Monday 2nd March 2015
NEWS TICKER, MARCH 2ND 2015: Turnover at Deutsche Börse’s cash markets at €125.5bn euros last month. Order book turnover on Xetra, Börse Frankfurt and Tradegate Exchange across all asset classes stood at €125.5bn in February (February 2014: €102.6bn). Of that, €113.4bn was attributable to Xetra (February 2014: €93.4 billion). The average daily turnover on Xetra stood at €5.7bn last month (February 2014: €4.7bn). Meantime, Börse Frankfurt reported turnover of €4.9bn was (February 2014: €4.7bn). Order book turnover on Tradegate Exchange touched approximately €7.2bn in February (February 2014: €4.6bn). Broken down by asset classes, turnover in equities reached about €107.1bn. Turnover in ETFs/ETCs/ETNs amounted to €15.9bn. Turnover in bonds was €0.7bn, and in structured products €1.5bn. Viewed by transactions, a total of 18.0m trades were executed on Xetra in February (February 2014: 16.7m). - Moody's has released a special edition of its compendium of Asian oil and gas research, following the collapse of crude oil prices in recent months. The compendium, covering both corporates and sovereigns in the region. "The steep drop in crude oil prices since mid-2014 will materially reduce the earnings and cash flows of Asian oil & gas companies and weaken their credit metrics in 2015," says Vikas Halan, a Moody's vice president and senior credit officer. "At the same time the low prices will benefit most Asia Pacific sovereigns, given the region's status as a net oil importer," adds Halan. Crude prices more than halved between June 2014 and January 2015, reflecting higher-than-expected oil production in the US and lower demand in emerging markets. At the same time, with the slowing growth in worldwide demand, oil markets will likely remain oversupplied in the next two years. The demand-supply imbalance may be exacerbated if China's economic growth slows sharply or if significant lifting of economic sanctions on Iran further increases oil volumes. Moody's has lowered its price assumptions for Brent crude to $55/barrel through 2015 and $65/barrel in 2016. - Businesses are increasingly collecting and using data from, and about, consumers. This includes the identity of their customers, what they consume, where they live and work and other demographic information. It also includes information on who they connect with, their interests and attitudes. The UK Competition and Markets Authority is calling for information in a fact-finding exercise to help understand fully how businesses collect and use this data for commercial purposes and the implications for firms and consumers. Response forms can be found on the authority’s website - According to local press reports, Malaysia-based healthcare group Qualitas Healthcare Corporation Ltd, will decide this week either to list on Bursa Malaysia or put itself up for sale. The estimated value for the firm is reportedly around MYR1.2bn and press reports say it is in active negotiations with at least three potential buyers – International law firm Ropes & Gray has advised Crescent Capital Partners Management Pty Limited (Crescent) on the successful establishment of the over-subscribed Crescent Capital Partners V (Crescent V). An AUD675m fund, Crescent V will seek to invest in middle market businesses primarily in Australia and New Zealand with a focus on companies worth between AUD50m and AUD300m - MEPs will this week focus on the €315bn investment plan to boost growth in Europe, discussing with experts its three pillars: an investment fund, an advisory hub and a project pipeline. On Monday afternoon the economic affairs and budget committees hold a hearing with experts to discuss the €315bn investment plan for Europe as proposed by the European Commission - permanent tsb (PTSB), the Irish retail bank, will be using SAS solutions to deliver quicker and more efficient credit-decisioning, says the bank. Analysing this data in real-time will enable the bank to make quicker decisions that reflect each customer’s circumstances - The Straits Times Index (STI) ended +1.03 points higher or +0.03% to 3403.89, taking the year-to-date performance to +1.15%. The FTSE ST Mid Cap Index declined -0.39% while the FTSE ST Small Cap Index declined -1.14%. The top active stocks were SingTel (+0.47%), DBS (-1.48%), OCBC Bank (-0.86%), Noble (-3.08%) and UOB (-0.04%). The outperforming sectors today were represented by the FTSE ST Consumer Goods Index (+0.68%). The two biggest stocks of the FTSE ST Consumer Goods Index are Wilmar International (+0.31%) and Thai Beverage (+2.14%). The underperforming sector was the FTSE ST Basic Materials Index, which declined -3.44% with Midas Holdings’ share price gaining +1.61% and Geo Energy Resources’ share price declining -1.57%. The three most active Exchange Traded Funds (ETFs) by value today were the STI ETF (-0.29%), IS MSCI India (+0.37%), SPDR Gold Shares (+1.10%).

Blog

The European Review

By Patrick Artus, chief economist at Natixis

France needs supply-side policies to stimulate growth

Tuesday, 14 February 2012 Written by 
France needs supply-side policies to stimulate growth France’s ailing economy urgently requires stimulation – and this must come from supply-side policies. Previously buoyed by borrowing, the strength of real estate and an increase in fiscal deficits, France is now suffering from significant economic weaknesses that can only be overcome by a stimulation of supply via institutional, tax and labour market reforms. http://www.ftseglobalmarkets.com/

France’s ailing economy urgently requires stimulation – and this must come from supply-side policies. Previously buoyed by borrowing, the strength of real estate and an increase in fiscal deficits, France is now suffering from significant economic weaknesses that can only be overcome by a stimulation of supply via institutional, tax and labour market reforms.

 

The French economy is experiencing a decline in investment, an inability to rebuild exports, continuing market share losses and a rapid rise in unemployment. Although previously bolstered by an increase in private sector indebtedness, growth in residential construction (until 2008), and a temporary increase in fiscal deficits, economic growth has fallen to virtually zero as of the second quarter of 2011.



However, unlike similar situations in Spain and the UK, France’s underperformance is due to a deterioration of supply rather than a decline in demand. Certainly, France’s weak economy cannot be blamed on a rapid correction in the fiscal deficit, nor to a decline in real wages. In fact, there has been a worsening of supply-side conditions since the late 1990s, highlighted by a decline in profitability, the tightening of profit margins (particularly in the industrial sector) and the distortion of income sharing in favour of wages and to the detriment of profits, itself the equivalent to an economy-wide fall in profit margins.

The result is a country where companies are hampered by poor levels of investment. Indeed, the economy has become stuck in a mid-market product range, as portrayed by the sharp drop in French exports caused by an appreciation in the euro. Furthermore, France is exhibiting advanced deindustrialisation (in the past decade both manufacturing employment and manufacturing volume as a proportion of GDP have steadily decreased), weak growth of companies (limiting the number of companies big enough to export) and a high proportion of small and medium-sized enterprises (SME) that are prematurely sold to large groups. 

Reforms to restore the economy

Supply-side reforms are urgently required: in particular, tax reform to reduce companies’ welfare contributions, labour market negotiations to take into account both wages and employment, and institutional reforms to encourage the growth of innovative SMEs.

Firstly, France must reduce welfare contributions, especially those paid by companies. It is well known that welfare contributions negatively affect employment. Therefore to boost the supply of goods, and the demand for labour, there needs to be a reduction in government expenditure on wages and welfare benefits, or (as happened in Germany and the UK in 2007 and 2011 respectively) an increase in VAT.

Secondly, the country’s labour market lacks a corrective force in periods of rising unemployment. Current pay talks are purely wage-based and do not take into account the need to reduce unemployment and create new jobs. The result is that increasing unemployment does not have a significant impact on wages and therefore unemployment levels can remain high for long periods without reducing wages.

Therefore the government needs to ensure that pay talks involve both wages and jobs, in order to create a trade-off between wage increases and job creation. Certainly, the close link between unemployment and wage increases can be seen in Germany, Spain, Italy and the UK – a labour market scenario that France must replicate.

Finally, institutional reforms are needed to boost SME growth. France’s already weak export levels are compounded by the low proportion of companies big enough to export their goods. In order to stimulate growth among SMEs, France should create a Small Business Act and Small Business Administration to improve relationships between large groups and their subcontractors, simplify administrative paperwork and improve cooperation between companies and the education system.

Going forward

In the short term, these reforms (government spending cuts, a VAT hike, reduction in wages in exchange for additional jobs, etc.) would inevitably lead to a fall in demand. But the current view – that the solution to the economy’s woes lies in stimulating demand – must be abandoned in favour of supply-side policies if a recovery is to be achieved. 

The acute question remains in play: Is there a political party ready to carry out this programme after the presidential elections?

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

Related News

Related Articles

Related Blogs

Related Videos

Current IssueSpecial Report

Tweets by @DataLend

DataLend is a global securities finance market data provider covering 42,000+ unique securities globally with a total on-loan value of more than $1.8 trillion.

What do our tweets mean? See: http://bit.ly/18YlGjP