Markets Overview

类型：投资策略机构：大华银行有限公司研究员：大华银行研究所日期：2015-07-13

HIGHLIGHTS AHEAD

    The Greece bailout did not happen on Sunday (12 Jul) but (somesort of) an ultimatum was imposed on Greece on Sunday as theEU leaders required the Greek government to enact their maindemands into Greek law by this Wednesday (15 Jul) in exchangefor the third bailout. Finnish Finance Minister Alex Stubb also saidGreece would have to introduce tough conditions on labour reformand pensions, VAT and taxes, and measures on privatisation. The Eurogroupalso proposed (an idea first mooted by Germany) that “Incase no agreement could be reached, Greece should be offered swiftnegotiations on a time-out from the euro area, with possible debt restructuring,”which looks to be a thinly disguised way of letting Greeceexit the euro. This week, we have the scheduled Eurozone FinanceMinisters meeting in Brussels on Monday (13 Jul) followed by the28 EU Finance Ministers’ meeting (also in Brussels) on Tuesday (14Jul). German Chancellor Angela Merkel is scheduled to give a TVinterview on the German ARD TV on Monday (13 Jul). Meanwhile,Greek banks remain shut and looks unlikely to reopen at least untilWednesday’s deadline.

    As for the US, while there is some interesting data on this week’s calendar,the focus is likely on FOMC Chair Janet Yellen’s semi-annualtestimonies to the House Financial Services panel (15 Jul) and thento the Senate Banking Committee (16 Jul). The Monetary Policy Reportsto the House and Senate committees are delivered twice a year, inFebruary and July. In her speech on the US economic outlook in Clevelandlast Friday (10 Jul), Yellen said that she sees the Fed likely to raiseinterest rates at some point in 2015, but also highlighted her concernsabout the labor markets. She opined that the US labour market is notquite as tight as the current 5.3% unemployment rate suggests, as “atleast my own judgment is there is a little bit more slack than that.” Yellenalso noted that wage signal “not entirely clear”, but there are some“tentative hints of a pickup”.

    The other focus for the US financial markets will the flood of corporateearnings reports due for release this week and it will be led by the bigfinancial and tech names. Market attention will also be on the monetarypolicy decisions of three major central banks from the developedeconomies this week, the Bank of Japan (15 July and it includes an interimassessment) followed by Bank of Canada (15 Jul) and the mostwidely watched will be the European Central Bank (ECB) decisionon Thursday (16 Jul).

    Meanwhile, the key US data for the week are the June advance retailsales (14 Jul), the June CPI inflation data (17 Jul) and the preliminaryprint for the July University of Michigan consumer confidence survey(17 Jul). Other noteworthy data will revolve around the US housingmarket including weekly MBA mortgage applications (15 Jul), JulyNAHB housing market index (16 Jul), June housing starts and buildingpermits (both 17 Jul). Other than the housing data, the rest of the USeconomic data releases include the June monthly Budget statement(13 Jul), June import prices (14 Jul), the July NFIB small business optimismsurvey (15 Jul), May business inventories (15 Jul), the Jun PPI (15Jul), July Empire manufacturing survey (15 Jul), June industrial produc-tion (15 Jul), June capacity utilization (15 Jul), the July Philadelphia Fed business outlook survey(16 Jul),the usual weekly initial jobless claims on Thursday (16 Jul), and June real average weeklyearnings (17 Jul). And as for the data docket for the rest of the developed economies, it includesthe final print for Japan May IP and May capacity utilization (13 Jul), Japan May tertiary industryindex (13 Jul), German June WPI (13 Jul), Japan June Tokyo condo sales (14 Jul), the finalprint for June German CPI (14 Jun), UK June CPI, RPI and PPI data (14 Jul), Eurozone May IP data(14 Jul), German and the Eurozone ZEW survey for July (14 Jul), France June CPI (15 Jul), UK Junejobless claims and May earnings/unemployment data (on 15 Jul), May trade balance data fromItaly and Eurozone (16 Jul), the final print for Eurozone June CPI data (16 Jul), and Eurozone Mayconstruction output (17 Jul).

    The US stock markets rallied on Friday (10 Jul) session on hopes that a deal could be agreed betweenGreece and its creditors on Sunday. The euro was similarly buoyed by the hopes of a Greekbailout by the weekend and the common currency ended higher against the USD and the yen.

    Similarly, investors left the US treasuries & safe haven trades for the second straight session asrisk appetite picked up more with the Greek worries easing on Friday. But risk aversion is likelyto return on Monday (13 Jul) as the European leaders exact tougher terms on Greece making abailout more unlikely and pushing Greece closer to an euro exit. Meanwhile, US & global oil pricesresumed divergence on Friday (9 Jul) even though the price changes were small. IEA’s warningsabout oversupply to remain in 2016 on slower demand growth even as US gasoline consumptiongrew strongly in 1H 2015 while Baker Hughes reported a second week of increase in US oil rigcounts sending US oil prices edging lower. Brent prices in comparison were up slightly probablybecause investors viewed an Iranian nuclear agreement seemed to lack progress and with that, alesser chance of seeing Iranian crude hitting the global markets anytime soon. However, over theweekend, Bloomberg reported that Iran and world powers seem to be on cusp of a nuclear deal,as a political agreement was reached Sunday to lift a United Nations arms embargo thereforeresolving one of the remaining obstacles to a deal which could be announced as soon as Monday(13 Jul) and that could send oil prices lower.

    This week’s focus in Asia will be the slew of data releases from China for Jun, including 2Q15GDP report on Wed (15 Jul), as well as Singapore’s advance GDP reading for 2Q15 on Tue (14 Jul).

    China’s equity markets performance remains in view this week, after eking out their first weeklygains since mid-June following a massive slump, together with developments in Greece as anotherdebt repayment is approaching. We look for China’s 2Q15 GDP to grow at 6.8%y/y pace, inline with market, from 7% expansion in 1Q15.

    Bank Indonesia is due to review monetary policy on Tue (14 Jul), though ECB, Bank of Canada, andBank of Japan are on tap through the week.

    The key data release this week for Singapore will be the 2Q 2015 advance estimates of GDP Tue(14 Jul 2015, 8am Singapore time). Although the general consensus view was that 2Q GDP wouldregister a 2.5% y/y growth vs. 2.6% y/y in 1Q, which we think could be overly optimistic. Ourforecast for 2Q GDP growth comes in at 1.8% y/y only as we believe the downside continues tocome from the weak manufacturing performance. Our forecast of a 3.0% y/y contraction in themanufacturing sector for 2Q 2015 (the 3rd consecutive on-year contraction experienced by thissector) was due to the poor industrial production performance in Apr-May 2015 (where averageproduction fell by 5.8% y/y). Nevertheless, we remain optimistic on the services sector wheregrowth will likely come in at 3.0% y/y, although this is slower than the 3.8% y/y growth rate in 1Q.

    The May retail sales data will be released on 15 July and it is expected to grow 3.0% y/y, comparedto the 5.0% y/y growth in April. Thereafter, June non-oil domestic exports (NODX) will be releasedon Thur (16 Jul) and market is predicting a 2.0% y/y growth, in contrast to the 0.2% y/y contractionin the month of May.

    On Fri (17 Jul), Singapore, Indonesia, Malaysia, and Philippines will be away on for public holidays.

    For today (Mon, 13 Jul), China’s external trade report for Jun will be released (no fixed timingbut most likely late morning), with exports likely to remain in downbeat mode as market expectsjust 1%y/y expansion after a decline of 2.5% in USD terms in May. For imports, expectations are fora continued decline, at -15.9%y/y from -17.6% in May, resulting in a trade surplus of USD57.95bnin Jun from USD59.49bn in May.