MARKET MOVER - BNP PARIBAS - Investment Services India

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FMCI Update • Financial and monetary conditions tightened in most of the major advanced economies during July. • The slower pace of increase in equities (in % y/y terms) was one of the main drivers of the tightening of conditions over the month. • Among the major advanced economies, the US FMCI points to the loosest financial and monetary conditions and the Swedish FMCI, the tightest. • Meanwhile, in Asia, conditions loosened significantly in China. In India, conditions loosened slightly and in South Korea they remained broadly stable. Table 1: FMCI (Standard Deviations From Avg) Low Jul Jun May Apr Mar Since 1990 US -2.5 -2.5 -2.4 -2.0 -1.7 -2.5 Eurozone 0.0 -0.1 -0.2 0.0 -0.2 -2.3 Japan -0.7 -1.0 -1.1 -1.1 -0.4 -2.2 UK -1.2 -1.7 -1.7 -1.7 -1.4 -3.3 Sweden 1.3 0.9 1.1 1.1 1.3 -2.5 China - -1.2 -0.5 -0.6 -0.8 -2.5 India - 0.1 0.3 0.1 0.8 -2.7 S. Korea - -0.5 -0.5 -0.5 -1.0 -2.3 Source: BNP Paribas Chart 1: US FMCI US • The US FMCI was unchanged during July, standing 2.5 standard deviations below the longterm average. • The depreciation relative to trend in the effective USD exchange rate and a narrowing in the Ted spread proxy was offset by a slower pace of increase in equities (in % y/y terms) and a narrowing in the 10-year/2-year spread. • At -2.5, the US FMCI remains at its all-time low and points to the loosest financial and monetary conditions among the G7 economies. Source: BNP Paribas SD from average Chart 2: Eurozone FMCI Eurozone • The eurozone index rose by 0.1 of a point during July, to stand in line with its long-term average. • The depreciation relative to trend in the effective EUR exchange rate was more than offset by a narrowing in the 10-year/2-year spread and a slower pace of increase in equities (in % y/y terms). • The eurozone FMCI now points to neutral financial and monetary conditions. At its current level, it is 1.4 points above its recent low in March 2010. Source: BNP Paribas SD from average Gizem Kara/Mole Hau 4 August 2011 Market Mover 28 www.GlobalMarkets.bnpparibas.com
Japan • The Japanese FMCI rose by 0.3 of a point during July, to stand 0.7 deviations below the long-term average. • The appreciation relative to trend in the effective JPY exchange rate was the main driver of the tightening over the month. • The Japanese FMCI points to looser than average conditions over the past nine months. At -0.7, the index is 0.4 of a point higher than its recent low in May. Chart 3: Japanese FMCI Source: BNP Paribas SD from average UK • The UK FMCI rose by 0.5 of a point in July, to stand 1.2 standard deviations below the longterm average. • This reflected an appreciation relative to trend in the effective GBP exchange rate and a narrowing in the 10-year/2-year spread. • At -1.2, the UK FMCI is 2.1 points higher than the March 2010 low and points to the third-loosest financial and monetary conditions among the G7 economies, after the US and Canada (the Canadian FMCI stood 1.7 standard deviations below the long-term average in July). Chart 4: UK FMCI Source: BNP Paribas SD from average Sweden • The Swedish FMCI rose by 0.4 of a point, to stand 1.3 standard deviations above the longterm average in June. • The widening in the Ted spread proxy, higher real policy rate and a slower pace of increase in equities (in % y/y terms) were the main drivers of the tightening over the month. • At 1.3, the index is now back to its level in March and points to the tightest financial and monetary conditions among the main advanced economies. Chart 5: Swedish FMCI Source: BNP Paribas SD from average Gizem Kara/Mole Hau 4 August 2011 Market Mover 29 www.GlobalMarkets.bnpparibas.com
Page 1 and 2: Market Economics | Interest Rate St
Page 3 and 4: momentum is not something we would
Page 5 and 6: particular, estimates of consumer s
Page 7 and 8: much higher inflation and inflation
Page 9 and 10: US: GDP Revisions Paint Sobering Pi
Page 11 and 12: ECB: Changing Tack • The use of u
Page 13 and 14: uncertainty and market turbulence i
Page 15 and 16: 10-year maturity and by about 150bp
Page 17 and 18: Eurozone: Weaker for Longer • The
Page 19 and 20: This is a bigger downward revision
Page 21 and 22: Japan: Rebasing to Slash July Core
Page 23 and 24: Japan: IP Recovering But Outlook Un
Page 25 and 26: BNP Paribas Surprise Indicator •
Page 27: UK headline UK economic data were,
Page 31 and 32: US: Taking Stock…Reality Sinks In
Page 33 and 34: In contrast, the 1y inflation swap
Page 35 and 36: US: Subtle Changes in the Short-End
Page 37 and 38: US: Short-Vol Strategy on 10y10y
Page 39 and 40: EMU Debt Monitor: CDS Analysis Char
Page 41 and 42: EMU Debt Monitor: Trade Ideas • B
Page 43 and 44: EMU Debt Monitor: Redemptions EGB M
Page 45 and 46: Global Inflation Watch Eurozone HIC
Page 47 and 48: Table 2: BNP Paribas' Inflation For
Page 49 and 50: Inflation: Beta Hedge the Uncertain
Page 51 and 52: US: TIPS Breakevens Look Vulnerable
Page 53 and 54: Table 1: BNP Paribas Carry Analysis
Page 55 and 56: Germany 10y: Down oriented again be
Page 57 and 58: CHF: Rise to Persist Despite SNB’
Page 59 and 60: Why EURUSD May Stay in a Range •
Page 61 and 62: Economic Calendar: 5 - 12 August GM
Page 63 and 64: Key Data Preview Chart 1: US Claims
Page 65 and 66: Key Data Preview Chart 5: Japanese
Page 67 and 68: Key Data Preview Source: Reuters Ec
Page 69 and 70: Treasury and SAS Issuance Calendar
Page 71 and 72: Central Bank Watch Interest Rate EU
Page 73 and 74: Market Coverage Market Economics Pa

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