HIGHLIGHTS
WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS:Global equity markets ended firmer yesterday and the modestly improved tone continued in Asia and in early trade in Europe earlier today, supported by increased optimism on easing US/China trade tensions. Turning to the EMU periphery sovereign bonds, Italy outperformed with the 10-yr BTP yield falling close to a three month low of 2.92% following Prime Minister Giuseppe Conte’s announcement that his government proposed to the...
Commentary: AKK’s rise – France, euro repercussions
By David Marsh in London
Annegret Kramp-Karrenbauer, the new leader of Germany’s principal governing party, faces a complex struggle to impose her will on her fractious Christian Democratic Union. She will pursue a more conservative path in key areas compared with still-Chancellor Angela Merkel. This has consequences for policies to stabilise the euro. ‘AKK’ is a long-time Merkel ally and, more recently, her designated successor. How well she...
Balancing the roles of the ECB
Monday 10 December, 12:15
London
A discussion with Ignazio Angeloni, member of the supervisory board at the European Central Bank. The meeting will focus on how the ECB balances its roles of monitoring the euro area’s banking sector whilst stimulating banks to lend more.
Topics include the assessing the condition of the banking sector, reduction of the level of non-performing loans, improvements in banks’ balance sheets and setting the right macroprudential...
Commentary: ECB must address QE misallocation risk
By Frank Westermann in Osnabrück
By the end of this year, the European Central Bank is expected to end its monthly net asset purchases. This raises several questions about the ECB’s reinvestment strategy and the implications for individual countries. The central bank’s quantitative easing programme was not as successful as believed. The real issue for the ECB governing council to address when discussing fiscal implications of reinvestment is...
Commentary: ECB on brink of egregious policy error
By Desmond Lachman in Washington
ECB President Mario Draghi sees no need for the central bank to change course from its decision to withdraw monetary policy stimulus by concluding its bond-buying programme later this year. He does so despite growing signs of vulnerability in the European and global economies.
Clouds are gathering over Italy, and it is possible that the UK will crash out of the EU without an exit deal by end-March 2019. Meanwhile,...
Commentary: ECB capital key dilemma on reinvestment
By David Marsh and Ben Robinson in London
The ECB faces potential charges of discrimination from Italy over maintaining its quantitative easing programme next year. Technical changes in allocating reinvestment of national central banks’ maturing bond holdings in 2019 could exacerbate Italy’s dispute with the European Commission over Rome’s budgetary policy.
Potential squabbles centre on the quinquennial recalculation of the ECB’s ‘capital key’,...
Global Economic & Market Outlook – Focus Notes (Thursday, October 18, 2018)
Sustainability of Italy’s public finances under question post budget announcement
Executive Summary
The Italian government’s Draft Budgetary Plan 2019, based on its earlier multi-year Economic and Financial Document, was submitted to the European Commission on 15 October as mandated by the European Semester, keeping the budget deficit target for 2019 at 2.4% of GDP. Although the planned fiscal relaxation is expected to...
Commentary: ECB faces QE dilemma
By Marchel Alexandrovich in London
While Italy continues to dominate the headlines, the European Central Bank is more interested in the big picture: the continuing economic recovery, building inflationary pressure, the end of quantitative easing and guiding interest rate expectations. As its bond-buying programme starts to wind down, the ECB is increasingly relying on the flow from QE reinvestments to make its presence felt in the markets. The uneven nature of...