Euro area GDP growth and inflation remain positive but near to zero in the second quarter.
By UBS Global Macro Team | Our proprietary surprise indices for growth and inflation are still enjoying very tight correlations with the prices of a wide range of global financial assets. The gyrations of our global and regional growth indices for instance closely track equity markets, both developed and emerging. Global growth surprises (excluding the US) closely track – and often lead – the US dollar and oil prices. Eurozone growth surprises closely track – and often lead – the euro. And global inflation surprises closely track the price of gold.
MADRID | The Corner | As expected, the ECB’s Governing Council left the policy rates and the ABSPP, CBPP3 and TLTRO programmes unchanged and expressed its endorsement for increasing the central bank’s balance sheet to its size at March 2012, that is, around €3Tr. Draghi explicitly pointed out that they would evaluate further measures in case that the current purchase programmes are not enough to expand the balance sheet or if the EZ inflation outlook worsens. With policy rates at the zero bound, pressure is mounting on the central bank to act.
MADRID | By JP Marín Arrese | Central banks all over Europe bombastically hailed the stress tests results as solid evidence the banking system enjoyed enviable health. Their diagnosis utterly failed to impress the markets. Ten days later, financials are plunging to fresh lows as low growth rates signify dire prospects ahead. Investors feel increasingly uneasy faced with dwarfish interest rates and dwindling intermediary receipts, leading to chronic underperformance and under-sized profits. Many fear that an inability to raise their own funds to plug gaps in their balance sheets might weigh on mounting impairment, sending shivers down the spine. Banks may face rough times ahead should deflationary bouts keep the European economy close to stagnation.
MADRID | By Francisco López | The latest movements within currency markets function as a gauge of the economic momentum in both Europe and the US. The decline of the Euro against the Dollar has increased in the last few days due to poor macroeconomic data in the eurozone, which is in sharp contrast with the vigour shown by the US (who showed growth of 3.5% in the third quarter of 2014).
MADRID | The Corner | Spain’s real GDP increased by 0.5% q/q in Q3 14 (flash estimate), in line with market consensus. Experts at Barclays believe that most of the growth contribution came from domestic demand, as weak eurozone growth in Q2 and Q3 likely implied soft external demand from key trading partners, including from the largest three economies.