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An effective ECB QE programme would probably involve large-scale purchases of higher-yielding and long-term debt, including both government bonds and private sector assets. But we suspect that the Bank will stick to limited purchases of short-dated bonds, …
19th November 2014
The recent drop in oil prices looks set to tip euro-zone CPI inflation into negative territory over the coming months, increasing the risk of a prolonged and damaging bout of deflation. … Falling oil prices to tip the euro-zone into …
18th November 2014
The improvement in Dutch consumer confidence and upturn in the housing market suggest that the near stagnation of consumer spending in Q3 need not be a sign of things to come. But continued fiscal austerity and the high level of household debt will ensure …
November’s rise in German ZEW investor sentiment came as a modest relief after the recent gloomy news on the euro-zone. But the index has not been very reliable in the past and it remains consistent with only a slow resumption of the German recovery. … …
While it is welcome news that the Greek economy has finally started growing again after seven years of recession, the recent GDP figures have not solved two of its, arguably biggest, problems: its huge debt burden and ongoing uncertainty about how it will …
17th November 2014
The widening of the euro-zone trade surplus to a new record in September was an encouraging sign that exporters are starting to benefit from the weaker euro. But the ECB will need to deliver on hints of quantitative easing if this boost is to be …
One notable element of last week’s euro-zone GDP figures for the third quarter was the strength of the peripheral economies, even Greece, in relation to the core. This might be seen as confirmation that the five year long euro-zone crisis, which …
14th November 2014
The small expansion in the euro-zone economy in Q3 has not diminished the need for both the European Central Bank (ECB) and national governments to respond to the persistent risk of deflation in the currency union with more decisive policy action. … …
Q3’s near stagnation of the German economy confirmed that economic weakness has spread to the core of the single currency area. While France performed marginally better, it seems that the euro-zone barely returned to growth after Q2’s stagnation. … …
Markets have probably at least partially priced in the prospect of QE in the euro-zone, suggesting that the ECB will have to unveil a bold programme to prompt a further significant market reaction. … Is QE already priced …
12th November 2014
September’s euro-zone industrial production figures confirmed that industry acted as a drag on the currency union’s economy in Q3 and pose downside risks to Friday’s euro-zone GDP figures. … Euro-zone Industrial Production …
The rise in Sweden’s headline inflation rate in October will do little to dispel fears that the country is succumbing to a damaging bout of deflation and will maintain pressure on the Riksbank to consider unconventional monetary policy measures. … …
11th November 2014
The rise in Sweden’s headline inflation rate in October will do little to dispel fears that the country is succumbing to a damaging bout of deflation and will maintain pressure on the Riksbank to consider unconventional monetary policy measures. … Swedish …
Any optimism surrounding the ECB’s progress towards QE has been dulled by concerns that the already low level of yields on many assets will make the policy ineffective. But there is still scope for QE to bring down interest rates as well as having …
10th November 2014
The ECB suggested last week that preparations are finally underway to launch full-blown quantitative easing. It seems that action will be triggered by either of two factors: evidence that existing policies will not achieve the desired €1trn balance sheet …
7th November 2014
September’s disappointing rebound in German industrial production increased the risks that both the German and euro-zone economies contracted in Q3 and added to the pressure on the ECB and German Government to provide more policy support. … German & …
Today’s statement from Mr Draghi that ECB staff are preparing further monetary policy measures provided the firmest support yet for our long-held view that the Bank will implement full-blown quantitative easing. It is now a matter of when rather than …
6th November 2014
The latest data have shown tentative signs of improvement in the euro-zone banking sector, with the pace of contraction in lending slowing slightly in September (see Chart) and the Bank Lending Survey pointing to a further loosening of credit conditions. …
5th November 2014
Iceland’s central bank unexpectedly cut its main interest rate to 5.75% today, the first change in two years, as it lowered its inflation and growth forecasts. But we think it may have to reverse course next year as strong domestic demand and labour …
October’s final composite PMI was slightly below the flash estimate and indicated that the euro-zone economy may have started Q4 on a weak note. … Euro-zone Retail Sales (Sep.) & Final PMIs …
While the extension of the Bank of Japan’s quantitative easing programme may not deliver a sharp upturn in the Japanese economy, the signal it has sent regarding the future stance of Japanese monetary policy and the corresponding impact on the yen provide …
4th November 2014
The Greek Government appears to have backtracked from plans of a “clean exit” from its EU bail-out programme in December, but it might still be over-estimating the extent to which it can finance itself in the markets and not rely on external support. … …
Fears that a referendum over the Swiss National Bank’s (SNB’s) gold holdings might prevent the Bank defending its ceiling for the Swiss franc may be overblown. But the referendum highlights political opposition to the SNB’s aggressive balance sheet …
All peripheral economies narrowed their budget deficits in September but France and Italy submitted draft budgets that flouted EU fiscal rules. … Euro-zone Fiscal Monitor …
3rd November 2014
The Italian Prime Minister’s package of labour market reforms is a step in the right direction, but reform efforts are moving too slowly to ensure a meaningful reduction in unemployment or improvement in the broader economic outlook in the foreseeable …
31st October 2014
Last week’s bank stress test results, September’s lending data and the ECB’s latest Bank Lending Survey all suggested that conditions in the euro-zone’s banking sector are, on the whole, improving gradually. However, the weakness in Italy and a slowdown …
With euro-zone HICP inflation still close to zero in October and the unemployment rate holding near a record high, there remains a significant risk of deflation in the single currency area. … Euro-zone Flash CPI (Oct.) & Unemployment …
The ECB seems unlikely to announce any new policies this month as it continues to purchase small quantities of covered bonds and prepares to buy asset-backed securities. With the risk of deflation growing, President Mario Draghi may confirm speculation …
30th October 2014
October’s EC Business and Consumer Survey suggests that the euro-zone economy got off to a weak start in Q4, after broadly stagnating in Q3. … Euro-zone EC Survey …
The ECB’s October Bank Lending Survey (BLS) provided further evidence of a slow improvement in euro-zone credit conditions. But lending standards are still tight and the faltering economic recovery may discourage banks from easing them further. … ECB …
29th October 2014
Sweden’s central bank today stepped up its fight against deflation, cutting its main policy rate to a record low of 0% and pushing back the date at which it first expects to raise rates. We think that the Riksbank may well need to resort to currency …
28th October 2014
On the whole, the results of Europe’s bank stress tests were positive, implying that the heavy drag that falls in bank lending have exerted on the euro-zone economy may be set to ease. But poor results for Italy suggest that further falls in bank lending …
27th October 2014
September’s euro-zone monetary data showed further signs of improvement but with lending growth still negative and, given the need for some of the weakest banks to raise further capital, the sector is likely to remain a drag on the recovery. … Euro-zone …
October’s fall in Ifo business sentiment was a blow to hopes that the German recovery should resume at the end of the year and will add to pressure on the Government there to consider a fiscal boost. … German Ifo Survey …
The Comprehensive Assessment of the euro-zone’s banks published on Sunday should go some way towards restoring sentiment in the banking sector. After all, the adverse economic scenarios to which the banks have been subjected are fairly extreme. But the …
24th October 2014
The surprisingly sharp slowdown in the euro-zone economy over recent months may be partly the result of temporary negative factors such as the Ukraine crisis. But the underlying picture is still one of a very fragile recovery and continued risks of …
23rd October 2014
October’s modest rise in the euro-zone composite PMI left it still dangerously close to the no change level of 50. With hard data pointing to a possible fall in GDP in Q3, the region may still have entered its third recession in six years. … Euro-zone …
Rumours that the ECB is considering corporate bond purchases suggest that the Bank is edging further into the realms of quantitative easing. But we think that it will need to buy sovereign bonds as well to ensure a meaningful expansion of its balance …
21st October 2014
The euro-zone’s latest bank stress tests may be more credible than previous versions and hence do more to restore confidence in the region’s banking sector. But the corrective measures required in response could continue to constrain bank lending in the …
The improvement in southern euro-zone nations’ competitiveness has left some core countries, such as Belgium, lagging behind. If Belgium and other uncompetitive economies are unable to close the growing cost gap with the rest of the euro-zone, they risk …
20th October 2014
Last week’s rise in peripheral euro-zone bond yields mainly reflected contagion effects from Greece’s sell-off, rather than general fiscal concerns. Indeed, draft 2015 budgets showed most countries planning to meet their deficit targets this year. …
17th October 2014
While there are some comforting distinctions between the recent jump in Greek bond yields and that which triggered the euro-zone crisis back in 2010, the scale of the economic challenges still facing the peripheral countries suggests that further …
While the recent weakness of financial markets appears hard to square with the economic outlook insome parts of the world like the US, in the euro-zone the markets’ concerns appear more justified. … In the euro-zone at least, the markets have got it …
16th October 2014
The widening of the euro-zone trade surplus in August reflected a drop in importsrelated to weak domestic demand rather than a rise in exports. It still looks like theeconomy failed to grow in Q3 and exports will probably recover only slowly thereafter. … …
The French Government’s submission today of a budget that flouts the European Commission’s fiscal rules will be a key test of EU authorities’ resolve. We expect a compromise to be reached that forces slightly more austerity onto France but also hastens …
15th October 2014
The adverse market reaction to the Greek Government’s plans to exit its IMF bail-out early has underlined the fragility of market sentiment towards the country and presumably made it very unlikely that Greece will be able to carry through its plans. … …
14th October 2014
August’s fall in euro-zone industrial production and the sharp drop in German ZEW investor sentiment in October add to the risk that the single currency area may be entering its third recession in six years. … Euro-zone Industrial Production (Aug.) & …
