233 1,294 4.9. 21.9 Silver 17. 17.8 5.2. 28.9 Industrial Copper 5,31 5,5.4. 7.3 Steel 54 5 3.2. 37.2 Aluminum 1,653 1,679 1.6. 11.4 Wheat 467 478 2.4. 1.7 Corn 372 39 5.. 8.8 Cocoa 3,137 3,7 2.2. -.1 Gold is benefitting from low interest rates globally and the weaker dollar Oil prices rose despite higher inventories than expected (2m barrels vs. 1.4m), although they still fell from the prior week (2.1m) Heat Map Legend Higher Commodity Prices Lower Commodity Prices Sources: Bloomberg and QNB Economics; * Spot prices or nearest expiring future 6
US nonfarm payrolls and China PMIs are likely to dominate markets this week Last Week s Data Review Date Country Event Period Consensus Actual Previous Apr 26 US Durable Goods Orders Mar 1.9%.8% -3.% Apr 27 US FOMC Rate Decision Apr.5%.5%.5% Apr 27 US Consumer Confidence Index Apr 95.8 94.2 96.2 Apr 27 UK GDP YoY Q1 2.% 2.1% 2.1% Apr 28 US GDP Annualized QoQ Q1.7%.5% 1.4% Apr 28 Japan Industrial Production MoM Mar 2.8% 3.6% -5.2% Apr 28 Japan BoJ Statement on Monetary Policy Unchanged Apr 29 Eurozone GDP SA YoY Q1 1.4% 1.6% 1.6% Forthcoming Economic Events Date Country Event Period Consensus Actual Previous May 2 US Markit Manufacturing PMI Apr 5.8 5.8 May 2 Eurozone Markit Manufacturing PMI Apr F 51.5 51.5 May 2 Eurozone ECB's Draghi to speak in Frankfurt May 3 China Caixin Manufacturing PMI Apr 49.8 49.7 May 4 US Durable Goods Orders Mar F.%.% May 6 US Nonfarm Payrolls Apr k 215k May 6 US Unenmployment Rate Apr 5.% 5.% Sources: Bloomberg and QNB Economics 7
Two-Year Performance of Major Asset Classes Sovereign 1-Year Bond Yields Equities 19 1 Advanced Economies* (left axis) Emerging Markets** (right axis) 1 1 3 US Germany 17 2 1 9 1 15 1 5/14 8/14 11/14 2/15 5/15 8/15 11/15 2/16 Exchange Rates 7 5/14 8/14 11/14 2/15 5/15 8/15 11/15 2/16 Commodities 15 95 9 Dollar Index (left axis) EUR:USD (right axis) 1.5 1.4 1.3 1 Oil (left axis) Food*** (right axis) 5 85 75 1.2 1.1 3 7 1 5/14 8/14 11/14 2/15 5/15 8/15 11/15 2/16 5/14 8/14 11/14 2/15 5/15 8/15 11/15 2/16 Sources: Bloomberg and QNB Economics; * MSCI World Index; ** MSCI Emerging Markets Index;; ***S&P GSCI Agricultural Index, which includes wheat corn, soybeans, coffee, sugar, cocoa and cotton 8
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