Daily Brief – EU capital markets

EU capital markets

As we have written before, for the EUR to become a global reserve currency requires a number of pre-conditions which largely stem from the establishment of an integrated EU Capital Market. Brussels is accused of dragging its feet if not actually being obstructive so the 6 largest countries have banded together to form the E6 to push the project forward. Germany, France, Italy, Spain, Netherlands, and Poland seek the creation of a single market for capital including investments and savings to allow money to flow freely across borders without regulatory barriers. The proposal gives ESMA – the European Securities and Markets Association regulatory powers which almost certainly explains Brussels’ reluctance since by definition that means a reduction of their own pan-European regulatory dominance. However, before getting ahead of themselves the E6 need a further 9 countries to sign up to the Project to achieve the requisite 65% to take it forward. 

EUR/USD 1.1653.

EU Interest Rates

The forthcoming ECB meeting on June 11 is expected to be followed by a 25bp hike since inflation in France, Italy, and Spain is flashing red on the economic dashboard. Perversely, German inflation is not showing the same “stubbornness” but that could be down to simply a lag effect given that Germany is exposed to the same challenges as the other larger EU economies due to the US-Iran war and the consequent energy price hikes. Separately, it just shows how the Central Bank shtick has changed in the past 5 years since the pandemic: beforehand, central bankers were at pains to signal interest rate trajectories and were met with howls of market protest when they got it wrong post Covid when inflation rocketed. Last week, Italian Central Bank Governor Fabio Panetta acknowledged the likelihood of the need for a June rate hike but went on to say that “not being tied to a predetermined path remains essential.” Perversely, FP and his colleagues appear to have forgotten the age-old dictum that says that markets do not like uncertainty.

EUR/GBP 0.8652.

Summer of Sex

In case it’s passed you by, this was a political health campaign launched by Labour MP Samantha Niblett which advocates “open, inclusive, and lifelong sex education to destigmatize sexual health across all life stages” which unsurprisingly given its less than catchy title has proven somewhat flaccid . In case you are confused with 1969’s Summer of Love, it is a far cry from those liberated times and since STIs have reportedly hit record levels in the UK, such love-ins should be treated at arm’s length or certainly with circumspection. For those brave hearts intent on planting the Union Jack in Europe this summer, the stats for STI’s on Le Continent are the same if not worse there when it comes to STIs.

GBP/USD 1.3467.

Bitcoin

Never say never when it comes to Popular Delusions and The Madness of Crowds but as the silly season kicks off officially today on this the first day of June, it is worth (briefly) noting that Forbes carried a story over the weekend puffed by a crypto billionaire named Mark Cuban. The synopsis is as follows: US Government continues to borrow and print Dollars and the world moves to Bitcoin which goes to USD 1 million. While acknowledging that that trade has not started well with Bitcoin falling 30% in the past 12 months, crypto zealots are undaunted in their view that Bitcoin will go to USD 1 million which they describe as the easy part. Yes, you guessed it: the hard part is knowing when. It was ever thus.

EUR/JPY 185.84.

Mrs Robinson

This day in 1968, the pop pixie American duo of Paul Simon and Art Garfunkel notched up firstly a Number One and then many other plaudits given that this song was adopted for the cult film, The Graduate which was released. In those days the film starring Dustin Hoffman and Ann Bancroft was rated X which meant that cinema viewers had to be aged a minimum of 16. Often jointly billed with Easy Rider starring Peter Fonda and Denis Hopper, both made a great reason to bunk off school for the afternoon.

And here’s to you, Mrs. Robinson
Jesus loves you more than you will know
Whoa, whoa, whoa
God bless you, please, Mrs. Robinson
Heaven holds a place for those who pray
Hey, hey, hey
Hey, hey, hey

We’d like to know a little bit about you for our files
We’d like to help you learn to help yourself
Look around you, all you see are sympathetic eyes
Stroll around the grounds until you feel at home

And here’s to you, Mrs. Robinson
Jesus loves you more than you will know
Whoa, whoa, whoa
God bless you, please, Mrs. Robinson
Heaven holds a place for those who pray
Hey, hey, hey
Hey, hey, hey

Hide it in a hiding place where no one ever goes
Put it in your pantry with your cupcakes
It’s a little secret, just the Robinson’s affair
Most of all, you’ve got to hide it from the kids

Coo, coo, ca-choo, Mrs. Robinson
Jesus loves you more than you will know
Whoa, whoa, whoa
God bless you, please, Mrs. Robinson
Heaven holds a place for those who pray
Hey, hey, hey

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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