James Alexander via Historinhas | While we firmly believe NGDP expectations are the best guide to monetary policy we are still some way from having a proper market measure of those expectations. However, two of the peripheral countries, Spain and Italy have now produced their first estimate of NGDP for 3Q.
Most investors had priced in a bold increase in monthly purchases by the ECB under its QE programme. No wonder they showed utter dismay when confronted with a mere extension of the scheme until March 2017 plus pledges to buy sound local authorities’ issues. The slight reduction in the current negative rate imposed on overnight money placed by credit institutions in the central bank did little to raise market sentiment.
Wang Xiaoqing via Caixin | The huge e-commerce day is a windfall for Alibaba, but a headache for sellers and brand names, not to mention the economy.
Lately the markets are moving more to the beat of the big central banks’ drums than to the trend in corporate earnings. That’s the only way to explain how the Ibex is saving face, given that third quarter results presented so far (by 20 out of the 35 companies in the index) are 16% lower than expected, according to Bloomberg.
Guan Qingyou via Caixin | The Chinese central bank’s decisions to trim banks’ reserve-requirement ratios and benchmark interest rates this year have all coincided with bad news, so it was hardly surprising that it would make cuts again on October 23, shortly after the National Bureau of Statistics said the country’s GDP growth rate for the third quarter fell to 6.9 percent.
Fernando Barciela | The central bank has put QE in place, a trillion euros asset purchase programme, but inflation has returned to negative territory. Has the ECB’s strategy failed? Are critics right when they say it does too little, too late.
BARCLAYS | Repsol’s 2016-2020 strategy presentation set out the resilience of its integrated business model with a shift to a focus on value from the previous growth focused strategy. The company expects to be free cashflow breakeven after dividends at $50/bl Brent over the 2016-2020 period with the breakeven likely to be $60/bl in 2016/17 before falling to $45/bl in 2018- 2020.
The European financial center still cherishes the hope that the debt markets will brighten up before the end of the year. It would help if the catastrophic headlines stopped.
BARCLAYS | We have been arguing for some time that we see no grounds for attaching a high probability to a reflation scenario for the euro area, at least in the near term
UBS | In September PM Abe fired off three new arrows: a strong economy, parenting support, and social security, setting a nominal GDP target of ¥600trn as the first of these. A nominal growth rate of 3% would achieve the ¥600trn target in FY21.