Spain

More dark clouds over Spain

The week is ending in a similar fashion to which it began, namely with markets broadly in retreat from risk. There’s little reason to feel that today will be much different. The focus is on Spain and its expected announcement of just how bad the government believes the bad loans situation is for the banking sector there. Meanwhile, Greece is still trying to stitch together a government from the results of the weekend’s election. Read more

11/05/2012 @ 07:11 GMT

Spanish banks – the next systemic risk

Yesterday’s decision by the Rajoy government to take a 45% stake in troubled lender Bankia and to provide capital as necessary is just the tip of the iceberg in terms of cleaning up the bereft Spanish banking system. The third-largest lender in Spain and arguably the most vulnerable because of its huge exposure to the tumbling property market, the government correctly formed the view that urgent steps were required to attempt to stabilise Bankia.

10/05/12 @ 09:46 GMT by Michael Derks, Chief Strategist

Spain’s financial misery

Evidence continues to mount regarding Spain’s economic and financial misery. According to the largest home appraisals company in the country, Tasaciones Inmobiliarias SA, house prices plunged 12.5% in the year ended April. Also, industrial production dropped by 7.5% YoY in March, the biggest drop in two years and much worse than expected. The government’s forecast that the economy will decline by 1.7% this calendar year will almost certainly need to be revised down quite significantly. Read more

08/05/2012 @ 07:44 GMT

RBA boldness should be applauded

Last night’s decision by the RBA to lower the cash rate by 50bp to 3.75% ought to be applauded. Faced with an economy which, outside the mining sector, is in recession and with inflation likely to be lower than expected, policy-makers rightly decided that financial conditions needed to be loosened considerably. Australia’s central bank would also be concerned by the continued decline in property prices – according to the ABS, established house prices fell by a further 1.1% in the first quarter, the fifth consecutive quarterly decline. Read more

01/05/2012 @ 07:37 GMT

The dollar’s gentle descent

It has been exceedingly gradual, but the dollar has been drifting downwards over the past two weeks. Not that we are talking about a big move mind you – the dollar index is down by roughly 1.5% over that time. That said, some of the major dollar crosses are at levels not witnessed for some time – cable for instance reached a 7mth high at just under 1.63 overnight. Indeed, the pound has been something of a revelation so far this year, despite the fact that the economy is apparently back in recession. Clearly sterling is attracting flows from a number of different sources. Read more

30/04/2012 @ 11:11 GMT

Should Spain be spared?

Like it or not, it’s Spain that is the focus this Friday. One has to wonder about the efficiency of markets when we see both currencies and bonds react to S&P’s announcement that it has cut the rating by two notches, to BBB+. The single currency was some 60 cents lower on the announcement, albeit in thin overnight trade, with bonds once again testing the 6% level on the 10yr. Of course, some investors may be tied to ratings in their investment mandate, so the reaction is understandable from some angles. Read more

27/04/2012 @ 09:43 GMT

The politics of austerity

At its heart, the crisis in the eurozone is one of economics. At the start of Economic & Monetary Union (EMU) there was a great focus on the M, far less on the E. At the risk of oversimplifying things, the lack of economic focus is why things went wrong and why governments pretty much everywhere are trying to make amends. But the political price of this is becoming all too apparent and, whilst the centre of Europe is enacting reforms that strength central surveillance and powers (such as the fiscal compact), there are more signs that electorates and indeed politicians are pushing back.

26/04/12 @ 07:36 GMT by Simon Smith, Chief Economist

A lovely shiny pound

Of the major currencies it has been the proud pound that has been leading the way so far this year. Following yesterday’s less dovish MPC Minutes and the surprisingly strong employment figures, cable is back through 1.60 once more and EUR/GBP is at a 20mth low of 0.8180. Against the Japanese yen the pound has advanced by almost 10% so far this year. Read more

19/04/2012 @ 07:23 GMT

Spain goes back to its roots

Today’s news out of Spain has served as a timely reminder that Spain is, at heart, a credit bubble with a sovereign crisis by-product. Markets have been overly focused on the latter in recent weeks, not surprising given that Spain has laid out budget plans and fallen short of those set out last year. Today’s data on loan delinquency for February (of three months or more) showed a further increase to above 8.00%, which puts this measure not that far off the 8.9% seen in 1993. This is also from a position of 0.70% in late 2006, which itself was a multi-decade low. Read more

18/04/2012 @ 13:46 GMT

Euro balks at 1.30

After threatening to really crack the 1.30 level yesterday, the single currency is back up at 1.3150 late in the morning session. Those hoping for a cogent explanation for the turnaround can look away now – apart from some good old short-covering, stop-hunting and sovereign wealth fund-buying, there is little in the way of fundamental developments to account for the mood change. Since early London, the euro has been well-bid. Read more

17/04/2012 @ 10:01 GMT

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