EUROZONE ECONOMIC MOOD EASES MORE THAN EXPECTED IN MARCH, bodes ill for the first quarter. Sentiment in the eurozone weakened due to a bleaker outlook among
manufacturers and services. Businesses confidence continues to
suffer as the economic sentiment index settled at
105.5 points in March from
106.2 in February. Also, the business climate index, which points out the phase of the business cycle
declined to 0.53 in
March
from 0.69 in
February.
Global bond yields continued in a downward spiral trend on recession fears causing the
Turkish currency, Lira to contract 5 percent. The latest plunge in German bond yields
appeared to stagnate after a
vicious drop on Wednesday. The ECB is devising a plan to support side-effects of
negative interest rates.
The UK 10-year Gilt decreased
one basis points.
FTSE 100, +0.59%,
STOXX Europe 600 -0.10%,
CAC 40 -0.07%,
German DAX +0.09%.
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ECB’S PRESIDENT, MARIO DRAGHI HINTS AT DRAWBACKS OF NEGATIVE RATES AS BANKS START TO WORRY
about the adverse effects of
negative interest rates. Expectations of easier monetary policy have pushed government bond yields below zero, meanwhile,
cheaper cost of borrowing capital has raised risks of housing bubbles
in part of Europe.
European bank stocks have fallen around 30% since the start of 2018 since lower interest rates induce compressed profit margins.
Rates are expected to stay where there are for many months, laying the foundation for negative interest rates for years to come. The
ECB targets an annual
inflation of just under 2%, it is currently at 1.5%. The UK 10-year Gilt
declined one basis point.
FTSE 100, -0.41%,
STOXX Europe 600 -0.64%,
CAC 40 -0.28%,
German DAX -0.29%.
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UK BANKS APPROVE FEWEST MORTGAGES IN SIX YEARS as Brexit nears. Seasonally-adjusted data from the UK Finance industry
“resonated” with banks approving a lean 35,200 mortgages last month, the smallest number since
April 2013. Overall consumer credit growth also decelerated only rising 3.8 percent in February
compared to an expected
4.5% increase. After a few years of “
ultra-easy monetary policy,” including negative interest rates and an unprecedented 2.6 trillion euro asset purchase program,
economic growth is weakening again. Inflation is below 2 percent and Germany’s 10-year bond yield has dropped back under zero, signaling a recession fear.
German consumer morale deteriorated heading into April,
suggesting that household spending might
weaken in the second quarter. The UK 10-year Gilt
increased two basis points.
FTSE 100, +0.39%,
STOXX Europe 600 +0.76%,
CAC 40 +0.88%,
German DAX +0.62%.
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EUROPEAN OFFICIALS STATED A
NO-DEAL BREXIT
IS LIKELY. “
We don’t want a no-deal Brexit, we’d much rather have the Withdrawal Agreement, but if it is a no deal, let’s do it quickly to avoid
larger collateral damage,” mentioned a European official. Exposed countries such as
Ireland and Belgium
are far from prepared for a no-deal Brexit.
The no deal-contingency measures include: EU financial aid program in Northern Ireland, ensuring basic air transportation is not affected and allowing a temporary measure to create a smooth transition in the central clearing of derivatives and depositories. EU will
honor the entitlement to social security benefits accrued by EU citizens. “It would be a
material shock
for the EU if a no-deal Brexit occurs,” Brian Coulton,
Chief Economist at rating agency Fitch Ratings. The UK 10-year Gilt
increased one basis point.
FTSE 100, -0.53%,
STOXX Europe 600 -0.49%,
CAC 40 -0.27%,
German DAX -0.22%.
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EUROZONE BUSINESSES GROWTH IS WORSE THAN EXPECTED IN MARCH as factory activity contracted at the
“fastest”
pace in nearly six years,
suffered by a substantial drop
in demand. The manufacturing PMI sank to 47.6 from February’s 49.3. In addition, the
n
ew orders index dropped to 44.5 from 44.6,
a level not seen since the end of 2012. Germany manufacturing
further weakened on unresolved trade disputes and exacerbating slowdown in Europe. “The
German manufacturing recession is getting worse,” said
Andrew Kenningham at Capital Economics.
IHS Markit stated, "The first-quarter GDP grew by
0.2 percent, below the
0.3 percent prediction."
This supports the ECB’s
decision on pushing out its
rate hike until 2020
at the earliest to help
revive the economy. The UK 10-year Gilt
declined basis points.
FTSE 100, -2.00%,
STOXX Europe 600 -1.10%,
CAC 40 -1.83%,
German DAX -1.20%.
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BANK OF ENGLAND KEEPS RATES ON HOLD
AT 0.75 PERCENT AS BUSINESSES “BRACE” FOR
possible
no-deal Brexit. “The
economic outlook will continue to depend significantly on the nature and
timing of EU withdrawal,” the BoE said. Brexit uncertainty has created volatility in British asset prices and sterling is impairing businesses
confidence and investment. Inflation is running below the BoE’s 2 percent target, which is one
rationale on not raising rates; allowing
borrowing costs to be low-cost.
Banking shares had risen earlier this week on signs of a merger between Deutsche Bank and Commerzbank being
officialized soon. Bundesbank sees no “credit crunch” after Brexit. The UK 10-year Gilt
declined 10 basis points.
FTSE 100, +1.05%,
STOXX Europe 600 +0.12%,
CAC 40 +0.19%,
German DAX -0.26%.
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GERMANY IS IN A “STRONG” POSITION to weather
Brexit
and trade shocks, stated by Finance Minister Olaf Scholz. The country has
solid
public finances and a
“vibrant”
domestic economy to
cope with headwinds. German cabinet authorizes a budget for 2020 that calls for
1.7 percent spending hikewithout issuing new debt. The
Spanish economy
expanded in early 2019, “
stronger-than-expected domestic
demand
offset a slowdown in exports”. Spanish GDP grew 0.6 percent in January, to maintain this
growth, the Bank of Spain noted reducing public deficit and debt to protect the
economy against future shocks. Assets worth around a trillion pounds is moving from
London to hubs in the
European Union ahead of Brexit. The UK 10-year Gilt
declined three
basis points.
FTSE 100, -0.16%,
STOXX Europe 600 -0.
68%,
CAC 40 -0.47%,
German DAX -1.34%.
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RISK-ON SENTIMENT REGAINED CONTROL as investors pour capital into equities. The pound rallied to $1.3282, “The predominant notion adopted by the market is that as long as the
worst case scenario of hard
Brexit is avoided by delaying
Brexit, the pound is a buy on dips,” stated by
Rabobank strategists. Advisers to the German government on
Tuesday cut its growth forecast for this year to 0.8 percent.
Christopher Schmidt, one of the
advisers
mentioned: “
German economic boom
is over but a recession is not currently expected due to the
robust domestic
economy.” The ZEW indicator of economic sentiment points to relatively weak growth for the first half of 2019
fueled by industrial orders posting their largest drop in seven months.
The UK 10-year Gilt elevated two basis points.
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STOXX Europe 600 +0.
60%,
CAC 40 +0.27%,
German DAX +1.10%.
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CME STATED, EURO TRADING HAS MOVED TO AMSTERDAM ahead of
Brexit; full migration will be
completed
by April 1
st. CBOE Europe is “closely
monitoring political discussions
and would react as quickly as possible” that would
alter the April 1
st
launch date. UK will produce a new indicator called a VAT index,
which will display whether businesses are seeing more or less turnover in employment; providing better
clarity on economic growth and contraction. Bank of England will be utilizing this indicator to
gauge inflation and determine
interest rates. The UK 10-year Gilt declined two basis points.
FTSE 100, +0.77%,
STOXX Europe 600 +0.
20%,
CAC 40 +0.13%,
German DAX -0.12%.
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BRITAIN’S ECONOMY CAME CLOSE TO STAGNATING in February amid Brexit nerves and “sluggish” global growth. Earlier this month, the ECB
offered banks a new round of cheap loans to help revive the Eurozone economy. Norway’s central bank is
expected to raise its key rate
on March 21 and will continue to tighten later this year due to
rising inflation and solid growth.
Norway’s
2018 Q4 growth
exceeded expectations and
higher demand in crude oil prices point to
a justification
for tighter policy. The UK 10-year Gilt declined one basis point.
FTSE 100, +0.50%,
STOXX Europe 600 +0.
63%,
CAC 40 +0.63%,
German DAX +0.18%.
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