20141204-穆迪服务-Corporate_Credit_Disputes_the_Equity_Market_on_Risk_25页_474kb

Moody's Weekly Market Outlook Summary

Core Content

Moody's Weekly Market Outlook provides insights into credit and equity markets, economic forecasts, and key indicators across the US, UK/Europe, and Asia-Pacific regions. The report highlights the evolving dynamics between corporate credit and equity markets, with corporate credit becoming more risk averse and equity markets showing greater tolerance for risk.

Main Points

• Corporate Credit vs. Equity Risk Tolerance: Corporate credit markets have become more risk averse, with high yield bond spreads widening. In contrast, equity markets are more tolerant of risk, with core profits as a percentage of market value of common stock decreasing. This divergence suggests that equity markets may be overvalued relative to credit market signals.

• High Yield Bond Spread: The high yield bond spread was at 380 bp in Q3 2014, up from a 376 bp average in the same period. It is expected to dip to 450 bp by year-end 2014. The EDF/NAI model indicates that the market's pricing of high yield bonds is in line with expectations, suggesting that the market is not overly harsh in its pricing.

• Equity Market Overvaluation: The overvaluation of equities is evident from the significant rise in market value of US common stock (cumulative 99% increase from 1996 to 2000), which outpaced the decline in core profits and the rise in default rates. The report suggests that equity markets may soften if the US average high yield EDF metric rises above 4%.

• Base Metals and Global Growth: The base metals price index indicates a subpar global business upturn, especially for emerging markets. The index is a better predictor of near-term global growth than the composite PMI index. The report forecasts a 3.4% growth rate for the global economy in 2015, which is below the historical average of 4.3%.

• Treasury Bond Yields and Housing Recovery: The report notes that Treasury bond yields will respond to the needs of housing recovery. It forecasts a 3.1% average 10-year Treasury yield for the second half of 2015, implying an improved outlook for employment and income.

• Regional Outlook:

  • United States: The labor market remains on track, with nonfarm payrolls expected to grow by 230,000 in November. Retail sales are forecast to rise modestly, but the trade balance is expected to remain negative. The Producer Price Index (PPI) is expected to show little cost pressure, and the University of Michigan Consumer Confidence is projected to reach a seven-year high.

  • Europe: The euro zone manufacturing PMI fell to 50.1 in November, indicating little improvement in business conditions. Germany's industrial production is expected to contract slightly in October, while France's fiscal deficit is forecast to widen. The UK's housing price index is expected to rise, but the trade deficit is likely to widen. Deflationary pressures persist in several European countries, including Germany, France, and Spain.

  • Asia-Pacific: China's economy is expected to run below potential, with weak exports and strong global demand for consumer electronics. The trade surplus remains high, but inflation remains low due to oversupply of industrial goods and falling fuel prices. The Bank of Korea is expected to cut its policy rate to a record low, while New Zealand and Indonesia will keep rates unchanged. Japan's GDP is forecast to contract by 0.4% in Q3 2014, with weak aggregate demand and inventory issues contributing to the slowdown.

Key Information

• Credit Market Trends:

  • Investment grade bond issuance is expected to rise by 1% in 2014 to $1.135 trillion.
  • High yield bond issuance is forecast to increase by 1% in 2014 to $434 billion.
  • The US high yield default rate is expected to remain at 1.9% in October and average 2.2% for 2015.

• Equity Market Dynamics:

  • The ratio of core profits to the market value of US common stock has fallen from 10.1% to 9.8%.
  • The report suggests that equity markets may be overvalued compared to credit market signals.

• Economic Forecasts:

  • Global economic growth is forecast to be 2.5% in 2014 and 3.1% in 2015.
  • The US economy is expected to grow at 2.0% in 2015, while emerging markets are projected to grow at 4.3%.

• Market Indicators:

  • The EDF/NAI model is a strong predictor of high yield bond spreads, with the current spread at 480 bp close to its predicted value of 460 bp.
  • The base metals price index is a useful indicator of near-term global economic activity.

• Regional Reports:

  • US: Expectations for nonfarm payrolls, retail sales, and housing prices are positive, but trade deficits and weak PPI readings suggest continued economic challenges.
  • Europe: Weak domestic and external demand, deflationary pressures, and political tensions are expected to weigh on industrial production and trade balances.
  • Asia-Pacific: China's economy is expected to remain below potential, with weak exports and strong global demand for electronics. Japan and South Korea face weak GDP and employment growth, respectively, while Australia and the Philippines show mixed signals.

Summary

Moody's Weekly Market Outlook emphasizes the divergent trends in corporate credit and equity markets, with corporate credit becoming more risk averse and equity markets more tolerant. The report also provides a detailed analysis of economic indicators and forecasts across the US, Europe, and Asia-Pacific, highlighting the challenges faced by the global economy, particularly in the context of weak growth and deflationary pressures. The EDF/NAI model is used to predict high yield bond spreads, and the base metals price index is noted as a reliable near-term indicator of global economic activity.