ETFWorld.co.uk
Image default

ETF Weekly Market Update

Flows, Market Snapshot and Axes… 


            Sign up for our weekly Newsletter and receive the latest ETF and ETC news.
            Click here to register for your free copy

            Fundamental Highlights

             

            Soft restructuring, “reprofiling” – new terms for an old problem: Some EMU finance ministers and the EU Commission have proposed a soft  restructuring of outstanding Greek government bonds. Conditional on further progress in the usual areas (austerity, structural reforms,  privatization), Jean-Claude Juncker proposed reprofiling Greek debt maturities on a voluntary basis.

            While the terminology isn’t fixed in any  textbook, the following definitions might apply: Restructuring: change of terms including nominal. Soft restructuring: change of terms excluding  nominal (i.e. maturity, coupon). Reprofiling: change of terms, but only maturity. It is, however, still not perfectly clear, whether a voluntary  reprofiling would constitute a credit event, or a default, something all EU officials are trying to avoid.

            The ECB threatened to not accept  restructured bonds as collateral. The central bank strictly opposes any form of debt restructuring for a variety of reasons (it eases the pressure  on Greece to re-form; it carries the risk of contagion; it carries the risk of portfolio losses on the ECB’s books; it threatens the independence of  the ECB; it does not solve Greece’s debt problems). However, threatening not to accept restructured Greek government bonds is a double- edged sword: on the one hand, the ECB does not intend to monetize debt of a country in default; on the other hand, the ECB is obliged to  guarantee financial stability.

            Over the weekend, politicians weakened their call for a soft restructuring: Jean-Claude Juncker argued that a soft  restructuring should only become an option once Greece’s (primary) budget is consolidated. Wolfgang Schäuble listed no less than four  conditions for a soft restructuring: private investors need to be involved; the ECB must support the idea; Greece must redouble its efforts; and  there needs to be a “sufficient guaran-tee” that Greece’s debt is sustainable. Only once these four conditions are fulfilled could one discuss the  option of soft re-structuring, Schäuble elaborated. The outcome of the dispute remains completely open. Investors are confused and nervous. 

            After a moderate recovery period, EUR-USD dropped by another two cents to 1.4150 on Friday. Fitch lowered its rating on Greece by three (!)  notches from BB+ to B+ (watch negative) and stated that voluntary debt rescheduling would be consid-ered a default. Greek bond yields rose.  Spanish bonds also came under pressure, but less so from contagion effects but rather following genuine concerns: at auctions of long-term  bonds, demand fell short of expectations. Public unrest intensified in the run-up to regional elections on Sunday. Spanish bond spreads widened by 25-35bp during the week. EMU debt con-cerns reached their climax on Friday midnight when S&P lowered its outlook on Italy’s A+ rating from stable to negative.

            The rating agency justified its decision with “weak growth prospects” and the increased risk that Italy would fail to slash  its debt mountain. There has been much discussion about the timing of rating agency actions in the past, which have been criticized as unjustified in most instances; but this rating action probably comes at the worst of all moments: it is absolutely imperative that Spanish and Italian government bonds are isolated from developments in the Greek, Irish and Portuguese bond markets. With Spanish bond spreads under genuine widening pressure and Italian bonds in the stranglehold of the rating agencies, the next few trading days might once again become a challenge for the euro. In the background, investors examine every single piece of economic data to stress-test their growth outlook.

            In the US, last week’s data disappointed in this regard: the Philly Fed index, industrial production and housing data were all below expectations. This week, EMU business sentiment indica-tors (PMI, Ifo) are expected to confirm the view that the peak in economic activity lies behind us. While there’s no reason to be afraid of the impending cyclical economic moderation, core government bond yields are facing a hard time moving to higher levels that would appear to be appropriate from a fundamental perspective.


            DISCLAIMER

            This publication is presented to you by:
            Corporate & Investment Banking
            UniCredit Bank AG
            Arabellastr. 12    D-81925 München

            The information in this publication is based on carefully selected sources believed to be reliable. However we do not make any representation as to its accuracy or completeness. Any opinions herein reflect our judgement at the date hereof and are subject to change without notice. Any investments presented in this report may be unsuitable for the investor depending on his or her specific investment objectives and financial position. Any reports provided herein are provided for general information purposes only and cannot substitute the obtaining of independent financial advice. Private investors should obtain the advice of their banker/broker about any investments concerned prior to making them. Nothing in this publication is intended to create contractual obligations. UniCredit Corporate & Investment Banking consists of UniCredit Bank AG, Munich, UniCredit Bank Austria AG, Vienna, UniCredit CAIB Securities UK Ltd. London, UniCredit S.p.A., Rome and other members of the UniCredit Group. UniCredit Bank AGis regulated by the German Financial Supervisory Authority (BaFin), UniCredit Bank Austria AG is regulated by the Austrian Financial Market Authority (FMA), UniCredit CAIB AG is regulated by the UniCredit CAIB AG is regulated by the Austrian Financial Market Authority (FMA) and UniCredit S.p.A. is regulated by both the Banca d’Italia and the Commissione Nazionale per le Societàe la Borsa (CONSOB).Note to UK Residents:In the United Kingdom, this publication is being communicated ona confidential basis only to clients of UniCredit Corporate & Investment Banking Division (acting through UniCredit Bank AG, London Branch (“HVB London”) and/or UniCredit CAIB Securities UK Ltd. who (i) have professional experience in matters relating to investments being investment professionals as defined in Article 19(5) of the Financial Services and MarketsAct 2000 (Financial Promotion) Order 2005 (“FPO”); and/or (ii) are falling within Article 49(2) (a) –(d) (“high net worth companies, unincorporated associations etc.”) of the FPO (or, to the extent that this publication relates to an unregulated collective scheme, to professional investors as defined in Article 14(5) of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 and/or (iii) to whom it may be lawful to communicate it, other than private investors (all such persons being referred to as “Relevant Persons”). This publication is only directed at Relevant Persons and any investment or investment activity to which this publication relates is only available to Relevant Persons or will be engaged in only with Relevant Persons. Solicitations resulting from this publication will only be responded to if the person concerned is a Relevant Person. Other persons should not rely or act upon this publication or any of its contents. The information provided herein (including any report set out herein) does not constitute a solicitation to buy or an offer to sell any securities. The information in this publication is basedon carefully selected sources believed to be reliable but we do not make any representation as to its accuracy or completeness. Any opinions herein reflect our judgement at the date hereof and are subject to change without notice. We and/or any other entity of UniCredit Corporate & Investment Banking may from time to time with respect to securities mentioned in this publication (i) take a long or short position and buy or sell such securities; (ii) act as investment bankers and/or commercial bankers for issuers of such securities; (iii) be represented on the board of any issuers of such securities; (iv) engage in “market making” of such securities; (v) have a consulting relationship with any issuer. Any investments discussed or recommended in any report provided herein may be unsuitable for investors depending on their specific investment objectives and financial position. Any information provided herein is provided for general information purposes only and cannot substitute the obtaining ofindependent financial advice. HVB London is regulated by the Financial Services Authority for the conduct of business in the UK as well as by BaFIN, Germany. UniCredit CAIB Securities UK Ltd., London, a subsidiary of UniCredit Bank Austria AG, is authorised and regulated by the Financial Services Authority.Notwithstanding the above, if this publication relates to securities subject to the Prospectus Directive (2005) it is sent to you on the basis that you are a Qualified Investor for the purposes of the directive or any relevant implementing legislation of a European Economic Area (“EEA”) Member State which has implemented the Prospectus Directive and it must not be given to any person who is not a Qualified Investor. By being in receipt of this publication you undertake that you will only offer or sell the securities described in this publication in circumstances which do not require the production of a prospectus under Article 3 of the Prospectus Directive or any relevantimplementing legislation of an EEA Member State which has implemented the Prospectus Directive.Note to US Residents:The information provided herein or contained in any report provided herein is intended solely for institutional clients of UniCredit Corporate & Investment Banking acting through UniCredit Bank AG, New York Branch and UniCredit Capital Markets, Inc. (together “HVB”) in the United States, and may notbe used or relied upon by any other person for any purpose. It does not constitute a solicitation to buy or an offer to sell any securities under the Securities Act of 1933, as amended, or under any other US federal or state securities laws,rules or regulations. Investments in securities discussed herein may be unsuitable for investors, depending on their specific investment objectives, risk tolerance and financial position. In jurisdictions where HVB is not registered or licensed to trade in securities, commodities or other financial products, any transaction may be effected only in accordance with applicable laws and legislation, which may vary from jurisdiction to jurisdiction and may require that a transaction be made in accordance with applicable exemptions from registration or licensing requirements.All information contained herein is based on carefully selected sources believed to be reliable, but HVB makes no representations as to its accuracy or completeness. Any opinions contained herein reflect HVB’sjudgement as of the original date of publication, without regard to the date on which you mayreceive such information, and are subject to change without notice. HVB may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented inany report provided herein. Those reports reflect the differentassumptions, views and analytical methods of the analysts who prepared them. Past performance should not be takenas an indication or guarantee of further performance, and no representation or warranty, express or implied, is made regarding future performance. HVB and/or any other entity of UniCredit Corporate & Investment Banking may from time to time, with respect to any securities discussed herein: (i) take a long or short position and buy or sell such securities; (ii) act as investment and/or commercial bankers for issuers of such securities; (iii) be represented on the board of such issuers; (iv) engage in “market-making” of such securities; and (v) act as a paid consultant or adviser to any issuer.The information contained in any report provided herein may include forward-looking statements within the meaning of US federal securities laws that are subject to risks and uncertainties. Factors that could cause a company’s actual results and financial condition to differ from its expectations include,without limitation: Political uncertainty, changes in economic conditions that adversely affect the level of demand for the company‘s products or services, changes in foreign exchange markets, changes in international and domestic financial markets, competitive environments and other factors relating to the foregoing. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement.

            Source: ETFWorld – Corporate & Investment BankingUniCredit Bank AG

             

            – Valuesabove100% indicatean above average turnover compared to either the prior 30 trading days or the prior 260 trading days.

            Articoli Simili

            WisdomTree Outlook 2019: USA

            Webmaster

            WisdomTree Outlook 2019: Europe

            Webmaster

            WisdomTree Outlook 2019: Emerging Markets

            Webmaster