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Markets 3rd April 2014

Market chatter: ECB’s talking yet non acting

MADRID | By Jaime Santisteban | “The IMF nor politicians will have influence on the ECB as long as Mr. Draghi is running it” Link’s chief analyst J.J. Figares points out. As expected, the monetary authority announced on Thursday that it will stand still in spite of deflation tensions, maintaining interest rates at an all-time-minimum 0.25 % and choosing not to use the little ammunition it has left. However, Mr. Draghi left the door open for stimulus if needed.

In Europe 3rd April 2014

ECB likely to bet on inaction again

MADRID | By The Corner | Bundesbank’s Jens Weidmann shift, more inclined to consider bonds purchases, basically reponds to pure economic policy. Although it could anticipate those are closer than ever, it does not mean that ECB is to take action in today’s meeting. Most of analysts at Madrid’s financial place agree that Draghi would be more explicit regarding eventual tools to fight deflation- or low inflation as European authorities prefer to call it now-. He could announce some kind of corporate financing support such as securitization’ buyings at most.

World economy 1st April 2014

Will the Increase in the Consumption Tax Derail Abenomics?

SAO PAULO | By Marcus Nunes | The WSJ has a piece which closely reflects the consensus view on the matter: “Japan´s Sales-Tax Boost will Test Abenomics”: The tax increase is designed to pay for Japan’s ballooning social-welfare costs and to pare its huge public debt, which, at more than twice the size of the economy, is the largest among rich nations.

Markets 31st March 2014

Market chatter: goodbye to a quite unsettling quarter

MADRID | By Jaime Santisteban | Today we close a rather complicated quarter. Beyond 10-year Spanish bonds, this term turned out a little unnerving with Ukraine’s crisis, fears of deleveraging in China and Fed’s “hawkish” messages. J.P. MORGAN downgraded 1Q14 global growth prediction from 3 % to 2.3 % and now reduces US’s from 2 % to 1.5 %. Harsh weather may have affected the GDP by up to 1 %.

Markets 27th March 2014

Market chatter: bonds await ECB’s move

MADRID | By Julia Pastor | European sovereign bonds markets have put some champagne bottles on the fridge for next neek in the case the ECB decides to inject some stimulus on the euro zone at last. Without setting a precedent, president Mario Draghi and Bundesbank’s head Jens Weidmann seem to bring their positions over the mechanism closer. This change of direction led Spanish 10-years bonds to 2005’s minimum yields of 3.27% and was behind the successful issue of Italian public Treasury, which sold €2.5 bn at also very low prices. Just Greece’s bonds are trending downwards.

Markets 26th March 2014

Today’s market chatter in Spain

MADRID | By Jaime Santisteban | Spanish government plans to create a state firm to house the failed toll roads, which will issue a 30-year bond of around 2.3 billion euros to pay the motorways’ debt. Also, creditor banks will be forced to accept a 50 percent haircut. In this regard, analysts at ACF and Sabadell don’t expect a considerable harm on licensed building companies’ share price.

In Europe 26th March 2014

Is ice between ECB and Bundesbank melting?

MADRID | By Julia Pastor | The Bundesbank must be really worried about euro zone’s economy evolution. The German central bank’s chairman Jens Weidmann, paradigm of the country’s economic orthodoxy, opened the door to an ECB’s eventual bond purchase program for the first time in order to fight against common currency’s appreciation and the ghost of deflation. Furthermore, the German economy, strongly linked to Ukrainian interests, could suffer a downturn in the 2Q14, according to Bundesbank’s estimations. Meanwhile, the ECB could be studying some operational and legal points to start the stimulus program.

In Europe 21st March 2014

Shiller backs Abe and Roosevelt… what’s Merkel say on that?

MADRID | By Luis Arroyo | Nobel laureate economist Robert Shiller discusses the issue of the so-called “animal spirits” and what should be done in order to pump trust. He uses a visit to Japan as a base to show how effective the politics by Mr. Abe were. Japan is the country that has reduced the gap with the potential GDP.

In Europe 14th March 2014

Spain Wants A More Efficient Tax System- But Will It Be Socially Equal?

MADRID | By Julia Pastor | Spain could cook a historical fiscal reform to simplify complex patchwork of tax rates at national and regional level- there are more than 1,000 tax exemptions, even more than in the UK, which was the European country with the highest freedom from taxation-, and increasing revenue collection efficiency. Spanish market watchers are looking forward to see reforms in the 444 pages report presented to the cabinet by an experts committee. However, critics fear that social policies, especially those focused on employment, quality of labour force or further specialization, will be ignored. As the rest of euro zone’s southern countries walk over the same path of Spain’s, a real harmonized fiscal union still seems too far.

In Europe 13th March 2014

Spain’s Warning Signs Of Japanisation- Shall We Buckle Up?

MADRID | By Julia Pastor | Amid the debate on the euro zone’s eventual japanisation due to low inflation levels, we wonder if Spain could be the first member state with severe signs of this illness. Inflation is near 0% since six months ago and markets’ expectations suggest an average price index scarcely over 1% for next five years, and under 2% in a decade. Along with Portugal, Spain is the EU economy having more price indicators’ components in red year-on-year rates, namely 40% against 20% of Europe’s average. That means that 2 out of 3 goods in Spaniards’ shopping basket are affected by deflation. Although good for the country’s competitiveness, there is a risk in the process of public as well as private debt deleveraging.

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