Markets


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Markets welcome Eurozone economic ‘bad news’

MADRID | By J. J. Fdez-Figares (LINK) | Stock markets face today a new week in which geopolitical conflicts, especially in Ukraine, and macroeconomic data that will be announced during the day will monopolize the attention of investors. Although we expect trading volumes remain low, typical of summer dates, we do expect a slight rise in volatility, especially given the current stage of confusion, both in the geopolitical and economic environment that financial markets are facing.


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Stock markets go up despite poor global macroeconomic data

MADRID | By J. J. Fdez-Figares (LINK) | European and American stock markets closed yesterday up in a session of low activity and  volatility. The good performance of Western stock markets ​​occurred despite the set of macroeconomic figures published during the day in China, Europe and the USA, which pointed again to a global slowdown in economic growth. The only explanation we can find to the good performance of stock markets yesterday is precisely that investors have interpreted that as long as the growth of these economies remain weak, the central banks will be forced to maintain its current policy of monetary expansion, which provide liquidity to the system, something that equity markets consider positive.


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German investors lose their confidence in Europe’s growth engine

MADRID | By J. J. Fdez-Figares (LINK) | After the rises experienced by the European and American stocks on Monday, these markets showed yesterday certain weakness, leading to a mixed closing in the major indices in Europe and negative in US. Thus, and since the beginning of the day in Europe some profit taking by the short-term investors were observed, who profited from the rebound that many values experienced on the day before. As there was a lack of relevant developments in the three main geopolitical conflicts (Ukraine, Iraq and Gaza), the investors’ attention turned to macroeconomic data, particularly towards indices released yesterday by the German institute ZEW.


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EZ investor confidence dropped to its lowest level in a year

MADRID | The Corner | The Eurozone Sentix Index fell 2.7 points in August, its lowest level in a year, from 10.1 reached in July. The analysts’ consensus had expected that the indicator would go back to 9 points. Sentix attributes in a press release this decline to the approved economic sanctions against Russia and points out that “As this slump derives from an event which is subject to politics and power play, the central banks, particularly the European Central Bank, will have difficulty in trying to counter this.”


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Morning coffee: Argentina, BES and other summer intrigues

MADRID | The Corner | Juicy day for European markets, peripheral and emerging countries, after Portuguese BES announced €3.6 billion losses in 1S14, which reduce its CT1 to 5%, below the 7% asked in Portugal. Besides, we’ll be very attentive to how Argentina’s so-called “second default in 12 years” (we are working on an analysis explaining why the real problem lies on the US judge’s sentence) unfolds –late on Thursday S&P rated the country as selective default after it didn’t come to an agreement with a group of its bond-holders. Stay tuned!


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EM: High yields offer some shelter

LONDON | By Koon Chow at Barclays | A pertinent question asked by some investors is whether EM markets have become complacent again and whether new exogenous shocks may catch investors at a vulnerable point just as they are settling down to ‘summer’ carry trades. We see this risk in some markets but it is far from a universal theme in our view. In EM local markets – FX and bonds – we see Turkey as probably the most vulnerable to exogenous risk aversion. At the other end of the spectrum are Brazil, Central Europe, and Colombia, which do not appear vulnerable in part because of the high local real yield levels.


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Markets may overreact, but bottom-line is plain vanilla

MADRID | The Corner | Yes, it’s boring. The only news you’ll find this Monday are about geostrategy (Israeli-Palestinian never-ending drama and Russian-Ukrainian conflict) and business results. The reduction of volumes of activity as we enter the central weeks of summer could make certain assets (stock markets, bonds, currencies…) overreact in the short-term. But nothing will substantially change.


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UBS Analysts Expect Further M&A Activity

ZURICH | By The Corner | Based on the results of the 20th quarterly survey of the UBS Global Equity Research department, UBS analysts expect M&A activity in the second half of 2014 to remain strong. 50% of respondents believe M&A will increase and 45% believe the pace will remain unchanged. Only 5% of analysts expect the pace of deal activity to slow in Q3 and Q4.


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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.