Global MacroScape: Looking for Rocky Marciano

RBC Dominion Securities Inc.
RBC Capital Markets, LLC
(Head of Cross Asset Strategy)
(416) 842-9629
[email protected]
(Cross Asset Strategist)
(212) 618-3539
[email protected]
Jordan Kotick
Jay Govender
September 14, 2015
Global MacroScape – Looking for Rocky Marciano
Inside (click below to go to articles):
Surveying the MacroScape
Fed hike aftershocks
That’s Hot
Oil Slick
Data Watch
Getting Sentiment-al: S&P500
FORWARD
Monthly and Quarterly Correlation
Matrix
Shaken & Stirred – week ending
09/11/2015
Cross Asset Snapshot
Methodologies
Exhibit 1: VIX distribution following the traditional seasonal trajectory.
Surveying the MacroScape
The key question is whether China
and its policies will lead to contagion for
global markets and global growth. While
bearish for EM, we believe China
fortifies the multiyear process of
market/country winners and losers
within an asset class. Blanket bullish or
bearish will remain an unprofitable
strategy. Call it market timing, call it
selectivity, call it active portfolio
management.
As for the Fed, we are reminded of
Berlin
and
International
Chess
Grandmaster (1950) Freidrich Saemisch
(1896-1975) who, in a championship
match, famously waited 45 minutes
before making his first move.
Bear market rallies look better
than the real thing, a market maxim
that often rings true. Proper equity
bottoms tend to see drift, chop, retests,
whippiness, seemingly random trade
and base building. It is like a fighter
getting knocked down. He does not pop
right back up but rather tries to find his
footing, staggers, gets his bearings, puts
his head back on his shoulders, and
then gets back into it.
While the speed of the equity
correction was surprising, the direction
was not. As we noted in early summer,
keeping the “hurricane shutters” up
seemed prudent (given the newly
declining internals among other things).
The bearish seasonal window begins to
close into Oct. as we highlight on page 1
(return distribution of the VIX).
We were bearish EM in Jan., we
are bearish now, we will remain(1)
bearish
going forward (in a word: Brazil).
The focus is the Fed of course. The
market has priced approx. a 30% chance
the Fed will raise rates. Our economics
team however expects they will raise
(despite the unsolicited advice the Fed
receives from the World Bank and IMF).
Accordingly, we took a look this
week across the assets for their
cumulative reaction after the hiking
cycle begins. We also looked at oil given
the (bearish) ongoing stock build.
(i)
Source: Bloomberg. RBC CM Cross Asset Strategy
Fed hike aftershocks
With the Fed meeting later this
week we thought it a good time to look
at the cross market implications of a
rate hike. In order to do this though we
had to first define a hiking cycle and
then find its beginning. We defined a
hiking cycle as a period in which the Fed
raised rates by at least 100bps from the
nadir over a period of at least 18
months. We identified 6 such
occurrences starting in 1972, 1976,
1983, 1986, 1994 and 2004.
Upon identifying the start dates
for the hiking cycles we then turned to
the asset classes to calculate average
returns on the day of the hike, one
week, one quarter and one year later.
Yield behavior was the most
interesting of the set with miniscule
negative changes on the day and an
unaggressive trajectory one week later,
suggesting markets tend to anticipate
initial moves. When one moves out one
quarter and one year, the bear
flattening trajectory consistent with
Exhibit 2: Put/calls hit rarely seen bearish extremes (contrarian) in the Aug. swoon.
Source: Bloomberg, RBCCM Cross Asset Strategy
For Required Conflicts Disclosures, please see page 9.
Global MacroScape: Looking for Rocky Marciano
Exhibit 3: Post hike yield behavior
CAD (not shown).
Finally we examined commodities
where we found evidence of outsized
returns at the onset of a hiking cycle. All
three examined assets bested their 365
day rolling average returns by over 4%.
Copper is far and away the standout bull
beating its rolling 1y average return
significantly. Gold also performed well,
besting its 1y rolling average by 4.14%.
That’s Hot
Market signals to watch for –
Bullish signs will be more chop and
a hiking cycle (and common sense) chase (base building), improving
breadth/internals, less volume/vol. on
becomes apparent.
The movement of the 3m, as one downticks than upticks, sentiment
would expect, closely mimics the reaching bearish extremes (closing in
average cumulative hiking cycle while 5s currently), the bearish seasonal window
and 10s lag. An obvious point but we still passing, and capitulation trading.
Bearish signs will be credit spreads
wanted to run the numbers.
Equities too behave in a not coming in, EM remaining under
predictable manner with initial reactions pressure, falling commodities, US
in both the US and abroad indicating a Transports continuing their historic
knee jerk lower of between 0.25% and underperformance and of course
0.61% the day of the initial move. Chinese asset weakness continuing.
Central Banks – 1) significant daily
Overall however, this bearish move is
move
in Japanese equities last week
subsequently faded as the average 12
(Nikkei
225 up 7.71%) partially
month period after the hiking cycle
motivated
the potential for lower
began ended on a positive note.
corporate
tax
rates and suggestion that
The most surprising asset class was
Foreign Exchange where expected USD there may be another ¥2trn in stimulus
strength gave way to USD weakness vs coming. 2) Draghi begins clearing the
both the JPY and GBP. The 5.57% drop in way for further QE (in “size, composition
the USD index over the course of a year and duration”) if global market
after an initial hike confirms that for FX, volatility/bearishness (low oil, China, EM
interest rate differentials are key, not key drivers) continues, especially if it
simply US interest rates. To note, the threatens the budding European
USD is not universally panned after a recovery. 3) BoE minutes remained
hike however – while it may lose ground optimistic on UK economy despite
to JPY, it gains ground on the likes of admitting risks to global economy. Rates
Exhibit 4: Average market reactions (in %) after an initial Fed hike.
Source: Bloomberg, RBC CM Cross Asset Strategy
(2)
(i)
left at record low levels of 0.5%, 8-1 in
favour of not raising rates.
Oil Slick
Volatility in oil markets continues
to expand as highlighted by the oil VIX
printing its highest value (74.29) since
March 2009. We remain in the bearish
price camp near term looking for a
further downturn in price as a condition
necessary to balance the market
through supply destruction.
This past week’s 2.57mb stock
build underscores continued excess
production risks just as refineries have
to gear down for fall maintenance
schedules. Additionally, “US production
proving extremely resilient in this
current price environment could further
1
exacerbate the race to the bottom.”
Despite the weakness in prices it
seems Saudi Arabia is willing to let prices
fall further to push out the higher cost
producers such as offshore and higher
cost tight oil. They have even moved
away from a Venezuela backed OPEC
meeting stating that such a meeting
would not result in a curtailment of
supply.
Russia meanwhile continues to
keep the taps wide open. The weakness
in the Ruble has helped to blunt some of
the pressure of lower oil prices. While oil
accounts for nearly 60% of exports the
lower prices mean lower Russian tax
rates which act as a buffer and help to
spur productivity. The net effect is a
supply side game of chicken where no
one wants to be the first to cut.
Source: Bloomberg, RBCCM Cross Asset Strategy
September 14, 2015
2
Global MacroScape: Looking for Rocky Marciano
Exhibit 5: Strong US labor market, JOLTS data in the stratosphere.
Source, RBCCM Cross Asset Strategy, Bloomberg
Data Watch
turbulence is clearly still weighing
heavily…” 2
Whether the Fed wants to go
against hobbling equity markets,
imploding EM markets and sliding
commodity markets with Fed Funds
saying a 28% chance of a Sept. liftoff will
be interesting.
As for China, the Shanghai and
Shenzhen were up for the week, data was
fragile though not as weak as expected:
lower exports YoY (-5.5%, exp. -6.6%),
with Trade Balance at $60.24 bn vs exp of
$48 bn. PBOC Governor Zhou Xiaochuan
claims the stock market correction is
“mostly over,” as they continue to prop
up their markets/economy. We fade that
but at the same time, the market did not
matter to the economy on the way up, its
effects are minimal on the way down.
The economy will weaken further.
While it started with Romania (Jan.
7, cut of 25 bps intheir policy rate to
2.50%), 28 countries have since followed
suit by lowering rates. In this competivive
devaluation
(FX
Hunger
Games)
rd
landscape, last week, NZ cut again (3
time this year, another 25bps, cash rate
now at 2.75%) and Serbia (yes, Serbia…)
cut its key policy rate 50 bps to 5.00%.
Bottom line, Fed week, Tom Porcelli
and team belive they will raise rates. We
have 3 main takeaways from Tom and
team: 1) “the unemployment rate fell to a
much lower than anticipated 5.1%...their
unemployment rate estimates for this
year have to come down.” 2) “Once the
Fed tightens, we think the baseline pace
will be every other meeting.” 2) Finally “if
(emphasis ours) the equity markets calm
down…The recent financial market
Exhibit 6: Sentiment on the S&P closing in on bearish extremes.
As for the US, JOLTS was
staggeringly strong (as shown) with the
5753 new cycle high print. The labour
market continues to strengthen. Small
Business Optimism was up small (95.9 vs
95.4 prior). Michigan closed the week
with weaker than expected sentiment
readings (85.7 vs exp. 91.1).
More talk from Japan (Yamamoto,
Kuroda) that 2% inflation remains their
dream, we mean target, with potentially
an expansion of further monetray easing
if need be (we do not know how to say
whatever it takes in Japanese). We
maintain 140/150 USD/JPY targets
medium term at miniumum and a bullish
view of Japanese equities, a view we have
had since 2014 (Springtime for
Kondratieff perhaps).
As
for
Europe,
Schaeuble
announced there will be a supplementary
budget for Germany given the refugee
crises. Data wise, the highlight was Euro
area Q2 GDP: a solid 0.4% with a revision
higher to 0.5% last quarter: “its fastest
pace since 2011…the growth impulse
was…evenly balanced between domestic
and external demand relative to what
was observed at the start of the year…a
solid report.”3
As for the Greek election, between
the New Democracy and Syriza, what was
neck and neck now has Syriza in the lead
according latest polls.
Getting Sentiment-al: S&P500
Extremely bearish indeed. But not
enough. That is our bottom line on
market sentiment.
This, alongside others like Market
Vane, AAII etc are definitely in the
onesided bear camp but not yet at the
one sided, historically extreme (recent
history) bear camp.
This implies that major markets like
the S&P should chop through their
seasonal bearish window (September)
but the risk is still for higher volatility,
corrective downside ahead of deeper
bearish sentiment extremes and a riper
buying opportunity into year end.
Source: tradefutures.com, RBC CM Cross Asset Strategy
September 14, 2015
3
Global MacroScape: Looking for Rocky Marciano
FORWARD
Encapsulations
Equities
 EM equities staged a bounce last week. We are
believers/bullish on Japan, bearish most others.

US leadership shifts consistent with equity correction,
not bear market. Please see Robert Sluymer’s (our chief
equity technical strategist), work for more detail.4
Fixed Income
 US belly choppy with little triggers to note. But 2s
above 75/77 bps will send bearish shockwaves

Peripheral European 10s (Greece, Italy, and Ireland)
tighten against Germany on back of potential increase
in QE.
Emerging Markets
 Downgrade causes Real and Brazilian bonds to fall.
Further upside for USD/BRL expected

Mixed FX week: Bearish - TRY, IDR, MYR, BRL. Bullish ILS, ZAR, KRW, SGD, PLN, RUB, CLP, HUF, CZK
Commodities
 Larger than anticipated gain in oil stocks partially
offset by higher gasoline consumption.

China to keep crude purchases high in near term as
new strategic storage coming online will need to be
filled.
Foreign Exchange
 Aggressive fall (since late Aug) in Fed Funds probabiliy
for Sept. liftoff continues to weigh on US Dollar.

USA: Fed monetary policy
meeting. Consumer prices,
retail sales and housing price
data all due.
Eurozone: CPI, Employment,
IP, trade balance and current
account data all due.
Japan: BOJ monetary policy
meeting. Machine tool orders,
IP, capacity utilization and
import and export data all
due.
China: Retail sales, IP, BBG
GDP monthly estimate, new
yuan loans and money supply
data all due.
Switzerland: SNB monetary
policy decision and retail sales
data.
GBP (approx. +1.6%) and AUD (approx. +2.2%) led the
gains against the US Dollar
Geopolitics
 Ukrainian politicians to vote on debt restructuring
agreement.

Global Watch List
Indonesia: BOI reference rate
decision due. Export, import
and trade balance data due.
Final week for campaigning in Greece before vote on
th
the 20 of September, Tsipras hoping to retain seat.
September 14, 2015
4
Global MacroScape: Looking for Rocky Marciano
USDRUB
USDZAR
USDMXN
Japanese 10s
German 10s
SHComp
S&P 500
Iron Ore
0.21
(0.01) (0.21) (0.14) (0.11) (0.30) (0.14) (0.21) (0.00)
0.63
0.82
0.66
0.27
0.13
0.63
0.44
0.66
0.68
0.47
0.13
0.65
(0.12)
0.63
0.50
0.29
0.19
0.65
0.08
0.66
0.12
0.02
0.54
0.12
0.33
0.31
0.18
0.04
(0.07) (0.24) (0.49) (0.30) (0.32)
0.06
0.05
(0.49) (0.54)
UK 10s
0.39
US10s
0.16
Nikkei
(0.11)
FTSE
(0.15) (0.29) (0.72) (0.68) (0.64) (0.52) (0.31) (0.60) (0.16) (0.16) (0.43) (0.70) (0.22) (0.51)
0.26
DAX
0.58
0.04
Copper
(0.31) (0.26) (0.43) (0.02)
0.26
Oil
Gold
0.78
Nat Gas
USDJPY
0.56
AUDUSD
GBPUSD
EURUSD
GBPUSD
0.45
USDJPY
0.63
USDCAD
0.07
AUDUSD
(0.08)
Oil
(0.27)
Nat Gas
(0.01)
Gold
0.46
Copper
(0.07)
Iron Ore
(0.14)
S&P 500
(0.57)
DAX
(0.50)
FTSE
(0.46)
Nikkei
(0.47)
SHComp
(0.24)
US10s
(0.38)
German 10s 0.07
UK 10s
(0.02)
Japanese 10s (0.35)
USDMXN
(0.28)
USDZAR
(0.02)
USDRUB
(0.33)
USDCAD
EURUSD
Monthly and Quarterly Correlation Matrix
0.10
(0.17) (0.14)
(0.09)
0.18
(0.21) (0.11) (0.61) (0.63) (0.48) (0.36)
0.36
0.49
0.19
0.26
0.43
(0.04)
0.09
(0.03)
0.70
0.55
0.66
0.43
0.53
0.27
0.45
0.45
0.03
(0.00)
0.21
0.64
0.77
0.60
0.59
0.52
0.63
0.16
0.43
0.47
0.24
0.09
0.21
0.70
0.48
0.86
0.13
0.07
0.13
(0.14) (0.02)
0.00
(0.06) (0.02) (0.36)
0.27
0.24
0.22
0.11
(0.59) (0.43) (0.58) (0.45) (0.33)
0.06
(0.21)
(0.24)
0.26
(0.33)
0.49
(0.02) (0.42)
0.58
0.41
0.16
(0.05)
0.26
0.23
0.08
0.35
0.24
0.24
0.18
0.05
0.20
0.11
(0.15)
0.48
0.45
0.49
0.22
0.17
0.02
(0.27)
0.11
0.15
0.08
0.13
(0.09)
0.13
(0.02) (0.76)
0.45
0.45
0.52
0.07
(0.18)
0.19
0.08
(0.05) (0.64)
0.23
0.23
0.41
(0.04) (0.30)
0.49
0.23
0.52
(0.05) (0.68)
0.33
0.35
0.51
0.57
0.24
0.51
0.90
(0.21) (0.63)
0.12
0.18
0.17
(0.07) (0.30) (0.05)
0.26
0.44
0.29
0.41
0.02
(0.46)
0.15
0.36
0.34
0.09
(0.00)
0.16
0.24
0.38
0.22
0.27
0.39
(0.01) (0.51)
0.33
0.15
0.42
0.06
(0.25)
0.34
0.18
0.52
0.56
0.39
0.21
0.18
(0.23)
0.19
0.01
0.22
0.03
(0.06)
0.31
0.15
0.11
0.58
0.46
(0.07) (0.01)
0.59
0.24
(0.14)
0.23
(0.00)
0.14
0.11
(0.16)
0.29
0.15
0.18
0.45
0.33
(0.02)
0.00
0.59
0.80
(0.12) (0.45)
0.06
0.14
0.19
(0.10) (0.32)
0.26
0.29
0.19
0.51
0.49
0.32
0.15
0.25
0.32
0.17
0.13
(0.49)
0.53
0.48
0.48
0.11
(0.03)
0.24
0.15
0.64
0.40
0.49
0.35
0.23
0.25
0.16
0.19
0.26
0.27
(0.34)
0.45
0.63
0.37
0.27
0.07
0.24
0.06
0.48
0.28
0.30
0.10
0.19
0.25
0.19
0.16
0.16
0.52
0.07
(0.50)
0.54
0.42
0.79
0.27
(0.08)
0.43
0.01
0.57
0.51
0.56
0.18
0.35
0.52
0.38
0.33
0.25
0.47
(0.18)
(0.08)
0.02
0.25
0.04
0.16
0.17
0.33
0.67
0.73
0.03
0.27
0.29
0.31
0.16
0.42
0.43
0.46
0.67
0.08
0.25
0.24
0.27
0.32
0.10
0.12
(0.06)
0.07
0.23
(0.15)
0.07
0.47
0.51
0.41
0.53
0.63
(0.08)
0.11
0.18
0.85
0.58
0.61
0.92
0.25
0.24
0.54
0.56
0.32
0.70
0.55
0.37
0.75
0.42
0.40
0.43
0.41
0.14
0.63
0.59
0.36
0.78
0.55
0.25
(0.14) (0.02)
0.24
0.41
(0.00)
0.17
0.00
(0.30) (0.32)
0.09
0.38
0.13
0.30
0.53
0.62
0.30
0.76
0.60
0.62
0.72
0.51
0.17
0.22
0.49
0.22
0.31
0.19
0.36
0.16
0.16
0.41
0.56
0.74
0.23
0.60
0.46
Source: RBC Capital Markets, Bloomberg. Monthly correlations are above the black dividing line and quarterly correlations are below the black dividing line
Endnotes:
1 – Helima Croft, Mike Tran, Chris Louney, Jay Govender, A tale of tail risks, Sept 9, p. 1.
2 – Tom Porcelli, Dan Grubert, Jacob Oubina, Michael Cloherty, Weekly Dashboard, September 4, p. 1.
3 – Timo del Carpio, RBCi – Euro area Q2/15 GDPO: encouraging revisions”, September 8, p. 1.
4 – Robert Sluymer, Chris Tevere, Weekly Technical Themes- Secular vs Cyclical vs Bond Proxy leadership: Part II, September 10,
p. 1.
September 14, 2015
5
Global MacroScape: Looking for Rocky Marciano
Shaken & Stirred – week ending 09/11/2015
S&P Asia 50
HSI
Nikkei
NASDAQ
OMX
AEX
S&P TSX
IBEX
Mexican IPC
Bovespa
Equities
0.0%
2.0%
4.0%
AUD/JPY
GBP/JPY
EUR/JPY
AUD/USD
AUD/NZD
USD/CAD
EUR/GBP
USD/SEK
USD/DKK
USD/NOK
6.0%
0.0%
2.0%
Aus 02YR
Aus 05YR
US 30YR
US 10YR
Aus 15YR
German 02YR
Japan 05YR
Japan 02YR
German 05YR
Japan 10YR
4.0%
6.0%
0
5
-5.0%
0.0%
10
15
5.0%
EM FX
-3.0%
-2.0%
-1.0%
Copper
Lead
Corn
Palladium
Wheat
Heating Oil
Brent
Gasoil
Gasoline
Coffee
Rates
-5
EM EQ
USD/MYR
USD/IDR
USD/TRY
USD/CNY
USD/ARS
USD/CZK
USD/RUB
USD/PLN
USD/ZAR
USD/COP
FX
-2.0%
bp
Tadawul All Share
Qatar Exchange
Kospi
TWSE
Sensex
Tel-Aviv 25
Borsa Istanbul
Jakarta Composite
Philippines
Caracas
-4.0% -2.0%
0.0%
1.0%
2.0%
Commods
0.0%
2.0%
4.0%
6.0%
Source: RBC Capital Markets and Bloomberg
September 14, 2015
6
Global MacroScape: Looking for Rocky Marciano
Cross Asset Snapshot
Global Equities Percentage Change
DJIA
1 week
1 month
1 quarter
1 year
YTD
S&P 500
FTSE 100
DAX
Nikkei
ShComp
IPC
Micex
1.42
1.62
1.87
1.72
2.85
1.19
0.34
1.22
(7.29)
(7.22)
(8.62)
(12.02)
(11.68)
(18.59)
(5.37)
0.99
(9.28)
(7.26)
(9.87)
(9.36)
(10.22)
(37.56)
(3.79)
3.98
(4.33)
(2.17)
(9.87)
5.26
15.03
38.34
(6.55)
17.05
(8.37)
(5.18)
(6.25)
4.13
4.86
(1.14)
(0.60)
23.08
Key Global Interest Rates
9/10/2015
US
EU
UK
Japan
Australia
Canada
China
India
0.25
0.05
0.50
0.08
2.00
0.50
4.60
6.25
G4 Yields and Curves
US
UK
DE
JP
3m
6m
2y
5y
10y
2s-5s
2s-10s
5s-10s
0.02
0.25
0.73
1.55
2.22
0.81
1.49
0.67
0.51
0.61
0.64
1.31
1.87
0.67
1.24
0.57
-0.34
-0.29
-0.22
0.04
0.70
0.27
0.92
0.65
0.00
0.00
0.02
0.07
0.35
0.05
0.33
0.28
Commodities Percentage Change
1 week
1 month
1 quarter
1 year
YTD
Gold
Silver
Brent
Nat Gas
(0.97)
0.78
(1.81)
0.79
Copper
4.79
Ally
Wheat
Corn
1.37
2.24
3.51
0.19
(4.41)
(3.37)
(5.84)
3.71
2.58
(10.94)
(7.30)
(6.01)
(8.44)
(25.86)
(7.44)
(10.06)
(6.86)
(8.86)
1.26
(10.47)
(21.48)
(50.32)
(32.32)
(21.56)
(21.18)
(9.78)
6.79
(6.19)
(6.49)
(15.04)
(7.37)
(14.84)
(12.01)
(20.64)
(8.88)
USD/CAD USD/MXN
USD/RUB
USD/INR
(1.28)
(0.65)
Foreign Exchange Percentage Change
EUR/USD
1 week
1 month
1 Quarter
1 Year
YTD
GBP/USD
USD/JPY
AUD/USD
1.17
1.81
1.34
2.37
(0.28)
(1.04)
2.15
(0.82)
(3.58)
(3.18)
0.98
2.77
5.21
3.05
0.19
(0.47)
(2.27)
(8.81)
7.71
9.22
23.60
3.64
(12.74)
(4.99)
12.63
(22.29)
20.01
26.72
80.05
8.78
(6.77)
(0.85)
0.78
(13.49)
13.96
13.61
16.50
4.83
Source: RBC Capital Markets and Bloomberg
September 14, 2015
7
Global MacroScape: Looking for Rocky Marciano
Methodologies
Correlation Table




Data for the table was extracted from BBG with a closing date of the Thursday of the prior week.
Correlations were calculated on daily changes with a periodicity of one month (top right half) and three months (bottom
left half).
Yield market correlations were done on the changes on the yields themselves—not price.
Highlights were done using a sliding scale, with strong positive correlations highlighted by a green color, strong negative
correlations highlighted by a red color, and no correlation highlighted by no coloring
Shaken & Stirred




Data used in the “Shaken & Stirred” table is sourced from Bloomberg.
Tables look at a total of 24 assets within each asset class and highlight the largest gainers and losers over the course of the
week up to the point of publication.
All assets look at percentage changes over the course of the week except the Bonds Table, which looks at the change in
Yield over the course of the week measured in bps; winners are assets that see yields fall the most (in bps).
The total list of assets can be seen in the table below.
Developed Equities
DJ Industrials
S&P 500
NASDAQ
S&P TSX
Mexican IPC
Bovespa
EuroStoxx 50
FTSE 100
CAC 40
DAX
IBEX
FTSEMIB
AEX
OMX
SMI
Nikkei
HIS
ASX200
S&P Midcap
S&P Smallcap
EuroStoxx
MSCI Pan Euro
Straights Times
S&P Asia 50
EM Equities
Qatar Exchange
Prague SE
IPSA
SHCOMP Index
TWSE
Ibovespa
Micex
Sh Composite
Tadawul All Share
Kospi
Merval
Philippines
Dubai Financial
Caracas
WIG
Borsa Istanbul
OMX Tallinn
Colombia
Sensex
Tel-Aviv 25
JSE all share
Jakarta Composite
RTSI$ Index
Mexican IPC
Developed FX
EURUSD
NZDUSD
EURGBP
EURCAD
EURCHF
GBPUSD
AUDUSD
EURJPY
NZDJPY
GBPCAD
USDNOK
CADCHF
AUDCAD
USDCAD
GBPCHF
USDCHF
CADJPY
NOKSEK
GBPJPY
AUDNZD
USDSEK
USDDKK
AUDJPY
USDJPY
EM FX
USDINR
USDRUB
USDQAR
USDVEF
USDSAR
USDEGP
USDCNY
USDTHB
USDMYR
USDSGD
USDKRW
USDIDR
USDKWD
USDCLP
USDCZK
USDZAR
USDMXN
USDTRY
USDILS
USDPLN
USDHUF
USDARS
USDBRL
USDCOP
Rates
US 30YR
German 30YR
German 10YR
German 05YR
CAN 10YR
CAN 30YR
German 02YR
JGB 30YR
US 10YR
JGB 05YR
UK 30YR
UK 10YR
JGB 10YR
JGB 02YR
UK 05YR
CAN 02YR
CAN 5YR
UK 02YR
Aus 15YR
Aus 10YR
Aus 02YR
US 02YR
Aus 05YR
US 05YR
Commodities
Soybeans
Lean Hogs
Platinum
Gold
Corn
Tin
Wheat
Sugar
Silver
Gasoil
WTI
Cattle
Heating Oil
Palladium
Coffee
Nickel
Brent
Aluminium
Lead
NatGas
Gasoline
Zinc
Copper
Cotton
Source: RBC Capital Markets
Snapshot


Data for the “Snapshot” table is sourced from Bloomberg as of the publication date.
Snapshot shading highlights winners and losers for each asset class within each tenor.
September 14, 2015
8
Global MacroScape: Looking for Rocky Marciano
Required disclosures
Conflicts disclosures
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including
total revenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generated
by investment banking activities of the member companies of RBC Capital Markets and its affiliates.
Conflicts policy
RBC Capital Markets Policy for Managing Conflicts of Interest in Relation to Investment Research is available from us on request.
To access our current policy, clients should refer to
https://www.rbccm.com/global/file-414164.pdf
or send a request to RBC Capital Markets Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South
Tower, Toronto, Ontario M5J 2W7. We reserve the right to amend or supplement this policy at any time.
Dissemination of research and short-term trade ideas
RBC Capital Markets endeavors to make all reasonable efforts to provide research simultaneously to all eligible clients, having
regard to local time zones in overseas jurisdictions. RBC Capital Markets' equity research is posted to our proprietary website
to ensure eligible clients receive coverage initiations and changes in ratings, targets and opinions in a timely manner. Additional
distribution may be done by the sales personnel via email, fax, or other electronic means, or regular mail. Clients may also
receive our research via third party vendors. RBC Capital Markets also provides eligible clients with access to SPARC on the Firms
proprietary INSIGHT website, via email and via third-party vendors. SPARC contains market color and commentary regarding
subject companies on which the Firm currently provides equity research coverage. Research Analysts may, from time to time,
include short-term trade ideas in research reports and / or in SPARC. A short-term trade idea offers a short-term view on
how a security may trade, based on market and trading events, and the resulting trading opportunity that may be available. A
short-term trade idea may differ from the price targets and recommendations in our published research reports reflecting the
research analyst's views of the longer-term (one year) prospects of the subject company, as a result of the differing time horizons,
methodologies and/or other factors. Thus, it is possible that a subject company's common equity that is considered a long-term
'Sector Perform' or even an 'Underperform' might present a short-term buying opportunity as a result of temporary selling pressure
in the market; conversely, a subject company's common equity rated a long-term 'Outperform' could be considered susceptible
to a short-term downward price correction. Short-term trade ideas are not ratings, nor are they part of any ratings system, and
the firm generally does not intend, nor undertakes any obligation, to maintain or update short-term trade ideas. Short-term trade
ideas may not be suitable for all investors and have not been tailored to individual investor circumstances and objectives, and
investors should make their own independent decisions regarding any securities or strategies discussed herein. Please contact
your investment advisor or institutional salesperson for more information regarding RBC Capital Markets' research.
Analyst certification
All of the views expressed in this report accurately reflect the personal views of the responsible analyst(s) about any and all of
the subject securities or issuers. No part of the compensation of the responsible analyst(s) named herein is, or will be, directly or
indirectly, related to the specific recommendations or views expressed by the responsible analyst(s) in this report.
Disclaimer
RBC Capital Markets is the business name used by certain branches and subsidiaries of the Royal Bank of Canada, including RBC Dominion Securities Inc., RBC
Capital Markets, LLC, RBC Europe Limited, RBC Capital Markets (Hong Kong) Limited, Royal Bank of Canada, Hong Kong Branch and Royal Bank of Canada, Sydney
Branch. The information contained in this report has been compiled by RBC Capital Markets from sources believed to be reliable, but no representation or warranty,
express or implied, is made by Royal Bank of Canada, RBC Capital Markets, its affiliates or any other person as to its accuracy, completeness or correctness. All
opinions and estimates contained in this report constitute RBC Capital Markets' judgement as of the date of this report, are subject to change without notice and
are provided in good faith but without legal responsibility. Nothing in this report constitutes legal, accounting or tax advice or individually tailored investment
advice. This material is prepared for general circulation to clients and has been prepared without regard to the individual financial circumstances and objectives of
persons who receive it. The investments or services contained in this report may not be suitable for you and it is recommended that you consult an independent
investment advisor if you are in doubt about the suitability of such investments or services. This report is not an offer to sell or a solicitation of an offer to buy
any securities. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. RBC Capital
Markets research analyst compensation is based in part on the overall profitability of RBC Capital Markets, which includes profits attributable to investment banking
revenues. Every province in Canada, state in the U.S., and most countries throughout the world have their own laws regulating the types of securities and other
investment products which may be offered to their residents, as well as the process for doing so. As a result, the securities discussed in this report may not be
eligible for sale in some jurisdictions. RBC Capital Markets may be restricted from publishing research reports, from time to time, due to regulatory restrictions and/
or internal compliance policies. If this is the case, the latest published research reports available to clients may not reflect recent material changes in the applicable
September 14, 2015
9
Global MacroScape: Looking for Rocky Marciano
industry and/or applicable subject companies. RBC Capital Markets research reports are current only as of the date set forth on the research reports. This report is
not, and under no circumstances should be construed as, a solicitation to act as securities broker or dealer in any jurisdiction by any person or company that is not
legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. To the full extent permitted by law neither RBC Capital Markets nor
any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information
contained herein. No matter contained in this document may be reproduced or copied by any means without the prior consent of RBC Capital Markets.
Additional information is available on request.
To U.S. Residents:
This publication has been approved by RBC Capital Markets, LLC (member FINRA, NYSE, SIPC), which is a U.S. registered broker-dealer and which accepts
responsibility for this report and its dissemination in the United States. Any U.S. recipient of this report that is not a registered broker-dealer or a bank acting in
a broker or dealer capacity and that wishes further information regarding, or to effect any transaction in, any of the securities discussed in this report, should
contact and place orders with RBC Capital Markets, LLC.
To Canadian Residents:
This publication has been approved by RBC Dominion Securities Inc.(member IIROC). Any Canadian recipient of this report that is not a Designated Institution in
Ontario, an Accredited Investor in British Columbia or Alberta or a Sophisticated Purchaser in Quebec (or similar permitted purchaser in any other province) and
that wishes further information regarding, or to effect any transaction in, any of the securities discussed in this report should contact and place orders with RBC
Dominion Securities Inc., which, without in any way limiting the foregoing, accepts responsibility for this report and its dissemination in Canada.
To U.K. Residents:
This publication has been approved by RBC Europe Limited ('RBCEL') which is authorized by the Prudential Regulation Authority and regulated by the Financial
Conduct Authority ('FCA') and the Prudential Regulation Authority, in connection with its distribution in the United Kingdom. This material is not for general
distribution in the United Kingdom to retail clients, as defined under the rules of the FCA. However, targeted distribution may be made to selected retail clients of
RBC and its affiliates. RBCEL accepts responsibility for this report and its dissemination in the United Kingdom.
To Persons Receiving This Advice in Australia:
This material has been distributed in Australia by Royal Bank of Canada - Sydney Branch (ABN 86 076 940 880, AFSL No. 246521). This material has been prepared
for general circulation and does not take into account the objectives, financial situation or needs of any recipient. Accordingly, any recipient should, before acting on
this material, consider the appropriateness of this material having regard to their objectives, financial situation and needs. If this material relates to the acquisition
or possible acquisition of a particular financial product, a recipient in Australia should obtain any relevant disclosure document prepared in respect of that product
and consider that document before making any decision about whether to acquire the product. This research report is not for retail investors as defined in section
761G of the Corporations Act.
To Hong Kong Residents:
This publication is distributed in Hong Kong by RBC Capital Markets (Hong Kong) Limited and Royal Bank of Canada, Hong Kong Branch (both entities which are
regulated by the Hong Kong Monetary Authority ('HKMA') and the Securities and Futures Commission ('SFC')). Financial Services provided to Australia: Financial
services may be provided in Australia in accordance with applicable law. Financial services provided by the Royal Bank of Canada, Hong Kong Branch are provided
pursuant to the Royal Bank of Canada's Australian Financial Services Licence ('AFSL') (No. 246521). RBC Capital Markets (Hong Kong) Limited is exempt from the
requirement to hold an AFSL under the Corporations Act 2001 in respect of the provision of such financial services. RBC Capital Markets (Hong Kong) Limited is
regulated by the HKMA and the SFC under the laws of Hong Kong, which differ from Australian laws.
To Singapore Residents:
This publication is distributed in Singapore by the Royal Bank of Canada, Singapore Branch, a registered entity granted offshore bank licence by the Monetary
Authority of Singapore. This material has been prepared for general circulation and does not take into account the objectives, financial situation, or needs of any
recipient. You are advised to seek independent advice from a financial adviser before purchasing any product. If you do not obtain independent advice, you should
consider whether the product is suitable for you. Past performance is not indicative of future performance. If you have any questions related to this publication,
please contact the Royal Bank of Canada, Singapore Branch. Royal Bank of Canada, Singapore Branch accepts responsibility for this report and its dissemination
in Singapore.
To Japanese Residents:
Unless otherwise exempted by Japanese law, this publication is distributed in Japan by or through RBC Capital Markets (Japan) Ltd., a registered type one financial
instruments firm and/or Royal Bank of Canada, Tokyo Branch, a licensed foreign bank.
.® Registered trademark of Royal Bank of Canada. RBC Capital Markets is a trademark of Royal Bank of Canada. Used under license.
Copyright © RBC Capital Markets, LLC 2015 - Member SIPC
Copyright © RBC Dominion Securities Inc. 2015 - Member Canadian Investor Protection Fund
Copyright © RBC Europe Limited 2015
Copyright © Royal Bank of Canada 2015
All rights reserved
September 14, 2015
10
Fixed Income & Currency Strategy Research Team Europe Adam Cole Head of G10 FX Strategy +44‐20‐7029‐7078 [email protected] Vatsala Datta UK Rates Strategist +44 20‐7029‐0184 [email protected] Timo del Carpio European Economist +44‐20‐7029‐7085 [email protected] Keng Goh Associate FX Strategist +44 20‐7029‐7077 [email protected] Sam Hill, CFA Senior UK Economist +44‐20‐7029‐0092 [email protected] Peter Schaffrik Chief European Macro Strategist +44‐20‐7029‐7076 [email protected] Michaela Seimen Howat SSA Strategist +44 20 7029 0122 [email protected]
RBC Europe Limited: Asia‐Pacific Royal Bank of Canada – Sydney Branch: Su‐Lin Ong Head of Australian and New Zealand FIC Strategy +612‐9033‐3088 su‐[email protected] Michael Turner Fixed Income & Currency Strategist +612‐9033‐3088 [email protected] +852‐2848‐5135 [email protected] Royal Bank of Canada – Hong Kong Branch: Sue Trinh Senior Currency Strategist North America RBC Dominion Securities Inc.: Mark Chandler Head of Canadian FIC Strategy (416) 842‐6388 [email protected] George Davis, CMT Chief Technical Analyst (416) 842‐6633 [email protected] Simon Deeley Fixed Income Strategist (416) 842‐6362 [email protected] Jordan Kotick Head of Cross Asset Strategy (416) 842‐9632 [email protected] Greg Moore Senior Currency Strategist (416) 842‐2802 [email protected] (212) 437‐2480 [email protected] RBC Capital Markets, LLC: Michael Cloherty Head of US Rates Strategy Helima Croft Global Head of Commodity Strategy (212) 618‐ 7798 [email protected] Jay Govender Associate Cross Asset Strategist (212) 618‐3539 [email protected] Dan Grubert Rates Strategist (212) 618‐7764 [email protected] Elsa Lignos Senior Currency Strategist (212) 428‐6492 [email protected] Christopher Louney Commodity Strategist (212) 437‐1925 [email protected] Chris Mauro Head of US Municipals Strategy (212) 618‐7729 [email protected] Jacob Oubina Senior US Economist (212) 618‐7795 [email protected] Tom Porcelli Chief US Economist (212) 618‐7788 [email protected] Daniel Tenengauzer Head of EM & Global FX Strategy (212) 618‐3535 [email protected] Daria Parkhomenko Associate (212) 618‐7857 [email protected] Michael Tran Commodity Strategist (212) 266‐4020 [email protected]