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 7: Eurozone M3 & Bank Lending Bank Lending to Private Sector M3 (% y/y) -2.5 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Sources: Reuters EcoWin Pro % y/y Aug (f) Jul Jun May M3 3.2 3.8 3.2 3.1 M3 (3-mth avg.) 3.4 3.4 3.0 3.0 Private-Sector Loans -0.2 0.1 -0.2 -0.1 Key Point: The growth rate in M3 has picked up, but bank lending to the private sector remains very weak. BNP Paribas Forecast: Still Soft Eurozone: Monetary Developments (August) Release Date: Thursday 27 September The y/y growth rate in M3 has accelerated markedly in recent months (see chart). The 3.8% y/y rise in July was the highest in more than three years. The principal reason is the pickup in the y/y growth rate of overnight deposits, which almost trebled in the period from April to July (rising to 4.5%). In turn, this is a reflection of a preference for liquidity in an environment of high uncertainty and low interest rates. The divergence between growth in M3 and bank lending to the private sector has become more pronounced (see chart). The latter remains weak. The key reason for the divergence is the pickup in bank lending to governments (i.e. sovereign debt purchases), which expanded by 9.4% y/y in July. The y/y rate of change in bank lending to the private sector has been hovering around zero since the spring. While the ECB’s Bank Lending Survey has shown a moderation in the tightening of credit conditions, the demand for loans remains weak across all sectors. The y/y rate of change in mortgage lending to households was stable at just 0.8% in July, well below the peak (of 4.5% in March 2011). The y/y change in consumer credit has been sub-zero (-2.0% in July) for more than three years. Lending growth to non-financial corporates also contracted in y/y terms in July (-0.4%) for the second straight month. Chart 8: Eurozone ESI Country Comparison Sources: Reuters EcoWin Pro Sep (f) Aug Jul Jun Economic Sentiment 85.7 85.8 87.9 89.9 Industry Sentiment -15.0 -15.3 -15.1 -12.8 Services Sentiment -10.3 -10.8 -8.5 -7.4 Consumer Confidence -24.0 -24.6 -21.5 -19.8 BNP Paribas Forecast: Moderate Decline Eurozone: Economic Sentiment Indicator (September) Release Date: Thursday 27 September Economic sentiment in the eurozone continued to deteriorate in August. The country breakdown showed that sentiment deteriorated most in the ‘big’ eurozone countries (Spain, Italy and Germany), with France a notable exception. Sector-wise, the deterioration was strongest in the retail trade and construction sector, as well on the consumer side. In September, we will take a careful look at the country breakdown once again. We expect the aggregate headline figure to remain nearly unchanged for the eurozone, but the trends in the individual countries could differ once again. The theme of recent months has been the ‘catch-down’ in sentiment in Germany, with the deterioration driven primarily by a weak industry sector. Here, growth prospects have been significantly affected by weakening new orders. Industrials had relied heavily on a backlog of work to smooth activity in the sector. But although German sentiment has weakened sharply of late, it still remains one of the most buoyant in the eurozone, suggesting that although growth may slow in the eurozone’s biggest economy, it is still set to outperform. Key Point: Economic sentiment should stabilise on aggregate in the eurozone, but the disparities between individual countries will persist. Market Economics 20 September 2012 Market Mover 48 www.GlobalMarkets.bnpparibas.com
Key Data Preview Chart 9: German ESI Employment Expectations Sources: Reuters EcoWin Pro Unemployment Sep (f) Aug Jul Jun Change (‘000) 2 9 9 7 Rate (%)) 6.8 6.8 6.8 6.8 BNP Paribas Forecast: Easing Pressure Germany: Labour-Market Data (September) Release Date: Thursday 27 September The tightness of the German labour market is the key driver of the relatively stable consumer confidence in Germany. Confidence in the employment situation, coupled with higher real disposable income, is stabilising consumer demand and contributing to growth. However, the survey data suggest that hiring is gradually grinding to a halt. The PMI employment components have been oscillating around 50 for several months, while the European Commission’s economic sentiment subcomponents have also been signalling slowing labour-market dynamics. Consequently, German unemployment has risen for five months in a row now, and we expect another moderate increase in September, though this will not yet affect the unemployment rate. Looking ahead, we do not expect a major deterioration. Conditions will loosen compared with a year ago, but will remain relatively tight on an historical basis. Key Point: Tensions in the labour market will ease, but overall, unemployment will remain at historically low levels. 6 4 2 0 -2 -4 Chart 10: Portuguese Economic Climate GDP % y/y Economic Climate Indicator ( 3mth Avg) -6 Mar-98 Sep-99 Mar-01 Sep-02 Mar-04 Sep-05 Mar-07 Sep-08 Mar-10 Sep-11 Sources: Reuters EcoWin Pro % y/y Sep (f) Aug Jul Jun Economic Climate -4.2 -4.0 -4.4 -4.6 BNP Paribas Forecast: Further Contraction Portugal: Economic Climate (September) Release Date: Thursday 27 September Portugal’s economic climate indicator is likely to fall to -4.2 in September from -4.0 in August, by our estimates. This will be the first pickup in the pace of contraction since January. This bigger fall will come mostly on the back of increasing uncertainty over the need for further austerity measures in the last quarter of 2012 or early 2013. The deceleration in exports due to a contraction in economic activity in Portugal’s main eurozone trading partners (mainly Spain) should also take its toll and contribute to the decline in Portuguese economic activity The economic climate indicator suggests a slower pace of decline in GDP in Q3 after an expected contraction of 1.2% q/q in Q2. In Q4, we expect the weakening to continue, though at a faster pace, as wage and pension cuts, in particular, are felt later in the year. Key Point: Contraction to intensify has exports are likely to slow and domestic demand is likely to fall further. Market Economics 20 September 2012 Market Mover 49 www.GlobalMarkets.bnpparibas.com
Page 1 and 2: Market Economics | Interest Rate St
Page 3 and 4: Spain set to present its new budget
Page 5 and 6: The methodology All of the above in
Page 7 and 8: Ireland: What to Expect When You Ar
Page 9 and 10: Spain: Inching Closer to a Request
Page 11 and 12: UK Inflation: No Pressure • UK in
Page 13 and 14: US Housing: New Channels for Policy
Page 15 and 16: Japan: The Eastern Fiscal Cliff •
Page 17 and 18: an agreement that all budget-relate
Page 19 and 20: This section is classified as non-o
Page 33 and 34: Table 1: BNP Paribas' Inflation For
Page 35 and 36: Table 3: BNP Paribas' Inflation For
Page 43 and 44: Economic Calendar: 21 - 28 Sep (con
Page 45 and 46: Key Data Preview Chart 1: UK Cumula
Page 47: Key Data Preview Chart 5: German He
Page 51 and 52: Key Data Preview Chart 13: Japanese
Page 53 and 54: Key Data Preview 7000 6500 6000 550
Page 55 and 56: Treasury and SAS Issuance Calendar
Page 57 and 58: Central Bank Watch Interest Rate EU
Page 61: For Production and Distribution, pl

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