IN SPAIN Spain the greatest fall in 2020 amongst the members of the Eurozone and the OECD, with GDP contracting by 10.8%. It will take Spain three and a half years to return to its pre-crisis GDP level.
The Corner | The OECD expects the global economy to be poised to grow this year at the fastest pace in nearly half a century, boosted by aggressive US vaccination programmes and government fiscal stimulus packages.
Therefore, the OECD expects global economic output to rise by 5.8% this year, following a 3.5% contraction in 2020. As for Spain, the OECD said its GDP will grow by 5.9% in 2021 (5.7%; previous estimate), and by 6.3% in 2022 (4.8%; previous estimate). Meanwhile, the organisation raised its growth forecast for the US to 6.9% ( from 6.5% previously), for the eurozone to 4.3% ( from 3.9% previously) •••
Fernando Rodríguez | 96.3% of the outstanding volume of Spanish fixed income with rating (€1.76 tr) was Investment Grade BBB or higher, at the end of 2020. This is only three tenths of a percentage point lower than in March of the same year, according to a study included in the CNMV Bulletin for the first quarter of this year, published recently.
The supervisor’s study concludes that “although the analysis identifies in the first months of the crisis a certain increase in the downgrades of Spanish debt ratings in certain issuers and sectors, it cannot be deduced that these are significant or generalised. This is shown by the stability of the high percentage of investment grade debt, although with a certain recomposition within this group towards the lowest rating levels. According to the Survey, the downgrade in rating levels is explained by purely technical and not economic issues, “almost entirely due to the reduction in A and AA rated securities, due to the amortisation of central government debt in the first case •••
Alphavalue | The European Single Resolution Board (SRB) may impose restrictions on the distribution of dividends, bonuses and other types of remuneration to banks that do not respect the minimum own funds and eligible liabilities (MREL).
Spanish banks recorded a shortfall of 7.336 billion euros in Q4.20, equivalent to 0.94%, compared to the target for their minimum requirements for own funds and eligible liabilities of 29.10% of risk-weighted assets, set on average for the sector in Spain by 2024 by the SRB. These figures leave Spanish banks lagging behind the Banking Union as a whole, whose average shortfall was 0.58% or 39.604 billion euros in Q4.20. •••
MORE • SPAIN
T.C. | Randstad Research forecasts that the summer campaign will generate 438,550 contracts in Spain, 20.7% more than last year, although still 29.5% below the amount clocked up in 2019. The figure predicted is on a par with that of 2015, when 437,873 contracts were signed. Since 2012, the volume of summer contracts has not stopped growing. •••
• With The Closing Of The Casablanca Oil Platform, Spain Ends Almost 60 Years Of Oil Production • The Government, Good Governance And The Indra Case • 18 Projects To Launch The Spanish Sandbox
IN EUROPE Blockchain-distributed private cryptocurrencies will not shake the solid foundation of fiat money: deposits, loans and transfers through regulated financial intermediaries.
Sam Theodore ( Scope Ratings) | Banks and investors are apprehensive that the growing presence of crypto assets (CAs) could shake the edifice of European banking, impacting core activities like lending, deposit taking, trading, and investments.
Those concerns may not be entirely misplaced, especially for banks that are digital laggards, but they are for the sector in general. I am less concerned when it comes to banks that have made visible progress in comprehensive digital restructuring and which are keeping their eyes open to the transformative megatrends underway. Such groups are clearly better positioned for the emerging crypto world and may in fact find opportunities in it.Besides, as highlighted below •••
T.C. | Europe is the place to be this year. That at least is what Morgan Stanley analysts say: “With economic momentum improving (and with a three-year visibility), strong earnings growth, lower relative valuations, tighter investor positioning, US flows growing, buybacks at lows and improving, positive inflation effect.
Bunds yields at 0% and the Recovery Fund, Europe could beat all regions for the first time since 2000 (being especially positive on Italy and the UK, where we reiterate Overweight – we miss Spain on this list, by the way).” According to MS, Europe has better growth momentum: “the European economy has taken longer to recover than its peers, which should mean that growth momentum should remain strong for longer than in other regions where the initial rebound has been slower. Added to this, the Eurozone is one of the few regions where GDP growth in 2022 is expected to be higher than in 2021.” And an “Earnings outperformance: Europe’s poor performance during 2020 was largely due to worse EPS trends. After this drop, strategists estimate EPS growth in 2021 of 30-40%, well above any other region. •••
Rigel Patricia Scheller (Scope Ratings) | Restricting people to their homes to contain the Covid-19 pandemic has changed how they shop, socialise, study and work. Some changes may prove long term, with far-reaching repercussions for real estate. The severity of the impact on office property is less clear.
The Covid-19 impact on office space could markedly diverge across different parts of Europe. While the repercussions in some countries might be limited due to pre-pandemic remote-working trends, the impact might be stronger in countries with significant office space under construction •••
IN THE WORLD
Felipe Villarroel (TwentyFour AM) | The likes of McDonald’s and Burger King were paying people just to attend interviews as they could not fill the positions they needed to operate their restaurants properly. So is this a case of subdued demand in the labour market with companies not hiring, or subdued supply with workers for whatever reason unwilling to fill vacancies? •••
• Not A Single Fund Manager Expects European Stocks To Fall By Year-End, BofA Says • Challenges For Europe’s Olive Oil Producers Continue To Stack Up • Legal Marijuana Sales Exceeded USD 21 Billion Globally In 2020
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