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The ECB QE: causes and effects
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https://www.caixabankresearch.com/en/monthly-report/388/march-2015/qe-del-bce-causas-y-efectos
The outbreak of the war in Iran represents a new twist in the geopolitical landscape that will once again test the resilience of the business cycle, amid a spike in energy prices and uncertainty in the short term. Once again, it is time to reassess where the economy stands and analyse its strengths and vulnerabilities in relation to the channels through which this new shock could spread, a task to which we dedicate much of the articles in this Monthly Report. Additionally, in this issue we analyse the challenges faced by Spanish exports in terms of competitiveness; the recent ruling by the United States Supreme Court on the country’s tariff policy and its potential effects on international trade, and the rise in sovereign rates in Japan and its consequences for the country’s economy.
In yesterday's session, investors traded cautiously despite easing concerns on the omicron variant. On the data front, the euro area economic sentiment indicator eased in November from 118.6 points to 117.5 and inflation numbers continued to increase in the region. Germany's HICP inflation rose 1.4pp to 6.0% while in Spain it rose 0.2pp to 5.6%.
In yesterday's session investors traded cautiously amid concerns on the new coronavirus variant and mixed economic sentiment data releases. November manufacturing PMIs ticked up in the euro area (58.4) but decreased in Spain (57.1 vs 57.4 in October), China (49.9 vs 50.6) and the U.S. (58.3 vs 58.4).
In yesterday's session, investors' sentiment worsened amid mixed signals in the ongoing Russian-Ukrainian talks, concerns about gas supplies in Germany and rising inflationary pressures in the euro area. In Germany and in Spain, inflation rose in March to 7.6% and 9.8%, led by an increase in energy prices.
In yesterday's session, investors traded with a risk-off mood as recessionary concerns spread across financial markets, following the release of the decrease in US real personal spending (from a downward revised +0.3% to -0.4% in May).
Investors continued to readjust their expectations about the future pace of monetary policy tightening, after data showed real GDP fell by 0.2% q/q in the US in Q2, the second consecutive quarterly decline.
Investors continued to trade with a risk-off mode, taking on board new hawkish comments from central bank officials and data showing job openings in the US unexpectedly rose in July. In addition, the flash HICP readings for both Spain and Germany showed inflation remained elevated in August (the eurozone aggregate will be released today).
Investors traded cautiously in yesterday's session amid lower-than-expected inflation data in some euro area countries. In particular, November HICP year-on-year inflation decreased 0.3pp and 0.7pp in Germany and Spain to 11.3% and 6.6%, respectively.
Investors continued to trade with caution on Tuesday, taking on board the upside surprise in February HICP inflation in both France (7.2% y/y) and Spain (6.1%) and dialing up its expectations for policy interest rates hikes (money markets price the depo rate could near 4% by year end). Today, the German HICP data is released.
Over the past few years, Spain's manufacturing industry has managed to avoid the worst scenarios of a slump in activity (COVID, bottlenecks, energy crisis). However, in 2023 it faces new challenges: the impact of higher interest rates, the effects of supply problems with certain inputs and rising production costs.
Stock markets advanced in the US, Europe and Asia while sovereign yields remained stable. In Spain, markets underperformed their peers as stocks declined and sovereign spreads rose.
Yesterday's session was filled with economic data releases. In the US, Q2 2023 GDP revision left growth unchanged from previous estimates at 2.1% SAAR, and personal consumption had its slowest increase in a year. In Europe, September inflation in Germany eased to 4.5% y/y from 6.1% in August but ticked up in Spain to 3.5% from 2.6%.
Despite the effects of the prolonged drought and the sharp rise in production costs, the current trend in Spain’s agrifood sector is one of moderate growth and its exports have managed to remain competitive and dynamic. Moreover, rural tourism is proving to be a good complement to agricultural activity, diversifying the sources of income for farms, which must nevertheless continue working to become more competitive and efficient in their use of resources.
In yesterday's session, euro area economic releases took center stage. Lower-than-expected October y/y inflation in Germany (3.0% vs 3.3% expected) and in Spain (3.5% vs 3.8% expected) pushed euro area sovereign yields down and the area's main stock indices up. 3Q German GDP growth came in at -0.1% vs -0.2% expected.
Government bond yields extended their losses across the board on Wednesday as investors continued to focus on future interest rate cuts by major central banks. These expectations were boosted by upwardly revised Q3 US GDP growth figures and better-than-expected November inflation figures in Germany and Spain.
US January PCE deflator came in line with expectations (2.4% yoy down from 2.6% the previous month), and euro area countries’ CPI did not surprise either (Germany: 2.5% yoy, France: 2.9% yoy, Spain: 2.8% yoy), boosting markets’ expectations of a first interest rate cut starting in June and July.
We present the CaixaBank Research Sectoral Observatory, the first 360º report on the state and outlook for Spain’s economic sectors. The goal of this publication is to take a more in-depth look at the underlying dynamics behind macroeconomic developments, offering a comprehensive view of the various economic sectors’ performance over time.
Investors kicked off the week with a somewhat quiet session as they await key inflation data later this week: June CPI for France, Spain and Italy; and the US PCE deflator, the Fed's preferred inflation measure.
Financial markets ended the week in a risk-off mode despite Friday's inflation data showing that disinflation is progressing on both sides of the Atlantic: US core PCE came in at 2.6% YoY, as expected; and in the eurozone the HCPI prints for Spain, France and Italy were also broadly in line with expectations at 3.5% YoY, 2.5% YoY, and 0.9% YoY, respectively.