eurozone

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What if we were to see deflation?

ZURICH | UBS analysts | Our central case is that we will not have deflation in any country except for Spain in 2015. But we cannot rule out the possibility of deflation, so here we look at assets that may outperform during periods of deflation. Generally deflation is bad for equity which de-rates aggressively but the story is more nuanced because particular sectors and styles are affected quite differently.


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ECJ: Green light to ECB’s bond purchase

LONDON | Barclays analysts | The European Court of Justice has already published its opinion about the Outright Monetary Transaction (OMT): the ECB’s anti-crisis plan was “necessary” and “in principle” is in line with EU law. This much awaited opinion  will have important implications for any broad-based ECB government bond purchases (QE), which we think are likely to be announced next week.


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Eurozone: Deflation and weak activity support 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.


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EU: When taxation is tailor-made

BRUSSELS | By Jacobo de Regoyos | The previous five years of Jean-Claude Juncker’s reign were suddenly thrown into flux following the publication of hundreds of secret documents regarding agreements between the Grand Duchy of Luxemburg-during his premiership- and over 340 multinationals. In essence, this amounted to the facilitation of tailor-made fiscal schemes that allow the payment of a corporate tax close to 1% instead of the stipulated 29%.


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EU: When taxation is tailor-made

BRUSSELS | By Jacobo de Regoyos | The previous five years of Jean-Claude Juncker’s reign were suddenly thrown into flux following the publication of hundreds of secret documents regarding agreements between the Grand Duchy of Luxemburg-during his premiership- and over 340 multinationals. In essence, this amounted to the facilitation of tailor-made fiscal schemes that allow the payment of a corporate tax close to 1% instead of the stipulated 29%. 


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EU Banks: Surprises for 2015

MADRID | The Corner | The ECB’s non-conventional measures, the banking restructuration and the adaptation to the new regulation make 2015 a crucial year. According to experts at Morgan Stanley, the many stories about restructuration, dividends and regulatory changes will allow to differentiate the performance of the different assets.



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Eurozone’s plight

MADRID | By JP Marín ArreseOnce again, Greece has ignited the flame of instability in the Eurozone. The prospect of early elections coupled with the left-wing party´s scores in the polls has resulted in severe shock-waves hitting other South-Med countries. The promised debt default by the better placed candidate in this race stands as a formidable threat to Europe. What happens in this relatively small country is bound to hit all of us. Confidence in sovereigns will dramatically fall while financials will also bear the brunt. 


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Falling oil price: 4 wins for Germany

ZURICH | UBS analysts | We see 4 wins for Germany in a backdrop of falling oil prices
1) German equity market is not exposed to Oil & Gas earnings. 2) While our Oil & Gas analysts expect energy capex to fall by 10% (which could hurt a cyclical Germany), the overall fall to European capex is < 3%. Plus capex is already at a 23 year low – can it get much worse? 3) Our economists think lower oil triggers sovereign-based QE given their view it pushes CPI even lower than Tuesday’s 0.3%.


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“The ECB is almost apologetic about the lack of growth and the weak inflation”

MADRID | The Corner | According to Patrice Gautry, chief economist at UBP, there is little doubt that monetary policy – due to be presented in detail at the beginning of next year – will be revised and reshuffled as follows: 1) bigger ECB spending; 2) more of a focus on private and public bond purchases rather than on LTROs and ABS and CoCo purchases.In short, broadened QE should kick in on 22 January, at the next ECB meeting.