J.P. Morgan - Guide to the Markets_watermark

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European politics

European parliament seat breakdown

% of seats
		Pro-Europe		Moderately Eurosceptic		Eurosceptic		Other
100

economy	90
Global	80
	70
	60
	50
	40
	30
	20
	10
	0
	2004		2009	2014	2019

GTM – Europe | 31

Survey results: Do you support the euro?

% answering “yes”

85
80	Nov ’13
	Nov ’17
75	Nov ’18
70
65
60
55
50
45
40	Italy	France	Spain	Germany

Source: (Left) European Parliament, J.P. Morgan Asset Management. Pro-Europe includes EPP: European People's Party, Renew Europe, Greens/EFA: The Greens/European Free Alliance, S&D: Group of the Progressive Alliance of Socialists and Democrats in the European Parliament. Moderately Eurosceptic includes GUE/NGL: European United Left-Nordic Green Left. Eurosceptic includes ID: Identity and Democracy, EFDD: Europe of Nations and Freedom, ECR: European Conservatives and Reformists. (Right) Eurobarometer survey, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 30 June 2019.

31

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Eurozone focus: Employment and loan growth		GTM – Europe | 32
Eurozone PMI: Employment	Eurozone loan growth to non-financial corporates

	Index level										% change year on year
	60		Share of total employment								10
	58		Services				76%				8
economy
			Manufacturing				14%				6
	56
Global											4
	54										2
	52										0
	50										-2
	48										-4								France
							Services: Employment												Germany
											-6
																			Eurozone
	46						Manufacturing: Employment
											-8								Italy
	44																		Spain
											-10
	42										-12
	'10	'11	'12	'13	'14	'15	'16	'17	'18	'19	'10	'11	'12	'13	'14	'15	'16	'17	'18	'19

Source: (Left) Markit, J.P. Morgan Asset Management. PMI is Purchasing Managers’ Index where a score of 50 indicates that economic activity is neither expanding nor contracting, above 50 indicates expansion. 10% of total eurozone employment is accounted for by other industries, mainly comprising of construction and agriculture. (Right) ECB, J.P. Morgan Asset Management. Loan growth measure is adjusted to reflect loans that have been sold or securitised and are no longer reported on banks’ balance sheets. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 30 June 2019.

32

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Global economy

UK GDP

GTM – Europe

| 33

Contribution to UK real GDP growth and composite PMI

% change year on year (LHS); index level (RHS)

6

65

4

60

2

55

0

50

-2

45

Net exports

-4

Change in inventories

40

Investment

Government

Average

1Q19

-6

since 2000

35

Consumption

1,9%

1,8%

-8

Composite PMI (RHS)

30

'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

'16

'17

'18

'19

Source: Markit, ONS, Refinitiv Datastream, J.P. Morgan Asset Management. PMI is Purchasing Managers’ Index where a score of 50 indicates that economic activity is neither expanding nor contracting, above 50 indicates expansion. PMI data is shown with quarterly frequency. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 30 June 2019.

33

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Global economy

UK consumer	GTM – Europe | 34
UK consumer confidence	UK house prices relative to income

Index level, three-month moving average							Index level
20							130
				Recession
							120
10
							110
0							100
							90
-10
							80
-20							70
							60
-30
							50
-40							40
'87	'92	'97	'02	'07	'12	'17	'87	'92	'97	'02	'07	'12	'17

Source: (Left) GfK, Refinitiv Datastream, J.P. Morgan Asset Management. (Right) OECD, Refinitiv Datastream, J.P. Morgan Asset Management. Light grey columns indicate recession. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 30 June 2019.

34

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UK inflation

UK headline and core inflation

	% change year on year							Average		May
	6							since 2000		2019
						Headline CPI		2,1%		2,0%
						Core CPI		1,7%		1,7%
economy	5
	4
Global
		Headline inflation
			target
	3
	2
	1
	0
	-1
	'00	'02	'04	'06	'08	'10	'12	'14	'16	'18

GTM – Europe | 35

UK core goods and services inflation

% change year on year							Average		May
6							since 2000		2019
				Services CPI			3,3%		2,6%
				Core goods CPI			-0,7%		0,4%
4
2
0
-2
-4
-6
'00	'02	'04	'06	'08	'10	'12	'14	'16	'18

Source: (All charts) ONS, Refinitiv Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core CPI is defined as CPI less energy, food, alcohol and tobacco. Core goods CPI is defined as goods CPI less energy, food, alcohol and tobacco. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 30 June 2019.

35

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UK focus: Brexit

			No-	Customs	Single
			deal	union	market
		Control of migration
economy
		‘Sovereignty’
		No budget payments to
		EU
Global
		- Ability to set broader
		laws
		- Ability to set goods
		regulations
		Ability to negotiate trade		~
		deals
		Resolves Northern Ireland
		border/Union risk
		Preserve current supply
		chain and economic links

GTM – Europe | 36

What Brexit outcome would you prefer to see?

% of respondents

40

35

35

30

30

25

20

16

15

	10
10	9

5

0

No-deal

This deal Single market Remain

Not sure

Source: (Left) J.P. Morgan Asset Management. (Right) YouGov, J.P. Morgan Asset Management. Survey fieldwork was carried out on 10-11 April 2019. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 30 June 2019.

36

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Japan GDP

GTM – Europe | 37

Contribution to Japan real GDP growth and composite PMI

% change year on year (LHS); index level (RHS)

6

62

economy

4

58

2

54

Global

0

50

-2

46

-4

Net exports

42

Change in inventories

-6

Investment

38

Government

Average

Consumption

1Q19

since 2000

-8

Manufacturing PMI (RHS)

0,9%

0,9%

34

-10

30

'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

'16

'17

'18

'19

Source: Japan Cabinet Office, Markit, Refinitiv Datastream, J.P. Morgan Asset Management. PMI is Purchasing Managers’ Index where a score of 50 indicates that economic activity is neither expanding nor contracting, above 50 indicates expansion. PMI data is shown with quarterly frequency. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 30 June 2019.

37

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Japan inflation

GTM – Europe | 38

Japan headline and core inflation

	% change year on year							Average		May
	5							since 2000		2019
						Headline CPI		0,1%		0,7%
	4	Headline inflation				Core CPI		0,1%		0,8%
economy
			target
	3
Global	2
	1
	0
	-1
	-2
	-3
	'00	'02	'04	'06	'08	'10	'12	'14	'16	'18

Japan core goods and services inflation

% change year on year	Average	May
	since 2000	2019

6				Core goods CPI			0,0%		1,2%
				Services CPI			0,1%		0,3%
5
4
3
2
1
0
-1
-2
-3
-4
-5
'00	'02	'04	'06	'08	'10	'12	'14	'16	'18

Source: (All charts) Japan Ministry of Internal Affairs & Communications, Refinitiv Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core CPI is defined as CPI excluding fresh food. Core goods CPI is defined as goods CPI excluding fresh food. Increase in Japan inflation measures between 2014 and 2016 can be attributed to the impact of the consumption tax hike over this period. Past performance is not a reliable indicator of current and future results.

Guide to the Markets - Europe. Data as of 30 June 2019.

38

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China GDP

GTM – Europe | 39

Contribution to China real GDP growth

1Q 2019

2019

China industrial production and retail sales

% change year on year

consensus

% change year on year

forecast

20

25

GDP growth

6,4%

6,2%

economy

Investment

Consumption

15

Net exports

20

Global

10

15

Retail sales

5

10

0

5

Industrial production

-5

0

'90

'92

'94

'96

'98

'00

'02

'04

'06

'08

'10

'12

'14

'16

'18

'96

'00

'04

'08

'12

'16

Source: (Left) Bloomberg, National Bureau of Statistics of China, Refinitiv Datastream, J.P. Morgan Asset Management. Forecast is from Bloomberg contributor composite. (Right) National Bureau of Statistics of China, Refinitiv Datastream, J.P. Morgan Asset Management. Industrial production is a three-month moving average and retail sales is a six-month moving average. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 30 June 2019.

39

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China debt	GTM – Europe | 40
China debt to GDP ratios	China credit growth

% of nominal GDP

% change year on year

180

40

Non-financial corporates

160

35

Total social financing

economy

140

30

Global

120

25

100

Broad credit

20

80

15

60

Government

10

RMB bank lending

40

Households

20

5

0

0

'00

'02

'04

'06

'08

'10

'12

'14

'16

'18

'07

'08

'09

'10

'11

'12

'13

'14

'15

'16

'17

'18

'19

Source: (Left) Bank for International Settlements, Refinitiv Datastream, J.P. Morgan Asset Management. Debt refers to gross debt. (Right) People’s Bank of China (PBoC), J.P. Morgan Asset Management. This chart includes three measures of credit ranging from the narrowest – RMB bank lending – to the more extensive broad credit. Specifically, RMB bank lending is the sum of all loans made by the commercial banking system to domestic borrowers. Total social financing (TSF) is all funding to domestic borrowers that is not explicitly backed by the sovereign and thus includes bank lending, trust loans, entrusted loans, bankers’ acceptances, corporate bonds and equity financing by non-financial enterprises, asset backed securities, loan write-offs and local government ‘special’ bonds. Broad credit is total social financing plus all finance provided by local and central governments. Past performance is not a reliable indicator of current and future results.

40 Guide to the Markets - Europe. Data as of 30 June 2019.