European interest rates are rising fast this week, with German 10 yr yields almost up 100% in a week to 0.47%. Rates were rising after statements from Mario Draghi where he mentioned that the ECB believes that the factors which are suppressing inflation are slowly fading away. This was considered to be a hint that quantitive easing will also be wind down as early as the end of this year. Brussels was accused of undermining EU efforts to end taxpayer bank bailouts after it allowed Italy to provide nearly €17bn in state aid for the wind-up of two stricken regional lenders. The European Commission and Italian authorities hammered out a plan over the weekend to liquidate Veneto Banca and Banca Popolare di Vicenza, with part of their assets and liabilities being sold to Intesa Sanpaolo, Italy’s largest bank. Senior bonds are shielded from losses as part of the plan. Junior creditors and shareholders will be wiped out by the rescue. “The promise that the taxpayer will not stand in to rescue failing banks any more is broken for good.” Due to extreme demand of a new coin, Status, which is linked to the Ethereum network there was downtime on the network. Some investors offloaded there coins and 'probably due to a fat finger' there was a massive sell order which flash crashed the Ethereum coin value with -99%. Expect more heavy volatility. Brent crude oil remained mired below $45 a barrel on Thursday leaving it further in a bear market as traders continue to lose faith in Opec’s ability to deliver on production cuts agreed last month. MSCI, the most influential indexer of emerging market equities, decided to include domestic Chinese A-shares in its main global indices. The 222 A-shares slated for inclusion a year from now will represent only 0.73 per cent of MSCI’s flagship emerging markets index, the cohort is far from insignificant. Estimates that passive and active investors who track the index will be obliged to invest about $15bn in the Chinese shares. The UK agreed to settle the issue of citizens' rights, borders and the so-called 'divorce bill' with the EU before discussions over trade begin, when formal Brexit negotiations finally got under way in Brussels on Monday. French President Emmanuel Macron has won a decisive majority in parliamentary elections (2nd round), giving him considerable power as he embarks on reforms to reinvigorate the economy and restore French influence in Europe. Mr Macron’s party La République en Marche and its centrist ally Modem secured 350 of the 577 seats in the National Assembly, according to official results from the interior ministry. The FED announced a +0.25% rate hike to 1.00%-1.25% on Wednesday as expected. The central bank last increased its benchmark rate in March. It now believes inflation will fall well short of its 2 percent target this year.The statement gave more detail on how it will unwind its $4.5 trillion balance sheet. Emmanuel Macron’s party wins a clear majority in parliament after attracting the highest share of the vote (24%) in the first round of French legislative elections that were marked by a record low turnout and the collapse of the Socialist party. Unlike earlier expectations it seems, as the first exit polls show, that the Conservative party loses its majority in the Lower House. Pound down 1.5% versus the euro and negotiations with the EU could be a lot tougher for the UK. The European Central Bank has trimmed its medium-term inflation forecasts despite acknowledging the strength of the eurozone’s accelerating economic growth. However, the bank confirmed that it would continue the quantitative easing programme until the end of the year or beyond if necessary and left interest rates unchanged at 0 per cent for the base rate and minus 0.4 per cent for the bank deposit rate. The UK prime minister called the snap election in April — just two years after the last vote — with her Conservative party riding high in the opinion polls, gambling that an apparent insurmountable lead over the main opposition Labour party would give her a decisive victory. |
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March 2021
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