MADRID | The Corner | The EUR/USD dropped nearly 4 cents from its maximum area in 2014 (very close to 1.40) with a movement that began on 8 may, when Mario Draghi announced that a package of monetary stimulus / liquidity would be used at the June 5 meeting (refi rates drop in 10bp, negative deposit type, completion sterilization SMP and quarterly TLTRO). Why hasn’t the Euro fallen more?
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.
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.
ATHENS | By Manos Giakoumis via MacroPolis | Having completed capital increases of 8.3 billion euros, which more than covered the capital needs identified by the Bank of Greece (BoG) under the baseline scenario, the single most important risk for Greek banks remains the non-performing loans (NPLs).
MADRID | By The Corner | Experts at JPMorgan think that it is largely due to positioning, regulatory concerns and profit-taking post ECB announcements in June. However, their funding costs have barely moved in the meantime and remain near historical lows. This is likely to have helped their earnings further in Q2.
MADRID | By The Corner | Real estate values are a function of cap rates (property yields) and income growth. In the tables following UBS illustrates their team’s rental growth forecasts for retail and office by country. The majority of markets are showing a modest improvement in rental growth with estimates more optimistic for San Franscisco and London office.
SAO PAULO | By Marcus Nunes via Historinhas | David Beckworth has a very good article “Inflation Targeting – A monetary regime whose time has come and gone.” A very short summary of the argument is given here: “What, then, would characterize a robust monetary-policy regime? Based on the discussion above, it would be one that does not respond to supply shocks, but does vigorously respond to demand shocks.
MADRID | By J.P. Marín Arrese | The troubles faced by Banco Espirito Santo ’s main share holding group have delivered a widespread blow to financials and periphery sovereigns. A nasty reminder that Eurozone doesn’t seem so stable as everyone bet it was. Investors are flying to safety, pushing the US Treasuries and German bunds close to past records. Stock exchanges and market sentiment are bound to undertake brisk U turns, at no warning. The more so as sharp and continued rises always offer a good excuse for a sell-off. There is nothing to worry about.
MADRID | The Corner | Although analysts see limited systemic implications for the Portuguese sovereign and the rest of the periphery, the BES vaudeville has put something bigger on the table: changes at the global corporate debt market. Spanish Popular bank and construction company ACS both postponed a planned issue of the riskiest bank debt because of “heightened volatility” in credit markets. Goldman Sachs delayed a planned inaugural issue of a new type of bond that offers investors three levels of protection on the event of default, Bloomberg reports.
MADRID | By The Corner | European banks have strenghtened their capital ratios for the upcoming stress tests and the AQR, whose results will be known after the summer. In that sense, between July 2013 and May 2014, EZ lenders increased their base capital by €45 billion, although it wasn’t entirely by issuing shares but contingent convertible bonds (CoCos), by which they would have raised around €35 billion.