via The Conversation | Recent data of recession in Italy and deceleration in the last quarter in German have sounded the alarm, although France and Spain have slightly increased their growth. It is certain that many risks exist, almost all geopolitical, which, if they came to pass, would have a negative impact on economic activity. And it is also hard to glimpse anything that would allow faster growth.
Benoit Coeure, a member of the European Central Bank (ECB) Executive Board, believes the renminbi will eventually become a major international currency. He also warns about the bitcoin bubble, reminding that the bitcoin is not a currency but a speculative investment.
On Thursday, ex-President of the ECB, Jean Claude Trichet warned that the political and economic authorities would have little room to manoeuvre in the face of a new crisis after the central banks exhaust their QE.
LONDON | Barclays analysts | We believe this week’s data on inflation and economic activity have provided more arguments to step up ECB’s asset purchase programmes by including EGBs on 22 January, which is our baseline scenario. Inflation entered negative territory in December and is likely to stay negative for a few months before a weaker euro improves the inflation and growth outlook.
By Suki Mann and Thibault Colle (UBS) | We effectively have four-weeks of business left in 2014 and the path is clear for corporate bond markets to record some more upside in performance. That isn’t as welcome as it might at first look. Because we do actually need something for next year. We’re already sitting on excellent returns for 2014 of 7.7% in IG and 5.6% in HY; and with that, record low yields in IG (1.42%) and spread levels not seen since before the crisis (iBoxx IG at B+101bp). Supply in HY is at a record level (€72bn YTD) and we now have the second best year for issuance ever in IG non-financials (€201.6bn) after Tuesday’s deals from BskyB and RCI are accounted for.
MADRID | The Corner | Markets were sad on Monday until Mario Draghi emerged and spoke his magic words. It seems markets feel more secure every time the president of the ECB takes the lead and assures everything will be alright. Investors felt more confident after his intervention at the European Parliament’s Economic and Financial Committee. However, despite his speech regarding new potential actions in monetary policy, he also highlighted the need of deep structural reforms by the Members States. According to market watchers at Link Securities, sooner or later, “such reforms will have to be faced by Italy or France’s government, because it is necessary to make them competitive and able to grow again.”
SAO PAULO | By Marcus Nunes via Historinhas | In “What caused the great recession in the Eurozone? What could have avoided it?” Philippe Martin and Thomas Philippon begin thus: There is a wide disagreement about the nature and cause of the Eurozone crisis. Some see it as driven by fiscal indiscipline, some emphasise excessive private leverage, while others focus on external imbalances, sudden stops, or competitiveness divergence due to fixed exchange rates, as the following quotes illustrate.
BRUSSELS | By Alexandre Mato | The head of the ECB’s financial watchdog, Daniele Nouy, asserted her belief before EU legislators that entities will arise stronger in the near future. Moreover, on the eve of the Single Supervisory Mechanism taking control of financial supervision, the French official expects that most of the capital shortfall will be filled by an influx of fresh private money.
BERLIN | By Alberto Lozano | While European media focus their attention on low inflation across Europe, concerns about the budgets of France and Italy, as well as the need for investment in Germany, more than 50 countries are about to take a crucial step in the fight against tax avoidance: the signing of the Multilateral Competent Authority Agreement on implementing a new international standard in the automatic exchange of information (AEOI).
LONDON | By Soren Willemann at Barclays | Credit spreads (here, iTraxx Main) have a strong relationship to the ZEW survey of eurozone expectations for economic growth (Figure 1) over long time horizons. In the past months, however, this relationship has shown a significant disconnect: the ZEW survey reveals a material worsening of sentiment, whereas credit spreads have been largely unchanged.