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P.1
Rates
0,5
1
1,5
2
2,5
3
3,5
Swap Rates (%)
EUR 5Yr Swap Rate US 5Yr Swap Rate
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
EURIBOR3M
Today (09/07) J une Meeting (06/06) J uly Meeting (04/07)
FedcommentscontinuedtoraiseexpectationsthattheFedwillsoonstarttaperingQEpurchases.Thisexertedupward
pressureonswaprates.DovishECBpolicylimitsthedamage
forEUswaprates.
TheeuriborstripcurveshiftedagainloweraftertheJulyECBmeetingasECBDraghisoundedverydovishandsuggested
moreeasingmaybeforthcoming.
0
1
2
3
4
5
6
7
POLICY RATES
ECB FED BOE
0
0,2
0,4
0,6
0,8
1
1,2
1,4
1,6
1,8
EURIBOR 3M / USD LIBOR 3M
EURIBOR3M USD L IBOR 3M
TheECBintroducedforwardguidanceasatooltoeaseits
policy.MarioDraghisaidthecurrent50bpsrefirateshould
notbeconsideredabottom,suggestingthatratesmaybecut
again,includingthedepositrate.
Euribor3MandUSDLibor3Mremainatlowlevels,asECB&
Fedarefarfromraisingrates.ExcessliquidityinEurope
stabilizedaround275B.AccordingtoanECBstudyafall
below200BwouldexertupwardspressureonMMrates.
Markets
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P.2
Currencies
1,2
1,25
1,3
1,35
1,4
1,45
1,5
EUR/USD
0,775
0,8
0,825
0,85
0,875
0,9
0,925
EUR/GBP
EUR/USDisnearingthe2013lowastheFedisactively
preparingascalingbackofpolicystimulation.Atthesame
time,theeurosuffersfromsoftECBguidance.
EUR/GBP:afragilebalanceofweaknessasboththeECBand
theBoEwillkeeppolicyaccommodativeintheforeseeable
future.Sterlingslightlyunderperforms.
0,00
0,50
1,00
1,50
2,00
2,50
3,00
2 3 4 5 6 7 8 9 10 11 12 15 20 25 30
Yield Curves
9/07/2013 9/06/2013 9/05/2013
050
100150200250300350400450500550600650
Semi-core Yield Spreads (10Yr)
Spain Italy Belgium France
Euroswap
curve
shifted
again
higher
under
influence
of
US
ratesandexpectationsofaturninFedpolicy.ECBtalk
mitigateupwardpressureandevenallowedtheshortendto
shiftlower.
Spreadsshowed
some
volatility,
but
given
the
prospect
for
anearlyFedtightening,thewideningremainedverylimited.
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P.3
75
80
85
90
95
100
105
USD/JPY
24
24,5
25
25,5
26
26,5
EUR/CZK
USD/JPYrebounds.
The
USD
receives
support
from
higher
US
bondyields,butthe103.74reactiontoplooksahighhurdle.The
Czech
koruna
stays
near
the
recent
lows
against
the
euro.Globalrepositioningweighsonsmallercurrenciesand
domesticgrowthisalsoofnohelpforthekoruna.
255
265
275
285
295
305
315
325
EUR/HUF
3,8
4
4,2
4,4
4,6
EUR/PLN
EUR/HUF:The
forint
is
holding
stable
roughly
in
the
290/300
rangeevenastheNMBcontinuestograduallyreduceits
policyrate.
EUR/PLN:Polish
central
bank
indicates
that
the
rate
cut
cycle
hasprobablycometoanend.EUR/PLNshowscautioussigns
oftoppingoutbutfornowthegainsofthezlotyarelimited.
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P.4
Others
240
260
280
300
320
340
360
380
CRB Commodity Index
CRB Commodity Index
210
230
250
270
290
310
Euro Stoxx 600
TheCRB
commodity
index
dropped
further
after
the
Fed
suggesteditmightsoonstarttaperingQE.Increasingsigns
thattheChineseeconomyisslowingaddedtodownward
pressure.EarlyJuly,theCRBindexpickedslightlyup.
Afterreaching
new
highs
in
May,
European
equities
dropped
sharplylowerinJuneastheFedconfirmeditsintentionto
soonstarttaperingitsassetpurchaseswhilealsouncertainty
inChinaweighedonsentiment.EarlyJuly,equitiesreversed
partoftheirlosses.
70
80
90
100
110
120
130
Brent Crude Oil
Brent Crude Oil (Future) - $/barrel
1100
1200
1300
1400
1500
1600
1700
1800
1900
Gold
Gold (Future) - $/ounce
BrentcrudeoilpricesfellbackaftertheFOMCmeeting,but
edgeduplaterinthemonth,partlyduetopoliticaltensionsin
Egypt.
GoldpriceswerefurtherhitaftertheFedconfirmedits
intentiontostarttaperingassetpurchases.Afterwards,gold
priceshoveredbetween$1200and$1250/ounce.
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Eurozone
20
15
10
5
0
5
10
15
20
25
1
0
1
2
3
4
5
Euro zone Inflation
CPI - Y/Y (Left axis)
Core CPI - Y/Y (Left axis)
EC Industrial confidence - selling price expectations (Right axis)
7
8
9
1
11
1
-40
-30
-20
-10
0
10
Euro zone Unemployment
Services Confidence - Employment Expectations(Left axis)
Industrial Confidence - Employment Expectations (Left axis)
Unemployment Rate (R ight axis)
EurozoneCPIinflationpickedfurtherupinJune,risingfrom
1.4%Y/Yto1.6%Y/Y.Whileinflationremainssignificantly
belowtheECBs2%target,therecentuptickeasesfearsfor
undershootingthetarget.
Theeurozoneunemploymentrateisrisingtoevernew
highs.InMay,theunemploymentrateincreasedto12.1%.
Whiletheunemploymentratewillprobablyincreasefurther
inthecomingmonths,thereareindicationsthatSpanish
unemploymentisstabilizingathighlevels.
-3
-2
-1
0
1
2
3
Euro zone GDP (Q/Q contribution to growth)
government household gross fixed capital formation
change in inventories exports imports
GDP Q/Q
30
35
40
45
50
55
60
65
Euro zone PMI Manufacturing - Services
PMI Manufacturing PMI Services
Forasixthconsecutivequarter,eurozoneGDPcontractedat
thestartoftheyear,althoughataslowerpacethaninthe
fourthquarterof2012.Forthesecondquarter,expectations
arestillmixed.
TheeurozonePMIsimprovedfurtherinJune,ledbya
reboundinperipheralcountries.Boththemanufacturingand
servicesPMIremainhoweverbelowthe50benchmarklevel.
Economic Overview
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P.6
-2
-1
0
1
2
PositiveSurprise
Negative
Surprise
Surpriseindex:measuresthedifference(instandarddeviations)betweenthe(median)Bloombergconsensusandtheactualoutcomeof
EMUeconomicdata.
InJuneandearlyJuly,almostalleurozoneeconomicdatasurprisedontheupsideofexpectations,providingfurther
evidencethattheeurozoneeconomyisontrackforareturntogrowthinthesecondhalfoftheyear.
-25
-20
-15
-10
-5
0
5
10
Euro zone Industrial Production
Industrial Production Y/Y
-5
-4
-3
-2
-1
0
1
2
Euro zone Retail Sales
Retail Sales Y/Y
Onamonthlybasis,eurozoneindustrialproductionrosefora
thirdconsecutivemonthinApril,supportedbydemandfrom
abroad.InMayhowever,industrialproductionisforecastto
haveweakened
led
by
adrop
in
German
production.
InMay,eurozoneretailsalespickedupby1.0%M/Masalso
consumersentimentimprovedsharply.Comparedwithlast
year,retailsalesaredownbyonlyamarginal0.1%.
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P.7
US
-3
-2
-1
0
1
2
3
4
5
6
15
25
35
45
55
65
75
85
95
US Inflation
Manufacturing ISM - prices paid index (Left Scale) US CP I Y/Y (Right Scale)
US Core CPI Y/Y (Right Scale)
3
4
5
6
7
8
9
10
-900
-700
-500
-300
-100
100
300
US Unemployment
Change in private payrolls (Left Scale) US unemployment rate (Right Scale)
AfterasharpslowdowninMarchandApril,USCPIinflation
pickedupinMay,from1.1%Y/Yto1.4%Y/Y.Coreinflation
remainedunchanged,wellabovetheheadlinereading.
TheJunepayrollsreportsurprisedontheupsideof
expectations,showinganincreaseby195000andalsothe
previousfiguresweresignificantlyupwardlyrevised.The
unemploymentratehoweverstayedunchangedat7.6%.
-8
-6
-4
-2
0
2
4
6
US GDP (Q/Q Annualized - contribution to growth)
P ersonal Consumption F ixed Investments Change in inventories
Net Exports Government Consumption US GDP Q/Q Annualized
75
80
85
90
95
100
105
110
30
35
40
45
50
55
60
65
US PMI Manufacturi ng - Services
ISM non-manufacturing (Left Axis) ISM Manufacturing (Left Axis)
NFIB Small Business Optimism (Right Axis)
ThefinalreadingofUSQ1GDPshowedasubstantial
downwardrevisionto1.8%Q/Qannualized(from2.4%Q/Q).
Personalconsumptionremainsthemaingrowthdriver,while
governmentconsumptionactedasasignificantdrag.
USbusinessconfidenceindicatorsshowedamixedpicturein
June.ThemanufacturingISMedgedbackabove50,whilethe
nonmanufacturingISMweakenedunexpectedasdidsmall
businessconfidence,suggestingthatsentimentremains
fragile.
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P.8
-20
-15
-10
-5
0
5
10
15
US Production
US Manufacturing Production Y/Y
-14
-9
-4
1
6
11
US Retail Sales
Retail Sales Y/Y
Comparedwith
the
previous
month,
US
industrial
production
stayedflatinMay,butmanufacturingproductionroseslightly
forthefirsttimeinthreemonths.Wehopetoseesome
improvementinthecomingmonthsasalsothemanufacturing
ISMpickedup.
USretail
sales
picked
up
in
May
led
by
strong
sales
of
motor
vehiclesandparts.Consumerspendingisexpectedtoremain
stronginthecomingmonthsafterconsumersentiment
improvedsharplyinthepreviousmonths.
-2
-1
0
1
2
3
Positive
Surprise
Surpriseindex:measuresthedifference(instandarddeviations)betweenthe(median)Bloombergconsensusandtheactualoutcomeof
USeconomicdata.
InJuneandearlyJuly,USeconomicdatasurprisedmostlyontheupsideofexpectations.Businessconfidenceindicators
weremixed,whilealsothedownwardrevisionoffirstquarterGDPwasdisappointing.
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ALLOURREPORTSAREAVAILABLEONWWW.KBCCORPORATES.COM/RESEARCHThisnonexhaustiveinformationisbasedonshorttermforecastsforexpecteddevelopmentsonthefinancialmarkets.KBCBankcannotguaranteethattheseforecastswillmaterializeandcannotbeheldliableinanywayfordirectorconsequentiallossarisingfromanyuseofthisdocumentoritscontent.Thedocumentisnotintendedaspersonalizedinvestmentadviceanddoesnotconstitutearecommendationtobuy,sellorholdinvestmentsdescribedherein.AlthoughinformationhasbeenobtainedfromandisbaseduponsourcesKBCbelievestobereliable,KBCdoesnotguaranteetheaccuracyofthisinformation,whichmaybeincompleteorcondensed.AllopinionsandestimatesconstituteaKBCjudgmentasofthedataofthereportandaresubjecttochangewithoutnotice.
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