Will wonders never cease. Via Goldman: BOTTOM LINE: The Governing Council adopted a 2% inflation target in its strategy review and agreed that owner-occupied housing costs should be reflected in the HICP. Although the target is symmetric, the ECB signals tolerance to temporarily overshoot 2% inflation given the lower bound on interest rates, but does
Nordea with the note. The short answer is nope: Germany will get a new Chancellor after the September elections and the course of German policies could change materially. The election result will have important consequences for financial markets as well. Germany has changed its stance on a number of important policy points amidst the Covid-19
Nordea with the note: There was broad support for the ECB to increase the pace of its bond purchases, but that support may wane, as the economic situation improves. We continue to see moderately higher Euro-area bond yields ahead. The monetary policy account from the ECB’s March meeting indicated that there were no strong objections to the central
Via Societe Generale: After a tumultuous first year, it looks like president Lagarde’s ECB is gradually finding its feet and defining its new modus operandi. Wisely, we believe the ECB will now be less sensitive to market pressure and inflation expectations, calling increasingly on fiscal policy to be engaged in determining future inflation.This also reflects
Four and a half years after the vote, Britain is properly out of the European Union and moving into a new era. It will surely be a freer nation, but will it be a richer one? Anatole has argued that the UK faces a long period of sub-par growth that will leave it worse off.
Via Bartho: Within the past fortnight, China has taken two steps that undermine the ability of the incoming Biden administration to build a western alliance to contain China’s growing and increasingly aggressive global assertiveness. On the final day of 2020, China signed an investment pact with the European Union despite pleas from Biden advisers to
Via Goldman: With less than three weeks to go until the end of the Brexit transition phase, significant sticking points remain in the EU-UK negotiations. Our base case remains that a “thin” free trade agreement (FTA) will be reached before the end of the year, which would ensure continued free trade in goods but
Via FTAlphaville: As with Japan in the 1990s, years of low — and even negative — interest rates in the eurozone have led to suspicions that the region’s business landscape is harbouring a load of zombie firms. That is, companies that are being kept artificially alive by the repeated extension of credit. Many have tried
Via News: With three words, Sweden’s King Carl Gustaf captured the panic engulfing his country as it backflips on a controversial herd immunity strategy and coronavirus case numbers explode. On Instagram, he wrote, simply: “Hold on tight!” The message is echoing around the Nordic breakaway nation which, up until now, has run a distinctly different race
Via MedRxiv: Abstract A variant of SARS-CoV-2 emerged in early summer 2020, presumably in Spain, and has since spread to multiple European countries. The variant was first observed in Spain in June and has been at frequencies above 40% since July. Outside of Spain, the frequency of this variant has increased from very low values
Via the excellent Damien Boey at Credit Suisse: Temporary fiscal union forming. The European Commission (EC) is launching an unprecedented fiscal package of €750 billion (5.6% of GDP) to deal with the fallout of COVID-19. Under the plan, €500 billion will be distributed to member states in the form of grants, while the remaining €250 billion will be available as loans, with the grants not
Via Magellen: ‘il Boom’ is how Italians describe the ‘great transformation’ of Italy over the 1950s and 1960s when a poor country turned itself into a modern industrial powerhouse with a stable currency, the lira. During those decades, rural southern Italians flocked to the industrial north and their cheap labour helped turn Italy into an
Via the FT: A closely watched gauge of stress in the eurozone’s financial system has climbed to its highest level since 2012, a sign that the coronavirus crisis has pushed up borrowing costs for banks in the currency bloc. Analysts said the rise in Euribor — a measure of the interest rates that euro area
Via the BBC: The coronavirus pandemic has exposed deep divides in Europe, with EU member states arguing over how to tackle the economic fallout. Italy and Spain have accused northern nations – led by Germany and the Netherlands – of not doing enough. Spanish Prime Minister Pedro Sánchez has even warned that if the EU
One of the components of MB’s ongoing COVID-19 base case, a second-round financial crisis, is a European banking bust. A part of that is loan losses for a very unprofitable sector. Another part is the so-far failed fiscal integration of the Eurozone, which presents massive fiscal stimulus risks, and bank bailout uncertainty as the COVID-19
Maybe. Via Bloomie: German Chancellor Angela Merkel said she’s ready to consider joint debt issuance to help contain the impact of the coronavirus, an opening that could transform the finances of the European Union. The idea was raised by Italian Prime Minister Giuseppe Conte on a video conference between the 27 EU leaders on Tuesday,
Via FTAlphaville: In the first of what we imagine will be many targeted fiscal policies to alleviate the economic stress from the Coronavirus panic, news from quarantined Italy this Tuesday morning. Via the FT’s Miles Johnson: Italy’s deputy finance minister has said the government will suspend mortgage payments and other household bills across the entire country
GaveKal on Brexit: Until last week there were so many permutations of Brexit that efforts to foresee events beyond the next political deadline were doomed to failure. This changed abruptly on Thursday after a meeting between Boris Johnson and Irish Prime Minister Leo Varadkar unexpectedly produced the outline of a Brexit deal, more or less
Via The Guardian: Universities are not adequately responding to the growing risk of China and other “autocracies” influencing academic freedom in the UK, the foreign affairs select committee has said. The report, rushed out before parliament is suspended pending the election, finds “alarming evidence” of Chinese interference on UK campuses, adding some of the activity seeking
Via Westpac: The October ECB meeting saw policy left unchanged. This is no surprise given the stimulus package announced at the September meeting and that the October meeting does not involve macroeconomic projections. In addition, the ECB’s cautious assessment of the economy was also left unchanged. Accordingly, the focus of October’s press conference centred on
Via UBS: Brexit crossroads: Possible paths ahead and their impacts on assets Things have been very fluid in the last 24 hours, but we believe markets still ascribe a low probability to a Brexit deal by end-October. Beyond that may loom new negotiations and elections, potentially a final turn in the Brexit saga. The consequences
Via the BBC: Conservative MP Phillip Lee has defected to the Liberal Democrats ahead of a showdown between Boris Johnson and Tory rebels over Brexit. Dr Lee, the MP for Bracknell, took his seat on the opposition benches as the PM addressed the Commons. His defection means Boris Johnson no longer has a working majority.
Via Wolfgang Munchau: The gloves have come off on both sides. MPs are now plotting a strategy to take total control of the House of Commons, and anti-Brexit Lords have devised a strategy to frustrate a filibuster. The important question is not whether a legislative route is theoretically possible within the time limits – we
Waleed Ali is clutching at his Brexit pearls today: This trick of rebuilding globalisation through lots of new bilateral agreements is really designed to preserve the mythology of national sovereignty: to say Britain will remain in the global economy, but on its own terms. Sure, that’s a bit false, since free trade agreements typically require
Via the excellent Damien Boey at Credit Suisse: Overnight, markets were spooked by deteriorating economic data and broad-based inversion of yield curves among the developed markets. The risk-off phase started with weak Chinese data, and was reinforced by weak European data. In 2Q: German real GDP shrunk by 0.1%, the second quarterly contraction within the
What a gale of fresh air is Adrian Blundell-Wignall, blowing aside Aussie group think with ease. As a doyen at the OECD he repeatedly warned about Aussie property bubbles and the failure to address the trade war. Since returning home, he has caned the houses and holes growth model and warned that China is going
Via FTAlphaville: Happy Friday Berlin! The entire German yield curve is now trading below zero: Which means if the government was to issue new bonds maturing up to thirty years from now, it could — barring a chronic deflation — expect to pay less to service the debt than it cost to borrow in the
Via the FT: The UK chancellor of the exchequer, Sajid Javid, is preparing to announce more than £1bn in increased funding for a no-deal Brexit after Michael Gove, the minister in charge of no-deal preparations, said such an exit was a “very real prospect”. A person familiar with Mr Javid’s thinking said that, while the
Interesting stuff out of Brussels today. First, The Guardian: Brussels has roundly rebuffed Boris Johnson after he laid down tough conditions for the new Brexit deal he hopes to strike over the summer. Speaking to the House of Commons for the first time as prime minister on Thursday, Johnson reiterated his campaign pledge of ditching
They’ll be rooned, says News: Setting aside the fact that just 160,000 members of the Conservative party will ultimately decide who will secure Britain’s exit from the EU, the new leader will find themselves in much the same position as that which forced Theresa May to quit. The conundrum is this: Theresa May negotiated a
