The destruction of wealth in Europe continues and it will surely have political consequences in 2019 elections for the European Parliament. For Chris Iggo, CIO Fixed Income at AXA IM, “there has to be a risk that populists will receive more support.” The pressure from the electorate might be to force change in the way Europe is managed and to take steps to boost growth.
The share price of Deutsche Bank has risen + 9% since 26 October. This reaction is explained by the entry of Hudson since the results for Q32018 were unconvincing and the reaction to the stress tests did call attention. The US hedge fund Hudson Executive Capital has invested 550 M€ to take control of 3.1% of the capital – equivalent to 8.6€/share. Hudson thus becomes the fourth largest shareholder behind the Chinese group HNA (7.6%), a Qatari fund (6.1%) and Blackrock (5%).
Jens Bastian | With Merkel’s gradual retreat from German politics, a new sense of political timing is set in motion across capital cities in Europe. How will Athens react to the gradual changing of the guards in Berlin? While much air time and social media is being consumed with domestic political quarrels in Greece, both government representatives and opposition parties will be well-advised to look closely at the next developments in Germany.
The EBA published the results of the latest stress tests on 47 European banks, plus one in Norway. These covered 70% of banking assets in the EU and revealed that in adverse scenario they would produce a negative impact of -395 base points in the capital ratio CET1 fully loaded (-410 base points of the transitory definition) to place itself in 10% at the end of 2020 (10.3% transitory). The four Spanish banks, Santander, BBVA, Caixabank and Sabadell, overcame the tests although they came out a little below the average.
Xavier Colás (Moscow) | Very affected by US sanctions, Russia has embarked on a de-dollarization plan up to 2024 and discounts paying EU members in euros. But the volatility of the rouble disrupts the road map.
The market reaction to Angela Merkel’s decision has not been bad. The euro depreciated to 1.1373 against the dollar, but sovereign debt suffered more because of the greater risk appetite, and the returns on 10 years German bonds rose to +2.5 bp. However, given that Merkel has held the role of a stabilising figure in Europe, some analysts expect that the long term markets could be concerned by the vacuum she could create with her departure.
Víctor Jiménez (London) | If you are looking for a European social housing market to invest in, you should know that the British prime minister is going to allow town halls to exceed the old debt limits to relaunch the development of housing. They will need investors, especially European investors, to share it and Brexit will not make it easy.
Guntram Wolff via Caixin | The EU remains a long-standing ally of the U.S. — despite its trade surplus. The successful negotiations of European Commission President Jean-Claude Juncker has also helped to ease the EU-U.S. tensions, though the truce remains fragile.
e have been investigating how the vote of June 23 2016 has since affected the values of Britain’s trade with major trading partners. By comparing trade flows with a model of what UK trade flows would have looked like had the UK voted to stay in the EU, we can see that British exports to both EU and non-EU countries have taken a hit.
“The narrative of expected compromises, a watering down of stances and the serving of another “Brussel’s fudge” seems to have become less convincing after the EU rejected the Italian budget proposal in an unprecedented move,” says analysts at Monex Europe regarding the rejection of Italy’s budgetary plans. In fact, for the first time in the history of the EU, the European Commission has rejected a draft budget proposal of a member country, while sounds from the Italian camp have an equally confrontational ring to it.