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The Corner contextualizes the EU’s economy from Spain with exclusive analysis from market leaders.

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Q2 Earnings preview – easier FX, sequentially a bit better growth and hurdle rate has come down

World economy

MADRID | By The Corner | Yet again this year equities have moved higher despite negative EPS revisions. While JPMorgan started the year with a constructive outlook on equity markets, they believed that for the 4th year in a row IBES projections would need to be downgraded. The investor concern now is that negative revisions could continue into H2, similar to the trend observed in Europe in each of the last three years.

In Europe

What if we are in a 2% growth world?

MADRID | By The Corner | Experts at JPMorgan are less worried about near-term disturbances and flows and more about the medium-term outlook for economic growth. Over the past three years, the world economy has grown only at a 2.5% pace, below potential and thus not able to make up for what we lost in the recession. Each year, they keep forecasting that growth will rise to a 3% handle, but have been steadily disappointed.

In Europe

Morgan Stanley: “Portugal is now a good buying opportunity”

MADRID | By The Corner | Experts at Morgan Stanley consider that Portugal is now a good opportunity due to its current technical levels. Since the Espirito Santo incident, the PSI20 has plummeted by 17.5%, but these analysts see a potential technical recovery of 10-12%. The Portuguese treasury has covered its entire financing needs for 2014 and is now raising funds for 2015.

Markets

These are UBS’ rental growth forecasts for retail and office by country

MADRID | By The Corner | Real estate values are a function of cap rates (property yields) and income growth. In the tables following UBS illustrates their team’s rental growth forecasts for retail and office by country. The majority of markets are showing a modest improvement in rental growth with estimates more optimistic for San Franscisco and London office.

BES
In Europe

Sovereign implications of the Espirito Santo saga

LONDON| By Barclays’ analysts | From the point of view of the banking system as a whole, the sovereign financial implications of Espirito Santo’s affair are rather limited. 
The sovereign has a relatively comfortable cash position and sufficient bank recapitalization funds. Specifically, the government estimates gross funding needs for 2014 of EUR13bn. At the same time, economic activity in Portugal is to expand by nearly 1% this year.

Mexico_capex
World economy

Mexico: ten-year, €18bn investment opportunity for EU Utilities

LONDON| By UBS analysts | Mexico is the eleventh largest country in the world by population. Yet, when it comes to energy infrastructure and consumption per capita, it ranks poorly especially compared to developed, western regions. The energy policy recently introduced provides a major capex opportunity: about €100bn over the coming ten years. Estimates for EU utilities reach investments of €18bn, which would allow for a potential net income increase of €1.1bn. In this context, most of the companies eyeing the region are from Southern Europe, with Enel and Iberdrola remaining as the sector top picks.

Tax breaks
World economy

Where does $2 Trillion in subsidies for the wealthiest hide? Capital gains tax breaks

WASHINTON, DC via Next New Deal |  By Harry Stein | Nobel-winning economist Joseph Stiglitz takes a hard look at subsidies for investment income. He advocates taxing capital gains and dividends at the same rates as ordinary income. Under current law, the federal government will deliver an estimated $1.34 trillion in subsidies to investors over the next 10 years in the form of reduced tax rates for capital gains and dividends. Sixty-eight percent of that money will go to the top 1 percent. Stiglitz argues that there is “no justification for taxing those who work hard to earn a living at a higher rate than those who derive their income from speculation.”