Thursday 7th May 2015
NEWS TICKER: WEDNESDAY, MAY 6TH 2015: According to Mineweb, silver prices on average will decline 14% this year as speculation over US interest rates spurs a shift to alternative assets. Silver will drop to $16.50 an ounce from the average fixing price of $19.08 in 2014, Andrew Leyland, manager of precious- metal demand at Thomson Reuters GFMS, told Mineweb in advance of Thomson Reuters'World Silver Survey 2015 on behalf of the Washington-based Silver Institute. Silver futures fell 2.7% last month - The Federal Reserve Bank of New York will release its Q1 2015 Household Debt and Credit Report Tuesday, May 12 at 11:00 am. The Household Debt and Credit Report offers an updated snapshot of household trends in borrowing and indebtedness, including data about mortgages, student loans, credit cards, auto loans and delinquencies. In conjunction with the report, the New York Fed will also release a blog post that details the change in debt by credit score and age group - Moody's has assigned a limited default (/LD) designation to DTEK ENERGY BV's (DTEK) Ca-PD probability of default rating (PDR). At the same time, Moody's has affirmed DTEK's Ca corporate family rating (CFR), as well as the Ca rating of DTEK Finance Plc's $750m 7.875% notes due April 4th 2018. The change of the PDR to Ca-PD/LD follows the completion of the exchange of DTEK Finance BV's $200m 9.5% notes on the notes' maturity date April 28th. The transaction was effected pursuant to a UK Scheme of Arrangement. The notes were exchanged into new $160m 10.375% notes due 28 March 2018, issued by DTEK Finance Plc for this purpose, and $44.9m of cash, including an early exchange offer acceptance fee, which was paid to note holders on April 28th. The Ca rating of DTEK Finance B.V.'s exchanged notes was withdrawn. Moody's expects to remove the "/LD" suffix after approximately three business days. The outlook on all ratings remains negative - A major new campaign ‘World of Talent in Ireland’ was today launched by the American Chamber of Commerce Ireland and IDA Ireland. The campaign will initially target Ireland’s global graduate community, highlighting abroad the career opportunities that now exist in Ireland, with a view to attracting talent here. Speaking on the launch of the campaign Mark Redmond, Chief Executive of the American Chamber said “For Ireland to continue to grow its economy it will be essential that we attract the best and the brightest talent from across the world. This campaign is about reaching out to anyone who attended college here and therefore has an affinity with Ireland but is currently living and working elsewhere. We want to ensure that they know the great career opportunities that now exist here and how they can avail of them” - Idinvest Partners, the European private equity firm specialising in SMEs, has announced the final closing of its Idinvest Digital Fund II at €140m. The fund is entirely dedicated to financing the growth of developing businesses in the digital and new technology segments (web-based, media, mobile, e-commerce services and software) in France and across Europe. The fund has invested in ten companies so far, including Sigfox, Synthesio and Twenga; 30% of the capital has been called in and the fund is already delivering positive returns. The fund has also gathered prominent investors, such as Bpifrance and Idinvest’s historical partner, Allianz France, who are topping the list. Besides these, there is also a large number of insurance companies, banks, family offices and leading industry players and corporates, such as Lagardère and Up groups - According to local press reports, Botswana’s largest retailer Choppies plans to cross-list its shares at the Johannesburg Stock Exchange by the end of May, as it expand its business in sub-Saharan Africa. The multinational grocery and general merchandise retailer has stores in three Southern Africa countries and is reportedly looking to expand into Zambia and Tanzania this year. The firm will list 10% of its shares and plans to raise about $50m. Choppies commands a market capitalization of about $535mon the Botswana Stock Exchange and has a 32% share of Botswana’s retail market and plans to add five more stores, taking the total to 77 retail outlets, by December, followed by another 20 in the medium term - Credit Agricole Egypt (CAE) reports net profit of EGP236m (+60% YoY and +8% QoQ) in 1Q2015 and net interest income of EGP371m in (+30% YoY and +7% QoQ)over the period, higher than analyst forecasts. No other income statement component was disclosed, with the exception of taxes (around EGP104m for the period, signifying an effective tax rate of around 31%). Full financial statements are not available yet - The European Union is reported to be investigating McDonald's over claims its structure allowed it to avoid more than €1bn (£730m) in tax. It is alleged that the fast food purveyor exploited loophole concerning royalties through Luxembourg, allowing it to pay just €16m of tax on royalties worth €3.7bn between 2009 and 2013. Unions claim McDonald's Luxembourg subsidiary employs just 13 people, yet booked €834m of revenue in 2013 - roughly around €64m per worker - Smith Cooper accountancy and business advisory firm today announced the appointment of Catherine Desmond as partner to enhance the firm's private client services across the Midlands. Desmond joins the firm from the Private Client department of Saffery Champness where she specialised in advising clients across a range of sectors, including predominantly family businesses and landed estates. In her new role at Smith Cooper, Catherine will be concentrating on further developing the range of tax planning services the firm offer their private clients. Her work will focus particularly on the agricultural sector and landed estates, an area Desmond has extensive experience in - Nomis Solutions has appointed Michael DeGusta to lead the architecture and development of the company’s next-generation pricing platform. Working with progressive technology companies such as Apple, eCoverage, and ChoicePoint, DeGusta brings 20 years of experience to Nomis. “Retail banks face unprecedented challenges, and Michael is the ideal leader to architect our future and to bring Nomis and our client banks to the next level of price optimization and profitability management,” says Frank Rohde, Nomis CEO. “The bankers we meet with relate a growing awakening to the opportunities provided by innovative technology and how it can help them thrive in the face of mediocre economies, changing customers, disruptive competitors, and challenging regulators.” -

Blog

The European Review

By Patrick Artus, chief economist at Natixis

Why the ECB will need to purchase bonds again

Friday, 27 July 2012 Written by 
Why the ECB will need to purchase bonds again Even if the European Central Bank (ECB) does not particularly like the idea, it will soon have to return to buying government bonds from several eurozone countries. The reasoning behind this prediction lies in a chain of events already taking place. http://www.ftseglobalmarkets.com/

Even if the European Central Bank (ECB) does not particularly like the idea, it will soon have to return to buying government bonds from several eurozone countries. The reasoning behind this prediction lies in a chain of events already taking place.

Earlier this year the ECB froze its securities market programme (SMP), which, since its inception in 2010, has bought over €210bn worth of sovereign bonds. The responsibility of buying sovereign bonds from various eurozone countries, it said, would now shift to the European Financial Stability Fund (EFSF) and European Stability Mechanism (ESM).

Despite the high level of interest rates in Spain and Italy, the ECB has not resumed its purchases of government bonds, and shows no enthusiasm for doing so. As mentioned, its official stance is that government bond purchases should be carried out by the EFSF/ESM.



However, many analysts (us included) believe the EFSF/ESM will not be able to react sufficiently – mainly due to its size but also the fact it lacks access to monetary creation, which the lender of last resort for governments must have.

To see the chain of events taking place, we only need look at the economic position of Spain, Italy, France and Portugal – which are all deteriorating. This reinforces the risk that investors will refuse to finance these countries, which will push interest rates to the point where there is a threat of default.

In these countries (obviously to different extents):

  • the private sector continues to deleverage;
  • the fiscal policy is and will be restrictive;
  • there is a decline in real wages since labour's bargaining power is weakening;
  • household demand is deteriorating, which leads to companies reducing their investment rate;
  • sluggish activity is leading to job losses and preventing these countries from improving their public finances; and
  • despite the decline in domestic demand in Italy, Spain and Portugal, there remains a substantial external deficit; in France, on the other hand, domestic demand has not started to fall yet, but the external deficit is rising.

The improvement in competitiveness due to the fall in wages (in Spain, Italy and Portugal, but not yet in France) is unable to improve foreign trade, either because the industrial sector is too small as a proportion of the whole economy (Spain, Portugal, France), or because this improvement is insufficient (Italy).

So there is clearly a downward spiralling risk. The crisis spreads from one country to the next via foreign trade and, since the external deficits are only partially being reduced, the crisis may be exacerbated by the rise in interest rates.

Therefore, we can see a continuous weakening of the economy. If the countries’ economic situation deteriorates, it will be increasingly difficult to finance their debts. Investors will be concerned about the countries’ situation and their solvency – in fiscal and external terms. Interest rates will rise further, and this means that countries and governments will be threatened with default.

Realistically, if this occurs the ECB will have to intervene because the officially planned solution (bond purchases by the EFSF/ESM) will not be sufficient. Given the size of the countries’ debts, the need to buy bonds will exceed the capacity of a bond issuer such as the EFSF/ESM – especially in the event of a bond market crisis affecting several eurozone countries.

Given that the lender of last resort for governments must have access to monetary creation, the only institution capable of buying bonds at the volumes required will be the ECB.

We believe that at the end of this process the ECB will have to intervene via massive government bond purchases (similar to the action taken by Bank of England). This is legal, provided that it relates to purchases in the secondary market, irrespective of some countries’ reservations.

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