20161103-穆迪服务-Overblown_Inflation_Fear_Roils_Markets_24页_520kb

Moody's Weekly Market Outlook Summary

Core Content

This document provides an analysis of credit markets and economic outlooks for the US, UK/Europe, and Asia-Pacific regions, focusing on inflation fears, bond market trends, and key economic indicators. It highlights the potential impact of rising Treasury yields, the state of housing and consumer price inflation, and the performance of major economies.

Main Views

• Overblown Inflation Fear:

  • Financial assets have performed poorly in the fourth quarter due to fears of an unwarranted rise in Treasury yields.
  • The 10-year Treasury yield increased from 1.63% to 1.81%, attributed to expectations of faster CPI inflation.
  • The document suggests that these fears may be exaggerated, as actual inflation data shows limited breadth and underlying deflationary pressures.

• Credit Market Trends:

  • Credit Spreads: Investment-grade spreads are expected to remain close to 137 bp, while high-yield spreads may rise to 575 bp by year-end 2016.
  • Bond Issuance: US dollar-denominated investment-grade bond issuance is projected to increase by 8.5% to a record $1.439 trillion in 2016, whereas high-yield bond issuance is expected to decline by 4.8% to $337 billion.
  • High-Yield Bonds: The recent sell-off may continue if Treasury yields rise without corresponding improvements in business profitability.

• Housing Market Impact:

  • Housing-sector share prices have plunged by -8.0% in the fourth quarter, reflecting concerns over higher mortgage yields.
  • The PHLX housing index has shown a weak response to lower mortgage rates, indicating limited upside for Treasury yields.
  • The core CPI's shelter cost component is expected to peak soon, with rent inflation likely to slow from 3.7% in Q3-2016.

• Consumer Price Inflation:

  • Core CPI inflation has risen slightly, but the increase is largely driven by medical-care and shelter costs.
  • Nonfood prices show deflationary trends, with durable goods prices down by -2.3% and nondurable goods by -1.3% in Q3-2016.
  • The document emphasizes that inflation is not broad-based and may not justify higher Treasury yields.

Key Information

US Outlook

• Employment Report (October): Expected to show 175,000 nonfarm payrolls and a 4.9% unemployment rate.
• Trade Balance (September): The goods trade deficit is expected to narrow.
• Consumer Sentiment (November Preliminary): Likely to remain little changed from October's low, with political uncertainty affecting spending decisions.

Europe Outlook

• Euro Zone GDP (Q3): Expected to grow at a broadly steady pace, with Germany growing at 0.3% q/q, France inching higher from stagnation, and Italy likely to stall.
• Unemployment (August): Expected to remain at 10.1%, with some improvement in periphery countries.
• Composite PMI (October): Rose to 53.7, showing resilience in the euro zone despite Brexit and market fears.

Asia-Pacific Outlook

• China:
  • October Foreign Trade: Likely to show a recovery in imports and consumer/producer price inflation.
  • Fixed Asset Investment (October): Expected to grow at 8%, with manufacturing investment improving.
  • Monetary Aggregates (October): Credit growth remains strong, driven by households and the housing market.
• India:
  • Consumer Price Index (October): CPI is expected to decelerate to 4% y/y due to a good monsoon and increased crop sowing.
  • Industrial Production (September): Likely to grow at 0.2% y/y, with weak external demand and nonperforming loans affecting growth.
• Malaysia:
  • GDP (Q3-2016): Expected to grow at 3.8% y/y, down from 4% in Q2-2016.
  • Industrial Production (September): Likely to rise to 5.6% y/y, driven by higher commodity prices and global tech demand.
• Thailand:
  • Monetary Policy (November): No expected changes, but the central bank may signal further rate cuts if the economic outlook worsens.
• Taiwan:
  • Foreign Trade (October): Expected to reach US$3.75 billion, supported by global demand for electronics.
  • Consumer Price Index (October): Inflation is expected to rise slightly to 0.5% y/y, with weak export demand and manufacturing pressures.
• South Korea:
  • Monetary Policy (November): The Bank of Korea is expected to keep rates at 1.25%, with inflation still below target.
• Japan:
  • Machinery Orders (September): Likely to rise 3.3% m/m, but factory conditions remain weak.
  • Industry Activity Indexes (September): Fell 3.1% y/y, reflecting weakness in the household sector.
• Australia:
  • Retail Sales (September): Expected to grow at 0.4%, with low interest rates supporting demand.
  • Housing Finance (September): Mortgages are expected to fall by -2.6%, though low rates are still supporting demand.
• New Zealand:
  • Monetary Policy (November): The Reserve Bank is expected to cut the overnight cash rate to 1.75% due to weak inflation and high kiwi.

Summary Table