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ECB-Meeting of 26-27 October 2022 Account of the monetary policy meeting of the Governing Council of the European Central Bank
November 24, 2022--Held in Frankfurt am Main on Wednesday and Thursday, 26-27 October 2022
1. Review of financial, economic and monetary developments and policy options
Financial market developments
Ms Schnabel noted that uncertainty had increased in financial markets since the Governing Council's previous monetary policy meeting on 7-8 September 2022. This had occurred amid persistently high inflation and elevated fears of a recession, with increased attention on potential financial instability.
Inflation concerns had remained the dominant driver of financial market developments, as inflation outcomes had continued to surprise to the upside, leading to a renewed adjustment of market expectations for monetary policy globally.
Against the background of persistent inflation surprises, investors had sharply revised up their expectations regarding central banks' "terminal policy rate" (the level at which market participants expected the current interest rate cycle to peak) as embedded in risk-free rates, for all major advanced economies, albeit to different degrees.
In the euro area, compared with expectations at the time of the Governing Council's previous monetary policy meeting, market pricing and survey evidence now pointed to expectations of a faster pace of policy rate hikes and a markedly higher terminal rate.
New Equity ETF from Global X on Xetra: access to Nasdaq-100 in combination with covered call strategy
November 23, 2022--A new exchange-traded fund issued by Global X has been tradable on Xetra and via Börse Frankfurt since Wednesday.
The Global X Nasdaq 100 Covered Call UCITS ETF tracks the performance of the Cboe NASDAQ-100 BuyWrite Index. The investment objective is to implement an investment in Nasdaq 100 companies in conjunction with a covered call strategy.
In the covered call strategy, call options with a short maturity on the main index are sold, thereby generating income in the form of option premiums. This has a positive effect on the return if the main index moves sideways or negatively. On the other hand, price increases can be limited to a certain extent. The covered call strategy offers investors an improved risk profile by cushioning the risk of loss.
Name: Global X Nasdaq 100 Covered Call UCITS ETF
Asset class: Equity ETF
ISIN: IE00BM8R0J59
New AXA Equity ETF on Xetra: investment in the 100 largest companies of the Nasdaq equity market excluding the financial sector
November 22, 2022--A new exchange-traded fund issued by AXA Investment Managers has been tradable on Xetra and via Börse Frankfurt since Tuesday.
AXA IM NASDAQ 100 UCITS ETF USD Acc is passively managed and invests in the 100 largest national and international companies of the Nasdaq equity market by market capitalisation.
The sectors currently included in the index are consumer discretionary, healthcare, materials, industrials, technology, telecoms, utilities, and consumer discretionary. The index does not include companies in the financial sector.
The ETF is set up as an accumulating variant and can be traded in USD.
Name: AXA IM NASDAQ 100 UCITS ETF USD Acc
Asset class: Equity ETF
ISIN: IE000QDFFK00
New Active ETF from Fidelity on Xetra: access to high-yield corporate bonds worldwide with multi-factor approach
November 22, 2022--A new exchange-traded fund issued by Fidelity has been tradable on Xetra and via Börse Frankfurt since Tuesday.
The actively managed Fidelity Sustainable Global High Yield Bond Paris-Aligned Multifactor UCITS ETF enables investors to participate in the performance of high-yield corporate bonds issued worldwide with a rating below investment grade.
The ETF uses a multi-factor model to select corporate bonds, combining quantitative, fundamental and sustainability factors. It is also guided by the climate targets of the Paris Agreement to reduce greenhouse gas emissions.
Issuers involved in business activities with significant externalities such as fossil fuels, tobacco and weapons are excluded from the ETF.
UK regulators call for action on hidden leverage threat to pension funds
November 20, 2022--Policymakers say more must be done to address blind spot revealed by September's gilt crisis
Regulators and policymakers are calling for action to address the risks associated with pension funds' use of derivatives, after key watchdogs admitted last week that they were unprepared for the crisis that hit the industry in September.
The meltdown, now the focus of four separate parliamentary probes, revealed regulators did not have a reliable picture of the scale of hidden leverage in liability-driven investment (LDI) strategies, which cover about £1.4tn of the future promises made by UK defined benefit pension schemes.
New Equity ETF from Amundi on Xetra: sustainable exposure to the Japanese market
November 18, 2022--A new exchange-traded fund issued by Amundi Asset Management has been tradable on Xetra and via Börse Frankfurt since Friday.
The Amundi Index MSCI Japan SRI PAB -UCITS ETF offers investors broadly diversified exposure to the Japanese equity market. The ETF offers access to companies with an outstanding ESG profile that have a large and medium market capitalisation.
Companies that have a negative impact on the environment and social structures are excluded.
The underlying index pursues a strategy that considers both the opportunities and risks of climate change and the minimum requirements of the Paris Climate Agreement. The trading currency is CHF.
ESMA launches a consultation on guidelines for the use of ESG or sustainability-related terms in funds' names
November 18, 2022--The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor, is seeking input on draft guidelines on the use in funds' names of ESG or sustainability-related terms.
Funds' names are a powerful marketing tool.
In order not to mislead investors, ESMA believes that ESG-and sustainability-related terms in funds' names should be supported in a material way by evidence of sustainability characteristics or objectives that are reflected fairly and consistently in the fund's investment objectives and policy.
IMF Working Paper-The Carrot and the Stock: In Search of Stock-Market Incentives for Decarbonization
November 18, 2022--Financial markets can support the transition to a low-carbon economy by redirecting funds from highly emissive to clean investments. We study whether European stock markets incorporate carbon prices in company valuations and to what degree they discriminate between firms with different carbon intensities. Using a novel dataset of stock prices and carbon intensities of 338 European publicly traded companies between 2013 and 2021, we find a strongly statistically significant relationship between weekly carbon price changes and stock returns.
Crucially, this relationship depends on firms' carbon intensity: the higher the carbon costs a firm faces, the poorer its stock performance during the periods of carbon price increases. Emissions covered with free allowances however do not affect this relationship, illustrating how both carbon pricing and disclosures are needed for financial markets to foster climate change mitigation. The relationship we identify can provide an incentive for firms to decarbonize. We argue in favor of more ambitious carbon pricing policies, as this would strengthen the stock-market incentive channel while causing only limited financial stability risk for stocks.
ECB-Euro area investment fund statistics: third quarter of 2022
November 18, 2022--In third quarter of 2022, outstanding amount of shares/units issued by investment funds other than money market funds fell to €14,513 billion, down €342 billion on previous quarter
Net redemptions in quarter amounted to €94 billion, with €1,002 billion in gross issues and €1,096 billion in gross redemptions
Outstanding amount of shares/units issued by money market funds rose to €1,368 billion, up €5 billion on previous quarter
LDI crisis to hit L&G's DB revenue and profit by £10mn
November 18, 2022--Legal & General has disclosed that its defined benefit business-linked revenues and profits will be hit by around £10mn in its full-year 2022 results, following an autumn liquidity crisis among pension schemes that saw its higher-fee products sold to meet collateral calls.
