MADRID | The Corner | The ECB’s non-conventional measures, the banking restructuration and the adaptation to the new regulation make 2015 a crucial year. According to experts at Morgan Stanley, the many stories about restructuration, dividends and regulatory changes will allow to differentiate the performance of the different assets.
ZURICH | UBS analysts | We review some of the key Eurozone developments of 2014, and look ahead to 2015 and beyond. Eurozone growth has disappointed in 2014, mainly due to Germany, France and Italy. Economic performance over the coming months is likely to remain subdued, given various risk factors, which are likely to weigh on sentiment.
MADRID | By JP Marín Arrese | Once again, Greece has ignited the flame of instability in the Eurozone. The prospect of early elections coupled with the left-wing party´s scores in the polls has resulted in severe shock-waves hitting other South-Med countries. The promised debt default by the better placed candidate in this race stands as a formidable threat to Europe. What happens in this relatively small country is bound to hit all of us. Confidence in sovereigns will dramatically fall while financials will also bear the brunt.
ZURICH | UBS analysts | We see 4 wins for Germany in a backdrop of falling oil prices
1) German equity market is not exposed to Oil & Gas earnings. 2) While our Oil & Gas analysts expect energy capex to fall by 10% (which could hurt a cyclical Germany), the overall fall to European capex is < 3%. Plus capex is already at a 23 year low – can it get much worse? 3) Our economists think lower oil triggers sovereign-based QE given their view it pushes CPI even lower than Tuesday’s 0.3%.
MADRID | The Corner | According to Patrice Gautry, chief economist at UBP, there is little doubt that monetary policy – due to be presented in detail at the beginning of next year – will be revised and reshuffled as follows: 1) bigger ECB spending; 2) more of a focus on private and public bond purchases rather than on LTROs and ABS and CoCo purchases.In short, broadened QE should kick in on 22 January, at the next ECB meeting.
SAO PAULO | By Marcus Nunes via Historinhas | The European Central Bank opened the door to a dramatic escalation in its campaign to stimulate the eurozone’s stagnant economy early next year, signaling a new chapter in the bank’s fight against excessively weak inflation in the heart of Europe. ECB President Mario Draghi said after the bank’s monthly meeting that officials discussed purchases of government bonds, known as quantitative easing or QE, but that they needed more time to gauge the effects of policies that they have already implemented while assessing how falling oil prices may affect the bank’s consumer-price outlook.
MADRID | The Corner | Risks for the Eurozone have significantly intensified in the last six months. According to experts at Afi, the reduction of the risk premium and more benign monetary conditions are not enough to boost the economic activity. The Euro depreciation, although stronger than the Dollar, was not as intense as that of other currencies, which suggests a moderate growth scenario for the export of the region. In such context, what is likely to happen with the interest rates in the next six months?
MADRID | The Corner | The leading indicators of the manufacturing sector both in Europe and the US will be announced on Monday. China’s indicators showed an economic slowdown of the sector, which could force the government to implement new stimuli measures. Together with the service sector index, which has a bigger impact on the developed economies, these indicators will show -again, two divergent scenarios: 1) the American economy keeps on growing at a good pace after two quarters in which the GDP increased more than 4% on average, 2) the economy of the Eurozone continues its slow expansion, but there is a threat of stagnation, according to experts at Link Securities.
MADRID | By Sean Duffy | The latest economic outlook from the Organisation for Economic Co-operation and Development (OECD) forecasts a bleak outlook for Europe unless action is taken. The Corner asked Piritta Sorsa, Head of EU and Eurozone surveillance at the OECD about the increased sense of urgency, sovereign bond proposals and the necessity for consensus among Eurozone members.
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.