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ESMA informs European Commission of its intention to ease certain frontloading requirements under EMIR
May 8, 2014--The European Securities and Markets Authority (ESMA) has today sent a letter to the European Commission advancing its intention to ease certain frontloading requirement under the European Markets Infrastructure Regulation (EMIR). Frontloading is a term that refers to the clearing obligation under EMIR, which will oblige counterparties to centrally clear certain derivative trades through clearing houses (CCP).
ESMA believes that the frontloading procedure creates uncertainties for derivatives end-users while the exact terms of the clearing obligation has not been defined which could have adverse impacts on risk hedging and financial stability. Therefore, ESMA informs the European Commission that it intends to establish the frontloading requirement in a manner that will minimise uncertainty.
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Source: ESMA
DB-Synthetic Equity & Index Strategy-Europe-ETF Research-Europe Monthly ETF Market Review -ETF Investors Positioning in EM
May 8, 2014--European ETP Highlights
As of the end of April 2014, global ETP
assets approached $2.36 trillion (€1.7 trillion) where European ETPs experienced +€6.4bn of cash inflows. Equity exposed ETFs benefitted most by gathering +€3.6bn, while fixed income products continued their steady rise from the start of the year by accumulating a further +€2.4bn. Commodity based ETFs listed in Europe saw modest inflows
of +€0.3bn.
European ETFs with EM exposure attracted significant flows
Investors trading European ETFs focused their investments outside of Europe,
particularly in global Emerging Markets. Our analysis suggests that +€1.2bn
flowed into EM despite the on-going political turmoil in Russia and Ukraine.
iShares MSCI Emerging Markets UCITS ETF (IEEM LN) commanded the top
spot for the month for net inflows gathering +€342mn.
Investors channelling money into equity yield
The dividend theme was also a highlight for ETF investors in April as it gained
+€450mn of cash inflow. Investors showed a preference for US and Global
dividend indices as indicated by the top dividend ETFs attracting flows. The
S&P US Dividend Aristocrats and STOXX Global Select Dividend 100 were
popular benchmark choices with investors.
UK the preferred investment in Europe
The UK equity market was the main driver for the strong European equity
market performance in April. The FTSE 100 was up over 3% and MSCI UK was
up over 4% on the month. This was supported by flows into ETFs tracking the
FTSE 100 and MSCI UK. UBS ETFs tracking MSCI UK experienced significant
inflows where investors also chose to invest in currency hedged versions of
the ETFs. This demonstrates investor caution on the strength of Sterling. Inside
we highlight the ETFs concerned.
Steady flows into Sovereigns, Gold ETPs in Europe countering trend in US
The flow into fixed income products have been steadily increasing since the
start of 2014. April saw another stellar month for fixed income ETFs where
Sovereign based ETFs received over +€1.4bn of inflows.
In spite of over -$1bn of outflows from US based ETPs tracking gold, investors
trading European ETPs sought safety by pilling in over +€170mn (+$239mn) in gold products.
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Source: Deutsche Bank-Synthetic Equity & Index Strategy-Europe
EU to get financial transaction tax despite strong opposition
May 6, 2014--The EU finance ministers backing a controversial financial transaction tax agreed Tuesday to introduce it from 2016 despite strong opposition led by Britain which promised to challenge the levy if it harms its interests.
The tax was needed, they said, to remedy the failings of the financial markets which plunged the world into crisis in 2008 but sceptics have charged them with political grandstanding ahead of European elections May 22-25.
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Source: EUbusiness
iShares unveils Qatar and UAE ETFs
May 6, 2014--iShares, the exchange-traded funds business of investment giant BlackRock, has launched two new ETFs providing exposure to Qatar and the United Arab Emirates (UAE).
Listed on Nasdaq, the iShares MSCI Qatar Capped ETF (QAT) and iShares MSCI UAE Capped ETF (UAE) are the first ETFs to provide single country exposure to two countries that MSCI will graduate from frontier markets to emerging markets status at the end of May.
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Source: ETF Strategy
European Commission-Spring 2014 forecast: Growth becoming broader-based
May 5, 2014--The European Commission's spring forecast points to a continuing economic recovery in the European Union following its emergence from recession one year ago. Real GDP growth is set to reach 1.6% in the EU and 1.2% in the euro area in 2014, and to improve further in 2015 to 2.0% and 1.7% respectively.
The forecast rests on the assumption that the agreed policy measures will be implemented by Member States and the EU, taking forward the necessary adjustment.
Siim Kallas, Commission Vice-President said: "The recovery has now taken hold. Deficits have declined, investment is rebounding and, importantly, the employment situation has started improving. Continued reform efforts by Member States and the EU itself are paying off. This ongoing structural change reminds me of the profound adjustment that the central and eastern European economies undertook in the 1990s and in subsequent years, linked to their joining the EU exactly 10 years ago. Their experience shows how important it is to embrace structural reforms early on and to stay the course, whatever challenges may be faced along the way. In this spirit, we must not lessen our efforts to create more jobs for Europeans and strengthen growth potential."
view the European Economic Forecast Spring 2014
Source: European Commission
EU Regulators to Focus on Asset Management
May 5, 2014--Sharon Bowles, chair of the committee on economic and monetary affairs in the European Parliament said the systemic risk from asset managers will be a heavy focus for regulators.
Bowles has chaired the committee, which is responsible for financial services, competition and tax, since 2009 and led its negotiations on the final text of the revised Markets in Financial Instruments Directive. She is stepping down next month after the European elections.
She said at the MarketAxess European Capital Markets Forum in London: "Going forward a huge focus for European regulators will be the global systemic risks from asset management."
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Source: Markets Media
IMF Working paper-Transmission of Financial Stress in Europe: The Pivotal Role of Italy and Spain, but not Greece
May 2, 2014--Summary: This paper proposes a stochastic volatility model to measure sovereign financial distress. It examines how key European sovereign credit default swap (CDS) spreads affect each other; specifically, the paper analyses the volatility structure of Germany, Greece, Ireland, Italy, Spain and Portugal. The stability of Germany is a close proxy for the resilience of the euro area as markets use Germany's sovereign CDS as a hedge for systemic risk.
Although most of the CDS changes for Germany during 2009-12 were due to idiosyncratic factors, market developments in Italy and Spain contributed significantly, likely due to their relative importance in the region. Changes in Greece's sovereign CDS had no significant effect on Germany’s sovereign CDS despite initial widespread concerns about such linkages. Spain and Italy show a notable co-dependence in explaining each other’s volatility while Germany also plays an important role. It is found that extreme bad news led to persistent and nearly permanent effects on the stochastic volatility of European sovereign CDS spreads.
Turnover at Deutsche Borse's cash markets at 96.4 billion euros in April
May 2, 2014-Order book turnover on Xetra, the Frankfurt Stock Exchange and Tradegate stood at €96.4 billion in April (April 2013: €103.0 billion). Of the €96.4 billion, €88.4 billion were attributable to Xetra (April 2013: €95.6 billion). €3.9 billion were attributable to the Frankfurt Stock Exchange (April 2013: €4.3 billion).
Order book turnover on Tradegate Exchange* totalled approximately €4.0 billion in April (April 2013: €3.1 billion).
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Source: Deutsche Börse
EU court dismisses UK challenge to financial sector tax
May 1, 2014--Britain's campaign against a proposed European Union tax on financial transactions suffered a blow on Wednesday, after the EU's top court ruled its suit against the levy was premature.
The European Court of Justice in Luxembourg found London's opposition to the Financial Transactions Tax (FTT) should not prevent a group of 11 EU member countries from proceeding with plans to implement it.
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Source: EUbusiness
IMF-Russian Federation-Concluding Statement for the 2014 Article IV Consultation Mission
April 30, 2014--The Russian economy, already slowing because of pre-existing structural bottlenecks, has been further affected by geopolitical uncertainties arising from conflict between Russia and Ukraine. Growth is expected to ease to 0.2 percent in 2014, with considerable downside risks. To safeguard against risks, the current macro framework should be further strengthened to provide a credible policy anchor. Monetary policy should focus on reducing inflation, and more exchange rate flexibility should provide a buffer against external shocks.
Adherence to the fiscal rule should continue, with additional consolidation in the outer years. Revitalizing the government’s structural reform agenda is essential to provide the needed catalyst to growth.
Geopolitical tensions and structural bottlenecks take a toll on growth
1. GDP growth is slowing down significantly. In 2014, Russia's growth is expected to continue its slowing trend to 0.2 percent, from 1.3 percent in 2013. Investment will further contract due to the uncertainty around the geopolitical situation. Capital outflows increased significantly in Q1 2014 to US$ 51 billion. While still strong, the pace of consumption growth-supported by wage and credit growth-has begun to slow. Net exports are expected to support growth, as imports are weakening, with the current account surplus projected to increase to around 3 percent of GDP. A slight recovery in growth to 1 percent is projected in 2015, on the back of stronger exports and an uptick in investment. However, unaddressed structural bottlenecks and stagnant investment are reducing potential output over the medium term.
2. Short-term risks are squarely on the downside. Current projections are contingent upon a gradual resolution of the geopolitical tensions; continued conflict could lead to additional sanctions and worse outcomes. Even in the absence of further intensification, continued uncertainty and the resulting deterioration of confidence may reduce investment and consumption further. In addition, Russia's economy and public finances remain very sensitive to oil prices. The impact of these risks on external sustainability is mitigated by sizeable buffers, including large international reserves, low headline budget deficits, and low net public debt. However, their materialization would imply a substantial setback to the growth outlook.
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Source: IMF
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