Markets

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EU’s low growth hits financials

MADRID | By JP Marín ArreseCentral banks all over Europe bombastically hailed the stress tests results as solid evidence the banking system enjoyed enviable health. Their diagnosis utterly failed to impress the markets. Ten days later,  financials are plunging to fresh lows as low growth rates signify dire prospects ahead. Investors feel increasingly uneasy faced with dwarfish interest rates and dwindling intermediary receipts, leading to chronic underperformance and under-sized profits. Many fear that an inability to raise their own funds to plug gaps in their balance sheets might weigh on mounting impairment, sending shivers down the spine. Banks may face rough times ahead should deflationary bouts keep the European economy close to stagnation. 


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And the ECB grabbed the mike

LONDON | Barclays analysts | Central banks will remain in the spotlight this week, with banks in Europe, UK, Australia, Malaysia, Thailand, Poland and the Czech Republic all set to deliver policy decisions. Of these only the NBP in Poland is likely to move, cutting policy rates by 25bp, in our view. However, most attention will be on the ECB for any hints of future QE, as economic data remain a challenge.



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European earnings: Blink and you’d miss it

LONDON | Barclays | Is this it? In the last week earnings estimates have risen by 11bps. At first glance you’d be forgiven for thinking that’s a trivial amount. But after years of near-constant downgrades ,we believe it could be very relevant, particularly when taken alongside a reporting season which is proving surprisingly strong. Of course one swallow doesn’t make a summer, but this is an important development nonetheless. If this trend continues, it could finally mark the end of the downward cycle.


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Do the ECB’s stress tests results change anything for EU banks?

MADRID | The Corner | The ECB’s comprehensive assessment showed positive results, yet not sufficiently positive for banks to increase risk and lending. So no, stress tests were not a clearing event and we are not entering a new era as some have said. Which makes it harder for policy makers to rely on bankers for economic growth. This scenario “will likely add to pressures for greater structural reform in Europe,” analysts at Barclays believe.


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The ECB’s stress tests deserve praise

MADRID | By Francisco López | Market watchers have something in common with journalists: they prefer criticism rather than compliments –as can be seen from the analysis of the European Central Bank’s stress tests. Criticism is growing, even though markets had already envisaged the results and neither the institution nor Mario Draghi is willing to defend the banking examination. 


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“QE ends and I feel fine”

WASHINGTON | Comment by UBS analysts | The FOMC ended QE and made its Fed funds rate hike guidance a bit more data- dependent. While the funds rate is likely to remain in its current range “for a considerable time” after asset purchases end at the end of this month, rate hikes could occur sooner or later than the Fed currently anticipates depending on the evolution of economic data. This was as straightforward an FOMC statement as could have been expected at the end of QE. It does not suggest changes in Fed thinking; nor does it change our expectations for the first Fed fund rate hike in mid-2015. 


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EZ private loans: Depressed… yet stabilising

MADRID | The Corner | Loans to the private sector in the euro area fell by 1.2% year-on-year in September, according to the ECB’s data,  a slower rate than the 1.5% decline seen in August.  Are there reasons for optimism? It depends.  “After seven years of crisis, bank loans continue to fall. Those to the private sector have fallen by -0.6% yoy. Loans to non-financial businesses dropped by -1.8%, with Spain and Ireland especially weak,” Barclay’s Alberto Vigil pointed out. “Now if you want  to look through a different glass (loans’ reduction is slowing down), the opposite interpretation is also perfectly correct,” he added.

 


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Investors to remain dovish until the end of FOMC’s meeting

MADRID | The Corner | Investors experienced the ECB’s stress tests hangover and were quite dovish throughout the Monday’s session. Apparently Tuesday won’t be any different and they will remain prudent until Wednesday, when the FOMC releases its conclusions. Markets expect the Fed to finish tapering, as well as an interest rates hike, experts at Link commented.


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Do not expect credit to start flowing immediately in the eurozone

MADRID | By Luis Arroyo | As the ECB’s stress tests showed, Spanish banks have enough capital to face a serious economic crisis, with a GDP contraction of 5%. However, this does not mean that Spanish lenders are going to start lending credit right now. Up to present nobody has been preventing them from doing so, and yet credit is not flowing.