European Economy

6

Draghi mulls QE to revive deflating Europe

by Chris Becker The ECB President, Mario “whatever it takes” Draghi is letting the QE cat out of the bag stating last night that he wants governments to do some heavy lifting on restructuring while he grabs the “unconventional” printing lever: The ECB stands ready to use additional unconventional tools and tweak its existing efforts

7

Comedy relief from the ECB

by Chris Becker You know, there’s no shortage of derision on tap when it comes to central bankers these days – and the European flavour does not disappoint this morning, following the G20 finance minister/central banking wow-pow in Cairns this weekend. From Bloomberg: “We will judge the combined effects of the measures, the measures of

2

European growth splits and risks

From Westpac’s excellent Elliot Clarke: Through 2014, we have cautioned over becoming too optimistic about the likely trajectory of European growth. The nil result in Q2, preceded by six negative quarters then four (soft) positive results, gives credence to this position. Underlying this soft aggregate growth trend is a tug-of-war between reform and growth-stifling rigidities; the result will determine the

62

Portugal seizes its largest bank

Risk markets might get a fillip from this today: Portugal will spend 4.9 billion euros ($6.58 billion) to rescue its largest listed bank, testing the euro zone’s resilience to another banking crisis just months after Lisbon exited an international bailout. The rescue of Banco Espirito Santo, which was unveiled after a frenzied weekend of discussions between Portuguese

1

What comes after European austerity

Cross-posted from The Conversation: Even Angela Merkel now seems to agree that austerity has run its course. When Italy’s prime minister, Matteo Renzi, together with other European leaders, led a fresh charge against the ill-fated policy after the European elections, Berlin caved in surprisingly quickly. The details remain to be worked out but it seems

3

Europe’s creditless recovery stumbles on

From Westpac’s excellent Elliot Clark: Over the past year, a modest, patchy uptrend in consumer demand has begun to take shape in the Euro Area, with consumption growth up 0.4%yr in March. Following almost two straight years of decline, this growth could either be seen as a burst of pent-up demand which will prove fleeting,

12

ECB warms up a frozen Euro

  by Chris Becker The currency wars continue! Ever since the GFC, a host of other acronyms has entered the lexicon as global central banks put up various parts of a “Wall” to stave off the White Walkers of deflation. This week ECB President Mario Draghi announced some more along with the tried and true

23

ECB fires first shot of many

Fresh from Westpac’s Elliot Clarke: The decision made at the June ECB meeting was broadly as expected. Draghi had all but confirmed a change of tack at the May meeting; and, since that time, leaks from ‘well-placed’ sources provided colour on the likely structure of the policy action. Not being in a position to fully

24

Can Europe’s creditless recovery continue?

Fresh from Westpac’s Elliot Clarke. With growing concerns over deflation and very little room to move on interest rates, the May ECB meeting brought Euro Area credit trends back to the forefront of investors’ minds. As at March, total loans to the resident private sector were 2.2% lower than a year ago. This is not

1

Europe’s “creditless recovery”

Cross-posted from Sober Look: The story from the Eurozone is beginning to sounds like a broken record. The area’s monetary conditions continue to tighten as the Eurosystem’s balance sheet shrinks. The decline is driven by banks’ deleveraging, as the LTRO balances decline. As a result of bank deleveraging, loans to area’s households are now growing

17

Kiev placates as separatism spreads

From the FT: Western governments struggled to present a united front to Moscow over the crisis in eastern Ukraine as pro-Russia separatists seized further government buildings in cities and towns in the region and defied a deadline from Kiev to surrender. Oleksandr Turchynov, Ukraine’s acting president, appealed to Ban Ki-moon, UN secretary-general, to deploy peacekeepers

2

More ECB easing is coming

From Credit Agricole: The ECB’s assessment of price and activity conditions was fairly unsurprising. March HICP inflation was dragged down (to a record low of 0.5% YoY) by calendar and base effects; long-term inflation remain anchored; the recovery remains intact despite external risks; and weak credit flows to the private sector are a consequence of

0

Eurozone recovery continues

From Markit overnight: Flash Eurozone PMI Composite Output Index(1) at 52.1 (51.7 in November). Three-month high. Flash Eurozone Services PMI Activity Index(2) at 51.0 (51.2 in November). Four-month low. Flash Eurozone Manufacturing PMI(3) at 52.7 (51.6 in November). 31-month high. The grinding Eurozone recovery continues. It’s not going to light up the world but the

1

Will Merkel steer back to austerity?

Once again the data coming out of the Eurozone is looking up, with the latest PMIs showing a broad improvement in both services and manufacturing indexes. Flash Eurozone PMI Composite Output Index at 52.1 (51.5 in August). 27 – month high. Flash Eurozone Services PMI Activity Index at 52.1 (50.7 in August). 27 – month

0

A German election primer

Cross-posted from Kate McKenzie at FT Alphaville Something funny happened to the eurozone over summer. Things… began to look better. Of course, there are plenty of difficulties lying in wait. As the FT’s Peter Spiegel and Alex Barker write, once a new German government is in place after this weekend’s election, fraught negotiations about Greece,

1

Have German austerians changed their spots?

Overnight Eurostat released its second estimate for Q2 GDP for the Eurozone which restated that the region finally showed some growth in Q2: GDP rose by 0.3% in the euro area1 (EA17) and by 0.4% in the EU271 during the second quarter of 2013, compared with the previous quarter, according to second estimates2 published by

11

As austerity lifts, so does Europe

Another good week for Europe as the latest PMI data shows the tentative recovery is gaining pace. Eurozone manufacturing recovery gathers pace in August Final Eurozone Manufacturing PMI at 26 – month high of 51.4 in August (July:50.3) Growth improves in Germany, the Netherlands, Italy, Austria and Ireland. Input prices broadly unchanged since July The

5

Greece highlights Germany’s EU dilemma

By John Browne from Euro Pacific Capital On August 11th, German media got hold of and published an internal Bundesbank report which maintained that Greece would likely need further relaxation of the terms of its rescue bailouts. The report contained revelations that could be deeply embarrassing to the government of Angela Merkel that has maintained

3

Europe bounces as austerity fades

Once again we are seeing more positive data out of Europe with the Flash PMIs coming out overnight. Eurozone recovery gains momentum with fastest growth for over two years Flash Eurozone PMI Composite Output Index at 51.7 (50.5 in July). 26 – month high. Flash Eurozone Services PMI Activity Index at 51.0 (49.8 in July).

3

Is the Eurozone crisis over?

Cross-posted from The Conversation Finally good news from the Eurozone! According to recent Eurostat estimates the combined economy of this troubled region grew by 0.3% in the second quarter of 2013 after shrinking for six subsequent quarters in a row. But closer inspections show that the region is still facing deep problems. A sustainable improvement

9

Putting the Euro recovery in perspective

By Leith van Onselen International media has been awash with reports hailing the European crisis over, following the Euro Zone’s 0.3% growth in the June quarter, which ended six consecutive quarters of contraction (see next chart). While the result is encouraging, and augers well for global growth (since Europe is now contributing to rather than

6

Austerity claims victory in Europe

Another night of relatively strong data out of Eurozone with services and composite PMIs looking mostly stronger, the UK also screamed ahead. Eurozone economy stabilises as German recovery accelerates and downturns ease in France, Italy and Spain Final Eurozone Composite Output Index: 50.5 (Flash 50.4, June 48.7) Final Eurozone Services Business Activity Index: 49.8. (Flash

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Weekend Links August 3-4

Global Macro/Markets: Swaps Probe Finds Banks Manipulated Rate at Expense of Retirees – Bloomberg ‘The most dishonest bankers walk away with the most money’ – Guardian North America: July Employment Report: 162,000 Jobs, 7.4% Unemployment Rate – Calculated Risk , BI Senate Republicans Eye ‘Grand Bargain’ on Budget – WSJ Banks Replacing Enron in Energy

0

More good news from Europe

Some more good news from the Eurozone, and in fact broader Europe, overnight with the release of the manufacturing PMI data. Eurozone manufacturing returns to growth at start of third quarter Final Eurozone Manufacturing PMI at two-year high of 50.3 in July (flash: 50.1) PMIs rise in all nations except Spain Price pressures remain on

2

Europe’s good news, bad news

A few interesting development this week in the Eurozone. Firstly the good news… The latest sentiment surveys have followed the latest PMIs in a new uptrend showing strength across most sectors, excluding construction. In the euro area, the ESI’s increase was driven by improved confidence among consumers and managers in industry, services and retail trade. Only in