Eurozone Inflation Above 2%
Eurozone inflation accelerated beyond ECB’s target of 2% increasing expectations that rates will be kept on hold during next week’s meeting
- CPI for the month of August came out at 2.1% year-on-year in line with expectations and above 2% registered last month – Core CPI at 2.3% meeting estimates
- On the positive side gains in service prices eased to 3.1%
- Report allows ECB to take another break in lowering interest rates come next week’s meeting given both the current pace of inflation and the economy’s ability to withstand higher US trade levies – rate was left at 2% already during last meeting in July
- Eurozone data followed mixed reports from across the region in past weeks – inflation figures undershot in France, Italy and Spain whilst were above forecast in Germany
From Green Bond to Defense Bond
Last Thursday a French bank sold the first ever “Defense Bond” designed to finance Europe’s defense spending
- The functioning is similar to green bonds, but in this case the amount received will be used to fund military firms and not environmentally-friendly projects
- BPCE priced a 5 year note of 750 million Euro receiving over 2.8 billion Euros in interest driving final spread 85bp from initial price thoughts of 110bp
- The bond comes with a commitment that BPCE will publish an annual allocation report verified by an external reviewer (as per green debt reporting standards)
- The security will not be qualified as a “sustainable bond instrument” under widely used ICMA guidelines as ethical investors remain concerned on where the weapons end up – it remains unclear if investors with sustainable mandates participated
Interesting pattern for Equities
An analysis of the performance of the S&P 500 index during periods of pause and resumption of rate cuts reveals an interesting pattern
- According to data from Goldman Sachs research, equities in general do well in an environment following a pause and a cut
Gold Touches Record High again
Gold hit a record high to top $ 3,535 as the prospect of US interest-rate cuts and growing concerns over the Federal Reserve’s future lent fresh impetus to the multiyear rally in precious metals
- The precious metal has risen more than 34% this year, making it one of the best-performing major commodities, with expectations the US central bank will lower interest rates this month
- An escalation in President Donald Trump’s attacks against the Fed this year has become the latest cause for investor alarm, with concerns over the central bank’s independencethreatening to erode confidence in the US
- Investors have piled into silver-backed ETFs, with holdings expanding for a seventh consecutive month in August, drawing down stockpiles of freely available metal in London and leading to persistent tightness in the market
Disclaimer
The information, products, data, services and instruments contained or described in this publication are for information purposes only and constitute neither an advertisement or recommendation nor an offer or solicitation to buy or sell any product.
The financial products described in this publication are not suitable for all investors. The information contained in this publication does not represent any financial, legal, tax and/or other recommendations. Any investment or other decision should not be made solely on the basis of this document. Before making any investment decision, it is recommended that you seek a thorough examination of your situation and the advice of a qualified specialist.
Although the information contained in this document has been compiled by PKB on the basis of or with reference to sources, materials and systems believed to be reliable and accurate, PKB does not guarantee its currency, accuracy or completeness.
PKB accepts no liability, to the fullest extent permitted by applicable laws and/or regulations, for loss or damage of any kind arising directly or indirectly from the content, accuracy, completeness or otherwise of the content or any third party content referred to in this publication.
The analyses and forecasts contained in this publication are based on assumptions, estimates and hypothetical models which may prove to be incorrect and therefore lead to substantially different results.