It has taken a long time. We have all suffered together but is already here. The message I have dreamed of sending, and that we have been meticulously building over the last two or three years. Enjoy it!

  • Eurozone Economy:
    • Eurozone economy exits record-long recession with GDP rising 0.3% q/q in Q2, slightly ahead of consensus expectations for a 0.2% increase.
    • Germany economy expanded 0.7%, beating expectations for a 0.6% increase.
    • The French economy grew 0.5% after two straight quarters of contraction, ahead of consensus expectations for a 0.2% increase.
    • Fund managers more upbeat on Europe : The FT noted that investor confidence in Europe has surged this month to the highest level in nine years, highlighting the shift in sentiment away from emerging markets and towards developed economies.
    • BofA Merrill Lynch paper said that 88% of European fund managers expect the Eurozone economy strengthen in the year ahead, twice the level seen in July and the highest since February 2004.
  • Banking sector::
    • US money-market funds starting to lend to Eurozone banks again : Growing confidence in a European recovery, US money-market funds are starting to lend to Eurozone banks again. Citing data from JPMorgan, lending to Eurozone banks has grown 9% since the start of the year, while lending to US banks has fallen by 13% over the same period. According to Fitch, the 10 biggest US money-market funds allocated ~15% of their $652B in assets to short-term deposits and debt securities with Eurozone banks in the first half of the year, nearly double the level in June 2012. However, the money-market funds continue to largely avoid banks on the crisis-hit periphery. European banks are trying to dampen their reliance on short-term funding from US money-market funds.
  • Italy:
    • BlackRock has resumed purchases of Italian debt : Rick Rieder, Chief Investment Officer of Fixed Income at BlackRock, told Repubblica on Wednesday that the world's largest money manager has started buying Italian bonds again. He said that BlackRock believes that Italy can resume growing, adding that it is a rich country with good export capacity. He also said that it will benefit from the ECB's support.
  • Spain:
    • Spanish banks continue to reduce dependence on ECB: Bank of Spain noted that Spanish banks borrowed €251.9B from the ECB in July, down from €253.1B in June. July marked the 11th consecutive month of decline. Borrowing from the ECB reached a record high of €411B in August of 2012.
  • Germany:
    • Merkel pushes back against tax increases, says she will not resign early : Merkel described tax increases as "poison". She also offered her most explicit denial of reports that she plans to step down during a prospective third term. Recall that a 7-Aug report in Stern magazine said that she planned to leave office in 2016 if re-elected. Merkel declined to rule out a coalition with the opposition SPD, though she said that such an alliance is not the goal of her CDU/CSU bloc.
    • Merkel says Greece needs more time : Chancellor Angela Merkel told German voters that Greece needs a little more time to achieve its bailout targets. Merkel rebuffed questions about a possible new bailout for Greece and instead noted positive signs that the Eurozone economy is beginning to recover. She also said she will maintain the same crisis-resolution approach following her re-election. INSA’s weekly poll, published on Tuesday, showed that Merkel’s CDU is expected to receive 39% of votes, setting the stage for a possible reprisal of a grand coalition with the SPD. (Last week’s polls gave her 41% of votes. We will see).

And now, What?

Indeed, I am not going to change our estimates for European markets, peripheral debt, EUR currency, European equity, etc…

The estimates contained in the last document of Corporate Review (Outlook for August – September), are in full force today.

Warm Regards and … be cautious

(Informatin provided by Street Account)



Chief Economist