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BoE

European economy 6th August 2020

BoE Policy Unchanged – Negative Rate Debate Rages

David Page, Head of Macro Research at AXA Investment Managers | The BoE left policy unchanged with Bank Rate at 0.1% and Asset Purchase Target at £745bn by unanimous vote. The Monetary Policy Report included projections for GDP to fall by 9.5% in 2020 and rebound by 9% in 2021. CPI was forecast to fall to 0.25% by end-2020, but to recover to 2% by end-2022. The MPC noted considerable uncertainty, but with risks skewed to the downside. The Report presented some discussion around the outlook for negative interest rates, which it confirmed it was “currently considering”.

Sin título 3

European economy 5th August 2020

The ECB’s Firewall Against The COVID-19 Crisis

Caixabank Research |Monetary policy has reacted quickly and decisively to the COVID-19 pandemic. However, having successfully played the role of “fire-fighter”, the ECB will have to remain highly active to support the revival of the economy. In just four months the ECB has increased the size of its balance sheet by more than 1.6 trillion euros (+35%), as much as it did in the entire four years of the global financial crisis and the euro area’s double recession of 2008-2012. It took four years (2008-2012) to do so then.

EU Green Deal: Bold headlines, elusive impact

European economy 4th August 2020

A Green Biased Recovery Fund

Morgan Stanley | The European Recovery Fund will not only benefit peripheral countries but also sustainable activities. In the end, this package will have an even greater green bias than initially expected: 30% of the funds will go towards climate investment compared to 25% in the initial proposal.

ECB Bundesbank

European economy 3rd August 2020

ECB’s Extended No-Dividend Recommendation: A Quid Pro Quo That Could Have Adverse Consequences

The ECB has finally decided to extend from 1 October this year until 1 January 2021 the recommendation to banks to not pay dividends to their shareholders. Nicolas Hardy, Analyst of Financial Institutions at Scope, thinks this measure is positive in the short term, but could be questioned in the long term as EU banks are facing different operating conditions in the wake of the pandemic.

Gilead vaccine

European economy 31st July 2020

Remdesivir Comes To The EU: Brussels Signs €63 M Deal With Gilead To Supply The Anti Covid-19 Drug

The European Commission has signed a 63 million euro contract with US pharmaceutical Gilead to ensure the supply of the drug ‘Veklury,’ its trade name for Remdesivir, to some 30,000 patients with severe symptoms of Covid-19 during the summer months.Late last month, the US Department of Health and Human Services struck a deal to buy nearly all of Gilead’s projected production until the end of September.

BCE exterior

European economy 29th July 2020

ECB Tests Found That Eurozone Banks Are Able To Withstand The Stress Caused By The Pandemic

Santander Corporate & Investment | The ECB published on Tuesday the aggregate results of its vulnerability analysis of the 86 banks directly supervised under the Single Supervisory Mechanism. This shows that “the euro area banking sector can withstand the stress induced by the pandemic but, if the situation worsens, the decline in bank capital would be significant. Furthermore, the ECB has extended its recommendation that banks should not distribute dividends until 2021.

Euro sculpture

European economy 28th July 2020

The Poisoned Gift Of The European Agreement: The Euro’s Appreciation

Intermoney | Unlike the last crisis, Europe does not want to make an example of any country and Germany has sided with the stimulus and economic revival. This has been a turning point and has allowed the EU to gain a vote of confidence. However, it also has negative side effects in the form of the appreciation of the euro to 1.154 against the dollar on the day the agreement was announced. This was equivalent to highs not seen since January 2019.

EU agriculture 2

European economy 27th July 2020

New EU Budget Cuts CAP By 10% But Strengthens Regional Funds

On last Tuesday, leaders agreed on a Multiannual Financial Framework (MFF) of €1.074 Bn for 2021-2027. The European Union budget for the next seven years cuts agricultural funding by 10% compared to the previous Community financial framework, with the amount now standing at €343.9 Bn. Meanwhile, the allocation of cohesion funds has been boosted by 2.7% to €377 Bn.

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European economy 24th July 2020

EU Debt Issuance To Fill Gap In Shortage Of European High Quality Bonds

Intermoney | EU supranational entities’ negotiable debt in euros which can be attractive for investors amounts to nearly 588 billion euros. This figure seems low in line with the gross emissions of the EU, the ESM, EFSF and EIB which, together, have averaged 67 billion euros between 2015 and 2019. These numbers are evidence of the fact that the markets in the EU are lacking a key element such as the supranational role of quality. Furthermore, the Recovery Plan largely dilutes the break-up premium of the European project, and this may generate an extra boost for EU equities in the coming months.