Spanish Banks Special.


Europe set for slight higher start. Macro eyes on US MBA mortgage applications + wholesale inventories.


It’s still raining…
I bought a new road bike, but it’s still grey and raining out there… It feels the same on the markets. Risk off mode in full on (Risk on is full off?)

The US economy seems to have slowed back with poor job numbers, poor non manufacturing ISM and GDP. There are some tiny spots of hope as the US Jobs Openings and Labor Turnover looks better and the NFIB Small Business Optimism Index also rose. But the lingering concerns on US growth and Europe will continue to act as a ceiling on market performance. The US earnings worked as a buffer as numbers were overall better than expected and the reporting season is now over (443 companies out of 500 have now reported), but kicks off the Apr-end reporting period Wed night May 9.

I won’t comment on French elections, but as the FT says this morning, Hollande’s plan for growth is somewhat different from what Mr Draghi has in mind…
In Italy, the refinancing program is far from over as suggest a note published by RBS and mentioned in l’Agefi this morning. Italy which has to print €227bn this year is only at a third of this. Spain and France are half way.

Liquidity will continue to flow, rates will remain low for long and at some point we should see inflation coming back. GS expects further monetary easing at the June 19-20 FOMC meeting despite contrary noises from Fed officials.

The next thing to look at are concerning the Spanish banks (see below) and the Chinese Apr trade balance (wed night?) and CPI/PPI (both Thurs night). Keep in mind sentiment towards the country’s growth prospects has brightened of late and investors will want to see the Chinese trade figures point to continued improvement.


more on the subject by ZeroHedge here: Spain Appears Unsure What A “Bank Bailout” Means | ZeroHedge

Spain: too much already… But still not enough.
I don’t know Cheuvreux research very well, but the intro page by the head of research of this 90 page-report is clear and to the point. More growth, a bit more flexibility on the deficits is what he seems to ask for. Worth a read.

GS (Omahen) Spain: Banks
Further measures, May 11 now the key date
The Spanish governments that further measures and help to the Spanish banks should be announced soon, GS expects announcements during the next cabinet meeting (May 11). GS expects the Spanish banks losses to amount to €58bn, translating into a €7-23bn capital gap on 2 years. These numbers are different from the ones calculated under the Royal Decree Law.
This is an interesting piece as it tries to value the NPL of the banks and a NAV for real estate assets… GS still prefers BBVA and SANTANDER (convinction Buy).

MS (Serrano) Spanish Banks
Assessing the Capital Needs.
In this piece, MS’ analysts estimate at €45-55bn the additional capital needed to absorb the upcoming losses uner MS stress tests. These include writing off half of commercial real estate loans and a massive loss on corporate loans. This is below market estimates and manageable as long as a credible frameworks is provided.
MS lists the potential options or requirements for the program to work and they remain cautious on Spanish banks with BBVA (OW) as the main beneficiary of more decisive action.

OTHER STUFF (Martin Wolfe) What Hollande must tell Germany


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