Market chatter: down the road to a banking union and much more

The European Parliament passed three crucial reforms to finally pave the road for the banking union. Firstly, the Single Resolution Mechanism, which includes a €55bn (gathered with banks contribution) for broke entities closure, to avoid taxpayers setback. Also, the reform of Deposit Guarantee Schemes Directive, which will force banks to finance national funds up to €100,000. And then the bail-out and Resolution Directive, which sets stokeholders and creditors as first subjects to asume losses in the event of a struggling entity.

Also, market makers are looking at the following issues:

SABADELL. The Bank of Spain achieved less tough criteria for Spanish banks in upcoming stress test, setting them closer to 2012 test requirements. This time Spain’s unemployment expected level in stressed scenario would get lower from about 32% to 30% (22% in July’11 and 27% in 2012 Oliver Wyman and Roland Berger). Besides, stressed level GDP in 2016 would be reduced to -5%. Good news according to Sabadell, but still to be confirmed. Analysts highlight that, seemingly, there will be coherence and homogeneity with the other European banks. The goal of reaching an 8% Core Tier 1 is maintained. Spanish entities must submit housing assets review and doubtful assets before July 31.

SANTANDER. Fitch reasserted Repsol rating (Baa3 e, BBB- e, BBB- p) and improved outlook to positive. The agency appreciated prospects of Repsol receiving Argentina’s guaranteed bonds worth $6mm for YPF expropriation. Besides, Fitch pointed out rating will be boosted when bonds are sold ($3mm) and additional rises will come depending on how Repsol uses obtained capital: acquisitons financing, investment, debt reduction and so on.

ACF. Ferrovial, ACS and FCC will enlighten Madrid for €770M in the next eight years, renewable for two more years. / Abertis and investmend fund, exempted from launching a tender offer for Brazilian company Arteris.

CORTAL CONSORS.– Tomorrow Chinese 1Q14 GDP will be released. A decline of year-on-year rate is expected, adding up to 7.3%. Government goal is 7.5% and the prior term GDP was 7.7%. Despite this fact, Chinese PM, Li Keqiang, showed confidence in economy and ruled out short-term measures to correct economic imbalances. Analysts highlight the drop of business confidence seen in PMIs.

AFI. Geopolitical tensions, strong recovery and deflation probability are behind the  the increasing volatility of the financial markets. Analysts expect a 1% inflation this year in the Eurozone, that will speed up in 2015-2016.

LINK. Spain’s overall public debt rose to €987.94bn in February, a new record, equivalent to 96.5% of GDP. Government forecasts it to be about 98.9% this year. – According to the General Council of Notaries, 26,602 houses were sold in February. It represents a notable y-o-y growth of 39.8%. This organization justifies the rise on the grounds of the elimination of the deduction in personal income tax for buying a residence in 2012 but also reflects an stabilization of monthly sales. Prices accumulate for two months in a row, which might anticipate a change of trend, or at least the end of declining spiral.