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Markets 30th July 2014

Earnings season: Mixed feelings on both sides of the Atlantic

MADRID | The Corner | We’re in the middle of second-quarter earnings season and companies are showing their cards to investors. Note the difference on both sides of the Atlantic: in the US, 53% of S&P500 firms have posted their results and 78% have performed better than expected (average surprise of 6%, JP Morgan analysts pointed out). EPS growth is of 11% yoy, while sales went up by 5% with 67% of companies having better than expected numbers. Meanwhile in Europe, with 152 SXXP companies having posted their results, 56% have turned in an average +0.4% EPS. Year-on-year EPS has risen by 18% (8% if we exclude financial entities), although yoy sales decreased by -2%.

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In Europe 18th July 2014

Implications from the reduction in Equity Weights

ZURICH | The Corner | UBS team reduced on Thursday their Overweight in Global Equities. In the near- term, they see some deterioration in the risk/return trade off, following a large re-rating in equity markets. However, the context is that they are coming from their largest ever Overweight in Equities and that it still remains their favoured asset class (with European Equities as an Overweight).

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Markets 16th July 2014

Espirito Santo crisis won’t damage the markets

MADRID | The Corner | The disappointing German ZEW together with the worsening of the Portuguese lender Banco Espirito Santo (BES) crisis weighed down on the markets on Tuesday. And that about today? Indeed, the banking sector will continue to be the main player in Europe with the BES drama as backdrop, although the calmness within the peripheral bonds markets is a positive sign and indicates the limited extent of such crisis.

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In Europe 14th July 2014

Morgan Stanley: “Portugal is now a good buying opportunity”

MADRID | By The Corner | Experts at Morgan Stanley consider that Portugal is now a good opportunity due to its current technical levels. Since the Espirito Santo incident, the PSI20 has plummeted by 17.5%, but these analysts see a potential technical recovery of 10-12%. The Portuguese treasury has covered its entire financing needs for 2014 and is now raising funds for 2015.

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In Europe 11th July 2014

Euro crisis turning point: Two years of banking union

Europe’s leaders avoided their usual muddling through complacency to do something radical — and it worked. Europe’s banking union, constituting a supranational pooling of most instruments of banking policy, was established over two years ago, in the early hours of June 29, 2012. To a greater extent than was initially realized by most observers, this step marked a watershed in the European crisis by making it possible for the European Central Bank (ECB) to stabilize sovereign debt markets.

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Markets 25th June 2014

European stock markets, harmed by US sluggish GDP

MADRID | By Francisco López | The first world power is doing worse than expected. USA’s GDP decreased in 1Q by 2.9% year on year, nearly three times the 1% foreseen just a month ago and far from 1.8% that Wall Street expected. European stock markets, unlike the American, reacted immediately with heavy losses. Spanish Ibex 35 leaded the way losing 1.25 and finished below 11,000 points.

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In Europe 18th June 2014

TLTRO: An X-Ray

MADRID | By Carlos Díaz Güell | Last week’s greatest news for SMEs were the Targeted Long Term Refinancing Operations (TLTRO), variety of LTROs that got a T standing for target. Banks will be allowed to borrow money at 0.25% interest rate at 4 years max.

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World economy 11th June 2014

Renewables in Europe triple US’ investment in shale gas

MADRID | The Corner | Head of Economics at the International Energy Agency remarked that “the investment in renewables in Europe has tripled the US’ investment in the entire shale gas production.” Prices are 20% below the right level to recover the cost of new investments due to the existence of overcapacity and subsidised prices in renewables.

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In Europe 11th June 2014

Easy money, stronger currency?

LONDON | By Chris Walker and Marvin Barth at Barclays | Despite the ECB delivering more easing than expected, the EUR remains close to the levels heading into Thursday’s meeting. Did the ECB then fail? In a word, no. The ECB’s objective is to raise inflation from unacceptably low levels well below its mandate of “less than but close to 2%” and a crucial element of doing so is to keep inflation expectations anchored near the Bank’s target.