Market Economics | Interest Rate Strategy - BNP PARIBAS ...

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Key Data Preview Chart 11: US Trade Deficit Components Source: Reuters EcoWin Pro USD bn Mar (f) Feb Jan Dec Merchandise: -52.3 -51.3 -49.4 -51.9 Services: 11.8 11.6 12.4 12.0 Total: -40.5 -39.7 -37.0 -39.9 BNP Paribas Forecast: Further Widening US: International Trade (March) Release Date: Wednesday 12 May The nominal US trade deficit is expected to widen to USD 40.5bn in March from USD 39.7bn in February. A small amount of the widening is likely to be nominal and owes to the fact that import prices rose a little faster than export prices. In addition, we expect the real deficit to widen as imports probably rose to meet strong production and consumer demand in March. A modest decline in oil imports will partially offset strength in other categories. The number will have implications for GDP growth as the estimate for Q1 included an assumption for March trade. The widening we expect would be in line with the modest weight of trade in Q1 GDP growth reflected in the advance estimate. Key Point: The nominal US trade deficit is expected to widen again in March owing to strength in imports. Chart 12: US Retail Sales in Gradual Recovery Source: Reuters EcoWin Pro % m/m Apr (f) Mar Feb Jan Retail sales -0.1 1.9 0.5 0.5 Ex-autos 0.2 0.9 1.0 0.6 Key Point: Sales of most products remain healthy but vehicle and gasoline sales are in retreat. BNP Paribas Forecast: Auto Sales Fall in April US: Retail Sales (April) Release Date: Friday 14 May After soaring in March when generous discounts on vehicle prices boosted vehicle sales and virtually all other consumer goods performed strongly, consumers paused in April. Sales are forecast to decline 0.1% in April. The monthly pattern of sales in the past nine months has been one of an outsized m/m gain usually associated with public or private sales promotions followed by one or two months of lacklustre sales activity. The March and April sales performance again appears to fit this pattern. Vehicle sales are forecast to slump, falling by an expected 2.0% as unit volume sales decreased by 4.8% after jumping 13.5% in March. Retail sales ex vehicles are forecast to increase by a miniscule 0.2% in April. Gasoline prices fell again in April, this time by an estimated 2.6% after seasonal adjustment. Consequently, sales ex autos and gasoline are forecast to rise by 0.4% compared with 0.7% in March. Sales at department stores and apparel retailers are forecast to rise by 0.5%, approximately the same pace as in March. Sales at building materials stores should continue their robust revival, increasing by an estimated 2.5% after sales jumped by 3.1% in March. Sales are expected to be mildly positive in food, health care, sporting goods and electronics. Market Economics 7 May 2010 Market Mover 76 www.GlobalMarkets.bnpparibas.com
Key Data Preview Chart 13: US Industrial Production Source: Reuters EcoWin Pro Apr (f) Mar Feb Jan Ind. Prod. (% m/m) 0.8 0.1 0.3 1.0 Cap. Util (%) 74.0 73.2 73.0 72.7 BNP Paribas Forecast: A Spring Rebound US: Industrial Production (April) Release Date: Friday 14 May We look for industrial production to rise 0.8% in April after a more subdued 0.1% gain in March that was held down by a notable drop in utilities production as the weather warmed up. Our forecast would imply capacity utilization jumping to 74.0%, the highest reading since 2008. Industrial indicators including the ISM manufacturing index have continued to point to robust growth driven by global trade and an upturn in business spending. Data on motor vehicle production suggest this sector should help drive the strong reading in March. Utilities output should decline again as temperatures continued to be above seasonal norms in much of the country. Thus manufacturing output should be even stronger than the headline number and we anticipate a 0.9% gain after a similar increase a month earlier. Key Point: A strong reading is expected in industrial production in April Chart 14: US Present Conditions Compared Source: Reuters EcoWin Pro May p (f) Apr 2H Apr p Apr Mar Michigan Sentiment 71.0 74.9 69.5 72.2 73.6 Key Point: The preliminary University of Michigan index is likely to decline in May as the oil spill pushes gasoline prices higher and as the number of people who will exhaust their unemployment benefits is projected to start increasing. BNP Paribas Forecast: Decline US: Michigan Consumer Sentiment (May, preliminary) Release Date: Friday 14 May The University of Michigan Survey of Consumer Confidence index fell in April to 72.2 from 73.6 in March, although confidence improved in the second half of the month from a preliminary fall to 69.5 in the first half of April. We expect to see another decline in confidence at the beginning of May as the oil spill pushes gasoline prices higher and as the number of people who will exhaust their unemployment benefits is projected to increase in coming months. In addition, stocks’ gains appear to have lost momentum lately. Moreover, the latest Senior Loan Officer Survey showed a modest net fraction of banks continued to tighten standards and terms on credit card loans over the past three months. In the next few months, we expect confidence to remain on an upward trend as the labour market continues to improve. Five year ahead median inflation expectations, the figure tracked by Fed policymakers, is likely to remain at the lower end of its range or even fall below it, as Core CPI on a y/y basis continues to decelerate. Market Economics 7 May 2010 Market Mover 77 www.GlobalMarkets.bnpparibas.com
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Market Economics | Interest Rate St
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UK: all eyes on the election US: re
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Event response The ECB is being ove
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Eurozone Periphery: Compare and Con
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over 20% in Q1) and, last but not l
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Market Stress Charts • Signs of s
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Chart 7: Greek Bank CDS* 900 Greece
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• The plan also contains a number
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Germany: Downs and Ups • The impa
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Retail sales data from month to mon
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On inflation, the statement was als
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quarterly average of 2.7% in the fi
Page 25 and 26: US Credit: Still the Recovery’s B
Page 27 and 28: Japan: Rising Chance of Sales Tax H
Page 29 and 30: BNP Paribas Surprise Indicator •
Page 31 and 32: UK headline After surprising to the
Page 33 and 34: US: Supply Could Affect Swap Spread
Page 35 and 36: steep curve is typically associated
Page 37 and 38: decline. We continue to maintain ou
Page 39 and 40: Chart 12: 90-119 Day Dlq for FRE 90
Page 41 and 42: the gamma sector for some time now.
Page 43 and 44: EUR: Limited Nervousness at ECB Ten
Page 45 and 46: with the big redemption (EUR 17.7bn
Page 47 and 48: measures are not promptly taken to
Page 49 and 50: Table 1: BNP Paribas' Inflation For
Page 51 and 52: Table 3: BNP Paribas' Inflation For
Page 53 and 54: Table 1: BNP Paribas Carry Analysis
Page 55 and 56: What’s the call? It is relatively
Page 57 and 58: Update on FIN SEN and FIN SUB 5/10y
Page 59 and 60: Germany 10y: Within MT falling wedg
Page 61 and 62: Judging Currencies by Liquidity •
Page 63 and 64: type of regulation would reduce mon
Page 65 and 66: Euro Dives • The euro is collapsi
Page 67 and 68: Currency Spot Trade Recommendations
Page 69 and 70: Economic Calendar: 7 - 14 May (cont
Page 71 and 72: Key Data Preview Chart 1: US Payrol
Page 73 and 74: Key Data Preview Chart 5: UK Manufa
Page 75: Key Data Preview Chart 9: French GD
Page 79 and 80: Treasury and SAS Issuance Calendar
Page 81 and 82: Central Bank Watch Interest Rate EU
Page 83 and 84: FX Forecasts* USD Bloc Q2 '10 Q3 '1
Page 85: RESEARCH DISCLAIMERS: IMPORTANT DIS
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