eurozone

In Europe 24th November 2014

The euro area’s deflation inflexion point

LONDON | By Jim McCormick and Keith Parker (Barclays) | At the start of the year, we analyzed the risks of a prolonged bout of deflation in the euro area (Japan-style deflation in Europe getting harder to dismiss). Our broad conclusion was that the risks of deflation in the euro area were probably not materially different from the risks Japan faced in the mid 1990s. Perhaps more important, we felt investors should picture 1996-97 Japan when assessing the risks of euro area deflation today.

Markets 19th November 2014

Deflationary risk: Which countries are most likely to be impacted?

MADRID | The Corner | In a report by Atradius Credit Insurance, they say that the disinflationary trend is visible across the Eurozone, but not all countries are expected to face the same issues. Countries that have a large output gap and those that still have to implement the most reforms will face the highest disinflationary pressure. To create a list of the countries most likely to be impacted, we first select the Eurozone markets that have a budget deficit larger than 3.0%, as these are subject to the Excessive Deficit Procedure which forces them to implement fiscal and structural reform.

Spanish economy 18th November 2014

Eurozone absorbs 50% of the Spanish exports

MADRID | The Corner | One of the risks of the Spanish economy is the significant lost of dynamism in the Eurozone. The latest data of the balance of trade published on Monday explain such fear. Thus, the Spanish exports registered last September a year-on-year rate of 9.6% (-5.1% from the previous month).

In Europe 13th November 2014

Eurozone crisis is taking its toll on Spain

MADRID | By Francisco López | Spain is not an oasis inside the Eurozone. The 18 main private research services believe that the slowdown in the European economy is already taking its toll on Spain. Besides, they forecast that Spanish GDP will grow slower than expected in the last quarter of 2014 (0.4%) versus 0.5% of the third quarter or 0.6% of the second quarter.

In Europe 12th November 2014

Eurozone crisis: “Everybody´s talking” (except about money)

SAO PAULO | By Marcus Nunes via Historinhas | In “What caused the great recession in the Eurozone? What could have avoided it?” Philippe Martin and Thomas Philippon begin thus: There is a wide disagreement about the nature and cause of the Eurozone crisis. Some see it as driven by fiscal indiscipline, some emphasise excessive private leverage, while others focus on external imbalances, sudden stops, or competitiveness divergence due to fixed exchange rates, as the following quotes illustrate.

In Europe 10th November 2014

UK: let’s be more British, please

LONDON | By Víctor Jiménez | Raise the main interest rate? Certainly not. Or not yet, anyway. While the US economy is not showing clear signs of having overcome the assisted breathing phase (i.e. printing money or the recently wound up phase of quantitative easing that the Fed finished two weeks ago), the chances are that the Bank of England will keep the price of the pound at a very low level.

World economy 8th November 2014

Economic surprises explain (nearly) everything

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.

In Europe 6th November 2014

ECB endorses balance sheet target

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.

Markets 6th November 2014

Risk of deflation increases after collapse in price of raw materials

MADRID | By Francisco López | The collapse in the price of raw materials in the last number of weeks is good news for consumers, but very bad news in macroeconomic terms because of the heightened risk of deflation in the eurozone. Oil continues to plummet and a barrel of Brent is now priced at $82, 30%, lower than its June level and is currently trading at a four year low.

In Europe 6th November 2014

ECB has some Aces up its sleeve yet, but what about Draghi?

MADRID | The Corner | According to CMC Markets’ analysts, “none of this week’s data from Europe has done anything to persuade markets that the European Central Bank won’t ultimately be forced into taking further action to help boost economic growth in the euro area at some point in the next few months.” Be that as it may, the Governing Council of the ECB will meet on Thursday to keep on working on the EZ economic recovery. Experts at Link Securities say that there won’t be any new measures for the monetary policy, although they believe Mr Draghi will announce the possibility of taking new actions to boost growth.

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