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Economics Review and Outlook 2014
 

Economics Review and Outlook 2014

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Bloomberg Brief produces high quality financial newsletters. Attached is our year end / outlook for Economics with our compliments. Our newsletters are subscription only but you can take a trial via ...

Bloomberg Brief produces high quality financial newsletters. Attached is our year end / outlook for Economics with our compliments. Our newsletters are subscription only but you can take a trial via our website bloombergbriefs.com

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    Economics Review and Outlook 2014 Economics Review and Outlook 2014 Document Transcript

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    • 01.15.14 www.bloombergbriefs.com Overview  2 Bloomberg Brief | Economics 2013 Global Review Commentary by Michael McDonough, Bloomberg Economist Recovery in Developed Markets to Dominate in 2014 Abenomics, stability in the euro zone and a potentially lasting U.S. economic recovery have renewed investors’ euphoria in the developed world, albeit at the expense of emerging markets. Emerging market equities are experiencing their longest streak of underperformance against their G-7 counterparts since the mid to late 1990s on an annual basis, as measured by their MSCI indexes. The MSCI G-7 equity index finished 2013 up about 25 percent year on year as the MSCI emerging market index fell 5 percent. That’s the largest spread since April 1999. While Abenomics likely will face longterm challenges in 2014, the first two arrows of Japan’s stimulus program — fiscal stimulus and monetary easing — have already been implemented and should continue to contribute to Japanese growth and a weaker yen. In Europe, while many challenges remain, a period of stability appears likely to persist, with at least modest growth ahead for many euro zone countries in 2014. In the U.S., a period of rapid productivity growth and slow hiring after the financial crisis has likely stretched companies’ current labor forces as far as they can be stretched. Accelerated hiring as growth continues to pick up is the probable result, helping to reinforce a positive feedback loop. In fact, in the U.S., most year-end data came in well above economists’ forecasts {ECSU<GO>}. U.S. Federal Reserve Chairman Ben Bernanke may have signaled the death knell for many emerging markets on May 22 when he first indicated that Fed tapering of its asset purchase program was in the offing. Following this announcement, the U.S. 10-year curve steepened substantially with long-end rates rising. The U.S. 10-year yield, which hit its one-year low of 1.6255 percent on May 2, was just shy of 3 percent immediately prior to the Fed’s September meeting, at which the FOMC unexpectedly delayed its decision to taper. Emerging Market Growth Prospects Dwindling 0.2 G10 Europe Asia EMEA LATAM World 0.0 -0.2 -0.4 -0.6 -0.8 -1.0 -1.2 Jan-13 * Bernanke Indicates Tapering Mar-13 Source: Bloomberg May-13 Jul-13 This period of rising U.S. rates led to a sharp deterioration of international financial conditions. Riskier emerging markets saw substantial capital outflows, especially from countries with high current account deficits that are dependent on foreign capital for growth {WFII<GO>}. Countries in this category that saw substantial currency depreciation include India, Brazil, Indonesia and Turkey. At the same time, stocks rallied and economic prospects held steady or improved in the developed markets, as measured by Bloomberg’s consensus 2014 real GDP forecasts {ECFC<GO>}. In contrast, emerging markets stocks sank as growth prospects dwindled. The largest decline occurred in Latin America, where the 2014 GDP growth consensus stood at 2.89 percent as of Jan. 7, down from 4 percent a year earlier. Developed Europe, which experienced the largest improvement, may grow 1.41 percent in 2014, up from 1.33 percent a year ago. Though the U.S.’s 2014 growth forecast Follow MICHAEL MCDONOUGH on Twitter FOr rEGULAr UpDATEs AND ADDITIONAL INsIGHTs Sep-13 Nov-13 Jan-14 has fallen modestly to 2.6 percent from 2.8 percent at the start of the year, U.S. GDP growth is forecast to accelerate to 3 percent quarter-on-quarter SAAR by the fourth quarter of 2014 from a 2.6 percent forecast for the first quarter. Global growth is anticipated to total 2.85 percent in 2014. The FOMC’s eventual move on Dec. 18 to begin the process of tapering outlined by Bernanke in May is likely the starting point for a longer-term trend of U.S. interest rate normalization. Over the past 20 years, the U.S. 10-year yield has averaged more than 4.5 percent, well above the current level just south of 3 percent. While Janet Yellen, who takes over the Fed on Feb. 1, probably will aim to increase rates gradually and without causing trauma to markets, international financial conditions may continue to weaken, weighing on overall emerging market growth. At the same time, developed markets are likely to continue to benefit from strengthening economies. @m_mcdonough  1 2 3 4 5 6 7 8 9 10 11 12 13 14 
    • 01.15.14 www.bloombergbriefs.com Bloomberg Brief | Economics 2013 Global Review 3 GR WTH It’s what the CGMA designation stands for ® Officially, it’s Chartered Global Management Accountant . Established by AICPA and CIMA, two of the world’s most prestigious accounting bodies, the CGMA designation represents accomplished professionals who drive and deliver business success, worldwide. ® 14602-312 Find out more at cgma.org  1 2 3 4 5 6 7 8 9 10 11 12 13 14 
    • 01.15.14 www.bloombergbriefs.com Bloomberg Brief | Economics 2013 Global Review 4 2014 CALENDAR Jan. 14-15: Egyptians vote on a new constitution Jan. Feb. 1: Janet Yellen’s first day as Fed chair Feb. Jan. 22 Syrian warring parties summit set to begin Mar. Feb. 2: Thai general elections May 22-25: European Parliament elections April 11: IMF spring April 5: meeting Afghanistan national elections starts April: South African national elections are due in the next three months March 19: Yellen’s first post-FOMC meeting press conference Feb. 7: The Sochi Olympics will begin after several terrorist acts nearby Apr. March: China’s National People’s Congress will set economic priorities for the year, including the budget and growth target June 4-5 G-8 leaders in Sochi By May 31: India general elections June 30: The biggest U.S. banks are scheduled to begin Volcker Rule reporting Jun. May April 9: Indonesia parliamentary elections May 25: Belgian federal elections End of May: Six months of talks with Iran over nuclear weapons conclude April 1: Japan raises its consumption tax July 9: Indonesia presidential elections July June 12: World Cup starts in Brazil July: Yellen delivers monetary outlook to Congress Quote of 2013 If see continued improvement, and “thatwe going to be sustained, in the next we have confidence that is few meetings we could take a step down in our pace of purchases. ” — Ben Bernanke, in May 22 testimony prepared for a hearing at the Joint Economic Committee of Congress in Washington. Sept. 14 Sweden general elections SEP. Brazilian President Dilma Rousseff Oct. 5: Brazil general elections Oct. Sept. 18 Scotland referendum on independence November: ECB takes over supervision of euro area’s largest banks Nov. 15-16: G-20 leaders’ summit Nov. Oct. 10-12: IMF/ World Bank annual meetings DEc. Nov. 4: U.S. midterm elections  1 2 3 4 5 6 7 8 9 10 11 12 13 14 
    • 01.15.14 www.bloombergbriefs.com 5 Bloomberg Brief | Economics 2013 Global Review consensus forecasts {ECFC <GO>}  Bloomberg News Click here to view as charts COUNTRY YoY% Unless Otherwise Specified GROSS DOMESTIC PRODUCT CONSUMER PRICE INDEX UNEMPLOYMENT RATE (%) 2011 2012 2013F 2014F 2015F 2011 2012 2013F 2014F 2015F 2011 2012 2013F 2014F 2015F 1.8% 1.5% -0.6% 1.1% 2.5% 2.8% -0.6% 2.0% 0.2% 1.7% 1.7% -0.4% 1.8% 1.4% 1.7% 2.6% 1.0% 1.6% 2.4% 2.3% 3.0% 1.4% 1.2% 2.4% 2.5% 3.1% 2.7% -0.3% 4.5% 2.9% 2.1% 2.5% 0.0% 2.8% 1.5% 1.5% 1.4% 0.3% 2.6% 1.0% 1.7% 1.2% 2.4% 2.2% 1.5% 2.0% 1.5% 1.8% 2.2% 1.9% 8.9% 10.2% 4.6% 8.0% 7.5% 8.1% 11.4% 4.4% 8.0% 7.3% 7.4% 12.1% 4.0% 7.7% 7.1% 6.8% 12.1% 3.9% 7.3% 6.8% 6.2% 11.8% 3.8% 7.0% 6.6% 3.4% 2.0% 0.4% 0.1% 0.9% -7.1% 2.2% -1.3% 0.9% 0.0% -2.4% -1.6% -1.2% -6.4% 0.2% -3.2% 0.5% 0.2% -1.8% -1.3% -1.1% -3.9% 0.0% -1.7% 1.7% 0.8% 0.5% 0.6% 0.4% 0.0% 1.9% 0.5% 1.9% 1.3% 0.9% 1.2% 1.1% 1.4% 2.2% 1.0% 2.5% 2.3% 2.9% 3.1% 2.5% 3.3% 1.2% 3.6% 2.1% 2.2% 3.3% 2.4% 2.8% 1.5% 1.9% 2.8% 1.6% 1.0% 1.3% 1.5% 2.7% -0.6% 0.5% 0.4% 1.6% 1.3% 1.2% 0.8% 1.5% -0.4% 0.7% 0.5% 1.9% 1.4% 1.4% 1.0% 1.5% 0.3% 1.3% 1.0% 6.8% 9.6% 8.4% 21.7% 5.8% 17.7% 14.6% 12.7% 6.9% 10.3% 10.7% 25.0% 6.6% 24.2% 14.7% 15.7% 6.9% 10.9% 12.2% 26.5% 8.4% 27.6% 13.6% 16.6% 6.8% 11.0% 12.4% 26.2% 9.1% 28.2% 12.7% 16.4% 6.6% 10.8% 12.1% 25.5% – 27.8% 11.9% 16.1% 1.0% 1.0% 3.0% 1.9% 0.9% 1.9% 2.1% 2.4% 2.3% 2.1% 2.6% 2.4% 0.2% 3.0% 1.3% -0.7% 0.9% 0.7% -0.2% 0.1% 2.2% 0.5% 1.3% 2.0% 0.9% 2.0% 2.1% 2.8% 7.8% 3.3% 2.9% 8.0% 3.2% 3.2% 8.1% 3.5% 3.1% 7.9% 3.6% 3.0% 7.6% 3.9% 3.4% 1.9% -1.2% 0.7% -1.7% 0.2% 1.5% 1.4% -1.3% 2.5% 0.7% -1.0% 2.4% 2.9% 1.7% 2.5% 1.8% 1.5% 2.7% 3.4% 2.5% 3.0% 2.0% 2.5% 8.4% 4.3% 1.9% 5.8% 3.9% 8.0% 5.1% 3.7% 3.3% 3.3% 5.7% 0.6% 6.7% 1.0% 1.4% 4.1% 1.8% -0.3% 5.4% 2.0% 1.3% 2.3% 2.2% 3.0% 5.0% 2.5% 2.0% 3.2% 3.0% 5.4% 6.5% 9.6% 6.7% 5.1% 10.9% 7.9% 6.0% 10.1% 7.0% 5.6% 10.9% 7.5% 5.5% 13.6% 7.7% 5.3% 10.5% 7.5% 5.7% 13.4% 7.4% 5.2% 10.3% 7.3% 5.6% 12.8% 7.2% 4.9% 10.1% 7.3% 3.5% 4.6% 8.6% 2.5% 3.4% 5.1% 2.0% 3.5% 4.0% 2.8% 3.4% 4.4% 3.3% 3.5% 4.0% 5.0% 3.5% 3.7% 5.7% 1.7% 2.9% 5.8% 1.6% 3.7% 5.6% 1.8% 3.5% 5.5% 2.1% 3.8% 24.9% 7.1% – 25.1% 6.9% – 25.0% 6.5% 10.0% 25.0% 6.8% 9.5% 24.6% 6.8% 7.0% 9.3% 6.3% 3.7% 6.5% 2.4% 4.1% 0.1% 7.7% 3.2% 2.0% 6.2% 3.7% 1.3% 6.5% 7.6% 5.0% 2.7% 5.7% 2.4% 2.0% 3.3% 7.5% 4.8% 3.5% 5.4% 2.7% 3.5% 4.5% 7.2% 5.5% 3.6% 6.0% 3.0% 3.8% 4.6% 5.4% 8.4% 4.0% 5.4% 3.3% 1.4% 3.8% 2.7% 10.4% 2.2% 4.3% 1.8% 1.9% 3.0% 2.7% 6.1% 1.2% 7.0% 2.4% 1.0% 2.2% 3.1% 9.2% 2.3% 6.5% 2.6% 1.5% 2.6% 3.2% 8.0% 2.8% 5.4% 2.5% 1.6% 2.7% 4.1% – 3.4% 6.6% 5.1% 4.4% 0.7% 4.1% – 3.2% 6.1% 5.2% 4.2% 0.7% 4.1% – 3.2% 6.4% 5.7% 4.2% 0.8% 4.1% – 3.2% 5.9% 5.9% 4.1% 0.7% 4.1% – 3.1% 5.8% 5.8% 4.0% 0.8% 4.0% 2.7% 8.9% 6.6% 4.2% 5.8% 3.6% 0.9% 1.9% 4.0% 5.6% 5.6% 1.3% 2.3% 3.0% 4.0% 1.3% 4.3% 3.5% 2.3% 2.3% 4.5% 0.8% 4.2% 3.9% 2.8% 2.6% 4.7% 1.5% 4.5% 3.4% 6.6% 9.8% 3.4% 26.1% 3.3% 4.1% 5.4% 10.0% 3.2% 21.1% 3.0% 3.7% 6.1% 10.6% 2.2% 39.1% 1.8% 3.7% 5.8% 12.2% 2.9% 51.2% 2.8% 3.6% 5.6% 14.9% 3.0% 45.1% 3.0% 5.2% 6.0% 7.2% 10.8% 8.2% 7.1% 5.0% 5.5% 7.2% 10.4% 7.8% 6.4% 5.0% 5.5% 7.5% 9.9% 7.9% 6.0% 4.9% 5.9% 7.9% 9.6% 8.2% 6.6% 4.7% 6.0% 7.9% 9.5% 7.9% 6.8% G-5 Countries United States* Eurozone Japan* United Kingdom Canada* Euro Area Germany France Italy Spain Netherlands Greece Ireland Portugal Other Developed Europe Switzerland Sweden Norway 1.8% 2.9% 1.3% Eastern Europe and CIS Russia Poland Czech Republic Romania Hungary Ukraine 4.3% 4.5% 1.8% 2.2% 1.6% 5.2% Africa and Middle East South Africa Israel Saudi Arabia Asia Pacific China India South Korea Indonesia Australia Taiwan Thailand Latin America Mexico Brazil Argentina Colombia Venezuela Chile Source: Bloomberg As of 12.31.2013 *GDP forecasts are SAAR  1 2 3 4 5 6 7 8 9 10 11 12 13 14 
    • 01.15.14 www.bloombergbriefs.com Bloomberg Brief | Economics 2013 Global Review 6 Best Overall Forecaster Rankings of 2013 BEST OVERALL FORECASTERS OF THE U.S. ECONOMY Q4 2013 Rank Forecaster Firm 1 2 3 4 5 6 7 8 9 10 Christophe Barraud Bernd Weidensteiner/Christoph Balz Thomas Lam Jim O’Sullivan Nariman Behravesh Joshua Shapiro Russell Price Michael Feroli Lou Crandall/Bill Jordan Brian Wesbury/Robert Stein Market Securities Commerzbank OSK-DMG High Frequency Economics IHS Maria Fiorini Ramirez Ameriprise Financial JPMorgan Chase Wrightson ICAP First Trust Portfolios Overall Score 62.19 59.28 58.50 58.03 57.72 57.48 56.68 56.50 56.16 56.11 BEST OVERALL FORECASTERS OF THE CHINESE ECONOMY Q4 2013 Rank 1 2 3 4 5 6 Forecaster Song Yu Nie Wen Yao Wei Mark Williams Qu Hongbin Chang Jian Firm Goldman Sachs Huabao Trust Societe Generale Capital Economics HSBC Barclays Overall Score 65.33 60.50 59.83 57.85 56.97 56.28 BEST OVERALL FORECASTERS OF THE EURO-ZONE ECONOMY Q4 2013 Rank 1 2 3 4 Forecaster Andreas Scheuerle/Peter Leonhardt Daniel Hartmann Janet Henry Francesca Panelli* Firm DekaBank Bantleon Bank HSBC Bank Banca Aletti Overall Score 65.38 65.36 62.03 61.92 Top-Ranked U.S. Forecaster Christophe Barraud, Market Securities 2014 Outlook “I expect that growth will accelerate in 2014 and reach at least 3 percent, the fastest growth in five years. Federal budgetary policy will be accommodative next year including a 2.4 percent increase in discretionary spending over 2013, which was impacted by a strong reduction (minus 5.3 percent). At the same time, state and local government spending will no longer be a drag as state finances significantly improved in 2013. Private investments should be positively oriented. I expect fiscal uncertainties will be reduced so companies can increase CAPEX. The pace of nonfarm payrolls will rise next year, helping boost incomes. According to the CBO, the level of mandatory spending (Medicaid, Medicare, Social Security) will be higher and should support households’ budget. Higher home prices will result in higher expenditures due to the wealth effect and household balance sheets are in much better shape after deleveraging.” *Senior Economist METHODOLOGY We identified the best overall forecasters by using estimates from the Bloomberg ECO survey for key economic indicators in the United States, euro zone and China. The U.S. ranking was based on 15 indicators: GDP, consumer price index, durable goods orders, existing home sales, housing starts, industrial production, the Institute for Supply Management’s manufacturing index and nonmanufacturing index, new home sales, nonfarm payrolls, personal income, personal spending, producer price index, retail sales and unemployment. We averaged the scores of the 68 forecasters who qualified for a ranking in at least 9 indicators. The ranking shows the top 10 forecasters. The euro-zone ranking included 11 indicators: GDP, consumer confidence, consumer price index, economic sentiment, industrial confidence, industrial production, Markit Eurozone Manufacturing PMI, Markit Eurozone Services PMI, M3 money supply, producer price index and unemployment. We averaged the scores of the 22 forecasters who qualified for a ranking in at least 7 indicators. The ranking shows the top 20 percent of that group. The Chinese ranking included 11 indicators: GDP, consumer price index, exports, imports, fixed assets investment, industrial production, money supply, producer price index, manufacturing PMI, retail sales and international trade balance. We averaged the scores of the 30 forecasters who qualified for a ranking in at least 7 indicators. The ranking shows the top 20 percent of that group. The latest two years of data reported by Jan. 1 were used. To qualify for a ranking on a monthly indicator, forecasters had to have made estimates for at least 15 of the 24 months and two consecutive forecasts within the last six periods. For quarterly indicators, forecasters had to have made at least five calls and two consecutive estimates within the last eight periods. Forecasters who didn’t provide any estimates in the latest three forecasting periods were excluded. The forecasts and actual reported numbers were compared, and individuals received a score of zero to 100 based on the accuracy of their historical forecasts for each indicator. Economists with fewer forecast errors relative to other forecasters received higher scores. The scores received for each indicator were averaged to determine each forecaster’s rank in a country or region.  1 2 3 4 5 6 7 8 9 10 11 12 13 14 
    • 01.15.14 www.bloombergbriefs.com 7 Bloomberg Brief | Economics 2013 Global Review U.S. economic Outlook  Commentary by joseph brusuelas, Bloomberg Economist U.S. Growth Hinges on Easing of Federal Fiscal Restraint, Corporate Reactions to Growth The outlook for U.S. growth in 2014 depends to a degree on the actions of politicians and corporations. The easing of federal fiscal restraint would help growth, as would an increase in government spending at the state and local levels. On the corporate side, whether firms choose to increase spending and investment ahead of any perceived economic acceleration will also be important. The debt ceiling debate, which will have to be resolved by mid-February, may roil Employment Conditions: Slow and Steady Credit Creation Supportive of Nominal GDP 17% Private Payrolls 6 Month Moving Average 2007 2008 Source: Bloomberg 2009 3 Month Moving Average 12 Month Moving Average 2010 2011 2012 Year-Over-Year Percentage Change 15% Thousands 400 300 200 100 0 -100 -200 -300 -400 -500 -600 -700 -800 -900 -1000 financial markets and affect consumer and business confidence. A positive resolution would probably result in a modest acceleration in overall growth. 11% 9% 7% 5% 3% 1% -1% -3% -5% 1963 2013 Adjusted R2=.64 13% Nominal GDP 1968 1973 Total Credit Creation Private Financial Instiutions 1978 Source: Federal Reserve, Bloomberg 1983 1988 1993 1998 2003 2008 2013 Employment conditions may brighten this year if job growth shows continued monthly gains in the 175,000-to-225,000 range. The unemployment rate will probably continue to drift down toward 6.5 percent by the end of 2014. The loss of public sector jobs appears to have ended, with state and local government employment likely to see a modest boost next year. Private credit creation ended the year at a pace well above that of nominal GDP, to which it is highly correlated. This should support an increase in demand for credit, which may signal the end of overall household deleveraging. The key question: Will an increase in credit remain the province of upper income households or will it finally flow down the income ladder? Interest Rates May Face Upward Pressure Fixed Business Investment Key for 2014 Growth 4.5 QE 1 QE 2 4.0 60 QE 3 Percentage 3.0 2.5 50 0 45 -20 40 -40 2.0 35 -60 1.5 Long Run Asset Purchase Programs 2009 2010 -80 U.S. 10-Year Yield 2011 2012 2013 Source: Bloomberg The Federal Reserve took a calculated risk by announcing its intention to slow the pace of its asset purchases. While growth this year appears poised to improve, it is unclear if the quality is sufficient to absorb an increase in long-term yields to between 3.25 and 3.5 percent as indicated by the Bloomberg consensus forecast. Index Percentage 55 20 3.5 1.0 2008 60 40 Op Twist 1&2 30 2003 2005 2007 2009 2011 2013 Net % of Dom Resp Reporting Stronger Demand for CRE Loans(LHS) U.S Architecture Firms Work-On-The-Boards Billings Index(RHS) Source: Bloomberg This year will provide an acid test for firms’ confidence in the duration and sustainability of the expansion. Many companies remain reluctant to increase capital expenditures due to weak demand for services. The difference between trend growth and a sustained period of above-trend growth will revolve around the pace of fixed business investment.  1 2 3 4 5 6 7 8 9 10 11 12 13 14 
    • 01.15.14 www.bloombergbriefs.com Europe Outlook  Bloomberg Brief | Economics 2013 Global Review 8 Commentary by David Powell, Bloomberg Economist Weak Euro-Area Inflation Likely to Prompt Additional Monetary Easing From ECB Inflationary pressures in the euro area are likely to remain weak this year. That development sets the stage for additional monetary easing. The European Central Bank is failing to meet its target. The consumer price index increased 0.8 percent year over year in December. The core reading was 0.7 percent. The monetary authority “aims to maintain inflation rates below, but close to, 2 percent over the medium term.” A deceleration of inflation is likely to continue next year. High unemployment and weak credit growth will probably limit price increases. The level of unemployment points to slack in the economy. The November reading of 12.1 percent was just below the record 12.2 percent set in September. The Organisation for Economic Cooperation & Development estimates the non-accelerating inflation rate of unemployment to be 10.2 percent. Lending data also give reason for concern. Loans to non-financial corporations, adjusted for sales and securitization, fell 3.1 percent year over year in November after a 3 percent decline in October. The equivalent figure for households stood at 0.3 percent year over year, unchanged from the previous month. Quantitative easing may ultimately be the most attractive option to the ECB. Others include: 1) a reduction of the main policy rate; 2) a negative deposit rate; 3) additional lending programs such as another three-year longer-term refinancing operation; 4) more forward guidance; 5) currency intervention. The purchase of privately-held assets by the central bank would be the most effective way to lower targeted interest rates. The ECB could use its balance sheet to reduce borrowing costs wherever the Governing Council feels the “monetary policy transmission mechanism” is still “broken.” Wide disparities in corporate borrowing costs remain throughout the monetary union. For example, the interest rate on new loans with maturities of more than five years ECB Fails to Meet Inflation Target 5 4 3 2 1 Euro-Area Headline CPI (YoY, %) Core CPI (YoY, %) 0 -1 12/1/02 ECB's Inflation Target (YoY, %) 5/1/04 10/1/05 3/1/07 8/1/08 1/1/10 6/1/11 11/1/12 Source: Bloomberg ECCPEMUY Index <GO>; CPEXEMUY Index <GO> (other than revolving loans and overdrafts, convenience and extended credit card debt) to non-financial corporations up to and including 1 million euros in Italy was 5.66 percent in October, according to data from the ECB. The equivalent figure for Germany was 2.95 percent. Those rates would probably apply more to small- and medium-sized companies than large corporates. A reduction of the main policy rate may still be an intermediate step. It would be mostly symbolic. It is already close to the zero bound at a historic low of 25 basis points. The introduction of a negative deposit rate seems unlikely. The ECB has rarely — if ever — been willing to be at the cutting edge of experimental monetary policy. No other major central bank has ever pursued that policy. Another three-year LTRO would probably be insufficient in the face of weak demand. The amount of funds borrowed by banks under the longer-term refinancing operations has declined to 583 billion euros from a high of 1.1 trillion euros in March 2012, though the aggregate figure may hide additional demand from the peripheral countries. Follow DAVID POWELL on Twitter FOr rEguLAr uPDATEs AnD ADDITIOnAL InsIghTs The lack of demand may discourage the Governing Council from implementing a “Funding for Lending Scheme.” The program introduced by the Bank of England was similar to a four-year LTRO, though borrowers were unable to buy securities with the loans. A version for the euro area seems unlikely to increase lending any more than the three-year LTROs did. The impact of additional forward guidance may be limited. The forward curve analysis function {FWCV <GO>} on the Bloomberg terminal indicates the EUR OIS curve has priced in a one-month rate of 20 basis points in one year. That is only 6 basis points lower than the reading on the eve of the policy announcement from the ECB. Currency intervention appears unlikely. Academic studies and history have shown attempts by central banks to influence the exchange rate normally fail unless accompanied by a broadcast change in monetary policy. Quantitative easing is therefore likely to be required and that would probably weaken the euro without the ECB selling the currency. @davidjpowell24  1 2 3 4 5 6 7 8 9 10 11 12 13 14 
    • 01.15.14 www.bloombergbriefs.com Asia Outlook  Bloomberg Brief | Economics 2013 Global Review 9 Commentary by Tamara Henderson and Tom Orlik, Bloomberg economists Previous Fed Tightening Suggests Asian Resilience The U.S. Congress’s two-year budget deal and the Federal Reserve’s gentle start to reducing its bond purchases both removed key sources of market anxiety and set up scope for a seasonal rally in emerging Asia during the first quarter of 2014. Investors may find comfort that in the previous Fed tightening cycle, average growth in Asia held above 5 percent and regional currencies rallied 5 percent against the U.S. dollar after they recovered from initial wobbles. While the external backdrop may have brightened, many Asian economies will continue to face internal headwinds in 2014. Speculation over China’s outlook may also hang over the region. China’s new leaders promised a renewed commitment to reform, targeting sustained growth as the country’s old economic model runs out of steam. Policy changes aim to increase labor force participation and to improve the efficiency of investment. Leaders hope these measures will be enough to secure medium-term growth at about the current 7.5 percent level. Managing down runaway lending, which has seen outstanding credit rise to 200 percent of GDP, will be difficult without denting growth. The government said controlling local-government borrowing will be a key task for 2014, a move that may damp infrastructure investment and demand for commodities. A stronger recovery in global demand would boost exports and give policy makers more breathing space. Japan’s headlong dash for growth in 2013 will change to a more complex picture in 2014. A tighter fiscal stance as the government faces down massive public debt will act as a drag. As government reduces its spending, attention will focus on Abenomics and whether the policies have increased demand from business investment and household consumption. Early signs are positive; stronger export growth has triggered higher investment. Generous wage settlements in the first quarter of 2014 will be critical to boosting consumption. The Bank of Japan has the option to expand stimulus if the tighter fiscal policy ap- Asian Currencies Recovered From Initial Wobble 130 7 Fed Funds Target Rate → 125 ←Asian Currencies Versus U.S. Dollar (ADXY) 120 6 5 115 4 110 3 105 2 100 1 95 90 1996 1999 Source: Bloomberg 0 2002 pears to take too much momentum out of the economy. More aggressive easing could see the yen extend its slide. The Japanese currency will end 2014 at 110 to the dollar, according to the consensus forecast, compared with around 105 at the end of 2013. Without dramatic improvements in exports or in investment, the Reserve Bank of Australia may need to provide further policy support for employment, confidence and growth via a weaker currency or lower interest rates. Australia’s job market is at its weakest since 2009. Rate cuts of 225 basis points since November 2011 have yet to bear fruit amid rebalancing in China, its largest trading partner. Singapore’s economy demonstrated resilience to Fed tapering jitters and China’s rebalancing. Growth approached 6 percent year on year in the third quarter of 2013 with domestic demand supported by low unemployment and rising real wages. Viewed increasingly as a safe-haven, the city-state’s financial sector achieved remarkable double-digit gains in the first nine months of 2013. In 2014, Singapore will benefit as a recently-established offshore yuan center. Investors will watch election outcomes in India and Indonesia and look for 2005 2008 2011 signs of policy prudence during the new governments’ respective tenures. Both countries need a reversal in sentiment. India in particular needs to break out of its vicious circle of slower investment and growth. In the Philippines, the destructive impact from Super Typhoon Haiyan on growth (which will be slower) and inflation (which will be higher) should start to fade by the second half of the year. Government efforts to attract investment in roads, railways and ports to lift the country’s growth potential to as much as 8 percent bore fruit in 2013. A powersharing arrangement with Muslim rebels in Mindanao signals progress in tapping the country’s mineral wealth, estimated to be worth as much as four times the size of the economy. South Korea’s open economy will be buffeted by shifts in global demand and capital flows. In an optimistic scenario, stronger global demand will boost exports and the Fed will manage its tapering of asset purchases without triggering destabilizing volatility. If stronger global demand fails to materialize, high debt in Korea’s households means domestic demand will struggle to pick up the slack.  1 2 3 4 5 6 7 8 9 10 11 12 13 14 
    • 01.15.14 www.bloombergbriefs.com CENTRAL BANK MONITOR Bloomberg Brief | Economics 2013 Global Review 10 by Bloomberg Economists Developed World Banks Still Have a Need for Unconventional Tools in 2014 As the Fed begins moving away from non-traditional monetary policy, Japan’s remains in full-swing and the European Central Bank may soon enter the fray with the euro zone near the zero boundary. The expectation of rising rates in the U.S. may force some emerging market central banks to prematurely increase interest rates to reduce the amount of capital flowing out of their countries. Brazil’s central bank been one of the most aggressive tighteners over the past six months, increasing its target rate by 250 basis points due to a combination of rising prices and capital outflows that followed May indications of an imminent taper from Fed Chairman Ben S. Bernanke. High debt, not high inflation, will be the main challenge for China’s central bank in 2014. Outstanding credit has ballooned from about 130 percent of GDP in 2008 to close to 200 percent in 2013. To bring that under control, the People’s Bank of China is pushing borrowing costs higher. The central bank is also shifting from use of quantitative tools such as loan quotas, to price tools such as market-set interest rates, to achieve its objectives. The decline of core inflation in the euro area to a record low is likely to push the ECB to reduce its main policy rate again. The move would be mostly symbolic. Quantitative easing may ultimately be the most attractive option for the central bank to lower targeted interest rates such as corporate borrowing costs in the peripheral nations. U.S. monetary policy is likely to shift from a reliance on asset purchases to forward guidance as the primary policy tool. The major challenge for the Fed will be to convince investors that tapering is not tightening, forward guidance is more than just talk and that it truly intends to hold the policy rate at zero until 2016. This year may feature a reduction in the unemployment threshold to 6 percent and the imposition of an inflation floor of 1 percent. Bloomberg Brief Global Central Bank Monitor Policy Rate Ticker BAIBPMOD Index RBATCTR Index BJIRONRR Index BZSTSETA Index BUBIRATE Index CABROVER Index CHOVCHOV Index CHLR12M Index CORRRMIN Index CKDRRATE Index CZARANN Index DERE Index EGBRLR Index EURR002W Index HKBASE Index HBBRANN Index ICBRANN Index RSPOYLDP Index IDBIRATE Index ISBRANN Index BOJDTR Index JORRRATE Index KIBODISC Index LTRFANN Index LREPRR Index MAOPRATE Index MXONBR Index MOBRRC Index NZOCR Index NOBRDEPA Index OCBOREPO Index PAPRSBP Index PRRRONUS Index PPCBON Index POREANN Index QAIRRR Index ROKEPOLA Index RREFRANN Index SRREPO Index SIBCON Index SARPRT Index KORP7DR Index SWRRATEI Index SZLTTR Index TAREDSC Index BTRR1DAY Index TUBR1WRA Index CUAE1-7 Index UKRBDIS Index UKBRBASE Index FDTR Index VNBOLOAN Index VNDIBASE Index Source: Bloomberg Country Argentina Australia Bahrain Brazil Bulgaria Canada Chile China Colombia Croatia Czech Rep. Denmark Egypt Euro zone Hong Kong Hungary Iceland India Indonesia Israel Japan Jordan Kuwait Latvia Lebanon Malaysia Mexico Morocco New Zealand Norway Oman Pakistan Peru Philippines Poland Qatar Romania Russia Saudi Arabia Singapore South Africa South Korea Sweden Switzerland Taiwan Thailand Turkey U.A.E. Ukraine U.K. U.S. Venezuela Vietnam Next Meets 2/4 1/15 1/31 1/22 1/16 1/31 2/6 2/6 1/21 2/12 1/28 2/13 1/27 1/29 1/31 3/19 1/29 3/27 1/13 2/13 2/6 2/5 2/4 1/29 2/13 2/13 3/20 3/25 1/22 1/21 2/6 1/29 Policy Rate 13.00% 2.50% 2.25% 10.00% 0.02% 1.00% 4.50% 6.00% 3.25% 7.00% 0.05% 0.20% 9.25% 0.25% 0.50% 3.00% 6.00% 6.75% 7.50% 1.00% 0.10% 4.25% 2.00% 0.25% 10.00% 3.00% 3.50% 3.00% 2.50% 1.50% 1.00% 10.00% 4.00% 3.50% 2.50% 4.50% 3.75% 8.25% 2.00% 0.01% 5.00% 2.50% 0.75% 0.00% 1.88% 2.25% 4.50% 1.00% 6.50% 0.50% 0.25% 15.66% 9.00% Taylor Rule 4.20% 3.35% 0.30% -1.30% 1.45% 4.17% 1.10% 3.05% 4.45% 0.55% 1.45% 11.5% 2.50% 0.68% 3M Chg 125 0 0 150 -1 0 -50 0 0 0 0 0 -100 -25 0 -80 0 50 25 0 0 -25 0 -175 0 0 -25 0 0 0 0 100 -25 0 0 0 -50 0 0 -14 0 0 -25 0 0 -25 0 0 0 0 0 -395 0 6M Chg 0 -25 0 250 0 0 -50 0 0 0 0 0 -150 -25 0 -150 0 50 150 -25 0 -50 0 -225 0 0 -50 0 0 0 0 50 -25 0 0 0 -125 0 0 -2 0 0 -25 0 0 -50 0 0 -50 0 0 -410 0 1Y Chg 330 -75 0 275 -1 0 -50 0 -100 0 0 0 -100 -50 0 -300 0 -25 175 -100 0 -50 0 -225 0 0 -100 0 0 0 0 0 -25 0 -175 0 -150 0 0 0 0 -25 -50 0 0 -50 0 -100 0 0 -41 0 CPI y/y 10.5% 2.2% 3.6% 5.9% -1.5% 0.9% 3.0% 2.5% 1.9% 0.4% 1.4% 0.8% 11.7% 0.8% 4.3% 0.9% 4.2% 11.5% 8.4% 1.9% 1.5% 3.3% 2.6% -0.4% 0.6% 2.9% 4.0% 1.0% 1.4% 2.0% 0.5% 9.2% 2.9% 4.1% 0.6% 1.4% 1.8% 6.5% 3.1% 2.6% 5.3% 1.1% 0.1% 0.1% 0.3% 1.7% 7.4% 1.4% 0.5% 2.1% 1.2% 51.7% 6.0%  1 2 3 4 5 6 7 8 9 10 11 12 13 14  3M Chg Prior 12M Est. 1Q14 2.38% Est. 2Q14 2.38% Est. 3Q14 2.38% Est. 4Q14 2.50% 10.38% 10.38% 10.38% 10.50% 1.00% 4.25% 6.00% 3.38% 6.00% 0.00% 0.25% 1.00% 4.25% 6.00% 3.63% 6.00% 0.00% 0.25% 1.00% 4.25% 6.00% 3.88% 6.00% 0.00% 0.25% 1.13% 4.25% 6.00% 4.13% 6.00% 0.13% 0.38% 0.25% 0.25% 0.25% 0.25% 3.25% 3.25% 3.25% 3.25% 7.00% 7.75% 0.88% 0.10% 6.88% 7.88% 0.88% 0.10% 6.75% 7.75% 1.13% 0.10% 6.50% 7.50% 1.25% 0.10% 3.00% 3.50% 3.13% 3.50% 3.13% 3.63% 3.25% 3.63% 2.63% 1.50% 3.00% 1.50% 3.13% 1.63% 3.38% 1.50% 4.00% 3.50% 2.50% 3.88% 3.63% 2.50% 3.88% 3.75% 2.63% 3.88% 3.88% 2.88% 3.63% 7.63% 3.63% 7.50% 3.63% 7.38% 3.75% 7.25% 5.00% 2.50% 1.00% 0.00% 1.88% 2.25% 4.75% 5.00% 2.50% 1.00% 0.00% 1.88% 2.38% 5.13% 5.13% 2.50% 1.00% 0.00% 2.00% 2.50% 5.25% 5.25% 2.75% 1.13% 0.00% 2.00% 2.75% 5.38% 6.38% 0.50% 0.25% 6.25% 0.50% 0.25% 6.00% 0.50% 0.25% 6.00% 0.50% 0.25%
    • 01.15.14 www.bloombergbriefs.com Market Indicators  Bloomberg Brief | Economics 2013 Global Review 11 By Bloomberg Brief Editors Mouse Over Commentary for Connections Australian stocks will extend gains in 2014, building on the best returns relative to bonds since 2009, a survey of strategists shows. There are signs that low rates are supporting spending, RBA Governor Stevens said in Dec. 18 remarks to a parliamentary panel in Canberra. Developing countries accounted for the 10 worst-performing stock markets in 2013. A year-end cash crunch in China has weighed on local equity markets and will likely hurt China’s fourth quarter growth. A similar cash crunch occurred in June that slowed China’s GDP growth down to 7.5 percent, triggering a mini-fiscal stimulus program. {WEIS <GO>} Japanese stocks climbed the most among industrialized nations in 2013. Stocks could surpass a level not seen since 2007 if the government pushes through in its drive to loosen business regulations, said Heizo Takenaka, a member of a government council on special economic zones. The Nikkei 225 Stock Average “could easily exceed 18,000 in light of Japan’s economic strength,” Takenaka said in an interview. MSCI EQUITY INDEXES TICKER COUNTRY MXAU Index MXCN Index MXHK Index MXID Index MXIN Index MXJP Index MXKR Index MXMY Index MXPH Index MXSG Index MXLK Index TAMSCI Index MXTH Index MXVI Index Australia China Hong Kong Indonesia India Japan Korea Malaysia Philippines Singapore Sri Lanka Taiwan Thailand Vietnam MXUS Index MXCA Index MXMX Index U.S. Canada Mexico MXAR Index MXBR Index MXCL Index MXCO Index MXPE Index Argentina Brazil Chile Colombia Peru MXEG Index MXIL Index MSEUSJO Index MXNI Index MSEUSTK Index MXZA Index MXAE Index Egypt Israel Jordan Nigeria Turkey South Africa U.A.E. MXAT Index MXBE Index MXEST Index MXFI Index MXFR index MXDE Index MXGR Index MXIE Index MXIT Index MXNL Index MXPT Index SKSM Index MXES Index Austria Belgium Estonia Finland France Germany Greece Ireland Italy Netherlands Portugal Slovakia Spain MXBU Index MXCZ Index MXDK Index MXHU Index RIGSE Index VILSE Index MXPL Index MXRO Index MXSE Index MXGB Index Bulgaria Czech Republic Denmark Hungary Latvia* Lithuania Poland Romania Sweden U.K. ICEXI Index MXNO Index MXRU Index MXCH Index MXUK Index Iceland Norway Russia Switzerland Ukraine LAST PRICE Asia/Pacific YoY %Chg 52W Min Average 52W Last Max 10 YEAR GOVERNMENT BOND YIELDS TICKER COUNTRY 1086.4 61.4 12205.2 4841.2 804.0 807.5 569.7 654.1 1013.2 1686.2 688.5 296.7 452.3 555.6 13.6% -5.2% 3.8% -7.6% 4.0% 48.8% -1.2% 9.3% 0.8% -0.9% 12.6% 7.0% -13.1% -3.4% 956 51 10,600 4,487 699 548 509 574 941 1,602 598 273 432 509 1115 66 12380 6149 818 808 605 669 1224 1823 778 303 573 629 GACGB10 Index GCNY10YR Index HKGG10Y Index GIDN10YR Index GIND10YR Index GJGB10 Index GVSK10YR Index MGIY10Y Index PDSF10YR Index MASB10Y Index GGSL10YR Index GVTW10YR Index GVTL10YR Index Australia China Hong Kong Indonesia India Japan Korea Malaysia Philippines Singapore Sri Lanka Taiwan Thailand 1758.3 1723.2 6785.6 25.9% 9.3% -8.6% 1,406 1,495 5,951 1768 1726 7772 USGG10YR Index GCAN10YR Index GMXN10YR Index U.S. Canada Mexico 1919.2 2140.5 1800.2 1011.5 1080.7 44.1% -23.2% -28.3% -26.1% -33.2% 1,158 2,053 1,793 1,011 1,020 2258 2839 2601 1393 1681 1390.9 200.2 97.4 817.2 445.4 1122.3 408.3 8.5% 7.4% -6.5% 19.4% -31.8% 9.4% 71.9% 992 179 82 674 431 916 238 1399 202 112 856 737 1147 416 EGPT10Y ARAB Index GISR10YR Index 125.1 74.6 864.8 99.7 119.2 130.5 19.8 36.7 55.8 100.9 54.4 194.4 112.4 7.2% 19.6% 0.3% 30.5% 14.9% 20.3% 50.1% 40.4% 8.0% 20.6% 1.9% 3.1% 19.4% 101 62 820 72 100 105 12 25 43 82 47 179 81 125 75 992 101 120 132 20 37 56 101 GAGB10YR Index GBGB10YR Index 203.6 252.8 5454.9 900.3 465.7 437.1 1673.0 681.4 10089.9 1982.9 84.6% -14.3% 16.2% -13.5% 13.7% 19.3% -5.5% 15.1% 17.2% 9.7% 111 223 4,322 880 395 367 1,543 542 8,495 1,783 204 290 5455 1107 473 438 1852 681 10142 2023 879.7 2631.1 756.6 1082.9 122.9 23.3% 11.8% -9.1% 16.8% -18.3% 724 2,256 668 926 110 886 2674 863 1083 228 North America South America Middle East & Africa Europe GEBR10Y Index COGR10Y Index GRPE10Y Index CTNGN10Y Govt IECM10Y Index GSAB9YR Index Argentina Brazil Chile Colombia Peru Egypt Israel Jordan Nigeria Turkey South Africa U.A.E. Euro Area Non-Euro EU Non EU LAST YIELD YoY BPS Asia/Pacific 4.32% 92.1 4.62% 102.0 2.41% 156.8 8.94% 378.1 8.79% 89.5 0.70% -13.0 3.67% 62.4 4.17% 66.1 4.27% -9.5 2.56% 116.0 9.84% -143.2 1.69% 51.8 4.05% 39.7 North America 52W Min Average Last 52W Max 3.0 3.4 0.8 5.2 7.1 0.4 2.7 3.1 3.0 1.3 9.8 1.2 3.3 4.4 4.7 2.6 9.1 9.2 0.9 3.8 4.2 4.6 2.8 12.1 1.7 4.4 2.99% 2.72% 6.48% 113.6 80.9 104.5 1.6 1.7 4.4 3.0 2.8 6.6 10.88% 85.0 9.2 11.6 6.79% 5.59% 133.0 147.0 4.7 3.9 7.6 6.1 15.00% 3.67% -38.0 14.9 3.5 17.0 4.1 13.11% 10.04% 7.99% 340.0 168.3 6.1 5.8 10.6 8.0 42.9 37.7 1.5 1.9 2.5 2.9 2.11% 43.8 2.57% 46.8 1.92% 43.8 7.71% -389 3.28% -112.3 3.93% -34.8 2.22% 56.2 5.39% -112.4 2.58% 43.7 3.80% -133.2 1.3 1.7 1.2 7.7 3.3 3.8 1.5 5.2 2.1 3.8 2.3 2.6 2.0 12.8 3.3 4.9 2.5 7.5 3.1 5.4 2.54% 1.96% 5.46% 58.4 42 -66.0 1.5 1.3 4.9 2.6 2.2 6.8 4.49% 66.4 3.00% -171.5 2.46% 76.0 2.98% 95.9 3.1 3.0 1.6 1.6 4.9 4.5 2.7 3.1 2.95% 8.01% 1.25% 2.0 6.7 0.6 3.3 8.4 1.3 South America Middle East & Africa Europe Euro Area Yields on the benchmark 10-year note rose 1.27 percentage points, the most in four years, to end 2013 at 3.03 percent. Based on the median estimate of 64 forecasters surveyed by Bloomberg, 10-year yields will increase to 3.42 percent by the end of 2014. {ECFC <GO>} 202 112 GFIN10YR Index GFRN10 Index GDBR10 Index GGGB10YR Index GIGB9YR Index GBTPGR10 Index GNTH10YR Index GSPT10YR Index GRSK10Y Index GSPG10YR Index CZGB10YR Index GDGB10YR Index GHGB10YR Index POGB10YR Index GRRO5YR Index GSGB10YR Index GUKG10 Index GNOR10YR Index MICXRU10 Index GSWISS10 Index Austria Belgium Estonia Finland France Germany Greece *Ireland (9Y) Italy Netherlands Portugal Slovakia Spain Bulgaria Czech Republic Denmark Hungary Latvia* Lithuania Poland *Romania (5Y) Sweden U.K. Iceland Norway Russia Switzerland Ukraine 2.26% 2.57% Non-Euro EU Non EU 77.2 116.8 67.2 Greece’s bonds had the biggest returns in 2013 among the 26 sovereign markets tracked by Bloomberg and the European Federation of Financial Analysts Societies. Ireland and Portugal, both recipients of bailouts alongside Greece, held bond sales in early January 2014 and Greece says it may sell bonds in 2014 as well. “We are gradually moving from fear to greed,” said Jacupo Ceccatelli, a Londonbased partner in the financial advisory and asset management firm JCI Capital. {WB <GO>} *All data as of Jan. 9.  *Latvia joined the euro zone Jan. 1.  Source: Bloomberg  1 2 3 4 5 6 7 8 9 10 11 12 13 14 
    • 01.15.14 www.bloombergbriefs.com Market Indicators  Bloomberg Brief | Economics 2013 Global Review 12 By Bloomberg Brief Editors Mouse Over Commentary for Connections Aluminum, last year’s second-worst performing industrial metal, may be poised for a stronger 2014 as inefficient global production comes offline and demand improves, particularly in the North American automotive market. Prices are expected to move back toward the symbolic $2,000-ametric-ton mark by the end of the year, with the Bloomberg consensus forecast pegging the aluminum price at $1,950 in the fourth quarter versus $1,800 in the first quarter. {FIFW CPF<GO>} The most-accurate forecasters of 2013 expect Brent crude prices to weaken for a second year in 2014 as U.S. output expands and threats to Middle East and North African supply ease. The Brent benchmark will average $105 a barrel in 2014, from $108.71 in 2013, according to the median of estimates from the seven analysts who most accurately predicted this year’s level in a survey last December. OTHER INDICATORS TICKER CURRENCIES LAST PRICE SPREAD/RATE/INDEX U.S. $$SWAP10 Curncy USGGBE05 Index .2Y10Y Index .TED3M Index .LIBORIOS Index .AAABAA Index MUNSMT10 Index 10Y US Swap Spread 5Y Breakeven Rate 2Y10Y Spread 3M Ted Spread 3M Libor/OIS IG HY Corp Spread Muni Spread EUR003M Index EONIA Index EUSA10 Index 3M Euribor EONIA EUR 10Y Swap Rate BUBOR03M Index WIBO3M Index BP0003M Index Hungary BUBOR Poland WIBO 3M U.K. LIBOR GBP 3M MOIB91 Index SF0003M Index Russia Moscow Intbk Switzerland LIBOR CHF SHIF3M Index CCSDO2 Curncy BOCRYLD Index 3M SHIBOR 2Y CNY IRS Avg Dim Sum Yield JY0003M Index TI0003M Index JYSW2 Curncy LIBOR 3M 3M TIBOR 2Y Yen Swap CIBO03M Index JPEIPLSP Index HIHD03M Index JIIN3M Index NSERO3M Index SIBF3M Index KWSWOOC Curncy TRLIB3M Index Denmark CIBOR 3M EMBI+ Spread Hong Kong 3M HIBOR Indonesia 3M JIBOR India 3M MIBOR Singapore SIBOR 3M S. Korea 3M OIS Turkey TRLIBOR 3m COMMODITIES TICKER COMMODITY Corn Coffee Sugar Wheat LA1 Comdty HG1 Comdty GC1 Comdty SI1 Comdty Aluminum Copper Gold Silver CO1 Comdty CL1 Comdty XB1 Comdty NG1 Comdty Crude (Brent) Crude (WTI) Gasoline Natural Gas CRY Index BDIY Index CMDI3MO Index DBLCDBAT Index CRB Index Baltic Dry Index Bloomberg 3M Cmdty DBIQ Diversified Ag 52W Min Average 52W Last Max 9.25% 1.94% 256.39 20.62 14.9 79.00 96.97 6.5 -20.9 -4.3 -2.1 -15.0 0.0 2.8 1.6 142.9 14.2 13 72.0 86.4 0.28% 0.14% 2.18% 0.1 0.1 0.5 0 0.1 1.4 0 0.4 2.4 2.99% 2.60% 0.52% -2.7 -1.4 0.0 3.0 2.5 0.5 5.7 3.9 0.5 7.42% 0.02% -0.1 0.0 7.3 0.01 7.8 0.02 5.58% 3.05% 4.34% 168.1 12.0 -57.0 3.9 2.9 3.8 5.8 3.1 6.0 0.15% 0.22% 0.21% -2.8 -8.8 -2.1 0.1 0.2 0.2 0.2 0.3 0.3 0.27% 339.72 0.38% 7.87% 9.15% 0.40% 2.49% 9.12% -0.7 94.7 -2.1 291.4 38.0 2.8 -32.0 332.9 0.2 242.8 0.4 4.9 8.2 0.4 2.5 4.7 Euro Area Europe Non-Euro EU C 1 Comdty KC1 Comdty SB1 Comdty W 1 Comdty Copper prices may come under pressure in 2014 as new mine supply is brought on stream, contributing to a swelling global surplus. The Bloomberg consensus forecast sees copper easing to $6,816 per metric ton in the fourth quarter from $6,983 in the first quarter, though analysts don’t expect the price to slip much lower without high-cost operations being taken offline. Automotive and appliance demand and infrastructure spending in China will also help keep a floor under copper prices. YoY bps/% Europe Non-EU China Japan Other Global LAST PRICE 25.5 2.4 264.8 26.3 18 108.0 115.4 0.4 389.0 0.4 7.9 11.6 0.4 2.8 9.1 YoY %Chg 52W Min 408.50 120.00 15.44 580.00 -41.2% -18.9% -17.5% -22.2% 408.5 101.5 15.4 580.0 741.3 156.3 19.5 791.3 1733.00 329.45 1223.50 19.5 -14.8% -10.2% -26.1% -35.5% 1700 302.4 1195 18.5 2128 378.5 1693 32.4 107.05 91.84 266.1 4.11 -4.2% -1.4% -4.3% 32.0% 97.7 86.7 250.3 3.2 118.9 110.5 320.4 4.5 273.42 1826.00 229.52 201.0 -7.0% 148.8% -7.2% -11.2% 272.5 735 217.8 200.0 305.1 2337 253.2 228.0 Agricultural Metals Energy Indexes Average 52W Last Max The Turkish lira, the worst performing major currency in EMEA since June, will plunge in the first quarter as a corruption probe roils markets before elections, the top forecaster said. The lira will fall 5.5 percent to 2.31 per dollar in the first three months, then weaken to 2.42 by June before stabilizing, according to Przemyslaw Kwiecien, chief economist at X-Trade Broker Dom Maklerski SA in Warsaw, the most accurate analyst in the fourth quarter. TICKER LAST PRICE CURRENCY AUD Curncy CNY Curncy HKD Curncy INR Curncy IDR Curncy JPY Curncy MYR Curncy NZD Curncy PHP Curncy SGD Curncy KRW Curncy LKR Curncy TWD Curncy THB Curncy VND Curncy Australian Dollar Chinese Renminbi Hong Kong Dollar Indian Rupee Indonesian Rupiah Japanese Yen Malaysian Ringgit New Zealand Dollar Philippine Peso Singapore Dollar South Korean Won Sri Lankan Rupee Taiwan Dollar Thai Baht Vietnamese Dong GBP Curncy CZK Curncy DKK Curncy EUR Curncy HUF Curncy ISK Curncy NOK Curncy PLN Curncy RON Curncy RUB Curncy SEK Curncy CHF Curncy UAH Curncy British Pound Czech Koruna Danish Krone Euro Hungarian Forint Iceland Krona Norwegian Krone Polish Zloty Romanian Leu Russian Ruble Swedish Krona Swiss Franc Ukranian Hryvnia ARS Curncy BRL Curncy CAD Curncy CLP Curncy COP Curncy MXN Curncy PEN Curncy Argentina Peso Brazilian Real Canadian Dollar Chilean Peso Colombian Peso Mexican Peso Peruvian Sol EGP Curncy IRR Curncy ILS Curncy MAD Curncy NGN Curncy ZAR Curncy SYP Curncy TRY Curncy AED Curncy Egyptian Pound Iranian Rial Israeli Shekel Moroccan Dirham Nigerian Naira South African Rand Syrian Pound Turkish Lira UAE Dirham EURSEK Curncy EURGBP Curncy EURNOK Curncy EURCHF Curncy EURJPY Curncy EUR/SEK EUR/GBP EUR/NOK EUR/CHF EUR/JPY AUDJPY Curncy GBPJPY Curncy EURJPY Curncy CHFJPY Curncy NOKJPY Curncy AUD/JPY GBP/JPY EUR/JPY CHF/JPY NOK/JPY On Dec. 31, 2012, analysts forecasted the yen would end 2015 at 88. Following the introduction of Abenomics, that forecast now stands at 114. {FXFC <GO>} YoY %CHG 52W Min 0.89 6.06 7.75 62.08 12193.0 104.73 3.28 0.82 44.67 1.27 1062.70 130.70 30.17 33.03 21095 -15.5% 2.8% 0.0% -11.8% -20.7% -16.1% -7.3% -1.8% -8.7% -3.5% -0.1% -3.4% -3.8% -8.0% -1.2% 0.9 6.1 7.8 53.1 9618 88.4 3.0 0.8 40.6 1.2 1050 125.4 28.9 28.7 20825 1.1 6.2 7.8 68.8 12261 105.3 3.3 0.9 44.8 1.3 1161 133.2 30.2 33.1 21243 1.65 20.18 5.49 1.36 220.3 117.01 6.19 3.07 3.34 33.23 6.56 0.91 8.27 2.7% -2.9% 4.0% 4.0% 0.7% 10.9% -9.6% 1.6% 0.7% -8.7% 0.1% 1.9% -2.0% 1.5 18.6 5.4 1.3 212 115.0 5.5 3.0 3.2 29.9 6.3 0.9 8.1 1.7 20.3 5.8 1.4 238 129.5 6.3 3.4 3.5 33.5 6.8 1.0 8.3 Asia/Pacific Europe Americas Average Last 6.63 -25.5% 4.9 2.40 -15.0% 1.9 1.09 -9.0% 1.0 533.84 -11.7% 467.1 1934.97 -8.6% 1759.0 13.15 -3.3% 12.0 2.80 -9.0% 2.5 Middle East & Africa 6.96 24653 3.50 8.26 158.87 10.81 142.66 2.19 3.67 52W Max 6.6 2.5 1.1 534.5 1956.3 13.4 2.8 -6.5% -50.2% 8.0% 3.2% -1.6% -20.5% -50.2% -18.8% 0.0% 6.5 12229 3.5 8.1 156.1 8.6 69.4 1.7 3.7 7.0 24853 3.7 8.7 163.9 10.8 142.9 2.2 3.7 8.92 -3.8% 1 -1.3% 8.42 -13.1% 1.23 -2.1% 142.35 -19.3% 8.3 1 7.3 1.2 117.5 9.1 1 8.5 1.3 145.1 93.05 -0.7% 172 -18.3% 142.35 -19.3% 115.31 -17.6% 16.91 -7.1% 86.7 139 117.5 94.9 15.9 105.2 174 145.1 118.5 17.7 EUR Crosses JPY Crosses Brazil’s worsening external position has helped fuel a sharp depreciation in the real, which the Fed’s taper may worsen. Brazil’s shrinking trade surplus has made it increasingly reliant on foreign capital inflows and thus more susceptible to external shocks. *All data as of Jan. 9.  Source: Bloomberg  1 2 3 4 5 6 7 8 9 10 11 12 13 14 
    • 01.15.14 www.bloombergbriefs.com MARKETS  Bloomberg Brief | Economics 2013 Global Review 13 BY Bloomberg Brief Editors U.S. Fiscal Debate, Fed Tapering, Euro-Area Politics Had Biggest Investor Impact in 2013 Fiscal stalemate pushed the U.S. to the edge of default. The Federal Reserve gave investors months to prepare for a reduction in stimulus, even surprising analysts with no tapering in September. Europe’s economy continued to improve, with echoes of crisis in Italy and Cyprus. China embraced reform even as it showed signs of an economic slowdown. These stories that moved markets in 2013 will continue to play out in the coming year. The chart below highlights investors’ responses to economic events and other news across equities, foreign exchange, fixed income and commodities, using proxy indexes for each market. Click the index title box to display specific events for that particular asset class. Bloomberg World Equities Index BWORLD Index Bloomberg U.S. 10-Year Treasury bond Index BUSY10 Index Bloomberg U.S. Dollar Index BBDXY Index UBS Bloomberg constant maturity commodity Index CMCIPI Index The U.S. Congress passed legislation on Jan. 1 that prevented income taxes from rising for most Americans while taxing top-earners more. Failure to reach a “grand bargain” on federal spending resulted in $1.2 trillion in automatic spending cuts going into effect on March 1. Cyprus secured 10 billion euro in aid on March 25 after agreeing to tax deposits. The so-called troika said in December the country is “on track” to meet fiscal targets. Italy’s Enrico Letta formed a coalition government in April after weeks of deadlock following the Feb. 24-25 elections. Federal Reserve officials signaled in May that they were ready to taper asset buying if economic data continued to improve. Chairman Ben S. Bernanke said on June 19 that stimulus may end by mid-2014. The Fed surprised many traders on Sept. 18 when it maintained monthly purchases at $85 billion. 120 120 115 115 110 110 105 105 100 100 95 90 85 Normalized to Dec. 31, 2012 01 02 03 03 04 04 05 06 07 08 09 09 10 10 11 11 12 12 01 02 05 06 07 08 A cash crunch in China in June added to fears of a slowdown in the world’s secondlargest economy, as regulators sought to control excessive lending. In December, the government warned of further “downward pressure” on growth, while rates surged again on year-end cash demand. A fiscal impasse led to a 16-day U.S. government shutdown that ended on Oct. 16 with a temporary deal. Obama signed a budget on Dec. 27 easing $63 billion in spending cuts for the next two years. Congress must pass an additional spending measure by Jan. 15 to avoid another shutdown. 12 U.S. housing and employment data continued to improve. The Fed said on Dec. 18 it will pare monthly bond purchases by $10 billion, while pledging to hold rates close to zero. Fed officials predicted the jobless rate will fall to as low as 6.3 percent by end-2014 from 7 percent in November. Source: Bloomberg  1 2 3 4 5 6 7 8 9 10 11 12 13 14 
    • 01.15.14 www.bloombergbriefs.com Bloomberg Brief | Economics 2013 Global Review 14 PERF R MANCE It’s what the CGMA designation stands for ® Officially, it’s Chartered Global Management Accountant . Established by AICPA and CIMA, two of the world’s most prestigious accounting bodies, the CGMA designation represents accomplished professionals who drive and deliver business success, worldwide. ® 14602-312 Find out more at cgma.org  1 2 3 4 5 6 7 8 9 10 11 12 13 14