MADRID | By Sean Duffy | A faltering economy, a plummeting currency, skeptical markets and a polarized electorate are just some of the issues observers are focusing on this weekend as Brazilians go to the polls in what has been labeled the tightest election for a generation.
MADRID | The Corner | The dollar is set to rise, mostly as monetary policies of the Fed, ECB and BoJ are set to diverge dramatically, the greenback trend being intact and the cheap valuations, analysts at Barclays commented.
LONDON | By Keith Parker at Barclays | The recent risk aversion episode has raised concerns that global growth and inflation are continuing to fall. While the collapse in oil is flashing red, copper prices and industrial metals have had a more measured decline. Copper has historically been a good barometer for global production and is pointing to continued sluggish growth, but not another leg down.
LONDON | By Antonio García Pascual at Barclays | The most recent labour market data have been improving at a faster pace than we had envisaged, including results for the Q3 14 Economically Active Population Survey (EAPS). The EAPS shows that employment increased by 151k in Q3 (private sector +155k; public sector -4k). The number of unemployed fell by 195k, standing at 5.4mn. The unemployment rate stood at 23.7% (24.1% sa), compared to 24.5% in Q2 (24.7% sa). The participation rate continues to fall, to 59.4% (sa), albeit at a moderate pace – this is also consistent with ongoing net migration outflows.
MADRID | The Corner | As all market eyes are set on Sunday’s stress tests results (which will be released 12 pm CET) and the FOMC meeting next Wednesday, the last PMI data are offering some hope, mostly in Germany. The rumors about the ECB having purchased at least 800 million euros ($1 billion) of covered bonds in the first four days of program (as opposed to €1.5bn in the first month of the last covered bond program in November 2011) fueled optimism.
ZURICH | By Ignacio Sanz at UBS | GDP expectations continue to improve, NPLs are starting to come down although we do not expect write-backs for any bank, capital looks comfortable ahead of AQR and banks show a healthy funding while underwriting new deposits at c0.5-0.7%. The market knows all that with banks trading north of 1x NAV15e although for retail banks making more than 10% ROE with 0% rates is challenging.
MADRID | The Corner | Which is the real origin of the deflationist pressure that the global economy is facing? A greater desire of saving money than investing at a global scale, experts at Morgan Stanley point out. The eurozone, Japan and the most stable emerging countries have a greater control over their domestic interest rates, whereas China, whose currency is pegged to the USD, will also import deflation -something Beijing won’t like.
BEIJING | By Liu Ligang via Caixin | Pessimistic voices are saying China’s property market is nearing a Japan-style collapse of the late 1980s, but this ignores the fact urbanization will continue to create demand for homes.
ZURICH | UBS | The impact of an EU slowdown on US growth would be minimal: US exports to the EU are a small proportion of GDP (2.8% in 2013), and the secondary effects—the impacts on major US trading partners’ incomes and import demand—are even smaller. For example, a hypothetical 1 percentage point slowing in EU real GDP growth would likely translate into only a 0.1 pct pt drag on US real GDP growth via weaker exports to the EU and to other US trading partners affected by the EU slowing.
MADRID | By Álex García.