Tuesday

April 12, 2016

www.bloombergbriefs.com

 

Fedspeak Spans Day; IMF Outlook; U.S. Import PricesBEN BARIS AND JAMES BATTY, BLOOMBERG BRIEF EDITORS

WHAT TO WATCH: Philadelphia Fed President speaks on the Patrick Harkereconomic outlook at an event titled “Region on the Rise: A Construction and Development Summit.” at 9 a.m. San Francisco President speaks at 3 p.John Williamsm. at the LendIt USA 2016 Conference. Richmond President speaks at Jeffrey Lacker4 p.m. on “Economic Leadership in an Uncertain World."

ECONOMICS: The fell to a level of 92.6 in NFIB small business optimism index March from 93.6 in February. are forecast to rise 1 percent in March from Import pricesa month earlier, 8:30 a.m. The issues its World International Monetary FundEconomic Outlook ahead of its spring meetings with the World Bank at 9 a.m.  

GOVERNMENT: President met with Federal Reserve Chair Barack Obama Janet on Monday to discuss the U.S. economy amid signs that growth may be slowing Yellen

as consumers retreat from spending. It was the first time since November 2014 that the Fed chair has met with the president on her own.

MARKETS: U.S. equity-index futures rose with emerging markets and commodities, while the slipped with government bonds, as ’s advance above $40 a yen crude oilbarrel boosted economic optimism.

(All times local for New York.)    

Click to view a live version of this chart on the Bloomberg terminal.here

QUOTE OF THE DAY

"We’ll know soon enough. We are not going to know by April. There is time for us to make these assessments over the next few months and we will."— Dallas Fed President on letting Robert Kaplan

events unfold in determining the timing of the next

interest-rate increase

COMMENTARY IN THIS ISSUE

 

Bloomberg Intelligence Economics updates its Fed

, assessing SpectrometerFOMC members' policyinclinations based on recent public statements: Carl Riccadonna.

 

 

Bloomberg Rankings compiles its list of the top of the U.S. economy, forecasterswith Market Securities' Christophe Barraud maintaining the top spot.

There has not been much good news in U.S. since they began corporate profitssliding a year ago — until now: Lu Wang.

 

Bank of America Capital Management's Joseph Quinlan discusses the facing risksthe global economy: Surveillance.

Under “certain extreme circumstances” like sharply deficient aggregate demand, exhausted monetary policy and an unwillingness of Congress to use debt-financed fiscal policies, helicopter moneymay be the “best available alternative,” writes former Fed Chair Ben Bernanke.

NUMBER OF THE DAY

—$5.1 billion The amount Goldman will pay to U.S. allegations Sachs resolve

that it failed to properly vet mortgage-backed securities before selling them to investors as high-quality debt.

FOMC  CARL RICCADONNA, BLOOMBERG INTELLIGENCE ECONOMIST

Consumers' Inflation Expectations Fell in March, Fed Says

U.S. consumers’ expectations for inflation declined in March following a rise from record lows the month before, according New York Fed data released Monday. The numbers may add to the debate over downside risks to the Federal Reserve’s 2 percent inflation target. The median respondent to the New York Fed’s March Survey of Consumer Expectations expected inflation to be 2.5 percent three years from now, down from 2.6 percent in the February survey. In January, expected inflation three years ahead was 2.45 percent, marking the lowest level in data going back to June 2013.

— Matthew Boesler, Bloomberg News

http://www.bloombergbriefs.com/https://blinks.bloomberg.com/screens/ecwb%20p%20570bc16b3f1c0003http://www.brookings.edu/blogs/ben-bernanke/posts/2016/04/11-helicopter-money#ftn1http://www.bloomberg.com/news/articles/2016-04-11/goldman-to-pay-5-1-billion-to-settle-u-s-mortgage-bond-probe

April 12, 2016 Bloomberg Brief Economics 2

FOMC  CARL RICCADONNA, BLOOMBERG INTELLIGENCE ECONOMISTFed Spectrometer Shows Doves Unified as Markets Diverge

Federal Reserve policy makers and financial market participants are not in agreement on the likely path of U.S. interest rates. The dot plot of rate projections published at the March FOMC meeting shows a broad consensus around a median year-end fed funds forecast consistent with two hikes of 25 basis points each. There is far less unanimity in future years, as evidenced by the looser clustering of forecasts in 2017 and 2018, although the median points are essentially consistent with a pace of four hikes per year.

Markets are far more conservative. Fed funds futures put the first meeting with a greater than 50 percent chance of a rate increase in February 2017, and the market-implied probability of two increases of 25 basis points by year-end stands at just 11 percent.

This divergence between markets and policy makers may explain why a number of ordinarily moderate and dovish policy makers have sounded slightly more hawkish lately. They are downplaying downside economic risks and supporting the notion of two rate hikes so as to avoid further erosion of market sentiment. They are trying to “jawbone” the market to keep the possibility of multiple rate increases this year alive. If expectations for the next rate increase slip too far into the future, the Fed will lose the ability to raise rates without a significant market adjustment. With growth tepid, this is a fine line to walk.

The economy appears to be contending with a multiple-quarter run of soft growth. Real GDP increased just 1.4 percent in the final quarter of last year, and tracking estimates for the first quarter have now slipped below 1 percent. The Atlanta Fed’sGDPNow estimate for the first quarter fell to 0.1 percent following the latest data on factory orders, unit motor vehicle sales and wholesale inventories. If that estimate proves accurate, the year-over-year pace of growth will slip to 1.8 percent in the first quarter.

To meet the Fed’s full-year GDP target of 2.2 percent, growth would have to average 2.9 percent over the ensuing three quarters, a feat only accomplished twice since 2011. The March retail sales report will provide important guidance as to whether the economy had indeed sunk to a sub-1 percent growth rate last

 

quarter. If the economy is mired in a sustained period of sub-2 percent growth in year-on-year terms, monetary policy makers will be extremely reluctant to pursue additional policy tightening.

In order to accurately estimate the trajectory of monetary policy, it is necessary to scrutinize sometimes subtle Fed signals, including changes to official communications, as well as any drift in the tone of public comments. The interpretation of Fed rhetoric depends to a large degree on not only what is being said, but who is saying it.

For this reason, Bloomberg Intelligence Economics maintains the Fed Spectrometer — a tool for monitoring the history and tone of public comments from individual FOMC members. As the title of the tool implies, it attempts to classify each Governor or regional Reserve Bank President along a spectrum spanning -2 (dovish) to +2 (hawkish) based on his or her policy inclination. The rankings are the subjective assessment of Bloomberg Intelligence economists based solely upon public statements, and they are updated on an ad hoc basis. Recent comments are rated more heavily. Currentrankings are shown in the image at right.

The spectrometer at right highlights the voting roster of the FOMC in 2016. The members of the Board of Governors vote continually, along with the President of the New York Fed. Four additional regional Reserve Bank Presidents vote on a rotating basis, which changes annually.

The relevant conclusion from the Spectrometer at present is that Fed watchers should not be misled into thinking that the hawkish dissent from Kansas City Fed President Esther George at the March FOMC meeting was the start of an unraveling of Chair Janet Yellen’s coalition. There are only two other hawkish voters on the FOMC this year, and based on recent public comments they appear to have a more moderate stance. (They are both rated at a less-hawkish reading of +1.) Most of the voters this year range from mildly dovish to neutral, which should provide Chair Yellen with broad-based support to proceed with deliberate caution.

A printable version of the Fed Spectrometer is available .here

TOP FORECASTERS  JUDITH SJO-GABER, BLOOMBERG RANKINGS

Source: Bloomberg Intelligence. Numerical ratings are the subjective assessment of the Bloomberg Intelligence U.S. Economics team based on recent public comments. Policy makers with the same number are equally ranked, regardless of placement.

http://www.bloombergbriefs.com/http://www.bloombergbriefs.com/content/uploads/sites/2/2016/04/Spectro.png

April 12, 2016 Bloomberg Brief Economics 3

TOP FORECASTERS  JUDITH SJO-GABER, BLOOMBERG RANKINGS

Market Securities' Barraud Still Top U.S. Forecaster; RHB's Lam Edges Up a SpotChristophe Barraud, Chief Economist at , is the top forecaster of the U.S. economy — a position he has held Market Securities

since the fourth quarter of 2014 — according to data compiled by Bloomberg Rankings. , represented by Chief Goldman SachsEconomist , reentered the top 10 overall rankings for the first time since the end of 2014. , Director of Real-Jan Hatzius Ryan SweetTime Economics at took over the top spot for nonfarm payrolls. Click to see the full ranking of all economists Moody's Analytics herein all 16 categories plus the top overall forecasters on your Bloomberg terminal.

Overall Forecasters

Rank Forecaster FirmAvg.

Score*4Q 2015

Rank

1 Christophe Barraud Market Securities 64.51 1

2 Jim O'SullivanHigh Frequency Economics

62.99 2

3 Thomas Lam RHB 61.12 4

4Bernd Weidensteiner/ Christoph Balz

Commerzbank   60.97 3

5 Brian Wesbury/Robert Stein First Trust Portfolios 60.27 6

6 Harald Preissler Bantleon Bank   60.15 5

7 Paul Mortimer-Lee BNP Paribas 57.92 7

8 Michael Feroli JPMorgan Chase 57.43 9

9 Jan Hatzius Goldman Sachs 57.28 NR

10 Avery Shenfeld CIBC World Markets 57.16 NR*In each indicator (out of 77 forecasters). Italicized names indicate the forecast was submitted unattributed. The individual identified is the chief economist for the firm. NR means forecaster was not previously ranked in the top 10.

 Retail Sales

Rank Forecaster Firm Score

1 Stuart Hoffman* PNC Financial Services Group 66.03

2 Harald Preissler Bantleon Bank   64.26

3 Avery Shenfeld* CIBC World Markets 63.81

4 Maury Harris/Samuel Coffin UBS 62.85

5 Michael Gapen Barclays Capital   62.58Source: Bloomberg. Italicized names indicate the forecast was submitted unattributed. The individual identified is the chief economist for the firm.          RANX

GDP (4Q)

Rank Forecaster Firm Score

1 Nariman Behravesh IHS   68.40

2 Stefane Marion/Krishen Rangasamy National Bank Financial 65.74

3 Scott Anderson Bank of the West 63.50

4 Russell Price Ameriprise Financial 61.65

5 Michelle Girard RBS Securities   61.25

 

Nonfarm Payrolls

Rank Forecaster Firm Score

1 Ryan Sweet Moody's Analytics 67.77

2 Ted Wieseman Morgan Stanley 65.62

3 Stephen Stanley Amherst Pierpont Securities 63.15

4 Stephan Buu CTI Capital 62.95

5 Brian Wesbury/Robert Stein First Trust Portfolios 61.53

 

Conference Board Consumer Confidence

Rank Forecaster Firm Score

1 Jim O'Sullivan High Frequency Economics 70.14

2 David Kelly JPMorgan Asset Management 64.62

3 Markus Schomer PineBridge Investments 62.86

4 Stephen Stanley Amherst Pierpont Securities 62.17

5 Paul Mortimer-Lee BNP Paribas 61.03

 Methodology: To identify the best forecasters of the U.S. economy, we used estimates submitted to Bloomberg for 16 key monthly indicators including Consumer

Confidence, CPI, Durable Goods Orders, Existing Home Sales, Housing Starts, IP, ISM Manufacturing, ISM Nonmanufacturing, New Home Sales, Nonfarm

Payrolls, Personal Income, Personal Spending, PPI, Retail Sales, Unemployment, and GDP. GDP is treated as a monthly indicator by ranking the advance,

second, and third revisions. For the first time in two years, this ranking includes PPI. The Labor Department expanded PPI in February 2014 to include prices

received for goods, services, government purchases, exports, and construction. The previous index reflected the cost of goods alone. This PPI final demand

indicator is now included because the minimum 24 months of data are now available. Bloomberg considers two years of data (ended February 2016) for monthly

indicators, with a forecast requirement of at least 15 out of 24 forecasts, a minimum of two consecutive forecasts within the last six months and at least one

forecast in the last three periods. Each indicator had at least 65 forecasters who qualified for the ranking. The forecasters indicated with an asterisk are those who

predicted the actual number released for the February period. Bloomberg assigned a score between zero and 100 to economists reflecting the accuracy of their

historical forecasts. Economists with lower forecast errors relative to other economists would receive higher scores, and vice versa. In the case of a tie of two or

more economists, the listings are alphabetical by firm name. To identify the best overall forecasters, we averaged the scores of the 77 forecasters who qualified in

at least ten indicators; the top 10 forecasters are shown here. A "Z-score"-based statistical model is employed to calculate the probability of the forecast error. The

score is then equated to the probability of the forecast error being larger than the observed error for the given economist. More information on Calculation

Methodology (Z-score-based) may be found on the Bloomberg Professional service on the ECOS Help Page under Calculations.

EARNINGS  LU WANG, BLOOMBERG NEWS

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April 12, 2016 Bloomberg Brief Economics 4

EARNINGS  LU WANG, BLOOMBERG NEWS

Whipsawed Wall Street Traders See Bullish Sign in Bad Profit There hasn’t been much good news in

U.S. corporate profits since they began sliding a year ago — until now.

At first glance, the earnings season will be downright ugly. Net income is forecast to plunge 10 percent in the worst performance since the aftermath of the financial crisis in 2009. Yet, for the first time in eight months, the pace at which analysts are cutting their estimates is slowing. Improvement in the ratio between upgrades and downgrades foreshadowed the bottom of the earnings cycle in 2001 and 2008.

Evidence that earnings aren’t getting worse would be a welcome development for investors, who have endured a white knuckle ride in stocks this year as the Standard & Poor’s 500 Index plunged 11 percent through early February only to recover in an epic comeback not seen since 1933. While the turnaround in revisions could reverse, it usually doesn’t.

More than $2 trillion was restored to equity prices over the last eight weeks as all but four of the S&P 500’s constituents bounced from their February lows. Besides calming nerves after the worst start on record, the rebound has pushed valuations back toward the highest level in six years, with the index trading at about 18.6 times profits. The benchmark gauge slipped 0.3 percent at 4 p.m. in New York, reversing an earlier gain of as much as 0.8 percent.

Improving sentiment is visible in a Bank of America Corp. gauge of estimate revisions. The indicator tracks the number of companies whose yearly profit forecasts have been revised by analysts over the past three months. Higher numbers signal fewer cuts. On that basis, the measure flashed 0.53 for March compared with a seven-year low of 0.47 in February, the first increase since July.

Nothing happening now will do anything to salvage the current season that starts today with Alcoa, which is projected to say operating profit fell 92 percent to 2 cents a share. Analysts have been relentlessly lowering forecasts throughout the S&P 500 for the January-to-March period and estimate earnings will decline 10 percent from 2015 after carrying out the sharpest downward revision to estimates in six years.

 While energy is expected to post the

biggest retreat, weakness has spread to other industries. Banks, which as recently as August were predicted to see a 2.8 percent gain in first-quarter income, are now estimated to suffer a 16 percent tumble. Industrial company profits may fall 12 percent, compared with a projection for 4.2 percent growth seven months ago. Technology, consumer staples and utilities are all seen reporting lower earnings.

Based on analyst estimates, income in the S&P 500 isn’t expected to increase on a year-over-year basis until the third quarter — and that rebound has been repeatedly pushed back. As recently as December, analysts said profits would rise 0.5 percent in the January-to-March period. Estimates for the second quarter didn’t turn negative until February.

The earnings outlook is so cloudy that chasing the rally in U.S. shares is a bad idea, according to Andrew Slimmon, Chicago-based fund manager who helps oversee $5.1 billion at Morgan Stanley Investment Management. While U.S. jobs and manufacturing data are improving, rising risks overseas prompted Fed Chair Janet Yellen to signal that officials will be cautious in raising interest rates.

“If the overall estimates for the year start to go up because companies are more optimistic, we’ll change our tune,” Slimmon said. “But at this junction, we

just haven’t seen it,” he said. “We will need to see some validation coming out of companies that the numbers are actually too low for the year.”

Determining the trajectory of earnings is crucial with equities stuck in the longest stretch of stagnation outside of a bear market since 1995. Down 2.7 percent from a year ago, the S&P 500 hasn’t seen a new high in 10 months. Even as the market sat still, the decline in profits has contributed to higher valuations.

An uptick in analyst optimism has historically pointed to better profits ahead, or at least smaller declines. In January 2009, when Bank of America’s revision ratio rose from a record low of 0.09, earnings improved in each of the following four quarters to herald a six-year expansion. The measure’s ascent in November 2001 following a 18-month slide also preceded five quarters of growth acceleration.

Eight of 10 industries saw their earnings revision ratios go up in March, led by industrial and material producers. A decline in the dollar contributed to improved sentiment toward multinational firms, Savita Subramanian, Bank of America’s equity and quantitative strategist, wrote in an April 4 note. Meanwhile, oil finished March with the biggest increase in a year, easing pressure on energy profit.

Read the full story .here

FEDSPEAK

Analyst Cuts Ease; Earnings Sentiment Halts 7-Month Slide

http://www.bloombergbriefs.com/http://www.bloomberg.com/news/articles/2016-04-11/whipsawed-wall-street-traders-find-bullish-signal-in-bad-profits

April 12, 2016 Bloomberg Brief Economics 5

FEDSPEAK

Fed's Kaplan Says Weak Data a Sign That No Need for April HikeSTEVE MATTHEWS, BLOOMBERG NEWS

Federal Reserve Bank of Dallas President Robert Kaplan said he doesn’t back an interest-rate increase this month in light of a puzzling weakening of economic growth, though a June tightening by the U.S. central bank remains a possibility.

“It is worth in this environment being patient and basically being willing to be cautious and let events unfold,” Kaplan told reporters after a speech Monday in Ruston, Louisiana. “We’ll know soon enough. We are not going to know by April. There is time for us to make these assessments over the next few months and we will.”

The policy-setting Federal Open Market Committee meets April 26-27 and June 14-15. Investors have lowered the odds of a move at either meeting after Chair Janet Yellen said on March 29 that central bankers should “proceed cautiously” amid heightened global economic risks.

Officials are discussing how quickly they should raise rates a second time following their initial hike in December, when they lifted rates held near zero since 2008, amid signs the U.S. economy appears to have slowed in the opening months of the year. The Atlanta Fed’s GDPNow forecasting model currently estimates growth at an annual rate of just 0.1 percent in the first quarter.

 “There is no question first-quarter GDP

numbers are weak,” said Kaplan, referring to gross domestic product, “and probably inconsistent with the job numbers” which show “solid” employment gains. Even so, he said it was likely that growth will pick up in the final three quarters of the year, based on his expectation of stronger consumer spending. “Being patient and cautious doesn’t mean standing still,” the Dallas Fed leader said. “There is a point at which I will be advocating to take the next step, but it is not now.”

The FOMC decided last month to hold off from raising interest rates, while policy makers halved their forecasts for the number of rate increases that would be warranted this year from the four moves they projected in December.

“I am certainly very open” to the possibility of a June move, said Kaplan. “I am not a big fan of predicting what my judgment is going to be” far in advance. “I am certainly open minded and will be making a judgment” as reports come in.

 

Williams Says Market Views Fed as Increasingly Data-DependentJANA RANDOW, BLOOMBERG NEWS

Investors are beginning to see monetary policy through the eyes of the Federal Reserve.

For almost two years, Fed Chair Janet Yellen has preached that any decision to raise interest rates will be data-dependent. Now, market participants have become more responsive to economic news, according to a by studySan Francisco Federal Reserve President John Williams and Benjamin Pyle, a research associate at the bank.

“In the past year or so, market-based measures of data dependence have risen considerably, although they are still below earlier norms,” Williams and Pyle wrote in

an economic letter published Monday. “This suggests that investors are increasingly viewing monetary policy actions as data dependent.”

While market-based measures of future interest rates, such as bond yields, react to economic data in normal times by rising or falling, that pattern can be short-circuited when borrowing costs are near zero and expected to stay there for a long time. Indeed, during the 2010-2014 period, Treasury yields with maturities of one year or less responded relatively little to economic news, according to the report.

“With the economy on the mend and FOMC communications emphasizing the

data dependence of policy actions, market-based measures of future interest rates became more responsive to economic news,” Williams and Pyle wrote, referring to the policy-setting Federal Open Market Committee. “The responsiveness of the longer yields to news increased more significantly,” which “reflects investor expectations that rates will move further away from zero over the subsequent two years.”

Yellen referred to the market acting as an ‘automatic stabilizer’ for the U.S. economy in a speech last month in which she noted that investors had scaled back the number of Fed rate hikes they expect this year.

CANADA   GREG QUINN AND THEOPHILOS ARGITIS, BLOOMBERG NEWS

Market Agrees No April Rate Increase, Mostly Rules Out June

http://www.bloombergbriefs.com/http://www.frbsf.org/economic-research/publications/economic-letter/2016/april/data-dependence-awakens-monetary-policy/

April 12, 2016 Bloomberg Brief Economics 6

 

CANADA   GREG QUINN AND THEOPHILOS ARGITIS, BLOOMBERG NEWS

Want an Indicator of Canada's Recovery? Check Its Bank StocksCanada may no longer have an oil

boom, but it still has itsbanks.With Bank of Canada officials

preparing for an interest-rate decision Wednesday, one thing that will comfort Governor Stephen Poloz and temper consideration of further interest rate cuts is the health of the nation’s lenders.

Credit to households has accelerated in recent months and loans to businesses continue to grow at above historical averages, even with the recent commodity slump, fueling an economic expansion that’s on track to be among the fastest in the Group of Seven this year. That’s one advantage Canada has over other regions like Europe, whose banks continue to struggle with bad loans and are more reluctant to lend.

“We still have a clean banking system,” Mark Chandler, head of fixed-income research at RBC Capital Markets in Toronto, said of why monetary policy seems to be more effective in Canada. “In places elsewhere, it’s not the case.”

It’s another example of Canada’s banks, ranked the ranked the soundest by the World Economic Forum, riding to the rescue. The country emerged from the 2009 recession as one of the most robust economies in the western world largely because its lenders avoided the trouble that ensnared global peers.

Now, as Canada struggles with the collapse in oil prices, those banks are keeping lending channels open.

Total credit to businesses in Canada in February was up 6.3 percent from a year ago, according to Bank of Canada data. While the pace has slowed over the past year, it’s still at about average since the recession and above average over the past 25 years. Credit to households has been growing at a pace of more than 5 percent year-over-year since last August, the highest levels since 2012.

On this front, Canada is a world beater. Total credit to the non-financial sector in Canada increased to 285 percent of GDP in the third quarter, an 18 percentage

 point gain from a year earlier, according to data from the Bank of International Settlements. Among major economies, only Australia has posted a bigger increase.

In Europe, banks continue to keep their money idle even with the ECB implementing negative rates, where commercial banks are charged interest on deposits.

“When you go down the granular reasons behind why Canada’s financial system has weathered the storm better than elsewhere, they are very good reasons,” said Derek Holt, an economist at Bank of Nova Scotia. “That’s enabled the country to avoid the overwhelming financial-sector problems that have plagued Europe and the U.S.”

The credit is in turn fueling a recovery that investors believe will keep Poloz from lowering interest rates again this year. Employment jumped by 40,600 new positions in March, quadrupling the median forecast, Statistics Canada said Friday. A week earlier the agency reported the fastest monthly economic growth since 2013. Economists surveyed by Bloomberg News last week project

growth of 2.9 percent in the first quarter.That marks a turnaround from last year

when Poloz cut rates twice as the economy tottered toward recession. At the time, the “Great White Short” bet against Canada’s banks and lenders was a prevailing theme. Canadian financial stocks had their worst start to the year in a quarter century in 2015, fueled in part by the Poloz’s first rate cut and concern about declining oil prices, an inflated housing market and indebted consumers.

Betting on Canada’s banks to underperform is turning into a money loser.

The eight-company Standard & Poor’s/TSX Commercial Banks Index, which includes Canadian Imperial Bank of Commerce and National Bank of Canada, has climbed 3.8 percent this year, compared with the 13 percent decline of the 24-member KBW Bank Index of large U.S. lenders. The Bloomberg World Banks Index of the 157 largest banks is down 10 percent this year.

Looking forward, bank-stock performance may turn out to be a better gauge of Canada’s economic health than oil.

DATA & EVENTS

Total Credit to Businesses in Canada Rose 6.3% YoY in Feb.

http://www.bloombergbriefs.com/

April 12, 2016 Bloomberg Brief Economics 7

DATA & EVENTS

TIME COUNTRY EVENT SURVEY PRIOR

8:00 India CPI YoY 5.00% 5.18%

8:00 India Industrial Production YoY 0.80% -1.50%

8:00 Brazil Retail Sales MoM 0.00% -1.50%

8:00 Brazil Retail Sales YoY -5.60% -10.30%

8:00 Brazil Retail Sales Broad YoY -6.50% -13.30%

8:30 U.S. Import Price Index MoM 1.00% -0.30%

8:30 U.S. Import Price Index YoY -4.80% -6.10%

14:00 U.S. Monthly Budget Statement -$104b -$52.9b

17:00 Chile Overnight Rate Target 3.50% 3.50%

19:50 Japan Money Stock M2 YoY 3.10% 3.10%

19:50 Japan PPI MoM 0.00% -0.20%

19:50 Japan PPI YoY -3.50% -3.40%Source: Bloomberg. Surveys updated at 5:25 a.m. New York.

 

Click to view a live version of this chart on the Bloomberg terminal.here

CALENDAR

Click on the to see the full range of economists' forecasts on the terminal.   highlighted releases

OVERNIGHT

U.K. inflation accelerated to a 15-month high in March as an early Easter boosted air fares and clothing prices increased. rose 0.5 Consumer pricespercent from a year earlier, the fastest pace since December 2014, the Office

in London said for National Statisticstoday. That exceeded the 0.4 percent median estimate in a Bloomberg survey of economists. Core inflation, which excludes volatile food and energy prices, quickened to 1.5 percent, the most since October 2014.

Italian officials and bank executives agreed to create a multibillion-euro fund to help troubled lenders raise capital and offload bad loans, as the nation tries to assuage investor jitters. The new vehicle will be named and will be Atlantefinanced by banks, insurers and institutional investors. It will be worth about 5 billion euros ($5.7 billion).   

German discontent toward the is rising European Central Bank — and

the feeling seems to be mutual. Days before and Group of 20 International

meetings in Monetary Fund Washington, German Finance Minister

has suggested Wolfgang Schaeublethat ECB President shares Mario Draghi the blame for the rise of populist parties. With mainstream representatives piling on the opprobrium, ECB officials are showing exasperation that they’re under attack from politicians who have failed to upgrade the euro area’s economic foundations.

The is reducing the Bank of Japanshare of funds financial institutions keep at the BOJ that will be subject to the new negative interest rate policy. Enacting a technical adjustment that the central bank indicated was a possibility when it unveiled the new policy in January, the BOJ enlarged the share of new current-account funds that will be charged a zero percent rate. That portion is referred to as the macro add-on balance.

Europe

Asia

MARKET INDICATORS

Core CPI Would Benefit From Import Price Pickup

The extended period of falling U.S. import prices is swiftly ending, as the dollar's appreciation and crude oil's decline have both stalled — at least temporarily. The broad, trade-weighted dollar fell about 1 percent in the first three months of the year, leaving the 12-month gain through March at just 4.5 percent — the slowest pace in 18 months. Oil also appears to have found some stability, rising 24 percent in March after a 29 percent decline in the prior three months. Analysts should be on the lookout for significant increases in both headline and ex-petroleum import prices. The consensus estimate is for a 1 percent gain in the headline, which will lift the 12-month change to minus 4.8 percent from minus 6.1 percent prior. Core CPI will accelerate if the drag from goods price deflation ends.

— Carl Riccadonna and Yelena Shulyatyeva, Bloomberg Intelligence Economists

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April 12, 2016 Bloomberg Brief Economics 8

MARKET INDICATORS

SURVEILLANCE

Source: Bloomberg. Updated 5:30 a.m. New York time.

http://www.bloombergbriefs.com/

April 12, 2016 Bloomberg Brief Economics 9

Bloomberg Brief: Economics

SURVEILLANCE

Joseph Quinlan, Chief Market Strategist at Bank

of America Capital Management, speaks with

Bloomberg's Tom Keene and Francine Lacqua

about the risks facing the global economy and the

chances of a global recession.

Q: Negative yields in Germany, negative yields in Denmark, a strong yen — what's the so-what for American investors?A: The so-what, is that the global economy is still struggling seven, eight years after the crisis. The United States is OK, but we are not strong enough to pull along the rest of the world. It is very indicative also that growth in China, probably like five, six percent, not anything close to seven. So we're in this very fragile situation where you see policy makers still pushing on the string with monetary policy, not much fiscally, and a lot of companies and corporations are just standing off to the sidelines.

Q: As we go to the IMF meetings, we are not an island, are we?A: We are not an island. We need the trade, we need the investment, the capital, the human resources, and we need the demand. We're in a world of lack.

Q: This is a demand deficiency now? I think so. Maybe not so much in the U.A:

S., but it doesn't matter, it's global.

Q: You are saying, sure, the world economy is fragile, but is it ugly enough for Janet Yellen to not normalize, or is it just an excuse for the Fed to buy themselves time?A: Maybe a little bit of both. We have heard the Fed talk back just a couple of weeks ago that international developments are still soft and fragile. They pulled back on the four rate hikes this year that no one believed in anyways. Maybe we're discussing, instead of two it will be one. So it is affecting the Fed. How it plays out, we'll see. But there's no doubt that they're looking globally and not liking what they're seeing.

Q: Tell us about the risks out there. We know about China, Brexit, Japan and the great financial experiment that may not be working out. Is there anything else?A: I think globally, it's de-globalization. The borders are going up. And it's not just about barbed wire in Europe, it's also about data protection, localizing servers, you saw a slowdown in trade, the global supply chains are contracting, corporations — they're not pulling money home. They are also pulling also work home, production. So there's a feeling out there that corporations, if they're going to build something, they're looking closer to home because they don't like the risk factor in China, which wants its own standards, or in Europe, which isn't growing.

 

Q: Is there anything that can bring us to a world recession? Should we be worried more about risks, about some kind of shocks out there in the financial system?A: I think a shock that takes us down globally, not yet. Because the central banks are doing their part; they're pumping money, they're talking up everyone to spend more, capital investment — I think the key will be corporations. Corporations, they're the ones that drive trade. There the one's that hire. And the feeling amongst corporations, particularly in the United States, is like, it's OK, it's not great. So they can continue on. In Europe, maybe you get a little cyclical recovery here. If China grows by five percent, six percent, that gives us enough lift to keep plodding along at that subpar rate, but it's very fragile, as you know, and it's not a great backdrop.

Q: You mentioned the earnings season in the U.S. Is it going to be more of the same? Cost-cutting, synergies, and they just need to cut the fat?A: I think that's going to be the main story. I think there will be some top line growth, maybe certain sectors, whether it's technology, maybe materials and industrials, but the forward guidance will be cautious. It'll be a similar page from the Fed.

This interview has been edited and condensed.

 

 

 

 

 

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