EPS: where will multiples get?
MADRID | The Corner | Markets are wondering where will expansion of multiples will get given this low macro volatility environment and expansionary monetary policies at the global level.
Markets
Draghi is in trouble: credit still doesn’t flow in the periphery
MADRID | By Francisco López | The ECB President announced with fanfare last month a battery of measures to revive the credit in the EZ. The problem is that the open bar announced by Draghi won’t have an impact on loans until 2015 and, meanwhile, credit fall continues to accelerate in some peripheral countries, especially in Spain and Italy. There are those who believe that the latest data could force Mr Draghi to approve a direct debt purchase program before year’s end.
BNP is not alone: EU banks could lose up to €80 bn in sanctions
MADRID | The Corner | BNP Paribas shares rose more than 4% on Tuesday after the French lender said it could pay the landmark $8.9bn settlement with US authorities for transferring billions of dollars on behalf of Sudan and other Washington-blacklisted countries. More actors in the EU banking sector might need to pay billionaire fines.
BIS warns over stimulus’ diminished effect over time; IMF asks for more
MADRID | The Corner | Swiss-based Bank for International Settlements (BIS) is concerned about a troubling disconnection between “markets’ buoyancy and underlying economic developments globally.” The international body representing central banks believes the risk of central banks normalizing monetary policy too late and too gradually shouldn’t be underestimated, pointing out that extremely accommodative monetary policy has a diminished effect over time. Meanwhile, the IMF has been asking to break the lethargy of the European economy with measures against low inflation for months with more stimulus.
Effects of the deflation on debt
MADRID | By Luis Arroyo | The Spanish National Statistical Institute has recently published May’s CPI. The chart shows the 0.1% annual variation with respect to May 2013. Such variations determine a curious outcome on the price level, as the second chart exhibits.
Fed tapering: Doubts resurface again
MADRID | JP Marín Arrese | The revised growth figure for the US economy in Q1 comes as a nasty surprise. It has dampened market sentiment worldwide. Earlier assessments blaming bad weather the moderate setback no longer hold when faced with a downturn close to 3%. Even discarding a fallback into full-fledged recession, it undoubtedly points to a markedly weaker performance than expected. The Fed tapering strategy is confronted with a baffling dilemma.
Most EU banks expect medium-to-large consolidations within three years
MADRID | The Corner | Banks feel nervous about the upcoming ECB’s AQR and stress tests. Despite the recent waves of capital raises, lenders still don’t know about the amount of expected recapitalization needs, nor how their provisions against loan losses will do. According to a interesting piece by Bruegel (check their graphs), which comments on the recent E&Y European Banking Barometer, almost one in three of the 294 respondents still expecting to raise Loan Loss Provisions. And, as we wrote not long ago, only 8% of respondents anticipate raising additional capital following the exercise, there is an additional 19% of respondents who a capital raise “might” be necessary.
Why All Currencies Are National
By Jean Pisani-Ferry via Caixin | Actions by America’s Justice Department launching a probe against BNP Paribas are a reminder that the major international currency – the U.S. dollar – brings with it legal, judicial and political dimensions.
Biggest EU banks show poorest Q1 results in 5 years
MADRID | The Corner | The first quarter of the year is usually the best for lenders, and yet major European entities are showing the weakest results since Q1 2009: net profit fell once more (-9% yoy) to a pale EUR 12, according to a report by Deutsche Bank Research. Potentially high litigation costs and the upcoming ARQ and ECB’s stress tests make them eager to strengthen their capital buffers.
European stock markets, harmed by US sluggish GDP
MADRID | By Francisco López | The first world power is doing worse than expected. USA’s GDP decreased in 1Q by 2.9% year on year, nearly three times the 1% foreseen just a month ago and far from 1.8% that Wall Street expected. European stock markets, unlike the American, reacted immediately with heavy losses. Spanish Ibex 35 leaded the way losing 1.25 and finished below 11,000 points.