Week in Focus How Emerging Markets will slow the euro zone
Transcription
Week in Focus How Emerging Markets will slow the euro zone
Economic Research Week in Focus . 10 October 2014 How Emerging Markets will slow the euro zone Economic data in the euro zone and especially Germany have been quite poor lately. This is primarily due to the weakening in demand from emerging markets. Our analysis suggests that this weakness is likely to remain in place, partly because the looming Fed rate hike will end the decade of cheap money in many emerging markets whilst many BRICs have domestic problems of their own. As the drag on the euro zone from this source intensifies, this is likely to hasten the ECB's decision to buy government bonds. Page 2 The Week in Focus in 100 seconds Please follow this link for a video summary. Growth differential in favour of Emerging Markets is narrowing Real GDP, year-on-year change in per cent, growth differential in percentage points; 2014 + 2015: Commerzbank forecasts 10 8 6 4 2 0 -2 -4 1980 1985 1990 Growth differential 1995 2000 Advanced economies 2005 2010 2015 Emerging markets Source: IMF, Commerzbank Research ECB QE: Allocation probably by capital key. Assuming the ECB engages in QE, the question of how it will distribute its bond purchases will be a controversial one. We believe that an allocation based on the ECB capital key is the most likely variant as the alternatives under discussion have even more drawbacks from the ECB’s perspective. Page 5 Product Idea: Range Bet Forward in EUR-JPY. Markets are starting to price in more ECB easing but rather less from the BoJ. This will likely result in EUR-JPY trading in a tight range over the coming year. We suggest that customers participate in a EUR-JPY Range Bet Forward in order to profit from such a development. Page 6 Outlook for the week of 13 October to 17 October 2014 Economic data: The data next week should confirm that the US economy is continuing to grow at a solid rate. In Germany, recent weak economic data releases for October suggest that the ZEW index will come in below 0 for the first time since end-2012. Page 8 Bond market: With economic concerns likely to persist in the near term, Bunds ought to remain supported, whilst the hunt for yield appears to be running out of steam despite ongoing ECB QE speculation. Page 12 Chief economist FX market: We view the recent USD weakness as temporary and the current phase represents merely a correction, rather than the end of USD strength. Page 13 Dr Jörg Krämer Equity market: After a weak October we look for the DAX soon to find its trough and expect it to recover in November and December following the recent soft patch. Page 14 Editor Commodity market: Downward pressure on the oil price is likely to continue for the time being although base metal prices are expected to remain fairly static. Page 15 +49 69 136 23650 jjoerg.kraemer@commerzbank.com Peter Dixon +44 20 7475 4806 peter.dixon@commerzbank.com research.commerzbank.com Bloomberg: CBKR Research APP available For important disclosure information please see end of this document Dr Jörg Krämer Tel. +49 69 136 23650 How Emerging Markets will slow the euro zone Recent economic data in the euro zone, particularly in Germany whose economy up to now has been robust, have turned weaker. This is primarily due to the weakening in demand from emerging markets. Our analysis suggests this is likely to remain the case, partly because the looming Fed interest rate hike will end the decade of cheap money in many emerging markets. In addition, many BRICs have domestic problems of their own. This suggests that the growth advantage which many emerging markets have enjoyed vis-à-vis the advanced economies is likely to narrow further, thus reducing the impetus to the euro zone economy. This is likely to hasten the ECB's decision to buy government bonds. Emerging markets: Economic growth has stabilised … Many investors are concerned about growth in emerging markets. These concerns are understandable particularly in view of Chinese developments, notably falling house prices. Whilst we hold to a below-consensus view for Chinese growth, industrial production across emerging markets as a whole is still posting stable growth of around 5%. Furthermore, the purchasing managers’ indices and the OECD leading indicators for EM are tending sideways and are not signalling a slump. … but the growth gap vs. advanced economies is shrinking … However, the emerging markets have not been able to profit from somewhat higher growth in the advanced economies is worthy of further examination. The growth rate of industrial production in the advanced economies moved into positive territory in 2013 (chart 1), without output growth in EM gaining any momentum. The same is true for GDP (chart 2). The growth gap between emerging markets and industrial countries has thus narrowed further this year – to around 3 percentage points compared to an average in excess of 6 percentage points in the period 2007 to 2009. … and import demand is barely rising Another factor pointing to domestic problems in the EM space is the slowdown in demand growth in the region since the turn of the year. Growth in EM import volumes has weakened from around 5% in 2012 and 2013 to 2½% recently (chart 3). This generally applies to Asia, Eastern Europe and Latin America. The German economy is being particularly affected at present, which explains why the German purchasing managers’ index for the export-oriented manufacturing sector has fallen at a sharper rate than the PMI for other euro zone countries. This was the main reason why a week ago we lowered our German growth forecast for this year and next to 1.3%. Data released this week showing weak industrial orders and production in August suggest that third quarter German GDP is likely to have stagnated at best. CHART 1: EM Industrial production has stabilised … CHART 2: ... but the growth gap is narrowing Industrial production, year-on-year change in per cent, growth differential in percentage points, moving 5-month average Real GDP, year-on-year change in per cent, growth gap in percentage points; 2014 + 2015: Commerzbank forecasts 10 10 8 8 6 6 4 4 2 2 0 0 -2 -4 -2 2011 2012 gap 2013 Advanced economies Source: Centraal Planbureau, Commerzbank Research 2 1980 2014 Emerging markets 1985 1990 Growth differential 1995 2000 Advanced economies 2005 2010 2015 Emerging markets Source: IMF, Commerzbank Research research.commerzbank.com 10 October 2014 An end to the decade of cheap money In future, emerging markets are set to suffer an additional burden due to the fact looming Fed rate hikes will bring an end to the decade of cheap money: In its annual report, the Bank for International Settlements (BIS) showed that the average central bank rate in emerging markets over the past ten years was well below the so-called Taylor interest rate, which would have been appropriate given trends in inflation and growth (see box on page 4). Central banks in many emerging markets have clearly copied the Fed’s loose monetary policy in order to prevent their currencies from appreciating. Our update of the calculations made by the BIS shows that monetary policy in emerging markets is still too expansionary, even though numerous central banks raised key interest rates last year after their currencies came under pressure following the Fed’s announcement that it would begin tapering its asset purchases. If the Fed were to raise the funds rate in Q2 2015, this will increase the pressure on EM central banks to hike interest rates further, and thus close the gap to the Taylor rate. The decade of cheap money would then clearly be at an end, which would further narrow the growth advantage which EM currently enjoy (Chart 2), even though it will not narrow to the levels of the 1980s because many emerging markets are fundamentally stronger than they were then. They are now much more closely integrated into the international economy and public debt trends are much more favourable than in the advanced economies. The self-made problems of emerging markets The emerging markets are not only suffering from the end of cheap global money but also as a result of their own self-made problems. In the past few years, negative developments have emerged in the so-called BRIC countries: • Brazil: The country is not saving enough, partly because, unlike Chile, it does not have a capital-backed pension system, thus state consumption spending is too high. This means that private and public investment relative to GDP are lower than almost every other emerging market, although the country will import capital amounting to 3½% of GDP this year. The Brazilian economy will probably barely grow this year (forecast: +0.3%). • Russia: By the end of the commodities boom Russian growth had already slowed considerably, from rates above 5% in the years prior to the Lehman bankruptcy to an estimated 0.3% this year. Outside the huge commodities sector (20% of GDP), no dynamic business sector has emerged, which is also partly due to unfavourable institutional conditions – notably the legal system and problems with property rights. The Ukraine conflict has added to the uncertainty. CHART 3: Demand from EM is clearly losing momentum CHART 4: Monetary policy in EM is much too loose Real imports of emerging markets, year-on-year change in per cent, unsmoothed and 5-month average Average key interest rates of emerging markets, actual and based on Taylor rule, in %, see box on page 4 14 12 10 8 6 4 2 0 2011 2012 2013 Source: Centraal Planbureau, Commerzbank Research 10 October 2014 2014 Source: Datastream, Commerzbank Research research.commerzbank.com 3 • India: Economic growth has dipped below 5% in the last two years, after topping 8% on average from 2003 to 2011. Institutional conditions did not keep pace with strong economic growth in the early years of the century. For example, outdated land tenure laws make it difficult for businesses to buy the land required to boost growth. Furthermore, transport infrastructure (roads, ports, railways) are in a poor state. Hopes are now directed at new Prime Minister Modi. • China: After many years of sharply rising house prices, prices have been falling for several months. This will hit the over-sized construction sector (which, including estate agents, amounts to almost 20% of GDP), and regional authorities, who have recently been investing approximately half their revenues from land purchase (2013: 7.2% of GDP) in infrastructure. Emerging Markets: Growth edge narrows The self-made problems in BRIC countries and an end to the decade of cheap money suggest that the growth advantage which emerging countries enjoy over the advanced economies will narrow further – from 3.4 percentage points last year to 2¾ percentage points in 2015. Growth in the emerging markets will therefore not profit from somewhat higher growth in advanced economies (USA: 2014: +2.2%; 2015: +2.9%) but stick at around 4½%. While growth in China should decline, due partly to a weakening of the property sector (2014: +7.3%; 2015: +6.5%), it should be a little higher in India, not least because of the new government (2014:+5.8%; 2015: +6.2%). Less impetus from emerging markets - a further argument for QE Less impetus from the emerging markets is a further argument supporting our forecast that euro zone GDP will grow by only 0.8% in 2015, i.e. much less than the ECB still expects (+1.6%). Disappointment about growth and an inflation rate well below the 2% mark will serve as an argument for those ECB governing council members in favour of broad-based government bond purchases (QE). They will additionally point out that the ECB cannot buy enough ABS and covered bonds to increase its balance sheet by 1000 billion euros, given the lack of liquidity. We still expect the purchase of government bonds, although this is more likely to happen at the beginning of 2015 rather than this year. In the medium term, this will continue to push down the EUR-USD exchange rate (forecast for end of 2015: 1.15). Taylor rule for emerging markets In its annual report, the Bank for International Settlements (BIS) reiterated that key interest rates in emerging markets have been much too low for at least the last ten years. 1 To support this view, the BIS also uses the so-called Taylor rule, which determines the appropriate key interest rate based on capacity utilisation rates and the deviation of inflation from target. For the industrial countries, this rule has in the past generally been a useful indicator of an overlyexpansionary monetary policy and thus warned of the dangers of a monetary-driven market distortions or even a bubble. We have applied this analysis to calculate a Taylor rule for the emerging markets. Like the BIS, we have determined trend growth in the emerging markets using a Hodrick-Prescott filter. As many central banks do not have an explicit inflation target, we have likewise calculated an underlying inflation trend using the Hodrick-Prescott filter and interpreted this – like the BIS – as the inflation target. We have calculated two versions of the rule; in the one version we use the consumer price index as our inflation measure, in the other the GDP deflator. Chart 4 compares the average result of both equations and their range with the actual trend in key interest rates (where we aggregate countries together using their GDP weights). 1 4 See http://www.bis.org/publ/arpdf/ar2014_5_de.pdf, page 109 research.commerzbank.com 10 October 2014 Dr Michael Schubert +49 69 136 23700 ECB QE: Allocation probably by capital key We still believe that the ECB will ultimately announce broad-based government bond purchases (QE). The question of how the central bank will distribute the purchases across individual member states is, however, controversial. We think that allocation according to the ECB capital key is the most likely variant as the alternatives under discussion (allocation by market share, risk-weighted approach) probably have more drawbacks from the ECB’s perspective. The ECB is reportedly discussing three alternatives for allocation: • The ECB uses the shares of euro-zone countries in ECB capital. The share of capital is calculated in equal parts from the share of the respective country in the overall population and GDP. In this case, 26% of QE purchases would go German government bonds, 20% to France and 18% to Italy (chart 5). • If the ECB bases its distribution on the market shares of government bonds (Source: Bloomberg; all maturities, including linker and floater), the split would be 27% Italian, 23% French and 19% German. • The risk-weighted approach stresses that the central bank – as is customary in other countries – should favour bonds with top ratings (many German bonds, fewer Spanish and Italian bonds) to minimise the default risk. However, the weighting by market shares and the risk-weighted approach have decisive drawbacks for the ECB. The weighting by market shares amounts to the ECB buying more government bonds from those countries where issuance has been high. This could leave the ECB open to the charge of trying to circumvent the prohibition of monetary financing. A further counter-argument is that the highest shares will be Italian and French bonds, the two countries under heavy criticism for their lack of structural reforms and consolidation. Some Governing Council members had only agreed to the OMT asset purchase programme because buying was tied to certain requirements for governments. One problem with the risk-weighted approach is that it cannot be determined objectively how high the share of (say) German bonds should be compared to Italian and Spanish bonds, in order to ensure that credit default risk remains low. Moreover, many Governing Council members would presumably reject this proposal on the grounds that countries such as Germany received most support when they needed it the least. Consequently, if the ECB buys government bonds on a broad base, allocation should be as “fair” and “equal” as possible. This is also important from a legal perspective as the German Federal Constitutional Court in its judgment on OMT was particularly critical of the fact that these purchases were “selective”. A weighting by ECB capital key, i.e. by shares of population and economic strength, not only appears plausible but is also tried and tested. After all, it is stipulated in the EU treaties that the ECB Governing Council will use this key when deciding on central bank capital and questions of gains and losses. CHART 5: Euro zone: QE allocation probably by ECB capital key ECB capital key and market shares of euro zone government bonds in per cent, S&P rating 30 25 20 15 10 5 0 S&P DE FR IT ES NL BE AT PT GR AAA AA BBB BBB AA+ AA AA+ BB B Capital key market share Source: ECB, Bloomberg, Commerzbank Research 10 October 2014 research.commerzbank.com 5 Product idea: Range Bet Forward in EUR-JPY Peter Kinsella Tel. +44Tel. 207+49 475 (0) 3959 69 136 41250 Profiting from EUR-JPY staying in a 130 – 145 range Markets are starting to price in both the ECB and the BoJ engaging in quantitative easing to a greater and lesser extent respectively. The result of this is that EUR-JPY is likely to trade in a tight range over the coming year. We suggest that customers participate in a EUR-JPY Range Bet Forward in order to profit from such a development. Since the beginning of September both the EUR and JPY have traded almost in lockstep against the USD. Investors should get used to such a phenomenon because it could well be a taste of things to come. Inflationary developments in the euro zone continue to give cause for concern. Due to the continued fall in inflation readings in the euro zone, market participants are already beginning to price in the prospect of broad based QE by the ECB. The real goal of such a programme, although the ECB will never admit it, is to weaken the EUR. This is the only way in which ECB can hope to achieve higher inflation levels in the short term, essentially by importing it through a weaker exchange rate. All told the outlook for the EUR in the coming months is for further weakness. At the same time, developments in the Japanese economy also lead market participants to question whether the BoJ is doing enough to achieve the 2% inflation target. Growth data in Q2 disappointed such that markets are also starting to price in even more BoJ quantitative easing. These developments, along with USD appreciation, led to USD-JPY trading from levels around 105 towards 110 in recent weeks. The combination of EUR and JPY weakness in our view means that EUR-JPY will likely trade in a tight range over the coming months. Our forecast shows an incredibly tight range around 138 over the coming year. We therefore suggest that customers participate in a EUR-JPY Range Bet Forward in order to participate from these developments. Product idea: Range Bet Forward in EUR-JPY Spot rate (sample calculation) 137.28 Upper limit (trigger) 145.00 Lower limit (‘trigger’) 130.00 Nominal EUR 1,000,000 Duration 6 months Cost Zero cost The Range Bet Forward allows customers to sell JPY and buy EUR at 135.00 if the range of 130.00 – 145.00 holds during the 6 month window. Investors participate in the structure on lower levels in EUR-JPY down to 130.01 if the range holds. If the range 130.00 – 145.00 is triggered during the 6 month window, the investor has a synthetic forward where he has to buy EUR and sell JPY at 140.50. 6 research.commerzbank.com 10 October 2014 Major publications from 2 – 9 October 2014 Economic Briefing: Germany heading for a weak Q3 At -4%, the decline in industrial output in August even outpaced our below-consensus forecast. The late timing of the summer holidays was key, favouring production in July but hitting output considerably in August. Consequently, another countermove must be expected in September. Yet the trend is pointing down, with the German economy in the third quarter likely to have stagnated at best. more EM Briefing: Brazil – An unexpected run-off Dilma Rousseff from PT and Aecio Neves from PSDB will be in the ballot on 26 October in the election run-off. These results are somewhat unexpected as this scenario had not been envisioned until a few days ago, and then not in a clear way. At this juncture, who wins Marina Silva’s supporters is the key to deciding the second-round. Thus polls, air-time and debates will be of paramount importance to understand short-term market behaviour. more FX Hotspot: ARPI² update – Uncertainty rose further Compared to last week, the ARPI² rose 0.2 index points which was in particular due to somewhat higher credit and commodity risks. Commodity risks rose as oil prices fell significantly due to a price cut by Saudi Arabia and to speculation of weaker demand as global growth forecasts have been revised down. The increase of credit risks was partly due to a change of index characteristics in the iTraxx Crossover data series which we use to describe risks in this asset class. more FX Hotspot: Our G10 – FX outlook The two most important central banks, Fed and ECB, are pursuing opposing monetary policy paths. That affects EUR-USD as well as other G10 currencies, with some of the central banks concerned facing notable challenges. Please find below an overview over the different monetary policies as well as the other economic conditions affecting the individual G10 currencies. more Mid-cycle soft patch – From Fed rate hike fears to global growth concerns (and back?) Market sentiment flipped from Fed rate hike fears to global growth concerns over the last month. Global growth is softening mainly due to idiosyncratic but synchronised weakness in the EM spilling over to exposed economies such as Germany. We firmly believe the scenario of a midcycle soft patch is the most likely, as opposed to a more severe slowdown of global growth threatening to end the cycle. This scenario seems largely priced in by markets. The retreat in risk assets is not far from what we saw during mid-cycle soft-patches in the last two cycles and risk assets should find support from bearish sentiment, positioning and a favourable seasonality. We recommend looking out for buying opportunities in risk assets. Moreover, once the current growth concerns abate, Fed/BoE rate hike discussions are likely to intensify again. We stick to our recommendation of a well-diversified moderate pro-risk stance. more 10 October 2014 research.commerzbank.com 7 Preview – The week of 13 to 17 October 2014 Time Region Indicator Period Forecast Survey Last Monday, 13 October 2014 No relevant data are due for release Tuesday, 14 October 2014 • GBR CPI CPI ex tobacco CPI Sep Sep Sep 10:00 GER ZEW Index Oct 10:00 EUR Industrial production Aug 7:45 FRA 9:30 yoy 0.4 126.13 0.3 1.5 -5.0 – – 0.2 1.4 0.0 0.4 126.38 0.4 1.5 6.9 mom, sa yoy -1.4 -1.7 1.0 2.2 mom yoy Wednesday, 15 October 2014 9:30 • 13:30 GBR Claimant count change Aug mom, k, sa -35 -35 -37.2 USA Wages (three-month average) Unemployment rate (ILO) Retail sales Aug Aug Sep yoy %, sa mom, sa 0.7 6.1 -0.1 0.8 6.1 -0.1 0.6 6.2 0.6 Sep Oct Sep mom, sa sa mom, sa 0.0 15.0 0.1 0.2 20.0 0.2 0.3 27.5 0.0 CPI, final Sep yoy 0.3 0.3 0.3(p) CPI excl. food and energy, final Initial claims Industrial production Philadelphia Fed Index NAHB Index Sep Oct 11 Sep Oct Oct yoy k, sa mom, sa sa sa 0.8 285 0.4 15.0 59 0.8 – 0.4 20.0 59 0.7(p) Housing starts Housing permits Sep Sep SAAR, k SAAR, k 985 1035 1000 1035 956 998 Consumer confidence (Univ. of Michigan), preliminary Oct sa 82.8 84.2 84.6 Retail sales ex autos Empire State Index PPI, final demand USA: Federal Reserve releases Beige Book (19:00) Thursday, 16 October 2014 10:00 13:30 14:15 15:00 EUR USA -0.1 22.5 59 Friday, 17 October 2014 13:30 14:55 USA Source: Bloomberg. Commerzbank Economic Research; *Time BST (subtract 5 hours for EDST. add 1 hour for CEST). # = Possible release; mom/qoq/yoy: change to previous period in percent. AR = annual rate. sa = seasonal adjusted. wda = working days adjusted; • = data of highest importance for markets. 8 research.commerzbank.com 5 September 2014 Economic data preview: Dr Christoph Balz Tel. +49 69 136 24889 USA: No clear signals A large number of indicators are due out in the US next week. On balance, the data should confirm the view that the US economy continues to grow at a solid rate and thus is faring better than average in an international comparison. In Germany, the recent releases of weak economic data for October suggest that the ZEW index will come in below 0 for the first time since the end of 2012. Next week’s US economic data should be dominated by special factors. Those indicators that disappointed recently will probably increase noticeably, while those indicators that turned out positive of late will likely come in weaker. Retail sales presumably declined in September by 0.1% on the month (consensus: -0.1%). This is mainly suggested by significantly lower auto sales (-6.0%). But this is not indicative of a general weakness in consumption. The recent decline in the petrol price overstates the lull in September, and sales had risen strongly by 0.6% in August. The trend driven by the labour market recovery thus still points clearly upwards. This is especially true for the core business excluding autos, building material and sales at the gas pump (chart 6). In contrast, housing starts in September should have recovered from the 14% drop in August, when construction permits exceeded housing starts. Our forecast of 985,000 housing starts for September (consensus: 1,000,000) would mean an increase of 3% on the month. Industrial production also declined in August by 0.1% due to a one-off effect in the automotive industry. But for September, the usual indicators such as hours worked in manufacturing lead us to expect a gain. Moreover, it is to be assumed that energy production rose considerably. Owing to above-average temperatures, more energy was presumably used for operating air conditioners. We forecast an increase of 0.4% in industrial production (consensus: 0.4%). Prospects for manufacturing remain favourable, though perhaps not quite so exceptionally good as they were only recently. The first incoming regional survey results for September will likely turn out somewhat weaker than in August, as the export outlook has become cloudier given the malaise in important markets and on account of the strong dollar. The Empire State index and the Philly Fed index should each fall to 15, though this would still be an above-average level. Germany: Economic blues The recent weakness in German economic data (which was also partly attributable to special factors) has considerably intensified concerns about a plunge in German economic activity. Alongside the comparable component of the Sentix survey (chart 7), this can probably be gleaned from the ZEW index, which we expect to have fallen to -5.0 (consensus: 0.0). CHART 6: USA – retail sales have revived CHART 7: Germany – ZEW back below zero? Retail sales in the core business excluding autos, building material and gasoline, in % ZEW index for economic expectations in Germany; component of the Sentix survey on the economic expectations of institutional investors in Germany 1.5 5.0 1.0 4.0 0.5 3.0 0.0 2.0 -0.5 1.0 -25 0.0 -50 2009 -1.0 Jan-14 Mar-14 May-14 month-on-month (LS) Source: Global Insight, Commerzbank Research 10 October 2014 Jul-14 50 100 25 50 0 0 -50 -100 2010 2011 2012 2013 Sentix (LS) year-on-year (RS) 2014 ZEW (RS) Source: Global Insight, Commerzbank Research research.commerzbank.com 9 Central Bank Watch (1) Fed From the Fed's perspective, the labour market is still substantially underutilised. This was the message at least from the minutes of the Fed meeting on 16/17 September. For many FOMC members, evidence of this comes from the weakness of weak growth. This correlation does not convince everyone though, as some participants at the meeting regard low wage growth as a consequence of the fact that wages had not fallen during the recent recession. Downside wage pressure had therefore built up, which is also preventing higher pay growth even in an improved economic environment, according to this view. Note that the Fed meeting took place before publication of the latest very robust employment report. Other data such as job vacancies, which have risen to a 13-year high, likewise cast doubts about the view that the labour market is still substantially underutilised. That said, the Fed decided, in line with expectations, to maintain its waiting stance, especially as it expects inflation to move towards the 2% target only "in the coming years". The minutes of the meeting emphasise once again, however, that everything depends on the data. This also means that a reaction might come faster than currently expected. Bernd Weidensteiner +49 69 136 24527 CHART 8: Expected interest rate for 3-month funds (USD) 2,0 1,5 1,0 0,5 0,0 current Dez 14 Futures 09.10.14 Mrz 15 Jun 15 02.10.14 Sep 15 Dez 15 Commerzbank TABLE 1: Consensus forecasts Fed funds rate Q4 14 Q2 15 Q4 15 Consensus 0.25 0.25 1.00 High 0,50 1.00 2.00 Low 0.25 0.25 0.25 Commerzbank 0.25 0.50 1.50 Source: Bloomberg, Commerzbank Research ECB ECB vice president Constancio emphasised that “the measures decided in the past few months mark a new phase in the ECB’s approach. With these new measures, the Governing Council demonstrates that we are ready to actively steer the size of our balance sheet towards significantly larger levels.” In our view, the balance sheet will increase only moderately as a result of the existing measures. This is one reason why we expect that in the end the ECB will broaden the scope of assets purchases by including government bonds. Constancio clarified that an important condition for considering purchases of Greek and Cypriot ABS/covered bonds is that “these countries must be under a European programme”. According to ECB’s Weidmann, “with the recent decisions, the ECB’s monetary policy approach has changed from programs specifically aimed at credit easing towards a quantitative easing philosophy. This is an important policy shift. Against the background of the announced target for the balance sheet, I see a risk that we will overpay for these assets. That would represent a transfer of risk … to the taxpayers.” According to ECB’s Knot, the central bank cannot ensure a sustainable recovery on its own. Governments must take “farreaching” economic reforms. Dr Michael Schubert +49 69 136 23700 10 CHART 9: Expected interest rate for 3-month funds (EUR) 1,0 0,8 0,6 0,4 0,2 0,0 current Dez 14 Futures 09.10.14 Mrz 15 Jun 15 02.10.14 Sep 15 Dez 15 Commerzbank TABLE 2: Consensus forecasts ECB minimum bid rate Q4 14 Q2 15 Q4 15 Consensus 0.05 0.05 0.05 High 0.05 0.05 0.25 Low 0.05 0.05 0.05 Commerzbank 0.05 0.05 0.05 Source: Bloomberg, Commerzbank Research research.commerzbank.com 10 October 2014 Central Bank Watch (2) BoE As expected, the BoE continued to leave interest rates and the volume of asset purchases on hold this month but the debate about the future course of monetary policy has become more nuanced. This is partly the result of increasing headwinds from the euro zone but is also due to some indications of slowdown in the domestic economy. Not only is the housing market failing to gain momentum, but the PMIs have come off their recent highs, and it seems likely that Q3 GDP growth slowed from the high of 0.9% q-o-q reported in Q2. One of the interesting questions over the coming weeks will be whether the two MPC dissenters who have voted for a rate increase will change their mind. Messrs McCafferty and Weale have argued that the recent decline in unemployment poses wage inflation risks. Not only is there no evidence of this in the data, but recent revisions to productivity figures indicate that performance has been less weak than previous national accounts data suggested, which further weakens wage risks. Market pricing suggests that less weight is being assigned to the likelihood of an increase in the early months of 2015, with the probability of a 25 bps increase in Q1 now only slightly above 60%. The SONIA curve also indicates that a 25 bps move is now fully priced only for next summer. Peter Dixon +44 20 7475 4806 CHART 10: Expected interest rate for 3-month funds (GBP) 2,0 1,5 1,0 0,5 0,0 current Dez 14 Mrz 15 Jun 15 Sep 15 Dez 15 Futures 09.10.14 02.10.14 Commerzbank RBNZ (New Zealand) At the beginning of September, the RBNZ left its key interest rate unchanged, as it had previously announced it would. Since March it has increased the rate by 100 basis points to 3.5%, to counter the danger of the economy overheating and to dampen inflation risks. The RBNZ now wants to await the effects of the steps taken so far and has trimmed prospective rate hikes significantly. Furthermore, amid sharply falling export prices, it has reiterated that the high external value of the NZD is "unjustified and not sustainable". Actual intervention followed the central bank's words at the end of September, which temporarily put the NZD under substantial pressure. Leading indicators have signalled moderate economic growth lately. However, a markedly weaker NZD should give the economy new impetus as it improves business competitiveness. At the same time, it strengthens the price pressure in the medium term through rising import prices. The RBNZ is watching this closely. So far, though, inflation data has remained in the target corridor and NZD depreciation has been limited. Furthermore, the growth outlook in important export markets has deteriorated. We therefore do not expect the RBNZ to increase interest rates further at least before spring 2015 – and certainly not at its next meeting at the end of October. CHART 11: Expected interest rate for 3-month funds (NZD) 5,0 4,5 4,0 3,5 3,0 current Dez 14 Mrz 15 Jun 15 Futures 09.10.14 02.10.14 Sep 15 Dez 15 Commerzbank Elisabeth Andreae +49 69 136 24052 10 October 2014 research.commerzbank.com 11 Bond market preview: Rainer Guntermann Tel. +49 69 136 87506 Tailwind for Bunds Ten-year Bund yields have dropped to a new all-time low. With economic concerns likely to persist in the near term, Bunds ought to remain supported, whereas the hunt for yield appears to be running out of steam despite ongoing ECB QE speculation. Short term, we continue to recommend a cautious stance with regard to periphery spreads, but maintain our strategic spread targets with markedly lower spreads. TABLE 3: Weekly outlook for yields and curves Yields (10 years) Curve (2 - 10 years) Bunds US Treasuries Sideways Moderately higher Neutral Steeper Source: Commerzbank Research Outlook for the Bund future, 13 – 17 October Economy ↓ Inflation → Monetary policy ↑ Trend → Supply → Risk aversion ↑ Ten-year Bund yields have fallen to a new record low. As expected, economic concerns are taking hold, and inflation expectations are still edging lower. At the same time, volatility in the euro bond markets has increased, and the decline in peripheral spreads has come to a halt for now (chart 12). Whilst absolute yields in Spain and Italy are still near their record lows, Bund yields are falling steadily (chart 13). Short term, at least, the hunt for yields looks set to fade. At first glance, it comes as a surprise that peripheral bonds recently underperformed Bunds despite increasing speculation about a broad-based ECB bond-buying programme. After all, this speculation, in particular, had previously caused yields and spreads in the periphery to fall. One reason why the ECB’s recent decisions triggered only a temporary reduction in spreads is that Bunds would be at the top of the shopping list should the ECB decide to buy bonds (see also page 5). Moreover, given the flatter yield curve, peripheral bonds with longer maturities, in particular, appear to be less attractive at current levels, as they offer a less favourable risk/return profile amid rising volatility and, consequently, increasing risk. With further possible stumbling blocks looming for the peripheral markets in the weeks ahead, we ought to see persistently high volatility. Although the Spanish Constitutional Court has for now suspended the planned referendum on independence in Catalonia, it is not yet off the table. Furthermore, markets could be driven by the headlines surrounding the results of the bank stress test due to be released at the end of the month. For the weeks ahead, we continue to recommend a cautious approach to peripheral exposure. At the same time, we stick to our strategic spread targets. By the beginning of next year, the spread of ten-year Spanish sovereign bonds versus Bunds should decline to 75 basis points. CHART 12: CHART 13: Bunds remain supported Hunt for yield is running out of steam Spreads of ten-year Spanish and Italian sovereign bonds versus Bunds, in basis points Bund yields, in % 400 2.0 350 1.8 300 1.6 250 1.4 200 1.2 150 100 Jan-13 1.0 Jul-13 Jan-14 SPA Source: Bloomberg, Commerzbank Research 12 Jul-14 ITA 0.8 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Source: Bloomberg, Commerzbank Research research.commerzbank.com 10 October 2014 FX market preview: Ulrich Leuchtmann Tel. +49 69 136 23393 How much USD strength will the US take? Fears of a US central bank reaction to the dollar strength of the past few months have caused the US dollar to ease. However, these concerns are likely to be unfounded. So what we are seeing is a correction, rather than the end of the USD strength. TABLE 4: Expected weekly trading range Range Bias Range Bias EUR-USD 1,2550-1,2950 Ô EUR-GBP 0,7700-0,7925 Î EUR-JPY 137,00-141,00 Î GBP-USD 1,6100-1,6500 Ô USD-JPY 107,50-111,00 Ò EUR-CHF 1,2025-1,2120 Î Source: Commerzbank Research The minutes of the Fed’s last FOMC meeting suggest that some FOMC members are concerned about the negative effects of the recent dollar appreciation on growth and inflation. That is nothing new though. The well-known doves (above all Charles Evans and Bill Dudley) have made comments along these lines for some time. That is hardly surprising as both regional Fed Presidents have always been looking for reasons as to why the ultra-expansionary monetary policy should be continued. The majority of FOMC members are likely to realise that (a) the dollar strength has a limited effect on inflation and economic growth in the US and (b) the positive economic momentum this creates for the rest of the world, and for Europe and Japan in particular, is important. In the end a favourable performance in these two regions is more important for the US economy than a slightly weaker dollar today. The FX market seems to differ. EUR-USD for example has lost approx. 3 cents of its 15 cent move since May. However, the strong reaction of the USD is likely to be mainly due to speculative investors holding considerable USD longs (chart 14). As a result even the smallest risk to the fundamental reasons behind this position has a much more pronounced effect than news supporting the positioning (chart 15). However, this also means that the correction should not go too far. We expect that reasons for a further appreciation of the dollar will emerge, in particular that the Fed will hike rates quite quickly in 2015. The majority of the other G10 central banks on the other hand will probably be interested in weakening their own currencies. At present there is little reason for the Fed to take part in this depreciation race. Until that changes corrections in the dollar appreciation trend offer good entry rather than exit points. CHART 14: Is everyone USD long? CHART 15: Too much dollar strength? Share of EUR longs in directional EUR positions of non-commercial IMM traders ICE’s US dollar index (DXY), a relative good measure for the trade weighted dollar, monthly candlestick chart 100% 90 75% 85 50% 80 25% 75 0% 2010 2011 2012 Source: CFTC, Commerzbank Research 10 October 2014 2013 2014 70 2010 2011 2012 2013 2014 Source: ICE, Commerzbank Research research.commerzbank.com 13 Equity market preview: Andreas Hürkamp Tel. +49 69 136 45925 DAX at 9,000 a buying opportunity in our non-recession scenario The DAX is suffering a volatile, painful October 2014, and the index has again fallen towards the low of our expected 2014 trading range at 9,000. Germany's bleak 'hard' data for August have intensified euro zone recession fears. However, we expect the DAX to find a bottom in the coming trading days as (1) sentiment has moved from 'very optimistic' to 'very concerned', (2) monetary indicators point to a mid-cycle slowdown scenario and (3) DAX valuation metrics have fallen back to their 10-year averages. Therefore we expect a DAX recovery in November and December following a negative October. TABLE 5: DAX suffers very weak start to Q4 2014 Earnings 2014e Performance (%) since Index 30/09 30/06 31/12 Index points Growth (%) current current 31/12 P/E 2014e 31/12 current 31/12 DAX 30 8,995 -5.1 -8.5 -5.8 710.8 731.1 2.1 11.6 12.7 13.1 MDAX 15,377 -3.9 -8.6 -7.2 934.8 994.2 27.7 41.6 16.4 16.7 Euro Stoxx 50 3,053 -5.4 -5.4 -1.8 223.3 242.3 5.2 12.1 13.7 12.8 S&P 500 1,969 -0.2 0.4 6.5 117.2 119.3 7.9 9.9 16.8 15.5 Source: Commerzbank Corporates & Markets, I/B/E/S Supported by bleak German data, the advance of ISIS, Ebola fears and worries over a weak earnings season, bears were again able to depress the DAX to 9,000. In our DAX scenario the level of 9,000 is near the low of our expected trading range. Several trends indicate that the DAX should again find a bottom, and we expect a DAX recovery for November and December. (1) Sentiment: Sentiment has strongly improved since the start of this year. The CBOE Total Put Call Ratio, for example, has risen from a multi-year low of 0.7 ('very optimistic') back to 1.0 ('very concerned'; see chart 16). The implied DAX volatility VDAX was near multi-year lows at 12 in January - currently the VDAX is near 20. (2) Economy: 2014 started with broad-based optimism that global growth should accelerate thanks to the renaissance of the euro zone economy. Ten months later, however, investors are discussing 'recession' scenarios. We do not believe in this bearish scenario as M1 money growth in the euro zone has stabilised at 6% over the last few months. In our non-recession view we also bank on the recent rise of Commerzbank's Early Bird indicator for the German economy which forecasts a recovery in the ifo index in 2015 (chart 17). (3) Valuation: Following Draghi's 'whatever it takes speech' the DAX P/E ratio (12-month forward) rose from 9x in mid-2012 to 13x at the beginning of 2014. Since January the DAX P/E ratio has now improved to 11.5x from 13.0x – the DAX P/E is back at its 10-year average. The expected DAX dividend yield has risen to 3.3% from 3.0% since January – the yield is 170 bps above the € BBB corporate bond yield. Based on this week’s prices and the assumption of unchanged dividends for FY2014, 13 DAX companies offer a dividend yield of more than 3%. CHART 16: Sentiment from optimism back to pessimism CHART 17: Early Bird indicator not in recession territory CBOE Total Put Call Ratio (15-day average) DAX and Early Bird indicator since 2000 1.5 10000 1.2 pessimism 1.0 8000 0.5 1.0 6000 0.0 4000 0.8 optimism 0.6 Jan-12 14 Jul-12 Jan-13 Jul-13 Jan-14 -0.5 2000 -1.0 2000 2002 2004 2006 2008 2010 2012 2014 Jul-14 research.commerzbank.com DAX Early Bird 10 October 2014 Commodities market preview: Barbara Lambrecht Tel. +49 69 136 22295 Nosedive on oil market not over yet A sharp decline in Chinese oil imports and a more sceptical outlook from the International Energy Agency are likely to intensify demand concerns on the oil market and maintain the pressure on the oil price. Base metal prices should barely move next week as market participants should not be very surprised when the International Study Groups indicate that the balance between supply and demand as much less favourable than it was only last spring. Weak Chinese metal imports in September are probably also generally expected. TABLE 6: Trends in important commodities Per cent change Trend Commodity specific events 9 Oct. 1 week 1 month 1 year short-term Brent (USD per barrel) 91.0 -2.6 -8.2 -16.6 Þ Copper (USD per tonne) 6716 1.7 -1.8 -5.4 Ö Gold (USD per troy ounce) 1230 1.2 -2.1 -5.8 Ö CHN: oil imports (13), IEA (14) CHN: Trade balance (13) ; Autumn meetings International Study Groups Source: Bloomberg, Commerzbank Research In the last three and a half months, the price of a barrel of Brent has dropped by 20 %. At just under 91 USD in mid week, it was at its lowest level since June 2012. Record-high speculative short positions on the ICE reflect the bearish sentiment on the market. Nevertheless, the oil price is likely to decline further as Chinese oil imports will probably show a sharp fall in September. Moreover the International Energy Agency is likely to again reduce its forecast of global oil demand. OPEC members are so far holding back with comments on future production levels. Although a price level below 100 USD is already “painful” for many, they are likely to keep their powder dry for the time being. However, should the price not rise soon, Saudi Arabia may announce at the next OPEC meeting in late November that it is adjusting its production to accommodate lower demand. This should then push the oil price up. Base metal prices were able to escape the latest downward pull on the oil market (chart 18). One reason was the recent positive equity market trend in the main base metals consumers: For example, China’s CSI 300 has gained a good 15% since mid July. Furthermore, base metals do not show as much oversupply as the oil market and the balance between supply and demand is even worse than was expected in the spring. The International Study Groups should confirm this view at their autumn meetings. In the spring, the International Copper Study Group expected a supply surplus of 500,000 tonnes for the current year (chart 19). Supply fell short of demand by 500,000 tonnes in the first half of the year alone. The need for a correction in zinc market forecasts is also pressing, and these are due a week on Monday. As the market already expects such corrections, prices should hardly react. CHART 18: Base metals are robust CHART 19: Study groups were more optimistic in the indexed 1 January 2014 = 100 spring Supply minus demand in thousand tonnes 500 300 100 -100 -300 -500 Copper 2013 Source: Bloomberg, LME, Commerzbank Research 10 October 2014 Zinc Lead Nickel 2014 forecast Source: ICSG; INSG; ILZSG, Commerzbank Research research.commerzbank.com 15 Commerzbank forecasts TABLE 7: Growth and inflation Real GDP (%) Inflation rate (%) 2013 2014 2015 2013 2014 2.2 2.2 2.9 1.5 1.7 1.8 2.0 2.3 2.5 0.9 2.1 2.0 Japan 1.5 1.0 1.3 0.4 2.8 1.5 Euro area -0.4 0.7 0.8 1.4 0.6 1.0 - Germany 0.1 1.3 1.3 1.5 1.1 2.1 - France 0.4 0.3 0.5 0.9 0.6 0.7 - Italy -1.7 -0.2 0.3 1.2 0.4 0.6 USA Canada 2015 - Spain -1.2 1.4 2.3 1.4 0.0 0.5 - Portugal -1.4 1.0 1.5 0.3 -0.2 0.8 - Ireland 0.2 5.2 3.1 0.5 0.6 1.4 - Greece -4.2 1.0 2.0 -0.9 -1.3 0.5 United Kingdom 1.7 3.0 2.6 2.6 1.6 1.9 Switzerland 2.0 1.7 1.8 -0.2 0.0 0.5 China 7.7 7.3 6.5 2.6 2.3 2.5 India 4.7 5.8 6.2 6.3 6.5 6.2 Brazil 2.5 0.3 0.9 6.2 6.3 6.5 Russia 1.3 0.3 0.9 6.8 7.3 6.5 World 2.9 3.1 3.4 • The ultra-expansionary policy of the Fed is boosting the US economy. At the same time, fiscal policy is at least no longer a headwind. We therefore expect US growth to markedly accelerate. • Growth in China decelerates further, also due to decreasing house prices. • The recovery in the euro zone will only continue at a slow pace. GDP growth will remain lower than that of the USA. • EMU has survived the sovereign debt crisis, but is gradually evolving into an “Italian-style monetary union”. • Despite its current weakness, the German economy looks set to continue outperforming the rest of the euro area – partly because ECB target rates are much too low for Germany. • High unemployment in most countries is keeping inflation low for the time being. In the long term, however, inflation is likely to rise, as central banks have given up some of their independence. TABLE 8: Interest rates (end-of-quarter) 09.10.2014 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Federal funds rate 0.25 0.25 0.25 0.50 1.00 1.50 3-months Libor 0.23 0.25 0.30 0.80 1.35 1.90 2 years* 0.45 0.70 0.90 1.20 1.60 2.00 5 years* 1.55 2.10 2.40 2.70 2.95 3.20 10 years* 2.31 2.70 2.90 3.10 3.30 3.50 Spread 10-2 years 187 200 200 190 170 150 Swap-Spread 10 years 15 10 10 10 15 15 USA Euro area Minimum bid rate 0.05 0.05 0.05 0.05 0.05 0.05 3-months Euribor 0.08 0.05 0.05 0.05 0.05 0.05 2 years* -0.07 -0.10 -0.10 -0.10 -0.05 0.00 5 years* 0.15 0.25 0.20 0.25 0.35 0.40 10 years* 0.89 1.10 0.80 1.00 1.20 1.35 Spread 10-2 years 96 120 90 110 125 135 Swap-Spread 10 years 22 15 25 30 35 35 United Kingdom Bank Rate 0.50 0.50 0.75 0.75 1.00 1.25 3-months Libor 0.56 0.80 0.90 1.05 1.25 1.40 2 years* 0.72 1.00 1.25 1.30 1.35 1.55 10 years* 2.25 2.60 2.85 3.05 3.20 3.35 • The Fed is set to gradually reduce its QE3 programme and end it in October 2014. Interest rate hikes are on the cards from 2015Q2, due to a continuously decreasing US unemployment rate and gradually rising inflation. • Due to the deteriorating growth outlook and increasing downside risks for inflation we expect the ECB to announce QE within the next 12 months. • 10y Bund yields are likely to stabilise around 1% later this year when the Fed communication changes but mark new record lows when the ECB announces QE in 2015. Thereafter, yields should rise gradually. The structurally low interest rate environment remains intact. • The focus on the Fed’s lift-off will put upward pressure on US$ rates. A return to 3% for 10y USTs is only on the cards for 2015, though. The curve is in for a textbook-style flattening via the short-end in the coming quarters. • Risk premiums of peripheral government bonds are set to decline further. TABLE 9: Exchange rates (end-of-quarter) 09.10.2014 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 EUR/USD 1.27 1.25 1.22 1.19 1.17 1.15 USD/JPY 108 110 113 116 118 120 EUR/CHF 1.21 1.21 1.21 1.21 1.21 1.21 EUR/GBP 0.79 0.77 0.76 0.75 0.74 0.73 EUR/SEK 9.13 9.10 9.00 8.95 8.90 8.90 EUR/NOK 8.18 8.05 7.80 7.70 7.70 7.65 EUR/PLN 4.17 4.15 4.10 4.08 4.06 4.05 EUR/HUF 306 312 310 309 308 306 EUR/CZK 27.47 27.50 27.30 27.00 27.00 26.90 AUD/USD 0.88 0.87 0.85 0.83 0.81 0.80 NZD/USD 0.79 0.77 0.75 0.73 0.71 0.70 USD/CAD USD/CNY 1.11 1.13 1.15 1.16 1.17 1.18 6.13 6.10 6.05 6.00 5.95 5.95 • USD should further profit from the expectations of Fed interest rate normalization. Current USD rates have not priced in the speed of rate hikes that we expect. • The high yielding G10 currencies should particularly suffer from US rate hikes. • EUR will remain under pressure due to increasing likelihood of an ECB QE program. ECB wants a weaker EUR and is active in achieving this goal. • CEE currencies are generally benefiting from the dovish ECB backdrop, meaning central banks have room to cut rates further. HUF, PLN and RON should trade range-bound, while EUR/CZK will float above the 27.0 floor set by the CNB. Source: Bloomberg. Commerzbank Economic Research; bold change on last week; * Treasuries, Bunds, Gilts, JGBs 16 research.commerzbank.com 10 October 2014 Research contacts (E-Mail: firstname.surname@commerzbank.com) Chief Economist Dr Jörg Krämer +49 69 136 23650 Economic Research Interest Rate & Credit Research FX Strategy Dr Jörg Krämer (Head) +49 69 136 23650 Christoph Rieger (Head) +49 69 136 87664 Ulrich Leuchtmann (Head) +49 69 136 23393 Eugen Weinberg (Head) +49 69 136 43417 Dr Ralph Solveen (Deputy Head; Germany) +49 69 136 22322 Alexander Aldinger +49 69 136 89004 Lutz Karpowitz +49 69 136 42152 Daniel Briesemann +49 69 136 29158 Elisabeth Andreae (Scandinavia, Australia) +49 69 136 24052 Rainer Guntermann +49 69 136 87506 Peter Kinsella +44 20 7475 3959 Carsten Fritsch +49 69 136 21006 Dr Christoph Balz (USA, Fed) +49 69 136 24889 Peggy Jäger +49 69 136 87508 Thu-Lan Nguyen +49 69 136 82878 Dr Michaela Kuhl +49 69 136 29363 Peter Dixon (UK, BoE), London +44 20 7475 4806 Markus Koch +49 69 136 87685 Esther Reichelt +49 69 136 41505 Barbara Lambrecht +49 69 136 22295 Dr Michael Schubert (ECB) +49 69 136 23700 Michael Leister +49 69 136 21264 Dr Michael Schubert (Quant) +49 69 136 23700 Equity Markets Strategy Eckart Tuchtfeld (German economic policy) +49 69 136 23888 David Schnautz +1 212 895 1993 Cross Asset Strategy Dr Marco Wagner (Germany, France, Italy) +49 69 136 84335 Benjamin Schröder +49 69 136 87622 Bernd Weidensteiner (USA, Fed) +49 69 136 24527 Dr Patrick Kohlmann (Head Non-Financials) +49 69 136 22411 Andreas Hürkamp +49 69 136 45925 Ted Packmohr (Head Covered Bonds and Financials) +49 69 136 87571 Technical Analysis Christoph Weil (Euro area) +49 69 136 24041 Emerging Markets Simon Quijano-Evans (Head) +44 20 7475 9200 Dr Bernd Meyer (Head) +49 69 136 87788 Commodity Research Christoph Dolleschal (Deputy Head Research) +49 69 136 21255 Gunnar Hamann +49 69 136 29440 Markus Wallner +49 69 136 21747 Achim Matzke (Head) +49 69 136 29138 Other publications (examples) Economic Research: Economic Briefing (up-to-date comment on main indicators and events) Economic Insight (detailed analysis of selected topics) Economic and Market Monitor (chart book presenting our monthly global view) Commodity Research: Commodity Daily (up-to-date comment on commodities markets) Commodity Spotlight (weekly analysis of commodities markets and forecasts) Interest Rate & Credit Research: Ahead of the Curve (flagship publication with analysis and trading strategy for global bond markets European Sunrise (daily comment and trading strategy for euro area bond markets) Rates Radar (ad-hoc topics and trading ideas for bond markets) Covered Bonds Weekly (weekly analysis of the covered bonds markets) Credit Calls (monthly flagship publication with a focus on credit strategy) Credit Morning Breeze (daily overview on European credit market) Credit Note (trading recommendations for institutional investors) FX Strategy: Daily Currency Briefing (daily comment and forecasts for FX markets) Hot Spots (in-depth analysis of FX market topics) FX Alpha (monthly analyses, models, and trading strategies for FX markets) Equity Markets Strategy: Weekly Equity Monitor (weekly outlook on equity markets and quarterly company reports) Monthly Equity Monitor (monthly outlook on earnings, valuation, and sentiment on equity markets) Digging in Deutschland (thematic research focusing on the German equity market) Emerging Markets: EM Week Ahead (weekly preview on events of upcoming week) EM Briefing (up-to-date comment of important indicators and events) EM Outlook (quarterly flagship publication with EM economic analysis and strategy recommendation) Cross Asset: Cross Asset Monitor (weekly market overview, incl. sentiment and risk indicators) Cross Asset Outlook (monthly analysis of global financial markets and tactical asset allocation) Cross Asset Feature (special reports on cross-asset themes) To receive these publications, please ask your Commerzbank contact. 10 October 2014 research.commerzbank.com 17 This document has been created and published by the Corporates & Markets division of Commerzbank AG, Frankfurt/Main or Commerzbank’s branch offices mentioned in the document. 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Version 9.17 Commerzbank Corporates & Markets Frankfurt Commerzbank AG DLZ - Gebäude 2, Händlerhaus Mainzer Landstraße 153 60327 Frankfurt Tel: + 49 69 136 21200 18 London Commerzbank AG, London Branch PO BOX 52715 30 Gresham Street London, EC2P 2XY Tel: + 44 207 623 8000 New York Commerz Markets LLC 225 Liberty Street, 32nd floor New York, NY 10281 - 1050 Tel: + 1 212 703 4000 Singapore Branch Commerzbank AG 71, Robinson Road, #12-01 Singapore 068895 Tel: +65 631 10000 research.commerzbank.com Hong Kong Branch Commerzbank AG 29/F, Two IFC 8 Finance Street Central Hong Kong Tel: +852 3988 0988 10 October 2014