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Monetary developments in the euro area: August 2021
September 27,2021--Annual growth rate of broad monetary aggregate M3 increased to 7.9% in August 2021 from 7.6% in July
Annual growth rate of narrower monetary aggregate M1,comprising currency in circulation and overnight deposits,stood at 11.1% in August,compared with 11.0% in July
Annual growth rate of adjusted loans to households stood at 4.2% in August,unchanged from previous month
Annual growth rate of adjusted loans to non-financial corporations decreased to 1.5% in August from 1.7% in July
Components of the broad monetary aggregate M3
The annual growth rate of the broad monetary aggregate M3 increased to 7.9% in August 2021 from 7.6% in July,averaging 7.9% in the three months up to August.
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Sourc: ecb.europa.eu
New FlexShares ETFs on Xetra: emerging markets companies with focus on dividend yield or low volatility as well as climate and sustainability targets
September 27, 2021--Two new exchange traded funds issued by FlexShares have been tradable on Xetra and Börse Frankfurt since Monday.
The FlexShares Emerging Markets High Dividend Climate ESG UCITS ETF-Dist and the FlexShares Emerging Markets Low Volatility Climate ESG UCITS ETF-Acc are strategy ETFs with a focus on emerging markets.
The two ETFs give investors access to 85 per cent of the market capitalisation of emerging markets, with the option of investing in either large and mid-cap companies with high dividend yield or low volatility. All companies have been pre-selected for their quality in terms of profitability, cash flow and management experience.
Furthermore, the companies are selected based on their climate and sustainability targets. Companies with activities in the areas of tobacco and weapons as well as a high carbon intensity are excluded from the index. In addition, common standards regarding ESG criteria (environmental, social, and good corporate governance) must be met.
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Source: Xetra
Asset Purchase Programs in European Emerging Markets
September 27, 2021--Summary:
Several emerging market central banks in Europe deployed asset purchase programs (APPs) amid the 2020 pandemic. The common main goals were to address market dysfunction and impaired monetary transmission, distinct from the quantitative easing conducted by major advanced economy central banks. Likely reflecting the global nature of the crisis, these APPs defied the traditional emerging market concern of destabilizing the exchange rate or inflation expectations and instead alleviated markets successfully.
We uncover some evidence that APPs in European emerging markets stabilized government bond markets and boosted equity prices, with no indication of exchange rate pressure. Examining global and domestic factors that could limit the usability of APPs, in the event of renewed market dysfunction we see a potential scope for scaling up APPs in most European emerging markets that used APPs during the pandemic, provided that they remain consistent with the primary objective of monetary policy and keep a safe distance from the risk of fiscal dominance. As central banks in the region move towards monetary policy tightening, the tapering, ending, and unwinding of APPs must also be carefully considered. Clear and transparent communication is critical at each step of the process, from the inception to the closure of APPs, particularly when a large shock hits and triggers a major policy shift.
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Source: IMF
'Liquidity in the Time of Covid' Report
September 27, 2021--Covid-19 continues to redefine the trading landscape in Europe. Changes in liquidity formation already in play due to the increased use of automated trading and rise of passive investing were accelerated as traders rushed to make changes to investment strategies due to the pandemic.
Remote working, greater reliance on cloud technology and the high volatility early in the pandemic created new additional challenges which is resulting in the industry rethinking trading partners and access points to liquidity.
The study is written by independent financial services research group Redlap Consulting. It was commissioned by FIA EPTA, which represents Europe's leading market making firms, to drive greater understanding of what independent market making firms do, and their contribution to both financial markets and the wider economy.
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Source: FIA EPTA
Productive finance working group publishes recommendations addressing the barriers to investment in less liquid assets
September 27, 2021--The Productive Finance Working Group has today published a series of recommendations which could facilitate greater investment in longer-term, less liquid assets.
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Source: SEC.gov
ESMA consults on proposals for a review of the MiFID II best execution reporting regime
September 24, 2021--September 24, 2021--The European Securities and Markets Authority (ESMA), the EU's securities markets regulator, today launches a consultation on proposals for improvements to the MiFID II framework on best execution reports.
These proposals aim at ensuring effective and consistent regulation and supervision and enhancing investor protection.
ESMA's proposals include technical changes to:
the reporting obligations for execution venues:
aimed at simplifying the reporting requirements by reducing the granularity and volume of data to be reported; and
moving to a set of seven indicators aimed at disclosing meaningful information to help firms to assess venues’ execution quality; and
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Source: ESMA
ESMA consults on the review of the Short Selling Regulation
September 24, 2021--The European Securities and Markets Authority (ESMA), the EU's securities markets regulator, today launches a consultation paper (CP) on the review of the Short Selling Regulation (SSR).
The CP sets out suggestions for operational improvements and policy clarifications on:
the calculation of net short positions, the prohibition of uncovered short selling and the locate rule under which short selling trades can take place;
the mechanism for transparency of net short positions and the proposal to publish aggregated net short positions per issuer based on all individual positions and the scope of the exemptions for shares that are more heavily traded in a third country; and
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Source: ESMA
Turkish central bank stuns lira with rate cut sought by Erdogan
September 23, 2021--Turkey's central bank unexpectedly cut its policy rate by 100 basis points to 18% on Thursday, delivering stimulus long sought by President Tayyip Erdogan despite high inflation, and sending the lira to near a record low.
The central bank was widely expected to hold interest rates steady at 19%, where they had been since March, given inflation reached 19.25% last month. Only two of 17 economists polled by Reuters had predicted a cut.
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Source: reuters.com
Germany's foreign economic policy: four essential steps
September 23, 2021--Germany and the EU need to develop a strong and proactive agenda to manage foreign economic relations, which are essential for German and European prosperity
Germany's foreign economic policy has barely got a mention in the 2021 federal election campaign.
Yet, the issues arising are all central for Germany's prosperity: the potential impact on Germany of rising tensions between the United States and China; international climate diplomacy; climate action; the declining effectiveness of international and multilateral rules in a geopolitical environment in which a multitude of power poles pursue different interests; and European integration.
Openness implies vulnerability
The experience of recent years shows how the US and China use economic pressure points to assert their geopolitical interests against Germany. This raises the central questions of how Germany should deal with international pressure on its own economy, and to what extent Germany and Europe can work with their trading partners to pursue their interests globally.
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Source: bruegel.org
New L&G ETF on Xetra: access to diversified commodity portfolio with optimised roll mechanism
September 23, 2021--Since Thursday, a new exchange traded fund issued by Legal & General Investment Management is tradable on Xetra and Börse Frankfurt.
The L&G Multi-Strategy Enhanced Commodities UCITS ETF-Acc offers investors access to the performance of a diversified commodity portfolio consisting of futures contracts in the following sectors: precious and industrial metals, energy, agriculture, and livestock.
The index invests in the corresponding commodity futures with different maturities of up to one year. When the respective futures contracts are changed, the so-called "rolling", rolling losses may occur. An optimised roll mechanism is used, to keep the potential losses resulting from contracts in contango markets low and to maximise the potential gains from contracts in backwardation markets.
Backwardation describes a situation where the spot price of a commodity is higher than the futures price. In contango, the futures price of a commodity is higher than the spot price. Contango usually occurs when the price of a commodity is expected to rise over time. This results in a rising futures curve.
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Source: Xetra
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