Tuesday 5th May 2015
NEWS TICKER: FRIDAY, MAY 5th: Zurich Insurance Group will release its results for the three months to March 31st this year on May 7th - According to the Luxembourg Stock Exchange, National Bank of Greece Funding Limited says that in accordance with the terms of its Series B CMS-Linked non-cumulative guaranteed preference securities (ISIN: XS0203171755) which has the benefit of a subordinated guarantee from the National Bank of Greece, the non-cumulative preferential cash dividend on the preferred securities which would otherwise have been payable on today (May 5th) will not be declared and will not be paid - Randgold Resources confirms that at the Company's Annual General Meeting held earlier today the shareholders approved a final dividend for the year ended December 31st 2014 of $0.60 per share. The dividend payment will be made on Friday May 29th to shareholders on the register as at Friday March 13th The ex-dividend date was Thursday March 12th. The exchange rate for payment to those shareholders who have elected to receive the final dividend for the year in Pounds Sterling is: £1/$1.5134. The company also announces that at its Annual General Meeting all of the resolutions were passed on a poll. Copies of all the resolutions passed have been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do - Intercontinental Exchange today reports April 2015 futures and options average daily volume (ADV) declined 11% compared to April 2014. Commodity ADV increased 11% led by Brent, Other Oil and Sugar contracts up 21%, 37%, and 30% respectively, from the prior April. Meantime, financials ADV declined 28% from the previous April primarily due to continued low volatility in Continental European short-term interest rate and single stock equity contracts. ADV for NYSE’s US cash equities increased 3%, while US equity options ADV declined 30% from the prior April. NYSE’s U.S. cash equities market share was 23.8% and NYSE’s U.S. options market share was 18.4% - McDonald’s Corporation’s new chief executive today laid out initial plans for luring back customers, boosting sales and transforming the world’s biggest restaurant chain by revenue into a “modern, progressive burger company.” The plans include organising McDonald’s business around four new operating divisions, selling restaurants to franchisees, cutting corporate costs, improving food quality and taking layers out of its “cumbersome” management structure - The Central Electricity Authority (CEA) is reported to be planning an exhaustive basin-wise study of the hydropower potential in the country after a gap of 28 years. The study will also assess the environmental and social impact of river basin development. The last survey was undertaken between 1978 and 1987. The plans come against a backdrop of widespread protests against hydropower projects in India from people who are at risk of being displaced by the projects. Most of India’s hydropower potential falls in seismic zone 5, they charge, a region classified as highly vulnerable to high-intensity quakes. The exercise will also consider issues such as site geology, submergence and impact on environment and forests - Optical network infrastructure specialist has announced it has entered a definitive agreement to acquire Cyan Inc, a rival optical provider and software platform specialist. The agreement puts an approximate $400m on Cyan; no other terms have been released yet - Spain’s Cirsa Funding Luxembourg SA has announced the results of its tender offer to repurchase for cash up to €450,000,000 aggregate principal amount of its outstanding 8.75% senior notes due 2018. Deutsche Bank, London Branch is acting as tender agent and dealer manager - Trading turnover since the start of 2015 touched CHF534.3bn (+33.1% versus the same period in the prior year of 2014), while the number of trades since the start of 2015: 18,297,635 (+39.9% versus the prior year period) and average trading turnover per day was valued at CHF6.5bn over the first four months of this year says SIX Swill Exchange and SIX Structured Products Exchange - CME Clearing says it is aware that PAI was not included in the end-of-day (EOD) reporting or cash movements from Monday 5/4 for CDS in Production. IRS was not affected says the CCP. To correct, CME Clearing will enter cash adjustments tonight for each open position and will contact each firm with their expected adjustment figures. The CCP also apologies for the inconvenience caused – The Federal Reserve Bank of New York says its daily effective Fed Funds rate is 0.13% (Low 0.060% and High ).3125%) with four basis points of standard deviation - UK operator O2 has acquired the interest held in mobile commerce outfit Weve from its joint venture partners EE and Vodafone. Weve will now operate as a wholly owned subsidiary of O2 UK -

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The European Review

By Patrick Artus, chief economist at Natixis

Avoid investing in German financial assets

Wednesday, 09 May 2012 Written by 
Avoid investing in German financial assets It may seem tempting to invest in German financial or property assets: Germany's economic and financial situation is at present far better than that of the other euro-zone countries, and German assets have outperformed those of the other euro-zone countries. http://www.ftseglobalmarkets.com/

It may seem tempting to invest in German financial or property assets: Germany's economic and financial situation is at present far better than that of the other euro-zone countries, and German assets have outperformed those of the other euro-zone countries.

But it should be realised that: German assets are overvalued because the euro zone's monetary policy is too expansionary for Germany and because German investors have a very significant domestic bias while the supply of assets is small and Germany risks economic and financial overheating which could lead to a correction in asset prices in the medium term.

German financial assets might seem attractive
German financial and property assets might seem attractive for two reasons. First, because the present economic and financial situation in Germany is far better than in other euro-zone countries. This is reflected in its public finances, current-account balance, the size of its industry and export capacity, its cost-competitiveness, corporate profitability and investment drive, and in its labour market - which is now experiencing rises in real wages, compared to falling real wages in the rest of the euro zone. All in all, given that Germany does not need to reduce its fiscal deficit, and given the rise in real wages, better export performance, increasing business investment and job creation, the growth outlook is at present far better in Germany than in the other euro-zone countries.



The second reason why German assets could seem attractive is that their recent performance has been strong. This is true for government bonds, equities, corporate bonds, bank debts and residential real estate (but not commercial real estate), since 2008.

But in reality, investment in German assets should be avoided, because they are too expensive and Germany could start overheating

German assets are too expensive
Since 2006, Germany has witnessed and will continue to maintain stronger growth than the euro zone as a whole. This means that the euro zone's current monetary policy is too expansionary for Germany, as it was for the rest of the euro zone from 2002 to 2007. This of course tends to cause a rise in asset prices.

Also, Germany has excess savings (by households and companies, as shown by its external surplus) with an increasing bias for investing domestically, while at the same time the supply of assets is small: meaning the fiscal deficit has almost disappeared, companies are self-financed and issue few bonds and residential construction is at a low level. There is therefore ex ante excess demand for German assets, which has driven up asset prices, especially for safe-haven government bonds.

Germany could start overheating in the medium term
Germany is practically in a situation of full employment, and since its companies are very profitable, wage growth is accelerating. In 2012-2013 an increase in the unit wage cost approaching 3% can be expected, with productivity gains that are fairly low. This will probably lead to a rise in underlying inflation towards 2%, and hence to even more abnormally low long-term interest rates, which will continue to push up the prices of other assets.

It is well known that such a situation of overheating (full employment and interest rates that are too low relative to growth) is potentially unstable and can lead to a downward correction in asset prices (as it occurred in Spain, Ireland and the United States, for example).

Patrick Artus

A graduate of Ecole Polytechnique, of Ecole Nationale de la Statistique et de l'Adminstration Economique and of Institut d'Etudes Politiques de Paris, Patrick Artus is today the Chief Economist at Natixis. He began his career in 1975 where his work included economic forecasting and modelisation. He then worked at the Economics Department of the OECD (1980), before becoming Head of Research at the ENSAE. Thereafter, Patrick taught seminars on research at Paris Dauphine (1982) and was Professor at a number of Universities (including Dauphine, ENSAE, Centre des Hautes Etudes de l'Armement, Ecole Nationale des Ponts et Chaussées and HEC Lausanne).

Patrick is now Professor of Economics at University Paris I Panthéon-Sorbonne. He combines these responsibilities with his research work at Natixis. Patrick was awarded "Best Economist of the year 1996" by the "Nouvel Economiste", and today is a member of the council of economic advisors to the French Prime Minister. He is also a board member at Total and Ipsos.

Website: cib.natixis.com/research/economic.aspx

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