PARIS | Guest post by Francesco Saraceno | Germany has been sitting on the shoulders of the rest of the world economy, and since 2010 it has been followed by the rest of the eurozone that is globally running trade surpluses. I have already said many times that this is a bad (and dangerous) strategy.
BEIJING | By Peter Lundgreen via Caixin | There are a host of reasons to doubt Europe’s growth prospects for this year and next, so investors would be wise to look for opportunities in Asia.
MADRID | By JP Marín Arrese | No need to wait for IMF forecasts. The hasty downfall in oil prices signals a steep deterioration in most export-led economies, ranging from China to Brazil. An upsurge in the US dollar coupled with prospects of more stringent credit conditions, are rapidly changing the global mood towards risk aversion. As hot money flees emerging countries bogging down their investment plans, main suppliers of capital goods such as Germany become increasingly crippled.
MADRID | By Julia Pastor | ECB’s upcoming ABS drive with senior, higher credit quality assets will be launched with or without guarantees from the states, that is for sure. The question is if countries will guarantee riskier tranches, the so-called mezzanine ABS. Spain is willing to do so if others go for it, yet Germany, France and the Netherlands are refusing. This makes sense since a state back up would mean to put assets with uneven exposure to bankruptcy on the same level. An eventual agreement would be a very difficult political decision. Details of the ABS plan will be announced after the central lender’s next monetary policy meeting on Oct. 2.
MADRID | The Corner | Don’t expect big changes in stock markets’ behaviour today: everyone is waiting for the main events of the week, that is, any move from the US Federal Reserve (FOMC meeting ends on Wednesday) and the Scotland referendum on Thursday. Just note that Germany is releasing ZEW index today, which gauges big investors and analysts’ confidence in the EU’s main economy. In the UK we’ll have consumer prices for August.
FRANKFURT | By Lidia Conde | Martin Gornig is deputy head of department of Firms and Markets at the prestigious German Institute for Economic Research (DIW) in Berlin. The Institute conducts a working group that advises the Minister of Economy Sigmar Gabriel with the idea of increasing investments in Germany. Gornig and his team released a report last summer on the possibility of stimulating growth in Europe without changing the Stability Pact. The proposal of DIW is to immediately mobilize the necessary investments “to boost growth in countries in crisis and avoid a new recession in the eurozone.” As France and Italy are demanding, the Institute bets on growth but warns that it should not be at the expense of a debt increase
MADRID | The Corner | Historically, German housing prices have remained flat, but since 2011 they have increased by 30% (a low figure when compared with +150% growth of the last 15 years in UK, France and Spain). Morgan Stanley analysts already see signs of recovery in the German residential sector, so the stocks exposed to it may be attractive. Moreover, housing prices in the UK have fallen significantly more than expected: 40% in August from 48% in July, instead of the 47% expected fall. It’s the lowest level of the past 12 months. According to Bankinter, this is a good sign “because it dissipates the fear of a possible housing bubble and reduces the BoE arguments to raise its main interest rate in advance.”
FRANKFURT | By Lidia Conde | What a relief! France is reinventing itself as it is Angela Merkel’s hope. However much Mr Draghi warns that the ECB will do whatever it takes to save the euro, all the fresh money in the bank will be useless unless “some members of the Eurozone” change their economic policy. This is Germany’s analysis of the Eurozone state.
MADRID | The Corner | China’s antitrust investigation on over 1,000 manufacturers and foreign suppliers in China (market of € 450,000 million in revenues) threatens 25% of the sector’s global benefits. In particular, German manufacturers are the most exposed (BMW, Daimler, Audi and Porsche generate 50.000 million euros and account for over 80% of demand for luxury goods). According to Morgan Stanley figures, 80% of the market has been influenced by foreign companies. In the short term Morgan Stanley analysts believe the focus of the problem will centre on imports but generalized cuts in luxury markets are also expected.
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?