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In Europe 22nd September 2014

Why ABS drive will fail, Barclays reckons

MADRID | By Alberto Vigil at Barclays | The ABS purchases by the European Central Bank will not work basically because it is necessary for a regulatory change that does not penalise (in capital terms) either banks or insurance companies who have those securities. That is, if the ECB’s intention is to increase the amount of credit in the real economy, then it should have two specific goals: first, spreading the risk that banks assume when they provide credit; second, reducing banks’ costs of financing.

Economic sentiment indicator

In Europe 28th August 2014

Economic sentiment worsens in Italy, Germany and France, but remains stable in Spain

MADRID | The Corner | In August the Economic Sentiment Indicator (ESI) fell in the euro area (by 1.5 points to 100.6) and the EU (by 1.2 points at 104.6). Once again the core Europe does not bring any good news, where sentiment dropped in Italy (by 4.1p to 97.8), Germany (by 1.9p to 104.1 ) and France (by 0.6p to 95.1), while sentiment remained flat in Spain (103.).  Among the data published by the European Commission today, the industrial confidence fell in the EA to -5.3 in August from -3.8 in July and construction sentiment dropped to -28.4 from -28.2. Sentiment in the services industry declined to 3.1 from 3.6 and retail trade to -4.6 from -2.3. Consumer confidence remained at -10.

No Picture

In Europe 28th August 2014

ECB stimulus speculations keep circulating

MADRID | The Corner | The expectation that the ECB will finally announce a QE program after Draghi’s words at Jackson Hole and the confirmation that the ECB would have hired Blackrock for advice on launching a ABS program continue to nurture the Eurozone bond rally and thereby the credit one. Yesterday many bond markets in Europe returned to record lows with improvements in 10 years of 3bp (Germany), 2.5bp (Spain) and 2bp (Italy).

No Picture

In Europe 27th August 2014

A QE would be key for Germany, France and Italy to overcome their current stagnation

MADRID | By Francisco López | Are there reasons for such optimism after Draghi’s words in Jackson Hole? Yes, but only if Draghi dares to execute a program of sovereign debt purchases immediately. It happens that not all experts are clear that it will be the case. Especially, because the package of measures adopted by the ECB in June has still not been implemented: two TLTROs auctions and the Asset-Backed Securities (ABS) program. Would it not be better to wait to check the effects of these measures?

UBS Debt to GDP Euro area

In Europe 26th August 2014

Peripheral Europe’s bond rally might soon come to an end

MADRID | The Corner | Peripheral equities and bonds have been strongly favored by Draghi’s speech last Friday at Jackson Hole with intense improvements in sovereign credits from Portugal, Spain and Italy, which have reached record lows. In particular, Spain’s 10-year bonds yields are at 2.12% under the 2.38% of comparable U.S. Treasuries and especially today the Spanish Treasury has reduced sharply the interest rates of three- and nine-months bills in an auction of € 3,500 million at historical lows, without entering in negative territory like on the secondary market. Nevertheless, UBS strategists are starting to change their bullish view on peripheral Europe basing on market and fundamental arguments.

No Picture

In Europe 21st August 2014

The BoE might be the first big Western Central Bank to raise its interest rates

MADRID | By J. J. Figares (LINK) | On Wednesday, the minutes of the last meeting of the Monetary Policy Committee of the Bank of England (BoE) were published. Although 9 of its members voted to retain unchanged its program of asset purchases in secondary markets, 2 of them, Ian McCafferty and Martin Weal, they voted against the proposal to keep interest rates reference at the current level of 0.5% and advocated to increase them by a quarter percentage point.

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Markets 18th August 2014

Markets welcome Eurozone economic ‘bad news’

MADRID | By J. J. Fdez-Figares (LINK) | Stock markets face today a new week in which geopolitical conflicts, especially in Ukraine, and macroeconomic data that will be announced during the day will monopolize the attention of investors. Although we expect trading volumes remain low, typical of summer dates, we do expect a slight rise in volatility, especially given the current stage of confusion, both in the geopolitical and economic environment that financial markets are facing.

ecb1

In Europe 15th August 2014

ECB under pressure, markets demand QE policy

MADRID | The Corner | The European weak economic growth increases the pressure on the ECB to take additional measures or the long-awaited QE to boost growth, beyond those already announced in June and of which the effects probably will not be seen until 2015. At the moment the ECB in its monthly report reemphasized that there is “a continued moderate and uneven recovery of the euro area economy”, with low inflation rates and a weak monetary and credit evolution. At the same time, inflation expectations for the euro area in the medium and long term remain firmly anchored in line with the ECB’s target of keeping the inflation rates at levels below but close to 2%.

No Picture

In Europe 15th August 2014

Putin’s ‘moderate’ speech calm the investors

MADRID | By J. J. Fdez-Figares (LINK) | The main European and American stock markets closed yesterday up in a new session with low activity and reduced volatility, where the investors interpreted the words of the Russian President Putin, in his speech in Crimea, as an attempt to avoid the international isolation of his country as a result of their involvement in Ukraine. Yesterday again the macroeconomic figures published in the Eurozone surprised negatively because to the shrinking economic growth in Germany in the 2Q 2014, the first produced since 1Q 2012 during the euro crisis, the stagnation of the French economy and in the whole of the eurozone during the same period – the German and French economies account for about 50% of the Eurozone.