By Alexander Coward|While it was a tragic day for those whimsical souls who see the lie in the notion of Britain being a modern great power, recognizing its status as a medium-sized country that used to have an empire, when Article 50 was triggered on March 29 it was not a sad day for Europe.
Nick Ottens via The Atlantic Sentinel | Brexit fundamentalists scored another victory on Wednesday, when the United Kingdom began the process of withdrawing from the European Union without a plan for what comes next.
There is a sudden push to cut taxes in the US and Europe, although the Spanish government is preparing to increase taxes here, particularly for companies.
The volume of M&A in the European banking sector has gone from 39 billion euros in 2008 to scarcely 9.5 billion in 2015. And in the first half of last year, it was little over 1 billion euros. Why has there not been more consolidation in the sector? It’s an important question for the European authorities who want to promote banking union to answer.
Miguel Ángel Tramullas | Investment in public debt has traditionally been one of the most popular fixed income assets with both retail and institutional investors. It’s considered as a safe-haven. But in the last few years, it has lost part of its attraction because of lower interest rates which in some places are now in negative territory. To protect themselves, many countries like the US, Japan, the UK, France, Italy and also Spain have begun to issue inflation-linked bonds.
We can expect a rise in interest rates in 2017, driven up by the Fed, but fuelled by doubts over Europe. And I would bet the dollar will appreciate against the euro and the yuan – and sterling – although I am not normally a betting man.
Just minutes after the the EU ruling on ‘floor clauses’ was released, the banks in Spain’s blue-chip Ibex 35 index ended up dropping over 10%. But most of the lenders recovered ground by the end of the session. Afi estimates the ruling will affect the banking sector as a whole to the tune of some 4.5 billion euros.
Many take comfort from the prospect of higher inflation and rising interest rates driven by the fiscal stimulus the President-elect Trump promises to deliver. This will push the dollar up, endowing European exports with increased competitiveness. Yet the currency tailwind expectations might prove short lived as current debt levels curb any significant public deficit-led expansion.
BoAML | Council member Nowotny stated on 9 November that “how the Fed reacts” will be “key”. Unfortunately, the ECB will meet before the FOMC, on 8 December. The ECB will need to rely on its own and the market’s expectations of the Fed.
James Alexander via Historinhas | It’s taken a while but the evidence is now in. Euro Area NGDP growth has overtaken US NGDP growth. Congratulations to the ECB, commiserations to the Fed. Go Europe!