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Recession, secession and political uncertainty: The post-Brexit UK

24 June 2016

Grant Lewis

So, the opinion polls, which had shown a big move towards a Remain vote, got it wrong yet again, with Leave squeaking a win by 51.9% to 48.1%.

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It’s the stupid politics, stupid

22 June 2016

Grant Lewis
, 
Mantas Vanagas

For markets, which have seemingly largely priced out that probability over recent days, the market impact would be immediate if a Leave vote starts to look likely through during the early hours of Friday morning, including:

  • a precipitous drop in Sterling, with the euro also under pressure as the dollar, Yen and Swiss Franc benefit;
  • a hit to global equity markets and futures;
  • a flood of money into government bond markets, including Gilts and core euro area government bonds, but
  • a significant underperformance of euro area peripheral bonds; and
  • a hit to credit spreads, particularly of European financials and UK financials in particular.

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ECB Barrel Scraping Getting Louder?

10 March 2016

Grant Lewis
, 
Chris Scicluna

There was never any doubt that the ECB would ease policy at today’s Governing Council meeting. In the event, however, it beat expectations, adjusting policy in several different ways:

  • Further rate cuts
  •  Increased asset purchases
  • More, and more innovative, long-term liquidity operations

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Euro banks' equity valuations - credit still to catch up?

04 February 2016

Jakub Lichwa
, 
Grant Lewis
  • Equity valuation of European banks hit its lowest point since 2 August 2012.
  • This drop in valuations reflects what appear to be growing fears around the health of the banking sector in Europe.
  • But while equity valuations have tanked, the move in CDS has been much less pronounced, and is still a far cry from the 280 level hit on 2 August 2012.

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Market-testing the euro area recovery

03 February 2016

Chris Scicluna
  • While the euro area economic recovery continues for now, heightened global financial market turmoil risks denting business and consumer confidence and hitting GDP growth.
  • Given the weakened inflation outlook the ECB will ease policy again in March. But whatever is announced seems unlikely to be transformative.

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