global economic & financial outlook - cfa institute presentations/global... · global economic...

Global Economic Intelligence

Pablo F.G. BréardVice-President, Head International Economist

George Town – October 2013

Global Economic & Financial Outlook

Emerging Markets in Context


Key Issues in Focus


2.1%2.8%

18.5%

2.6% 2.7% 3.0%3.7%

5.4% 5.8%

16.0%

0

1,500

3,000

4,500

6,000

7,500

9,000

10,500

12,000

13,500

15,000

16,500

Mex

ico

Fran

ce UK

Bra

zil

Rus

sia

Ger

man

y

Japa

n

Indi

a

Chi

na

USA

GD

P si

ze in

pur

chas

ing

pow

er p

arity

term

s -

2013

-14

(e) U

S$ b

ln

Source: IMF World Economic Outlook (April 2013)

Americas

Europe

Asia

Global Economic Rebalancing ► The New G10


0

1

2

3

4

5

6

7

Fran

ce

Ger

man

y

Uni

ted

Kin

gdom

Japa

n

USA

Rus

sia

Bra

zil

Mex

ico

Indi

a

Chi

na

Rea

l GD

P G

row

th –

Ann

ual A

vera

ge %

201

3-14

(e)

Source: Scotiabank & IMF World Economic Outlook Report

High IncomeEmerging

G10 Growth 2013-14 ► Emerging Markets in Focus


Global Growth Trends ► Improving in 2014


0

1

2

3

4

5

6

7

8

9

Japa

n

Fran

ce

Ger

man

y

USA

Uni

ted

Kin

gdom

Chi

na

Mex

ico

Bra

zil

Rus

sia

Indi

a

Con

sum

er P

rice

Infla

tion

% 2

013-

14 (e

)

Source: Scotiabank & IMF World Economic Outlook

High Income

Emerging

Global Inflation ► Emerging Markets in Context


“The Federal Reserve’s Acquisition of long-term Treasury securities boosted the prices of such securities and

caused long-term Treasury yields to be lower than they would have been otherwise”

Ben Bernanke

The Fed Focus ► Inflation & Employment Targeting


US Growth ► Policy Mix Focused on Employment

4

5

6

7

8

9

10

Nov

-04

Mar

-05

Jul-0

5N

ov-0

5M

ar-0

6Ju

l-06

Nov

-06

Mar

-07

Jul-0

7N

ov-0

7M

ar-0

8Ju

l-08

Nov

-08

Mar

-09

Jul-0

9N

ov-0

9M

ar-1

0Ju

l-10

Nov

-10

Mar

-11

Jul-1

1N

ov-1

1M

ar-1

2Ju

l-12

Nov

-12

Mar

-13

Jul-1

3

290,800327,750364,700401,650438,600475,550512,500549,450586,400623,350660,300

Nov

-03

Mar

-04

Jul-0

4N

ov-0

4M

ar-0

5Ju

l-05

Nov

-05

Mar

-06

Jul-0

6N

ov-0

6M

ar-0

7Ju

l-07

Nov

-07

Mar

-08

Jul-0

8N

ov-0

8M

ar-0

9Ju

l-09

Nov

-09

Mar

-10

Jul-1

0N

ov-1

0M

ar-1

1Ju

l-11

Nov

-11

Mar

-12

Jul-1

2

Jobless Claims

129,320130,194131,068131,942132,816133,690134,564135,438136,312137,186

Nov

-03

Mar

-04

Jul-0

4N

ov-0

4M

ar-0

5Ju

l-05

Nov

-05

Mar

-06

Jul-0

6N

ov-0

6M

ar-0

7Ju

l-07

Nov

-07

Mar

-08

Jul-0

8N

ov-0

8M

ar-0

9Ju

l-09

Nov

-09

Mar

-10

Jul-1

0N

ov-1

0M

ar-1

1Ju

l-11

Nov

-11

Mar

-12

Jul-1

2

Non-Farm Payrolls

Declining Unemployment Rate


US Growth ► Housing Market Metrics

400500600700800900

1,0001,1001,2001,3001,4001,5001,6001,7001,8001,9002,0002,1002,2002,300

Oct

-03

Feb-

04Ju

n-04

Oct

-04

Feb-

05Ju

n-05

Oct

-05

Feb-

06Ju

n-06

Oct

-06

Feb-

07Ju

n-07

Oct

-07

Feb-

08Ju

n-08

Oct

-08

Feb-

09Ju

n-09

Oct

-09

Feb-

10Ju

n-10

Oct

-10

Feb-

11Ju

n-11

Oct

-11

Feb-

12Ju

n-12

Oct

-12

Feb-

13Ju

n-13

-10-8-6-4-202468

1012

Dec

-03

Apr

-04

Aug

-04

Dec

-04

Apr

-05

Aug

-05

Dec

-05

Apr

-06

Aug

-06

Dec

-06

Apr

-07

Aug

-07

Dec

-07

Apr

-08

Aug

-08

Dec

-08

Apr

-09

Aug

-09

Dec

-09

Apr

-10

Aug

-10

Dec

-10

Apr

-11

Aug

-11

Dec

-11

Apr

-12

Aug

-12

Dec

-12

Apr

-13

Aug

-13

US house price Index

US house price purchase-ony SA Index

100110120130140150160170180190200210

814212734404653596672

Oct

-03

Feb-

04Ju

n-04

Oct

-04

Feb-

05Ju

n-05

Oct

-05

Feb-

06Ju

n-06

Oct

-06

Feb-

07Ju

n-07

Oct

-07

Feb-

08Ju

n-08

Oct

-08

Feb-

09Ju

n-09

Oct

-09

Feb-

10Ju

n-10

Oct

-10

Feb-

11Ju

n-11

Oct

-11

Feb-

12Ju

n-12

Oct

-12

Feb-

13Ju

n-13

Home Builders Market Index

Homebuyer Affordability

US Housing Starts (‘000 units/year)


Global Liquidity ► Aggressive Monetary Stimulus

0.00

0.25

0.50O

ct-1

2

Nov

-12

Dec

-12

Jan-

13

Feb-

13

Mar

-13

Apr

-13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep-

13

US FED FUNDS

Fut Dec 2013

Fut Jun 2014

0.75

1.00

1.25

1.50

1.75

Oct

-12

Nov

-12

Dec

-12

Jan-

13

Feb-

13

Mar

-13

Apr

-13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep-

13

CANADA BANK RATEFut Dec 2013Fut Jun 2014

0.25

0.50

0.75

1.00

Oct

-12

Nov

-12

Dec

-12

Jan-

13

Feb-

13

Mar

-13

Apr

-13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep-

13

UK BASE RATE

Fut Dec 2013

Fut Jun 2014

0.25

0.50

0.75

1.00

1.25

1.50

Oct

-12

Nov

-12

Dec

-12

Jan-

13

Feb-

13

Mar

-13

Apr

-13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep-

13

ECB REPO RATEFut Dec 2013Fut Jun 2014


-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

Oct

-08

Jan-

09A

pr-0

9Ju

l-09

Oct

-09

Jan-

10A

pr-1

0Ju

l-10

Oct

-10

Jan-

11A

pr-1

1Ju

l-11

Oct

-11

Jan-

12A

pr-1

2Ju

l-12

Oct

-12

Jan-

13A

pr-1

3Ju

l-13

MARKET (CRB)GOLDCOPPERCRUDE OILSOYBEANS

Steady Price Adjustments in Commodity Markets

2012 2013f 2014f

Crude Oil

94 → 100 102

Natural Gas

2.25 ↑ 3.75 4.00

Copper 3.61 ↓ 3.3 3.1

Gold 1,670 ↓ 1,420 1,325

Commodity Prices – 5-year Trends


Commodity Markets – Energy Price Outlook

14-Oct-13 Oil US Gasoline Natural GasToday 102.41 266.68 3.82

3-year Minimum 75.67 204.10 1.91 3-year Maximum 113.93 346.48 4.85 12-mth Average 96.12 283.54 3.66

1 month 102.48 264.89 3.97 change from spot 0.1% -0.7% 3.8%

3 months 102.23 264.33 4.06 change from spot -0.2% -0.9% 6.3%

6 months 100.29 282.04 3.97 change from spot -2.1% 5.8% 4.0%

9 months 97.93 277.57 4.05 change from spot -4.4% 4.1% 5.9%

12 months 95.91 257.37 4.07 change from spot -6.3% -3.5% 6.4%

Average 12 mths ahead 99.68 270.94 4.07 change from 12 months past 3.7% -4.4% 11.1%

Spot

Futu

res


Shale GAS Reserves0

200

400

600

800

1000

1200

China

Argentina

Algeria

USA

Canada

Mexico

Australia

South Africa

Russia

Brazil

Trillion Cubic Feet

AmericasAsiaAfricaEurope

Global Energy Rebalancing – Shale Resources

Shale OIL Reserves

0 10 20 30 40 50 60 70

Russia

USA

China

Argentina

Libya

Venezuela

Mexico

Pakistan

Canada

Indonesia

Billion Barrels

AmericasAsiaAfricaEurope


Global Risk Rebalancing ► Falling Angels


NEG

ATIVE x 1

NEG

ATIVE x 3

NEG

ATIVE x 1

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Ger

man

y

C A

N A

D A

Aus

tral

ia

Net

herla

nds

Swed

en

Switz

erla

nd

Sing

apor

e

Nor

way

Den

mar

k

Finl

and

Luxe

mbo

urg

GD

P si

ze in

US$

trill

ion

(ppp

ter

ms)

201

3-14

(e)

Americas

Europe

Asia/Pacific

Global Risk Rebalancing ► The “AAA” Rating Club


Global Risk Rebalancing ► Europe in Context

Stable

NegativeStable

NegativeStable

NegativeNegative

NegativeNegative

-12 -10 -8 -6 -4 -2 0 2 4 6 8 10

Moody'sGREECE - S&P

Moody'sPORTUGAL - S&P

Moody'sIRELAND - S&P

Moody'sITALY - S&P

Moody'sSPAIN - S&P

Notches Below / Above Investment Grade Rating

Oct-13

Oct-08


0

20

40

60

80

100

120

140

160

180

200

220

240

Rus

sia

Chi

na

Mex

ico

Bra

zil

Indi

a

Ger

man

y

Fran

ce

Uni

ted

Kin

gdom

Uni

ted

Stat

es

Japa

n

Gro

ss P

ublic

Sec

tor D

ebt

% G

DP

201

3-14

(e)


High Income

Emerging

Sovereign Debt (un) Sustainability in the G10


(10)

(9)

(8)

(7)

(6)

(5)

(4)

(3)

(2)

(1)

0

Japa

n

Indi

a

UK

USA

Fran

ce

Mex

ico

Chi

na

Bra

zil

Rus

sia

Ger

man

y

Gen

eral

Gov

ernm

ent D

efic

it %

GD

P 2

013-

14 (e

)


High Income

Emerging

Global Fiscal Position – Deep Adjustments in Sight


Top-10 = US$7.7 trillion FX Reserves by Holder

Americas5%

Asia75%

Middle East8%

Europe12%

3,496

0

500

1000

1500

2000

2500

3000

3500

China

Japan

Saudi Arabia

Russia

Switzerland

Taiwan

Brazil

South Korea

Hong Kong

India

Eurozone

AmericasAsia/PacificMiddle EastEurope

Global Cash Rebalancing ► FX Reserves Holdings


Global FX Trends: The US Dollar in Context


EUR per USD rate (2008-13)

1.15

1.20

1.25

1.30

1.35

1.40

1.45

1.50

1.55

Oct

-08

Jan-

09A

pr-0

9Ju

l-09

Oct

-09

Jan-

10A

pr-1

0Ju

l-10

Oct

-10

Jan-

11A

pr-1

1Ju

l-11

Oct

-11

Jan-

12A

pr-1

2Ju

l-12

Oct

-12

Jan-

13A

pr-1

3Ju

l-13

Trade-Weighted USD (2008-13)

Global FX Trends: EUR & USD

68

70

72

74

76

78

80

82

84

86

73

75

77

79

81

83

85

87

89

Oct

-08

Jan-

09A

pr-0

9Ju

l-09

Oct

-09

Jan-

10A

pr-1

0Ju

l-10

Oct

-10

Jan-

11A

pr-1

1Ju

l-11

Oct

-11

Jan-

12A

pr-1

2Ju

l-12

Oct

-12

Jan-

13A

pr-1

3Ju

l-13

USD (DXY index)USD (Fed Index)


Global FX Trends: “Currency War” vs US Dollar?

CHINA KOREA MEXICO CANADA UK AUSTRALIA EUROZONE RUSSIA INDIA BRAZIL JAPANMAX 6% 4% 2% 3% 2% 4% 4% 2% 2% 6% 7%MIN 0% -9% -18% -8% -8% -10% -15% -16% -22% -23% -21%Last 6% -2% -3% -4% -5% -6% -8% -10% -18% -19% -21%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

24-month % change vs. USD


102154

201171

500

508357

461524

536

574 529

-200

0

200

400

600

800

1,000

1,200

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

f

2014

f

US$

bill

ion

Source: Institute of International Finance – October 2013

Foreign Direct InvestmentPortfolio InvestmentMultilateral FinanceBank LendingBond Issuance

Net Foreign Capital Flows to Emerging Markets


World Market Cap = US$57 trillion By Major Country (US$ trillion)

0 2 4 6 8 10 12 14 16 18 20

USAJapan

UKHong Kong

ChinaC A N A D A

FranceGermanyAustralia

SwitzerlandIndia

Brazil

AmericasAsia/PacificEuropeAfrica/M.East

Americas42%

Asia/Pacific

31%

Europe24%

Africa/Middle East

3%

Global Equity Rebalancing – The US Influence


World Equity Market (MSCI) % Return since Mar 2009

-30%-20%-10%

0%10%20%30%40%50%60%70%80%90%

100%110%

Oct

-08

Jan-

09A

pr-0

9Ju

l-09

Oct

-09

Jan-

10A

pr-1

0Ju

l-10

Oct

-10

Jan-

11A

pr-1

1Ju

l-11

Oct

-11

Jan-

12A

pr-1

2Ju

l-12

Oct

-12

Jan-

13A

pr-1

3Ju

l-13

GLOBAL indexDevelopedEmerging

0 20 40 60 80 100

120

140

160

USA

EmergingEurope

EmergingAsia

UK

EU

LatinAmerica

BRIC

CHINA

JapanEmerging MarketsHigh Income

Uneven Performance in Major Equity Markets


EMBIG – Regional Breakdown EMBIG – Top 10 Credits

LATAM42%

EUROPE33%

ASIA17%

M.EAST/AFRICA

7%

0 2 4 6 8 10 12

Mexico

Russia

Venezuela

Turkey

Brazil

Indonesia

Philipppines

Colombia

Poland

Chile

South Africa

AmericasAsiaEuropeAfrica

Who is Who in the Emerging Market Debt Universe?


G10 Credit Default SwapsG10 Credit Default Swaps

11

18

25

32

39

46

53

60

67

74

222

391

559

728

897

1,065

1,234

1,403

1,571

1,740

Oct

-08

Feb-

09Ju

n-09

Oct

-09

Feb-

10Ju

n-10

Oct

-10

Feb-

11Ju

n-11

Oct

-11

Feb-

12Ju

n-12

Oct

-12

Feb-

13Ju

n-13

Bon

d Yi

eld

Spre

ad –

basi

s po

ints

(bps

)

US Corp High Yield Debt

EM Sovereign Debt

US Equity Market Volatility

Risk Aversion/Appetite Metrics

Global Sovereign Debt: Credit Risk Differentiation

0 50 100

150

200

250

300

350

400

450

500

Germany

UK

USA

Japan

France

China

Mexico

Brazil

Russia

CDS (basis points)

Oct 2008Oct 2013


Interdependence - Cooperation – Joint Intervention


MerciGracias

Thank You

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