MADRID | By Julia Pastor | Mario Draghi has been saying he doesn’t rule out a sovereing debt QE: he reminded it at Jackson Hole, then at the European Parliament and in a euro summit in Lithuania on Thursday. Markets are discounting those eventual state debt’s purchases. But do they make sense? Although the eurozone does not have a liquidity problem, analysts remind that the US didn’t either, and yet half of the QE3 went into govies.
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MADRID | By Julia Pastor | It is likely that the Spanish government will revise its growth forecasts upwards for the country in 2014, but only by one tenth of a percentage point-to 1.3%. This is likely to be the submission that the Ministry of Economy together with the Ministry of Finance will give to the next Council of Ministers.
MADRID | By Julia Pastor | ECB’s Mario Draghi brought put the bleak panorama that the Eurozone’s economy is facing on the table, and we saw it again reflected in the not-so-promising September manufacturing PMI. The index came in at 50.5 compared to 50.7 in the prior month, whereas EZ Services PMI accelerated at 52.8 for September versus 53.1 in August. Even the composite index plummeted to its lowest fee in the last nine months and reached 52.3. In Germany, both manufacturing and services indexes have also decreased; while in France only manufacturing improved, although it is still contracting.
MADRID | By Julia Pastor | The first TLTRO auction will not make history for its significance. Eurozone banks only asked for €82.6 billion, from which €14.147 million will go to Spanish entities (Santander €3bn; Caixabank €3bn; Popular 2.847 bn ; Bankia 2.7bn and BBVA 2.6bn), much less than the expected 100-150 billion, was firstly interpreted as a poor credit demand, although a second reading shows that lenders were right to be cautions.
MADRID | By Julia Pastor | As expected, ECB’s September TLTRO will not make big headlines. 255 European banks borrowed €82.6bn of liquidity below consensus estimate of €100-150bn. Although the Frankfurt-based institution doesn’t provide a geographical breakdown, banks in Italy and Spain were among the leading borrowers (40% of the total) to trim funding costs. Spanish entities are thought to have asked half of those €30bn at their disposal, although some entities “are not willing to disclose how much they asked for,” an ECB source confirmed to The Corner.
MADRID | By Julia Pastor | ECB’s upcoming ABS drive with senior, higher credit quality assets will be launched with or without guarantees from the states, that is for sure. The question is if countries will guarantee riskier tranches, the so-called mezzanine ABS. Spain is willing to do so if others go for it, yet Germany, France and the Netherlands are refusing. This makes sense since a state back up would mean to put assets with uneven exposure to bankruptcy on the same level. An eventual agreement would be a very difficult political decision. Details of the ABS plan will be announced after the central lender’s next monetary policy meeting on Oct. 2.
MADRID | The Corner | Historically, German housing prices have remained flat, but since 2011 they have increased by 30% (a low figure when compared with +150% growth of the last 15 years in UK, France and Spain). Morgan Stanley analysts already see signs of recovery in the German residential sector, so the stocks exposed to it may be attractive. Moreover, housing prices in the UK have fallen significantly more than expected: 40% in August from 48% in July, instead of the 47% expected fall. It’s the lowest level of the past 12 months. According to Bankinter, this is a good sign “because it dissipates the fear of a possible housing bubble and reduces the BoE arguments to raise its main interest rate in advance.”
MADRID | By Julia Pastor/The Corner | Spain is at minimums in terms of EU representation. No seat at the ECB. No relevant post in the new Commission either. Centre-right politician from the ruling Popular Party (PP) Miguel Arias Cañete was appointed Europe’s climate action and energy policy commissioner (those portfolios are merged for the first time). But he will be reporting to vice president Alenka Bratushek. Bottom line, an interesting job without sufficient weight to compensate the loss of Competence. UK’s Jonathan Hill will shape the EU’s Financial policy, a move that aims to tend a bridge between Brussels and the City of London.
MADRID |The Corner | After a meeting between Mariano Rajoy and Angela Merkel in Santiago de Compostela, the German chancellor gave her support to the candidature of the Spanish Economy Minister, Luis de Guindos, to succeed Jeroen Dijsselbloem as President of the Eurogroup. As Barclays analysts comment, “with Italy’s and France’s leftwing governments and UK in or out of the EU, Spain is now a more attractive partner.” Regarding Germany, Angela Merkel recognised that the crisis in Ukraine is damaging the German economy. Nevertheless, Merkel affirmed that she forecasts a good annual growth if nothing dramatic happens.
MADRID | The Corner | The continuous U.S. labor market upturn (on average 213K jobs/month were created so far this year) paves the way for the consumption and investment growth. The economy strength and the employment trend enabled the Fed to continue to reduce the QE program even after the weak beginning of the year. But apparently the Fed itself is still far from consensus.