Atlas Shrugged

Atlas Shrugged

Atlas Shrugged

April 12, 2016

Good Morning,

Less to talk about this morning compared to yesterday, but a couple of points worth raising.

The Italians launched their “Atlante” (“Atlas”) fund, which is designed to buy distressed assets from weaker Italian banks. There's no confirmed initial fund size,though it seems that €5bn is the number that will be agreed upon. There are question marks over the efficacy of a €5bn fund with a €300bn problem, but there's no reason the fund can't grow considerably, particularly once it starts acquiring and possibly churning assets. The market seems happy though, with Italian bank share prices having a fantastic afternoon yesterday, pushing the Milan Bourse to be the star performer of Europe.

Greece and Portugal have picked up Mario Draghi's cause and said, jointly, that Europe has to change course. They want to see an end to austerity and a programme of progressive reform that will include some spending. We like that European leaders are speaking with a united voice, but it would have probably been more constructive if those two voices weren't coming from heavily bailed out countries.

Bloomberg report that Spain is heading back to the polling booths. The anti-austerity party Podemos has rejected the idea of forming a three way coalition. Party leaders have until May 2nd to work out how to form a government and relieve Mariano Rajoy of his duties, if not it's back to the polls.

The main news out of the Americas is the Brazilian congressional approval to begin the impeachment process against Dilma Rousseff. The vote now moves to the lower house on Sunday/Monday, but is widely expected to pass there too. The Brazilian stock market was higher on the prospect of the vote and the currency has strengthened on the prospect of removing the incumbent in the hope that, economically, anything is better.

In Asia, the strength of the Japanese Yen is still the dominant headline. The Yen has strengthened despite the introduction of negative interest rates last month. Those negative rates were designed to stimulate loan growth too – with banks preferring to lend money out in return for a coupon, rather than hoard it and pay a coupon – but this hasn't yet materialised. Data out overnight showed loan growth actually slowed the most in three years last month. That isn't to say that the policy is dead – traditional monetary policy measures can take up to six months to filter through – but it is worrying the market. There is also an article in the Telegraph, citing Olivier Blanchard, that is worth a read if you want to know more on why it's worrying the market.

Today we look at inflation numbers from the UK and Europe, but otherwise fairly quiet.

Have a great day.



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