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 | By Francisco López | The latest movements within currency markets function as a gauge of the economic momentum in both Europe and the US. The decline of the Euro against the Dollar has increased in the last few days due to poor macroeconomic data in the eurozone, which is in sharp contrast with the vigour shown by the US (who showed growth of 3.5% in the third quarter of 2014).
MADRID | By Francisco López | The ECB’s measures since June have been oriented to fight the ghost of deflation, increasing the Eurozone’s economic activity and, in an indirect manner, managing the euro’s depreciation. For the moment Mr Draghi has failed in the first two goals, although he has succeeded in the third one. The euro is plummeting –which is good news.
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.”
MADRID | The Corner | Although it is not part of ECB’s mandate, last Friday in Jackson Hole, President Mario Draghi spoke about what needs to be done in the euro area to address the problem of high unemployment and weak economic growth. As Barclays analysts believe, the speech “represented a significant breakthrough in the ECB rhetoric and will probably have significant implications regarding the debate just about to start between European government on policies that need to be deployed to avoid a ‘triple-dip recession’ and a fall in outright deflation.”