1

0,00

0,25

0,50

0,75

1,00

1,25

1,50

1,75

2,00

2,25

2,50

2,75

3,00

Sep

15

Oct

15

No

v15

Dec

15

Jan

16

Feb

16

Mar

16

Ap

r16

May

16

Jun

16

Jul1

6

Au

g16

Sep

16

Oct

16

No

v16

Dec

16

Jan

17

Feb

17

Mar

17

Ap

r17

May

17

Jun

17

Jul1

7

Au

g17

Sep

17

Oct

17

No

v17

Dec

17

Fed Forecasts (three months ago)

Fed Forecasts (September 2015)

Futures (three months ago)

Futures (September 2015)

%

down by 25bps

down by 25bps

Fed Funds Interest Rate Projections

down by 25bps

Source: Federal Reserve, Bloomberg

0,65

0,67

0,69

0,71

0,73

0,75

0,77

0,79

0,81

0,83

0,85

2,10

2,15

2,20

2,25

2,30

2,35

9/14

/15

3:00

9/14

/15

11:2

0

9/14

/15

19:5

7

9/15

/15

7:12

9/15

/15

15:4

8

9/16

/15

3:04

9/16

/15

11:4

0

9/16

/15

20:1

7

9/17

/15

7:32

9/17

/15

16:0

9

9/18

/15

3:24

9/18

/15

12:0

1

9/18

/15

20:3

8

10Yr Yield (left)

2Yr Yield (right)

Intraday US Treasury Yields% %Intraday US Treasury Yields

Source: Bloomberg

Sept 14 Sept 15 Sept 16

Sept 17(FOMC

Meeting)

Sept 18

September 22, 2015

Global Markets Roundup NBG Economic Research Division

The timing of the Fed interest rate hike remains uncertain

Paul Mylonas, PhD NBG Group

Chief Economist 210-3341521

pmylonas@nbg.gr

Ilias Tsirigotakis Head of

Global Markets Research

210-3341517 tsirigotakis.hlias

@nbg.gr

Panagiotis Bakalis 210-3341545 mpakalis.pan

@nbg.gr

Lazaros Ioannidis 210-3341553

ioannidis.lazaros @nbg.gr

Vasiliki Karagianni

210-3341548 karagianni.vasiliki

@nbg.gr

Ch

art

s o

f th

e w

eek

See disclosures and analyst certification on last page.

The Fed maintained unchanged its target for the Federal Fed funds rate at 0.0%-0.25%, signaling at the

same time increasing concerns regarding global economic growth (China and other emerging market

economies) and the resulting tighter financial conditions in the US.

The FOMC notes the strength of US domestic demand, however, the above-mentioned external

developments, combined with lower oil prices, are expected to put downside pressures on inflation. Thus,

further evidence is required that inflation is moving towards its target.

The “median” forecast of the Fed funds rate for end-2015 declined by 25 bps to 0.375% (or a target

range of 0.25%-0.50%), implying one rate hike before end-year, compared with two rate hikes at the

June meeting. Futures now price in a later hike (March 2016).

The pace of tightening remains unchanged post-2015 (by 100 bps in 2016 and 150 bps in 2017), more

aggressive than the level of tightening expected by investors. Market estimates for the normalization path

are 50 bps for 2016 and 50 bps for 2017 (see graph). Unless this gap closes gradually, the risk of a

disorderly sell-off in rates (DM and EM) increases.

Overall, the meeting was dovish, as reflected in: i) greater emphasis on external developments; ii) slightly

lower US GDP and inflation forecasts for 2016/2017; and more importantly, iii) no evidence by Chair

Yellen that an interest rate increase is likely by end-year (despite the “median” forecast for 2015).

However, equity markets reacted poorly to the prospective 3-month extension of the zero interest rate

policy. DM equities were hurt by: i) the lack of transparency regarding the future policy path; and ii) the

Fed reinforcing the case for downside global growth risks.

The MSCI Developed Markets Index retreated by 1.4% following the FOMC meeting (Thursday/Friday),

with the S&P500 and the Eurostoxx indices declining by circa 2%. In contrast, EM equities were up 0.5%

in relative terms, due to the Fed’s hesitancy to raise rates.

Fixed income markets, especially US Treasuries, saw prices rise, in view of a more dovish Fed and rising

risk aversion. Specifically, 2-Year US Treasury yields declined by 13 bps to 0.62%, and 10-Year US

Treasury yields were down by 17 bps to 2.13% in two days (see graph).

The FOMC meeting also led to a weakness of the USD -- down 1.3% against the euro on Thursday --

albeit the US dollar recovered from a 20-day low on Friday due to increasing global risk aversion, ending

the week broadly unchanged at USD 1.13/€.

If September is just a transitory adjournment of the Fed’s first interest rate hike, the diverging monetary

policy path between the Fed and the ECB is expected to result in a stronger USD against the EUR over

the next 12 months (in the range of USD 1.05-1.00/€).

The Greek parliamentary elections resulted in a win for the “Syriza” party, with 35.4% of the vote and 145

seats. A repeat of the outgoing coalition is expected, with a majority of 155 seats (out of 300). Equity

market reaction was muted (ASE index down by -1.0%), albeit GGBs maturing in 2017 and 2019 were up

-- yields fell by 30 bps and 10 bps to 9.9% and 8.8%, respectively.

NBG Economic Research Division September 22, 2015

2

Economics In the US, the Fed remained on hold, as negative developments in

EMs (especially China), and subdued inflation data, more than

offset strong domestic developments (labor market). It also

maintained the same forward guidance, stating that it will need to

be “reasonably confident” that inflation will revert to its 2% target

over the medium term, in order to raise rates, thus providing no

clear evidence that a rate hike is looming. Regarding the economic

outlook, the Fed set a more dovish tone, adding to the official

statement that “global economic and financial developments may

constrain economic activity, and are likely to put further downward

pressure on inflation”, adding at the same time that it will “monitor

developments abroad” and that “market-based measures of

inflation moved lower”. Indeed, the 5Y/5Y breakeven inflation rate

has declined by 30 bps to 1.85% since end-June.

For 2015, the economic outlook remains positive, with the median

GDP forecast for 2015 (Q4:YoY) increasing to 2.1% (from 1.9% in

June). However, GDP forecasts for 2016 declined by 0.2 pps to

2.3% and by 0.1 pp to 2.2% for 2017. The median PCE inflation

forecasts for Q4:2015 (YoY average) were down 0.3 pps to 0.4%,

on the back of lower oil and import prices. For 2016 and 2017, the

forecasts were both down by 0.1 pp, to 1.7% and 1.9%,

respectively, with the Fed projecting that inflation will reach its 2.0%

target by 2018. On the other hand, the Fed lowered significantly its

median unemployment rate forecasts for Q4:2015 and Q4:2016

(YoY average) by 0.3 bps to 5.0% and 4.8%, respectively, and by

0.2 bps to 4.8% for 2017, reflecting the lower starting point (UR is

currently at 5.1% compared with 5.5% in May) and less optimistic

views about the labor force participation rate. However, the longer-

term projection (or NAIRU) also was lowered by 0.1 bp to 4.9%.

The FOMC members’ individual estimates for the official rate were

lowered, with the median FOMC forecast for end-2015 declining to

0.375% (from 0.625% in June), and signaling one rate increase by

end-year-end (compared with two rate increases in June). The

monetary policy tightening path was revised down (by 25 bps), with

the median forecast for end-2016 at 1.375% and at 2.625% for

end-2017. For end-2018, the FOMC members project the official

rate at 3.375%, while the longer-term projection also fell by 25 bps

to 3.50%.

Inflation data for August remained soft, corroborating the Fed’s

hesitancy to raise rates. Specifically, core CPI remained

unchanged at 0.1% m-o-m in August. The annual change of core

CPI was also unchanged at 1.8% y-o-y in August, below

expectations for 1.9% y-o-y. Headline inflation was negative on a

monthly basis (-0.1% m-o-m from +0.1% m-o-m), due to

decreasing energy prices (-2.0% m-o-m), with the annual rate of

CPI unchanged at 0.2% y-o-y. Recall that the PCE deflator (the

Fed’s preferred measure of gauging inflation pressures) for July

stood at 0.3% y-o-y (unchanged from June), while the core figure

declined to 1.2% y-o-y from 1.3% y-o-y in June.

US retail sales data in August were positive, with the underlying

trend remaining solid, corroborated by upward revisions to previous

months. The latest data suggest that consumption (c. 70% of US

GDP) will remain supportive of growth in Q3:2015. Specifically,

retail sales (in value terms) rose by 0.2% m-o-m (2.2% y-o-y) in

August, from an increase of 0.7% m-o-m (2.6% y-o-y) in July.

Moreover, retail sales excluding autos, gas, food services and

building materials -- the so-called “control group” since they feed

into the calculation for GDP -- increased by 0.4% m-o-m

(+3.5% y-o-y) in August, from an upwardly revised (by 0.3 pps)

increase of 0.6% m-o-m (+3.5% y-o-y) in July. It should be

noted that on a 3m/3m annualized rate basis, retail sales

“control group” growth stands at a solid 5.7% in August.

Industrial production in August disappointed, consistent with

the latest weak business surveys. Recall that the ISM

manufacturing index declined to a 27-month low of 51.1 in

August from 52.7 in July. It should be noted, however, that

upward revisions in the previous months alleviated the

negative outlook. Specifically, industrial production decreased

by 0.4% m-o-m (+0.9% y-o-y), from an upwardly revised (by

0.3 pps) +0.9% m-o-m (+1.3% y-o-y) in July. On a 3m/3m

annualized rate basis, industrial production was 0.4% in

August, up from -1.3% in July, whereas manufacturing

production (75% of total industrial production) was up +1.3%.

On the housing market front, data were mixed, albeit still

suggesting that the ongoing recovery remains. Specifically,

housing starts declined by 3.0% m-o-m (+16.6% y-o-y) to

1126k in August, from +4.1% m-o-m (+6.0% y-o-y) in July,

while building permits rose by 3.5% m-o-m (12.5% y-o-y) to

1170k in August, following a sharp decline of 15.5% m-o-m in

July (+8.6% y-o-y). More importantly, the NAHB survey index –

that captures homebuilders’ confidence for new home sales –

increased to a post-recession high (since October ‘05) of 62 in

September, up 1 point compared with August.

In the euro area, industrial production data was mixed and

business surveys came out slightly weaker than expected.

Specifically, industrial production increased by 0.6% m-o-m

(1.9% y-o-y) in July from -0.3% m-o-m (1.5% y-o-y) in June,

albeit on a 3m/3m annualized basis, industrial production

hovers at -1.4% in July, the lowest rate in over a year.

Furthermore, the ZEW expectation indicator for the German

economy weakened further in September, mostly reflecting

external factors (i.e. the slowdown in emerging markets).

Specifically, the ZEW forward-looking survey came out at 12.1

in September (from 25.0 in August), a 10-month low,

undershooting consensus expectations of 18.3, and below the

15-year average of 21.1 (since January 2000).

On a positive note, euro area employment posted its sixth

consecutive quarterly increase, up by 0.3% q-o-q in Q2:15,

following an increase of 0.2% in Q1:15, reflecting, inter alia, the

improving economic outlook during recent quarters and labor

market reforms. The annual rate in employment remained

unchainged at 0.8% y-o-y for a fourth consecutive quarter.

Recall that the unemployment rate in the euro area fell to

10.9% in July, the lowest reading since 2012. Regarding

developments by country, Spain posted the strongest pace of

job creation, as employment increased by 0.9% q-o-q (2.9%

y-o-y) from 0.8% q-o-q (2.9% y-o-y) in Q1:15.

In the UK, incoming data suggests that the labor market

remains solid, with the unemployment rate declining (by 0.1

pp) to 5.5% in July and wages recording further gains.

Specifically, the number of employed rose by 42k on a 3m/3m

basis (+1.4% y-o-y) in July, following a decline of 63k (+1.2%

y-o-y) in June. In addition, earnings growth accelerated, as

regular pay (average weekly earnings ex. bonuses) increased

by 2.9% y-o-y from 2.8% y-o-y in June, in line with consensus

estimates. However, on the inflation front, low energy prices

NBG Economic Research Division September 22, 2015

3

continue to weigh on, UK CPI growth, which was flat again in August (0.0% y-o-y),

down from 0.1% y-o-y in July. Core inflation decelerated to 1.0% y-o-y from 1.2%

y-o-y previously. Weak inflation pressures appear to offset strong wages for now, as

the Bank of England is expected to remain on hold at least until the second half of

2016. A more dovish-than-expected Fed could reinforce the case for the BoE to hold

its Bank rate low for even longer (currently at 0.50%).

The Bank of Japan maintained its policy unchanged, as expected, during the past

week, reiterating its goal to increase the monetary base at an annual rate of ¥80tn.

Nevertheless, the assessment of the economy’s outlook was downgraded, as the

Bank of Japan stated that “export and production are affected by the slowdown in

emerging economies”, jeopardizing at the same time the improvement in the trade

balance which has improved to -1.1% of GDP in August (on a 12-month rolling

basis) compared with -3.0% in the same period one year ago.

On a positive note, Chinese house prices rose for a fourth consecutive month,

suggesting that the Government’s measure to support the housing market is

gradually bearing fruit. Specifically, 35 out of 70 cities (50%) monitored by China’s

National Bureau of Statistics (NBS), reported a monthly increase in prices of new

residential buildings in August, compared with 44% of cities in July and only 3% in

January. On average, prices for new residential buildings rose by 0.2% m-o-m (+0.2

m-o-m in July), whereas the annual rate of decline slowed to 3.2% y-o-y from -4.4%

y-o-y in July, from a trough of -6.3% y-o-y in April. Quote of the week: ”I expect that we’ll reach our maximum employment mandate in the near future and inflation will gradually move back to our 2 percent goal. In that context, it will make sense to gradually move away from the extraordinary stimulus that got us here…I view the next appropriate step as gradually raising interest rates, most likely starting sometime later this year.” J. Williams, President of the Fed San Francisco, on September 19th 2015.

Markets

Global equity markets declined slightly during the past week, as the Fed’s decision

to defer the normalization of its monetary policy reheated global growth concerns.

The MSCI World index was flat for the week, as EM equities out-performed their

developed market peers (+2.3% vs -0.2%), with US equity markets shedding

cumulatively 1.9% on Thursday and Friday alone. Similarly, the rest of the major

developed equity markets weakened. In Japan, the Nikkei225 fell by 1.1% over the

week due to a stronger yen. Finally, Chinese equity markets ended the week down,

with the CSI300 (largest A-shares in Shanghai and Shenzhen exchanges) down by

2.9%. Nevertheless, the CSI300 rose on Monday (up by 1.8%).

Government bond yields were lower by the end of the week as the Fed’s more-

dovish-than-expected projections and rhetoric weighed on investors’ sentiment. The

US 10Yr Treasury yield fell by 6 bps to 2.13% and the Japanese government 10Yr

bond yield fell by 3 bps to 0.31% (lowest level since April). Note that S&P

downgraded the Japanese debt rating by one notch to A+ due to concerns over the

success of the government’s economic policies (Abenomics). In Europe, the decline

in government bond yields in the aftermath of the Fed was significant, with both the

UK’s 10Yr Gilts and the Germany’s 10Yr Bunds yield down by circa 12 bps on a

daily basis (on Friday). Moody’s downgraded France’s government bond rating by

one notch to Aa2, citing a weaker medium-term growth outlook and political

constraints that pose challenges in reducing the debt in the coming years. French

government 10Yr bond yields, however, remain unperturbed declining by 3 bps over

the week to 1.03%. Finally, periphery government bond spreads over Bund

narrowed, with Italy’s 10Yr BTPs spread declining by 7 bps to 110 bps and Spain’s

10Yr Bonos spread down by 17 bps to 128 bps. Market attention will now turn to

regional elections in Catalonia (September 27th). The parties (Together for Yes) that

support independence from Spain are struggling for an outright majority (68 seats).

Nevertheless, the parliamentary majority alone (and not a minimum of 50%-55% in

the share of vote) would weaken their call for Catalonia’s independence.

In foreign exchange markets, the US dollar weakened across the board amid the

more-dovish-than-expected Fed projections. Nevertheless, the US dollar gained

ground on Friday (up by 1.2% against the euro), benefiting from increased investor

risk aversion. The ongoing ECB QE, along with improving US fundamentals in

H2:15, should put further pressure on the euro/US dollar in the coming months.

Thus, we expect the exchange rate to reach 1.05-1.00 by Q2:2016, unless the Fed

delays further its monetary policy normalization.

25

50

75

100

125

150

175

200

225

250

275

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

22

-Ju

n

29

-Ju

n

6-J

ul

13

-Ju

l

20

-Ju

l

27

-Ju

l

3-A

ug

10

-Au

g

17

-Au

g

24

-Au

g

31

-Au

g

7-S

ep

14

-Se

p

Greece (left)

Italy (right)

Portugal (right)

Spain (right)

Ireland (right)

Source: Bloomberg - Data as of September 18th

10- Year Government Bond Spreadsbps bps

118

119

120

121

122

123

124

125

126

1,08

1,09

1,1

1,11

1,12

1,13

1,14

1,15

1,16

1,17

22

-Ju

n

29

-Ju

n

6-J

ul

13

-Ju

l

20

-Ju

l

27

-Ju

l

3-A

ug

10

-Au

g

17

-Au

g

24

-Au

g

31

-Au

g

7-S

ep

14

-Se

p

EUR/USD (left) USD/JPY (right)

Foreign Exchange

Source: Bloomberg - Data as of September 18th

-15

-10

-5

0

5

10

15

20

25

30

35

-15

-10

-5

0

5

10

15

20

25

30

35

Jan

-14

Feb

-14

Mar

-14

Ap

r-1

4

May

-14

Jun

-14

Jul-

14

Au

g-1

4

Sep

-14

Oct

-14

No

v-1

4

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5

May

-15

Jun

-15

Jul-

15

Au

g-1

5

Sep

-15

US Europe excl. UK

UK Japan

Emerging Markets

% %

Cumulative Flows into Equity ETFs as % of AUM

Source: Bloomberg, NBG Estimates, AUM = Assets Under Management Data as of September 18th

NBG Economic Research Division September 22, 2015

4

Day Region Release Period Survey Actual Prior

Current Week

Tuesday 15 US Retail Sales Advance MoM AUGUST 0.3% - 0.2% 0.7%

US Retail sales ex-autos (MoM) AUGUST 0.2% - 0.1% 0.6%

US Empire Manufacturing SEPTEMBER -0.50 - -14.67 -14.92

US Industrial Production (MoM) AUGUST -0.2% - -0.4% 0.9%

UK CPI (YoY) AUGUST 0.0% 0.0% 0.1%

UK CPI Core (YoY) AUGUST 1.0% 1.0% 1.2%

JAPAN Bank of Japan annual rise in Monetary Base (¥ tn) SEPTEMBER 15 80 80 80

EURO AREA Trade Balance SA (€ bn) JULY 21.4 + 22.4 21.9

EURO AREA Employment (QoQ) Q2:15 .. 0.3% 0.2%

EURO AREA Employment (YoY) Q2:15 .. 0.8% 0.8%

GERMANY ZEW survey current situation SEPTEMBER 64.0 + 67.5 65.7

GERMANY ZEW survey expectations SEPTEMBER 18.3 - 12.1 25.0

Wednesday 16 US CPI (YoY) AUGUST 0.2% 0.2% 0.2%

US Core CPI (YoY) AUGUST 1.9% - 1.8% 1.8%

US NAHB housing market confidence index SEPTEMBER 61 + 62 61

US Net Long-term TIC Flows ($ bn) JULY .. 7.7 103.1

UK ILO Unemployment Rate JULY 5.6% + 5.5% 5.6%

Thursday 17 US Housing starts (k) AUGUST 1.160 - 1.126 1.161

US Building permits (k) AUGUST 1.159 + 1.170 1.130

US Initial Jobless Claims (k) SEPTEMBER 12 275 + 264 275

US Continuing Claims (k) SEPTEMBER 5 2.258 + 2.237 2.263

US Philadelphia Fed Business Outlook SEPTEMBER 5.9 - -6.0 8.3

US Fed announces its intervention rate SEPTEMBER 17 0.25% 0.25% 0.25%

UK Retail sales Ex Auto MoM AUGUST 0.1% 0.1% 0.3%

JAPAN Exports YoY AUGUST 4.3 - 3.1 7.6

JAPAN Imports YoY AUGUST -2.5 - -3.1 -3.2

EURO AREA ECB publishes its economic bulletin

Monday 21 US Existing home sales (mn) AUGUST 5.50 - 5.31 5.58

Next Week

Tuesday 22 EURO AREA Consumer Confidence Indicator SEPTEMBER -7.0 .. -6.9

Wednesday 23 US Markit US Manufacturing PMI SEPTEMBER 52.8 .. 53.0

EURO AREA Markit Eurozone Manufacturing PMI SEPTEMBER 52.0 .. 52.3

EURO AREA Markit Eurozone Services PMI SEPTEMBER 54.2 .. 54.4

EURO AREA Markit Eurozone Composite PMI SEPTEMBER 54.0 .. 54.3

CHINA Caixin PMI Manufacturing SEPTEMBER 47.5 .. 47.3

Thursday 24 US Initial Jobless Claims (k) SEPTEMBER 19 275 .. 264

US Continuing Claims (k) SEPTEMBER 12 2.237 .. 2.237

US Durable goods orders (MoM) AUGUST -2.3% .. 2.2%

US Durable goods orders ex transportation (MoM) AUGUST 0.1% .. 0.4%

US New home sales (k) AUGUST 515 .. 507

JAPAN Markit/JMMA PMI manufacturing SEPTEMBER 51.2 .. 51.7

GERMANY IFO- Business Climate Indicator SEPTEMBER 107.9 .. 108.3

GERMANY IFO- Current Assesment SEPTEMBER 114.7 .. 114.8

GERMANY IFO-Expectations SEPTEMBER 101.4 .. 102.2

Friday 25 US GDP (QoQ, annualized) Q2:15 3.7% .. 3.7%

US Personal Consumption Q2:15 3.2% .. 3.1%

JAPAN CPI (YoY) AUGUST 0.1% .. 0.2%

JAPAN Core CPI (YoY) AUGUST -0.1% .. 0.0%

EURO AREA M3 money supply (YoY) AUGUST 5.3% .. 5.3%

Monday 28 US Personal income (MoM) AUGUST 0.4% .. 0.4%

US Personal spending (MoM) AUGUST 0.3% .. 0.3%

US PCE Core Deflator (YoY) AUGUST 1.3% .. 1.2%

US PCE Deflator (YoY) AUGUST .. .. 0.3%

US Pending home sales (MoM) AUGUST 0.4% .. 0.5%

UK Nationwide House Px NSA YoY SEPTEMBER .. .. 3.2%

Source: Bloomberg

Economic News Diary: September 15 - September 28, 2015

NBG Economic Research Division September 22, 2015

5

Equity Market Returns (%)

Developed Markets1Current Level

1-w eek change

(%)

Year-to-Date

change (%)

1-Year change

(%)

2-year change

(%)

US S&P 500 1958 -0,2 -4,9 -2,7 13,5

Japan NIKKEI 225 18070 -1,1 3,5 12,5 24,6

UK FTSE 100 6104 -0,2 -7,0 -10,5 -6,9

Canada S&P/TSX 13647 1,4 -6,7 -11,8 5,5

Hong Kong Hang Seng 21921 1,9 -7,1 -9,3 -5,2

Euro area EuroStoxx 331 -0,6 3,7 1,2 12,4

Germany DAX 30 9916 -2,0 1,1 1,2 14,8

France CAC 40 4536 -0,3 6,2 1,6 8,8

Italy FTSE/MIB 21515 -1,1 13,2 1,8 20,8

Spain IBEX-35 9847 1,1 -4,2 -10,4 8,7

Emerging Markets1

MSCI Emerging Markets 45439 2,3 -6,0 -9,7 -2,5

MSCI Asia 667 2,6 -7,3 -8,5 -0,4

China 60 2,9 -9,2 -7,6 -3,0

Korea 519 3,2 -3,2 -10,1 -10,7

MSCI Latin America 63215 1,7 -5,4 -16,5 -11,1

Brazil 173229 2,1 -7,3 -21,3 -16,8

Mexico 41473 1,8 0,6 -6,0 3,9

MSCI Europe 4486 1,5 1,2 -5,8 -8,0

Russia 786 1,1 18,6 6,8 -0,2

Turkey 1069306 5,6 -12,5 -3,4 0,7

As of September 18, 2015, 1) in local currency, Source Bloomberg

Financial Markets Monitor

World Equity Market Sector Returns (%)

in US Dollar terms Current Level

1-w eek change

(%)

Year-to-Date

change (%)

1-Year change

(%)

2-year change

(%)

Energy 187,3 1,0 -21,2 -35,4 -28,7

Materials 189,6 -0,6 -15,0 -22,4 -19,1

Industrials 185,9 -0,6 -6,7 -8,2 -0,8

Consumer Discretionary 190,7 0,9 2,4 5,6 12,9

Consumer Staples 197,9 2,0 -1,0 0,4 7,6

Healthcare 211,1 0,7 5,6 7,0 32,3

Financials 95,4 -0,6 -7,2 -9,2 -1,3

IT 137,2 -0,2 -2,9 -0,7 23,0

Telecoms 66,7 -1,2 -2,4 -6,8 1,8

Utilities 109,9 1,6 -10,7 -8,1 0,5

in local currency

Energy 187,2 0,5 -19,6 -32,4 -24,8

Materials 179,3 -1,3 -12,4 -16,3 -10,8

Industrials 184,5 -1,1 -5,3 -3,5 6,7

Consumer Discretionary 184,4 0,6 3,6 10,0 20,0

Consumer Staples 193,8 1,4 0,0 4,6 13,0

Healthcare 207,0 0,3 6,3 10,3 37,5

Financials 94,9 -1,2 -4,7 -3,3 7,1

IT 133,4 -0,3 -2,5 0,9 26,2

Telecoms 68,6 -1,7 -0,2 -0,5 10,8

Utilities 111,0 1,2 -9,1 -3,8 6,7

As of September 18, 2015, MSCI Indices, Source Bloomberg

Foreign Exchange & Commodities

Current Level

1-w eek change

(%)

1-month

change (%)

1-Year change

(%)

Year-to-Date

change (%)

EUR/USD 1,13 -0,4 1,6 -12,5 -6,6

EUR/CHF 1,09 -0,4 1,9 -9,3 -9,0

EUR/GBP 0,73 -1,0 2,6 -7,7 -6,3

EUR/JPY 135,55 -0,9 -1,5 -3,5 -6,5

EUR/NOK 9,23 -0,3 0,1 12,9 2,4

EUR/SEK 9,33 -0,1 -1,7 1,9 -1,3

EUR/AUD 1,57 -1,8 3,8 9,3 6,0

EUR/CAD 1,49 -0,7 2,3 5,7 6,2

USD/CAD 1,32 -0,3 0,7 21,0 13,8

USD/AUD 1,39 -1,4 2,2 25,1 13,6

USD/JPY 120,00 -0,5 -3,1 10,4 0,3

Agricultural 451 -1,6 -2,4 -11,7 -16,7

Energy 487 -2,1 1,0 -53,6 -22,6

West Texas Oil ($) 45 0,1 9,5 -52,0 -16,1

Crude brent Oil ($) 46 -2,7 1,9 -52,1 -17,2

Industrial Metals 1038 -2,3 2,7 -24,4 -17,9

Precious Metals 1398 3,3 0,7 -9,1 -4,3

Gold ($) 1139 2,8 0,5 -7,0 -3,9

Silver ($) 15 3,9 -0,9 -18,1 -3,3

Baltic Dry Index 960 17,4 -6,9 -11,8 22,8

Baltic Dirty Tankers Index 666 4,9 3,4 8,3 -22,7

As of September 18, 2015, Goldman Sachs Indices for Commodities, Source Bloomberg

Commodities

Foreign Exchange

Euro-based cross rates

USD-based cross rates

Bond Markets (%)

Current Last w eek Year Start One Year Back

10-year

average

US 2,13 2,19 2,17 2,62 3,17

Germany 0,66 0,65 0,54 1,08 2,65

Japan 0,31 0,35 0,33 0,57 1,14

UK 1,83 1,83 1,76 2,58 3,34

Greece 8,23 8,64 9,75 5,81 9,61

Ireland 1,26 1,28 1,25 1,84 4,98

Italy 1,76 1,83 1,88 2,44 4,17

Spain 1,94 2,11 1,61 2,28 4,16

Portugal 2,51 2,61 2,69 3,22 5,56

US Treasuries 10Y/2Y 145 148 151 205 158

US Treasuries 10Y/5Y 69 68 52 78 82

Bunds 10Y/2Y 90 89 64 114 113

Bunds 10Y/5Y 62 63 52 84 66

Global Inv. Grade (IG) 155 155 131 109 171

Global High yield 594 594 538 426 622

US IG 167 167 144 114 192

US High yield 562 562 504 398 604

Euro area IG 126 126 97 94 156

Euro area High Yield 477 477 409 360 639

30-Year FRM1 (%) 4,09 4,09 4,04 4,36 4,85

vs 30Yr Treasury (bps) 115 114 129 101 103

As of September 18, 2015, 1. Fixed-rate mortgage rate, Source Bloomberg

10-Year Government Bond

Yields

Government Bond Yield

Spreads (in bps)

Corporate Bond Spreads

(BofA/ML Indices, in bps)

US Mortgage Market

NBG Economic Research Division September 22, 2015

6

NBG Economic & Markets Forecasts

Euro area & US: GDP Growth & Inflation Forecasts

GDP (%)1 2013a Q1a Q2a Q3a Q4a 2014a Q1a Q2a Q3f Q4f 2015f

Euro area -0,3 0,2 0,1 0,3 0,4 0,9 0,5 0,4 0,4 0,5 1,3

US 1,5 -0,2 1,2 1,1 0,5 2,4 0,2 0,9 0,6 0,7 2,5

HICP Inflation (%)2

Euro area 1,4 0,7 0,6 0,4 0,2 0,4 -0,3 0,2 0,2 0,7 0,2

US 1,5 1,4 2,1 1,8 1,3 1,6 -0,1 0,0 0,3 1,0 0,4

a: Actual, f: Forecasts

1. Seasonally adjusted q-o-q grow th rates, 2.Year-to-year average percent change

2013a 2014a 2015f

Interest Rates & Foreign Exchange Forecasts

Current (*) 3-month 6-month 12-month

Germany 0,66 0,75 0,85 1,00

US 2,13 2,50 2,75 3,00

Official rate (%)

Euro area 0,05 0,05 0,05 0,05

US 0,25 0,50 0,75 1,00

Currency

EUR/USD 1,13 1,08 1,05 1,00

EUR/GBP 0,73 0,69 0,68 0,68EUR/JPY 136 134 131 126

10-year government bond yield (%)

(*) As of September 18 2015, end of period

NBG Economic Research Division September 22, 2015

7

NBG View and Key Factors for Global Markets

Euro area US Japan UK

Fo

reig

n E

xc

ha

ng

e

Go

ve

rnm

en

t B

on

ds

E

qu

itie

s

Reduced short-term tail

risks

Higher core bond yields

Current account surplus

▬ Sluggish growth

▬ Deflation concerns

▬ The ECB’s monetary

policy to remain extra

loose (LTROs, ABSs

and covered bank bond

purchases, Quantitative

Easing)

▬ Overvalued on a trade-

weighted basis

Lower euro against the

US dollar

The Fed is expected to

increase its policy rate by

end-2015 (currently at

0.00%-0.25%) for the first

time in nine years

Growth to accelerate in

H2:2015

Halting US Treasuries and

agency MBSs reinvestments

in H1:2016

▬ Structural weakness due to

twin deficits

▬ Mid-2014 rally probably

ahead of fundamentals

Higher US dollar against its

major counterparts

Safe haven demand

More balanced economic

growth recovery (long-

term)

Inflation is bottoming out

▬ Additional Quantitative

Easing by the Bank of

Japan if inflation does not

approach 2%

▬ Strong appetite for foreign

assets

Lower yen against the US

dollar

Weak growth outlook

Medium-term inflation

expectations are

drifting lower

Ultra accommodative

monetary policy

▬ Upside risk in US

benchmark yields

▬ Valuations appear

excessive compared

with long-term

fundamentals

Higher yields expected

Lower fiscal deficit

Fed’s commitment on low

policy rates (qualitative

forward guidance)

Safe haven demand

▬ Valuations appear rich

▬ Growth prospects improve

▬ The Fed is expected to

increase its policy rate

(currently at 0.00%-0.25%)

by end-2015

Higher yields expected

Periphery spreads

tightening

Declining equity risk prem

EPS are bottoming out

▬ Tight credit conditions &

bank de-leveraging

process

▬ Ongoing, albeit milder,

fiscal austerity

▬ Sovereign debt crisis

▬ Political uncertainty

Neutral stance on

equities

Very low government bond

yields

Strong EPS growth

Cash-rich corporates lead to

share buybacks and higher

dividends (de-equitization)

▬ Slightly demanding

valuations

▬ Peaking profit margins

▬ Disorderly re-pricing of

expectations for the first

interest rate-hike by the Fed

Neutral-to-positive stance on

equities

Upward revisions in

corporate earnings

Aggressive QE by the BoJ

Japanese Yen depreciation

favors export companies

▬ Signs of policy fatigue

regarding structural reforms

and fiscal discipline

▬ Strong appetite for foreign

assets

Neutral-to-positive stance on

equities

The Bank of England is

expected to increase its

Bank Rate (currently at

0.50%) in Q2:2016

Solid economic growth

with real GDP at c. 3% for

2014-2015

▬ Current account deficit

▬ Backloaded fiscal

adjustment

Higher British Pound

against the euro

Fiscal consolidation

Safe haven demand

▬ Rich valuations

▬ Relatively sticky inflation

feeds through inflation

expectations

▬ The Bank of England is

expected to increase its

Bank Rate (currently at

0.50%) in Q2:2016

Higher yields expected

Growth recovery

Strong EPS growth

▬ The BoE increases

interest rates faster-than-

expected due to labor

market tightening

▬ Strong trade links with

euro area economy

▬ High UK exposure to the

Energy sector

Neutral stance on equities

Safe haven demand

Extremely dovish

central bank

▬ Fiscal deficits

▬ Restructuring efforts

brightens growth

prospects

Higher yields expected

NBG Economic Research Division September 22, 2015

8

NBG 6-Month View and Key Factors for South Eastern European Markets Emerging Markets Research Team, tel:210-3341211, email: mloufir@nbg.gr

Turkey Romania Bulgaria Serbia

Fo

reig

n E

xc

ha

ng

e

Do

me

sti

c D

eb

t

Fo

reig

n D

eb

t

Currency board arrangement

Large foreign currency reserves and fiscal reserves

Current account surplus

▬ Sizable external financing requirements

Stable BGN against the

EUR

Fo

reig

n D

eb

t E

qu

itie

s

Attractive valuations

▬ Weak foreign investor appetite for emerging market assets

Neutral stance on equities

Attractive valuations

▬ Weak foreign investor appetite for emerging market assets

Neutral/Positive stance on

equities

Attractive valuations

Low-yielding domestic debt and deposits

▬ Weak foreign investor appetite for emerging market assets

Neutral/Positive stance on

equities

Attractive valuations

▬ Weak foreign investor appetite for emerging market assets

Neutral/Positive stance on

equities

High domestic debt yields

Narrowing current account deficit

▬ Sizable external financing requirements

▬ Protracted political uncertainty ahead of the formation of a new government following the June 7th general elections

Weaker to stable TRY against the EUR

Precautionary Stand-By Agreement with the IMF

Small current account deficit

▬ Sizable external financing requirements

Stable to stronger RON against the EUR

Ongoing EU membership negotiations

High domestic debt yields

Precautionary Stand-By Agreement with the IMF

▬ Sizable external financing requirements

Weaker to stable RSD against EUR

Low public debt-to-GDP ratio

▬ Stubbornly high inflation

Stable to lower yields

Precautionary Stand-By Agreement with the IMF

Low public debt-to-GDP ratio

▬ Easing fiscal stance

Stable to higher yields

Very low public debt-to-GDP ratio and large fiscal reserves

Low inflation

Stable to lower yields

Positive inflation outlook

Precautionary Stand-By

Agreement with the IMF

▬ Large public sector

borrowing requirements

Stable to lower yields

Narrowing current account deficit

Appropriate policy mix

▬ Sizeable external financing requirements

▬ Weak foreign investor appetite for emerging market assets

Stable to narrowing spreads

Precautionary Stand-By Agreement with the IMF

Small current account deficit

▬ Large external financing requirements

Stable to narrowing spreads

Solidly-based currency board arrangement, with substantial buffers

Current account surplus

▬ Large external financing requirements

Stable to narrowing

spreads

Stable spreads

Ongoing EU membership negotiations

Strengthening foreign investor sentiment

Precautionary Stand-By Agreement with the IMF

▬ Sizable external financing requirements

▬ Slow progress in structural reforms

Stable to narrowing spreads

NBG Economic Research Division September 22, 2015

9

NBG South Eastern Europe Economic Forecasts

SEE Economies

2011 2012 2013 2014 2015f 2016f

Real GDP Growth (%)

Turkey 8,8 2,1 4,2 2,9 2,9 3,2

Romania 1,1 0,6 3,4 2,8 3,4 4,0

Bulgaria 2,0 0,5 1,1 1,7 2,2 2,6

Serbia 1,4 -1,0 2,6 -1,8 0,8 2,0

Headline Inflation (eop,%)

Turkey 10,4 6,2 7,4 8,2 8,2 6,8

Romania 3,1 5,0 1,6 0,8 -0,8 0,5

Bulgaria 2,8 4,2 -1,6 -0,9 0,2 1,4

Serbia 7,0 12,2 2,2 1,7 2,4 3,5

Current Account Balance (% of GDP)

Turkey -9,7 -6,2 -7,9 -5,8 -5,6 -5,8

Romania -4,6 -4,5 -0,8 -0,4 -0,5 -1,1

Bulgaria 0,9 -0,3 1,9 0,9 2,5 1,5

Serbia -10,9 -11,6 -6,1 -6,0 -4,1 -3,6

Fiscal Balance (% of GDP)

Turkey -1,4 -2,1 -1,2 -1,3 -1,4 -1,2

Romania -4,2 -2,5 -2,5 -1,9 -1,9 -2,8

Bulgaria -2,0 -0,4 -1,8 -3,7 -2,5 -2,0

Serbia -4,8 -6,8 -5,5 -6,7 -5,2 -4,2

f: NBG forecasts

SEE Financial Markets

September

18th

3-month

forecast

6-month

forecast

12-month

forecast

1-m Money Market Rate (%)

Turkey 12,0 11,0 10,5 10,5

Romania 1,1 1,2 1,5 1,8

Bulgaria 0,2 0,2 0,2 0,2

Serbia 4,1 5,0 5,4 5,5

Currency

TRY/EUR 3,40 3,30 3,25 3,20

RON/EUR 4,42 4,42 4,41 4,40

BGN/EUR 1,96 1,96 1,96 1,96

RSD/EUR 120,2 119,8 120,1 120,0

Sovereign Eurobond Spread (bps)

Turkey (EUR 2017) 134 130 120 100

Romania (EUR 2018) 81 84 82 80

Bulgaria (EUR 2017) 62 78 74 70

Serbia (USD 2021)(*) 274 270 240 180

(*) Spread over US Treasuries

SEE Stock Market Returns1

September

18th

Last w eek

return (%) YTD (%)

2-year change

(%)

Index

Turkey ISE100 75.099 5,3 -12,4 0,6

Romania BET-BK 1.335 -0,9 2,0 20,0

Bulgaria SOFIX 444 -1,6 -14,9 -2,8

Serbia BELEX15 617 -2,8 -7,5 18,0

1. In local currency

NBG Economic Research Division September 22, 2015

10

DISCLOSURES:

This report is provided solely as a sheer reference for the information of experienced and sophisticated investors who are expected and considered to be fully able to make their own investment decisions without reliance on its contents, i.e. only after effecting their own independent enquiry from sources of the investors’ sole choice. . The information contained in this report does not constitute the provision of investment advice and under no circumstances is it to be used or considered as an offer or an invitation to buy or sell or a solicitation of an offer or invitation to buy or sell or enter into any agreement with respect to any security, product, service or investment. No information or opinion contained in this report shall constitute any representation or warranty as to future performance of any financial instrument, credit, currency rate or other market or economic measure. Past performance is not necessarily a reliable guide to future performance. National Bank of Greece and/or its affiliates shall not be liable in any matter whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance on or usage of this report and accepts no legal responsibility to any investor who directly or indirectly receives this report. The final investment decision must be made by the investor and the responsibility for the investment must be taken by the investor. Any data provided in this report has been obtained from sources believed to be reliable but has not been independently verified. Because of the possibility of error on the part of such sources, National Bank of Greece does not guarantee the accuracy, timeliness or usefulness of any information. Information and opinions contained in this report are subject to change without notice and there is no obligation to update the information and opinions contained in this report. The National Bank of Greece and its affiliate companies, its representatives, its managers and/or its personnel or other persons related to it, accept no responsibility, or liability as to the accuracy, or completeness of the information contained in this report, or for any loss in general arising from any use of this report including investment decisions based on this report. This report does not constitute investment research or a research recommendation and as such it has not been prepared in accordance with legal requirements designed to promote investment research independence. This report does not purport to contain all the information that a prospective investor may require. Recipients of this report should independently evaluate particular information and opinions and seek the advice of their own professional and financial advisers in relation to any investment, financial, legal, business, tax, accounting or regulatory issues before making any investment or entering into any transaction in relation to information and opinions discussed herein. National Bank of Greece has prepared and published this report wholly independently of any of its affiliates and thus any commitments, views, outlook, ratings or target prices expressed in these reports may differ substantially from any similar reports issued by affiliates which may be based upon different sources and methodologies. This report is not directed to, or intended for distribution to use or use by, any person or entity that is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to any law, regulation or rule. This report is protected under intellectual property laws and may not be altered, reproduced or redistributed, or passed on directly or indirectly, to any other party, in whole or in part, without the prior written consent of National Bank of Greece. ANALYST CERTIFICATION:

Each individual contributing to this report and whose name is listed on page 1 hereby certifies that all of the views expressed in this report accurately reflect his or her personal views solely, about any and all of the subject issues. Further, each of these individuals also certifies that no part of any of the report analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this report. Also, all opinions and estimates are subject to change without notice and there is no obligation for update.