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IMF-COVID-19: How Will European Banks Fare?
March 26, 2021--Summary:
This paper evaluates the impact of the crisis on European banks' capital under a range of macroeconomic scenarios, using granular data on the size and riskiness of sectoral exposures.
The analysis incorporates the important role of pandemic-related policy support, including not only regulatory relief for banks, but also policies to support businesses and households, which act to shield the financial sector from the real economic shock.
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Source: IMF
Monetary developments in the euro area: February 2021
March 25, 2021--March 25, 2021--Annual growth rate of broad monetary aggregate M3 decreased to 12.3% in February 2021 from 12.5% in January
Annual growth rate of narrower monetary aggregate M1, comprising currency in circulation and overnight deposits, stood at 16.4% in February, compared with 16.5% in January.
Annual growth rate of adjusted loans to households stood at 3.0% in February, unchanged from previous month
Annual growth rate of adjusted loans to non-financial corporations increased to 7.1% in February from 6.9% in January
Components of the broad monetary aggregate M3
The annual growth rate of the broad monetary aggregate M3 decreased to 12.3% in February 2021 from 12.5% in January, averaging 12.4% in the three months up to February. The components of M3 showed the following developments. The annual growth rate of the narrower aggregate M1, which comprises currency in circulation and overnight deposits, stood at 16.4% in February, compared with 16.5% in January.
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Source: ECB
How has COVID-19 affected inflation measurement in the euro area?
March 24, 2021-COVID-19 has complicated inflation measurement. Policymakers need to take this into account and should look at alternative measures of inflation to understand what is actually happening in the economy.
It might seem minor alongside the huge damage to people and economies done by COVID-19, but one of the consequences of the pandemic has been to throw into disarray the measurement of inflation. Eurostat's final estimate for inflation in the euro-area in January 2021 showed the biggest increase for a decade, from -0.3% year-on-year to 0.9% between December 2020 and January 2021, essentially due to one off factors. But while this attracted the most attention, the new composition of the consumption basket that will be used to calculate the price level throughout the year 2021, also published on 23 February by Eurostat, attracted much less. This yearly change usually goes unnoticed because consumption patterns evolve slowly. But the pandemic has changed consumption patterns dramatically.
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Source: bruegel.org
ESMA assesses the compliance with UCITS liquidity rules and highlights areas for vigilance
March 24, 2021-The European Securities and Markets Authority (ESMA), the EU's securities markets regulator, today publishes the results of the 2020 Common Supervisory Action (CSA) on UCITS liquidity risk management (LRM).
The CSA showed that the overall level of compliance with the applicable rules is satisfactory in most cases, but there is scope for improvement in liquidity management for some UCITS analysed. The exercise also highlighted areas where ESMA will work to further promote convergence across National Competent Authorities (NCAs).
This exercise was launched on 30 January 2020. Its purpose was for all NCAs to conduct coordinated supervisory activities to assess whether UCITS managers comply with their LRM obligations. The CSA was also an opportunity to strengthen the ongoing exchange of supervisory knowledge and experience among NCAs.
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Source: ESMA
Italy: Staff Concluding Statement of the 2021 Article IV Mission
March 30, 2021-- Economic Situation and Outlook
The pandemic has dealt a harsh blow to the Italian people and their economy. The large number of infections and fatalities as well as repeated waves of social distancing have caused considerable personal suffering. The economic impact has also been severe, interrupting the slow recovery from the previous double-dip recession and causing an unprecedented-but highly uneven-fall in output.
Despite the very strong rebound in the third quarter of last year and manufacturing returning close to pre-COVID levels, GDP dropped by almost 9 percent in 2020, with hospitality, tourism, and transport most affected. At end year, output remained about 6½ percent below the level at end 2019.
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Source: IMF
ECB steps up pace of bond-buying in bid to tame rise in borrowing costs
March 23, 2021--Europe is facing a difficult second quarter as coronavirus infections rise and governments reimpose lockdown measures, but the European Central Bank will do its part to keep borrowing costs ultra low, ECB chief economist Philip Lane said on Tuesday.
Fearing that rising borrowing costs would derail the recovery, the ECB earlier this month promised to ramp up bond purchases to keep yields low. Figures published on Monday showed its buys of mostly government bonds were already up by a half in the week since that decision.
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Source: sg.news.yahoo.com
Turkish lira tumbles in echoes of last year's meltdown
March 22, 2021--Turkey's lira plunged more than 4 percent against the U.S. dollar on Friday, its biggest one-day fall since a currency crisis took hold in August, raising concerns that Turks are buying more foreign cash as ties with Washington deteriorate.
The 2018 crisis, which tipped the economy into recession, was echoed across Turkish financial markets on Friday, with stocks hitting their lowest levels since January.
The currency shrugged off a stop-gap decision by the central bank to suspend one-week repo auctions in an attempt to squeeze liquidity in the market. The average cost of funding in Turkey saw a near record jump.
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Source: reuters.com
Investors' doubts rise over LSE takeover of Refinitiv
March 21, 2021--Worries have increased over scale of challenge to integrate business
Stock markets offer a blunt measure of buyer's remorse.
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Source: ft.com
UBS Licenses Solactive Index for new China Technology ETF
March 19, 2021--China is pushing for technical innovation. The world's second-largest economy is currently transitioning towards a "New Economy" where innovation and digital transformation are the key driving forces. Swiss bank UBS pooled the vast opportunities of this development in a dedicated ETF, the UBS Solactive China Technology UCITS ETF. The Exchange Traded Fund will be launched on March 19th, 2021, and it tracks the Solactive China Technology Index.
This release marks a new engagement between UBS and Solactive after the successful launches of previous ETFs and Index Certificates[1].
The Chinese tech industry is emerging as a high-profile opportunity for investors globally, and the pandemic has considerably accelerated this process. Record high internet, app, and mobile payment usage confirm this trend, and many companies in this industry are benefiting from both this growing demand as well as from supportive political initiatives. Above all, China is shaping up to be a tech leader beyond the IT industry. It has become the largest Electric Vehicle market globally[2], is bound to challenge the US' dominance in the biotech industry[3], and is a creative hub from many technologically oriented sectors.
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Source: Solactive AG
ESMA clarifies application of position limits pending MiFID II change
March 19, 2021--The European Securities and Markets Authority (ESMA), the EU's securities markets regulator, is issuing a public statement on its supervisory approach to position limits for commodity derivatives. The purpose is to clarify the application of position limits and coordinate the supervisory actions of National Competent Authorities (NCAs), pending the legislative change introduced by the MiFID II Recovery Package for commodity derivatives.
This legislative change will start to apply in early 2022.
Position limits, under the amended legal provisions, will only continue to apply to agricultural commodity derivatives and critical or significant commodity derivatives. In addition, positions that are objectively measurable as resulting from transactions entered into to fulfil obligations to provide liquidity on a trading venue will be exempted from position limits.
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Source: ESMA
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