weekly market view macro - standard chartered · growth momentum and potential rise in capital...

This commentary reflects the views of the Wealth Management Group of Standard Chartered Bank. Important disclosures can be found in the Disclosures Appendix.

1

weekly market view macro strategy | 26 January 2018 This reflects the views of the Wealth Management Group

Editorial

Turning up the heat – An update Equities are likely to extend their strong performance.

Emerging Market (EM) assets are generally favoured against

the backdrop of a weak USD and strong commodity prices.

Macro: Global growth and inflation expectations have risen

slightly since the end of 2017, led by the Euro area and the US.

Equity: We have become more optimistic on the outlook for EM

equities. Asia ex-Japan still ranks top on our list, but non-Asia

EM is now our third-most preferred region, behind the Euro area.

Bonds: Bond yields are likely to gradually rise, undermining

forward-looking returns. We have a strong preference for EM

bonds, both USD and local currency.

FX: USD likely to stay under pressure on a 12-month outlook.

Turning up the heat

Reflationary theme has accelerated in early 2018. Global

growth expectations have increased – US tax cuts have clearly

boosted US growth expectations, but Euro area growth

estimates have risen even more. US inflation expectations have

risen significantly over the past two months, though they are yet

to break above the January 2017 high. From a scenario

perspective, we have increased the probability we attach to a

reflationary outcome to 45% from 40% in Outlook 2018.

Equity market outlook remains positive. Global equities are

up c.9% since we released our Outlook 2018. Some indicators

raise the risk of a near-term pullback, but the strong performance

has been supported by rising earnings expectations. Analysis of

global equity performance from similar valuations historically still

suggests a two-thirds probability of positive returns over the next

12 months. We would remain buyers of equities on dips.

Asia ex-Japan and Euro area equities still preferred. Asia ex-

Japan has continued to outperform global equities, led by China.

We believe accelerating growth, a limited pick-up in inflation and

still healthy profit growth are supportive for Asia. A weak USD is

likely to fuel fund inflows into Asia, but is a headwind for the Euro

area, our other preferred market. However, Euro area earnings

are likely to be revised higher as economic growth expectations

are upgraded and EUR strength slows.

Bonds facing headwinds. The shift toward reflation has put

upward pressure on yields, but most areas of the bond market

have still generated positive returns. We continue to view bonds

as a core holding in any investment allocation and retain a strong

preference for EM bonds within this.

USD oversold, but still weakening. The USD has fallen more

than 5% in the past 6-7 weeks. We do not believe this pace of

decline is sustainable, but with the US Treasury Secretary

highlighting the benefits of a weaker USD and the US president

pursuing import tariffs and the renegotiation of trade agreements,

the USD looks likely to fall further over the coming 12 months.

What we are watching

Fed meeting. Comments on evolving inflation expectations.

NAFTA. Will President Trump turn hawkish in an election year?

Contents

Turning up the heat – An update 1

What does this mean for investors? 2

Top client questions 3

Global asset allocation summary 5

Asia asset allocation summary 6

Our Tactical Asset Allocation views (12m) USD 7

Market performance summary 8

Economic & Market Calendar 9

Disclosure Appendix 10

Commodities and equities have outperformed since we published our Outlook 2018

Performance of asset classes (8 Dec 2017-24 Jan 2018)

Source: Bloomberg, Standard Chartered

Global equities have risen on rising earnings estimates

MSCI AC World index and 12m forward EPS growth


Steve Brice Chief Investment Strategist

Clive McDonnell Head, Equity Strategy

Manpreet Gill Head, FICC Strategy

Adi Monappa, CFA Head, Asset Allocation & Portfolio Solutions

Audrey Goh, CFA Senior Strategist, Asset Allocation & Portfolio Solutions

Arun Kelshiker, CFA Senior Strategist, Asset Allocation & Portfolio Solutions

Daniel Lam, CFA

Senior Strategist, Asset Allocation & Portfolio Solutions

Belle Chan Senior Strategist

Rajat Bhattacharya Senior Strategist

Tariq Ali, CFA Strategist

Francis Lim Quantitative Strategist

Jill Yip, CFA Senior Strategist

Abhilash Narayan Strategist

Cedric Lam Strategist

Trang Nguyen Analyst, Asset Allocation & Portfolio Solutions

DJ Cheong Strategist

-10 -5 0 5 10 15

DXY

Alternatives

Commodities

Equities

Bonds

Since outlook 2018 YTD

400

440

480

520

560

27

28

29

30

31

32

33

34

Dec-16 Jul-17 Feb-18

Ind

ex

EP

S

12m fwd EPS MSCI ACWI index (RHS)

26 January 2018 | weekly market view

This reflects the views of the Wealth Management Group 2

What does this mean for investors? Global stocks rose to new record highs over the past week, led

by Emerging Markets, as the USD continued to weaken while

commodity prices extended gains.

Equities: Asia ex-Japan, Euro area remain preferred markets

Asia ex-Japan: Margin expansion, improvement in return on

equity (ROE) and attractive valuations remain the primary drivers

for Asia ex-Japan equities. The modestly weaker USD has been

positive for fund flows into the region YTD. Valuations represent a

19% discount to global equities, trading at a P/E ratio of 13x 2018

earnings. Steadily growing demand for technology products and

net interest margin expansion for the financial sector could trigger

a valuation re-rating. China and Korea are our most preferred

markets within Asia ex-Japan.

Euro area: Drivers include momentum in earnings growth and

ROE. The market has yet to reflect Euro area’s strong economic

growth momentum and potential rise in capital expenditure

(capex). Euro area’s high capacity utilisation rate of 84% could

spur greater capex spending, which is a positive for long-term

earnings growth. This should lead to further upside surprises for

Euro area’s 12-month forward earnings growth of 8.9% and ROE

of 11.1%, despite ongoing headwinds from EUR strength.

US equities remain a core holding. Sustained momentum in

economic data and ongoing EPS upward revision from US tax

reforms are key catalysts for the market. The US market’s 12-

month forward earnings growth of 15% is the highest among the

six regions we cover. We expect further profit upgrades in the Q4

17 earnings season on US tax reforms, particularly for sectors

with domestic exposure, including financials. Although short-term

risks have risen due to elevated valuations and overbought

technical indicators, this should be more than compensated from

greater earnings visibility in the medium term.

Bonds: EM bonds, both USD and local currency, preferred

Higher US Treasury yields fail to dampen EM flows. Although

US 10-year yields are testing a key long-term technical level

(2.63%) due to rising inflation expectations and higher oil prices,

flows to Emerging Markets (EM) have remained strong. These

flows partly reflect the USD’s weakness and the continued search

for higher yields. EM bonds are less expensive vs. historical

averages compared with DM HY bonds. Add to this a constructive

outlook for commodities (a key driver of EM bonds), and this

explains our preference for EM bonds (see page 3 for details).

FX: USD could weaken further, but near-term caution warranted

USD falls to three-year low. The latest decline, after US

Treasury Secretary Mnuchin highlighted the benefits of a weaker

USD, led to a breach of technical indicators vs. key currency

pairs. The EUR rose to its highest since the ECB started its bond-

buying programme in 2015, the GBP rose to a post-Brexit high,

close to 1.42, and the AUD tested its September high of 0.81.

While the USD could weaken further, near-term caution is

warranted given YTD losses and the US President backtracking

on Mnuchin’s comments.

Remain bearish on JPY. We believe USD/JPY’s drop to a four-

month low below 110 reflects the USD’s broad-based weakness.

We do not believe the BoJ intends to tighten policy at this

juncture, as was emphasised by Governor Kuroda this week.

Thus, USD/JPY downside is likely to be limited, with 107.50 a

strong support. Hence, we remain bearish on the JPY over the

medium term.

Benchmark (USD) performance w/w*

*Week of 18 January 2018 to 25 January 2018

Source: MSCI, JP Morgan, DJ-UBS, Citigroup, Bloomberg, Standard Chartered (Indices used are JP Morgan Cash, MSCI AC World TR, Citi World Big, DJ-UBS Commodity, DXY and ADXY)

S&P500 is 0.8% from its first key technical resistance

Technical levels of key market indicators as of 25 Jan

Index Spot

1st

support

1st

resistance

Short-

term trend

S&P500 2,839 2,733 2,863

STOXX 50 3,630 3,561 3,708

FTSE 100 7,616 7,544 7,795

Nikkei 225 23,752 22,700 24,500

Shanghai Comp 3,548 3,400 3,600

Hang Seng 32,654 31,100 33,800

MSCI Asia ex-Japan 769 720 800

MSCI EM 1,263 1,160 1,300

Brent crude oil (ICE) 70 65 72

Gold 1,348 1,305 1,382

UST 10Y Yield 2.62 2.40 2.72

Source: Trading Central, Standard Chartered Note: Arrows represent short-term trend opinions

EM local currency government bonds offer higher yields compared with US HY bonds

US HY, EM USD and local currency govt bond yields


Recent decline in USD/JPY is largely reflective of the USD’s broad-based decline

USD/JPY and broad USD (DXY) index


0.90

1.99

1.27

1.87

0.04

-0.5 0 0.5 1 1.5 2 2.5

Asian FX

USD Index

Commodities

Bonds

Equities

Cash

%

4

6

8

10

Jan-11 Mar-12 May-13 Jul-14 Sep-15 Nov-16 Jan-18

%

EM LCY govt EM USD govt DM HY

86

88

90

92

94

96

104

107

110

113

116

Jul-17 Sep-17 Nov-17 Jan-18

US

D i

nd

ex

US

D/J

PY

USD/JPY USD index (RHS)



Top client questions

Equities

Q1. Has this year’s rally in equity markets changed your

country/regional views?

Not really. Asia ex-Japan and Euro area remain our preferred

markets; Emerging Market (EM) ex-Asia, Japan and the US are

viewed as core holdings, and the UK is the least preferred. That

said, EM ex-Asia is now ranked third among markets/regions, up

from fifth previously. Within Asia, China and Korea remain our

preferred markets.

Earnings growth estimates for Asia ex-Japan and the Euro area

have remained steady at 13% and 9%, respectively. We remain

positive on Asia ex-Japan, focusing on margin improvement and a

weak USD, which should encourage fund inflows. In the Euro area,

the EUR’s strength has been a headwind, but strong corporate

investment and consumer spending should be supportive.

The improvement in ranking of EM ex-Asia reflects in part the recent

rally in commodity prices and a weaker US dollar. Higher oil prices

could boost Non-Asia EM markets such as Brazil, the largest market

in this group.

We view US equities as a core holding. Our preferred sectors are

financials, technology, materials, industrials and energy. Lower

corporate taxes and rising long-term bond yields have helped boost

US bank earnings forecasts while higher bond yields tend to boost

net interest income for banks.

Among our other preferred sectors, industrials stand out in terms of

earnings growth, with consensus expectations of 13%, up from 10%

in December. The improving outlook for economic growth is leading

to upward revisions in corporate investment, benefiting the capital

goods and transport sectors.

Bonds

Q2. Could you explain the upgrade to EM local currency bonds?

Since we published our Outlook 2018, EM USD and local currency

government bonds have returned 0.7% and 6.6% respectively, while

Asia USD bonds have been little changed. Despite the recent uptick

in US Treasury yields, core inflation remains relatively benign, while

the synchronised upswing in global growth looks set to continue,

encouraging flows to EMs. We retain our preference for EM USD

bonds and are upgrading EM local currency government bonds to

one of our preferred areas.

EM local currency government bonds are one of the highest yielding

sub-asset classes within bonds. We believe they should continue to

benefit from the positive macroeconomic backdrop and rising

commodity prices. Although a number of EM central banks may

tighten policy this year, our expectations for further USD weakness

should bode well for fund flows into the asset class.

We remain comfortable with the outlook for Asia USD corporate

bonds, especially as the asset class is highly concentrated in high

quality bonds. Indeed, Asia Investment Grade (IG) bonds remain our

preferred route for taking high quality bond exposure, as they offer a

premium over Developed Market (DM) IG corporate and government

bonds. Additionally, Asia USD bonds have also demonstrated less

volatility given their strong regional buyer base. However, the

improving outlook for EM local currency bonds has pushed Asian

corporate bonds from a preferred area to a core holding.

US earnings upgrades have been higher than other markets, primarily due to tax cuts

2018 consensus earnings estimates of major markets (24 Jan 2018 vs. 01 Dec 2017)


EM local currency bonds offer among the highest yields, while carrying relatively low risk from any further rise in US bond yields

Yield offered by various bonds and their sensitivity to changes in US bond yields (duration risk)


0%

5%

10%

15%

20%

US Asia ex-Japan

EM ex-Asia

Japan Euroarea

UK

2018 E

PS

g

1-Dec-17 24-Jan-18

EM USD govt bonds

EM LCY bondsDM HY

bonds

Asia USD bonds

DM IG corporate

bondsDM IG

govt bonds0.0

2.0

4.0

6.0

8.0

3.0 4.0 5.0 6.0 7.0 8.0

YT

W (

%)

Interest rate sensitivity



Top client questions (cont’d)

FX

Q3. The USD has weakened considerably so far this year. Are

we expecting further weakness from current levels?

The USD has fallen 4.6% since we published our Outlook 2018. We

maintain our outlook for further USD weakness, as we believe most

factors that have supported a weaker USD remain intact.

In the short term, a number of factors indicate the possibility of a

USD rebound. Apart from technical indicators highlighting oversold

levels, we note that USD positioning is significantly net short. The

USD also appears to be trading well ahead of values implied by real

interest rate differentials, suggesting an undervaluation relative to

short-term fundamentals. Finally, with global markets having

performed strongly, any pullback in risk sentiment would be

supportive for the USD in the immediate term.

However, over the medium term, we believe cyclical factors are likely

to dominate, triggering further USD weakness. In our view, Fed rate

hike expectations appear to be fairly priced into the USD and,

therefore, three Fed rate hikes this year are unlikely to change the

trend. In contrast, we continue to believe there is greater potential for

other central banks, including the ECB, BoE, RBA, RBNZ and BoC,

to surprise positively given the strong pick-up in growth outside the

US. In addition, improvement in growth across EMs and DMs are

likely to further support risk-on sentiment and continued demand for

non-USD denominated assets.

Commodities

Q4. Is the current rally in oil prices sustainable? What could

cause a dip in prices?

Oil prices have rallied almost 14% since we published our Outlook

2018. How much higher can prices go in 2018?

We believe a number of short-term factors are largely responsible for

the strong gains in oil prices and, as a result, we would not chase

prices higher from current levels. We believe there may be better

opportunities to gain exposure to oil prices, as some of the shorter-

term drivers for oil prices fade into Q2 ‘18.

Short-term factors supporting oil prices include higher-than-expected

seasonal demand as a result of the colder-than-usual weather in

North America, a significant rebuilding of inventory by refiners as

they resumed operations in the aftermath of the hurricane season

and problems with the Forties pipeline in the North Sea, which

carries a significant proportion of UK’s oil. Against this backdrop,

speculative net-long positioning in oil prices is near record levels,

while the USD has declined sharply over the past month. Both these

factors are likely to correct in the near term, supporting a modest

pullback in oil prices over the coming months.

From a medium-term perspective, excess supply remains the

biggest hurdle to a significant recovery in prices. In particular, we

expect US shale output to rise in response to the higher prices. The

International Energy Agency’s first report of 2018 estimated

substantially higher US supply growth, with a broadly unchanged

demand outlook. We believe stronger-than-expected US supply has

the potential to largely offset OPEC production cuts. Geopolitics

remains a risk to our view of a limited rise in oil prices. However, the

probability of a conflict in oil producing regions in the Middle East

remains low, in our opinion.

Broad USD index has fallen below long-term supports, suggesting further downside over the next 12 months

USD (DXY) index and 50-, 100-, 200-week moving averages (WMA)


US oil production has continued to soar, but inventory drawdown has been steep in recent months on higher demand due to a severe winter

US crude oil production and inventory


70

80

90

100

110

Apr-09 Jan-11 Oct-12 Jul-14 Apr-16 Jan-18

Ind

ex

USD index 50WMA 100WMA 200WMA

6

7

8

9

10

11

300

350

400

450

500

550

Feb-13 Oct-14 Jun-16 Feb-18

Mb

pd

Mb

bl

US inventory US production (RHS)



Global asset allocation summary Global-focused Tactical Asset Allocation - February 2018 (12m). All figures are in percentages.

Cash – UW Fixed Income – N Equity – OW Commodities – N Alternative Strategies – N

Asset class Region View vs. SAA Conservative Moderate

Moderately

Aggressive Aggressive

Cash & Cash Equivalents USD Cash UW 10 2 0 0

Developed Market (DM)

Investment Grade (IG) Bonds

DM Government Bonds UW 18 14 6 2

DM IG Corporate Bonds N 14 11 4 3

Developed Market High Yield

(HY) Bonds DM HY Corporate Bonds N 4 3 2 0

Emerging Market Bonds

EM USD Sovereign Bonds OW 5 4 0 0

EM Local Ccy Sovereign Bonds OW 0 0 0 0

Asia Corporate USD Bonds N 0 0 0 0

Developed Market Equity

North America N 15 23 36 45

Europe ex-UK OW 9 11 16 20

UK UW 0 0 0 0

Japan N 3 4 6 7

Emerging Market Equity Asia ex-Japan OW 7 10 12 15

Non-Asia EM N 0 0 2 3

Commodities Commodities N 7 6 5 0

Alternative Strategies

N 8 12 11 5


For illustrative purposes only. Please refer to the disclosure appendix at the end of the document.

Cash10

Fixed Income

41

Equity34

Commodities7


8

Conservative

Cash2

Fixed Income

32

Equity48

Commodities6


12

Moderate

Fixed Income

12

Equity72

Commodities5


11

ModeratelyAggressive

Fixed Income

5

Equity90


5

Aggressive



Asia asset allocation summary Asia-focused Tactical Asset Allocation - February 2018 (12m). All figures are in percentages.

Cash – UW Fixed Income – N Equity – OW Commodities – N Alternative Strategies – N

Asset class Region View vs. SAA Conservative Moderate

Moderately

Aggressive Aggressive

Cash & Cash Equivalents USD Cash UW 8 0 0 0

Developed Market (DM)

Investment Grade (IG) Bonds

DM Government Bonds UW 8 7 3 0

DM IG Corporate Bonds N 7 6 3 0

Developed Market High Yield

(HY) Bonds DM HY Corporate Bonds N 3 3 0 0

Emerging Market Bonds

EM USD Sovereign Bonds OW 14 10 4 0

EM Local Ccy Sovereign Bonds OW 11 8 4 0

Asia Corporate USD Bonds N 10 7 3 3

Developed Market Equity

North America N 7 11 17 22

Europe ex-UK OW 7 11 16 21

UK UW 0 0 0 0

Japan N 2 0 3 3

Emerging Market Equity Asia ex-Japan OW 9 19 27 36

Non-Asia EM N 2 3 6 7

Commodities Commodities N 6 5 5 4


N 6 10 9 4


For illustrative purposes only. Please refer to the disclosure appendix at the end of the document.

Cash8

Fixed Income

53

Equity27

Commodities6


6

ConservativeFixed

Income41

Equity44

Commodities5


10

Moderate

Fixed Income

17

Equity69

Commodities5


9

Moderately Aggressive

Fixed Income

3

Equity89

Commodities4


4

Aggressive



Our Tactical Asset Allocation views (12m) USD

Asset class Sub-asset class Relative outlook Rationale

Multi-asset Strategies

Multi-asset Income Low policy rates, low absolute yields expected to remain a support

Alternatives

Ranked second behind equities. Retain our preference for equity hedge, while lowering global macro to our least preferred alternative strategy

Equities

Asia ex-Japan Earnings uptick a positive; valuations fair; trade tensions long-term risks

Euro area Earnings expectations may be bottoming; valuations fair

Non-Asia EM Commodities key to earnings; valuations elevated; politics a risk

Japan JPY key to earnings; valuations attractive

US Expect further upside to earnings momentum; elevated valuations a risk

UK Brexit talks cloud earnings outlook; elevated valuations; GBP rebound a risk

Bonds

EM government (USD)

Attractive yield and positive EM sentiment compensating for higher interest rate sensitivity

EM government (local currency) Attractive yield and positive EM sentiment; aided by a weaker USD

Asian USD bonds High credit quality, defensive allocation; influenced by China risk sentiment

DM HY corporate Attractive yields on offer, offset by increasingly expensive valuations

DM IG corporate Likely to outperform DM IG government bonds; yield premium is relatively low

DM government Low yield; returns challenged by a normalising Fed and ECB monetary policy

Currencies

EUR Economic momentum and ECB tapering positive, but risk of short-term pullback

EM currencies Long-term EM fundamentals constructive; rising commodity prices supportive

GBP Political and policy uncertainty cloud the outlook

AUD Status quo in RBA policy and weaker iron ore prices likely to limit gains

JPY USD/JPY remains tied to US 10-year yields, which we expect to rise gradually

USD Longer-term risk to the downside, but short-term bounce likely

Source: Standard Chartered Global Investment Committee

Overweight Neutral Underweight



Market performance summary *

*Performance in USD terms unless otherwise stated, YTD period from 31 December 2017 to 25 Jan 2018, 1 week period: 18 Jan 2018 to 25 Jan 2018

Sources: MSCI, JP Morgan, Barclays Capital, Citigroup, Dow Jones, HFRX, FTSE, Bloomberg, Standard Chartered

4.6%

3.9%

1.9%

1.3%

2.8%

1.9%

3.0%

4.7%

3.3%

2.8%

1.8%

3.5%

5.3%

3.8%

0.3%

6.4%

0.4%

2.7%

-0.3%

5.1%

0.9%

1.5%

1.0%

2.4%

4.5%

0.2%

3.4%

-0.9%

2.1%

2.0%

0.0%

2.7%

6.8%

7.7%

6.5%

7.5%

8.1%

7.1%

2.8%

8.2%

8.8%

4.4%

4.5%

11.9%

5.6%

13.3%

12.8%

8.3%

7.9%

3.2%

7.9%

4.2%

6.6%

1.9%

6.3%

9.1%

6.3%

5.3%

6.6%

-5% 0% 5% 10% 15%

Year to date

1.5%

1.4%

0.5%

0.5%

0.9%

0.8%

1.5%

1.8%

1.3%

0.3%

0.9%

1.6%

1.6%

3.0%

2.2%

2.4%

1.6%

2.0%

-0.1%

2.4%

0.2%

0.5%

0.8%

1.0%

1.8%

0.0%

2.0%

0.0%

1.4%

2.6%

1.5%

2.5%

1.7%

1.1%

1.2%

2.4%

2.3%

1.6%

1.8%

2.6%

3.0%

2.1%

2.2%

2.9%

0.2%

4.4%

2.6%

4.2%

2.4%1.9%

2.3%

0.2%

2.1%

-0.4%

1.5%

2.9%

1.7%

1.7%

1.9%

-2% 0% 2% 4% 6%

1 Week

Global Equities

Global High Divi Yield Equities

Developed Markets (DM)

Emerging Markets (EM)

US

Western Europe (Local)

Western Europe (USD)

Japan (Local)

Japan (USD)

Australia

Asia ex-Japan

Africa

Eastern Europe

Latam

Middle East

China

India

South Korea

Taiwan

Alternatives

FX (against USD)

Commodity

Bonds | Credit

Equity | Country & Region

Equity | Sector

Bonds | Sovereign

Consumer Discretionary

Consumer Staples

Energy

Financial

Healthcare

Industrial

IT

Materials

Telecom

Utilities

Global Property Equity/REITs

DM IG Sovereign

US Sovereign

EU Sovereign

EM Sovereign Hard Currency

EM Sovereign Local Currency

Asia EM Local Currency

DM IG Corporates

DM High Yield Corporates

US High Yield

Europe High Yield

Asia Hard Currency

Diversified Commodity

Agriculture

Energy

Industrial Metal

Precious Metal

Crude Oil

Gold

Asia ex-Japan

AUD

EUR

GBP

JPY

SGD

Composite (All strategies)

Relative Value

Event Driven

Equity Long/Short

Macro CTAs



Economic & Market Calendar Event Next Week Date Period Expected Prior

MO

N

US Real Personal Spending 29-Jan-18 Dec – 0.4%

US PCE Core y/y 29-Jan-18 Dec 1.6% 1.5%

TU

E EC Economic Confidence 30-Jan-18 Jan – 116

US Conf. Board Consumer Confidence 30-Jan-18 Jan 123.1 122.1

WE

D

JN Industrial Production y/y 31-Jan-18 Dec P 3.1% 3.6%

CH Non-manufacturing PMI 31-Jan-18 Jan 55 55

CH Manufacturing PMI 31-Jan-18 Jan 51.5 51.6

EC Unemployment Rate 31-Jan-18 Dec – 8.7%

EC CPI Estimate y/y 31-Jan-18 Jan – 1.4%

IN GDP Annual Estimate y/y 31-Jan-18 2017 – 8.0%

TH

UR

US FOMC Rate Decision (Upper Bound) 01-Feb-18 31-Jan 1.5% 1.5%

CH Caixin China PMI Mfg 01-Feb-18 Jan 51.5 51.5

US ISM Manufacturing 01-Feb-18 Jan 58.9 59.7

US Wards Domestic Vehicle Sales 01-Feb-18 Jan – 13.72m

FR

I/

SA

T US Change in Nonfarm Payrolls 02-Feb-18 Jan 180k 148k

US Unemployment Rate 02-Feb-18 Jan 4.1% 4.1%

Event This Week Date Period Actual Prior

TU

E EC ZEW Survey Expectations 23-Jan-18 Jan 31.8 29

JN BOJ Policy Balance Rate 23-Jan-18 23-Jan -0.1% -0.1%

WE

D

JN Exports y/y 24-Jan-18 Dec 9.3% 16.2%

GE Markit/BME Germany Composite PMI 24-Jan-18 Jan P 58.8 58.9

EC Markit Eurozone Composite PMI 24-Jan-18 Jan P 58.6 58.1

UK ILO Unemployment Rate 3Mths 24-Jan-18 Nov 4.3% 4.3%

US Existing Home Sales 24-Jan-18 Dec 5.57m 5.78m

TH

UR

GE IFO Expectations 25-Jan-18 Jan 108.4 109.5

EC ECB Main Refinancing Rate 25-Jan-18 25-Jan 0.0% 0.0%

US New Home Sales 25-Jan-18 Dec 625k 689k

FR

I/S

AT

JN Natl CPI Ex Fresh Food, Energy y/y 26-Jan-18 Dec 0.3% 0.3%

UK GDP q/q 26-Jan-18 4Q A – 0.4%

US Personal Consumption 26-Jan-18 4Q – 2.2%

US GDP Annualized q/q 26-Jan-18 4Q A – 3.2%

US Durable Goods Orders 26-Jan-18 Dec P – 1.3%

Previous data are for the preceding period unless otherwise indicated

Data are % change on previous period unless otherwise indicated

P - preliminary data, F - final data, sa - seasonally adjusted

y/y – year-on-year, m/m - month-on-month

Source: Bloomberg, Standard Chartered; key indicators highlighted in blue


10

Disclosure Appendix

THIS IS NOT A RESEARCH REPORT AND HAS NOT BEEN PRODUCED BY A RESEARCH UNIT.

This document is not research material and it has not been prepared in accordance with legal requirements designed to promote

the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment

research. This document does not necessarily represent the views of every function within Standard Chartered Bank, particularly

those of the Global Research function.

Standard Chartered Bank is incorporated in England with limited liability by Royal Charter 1853 Reference Number ZC18. The

Principal Office of the Company is situated in England at 1 Basinghall Avenue, London, EC2V 5DD. Standard Chartered Bank is

authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation

Authority.

Banking activities may be carried out internationally by different Standard Chartered Bank branches, subsidiaries and affiliates

(collectively “SCB”) according to local regulatory requirements. With respect to any jurisdiction in which there is a SCB ent ity, this

document is distributed in such jurisdiction by, and is attributable to, such local SCB entity. Recipients in any jurisdiction should

contact the local SCB entity in relation to any matters arising from, or in connection with, this document. Not all products and

services are provided by all SCB entities.

This document is being distributed for general information only and it does not constitute an offer, recommendation or solici tation to

enter into any transaction or adopt any hedging, trading or investment strategy, in relation to any securities or other financial

instruments. This document is for general evaluation only, it does not take into account the specific investment objectives, financial

situation or particular needs of any particular person or class of persons and it has not been prepared for any particular person or

class of persons.

Investment involves risks. The prices of investment products fluctuate, sometimes dramatically. The price of investment products

may move up or down, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of

buying and selling investment products. You should not rely on any contents of this document in making any investment decisions.

Before making any investment, you should carefully read the relevant offering documents and seek independent legal, tax and

regulatory advice. In particular, we recommend you to seek advice regarding the suitability of the investment product, taking into

account your specific investment objectives, financial situation or particular needs, before you make a commitment to purchase the

investment product.

Opinions, projections and estimates are solely those of SCB at the date of this document and subject to change without notice.

Past performance is not indicative of future results and no representation or warranty is made regarding future performance. Any

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opinion only and is not indicative of actual future movements in rates or prices or actual future events or occurrences (as the case

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SCB, and/or a connected company, may at any time, to the extent permitted by applicable law and/or regulation, be long or short

any securities, currencies or financial instruments referred to on this document or have a material interest in any such securities or

related investment, or may be the only market maker in relation to such investments, or provide, or have provided advice,

investment banking or other services, to issuers of such investments. Accordingly, SCB, its affiliates and/or subsidiaries may have

a conflict of interest that could affect the objectivity of this document. This document must not be reproduced, forwarded or

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jurisdiction unless permitted by the local laws and regulations of that jurisdiction. Neither SCB nor any of its directors, employees

or agents accept any liability whatsoever for the actions of third parties in this respect.

Copyright: Standard Chartered Bank 2018. Copyright in all materials, text, articles and information contained herein is the property

of, and may only be reproduced with permission of an authorised signatory of, Standard Chartered Bank. Copyright in materials

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belonging to third parties and copyright in these materials as a compilation vests and shall remain at all times copyright of Standard

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11

with the express prior written consent of an authorised signatory of Standard Chartered Bank. All rights reserved. © Standard

Chartered Bank 2018.

Standard Chartered Private Bank is the private banking division of SCB. Private banking activities may be carried out internationally

by different SCB legal entities and affiliates according to local regulatory requirements. Not all products and services are provided

by all SCB branches, subsidiaries and affiliates. Some of the SCB entities and affiliates only act as representatives of the Standard

Chartered Private Bank, and may not be able to offer products and services, or offer advice to clients. They serve as points of

contact only.

Country Specific Disclosures

Botswana: This document is being distributed in Botswana by, and is attributable to, Standard Chartered Bank Botswana Limited

which is a financial institution licensed under the Section 6 of the Banking Act CAP 46.04 and is listed in the Botswana Stock

Exchange.

China: This document is being distributed in China by, and is attributable to, Standard Chartered Bank (China) Limited which is

mainly regulated by China Banking Regulatory Commission (CBRC), State Administration of Foreign Exchange (SAFE), and

People’s Bank of China (PBOC).

Ghana: Standard Chartered Bank Ghana Limited accepts no liability and will not be liable for any loss or damage arising directly or

indirectly (including special, incidental or consequential loss or damage) from your use of these documents. Past performance is

not indicative of future results and no representation or warranty is made regarding future performance. You should seek advice

from a financial adviser on the suitability of an investment for you, taking into account these factors before making a commitment to

invest in an investment. To unsubscribe from receiving further updates, please click here. Please do not reply to this email. Call our

Priority Banking on 0302610750 for any questions or service queries. You are advised not to send any confidential and/or important

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Hong Kong: In Hong Kong, this document, except for any portion advising on or facilitating any decision on futures contracts

trading, is distributed by Standard Chartered Bank (Hong Kong) Limited (“SCBHK”), a subsidiary of Standard Chartered Bank.

SCBHK has its registered address at 32/F, Standard Chartered Bank Building, 4-4A Des Voeux Road Central, Hong Kong and is

regulated by the Hong Kong Monetary Authority and registered with the Securities and Futures Commission (“SFC”) to carry on

Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset

management) regulated activity under the Securities and Futures Ordinance (Cap. 571) (“SFO”) (CE No. AJI614). The contents of

this document have not been reviewed by any regulatory authority in Hong Kong and you are advised to exercise caution in relation

to any offer set out herein. If you are in doubt about any of the contents of this document, you should obtain independent

professional advice. Any product named herein may not be offered or sold in Hong Kong by means of any document at any time

other than to “professional investors” as defined in the SFO and any rules made under that ordinance. In addition, this document

may not be issued or possessed for the purposes of issue, whether in Hong Kong or elsewhere, and any interests may not be

disposed of, to any person unless such person is outside Hong Kong or is a “professional investor” as defined in the SFO and any

rules made under that ordinance, or as otherwise may be permitted by that ordinance. In Hong Kong, Standard Chartered Private

Bank is the private banking division of Standard Chartered Bank (Hong Kong) Limited.

India: Standard Chartered Bank is registered with Securities and Exchange Board of India as an Investment Advisor (Registration

Number: INA000002249) under the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013. You can

avail of investment advisory services of Standard Chartered Bank only upon (i) executing separate documents with the Investment

Advisory Group of Standard Chartered Bank for availing 'Investment Advice’ (as defined in the Securities and Exchange Board of

India (Investment Advisers) Regulations, 2013); and (ii) paying specific fees (if applied by Standard Chartered Bank ) for such

‘Investment Advice’. Standard Chartered Bank acts as a distributor of mutual funds and referrer of other third party financia l

products, for which Standard Chartered Bank receives commission / referral fees from the product provider.

Jersey: In Jersey, Standard Chartered Private Bank is the Registered Business Name of the Jersey Branch of Standard Chartered

Bank. The Jersey Branch of Standard Chartered Bank is regulated by the Jersey Financial Services Commission. Copies of the

latest audited accounts of Standard Chartered Bank are available from its principal place of business in Jersey: PO Box 80, 15

Castle Street, St Helier, Jersey JE4 8PT. Standard Chartered Bank is incorporated in England with limited liability by Royal Charter

in 1853 Reference Number ZC 18. The Principal Office of the Company is situated in England at 1 Basinghall Avenue, London,

EC2V 5DD. Standard Chartered Bank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct

Authority and Prudential Regulation Authority. The Jersey Branch of Standard Chartered Bank is also an authorised financial

services provider under license number 44946 issued by the Financial Services Board of the Republic of South Africa. Jersey is not

part of the United Kingdom and all business transacted with Standard Chartered Bank, Jersey Branch and other Standard

Chartered Group Offices outside of the United Kingdom, are not subject to some or any of the investor protection and

compensation schemes available under United Kingdom law.

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12

Kenya: Investment Products and Services are distributed by Standard Chartered Investment Services Limited, a wholly owned

subsidiary of Standard Chartered Bank Kenya Limited (Standard Chartered Bank/the Bank) that is licensed by the Capital Markets

Authority as a Fund Manager. Standard Chartered Bank Kenya Limited is regulated by the Central Bank of Kenya.

Singapore SCBSL: This document is being distributed in Singapore by, and is attributable to, Standard Chartered Bank (Singapore)

Limited (“SCBSL”). Recipients in Singapore should contact SCBSL in relation to any matters arising from, or in connection with, this

document. SCBSL is an indirect wholly-owned subsidiary of Standard Chartered Bank and is licensed to conduct banking business

in Singapore under the Singapore Banking Act, Chapter 19. IN RELATION TO ANY FIXED INCOME AND STRUCTURED

SECURITIES REFERRED TO IN THIS DOCUMENT (IF ANY), THIS DOCUMENT TOGETHER WITH THE ISSUER

DOCUMENTATION SHALL BE DEEMED AN INFORMATION MEMORANDUM (AS DEFINED IN SECTION 275 OF THE

SECURITIES AND FUTURES ACT, CHAPTER 289 (“SFA”). IT IS INTENDED FOR DISTRIBUTION TO ACCREDITED

INVESTORS, AS DEFINED IN SECTION 4A OF THE SFA, OR ON TERMS THAT THE SECURITIES MAY ONLY BE ACQUIRED

AT A CONSIDERATION OF NOT LESS THAN S$200,000 (OR ITS EQUIVALENT IN A FOREIGN CURRENCY) FOR EACH

TRANSACTION. Further, in relation to fixed income and structured securities mentioned (if any), neither this document nor the

Issuer Documentation have been, and will not be, registered as a prospectus with the Monetary Authority of Singapore under the

SFA. Accordingly, this document and any other document or material in connection with the offer or sale, or invitation for

subscription or purchase, of the product may not be circulated or distributed, nor may the product be offered or sold, or be made

the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons other than a relevant person

pursuant to section 275(1) of the SFA, or any person pursuant to section 275(1A) of the SFA, and in accordance with the

conditions, specified in section 275 of the SFA, or pursuant to, and in accordance with the conditions of, any other applicable

provision of the SFA. Singapore dollar deposits of non-bank depositors are insured by the Singapore Deposit Insurance

Corporation, for up to S$50,000 in aggregate per depositor per Scheme member by law. Foreign currency deposits, dual currency

investments, structured deposits and other investment products are not insured.

Singapore SCB, Singapore Branch: This document is being distributed in Singapore by SCB, Singapore branch only to accredited

investors, expert investors or institutional investors, as defined in the Securities and Futures Act, Chapter 289 of Singapore.

Recipients in Singapore should contact SCB, Singapore branch in relation to any matters arising from, or in connection with, this

document. In Singapore, Standard Chartered Private Bank is the Private Banking division of SCB, Singapore branch. SCB,

Singapore branch (Registration No. S16FC0027L) (GST Registration No.: MR-8500053-0) is licensed to conduct banking business

under the Banking Act, Chapter 19 of Singapore. IN RELATION TO ANY FIXED INCOME AND STRUCTURED SECURITIES

REFERRED TO IN THIS DOCUMENT (IF ANY), THIS DOCUMENT TOGETHER WITH THE ISSUER DOCUMENTATION SHALL

BE DEEMED AN INFORMATION MEMORANDUM (AS DEFINED IN SECTION 275 OF THE SFA). IT IS INTENDED FOR

DISTRIBUTION TO ACCREDITED INVESTORS, AS DEFINED IN SECTION 4A OF THE SFA. Further, in relation to fixed income

and structured securities mentioned (if any), neither this document nor the Issuer Documentation have been, and will not be,

registered as a prospectus with the Monetary Authority of Singapore under the SFA. Accordingly, this document and any other

document or material in connection with the offer or sale, or invitation for subscription or purchase, of the product may not be

circulated or distributed, nor may the product be offered or sold, or be made the subject of an invitation for subscription or

purchase, whether directly or indirectly, to persons other than a relevant person pursuant to section 275(1) of the SFA, and in

accordance with the conditions, specified in section 275 of the SFA, or pursuant to, and in accordance with the conditions of, any

other applicable provision of the SFA. Singapore dollar deposits of non-bank depositors are insured by the Singapore Deposit

Insurance Corporation, for up to S$50,000 in aggregate per depositor per Scheme member by law. Foreign currency deposits, dual

currency investments, structured deposits and other investment products are not insured. In relation to any collective investment

schemes referred to in this document (if any), this document is for general information purposes only and is not an offering

document or prospectus (as defined in the SFA). This document is not, nor is it intended to be (i) an offer or solicitation of an offer

to buy or sell any financial product; or (ii) an advertisement of an offer or intended offer of any financial product.

Thailand: Please study the Scheme Information Documents carefully e.g. investment policy, risks, fund performance before

investing.

UAE: DIFC - Standard Chartered Bank, Dubai International Financial Centre (SCB DIFC) having its offices at Dubai International

Financial Centre, Building 1, Gate Precinct, P.O. Box 999, Dubai, UAE is a branch of Standard Chartered Bank and is regulated by

the Dubai Financial Services Authority (“DFSA”). This document is intended for use only by Professional Clients and is not directed

at Retail Clients as defined by the DFSA Rulebook. In the DIFC we are authorized to provide financial services only to clients who

qualify as Professional Clients and Market Counterparties and not to Retail Clients. As a Professional Client you will not be given

the higher retail client protection and compensation rights and if you use your right to be classified as a Retail Client we will be

unable to provide financial services and products to you as we do not hold the required license to undertake such activities. For

Islamic transactions, we are acting under the supervision of our Shariah Supervisory Committee. Relevant information on our

Shariah Supervisory Committee is currently available on the Standard Chartered Bank website in the Islamic banking section here.

UAE: For residents of the UAE – Standard Chartered Bank UAE does not provide financial analysis or consultation services in or

into the UAE within the meaning of UAE Securities and Commodities Authority Decision No. 48/r of 2008 concerning financial

consultation and financial analysis.

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Uganda: Our Investment products and services are distributed by Standard Chartered Bank Uganda Limited, which is licensed by

the Capital Markets Authority as an investment adviser.

United Kingdom: Standard Chartered Bank (trading as Standard Chartered Private Bank) is an authorised financial services

provider (licence number 45747) in terms of the South African Financial Advisory and Intermediary Services Act, 2002.

Zambia: This document is distributed by Standard Chartered Bank Zambia Plc, a company incorporated in Zambia and registered

as a commercial bank and licensed by the Bank of Zambia under the Banking and Financial Services Act Chapter 387 of the Laws

of Zambia.

Market Abuse Regulation (MAR) Disclaimer

Standard Chartered Bank is incorporated in England with limited liability by Royal Charter 1853 Reference Number ZC18. The

Principal Office of the Company is situated in England at 1 Basinghall Avenue, London, EC2V 5DD. Standard Chartered Bank is

authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation

Authority. Banking activities may be carried out internationally by different Standard Chartered Bank branches, subsidiaries and

affiliates (collectively “SCB”) according to local regulatory requirements. Opinions may contain outright "buy", "sell", "hold" or other

opinions. The time horizon of this opinion is dependent on prevailing market conditions and there is no planned frequency for

updates to the opinion.

This opinion is not independent of SCB’s own trading strategies or positions. SCB and/or its affiliates or its respective officers,

directors, employee benefit programmes or employees, including persons involved in the preparation or issuance of this document

may at any time, to the extent permitted by applicable law and/or regulation, be long or short any securities or financial instruments

referred to in this document or have material interest in any such securities or related investments. Therefore, it is possible, and

you should assume, that SCB has a material interest in one or more of the financial instruments mentioned herein. If specific

companies are mentioned in this communication, please note that SCB may at times do business or seek to do business with the

companies covered in this communication; hold a position in, or have economic exposure to, such companies; and/or invest in the

financial products issued by these companies. Further, SCB may be involved in activities such as dealing in, holding, acting as

market makers or liquidity providers, or performing financial or advisory services including but not limited to, lead manager or co-

lead manager in relation to any of the products referred to in this communication. SCB may have received compensation for these

services and activities. Accordingly, SCB may have a conflict of interest that could affect the objectivity of this communication.

SCB has in place policies and procedures, logical access controls and physical information walls to help ensure confidential

information, including material non-public or inside information is not disclosed unless in line with its policies and procedures and

the rules of its regulators.

Please refer to https://www.sc.com/en/banking-services/market-disclaimer.html for more detailed disclosures, including past

opinions in the last 12 months and conflict of interests, as well as disclaimers. This document must not be forwarded or otherwise

made available to any other person without the express written consent of SCB.

THIS IS NOT A RESEARCH REPORT AND HAS NOT BEEN PRODUCED BY A RESEARCH UNIT.

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