Europe
As expected, the Bank of England, Swiss National Bank, and Norges Bank all delivered rate hikes at their Thursday meetings, lifting interest rates by 25bps, 50bps, and 25bps respectively. In the case of the BoE, the Financial Policy Committee’s assessment…
This week’s report looks at the banking crisis within the context of shrinking dollar liquidity and implication for FX markets.
UK inflation was hotter-than-anticipated in February. Headline CPI inflation accelerated from 10.1% y/y to 10.4% y/y – surprising consensus estimates it would slow to 9.9% y/y. The monthly rate increased to 1.1% m/m, following a 0.6% m/m decline in January…
The ZEW Indicator of Economic Sentiment sent a negative signal for Eurozone risk assets. The expectations index for Germany tumbled from 28.1 to 13.0 in March – slightly below expectations of 15 and marking an end to the five-month streak of improving morale.…
Bulletproof Bet: French Aerospace & Defense
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German PPI inflation decelerated from 17.6% y/y to 15.8% y/y in February – the lowest since September 2021. Although the February print came in above consensus expectations calling for a more significant slowdown to 14.5% y/y, it nevertheless continues a…
The Russia-Ukraine war has prompted Europe to ramp up its defense spending. This will greatly benefit its defense industry, especially if defense coordination across the EU increases.
According to BCA Research’s European Investment Strategy service, the odds of a policy mistake whereby the ECB pushes interest rates to 4% or more have melted. On a near-term basis, the Credit Suisse saga will continue to weigh on the euro. The ECB will…
The turmoil in US regional banks will weigh on economic growth. Arguably, it would be better for the broader stock market if growth slowed because banks became more conservative in their lending than if it slowed because the Fed had to raise rates to over 6%. In both cases, economic growth would decelerate but at least in the former scenario, the discount rate applied to earnings would not be as high.
Despite the European banking turmoil, the ECB followed through on its pledge to deliver a 50bps rate hike on Thursday. However, President Christine Lagarde refrained from providing any explicit forward guidance about the path for policy rates. Instead, she…