MADRID | The Corner | On July 1 the new Italian fiscal reform will begin and the tax rate on capital gains will go up from 20% to 26%. Both private and institutional investors are selling before that date so as to rebuy again after and get a +2% after tax return. The FTSEMIB stands below the levels recorded after Mr Renzi’s victory and at the same levels registered before Mr Draghi’s last intervention. The index is behaving worse than the Spanish Ibex 35, and –if this trend continues, next week will be the moment to resume positions.
LONDON | Cagdas Aksy at Barclays | A model framework, which takes into account economic/fiscal fundamentals and risk aversion factors, indicates a fair value level of about 200bp for 10y Italy and Spain vs Germany. The high debt problem for most peripheral countries is something that will take many years to reverse and the ECB’s commitment through OMT and potential QE can contain these concerns to a large extent, as long as it maintains its credibility. Under this more optimistic scenario, fair value moves down to 90-100bp. After 350-400bp of tightening over the past two years, 10y core periphery spreads are 30-40bp away from stretched levels.
ROME | By Barbara Spinelli at La Repubblica via Presseurop | Silvio Berlusconi has been expelled by his peers from the Senate and stripped of his immunity in a long-awaited vote on November 27. Despite no longer being in Parliament, Il Cavaliere has indelibly left his mark on this era and society, writes Barbara Spinelli.
LONDON | By Barclays analysts | Taking into account today’s downward revision in Spanish HICP, we now revise our October French HICP forecast from -0.2% m/m (0.6% y/y) to -0.1% m/m (0.7% y/y). The Italian final October HICP inflation rate was revised up by 9bps to 0.76% y/y. We note that historical subcomponents indices have been revised since the beginning of the year (although not the headline index). This nonetheless does not alter our view that euro area HICP inflation rate should come in unchanged at 0.7% y/y. If anything, we see slight downside risk to our 116.99 HICP ex tobacco projection.
LONDON | By Barclays analysts | Industrial production data in September were slightly weaker than we expected, adding further downside risks to our expectation that Italy’s GDP growth was flat in Q3.
By Tim Parks via Presseurop | ‘Vote me out of jail, or I will bring the country down with me’. This is the message Il Cavaliere has just sent to the Italian government, ahead of a Senate decision on whether he will lose his seat after being convicted of tax fraud. Such blackmail speaks volumes about the state of Italy in 2013, says British writer Tim Parks.
BARCELONA | By Enric Fernandez | Both institutions and culture have a lot of inertia. There is no doubt, however, that this is much more the case with culture. Implementing a cultural change is surely impossible in the short term.
LONDON/MADRID | Financial analysts in Madrid noted today the positive surprise of a recovery tendency among Eurozone peripheral economies, particularly those of Italy and Spain.
MADRID | By Julia Pastor | Unlike Spain, where the external sector is supporting the economy, Italian exports fell by 1.9% in 1Q13, its worst register from 1Q09. The country’s GDP dropped by 0.6%, and April’s industrial production by 0.3%.
MADRID | By Antonio Sánchez-Gijón at CapitalMadrid | On May 9 the European Union will deliver Charlemagne Prize to Lithuania’s President Dalia Grybauskaite. The idea is not to reward her as a former EC Commissioner, but as the person who embodies the success of three small countries of Northern Europe out of their deep economic crisis in two years. While the populations of the Mediterranean Europe and France are raised in arms against austerity policies imposed from Brussels and Frankfurt to exit the stagnation and save the euro, two European Baltic nations are looking forward to joining the common currency.