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Market stress or financial crisis?

ZURICH | UBS analysts | The initial move in oil price was greeted as stimulating growth. The precipitous decline is triggering destabilising factors, especially in EM. As the US economy has accelerated, concern is growing that the Fed is about to shift policy in ways suited to its domestic objectives but not to the needs of increasingly stressed emerging and commodity producing countries and companies. In short, uneven global growth is simultaneously raising the spectre of unsustainable debt deflation across important parts of the (mostly emerging) world and a tightening of US dollar liquidity precisely when it is most needed.

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“The ECB is almost apologetic about the lack of growth and the weak inflation”

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.

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Eurozone faces an interest rates scenario highly dependent on ECB’s monetary policy

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?

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Spain will grow in 2014… hampered by Europe’s stagnation

MADRID | By Julia Pastor | It is likely that the Spanish government will revise  its growth forecasts upwards for the country in 2014, but only by one tenth of a percentage point-to 1.3%. This is  likely to be the submission that the Ministry of Economy together with the Ministry of Finance will give to the next Council of Ministers.

Commodity Indexes

Markets worried over weak global growth

MADRID | By Francisco López | Up to this point, investors had scarcely listened to economists’ warnings about world economic stagnation, but in the last number of days the situation has changed as commodities’ prices dropped, with debt and equity markets beginning to exert some pressure. 

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Boosting growth is the only way of achieving fiscal consolidation

MADRID | By Luis Alcaide | In an op-ed at Wall Street Journal on Thursday, New EU Vice Commissioner Jyrki Katainen pledged for stimulating growth in the eurozone by keeping the proper fiscal consolidation. But his comment could be put in a different way: stimulating growth by all means as the only way of achieving fiscal consolidation. Stimulating growth means that deflation, a price level increase inferior to 2% (the Stability Pact target) is a more pressing requirement than meeting the 3% public deficit in the short term. 


bonds and equities

Do equities and bonds live on different planets?

MADRID | The Corner | While bonds are considering a world without growth nor inflation, equities seem much more optimistic. On their Monday comment, JPMorgan analysts point out that, on a global level, monetary policies are still increasingly more expansionary in aggregate form.


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Hollande’s new government ready for reforms

MADRID | The Corner | The economy is stagnant, the confidence of businesses and consumers continues to decline and unemployment is touching new highs. France is being forced to carry out reforms from all sides, hence François Hollande and Manuel Valls have chosen the social democrat Emmanuel Macron as Minister of Economy, confirming their willingness to pursue the economic reform agenda.

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A QE would be key for Germany, France and Italy to overcome their current stagnation

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?