Slow turnaround Are we in the middle of a paradigm shift? Global - PowerPoint PPT Presentation

Slow turnaround Are we in the middle of a paradigm shift? Global Chief Economist Helge J. Pedersen ICMA Coference, Copenhagen 24h. May 2013 • 3/15/2013

Wheel of crisis turning in its sixth year 2nd phase 1st phase EFSF/ESM the great financial crisis Six-pack and early warning recession mechanisms 2007-2008 2008-2009 Fiscal compact – budget laws Common fiscal policy Growth pact and banking union European Federation Proactive central bank/SMP/OMT The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough. 3rd phase sovereign debt crisis 2009- 2 Helge J. Pedersen •

Global Risk perception at pre Lehman levels 225 225 Index Index Nordea Risk Perception - Main 200 200 Lehman 175 175 Cyprus, Italian elections 150 150 Eurocrisis 125 125 100 100 Greece 75 75 Spain, Greek elections 50 50 06 07 08 09 10 11 12 13 Source: Nordea Markets and Reuters Ecowin 3 Helge J. Pedersen • • 3/15/2013

Global Slow turnaround because of • Crisis of confidence • Tightening of fiscal policy • High oil prices • Deleveraging in the private and public sector New financial sector regulation • Macroeconomic consequences of Basel III on Denmark DKKbn Capital requirement 70 DKKbn Liquidity and funding 210 (2010- Taxes and reporting 20 Foreign effect GDP-level prices) -3% Yield demand 11% Derived GDP-effect via exports -1% Change in lending rate 2,2%-point of which SME >3%-point Total permanent effect -2.75% 40-45 Source: IIF, DBA, own calculations GDP level (10-year period) -1.75% Source: The Danish Bankers Association 4 Helge J. Pedersen • • 3/15/2013

Global The 2013 economic heat map… 5 Helge J. Pedersen • • 3/15/2013

Global The ‘old world’ breathes in a monetary policy respirator… “Extraordinary times calls for • extraordinary measures” 35 35 % of GDP % of GDP Central bank's balance sheets 30 30 25 25 20 20 15 15 Fed ECB 10 BoE 10 BoJ 5 5 07 08 09 10 11 12 Source: Nordea Markets and Reuters Ecowin MP ‐ plus: extraordinarily low interest rates and unconventional monetary policy measures 6 Helge J. Pedersen • • 3/15/2013

Global …why liquidity will be ample and rates extraordinarily low for long time yet 7 % 7 % Tightening Easing Tightening Easing 6 6 5 5 UK 4 4 3 3 2 2 Euro area USA 1 1 Japan 0 0 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Source: Nordea Markets and Reuters Ecowin 7 Helge J. Pedersen • • 3/15/2013

Global …also on government bonds 10 % 10 1 0 Y governm ent bond yields % 9 9 8 8 7 7 The Conondrum era 6 6 USA 5 5 4 4 Germany 3 3 Denmark 2 2 Lines marks beginning of policy tightening 1 1 90 92 94 96 98 00 02 04 06 08 10 12 Source: Nordea Markets and Reuters Ecowin 8 Helge J. Pedersen • • 3/15/2013

Global MP ‐ plus is not without risks. Addiction and new bubbles? 600 600 Index Index CRB spot 550 550 500 500 450 450 80 80 % % 400 400 70 70 350 350 Nikkei225 60 60 300 300 50 50 250 250 40 40 200 200 92 94 96 98 00 02 04 06 08 10 12 30 DAX30 30 OMX40 Source: Nordea Markets and Reuters Ecowin 20 20 DowJones 10 10 • IMF warns about property prices in 0 0 countries like Hong Kong, France, Brazil, -10 -10 Canada, Norway and Sweden May Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May 12 13 Source: Nordea Markets and Reuters Ecowin 9 Helge J. Pedersen • • 3/15/2013

Global Conclusion • Euro crisis is fading out • Growth in East and West – but everywhere low for longer • Monetary policy ‐ plus for a long time yet 1 0 Helge J. Pedersen • 3/15/2013 •

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