The Weekend Run Down
April 11, 2016
Plenty to run through this morning…
Starting with the Germans, who have said the ECB are partly responsible for the rise of the right wing AfD party in Germany. Finance Minister told an audience on Friday night that when speaking to Draghi, he said “be very proud: you can attribute fifty per cent of the results of a party that seems to be new and successful in Germany to the design of this policy”. Everyone in the German cabinet pitched in to lay blame at the door of the ECB for 'dangerous' and 'risky' policies that “create a gaping hole in citizens' old age preparations“.
Despite the criticism, the rumours circulating that the Germans were looking to take legal action against the ECB are untrue. Sigmar Gabriel, Germany's vice-chancellor was even slightly sympathetic, saying that instead “the blame lies with Europe's inability to put together a joint growth programme” which is what Mr Draghi has been saying for years. But Germany admitting they know what the problem is, is still a long way from solving it, particularly as their economy is still the only European growth engine and in isolation, they have little to worry about.
Greece seem to be nearing agreement on a restructure compromise. Pensions and non-performing loans remain the sticking point – these two always seem to be the main hurdle – but sources from within the talks are optimistic that last night's marathon negotiations will yield results. That said, Wolfgang Schaeuble still says that though “we're helping Greece, we're buying it time” people “don't want to talk about what Greece needs to do“.
Italy's government are meeting with banks today to talk in more detail about the state backed banking fund. They want to get into more detail on what the fund is and isn't to be used for and also how big the stakeholders can afford to make it. The urgency has been stepped up, as the €360bn of bad loans is weighing heavily on the sector and we could even see an agreement today -if that's the case, Italian banks will be the 'buy' of the day.
In the UK, David Cameron has released his tax returns for the last six years. There's a £200k gift from his mother in there, which is being called into question as a possible tax dodge, but we'll get to hear more later when he makes a statement in the Commons. We're sure Jeremy Corbyn is going to jump all over this.
Also from the UK; the Telegraph are pointing out that the Brexit fears are weighing on UK productivity and warn that the first quarter of this year could see the worst growth since 2012. Not much to say o n that, other than it's probably true, but we'd attribute a lot of that to global influence as well as the Brexit.
We're likely to see a deal for Tata steel's Scunthopre plant today, hopefully securing 4,500 jobs in the town. It looks like a London based Private Equity/Turnaround investment with about £400m in cash and then further contingency cash a requirement of the purchase.
An interesting article in the FT this morning about the US pension system and a massive $3.4trn black hole that it's facing. Independent research has come up with that number, which is three times larger than official estimates. The numbers are that much larger because they call into question the estimates that pension funds say they'll average 7-8% returns, which when adjusted to more realistic yields creates the chasm. Most believe the outcome will be more and more cities defaulting and declaring bankruptcy, much like Detroit, with those cities hoping that the Federal government take on the problem.
Looking at the week ahead; we're already seeing a risk averse market, much like we did last week and this risks creating the same sort of theme that we saw for the first weeks of Q1. We've got some big data releases this week that could shift sentiment in a more positive direction; UK inflation tomorrow, US retail sales on Wednesday as well as the Beige Book, so if we get a string of good readings things could change for the better.
Have a great week