ECB to downgrade growth figures for 2020 and 2021

The European Central Bank (ECB) has downgraded the euro-zone growth figures for the next year and the year 2021. According to the bank analysis, the GDP will show 1,4 % growth in 2020 and the same in 2021. In March, the central bank estimated that the growth would be 1,6 % and 1,5 % respectively.

The ECB says that the prolonged uncertainty over several economic and political issues have put the growth expectations down.  Global trade, Brexit and some geopolitical factors are the major issues impacting the economic growth. The ECB President “whatever it takes” Mario Draghi also pointed in the press conference  today that the rising protectionism is also hindering the global growth.

What he also said is that the markets are expecting something bigger than the markets disputes now. “Disruptions beyond trade” have to be taken seriously, he mentioned.

The ECB estimates that the average exchange rate of US dollar would be USD 1,12 per euro over the period 2019-21. This is 1,7 % lower that in the March estimates. Inflation estimate is 1,3 % for this year and 1,6 % for the year 2021.

The ECB decided today to leave the key interest rates unchanged at least through the first half of 2020. The Central Bank also confirmed its determination to act if needed and thus signaled the possible QE. This would also mean that the banking sector in the euro-zone will benefit from the low central banks rates in order to keep the economy and investments active also during the next year.

– The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase programme for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation, the ECB said.

The change in the leadership in the ECB will have its impact for the future decisions and estimates. It is now clearly seen that the candidates for this top position offer different kind of solutions for the economy recovery.   The EU leaders are expected to make the formal decision of this job during their July meeting. Mario Draghi is leaving the central bank on the 31st October.

The US Federal Reserve will be also debating the possible rate cut during its June meeting. According to Wall Street Journal the markets are expecting the rate cut to happen in June meeting with a 25% chance and at least one cut by the meeting after that on July 30-31 with a 75 % chance.

 

Business Finance

The negotiations of the EU top jobs started in Brussels

The EU leaders meeting in Brussels today was the start of the new leaders discussions in the EU. The German Chancellor Angela Merkel and the French President Emmanuel Macron expressed their different views of the new leader candidate for the EU Commission.

Manfred Weber has been the lead candidate for the EPP (centre-right), but President Macron was mentioning other candidates  for this position. This was the first time the EU leaders met after the EU elections last Sunday. Luxembourg´s Jean-Claude Juncker in stepping down on October 31st.

There are also other leading positions open to fulfil like European Council President (now Donald Tusk), the head of European Central Bank ECB (now Mario Draghi) and the EU representative for Foreign Affairs (now Federica Mogherini).

The EU elections last weekend put the seats in the EU Parliament to new order. Here are the main representatives for the 751 seats in the EU Parliament:

  • socialists & democrats (146)
  • greens (69)
  • liberals (109)
  • centre-rights (180)
  • conservatives (59)
  • populists (54)
  • right-wing nationalists (58)
  • left (39)

The timetable for the new leaders is somewhat open, others expect the names to be ready by July and others expect them during the autumn time.

 

 

 

 

 

 

 

 

Business

Brexit: What next – stocks closed up

The yesterday announcement by the UK Prime Minister Theresa May that she will step down from the Party leader position on June 7 has left some questions how to proceed after this? Mrs May, who is highly respected by her counterparts, will stay as Prime Minister until the new leader is chosen- maybe in July.

The UK decision was not a surprise for the EU leaders. In fact, they were asking swift process in order to avoid possible bottlenecks between the countries business and economic transition process. For example the French President Emmanuel Macron said that he would like more clarification about the situation while “EU cannot remain indefinitely uncertain on Brexit”. According to him, France is ready to work with the new British Prime Minister on all issues.

The German chancellor’s Angela Merkel´s spokesperson said that Germany is ready to continue the work with Prime Minister Theresa May’s successor for an “orderly exit”.

And several other EU leaders have had same kind of message as well. They want to conclude the work and the agreement agreed with the EU and Mrs May. The message is still the same: the legal text of the withdrawal agreement will not be open.

This case has also raised the possibility of the no-deal Brexit after the Mrs May decision to leave. This is a major concern for the British Industry and the City as well. The Bank of England has made also several economic estimates which show that the no-deal Brexit would be catastrophic for the UK economy and for example housing prises.

The UK and EU have extended the Brexit deadline for several times and now the deadline is at the end of October, 31st. So, the UK Parliament has this timeframe in order to decide how to proceed. There is not that much time left, while it is assumed that the new UK Prime Minister might start his/her duties July/August time. As Prime Minister Theresa May said in her speech on Friday, the new leader will have to find a compromise in the Parliament in oder to get on with the Brexit.

On the other hand, it might also be possible, that the new Party leader is not willing to make a deal, so the no-deal Brexit might increase its appearance. According to Bloomberg News, two-thirds of Conservative members want a no-deal Brexit.

But the Labour Party in the UK Parliament is against no-deal scenario, which makes this approach uncertain. And the third option is also a new referendum or general elections, which would have to be before the end of October.

Now, in the middle of EU elections, the UK Conservative party is expected to face losses and this might have also its impact for the future of the UK and the Brexit process. The results of the EU elections are to be published on Sunday evening.

The UK stock markets closed Friday slightly up and the FTSE 100 -index ended +0,65 % to 7277 points. During one year time, the yield has been -1,68%. The pound was at 1,27 US-dollars, up 0,45 % on Friday. During a five year period the pound has fallen from the 1,7 US-dollars levels.

Business Finance

Brexit delay until end of October- Asia stocks mixed

The EU leaders agreed late last night that the extension to the Brexit deal is until end of October, the 31st October. And signalled that more extension could follow if needed.

According to EU Council President Donald Tusk this also gives the UK the possibility to cancel the Brexit altogether. The UK Prime Minister Theresa May said that the country is leaving the EU as soon as possible to avoid the May EU elections on 23-26 May. The UK Goverment was the Labour party are exptected to continue their discussions today in London.

The Asian stock markets were mixed and the Hang Seng in Hong Kong was down 0,58 % to 29944 point and the Nikkei was down 0,28 % to 21 627 points. Singapore with STI Straits index was up 0,37 % to 3339 points and the Kosdaq-index was up 0,82 % to 766 points.

The UK Sterling was trading up slightly 0,05 % to 1,3098 dollars and the euro also 0,01 % to 1,127 dollars.

 

Business Finance

Stock markets up in Wall Street – focus on economic growth

The stock markets ended up in Wall Street on Wednesday. The Federal Reserve published its minutes of the meeting, but there were no surprises for the markets. Actually, the markets expect the Fed rather to cut the rates than to rise. The same situation was also today in Europe, when the ECB had its press conference after the Council meeting.

The ECB decided to hold the rates unchanged and the same outlook is for the year end 2019. The ECB also announced it will be watching the economic development ir order to make further decisions. The trade talks between US, China and Europe have lowered the economic growth forecasts.

Dow Jones ended up 0,04 % to 26160 points and S&P 500 -index ended up 0,36 % to 2888 points. Nasdaq closed up 0,69 % to 7964 points.

The earnings season is starting on Friday and it is also the day the UK will be leving the EU if no-deal is reached. The EU leaders meeting in Brussels is still going on, but it is expected that the EU will grant UK more time to solve the Brexit. The lenght of the delay is now the big question.

In Europe the FTSE 100 -index closed down 0,05 % to 7421 points, while the Paris CAC 40 -index ended up 0, 25 % to 5449 points and the German DAX-index ended up 0,47 % to 11905 points.

The UK sterling was up 0,29 % to 1,3090 dollars and the euro was up 0,07 % to 1,127 dollars.

 

Business Finance

Brexit: Delay to the year end?

The European Council President Donald Tusk has said today that the short extension of the deal would not be enough. He is then favour of  a longer Brexit, maybe up to a year or beyond.

The UK Prime Minister Theresa May has today met several EU leaders. She was in Germany and met the German Chancellor Angela Merkel, which pointed that the extension might be long enough, but also so that the option of leaving earlier is possible if the deal is reached. PM May is having a meeting with French President Emmanuel Macron tonight.

The EU leaders are having their summit tomorrow on Wednesday in Brussels and for example the Belgium has invited the country leaders, which border the North Sea, according to Bloomberg News. The fishering polices and the use of the natural resources in the future if no-deal is agreed means that more work is ahead.

The UK Parliament is also discussing tonight how long the delay would be for Theresa May to put forward. On Monday the Parliament decided that extension is ok. This was backed by the UK Parliament by votes 420-110.

PM Theresa May sent last week a letter to Mr Tusk and asked for the extension until June 30.  The UK is leaving the EU on next Friday the 12th April, if no deal is reached.

The UK Goverment has said that it will continue the talks with Labour Party after the summit on Thursday. The talks were halted because the parties said that there were not enough compromise.

Business Finance

Brexit: May to continue talks with Labour- stocks mixed

The UK Prime Minister Theresa May said on Sunday evening that the Goverment will continue the talks with the Labour party during this week.  She also commented that compromise is needed on both sides in order to proceed with the talks and Brexit agreement.

During Monday the House of Lords will also discuss about the bill to stop the non-deal spilt with the European Union.

The EU leaders are having their meeting on Wednesday in Brussels and last week PM Theresa May send a letter to Mr Donald Tusk in order to ask for the delay of the Brexit-deal until June 30 if needed.

The stock markets were on mixed on Mondy. In Asia the Hang Seng index in Hong Kong ended up 0,31 % to 30 029 points, but the Nikkei-index ended down 0,21 % to 21 761 points in Japan.

In Europe the early trading was in negative territory while the CAC 40-index was down 0,12 % to 5469 points, the German DAX-index was down 0,29 % to 11 974 points and the London FTSE was down 0,28 % to 6692 points.

The sterling was up 0,17 % to 1,3060 dollars and the euro was up 0,06 % to 1,1223 dollars.

Business Finance