MARKET MOVER - BNP PARIBAS - Investment Services India

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Key Data Preview 12.5 10.0 7.5 5.0 2.5 0.0 Chart 5: Eurozone M3 & Lending (% y/y) Private Sector Bank Lending M3 -2.5 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Source: Reuters EcoWin Pro % y/y Aug (f) Jul Jun May M3 0.4 0.2 0.2 0.0 M3 (3-mth Avg.) 0.2 0.1 0.0 -0.1 Private Sector Loans 1.2 0.9 0.5 0.2 Key Point: Rates of growth in M3 and bank lending remain low but have started to pick up. BNP Paribas Forecast: Signs of Life Eurozone: Monetary Developments (August) Release Date: Monday 27 September At 0.2% in July, the y/y rate of change in M3 was roughly half a percentage point above its cycle low in February. We forecast a further acceleration in August and given that the base effects over the remainder of the year are favourable, the y/y acceleration has further to go. The differential between narrow and broad money growth remains unusually wide but the gap is closing. The y/y rate of increase in M1, having been in double digits for almost a year from mid-2009, slowed to around 8% y/y in July. The y/y rate of change in M3 minus M2 has been negative since early 2009, with the relative steepness of yield curves having encouraged purchases of longer-term assets which are not captured in M3. This effect has started to diminish as yield curves have flattened. As with M3, the y/y rate of increase in bank lending to the private sector remains very low but has picked up in recent months. August’s 0.9% y/y growth rate was the highest in over a year. A further acceleration is forecast in August. Loan growth to households is the main reason for the pick up. It has been improving since October last year, with the y/y rate of change in July, of 2.8%, up by three percentage points from its cycle low in September 2009. Bank lending growth to non-financial corporates continues to lag. Chart 6: French Sales of Manuf. Goods (3m avg) 12.5 10.0 Retail Sales of Manuf. Goods (including cars, Volume % y/y) 7.5 5.0 2.5 0.0 -2.5 -5.0 03 04 05 06 07 08 09 10 Source: Reuters EcoWin Pro New Car Registrations (% y/y, RHS) Volume index Aug (f) Jul Jun Aug 09 SA-WDA % m/m -0.5 1.6 -1.4 -0.9 % y/y 1.4 1.0 -1.9 -0.7 Key Point: July should be much stronger than August. But the underlying trend is subdued. 50 40 30 20 10 0 -10 -20 -30 BNP Paribas Forecast: Volatile France: Hh Consumption of Manuf. Goods (Jul.-Aug.) Release Date: Tuesday 28 September The raw data are more difficult to collect in August, so INSEE publishes the July and August retail sales figures together in September. Car sales, which are included in the retail sales data, are the main source of short-term volatility. Car registrations declined in both July and August, more in the former month. The progressive ending of the sales incentive caused a sharp decline through H1 2010; it seems we are now close to the low point, although the y/y rate will continue to plunge because of the base effect. Sales of other manufactured goods were reportedly quite dynamic during the seasonal sales in July. Tourism activity was also relatively strong in July after a poor performance in June. As a result, we estimate retail sales jumped in July, fully correcting the June decline. However, sales probably declined again in August. Such a pattern would still open the door for a solid gain in Q3. Retail sales in July and August are among the first hard data for that quarter, allowing us to have a clearer view of how much growth will decelerate H2 2010 after a respectable 0.6% q/q GDP increase in Q2. Market Economics 23 September 2010 Market Mover 56 www.GlobalMarkets.bnpparibas.com
Key Data Preview Chart 7: US Consumer Confidence Source: Reuters EcoWin Pro Sep (f) Aug 2H Sep p Aug Conference Board 52.0 53.5 Michigan Sentiment 67.3 68.0 66.6 68.9 BNP Paribas Forecast: Still Sluggish US: Consumer Confidence (September) Release Date: Tuesday 28 September The Conference Board Index of Consumer Confidence is expected to edge down to 52.0 in August after improving 1.5 points to 53.5 in the previous month. The University of Michigan index of consumer confidence declined in the beginning of September to 66.6 from 68.9, the lowest reading for more than a year. Leading the decline, future conditions dropped to 59.1, the lowest reading since March 2009, suggesting consumers are becoming pessimistic about future business prospects, jobs and family income. Recent weakness is particularly worrying as the stock market has rebounded significantly from its May/June crash, oil prices have been stable and corporate earnings reports have been upbeat about Q2 results (which have generally beat analysts’ estimates). We expect the recovery to continue and payrolls to keep growing, although at a moderate pace. Therefore, we should see confidence stabilise at current depressed levels. Key Point: The Conference Board Index of consumer confidence is expected to edge down in September. Source: Reuters EcoWin Pro Chart 8: German CoL % Sep (f) Aug Jul Jun CoL m/m -0.2 0.0 0.3 0.1 CoL y/y 1.2 1.0 1.2 0.9 HICP m/m -0.1 0.1 0.2 0.0 HICP y/y 1.3 1.0 1.2 0.8 Key Point: Energy price base effects should help drive headline inflation higher in September. BNP Paribas Forecast: Energy Base Effects Germany: CoL (September, preliminary) Release Date: Tuesday 28 September In August, energy price base effects pushed down inflation despite stronger food and core inflation. In September, energy base effects will be in play once again. A 1.5% m/m decline in energy prices last September will not be repeated this month, mechanically pushing energy inflation higher. Food inflation should also rise further on the month. The boost from food price base effects is now past, but we should increasingly begin to see pass-through from the recent soft commodity price shock to food prices in the coming months. Core inflation should creep higher on modest gains in clothing and non-energy transport price inflation, though rounded it should remain at 0.6%. Looking beyond August, German headline inflation is likely to trend higher over the remainder of the year, but is not expected to rise above 2%. Core inflation is likely to remain subdued, although with consumption in Germany gaining momentum, we do not expect the discount to the euro area average to continue for long. Market Economics 23 September 2010 Market Mover 57 www.GlobalMarkets.bnpparibas.com
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Euromoney Interest Rates Survey 201
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ECB on a different page… …but i
Page 5 and 6: developments and is prepared to pro
Page 7 and 8: and property tax payments, dropped
Page 9 and 10: directly to effect outright purchas
Page 11 and 12: Services also on the slide The ‘f
Page 13 and 14: inflation rate is calculated exclud
Page 15 and 16: closer to a more normal level” to
Page 17 and 18: point advance in the June Tankan. P
Page 19 and 20: US: Belly of the Curve is Rich, but
Page 21 and 22: US: A Carry Trade with Extra Potent
Page 23 and 24: MBS: Remain Underweight, GNM CBRs U
Page 25 and 26: EUR: Re-Enter Flatteners on 5y/10y
Page 27 and 28: EGBs: Market Update & Top Trade Ide
Page 29 and 30: EUR Covered Bonds: Market Update
Page 31 and 32: GBP Curve Opportunities Update •
Page 33 and 34: Table 1: BNP Paribas' Inflation For
Page 35 and 36: Table 3: BNP Paribas' Inflation For
Page 37 and 38: Table 1: BNP Paribas Carry Analysis
Page 39 and 40: have been happy to buy the roll to
Page 41 and 42: Technical Analysis - Interest Rates
Page 43 and 44: Trade Reviews Options, Money Market
Page 45 and 46: ond market attracted huge swathes o
Page 47 and 48: warning to Greek banks that it migh
Page 49 and 50: Chart 2: EUR/SEK - major support be
Page 51 and 52: Economic Calendar: 24 Sep - 1 Oct G
Page 53 and 54: Economic Calendar: 24 Sep - 1 Oct (
Page 55: Key Data Preview Chart 3: US ISM Po
Page 59 and 60: Key Data Preview Chart 11: Japanese
Page 61 and 62: Key Data Preview Chart 7: UK CIPS M
Page 63 and 64: Economic Calendar: 4 - 29 October 4
Page 65 and 66: Next week's T-Bills Supply Date Cou
Page 67 and 68: Economic Forecasts GDP Year 2010 (%
Page 69 and 70: Market Coverage Market Economics Pa
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MARKET MOVER - BNP PARIBAS - Investment Services India

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