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

Highlights of the year 2018 – Brexit, trade talks and green finance

The year 2018 was a year of Brexit, electric cars and trade talks. It included special moments in the financial markets and in the company side. Green Bonds and Green Finance were getting more attention in the markets and trade talks and Brexit were the topics during the year 2018 along. Climate Change and low carbon landed also in the agenda of central banks.

Investors were also asking what is the role of the City as a global financial hub. Should it have its own rules in spite of the Brexit? In the financial hub competition, Frankfurt and Paris were the European cities to get more new financial offices as financial companies were moving some operations to the EU side.

The UK Parliament is expected to vote of the Brexit during Janury 2019 after very intensive debate about the deal during the year.

Climate Change has become part of the everyday life in the financial markets and for example one of the biggest insurance companies in the US, Berskhire Hathaway informed in February 2018, that it has got 3 billion dollars losses of the natural catastrophies, the hurricances in the US. Several central banks, including the European Central Bank and some Asian ones, have also agreed about the co-operation in the climate issues and how to monitor the impact on the markets.

In the tech-side augmented reality and ioT were the themes for the year. Apple, Amazon, Google, Tesla, Intel  and Samsung  were one of the tech-companies to deliver new services related to the new technology. On the other side of the topic, Facebook was dealing with the privacy issues globally. New tech- companies listed in the markets were for example Spotify and Xiaomi.

Year 2018 was a year of electric cars in many countries. The e-cars breakthrough with charging issues was one of the tech topics as well. Telsa founder Elon Musk was the leading industry sector figure as he estimated that Tesla would make one million cars by 2020 in February 2018.

Also the German automakers announced new investments and concept cars. For example the BMW Group launched an autonomous driving campus in Munich in March 2018.

Year 2018 was also a year for luxury goods and services. The Basel World 2018 -fair announced its good selling and for example the CEO of Hublot, Ricardo Guadalupe,  told ComteamPUB+ that the company expects double digit growth for the year and that the Chinese customers will be the leading segment.

In the debt markets the US Uber and Netflix issued their junk bonds to investors. Uber, the ride-sharing company, is said to plan an IPO for the year 2019 according to the secret filings to the SEC.

One of the biggest infrastructure projects ever, the China Silk Road, is getting more attention from the green investors side, while the organization made its first announcement of the green principles for the project co-operation and operators. The ancient Silk Road is expected to rise the GDP growth by 4 % or 240 billion dollars in the countries invlolved according to Credit Suisse analysis.

The aim of the Roman time Silk Road is to connect the western Europe with the eastern coast of China and to renew the infrasturcture in between. This means also that the 10 world largest container ports are located along the route.

Trade talks between different countries have continued lively during the year. US and China have been in the headlines, but also the EU with its agreement with Japan.  The political situation and rising volatility in the financial markets tell the direction for the next year. Geopolitical easing is needed.

Päivi Härkönen, co-founder, ComteamPUB+



Business Finance Lifestyle

US tax cuts to boost also EU economy

The US tax cuts are expected to support the growth also in the EU. According to the European Central Bank´s policy meeting in December,  the impact of the cuts have not been calculated in the estimates earlier.

The Central Bank has estimated that the GDP will grow 2,3 % this year and 1,9 & next year. For the year 2020 the growh estimate is 1,7%. For example the IMF has estimated that the growth would be 1,7 % in 2019.

This positive sign from the ECB memo was fuelling the rally in the currency and bond markets yesterday. For example the German 2 year bond yield increased by 4 basis points to minus 0,57 percent. And euro was trading 1,20 against US dollar. Also the Brent Oil increased to three year high and was over 70 dollars a barrel due to production cuts by OPEC. Stock markets were mixed.