Marc Chandler via Caixin | It is official. The yuan will be included in the International Monetary Fund’s special drawing rights (SDR). The 10.4 percent share is a bit more than I expected, but less than the 14 to 16 percent the IMF’s staff intimated a few months ago. This is a significant event, even if there is no short-term market opportunity.
Countries in the North don’t even want to talk about creating more inflation to help those in the South. Why should we, they say, if they are the debtors? Could they be persuaded that it is in their interests, given that the alternative could be default and the collapse of the eurzone economy and the euro? For the time being, they have allowed the ECB to work on moving away from zero inflation, but not beyond the 2% limit. And even this limit is not expected to be reached until 2017.
LONDON | By Apolline Menut via Barclays | Euro area “flash” composite PMIs came in stronger than expected, almost reaching a four-year high at 54.1 (+0.8 points). The rise was primarily driven by a surge in manufacturing output (+1.4 points to 53.5), while confidence continued to improve in the services sector (+0.6 points to 54.3).
MADRID, February 23, 2015 | By Sean Duffy | Friday´s deal was a relief for all involved, yet it remains to be seen if a frantic weekend of number cruncing from Greek officials will meet the strict criteria outlined in the agreement. German bank Berenberg cut the chances of a Grexit to 25% from 35% on Monday.
MADRID | By Soren Willemann at Barclays | European credit markets have been outperforming equities persistently since October 2014. However, following the recent ECB announcements, this relationship has shifted dramatically, with credit spreads now trading wide vs equities on a historical basis.
MADRID | By Sean Duffy | The euro hit a fresh nine-year low on Thursday after the publication of a letter from Mario Draghi which indicated that the central bank would likely purchase sovereign bonds in a bid to ward off a deflationary bout which is holding back growth on the continent. The euro was trading at $ 1.17540 against the greenback on Thursday. Friday saw a recovery to $ 1.18177. The single currency is currently hovering around levels seen back when the currency was launched in 2002, at €1.16.
MADRID | The Corner | The ECB published yesterday figures on bank lending that show the outlook keep being worrying. On the one hand there was an improvement in credit to households and on the other hand a further squeeze on credit to business, especially a pronounced decline in countries like Spain. The overall balance in July is a contraction of 1.6% YoY, which represents a further improvement since it got to the bottom during November, December and January (-2.5% YoY each month). Credit in the private sector continues to contract (-2.3% YoY) in line with last month but improving over July 2013 (-3.7% YoY ) and in general over the monthly evolution in 2014. In Spain the credit contracts € 7bn (-1.2% MoM from -1.04% MoM in June) and it moves back by € 77 bn YoY (-11.7%). In Italy the set-back is even bigger MoM (-3.6%) but is limited to +1.6% YoY.
MADRID | The Corner | In August the Economic Sentiment Indicator (ESI) fell in the euro area (by 1.5 points to 100.6) and the EU (by 1.2 points at 104.6). Once again the core Europe does not bring any good news, where sentiment dropped in Italy (by 4.1p to 97.8), Germany (by 1.9p to 104.1 ) and France (by 0.6p to 95.1), while sentiment remained flat in Spain (103.). Among the data published by the European Commission today, the industrial confidence fell in the EA to -5.3 in August from -3.8 in July and construction sentiment dropped to -28.4 from -28.2. Sentiment in the services industry declined to 3.1 from 3.6 and retail trade to -4.6 from -2.3. Consumer confidence remained at -10.
MADRID | The Corner | The economy is stagnant, the confidence of businesses and consumers continues to decline and unemployment is touching new highs. France is being forced to carry out reforms from all sides, hence François Hollande and Manuel Valls have chosen the social democrat Emmanuel Macron as Minister of Economy, confirming their willingness to pursue the economic reform agenda.
BERLIN | By Alberto Lozano | German IFO index has shown today that business climate continues to worsen. The German Business Sentiment registered its fourth consecutive decline after falling 1.7 points from the previous month to 106.3 points, representing its worst reading since July 2013 decline. “The German economy continues to lose steam”, indicates Hans-Werner Sinn, president of the IFO Institute. “The outlook for the coming months also deteriorated noticeably.”