European economy

BCE Atril

The mother of all repayments: European banks to repay €477m of TLTROs this week

Santander Corporate & Investment: This Wednesday European banks are to repay €477mm of TLTROs which will reduce excess liquidity in the system materially and funding via TLTROs to only around €600mm at a delicate time of acceleration of the QT programme from 1 July and with market sentiment further dampened after the ECB/FOMC and the flash PMIs plunge on Friday. For Italian banks, a geography where the gap excess liquidity…


PoundsTC

Red alert in UK: CPI rebounds in May to repeat previous month’s +8.7% and core CPI rises to +7.1%

Banca March: May’s inflation data has precipitated a sharp move in UK official rate expectations that put the UK’s terminal rate at 6% and assigns a 40% probability that the Bank of England would launch a 50bp “jumbo” hike at Thursday’s meeting, which would raise official rates to 5%. The concern stems from the rise in core inflation to 7.1% and the eleventh consecutive upward surprise in headline inflation to…


airbus A320

Supply normalisation bodes well for earnings and cash generation outlook for Airbus

Morgan Stanley| Management hosted a Business Update on Wednesday during the Paris Air Show, focusing on supply chains and production ramp-up. Specifically, Ross Law (analyst) estimates that during the event, the company has received orders for 846 aircraft, which according to the Airbus CEO, brings the total order backlog to 8,000 units, equivalent to 10 years of production at the current rate. With this, Ross highlights that the current strong…


renewables2

EU to raise renewable generation target from 22% to 42.5% by 2030

Banca March: The European Union is about to confirm that it is raising its renewable energy consumption target from 22% to 42.5% by 2030, a commitment that is expected to boost investment in clean generation sources. The agreement, which updates the current legal target of 32%, is based on a political negotiation concluded in the spring and although it is not yet final, as it will also have to be…


christine lagarde

ECB: market gives 100% probability of another rate hike in July

Banca March: The ECB followed the script and at Thursday’s meeting increased the price of money once again, raising all its interest rates by 25 b.p., bringing the benchmark rate to 4% and the deposit rate to 3.5%. However, the most relevant aspect was economic expectations and clues as to the monetary authority’s future moves. In these sections, it should be noted that the ECB lowered its GDP growth forecasts…


Christine Lagarde IMF director

ECB hikes 25bp at its June meeting, deposit rate now at 3.50%

Peter Goves (MFS) | This was as guided at the last meeting and is largely due to inflation projections being “too high for too long”. On QT, the policy was extended (again, as widely telegraphed) across all APP from July 2023. EGB spreads remain relatively tight and continue to exhibit relatively low volatility. There were minor changes to the forecasts which show medium term inflation at 2.2% (in 2025, +0.1ppt)….


bce lagarde 1

ECB faces dilemma as inflationary pressures remain at high levels

Jeremy Cunningham, Investment Director, Fixed Income at Capital Group| The European Central Bank (ECB) will face an even more challenging policy environment in 2023. Core inflation appears to have already peaked in the major European economies and should continue to fall as the effects of last year’s sharp increases in energy prices fade. However, underlying inflationary pressures are rising. Higher energy prices are being passed through to a wide range…


Italia fachadas

Italian industrial production falls 1.9% month-on-month and 7.2% year-on-year-year

Intermoney: Transalpine industrial production left a bad taste in the mouth in April, falling -1.9% month-on-month and -7.2% year-on-year. The secondary sector accounts for 16.2% of Italy’s GDP, so it is bad news that there was a generalised contraction in practically all the items, with a particular focus on the -2.1% m. in manufacturing activity. Moreover, the fall was especially visible in the production of base metals and materials, when…


UE gas

European Commission calls for end to emergency energy measures

Banco Sabadell: According to information in the press, the EC in a report sent to the Council and the European Parliament is calling for the withdrawal of emergency interventions in the wholesale market, such as the cap on income in the electricity market (€180/MWh in Europe and €67/MWh in Spain) for infra-marginal technologies (renewable, hydro and nuclear). The EC considers that electricity price peaks are not expected next winter like…


BCE grandeTC

Corporate lending significantly higher in Germany (+7.9%) and France (+6.6%) than Italy (-1.5%) or Spain (-0.6%).

Santander Corporate & Investment : Rising interest rates continue to take their toll on bank lending in the eurozone, as shown by the ECB’s data on lending to the private sector in the eurozone published last week. It confirms the progressive slowdown in bank lending to +3.5% year-on-year in April vs. +4% in March and a peak of +6.5% in September last year, thus approaching its pre-pandemic levels of +3%…