{"id":1382,"date":"2014-04-24T12:00:00","date_gmt":"2014-04-24T12:00:00","guid":{"rendered":"http:\/\/starthostunlimiteddmffassi-ss.stackstaging.com\/bondworld.ch\/home\/sites\/20b\/7\/760c69a11c\/public_html\/investmentworld.ch\/index.php\/2014\/04\/24\/viewpoint-the-recovery-in-the-euro-area-seems-to-be-continuing-as-expected\/"},"modified":"2014-04-24T12:00:00","modified_gmt":"2014-04-24T12:00:00","slug":"viewpoint-the-recovery-in-the-euro-area-seems-to-be-continuing-as-expected","status":"publish","type":"post","link":"https:\/\/www.investmentworld.eu\/ch\/viewpoint-the-recovery-in-the-euro-area-seems-to-be-continuing-as-expected\/","title":{"rendered":"Viewpoint: The recovery in the euro area seems to be continuing as expected"},"content":{"rendered":"

The recovery in the euro area advances in line with ECB projections and so far there is no upside. This week, preliminary inflation estimates should point to a rise back from last March\u2019s lows, and the trend of inflation in the next 6\/12 months will remain strongly dependent on the evolution….<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

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of the euro\u2019s exchange rate. US data due out this week (see below) could trigger a correction. Should this not be the case, the ECB might signal it stands ready to cut the refi rate in June to 0.10%. While the probability of a quantitative easing programme has increased following the April meeting, Draghi from Amsterdam clarified that a broad based asset purchase programme (including purchases of sovereigns) could be introduced only in the circumstance of significant downward revisions to the ECB\u2019s growth and inflation forecasts for 2015-2016.<\/strong>
The recovery in the euro area seems to be continuing as expected.<\/strong> Following the March drop, probably associated to the Ukraine crisis, the composite euro area PMI rose back to 54.0 from 53.1, a high since 2011 and beating our above Consensus estimates. The improvement was largely concentrated in the services sector. The euro area manufacturing PMI rose by only three tenths, staying below its January 2014 level. The April rise was once again driven by Germany, where the composite PMI index returned to 56.3, in line with February. The IFO index also recovered the previous month\u2019s decline, and was back at 111.2 from 110.7 the previous month, beating consensus estimates. More in detail, the 6\/12-month expectations index rose by 0.9 points to 107.3, a high since 2010. The current situation index was broadly stable at around 115.3, well above the long-term average. IFO survey data broken down by sector confirm that activity increased more in services, and in particular in wholesale, than in manufacturing. Thus, the German recovery seems to be driven not only by exports, but probably also by accelerating domestic demand. One element of lingering concern which emerges from April PMI surveys, and from the French INSEE survey, is the persisting weakness of the French economy, which seems unable to latch on to the recovery being experienced by the rest of the euro area. After a brief rise above 51, the French PMI indices have returned to levels close to the stagnation threshold, and the INSEE index has been hovering around 100 for six months in a row. This week, the EU Commission\u2019s economic sentiment index, and the Italian ISTAT index, will complete the picture on the health of the euro area economy, shedding light in particular on peripheral countries. We expect progress to be confirmed in Spain, which based on the Bank of Spain\u2019s latest estimates may have achieved +0.4 q\/q growth in the winter months, from +0.2% q\/q at the end of 2013.
On the whole, the data so far available suggest that the recovery trend in the euro area remains on track, despite the March pause. The cyclical recovery seems to be also extending to domestic demand in Germany and to the peripherals, undoubtedly a positive factor for the resilience of the recovery. Economic data are compatible with GDP growth of between 0.3% q\/q and 0.4% q\/q in the euro area in the central months of this year, although for the time being they do not suggest upside risks to our baseline growth scenario for 2014, which coincides with the ECB\u2019s.<\/strong>
The fact that the cycle is evolving in line with forecasts removes part of the risks weighing on the trend of consumer prices, as the narrowing of the output gap should also slacken downside pressures on wages and domestic prices. However, the unprecedentedly wide output gap, and not only its change, may have a more pervasive impact on the trend of domestic prices, in particular in peripheral countries. The other decisive factor for consumer prices trend in the next 6\/12 months is the exchange rate, which based on our estimates, not far from consensus, should drop from its current levels into the 1.34 area by the beginning of the summer. US data due out in the week could trigger a correction. Should this not be the case, we believe that at the May meeting the ECB will at least signal its intention to resort to standard measures, such as<\/strong> a refi rate cut to 0.10% in June.<\/strong> While the probability of a quantitative easing programme has increased following the April meeting, Draghi from Amsterdam clarified that a broad based programme (including purchases of sovereigns) could be introduced only in the circumstance of significant downward revisions to the ECB\u2019s growth and inflation forecasts for 2015-2016.<\/strong><\/p>\n

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Appendix
Analyst Certification<\/strong>
The financial analysts who prepared this report, and whose names and roles appear on the first page, certify that: (1) The views expressed on companies mentioned herein accurately reflect independent, fair and balanced personal views; (2) No direct or indirect compensation has been or will be received in exchange for any views expressed. Specific disclosures: The analysts who prepared this report do not receive bonuses, salaries, or any other form of compensation that is based upon specific investment banking transactions.<\/p>\n

Important Disclosures<\/strong>
This research has been prepared by Intesa Sanpaolo S.p.A. and distributed by Banca IMI S.p.A. Milan, Banca IMI SpA-London Branch (a member of the London Stock Exchange) and Banca IMI Securities Corp (a member of the NYSE and NASD). Intesa Sanpaolo S.p.A. accepts full responsibility for the contents of this report. Please also note that Intesa Sanpaolo S.p.A. reserves the right to issue this document to its own clients. Banca IMI S.p.A. and Intesa Sanpaolo S.p.A. are both part of the Gruppo Intesa Sanpaolo. Intesa Sanpaolo S.p.A. and Banca IMI S.p.A. are both authorised by the Banca d’Italia, are both regulated by the Financial Services Authority in the conduct of designated investment business in the UK and by the SEC for the conduct of US business.
Opinions and estimates in this research are as at the date of this material and are subject to change without notice to the recipient. Information and opinions have been obtained from sources believed to be reliable, but no representation or warranty is made as to their accuracy or correctness. Past performance is not a guarantee of future results. The investments and strategies discussed in this research may not be suitable for all investors. If you are in any doubt you should consult your investment advisor.
This report has been prepared solely for information purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any financial products. It should not be regarded as a substitute for the exercise of the recipient\u2019s own judgement.
No Intesa Sanpaolo S.p.A. or Banca IMI S.p.A. entities accept any liability whatsoever for any direct, consequential or indirect loss arising from any use of material contained in this report.
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Intesa Sanpaolo S.p.A. has formalised a set of principles and procedures for dealing with conflicts of interest (\u201cResearch Policy\u201d). The Research Policy is clearly explained in the relevant section of Banca IMI\u2019s web site (www.bancaimi.com).
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Valuation Methodology<\/strong>
Trading Ideas are based on the market\u2019s expectations, investors\u2019 positioning and technical, quantitative or qualitative aspects. They take into account the key macro and market events and to what extent they have already been discounted in yields and\/or market spreads. They are also based on events which are expected to affect the market trend in terms of yields and\/or spreads in the short-medium term. The Trading Ideas may refer to both cash and derivative instruments and indicate a precise target or yield range or a yield spread between different market curves or different maturities on the same curve. The relative valuations may be in terms of yield, asset swap spreads or benchmark spreads.

Coverage Policy And Frequency Of Research Reports<\/strong>
Intesa Sanpaolo S.p.A. trading ideas are made in both a very short time horizon (the current day or subsequent days) or in a horizon ranging from one week to three months, in conjunction with any exceptional event that affects the issuer\u2019s operations. In the case of a short note, we advise investors to refer to the most recent report published by Intesa Sanpaolo S.p.A\u2019s Research Department for a full analysis of valuation methodology, earnings assumptions and risks. Research is available on IMI\u2019s web site (www.bancaimi.com) or by contacting your sales representative.<\/p>\n

Source: BONDWorld – Intesa Sanpaolo \u2013 Research Department<\/p>\n","protected":false},"excerpt":{"rendered":"

The recovery in the euro area advances in line with ECB projections and so far there is no upside. This week, preliminary inflation estimates should point to a rise back from last March\u2019s lows, and the trend of inflation in the next 6\/12 months will remain strongly dependent on the evolution….<\/p>\n","protected":false},"author":2,"featured_media":3571,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"telegram_tosend":false,"telegram_tosend_message":"","telegram_tosend_target":0,"footnotes":"","_wpscp_schedule_draft_date":"","_wpscp_schedule_republish_date":"","_wpscppro_advance_schedule":false,"_wpscppro_advance_schedule_date":"","_wpscppro_dont_share_socialmedia":false,"_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_google_business_share_type":"","_selected_social_profile":[],"_wpsp_enable_custom_social_template":false,"_wpsp_social_scheduling":{"enabled":false,"datetime":null,"platforms":[],"status":"template_only","dateOption":"today","timeOption":"now","customDays":"","customHours":"","customDate":"","customTime":"","schedulingType":"absolute"},"_wpsp_active_default_template":true},"categories":[50],"tags":[],"class_list":["post-1382","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-weekly-analysis"],"blocksy_meta":{"styles_descriptor":{"styles":{"desktop":"","tablet":"","mobile":""},"google_fonts":[],"version":6}},"_links":{"self":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1382","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/comments?post=1382"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1382\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media\/3571"}],"wp:attachment":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media?parent=1382"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/categories?post=1382"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/tags?post=1382"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}