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Russia: the real effects of sanctions

Markets

MADRID | The Corner | The EU is considering harder sanctions on Russia after the downing of a Malaysian airliner in Ukraine. What are the effects of the current and potential further sanctions on the Russian economy and, in general, on Emerging Markets (EM) sovereign external debt? Co-CIO Deutsche Asset & Wealth Management’s Asoka Wöhrmann weighs in. (Illustration: Iain Green at The Scotsman)

Markets

European banks: How concerned should they be of Russia-Ukraine conflict?

MADRID | The Corner |  The escalation of the crisis in Ukraine has led to sharp asset prices and currency volatility with capital outflows from the region, particularly from Russia and of course Ukraine itself. UBS points out that the European banks within their coverage present “a meaningful exposure: the loans in Russia and Ukraine amount to over €60bn before taking into considerations any investment banking activity.”

exposure european banks
World economy

Can’t live without Russian gas (yet)

MADRID | The Corner | The EU released on Wednesday a target to improve energy efficiency by 30% as part of a package of climate and energy policy for 2030, and a measure that some considered “a gift to Mr Putin.” The truth is Europe says it is on the verge to impose sanctions to Russia for the downing of Malaysia Airlines Flight 17, although it has been reluctant to use US-stule sanctions in the past due to its high dependence on Russian gas -see this chart by Statista which shows the deep interconnection-. But there seems to be a way for the Old Continent to wear off any gas cuts if things gets really nasty: liquefied natural gas (LNG). For countries like Spain, it would be a golden opportunity. 

europe gas
In Europe

Greece: Drop ‘til you shop

ATHENS | By Nick Malkoutzis | It seems slightly surreal to be discussing whether shops in Greece should open on Sunday when household disposable income has dropped by around 30 percent since 2010 and we have seen the emergence of consumers of need rather than choice. Nevertheless, this is the debate that has been prompted by a new law allowing stores in 10 areas of Greece to open every Sunday.

greece
In Europe

Credit in Europe – is it finally set to turn?

LONDON | The Corner | The winners in the “race for recovery” are those who get credit flowing again. In their Wednesday comment, UBS Global Macro Team points out that “the key to recovery coming out of a credit crunch is to get credit flowing again: the US and, to a lesser degree, the UK managed this in the early years following the financial crisis, but the Eurozone is still grappling with the issue. We think this one factor is the best explanation for the outperformance of US equities over Europe post-crisis. The S&P 500 is up 190% from the March 2009 lows, whilst Europe is up 120%.”

Credit flowing
Markets

Is QE good for emerging markets?

MADRID | The Corner | The idea that quantitative easing has been helping equities of the EM has been widely discussed: many believe the liquidity generated by QE is used to play the “carry”, and that’s why the end of QE and the rates rises may lead to the withdrawal of those positions. But that’s not so clear. 

EM and QE
Markets

The idea that central banks “need a financial stability mandate” keeps coming back

SAO PAULO | By Marcus Nunes via Historinhas | Even in Sweden, where 4 years ago the Riksbank decided there was “too much debt” and raised rates to “calm people down”. That, as we know, ended in grief and with the head honcho being outvoted (first time that happens) in the last policy committee meeting, when the policy rate was lowered by 50 basis points to 0.25%.

Sweden central bank