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ECB-Monetary developments in the euro area: January 2023
February 27, 2023--Annual growth rate of broad monetary aggregate M3 decreased to 3.5% in January 2023 from 4.1% in December
Annual growth rate of narrower monetary aggregate M1, comprising currency in circulation and overnight deposits, decreased to -0.7% in January from 0.6% in December
Annual growth rate of adjusted loans to households decreased to 3.6% in January from 3.8% in December
Annual growth rate of adjusted loans to non-financial corporations decreased to 6.1% in January from 6.3% in December
Components of the broad monetary aggregate M3
The annual growth rate of the broad monetary aggregate M3 decreased to 3.5% in January 2023 from 4.1% in December, averaging 4.1% in the three months up to January. 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, decreased to -0.7% in January from 0.6% in December. The annual growth rate of short-term deposits other than overnight deposits (M2-M1) increased to 15.1% in January from 14.0% in December. The annual growth rate of marketable instruments (M3-M2) increased to 13.3% in January from 11.3% in December.
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Source: ECB
New Strategy ETFs from Global X on Xetra: access to S&P 500 companies with protection against downside risks
February 23, 2023--Two new exchange-traded funds issued by Global X have been tradable on Xetra and via the trading venue Börse Frankfurt since Thursday.
The new ETFs from Global X S&P 500 Quarterly Buffer and Tail Hedge track the performance of companies from the S&P 500 Index and use put options to hedge downside risks up to a certain level. The hedging strategy against losses has the side effect that the upside returns of the ETFs are limited by a cap.
The buffer strategy applied here is composed of a protection and a cap component. The protection component is achieved by simultaneously purchasing a put option (at-the-money) and selling a put option (out-the-money). The net costs resulting from these two transactions are covered by writing a call option. The exercise price of the call option defines the level of the cap and thus the profit opportunities. The closer the price of the S&P 500 Index approaches the execution price of the call option, the lower the profit opportunities (cap component). The level of the cap is updated on the Global X website.
The Global X S&P 500 Quarterly Buffer UCITS ETF limits downsides up to approximately 5 per cent. The Global X S&P 500 Quarterly Tail Hedge UCITS ETF protects investors from a downside of 3 per cent and up to 12 per cent. The buffer is therefore 9 per cent.
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Source: Xetra
ESMA publishes latest edition of its newsletter
February 22, 2023--The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor, has today published its latest edition of its Spotlight on Markets Newsletter.
Your one-stop-shop in the world of EU financial markets focused in January and February on different topics.
One of the most popular releases was our Trends, Risks and Vulnerabilities (TRV) article on Artificial intelligence (AI) in EU securities markets.
The widespread use of AI comes with risks. An increased uptake may lead to the concentration of systems and models among a few 'big players'. The experts say it all here.
ESMA has also published its first TRV Report of 2023. Overall, risks in ESMA's remit remain high, and investors should be prepared for further market corrections. In addition, we have issued an opinion on the first set of draft European Sustainability Reporting Standards.
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Source: ESMA
Axa IM targets retail ETF investors with focus on online platforms
February 21, 2023--Traditional means of reaching customers risk being 'squeezed out' forcing firms to 'evolve or die', analyst says
Axa Investment Managers is aiming to distribute its exchange traded funds through neobanks and robo-advisers within a year as it expands its new ETF business across different markets.
The plans are part of a growing shift by ETF providers towards digital distribution and targeting direct retail investors, experts say.
Nicolas-Louis Guille-Biel, global head of ETFs and product strategy at Axa IM, said the company was currently in talks with digital platforms as it looked for distributors of its ETFs.
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Source: ft.com
ECB-Euro area investment fund statistics: fourth quarter of 2022
February 17, 2023-- In fourth quarter of 2022, outstanding amount of shares/units issued by investment funds other than money market funds rose to €14,527 billion, up €28 billion on previous quarter
Net redemptions in quarter amounted to €109 billion, with €1,086 billion in gross issues and €1,195 billion in gross redemptions
Outstanding amount of shares/units issued by money market funds rose to €1,486 billion, up €118 billion on previous quarter
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Source: ecb.europa.eu
Official Statistics: Forecasts for the UK economy: February 2023
February 15, 2023--A comparison of independent forecasts for the UK economy in February 2023.
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Source: gov.uk
IMF Working Paper-The 2020-2022 Inflation Surge Across Europe: A Phillips-Curve-Based Dissection
February 10, 2023--Summary:
In 2021-22, inflation in Europe soared to multidecade highs, consistently exceeding policymakers' forecasts and surprising with its wide cross-country dispersion. This paper analyzes the key drivers of the inflation surge in Europe and its variation across countries. The analysis highlights significant differences in Phillips curve parameters across Europe's economies.
Inflation is more sensitive to domestic slack and external price pressures in emerging European economies compared to their advanced counterparts, which contributed to a greater passthrough of global commodity price shocks into domestic prices, and, consequently, to larger increases in inflation rates. Across Europe, inflation also appears to have become increasingly backward looking and more sensitive to commodity price shocks since the onset of the COVID-19 pandemic. This finding helps explain why conventional (Phillips curve) inflation models consistently underpredicted the 2021-2022 inflation surge, although it remains too early to conclude there has been a structural break in the inflation process.
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Source: imf.org
New equity ETFs from Xtrackers on Xetra: global thematic investments considering UN sustainability goals
February 10, 2023--Since Friday, four new exchange-traded funds issued by Xtrackers are tradable on Xetra and via the trading venue Börse Frankfurt.
With the new ETFs, Xtrackers is expanding its SDG family and offers investors a targeted investment in companies worldwide that contribute to the third, sixth or seventh Sustainable Development Goals of the United Nations' 2030 Agenda.
In addition, with the Xtrackers MSCI Global SDGs U-CITS ETF all 17 sustainability goals are accessible with just one transaction.
Only companies that are part of the MSCI ACWI IMI Index (parent index) and meet both the ESG criteria and the selection criteria of the respective sustainability target are considered in the selection process.
The Xtrackers MSCI Global SDG 3 Good Health UCITS ETF invests in companies with a focus on digital health. The focus is on promoting and ensuring good health across all ages of all people.
The Xtrackers MSCI Global SDG 6 Clean Water & Sanitation UCITS ETF focuses on companies with a business focus on the availability and sustainability of water and sanitation.
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Source: Xetra
ESMA sees high risks amid fragile markets
February 9, 2023--The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor, today publishes the first Trends, Risks and Vulnerabilities (TRV) Report of 2023. Overall, risks in ESMA’s remit remain high, and investors should be prepared for further market corrections.
The second half of 2022 was dominated by the slowdown of economic activity, high inflation, global tightening of financial conditions, the geopolitical environment and the materialisation of peripheral risks linked to leverage and liquidity, together with growing concerns over business practices in the crypto space.
These remain the defining drivers of risk in EU financial markets at the current juncture.
Main findings:
Overall risk assessment: Contagion and operational risks are considered very high, as are liquidity and market risks. Credit risk stays high and is expected to rise, reflecting the growing concerns over public and corporate indebtedness. Risks remain very high in securities markets and for asset management. Risks to infrastructures and to consumers both remain high, though now with a worsening outlook, while environmental risks remain elevated.
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Source: ESMA
ESMA report finds EU MMF industry at close to 1.5tn Euro
February 8, 2023--The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor, today published its inaugural market report on European Union (EU) Money Market Funds (MMF).
With this report ESMA provides for the first time a comprehensive market-level view of EU MMFs, based on supervisory information collected by National Competent Authorities (NCAs) and ESMA.
The main findings included in today's report are:
EU MMF sector: The EU MMF sector had €1.44tn of assets in 2021, with 89% of the funds domiciled in France, Luxembourg and Ireland.
Sector breakdown: Low-volatility NAV (LVNAV) MMFs account for 46% of the total assets, followed by Variable NAV (VNAV) MMFs (42%) and Constant NAV (CNAV) MMFs (12%). All MMFs domiciled in France are of the VNAV type and almost exclusively denominated in EUR. MMFs in Luxembourg and Ireland are mainly in non-EU currencies and set up mostly as CNAVs and LVNAVs. MMFs authorised in other EU jurisdictions are VNAVs denominated in other EU domestic currencies and account only for a small fraction of assets.
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Source: ESMA
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