Post on 17-Oct-2020
New York, 19 March 2012
Nick Kounis Head Macro Research
Global Economy and Trade
Past the nadir?
2
Global economy looks to be bottoming out
Source: Markit
Manufacturing PMIs
3035404550556065
06 07 08 09 10 11 12
Eurozone US World
3
Emerging markets as well as advanced economies
Source: Markit
Manufacturing PMIs
3035404550556065
06 07 08 09 10 11 12
China Brazil India
4
The Return of Global Easing
Source: Thomson Reuters Datastream
Central bank balance sheet, January 2008 = 100
50
100
150200
250
300
350
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
ECB Fed BoJ BoE
5
Emerging markets going from rate hikes to cuts
Source: Thomson Reuters Datastream
Central bank policy rates, %
4
6
8
10
12
14
07 08 09 10 11 126
8
10
12
14
16
China India Russia Brazil (rhs)
6
ECB has averted a credit crunch
Source: ECB
ECB lending to commercial banks, EUR bn
200
400
600
800
1000
1200
06 07 08 09 10 11 12
7
Bank funding markets starting to thaw
Source: Thomson Reuters Datastream
Eurozone bank CDS index
100
150
200
250
300
350
400
Jun-11 Sep-11 Dec-11 Mar-12
ECB loans
8
Italian and Spanish banks went shopping
Source: ECB, national central banks
December and January, EUR bn
-20-10
0102030405060
SP IT DE FR BG GR PT NL IE
change in ECB loans change in gov. bond holdings
9
Sovereign bond market stress easing
Source: Thomson Reuters Datastream
2-Y government bond yield, %
123456789
Jun-11 Sep-11 Dec-11 Mar-12
IT ES
ECB loans
10
Oil prices could spoil the mood…
Source: Thomson Reuters Datastream
$ per barrel
90
100
110
120
130
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12
Brent oil prices
A $10 rise transfers 0.5% GDP from oil consumers to producers
11
…and the debt crisis could re-escalate
Greek government debt, % GDP
Source: ABN AMRO GE, IMF
100
120
140
160
180
200
220
10 11 12 13 14 15 16 17 18 19 20100
120
140
160
180
200
220
Post PSI Pre PSI Post PSI (half austerity)
12
Safety net is just not big enough
Source: ABN AMRO Group Economics
EUR bn
0
200
400
600
800
1000
Remaining EUR-IMF funds 3-Y loan for IT and ES
13
Large Eurozone bank exposures to periphery
Source: EBA, ABN AMRO Group Economics
Eurozone big bank exposure to sovereign debt (% tier 1 capital)
0
20
40
60
80
100
GR incl. IR and PT incl. SP incl. IT
end December 2010 end September 2011
14
Threat of a vicious circle, euro break-up
Source: ABN AMRO Group Economics
Indebted governments
Banks
Markets
Tighter financing conditions
Weakening economy
Rising bond yields
Budget cuts
15
Who is going to save the euro?
Source: ABN AMRO Group Economics
16
Costs of super crisis outweigh costs of bail-out
Source: ABN AMRO Group Economics
Costs of bail-out: 25% GDP
Costs of euro break-up: 50 -100% GDP over 3-yrs
Defaults Bank failures Financial panic Uncertainty Deep recession Wealth losses
EFSF to be increased to 1.3 trillion euros
Road map to eurobonds
17
European banks tightening lending standards again
Source: ECB
Balance net tightening
-40
-20
020
40
60
80
03 04 05 06 07 08 09 10 11 12
companies mortgages consumer credit
Tighter lending standards
18
The new fiscal fundamentalism in Europe
Source: EC, ABN AMRO Group Economics
% GDP
0
2
4
6
8
10
GR IE ES PT IT FR EZ NL BE GE AU FI
budget cuts 2011-2013
19
Eurozone in recession – divergence remains
Source: ABN AMRO Group Economics
%
-6-5-4-3-2-1012
DE AU FR BE EZ NL ES IE IT PT GR
GDP in 2012
20
US labour market starting to come to life
Source: Thomson Reuters Datastream
000s %
-1,000-800-600-400-200
0200400600
04 05 06 07 08 09 10 11 1234567891011
Employment change Unemployment rate
21
US private sector deleveraging advanced
Source: Thomson Reuters Datastream
Debt, % GDP
20
40
60
80
100
71 75 79 83 87 91 95 99 03 07 11
Households Business Government
22
US fiscal policy getting tighter
Source: CBO, ABN AMRO Group Economics
% GDP
-3
-2
-1
0
1
2
3
2009 2010 2011 2012 2013
23
Asia still relies on the West for its exports
Source: Thomson Reuters Datastream
Share of total exports to US and Eurozone
05
101520253035
VI CH PA IN PI HK KO IND MA TH SI
24
China’s great transformation
25
Productivity catch-up has a long way to go
Source: Angus Maddison, ABN AMRO GE
Per capita GDP relative to the US
0.0
0.2
0.4
0.6
0.8
1.0
1950 1960 1970 1980 1990 2000
Singapore Japan South Korea China India
26
Moderate global growth
Source: ABN AMRO Group Economics
Economic outlook 2010 2011 2012 2013Global GDP 5.1 3.8 3.4 4.0US 3.0 1.7 2.4 2.4Eurozone 1.8 1.5 -0.3 1.4China 10.4 9.2 8.4 8.2
World trade 15.5 6.0 4.5 6.5
Global CPI 3.6 4.6 3.7 3.6Eurozone 1.6 2.7 2.1 1.2US 1.6 3.1 1.9 1.6China 3.3 5.4 4.5 5.0
Rates and FX (end of period) 16-Mar 3M 2012 20133-M Euribor rate 0.85 0.70 0.90 1.03-M Libor rate 0.47 0.40 0.30 0.3German 10-Y yield 2.06 2.20 2.40 2.9US 10-Y yield 2.34 2.30 2.50 3.3
EUR/USD 1.31 1.35 1.30 1.25
27
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