“Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100
description
Transcript of “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100
![Page 1: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/1.jpg)
The External Environment for Developing Countries
July 2008The World Bank
Development EconomicsProspects Group
![Page 2: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/2.jpg)
75
80
85
90
95
100
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08
Source: Thomson/Datastream.
“Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100
Dow Jones
MSI
TOPIX
CACI
![Page 3: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/3.jpg)
U.S. inflation pipeline suggests further price hikes for consumer
Headline CPI, PPI- and Import price indexes, ch% 3mma y/y
0
3
5
8
10
Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-080
5
10
15
20
Source: U.S. Department of Commerce.
PPI [left]
Import price [right]
CPI [left]
![Page 4: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/4.jpg)
Industrial countries
![Page 5: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/5.jpg)
Stimulus checks boost disposable incomes in May – but outlays rise less
disposable income and personal consumption, ch% saar
-2
0
2
4
6
8
10
May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08
Source: U.S. Department of Commerce.
income personal consumption
retail sales
![Page 6: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/6.jpg)
Consumer expectations at record lows... a threat to second-half growth
expectations for economy: percentage of survey responses, 3mma
-25
-15
-5
5
15
25
35
Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08
Source: Conference Board.
expectations “worse”
“better” minus “worse”
expectations “better”
![Page 7: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/7.jpg)
Manufacturing losses had been spared worse outturns by overseas demand goods export volume and IP, ch% saar
-4
-2
0
2
4
6
8
Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08-5
0
5
10
15
20
25
30
Source: Department of Commerce, Thomson/Datastream.
Export volume [R]
IP manufacturing [L]
![Page 8: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/8.jpg)
Japan’s households retrench after strong spending in first quarter
retail sales volume and houshold expenditure, ch% 3mma y/y
-1
0
1
2
3
Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08
Source: Cabinet Office-- Thomson/Datastream.
HH expenditures
Retail sales
![Page 9: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/9.jpg)
Japan’s export growth waning as import demand plummets
Export- and import volume growth, ch% saar
-30
-20
-10
0
10
20
30
Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08
Source: Japan Cabinet Office.
Exports
Imports
![Page 10: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/10.jpg)
Fall of the yen and new orders growth sustain export hopes
USD per Yen index [right], and factory orders [left] ch% 3mma y/y
-4
-2
0
2
4
6
8
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-0895
100
105
110
115
120
Source: Japan Cabinet Office; Thomson/Datastream.
Dollar per Yen index [right]
Factory orders [left]
![Page 11: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/11.jpg)
1.2
3.2 2.9
-2
0
2
4
Q4-2007 Q1-2008-P Q1-2008-F
Source: Eurostat and DECPG calculations.
Euro Area first-quarter GDP marked down on investment and net-X growth of real GDP, and contributions to
growth in percentage points
Change in StocksFixed Investment
GovernmentConsumptionNet exports
![Page 12: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/12.jpg)
German exports drop sharply in May in step with export orders growth export volumes and overseas factory
orders, ch% 3mma
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08
Source: Bundesbank-- Thomson/Datastream.
Export volume
Export orders
![Page 13: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/13.jpg)
HICP breaches 16-year highs illiciting ECB 25-bp rate hike
HICP ch% y/y and ECB policy rate (%)
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08
HICP
Source: Eurostat through Thomson/Datastream.
![Page 14: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/14.jpg)
Industrial production
![Page 15: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/15.jpg)
Other East Asia
Latin America and the Carribean
Industrial production growth across developing regions is slowing IP ch% saar: ECA, LAC [left]; Other East
Asia [right]
-4
0
4
8
12
16
Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08-10
0
10
20
30
40
Source: Thomson/Datastream, DECPG.
Europe and Central Asia
![Page 16: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/16.jpg)
China remains strong; output in the remainder of East Asia is lapsing
IP ch% saar
-10
-5
0
5
10
15
20
25
30
Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08
Source: Thomson/Datastream, DECPG.
Other East Asia
China
![Page 17: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/17.jpg)
Weaker manufacturing orders take a toll on German production
IP ch% saar: production [left], orders [right]
-8
-6
-4
-2
0
2
4
6
8
10
Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08-15
-10
-5
0
5
10
15
20
25
Source: Thomson/Datastream, DECPG.
IP
Manufacturing orders*
* One month lag
![Page 18: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/18.jpg)
International trade
![Page 19: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/19.jpg)
G-3 exports slow into second quarter of 2008
export volumes, ch% saar
-5
0
5
10
15
20
25
2007M1 2007M3 2007M5 2007M7 2007M9 2007M11 2008M1 2008M3 2008M5
Source: Thomson/Datastream, DECPG calculations.
Japan
USA
Germany
![Page 20: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/20.jpg)
Export market demand falling more quickly than anticipated
nominal imports, ch% saar
-20
0
20
40
60
80
100
2007M1 2007M3 2007M5 2007M7 2007M9 2007M11 2008M1 2008M3 2008M5
Source: Thomson/Datastream, DECPG calculations.
Taiwan, China
Russia
East Asia
High-income
Brazil Non-OECD High-income
![Page 21: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/21.jpg)
High-tech exporters see slowdown in outbound shipments
nominal exports, ch% saar
-25.0
-12.5
0.0
12.5
25.0
37.5
50.0
62.5
2007M1 2007M3 2007M5 2007M7 2007M9 2007M11 2008M1 2008M3
Source: Thomson/Datastream, DECPG calculations.
Taiwan, China
Thailand
Malaysia
Hong Kong SAR China
![Page 22: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/22.jpg)
Oil prices
![Page 23: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/23.jpg)
Oil prices climb on low stocks and sluggish supply growth
20
40
60
80
100
120
140
Jan-04 Jan-05 Jan-06 Jan-07 Jan-082400
2500
2600
2700
2800
$/bbl million bbl
WB Oil price [L scale]
OECD stocks [R]
Source: IEA and DECPG Commodities Group.
![Page 24: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/24.jpg)
Tight distillate market bidding up prices for light crudes
-10
0
10
20
30
40
Jan-06 Jan-07 Dec-07
$/bbl
Crude (WTI)
Gasoline
Distillate
Price differentials relative to crude
Source: Datastream and DECPG Commodities Group.
![Page 25: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/25.jpg)
Open Interest Crude Oil NYMEX (‘000 lots)
0
200
400
600
800
1000
1200
1400
1600
0
20
40
60
80
100
120
140
160$/bblOpen interest
Source: NYMEX and DECPG Commodities Group.
![Page 26: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/26.jpg)
Non-oil commodity prices
![Page 27: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/27.jpg)
100125150175200225250275300325350
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08
Grains
Fats & Oils
Other Food
Beverages
Continued gains in food prices(2000=100)
Source: DECPG Commodities Group.
![Page 28: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/28.jpg)
Copper and aluminum remain firmwhile other metals prices drop
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
15000
20000
25000
30000
35000
40000
45000
50000
55000Cu/Al $/ton Ni $/ton
Nickel
Copper
Aluminum
Source: LME and DECPG Commodities Group.
![Page 29: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/29.jpg)
0
25
50
75
100
125
150
Jan-85 Jan-88 Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06
Iron Ore Prices ($/mt)
Source: LME and DECPG Commodities Group.
![Page 30: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/30.jpg)
International Finance
![Page 31: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/31.jpg)
Bank lending leads flows in June
Source: DECPG Finance Team.
Gross capital flows to emerging markets
$ billion 2006
Total H1 H2 Total H1 Apr May Jun
Total 494 357 326 683 267 48 45 58 Bonds 137 107 39 146 58 13 12 19 Banks 246 164 180 343 165 22 24 36 Equity 111 86 107 194 44 13 8 3
Lat. America 116 69 88 157 54 14 12 9 Bonds 41 31 14 45 17 5 6 1E. Europe 179 156 96 252 104 15 16 35 Bonds 64 50 14 64 33 7 5 15Asia 153 110 113 213 90 16 13 11 Bonds 19 18 6 23 7 0 1 3Others 45 32 28 60 20 3 4 2
2007 2008
![Page 32: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/32.jpg)
1,350
1,400
1,450
1,500
1,550
1,600
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08325
350
375
400
425
450
475
Source: Bloomberg.
Equity market downturn appears mirrored in commodity market gains
MSCI global equities (USD) [left]; Reuters/Jeffries CRN [right]
MSCI equity [left]
CRN commodities [right]
![Page 33: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/33.jpg)
255
260
265
270
275
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08405
410
415
420
Source: JPMorgan-Chase and Morgan-Stanley.
Returns on high-yield assets suffer amid flight to quality
Developed market- high-yield bond index [left]; EMBIG [right]
EMBIG [right]
JPMorgan Developed HY [left]
![Page 34: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/34.jpg)
Currencies
![Page 35: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/35.jpg)
1.410
1.430
1.450
1.470
1.490
1.510
1.530
1.550
1.570
1.590
1.610
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08
96
98
100
102
104
106
108
110
112
Source: Thomson/Datastream.
yen/USD
USD/Euro (inverse)
Dollar continues move-up on yen... step-down on euro at ECB rate hike USD per Euro (inverse) [Left] and Yen per
USD [right]
![Page 36: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/36.jpg)
Is oil being viewed as a dollar hedge? USD nominal effective rate [left], oil price
[right], index 2000=100
80
85
90
95
100
105
110
Jan-00 Nov-00 Sep-01 Jul-02 May-03 Mar-04 Jan-05 Nov-05 Sep-06 Jul-07 May-0850100150200250300350400450500
Source: Thomson/Datastream, DECPG Commodities Group.
Oil price [right]
USD NEER [left]
![Page 37: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/37.jpg)
90
95
100
105
110
115
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08
Source: Thomson/Datastream.
Emerging market currencies show mixed movements against the dollar
LCU per USD indexes, Jan1 2008=100 [*increase = weaker LCU]
Turkish lira
Brazilian reis
Indonesian rupiah
Korean won
Philippine peso
![Page 38: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/38.jpg)
FOCUSJuly 2008
Difficulties at Fannie and Freddie
![Page 39: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/39.jpg)
0
5
10
15
20
25
30
35
5/1/2008 6/1/2008 7/1/2008
Fannie Mae Freddie Mac
Share prices ($)
Source: Thomson/Datastream.
Fannie and Freddie share prices halve over the 2nd week of July
![Page 40: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/40.jpg)
Freddie, 2.2 trillion
Fannie, 3.0 trillion
Others, 6.9 trillion
Source: OFHEO.
Mortgage portfolios and guarantees held by Fannie and Freddie
![Page 41: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/41.jpg)
30
40
50
60
70
80
90
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08
Fannie Mae
CDS spreads of Freddie Mac and Fannie Mae
Basis points
Freddie Mac
Source: Thomson/Datastream.
Market tension eases post actions by Treasury and Federal Reserve
![Page 42: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/42.jpg)
0
250
500
750
1,000
1,250
1,500
Treasury bonds Agency bonds Corp. bonds Corp. stocks
$ billion
Value of US LT securities held by foreign official institutions(As of June 30, 2007)
Source: U.S. Treasury.
Further difficulties could carry worldwide repercussions
![Page 43: “Bear market” spurred by financial and inflation uncertainties indexes, Jan1 2008=100](https://reader036.fdocuments.us/reader036/viewer/2022070423/5681679e550346895ddce40e/html5/thumbnails/43.jpg)
The External Environment for Developing Countries
July 2008The World Bank
Development EconomicsProspects Group