3. April 2019
Key highlights from Torsten Slok’s, Chief Economist, Monthly Chart Book detailing macro and economic drivers impacting markets today. [mehr]
Slide 1 April Economic Chart Book (Snapshot) Torsten Slok, Ph.D. Chief Economist Managing Director 60 Wall Street New York, New York 10005 Tel: 212 250 2155 Torsten.Slok@db.com April 2019 DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1 MCI(P) 091/04/2018. Matthew Barnard Associate Director of N.A. Equity Research Managing Director 60 Wall Street New York, New York 10005 Tel: 212 - 250 - 5111 Matthew.S.Barnard@db.com Deutsche Bank Research Deutsche Bank Research 1 Torsten Slok, torsten.slok@db.com +1 212 250 - 2155 April 2019 April Economic Chart Book (Snapshot) Enclosed are select charts from our April Economic Chart Book discussing: • Global Economic Slowdown or Green Shoots? • Global Interest Rates • US GDP and Economic Outlook • The US Labor Market & Continuing Claims • The US Housing Market • Consumer Credit Spreads & Supply Link to Torsten Slok’s full April Economic Chart Book can be found here . Deutsche Bank Research 2 Torsten Slok, torsten.slok@db.com +1 212 250 - 2155 April 2019 Chinese data improving China : manufacturing PMI vs manufacturing new export orders 33 38 43 48 53 58 0910111213141516171819 Index 33 38 43 48 53 58 Index Official PMI manufacturing headline Manufacturing new export orders Source: CFLP/NBS, Haver Analytics, DB Global Research Deutsche Bank Research 3 Torsten Slok, torsten.slok@db.com +1 212 250 - 2155 April 2019 Euro area PMI points to ECB easing Source: ECB, IHSM, Haver Analytics, DB Global Research -75 -50 -25 0 25 50 9901030507091113151719 bps 36 40 44 48 52 56 60 64 Index Change in ECB's refinancing rate (ls) Euro area manufacturing PMI new orders (rs) Deutsche Bank Research 4 Torsten Slok, torsten.slok@db.com +1 212 250 - 2155 April 2019 German 10 - year rate now below Japan’s 10 - year rate 10 year benchmark government bond yield -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 20062007200820092011201220132015201620172019 % -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 % Germany Japan Source: Bbk, MoFJ, Haver Analytics, DB Global Research Deutsche Bank Research 5 Torsten Slok, torsten.slok@db.com +1 212 250 - 2155 April 2019 The credit cycle is leading the economic cycle. Economic slowdown risk is rising Source: BLS, ABA, Haver Analytics, DB Global Research 2 4 6 8 10 12 657075808590950005101520 % 1.2 1.6 2.0 2.4 2.8 3.2 3.6 % Unemployment rate (ls) Delinquency rate on consumer loans (rs, 12m lead) Note: Composite consumer loans consists of eight loan types: personal, automobile direct & indirect, mobile homes, recreational vehicles, marine financing loans, property improvement and home equity and second mortgage loans. 4 years 5 years 1 year ? Deutsche Bank Research 6 Torsten Slok, torsten.slok@db.com +1 212 250 - 2155 April 2019 Has the unemployment rate bottomed? A rising unemployment rate will magnify household balance sheet problems US Continued jobless claims 1600 2200 2800 3400 4000 4600 5200 101112131415161718 '000s 1600 2200 2800 3400 4000 4600 5200 '000s Source: Department of Labor, Haver Analytics, DB Global Research Deutsche Bank Research 7 Torsten Slok, torsten.slok@db.com +1 212 250 - 2155 April 2019 US fixed income supply 0.0 0.5 1.0 1.5 2.0 2.5 201720182019*202020212022 Trillion $ 0.0 0.5 1.0 1.5 2.0 2.5 Trillion $ CBO baseline deficitFed SOMA Redemptions IG bonds maturing HY bonds maturing Source: Steven Zeng, Michal Jezek, Standard & Poor’s Financial Services LLC, DB Global Research Stock of risk - free assets growing dramatically: Rise in US Treasury supply from tax cuts and Fed balance sheet rundown will crowd out investments in IG, HY, and equities US bond supply rising from $1trn in 2017 to $1.6trn in 2018 and $2trn in 2019 Notes: Deficit projections based on the January 2019 CBO Outlook and are adjusted from fiscal year basis to calendar year basis. *If the Fed stops the runoff in October 2019 Deutsche Bank Research 8 Torsten Slok, torsten.slok@db.com +1 212 250 - 2155 April 2019 Share of market value in Bloomberg Barclays USD IG 0 25 50 75 100 909294969800020406081012141618 % 0 25 50 75 100 % BBB AAA AAA 50% of the IG index is BBB Source: Bloomberg Finance LP, DB Global Research Deutsche Bank Research 9 Torsten Slok, torsten.slok@db.com +1 212 250 - 2155 April 2019 BBB is a growing problem Source: Bloomberg Finance LP, DB Global Research Market cap 0 1 2 3 4 5 6 7 20082009201020112012201320142015201620172018 $, trln 0 1 2 3 4 5 6 7 $, trln Aaa Aa A Baa Ba B Caa CaNon-rated Deutsche Bank Research 10 Torsten Slok, torsten.slok@db.com +1 212 250 - 2155 April 2019 Torsten Slok, Ph.D. • Chief Economist, Managing Director • Deutsche Bank Securities, Inc.  Torsten Slok joined Deutsche Bank Securities in the fall of 2005.  Mr. Slok’s Economics team has been top - ranked by Institutional Investor in fixed income and equities since 2010. Slok currently serves as a member of the Economic Club of New York  Prior to joining the firm, Mr. Slok worked at the OECD in Paris in the Money and Finance Division and the Structural Policy Analysis Division. Before joining the OECD he worked for four years at the IMF in the Division responsible for writing the World Economic Outlook and the Division responsible for China, Hong Kong, and Mongolia.  Mr. Slok studied at University of Copenhagen and Princeton University. He has published numerous journal articles and reviews on economics and policy analysis, including in Journal of International Economics, Journal of International Money and Finance, and The Econometric Journal. Deutsche Bank Research 11 Torsten Slok, torsten.slok@db.com +1 212 250 - 2155 April 2019 04/04/2019 00:00:40 2010 DB Blue template Appendix 1 Important Disclosures *Other Information Available upon Request Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report. Torsten Slok Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources . For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look - up page on our website at https://research.db.com/Research/Disclosures/CompanySearch . Aside from within this report, important conflict disclosures can also be found at https://research.db.com/Research/Topics/Equities?topicId=RB0002 under the “Disclosures Lookup” and “Legal” tabs . Investors are strongly encouraged to review this information before investing . 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Macroeconomicfluctuationsoftenaccountformostoftherisksassociatedwithexposurestoinstrumentsthatpromisetopayfixedorvariableinterestrates.Foraninvestorwhoislongfixed-rate instruments(thusreceivingthesecashflows),increasesininterestratesnaturallyliftthediscountfactorsappliedtotheexpectedcashflowsandthuscausealoss.Thelongerthematurityofacertain cashflowandthehigherthemoveinthediscountfactor,thehigherwillbetheloss.Upsidesurprisesininflation,fiscalfundingneeds,andFXdepreciationratesareamongthemostcommonadverse macroeconomicshockstoreceivers.Butcounterpartyexposure,issuercreditworthiness,clientsegmentation,regulation(includingchangesinassetsholdinglimitsfordifferenttypesofinvestors), changesintaxpolicies,currencyconvertibility(whichmayconstraincurrencyconversion,repatriationofprofitsand/orliquidationofpositions),andsettlementissuesrelatedtolocalclearinghousesare alsoimportantriskfactors.Thesensitivityoffixed-incomeinstrumentstomacroeconomicshocksmaybemitigatedbyindexingthecontractedcashflowstoinflation,toFXdepreciation,ortospecified interestrates–thesearecommoninemergingmarkets.Theindexfixingsmay–byconstruction–lagormis-measuretheactualmoveintheunderlyingvariablestheyareintendedtotrack.Thechoice oftheproperfixing(ormetric)isparticularlyimportantinswapsmarkets,wherefloatingcouponrates(i.e.,couponsindexedtoatypicallyshort-datedinterestratereferenceindex)areexchangedfor fixedcoupons.FundinginacurrencythatdiffersfromthecurrencyinwhichcouponsaredenominatedcarriesFXrisk.Optionsonswaps(swaptions)theriskstypicaltooptionsinadditiontotherisks relatedtoratesmovements. 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