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The ECB will be more flexible in buying debt. Accelerates new anti-crisis tool – Commitments



The ECB will be more flexible in buying debt.  Accelerates new anti-crisis tool - Commitments

The European Central Bank (ECB) will take action to contain the turmoil in European debt markets. After an emergency meeting on Wednesday, the monetary authorities announced that they would be buying debt more flexibly and would also accelerate the implementation of a new “anti-fragmentation” tool.

“The Governing Council has decided that it will be flexible in reinvesting the expected repayments of the PEPP portfolio in order to keep the monetary policy transmission mechanism functioning, which is a precondition for the ECB to fulfill its mandate. price stability,” the central bank said in a statement.

In a Pandemic Emergency Procurement Program (PEPP) envelope 1.85 billion euros to buy eurozone public and private debt to try to stop the impact of the pandemic on the economy. Net purchases ended in March and the reinvestment phase of maturing amounts continues. These are values ​​that the ECB now wants to use purposefully.
Along with this policy measure, they also decided to “authorize the relevant committees of the Eurosystem, together with the services of the ECB, to expedite the completion of the development of a new anti-fragmentation instrument for consideration by the Governing Council.”

The ECB’s announcement comes at a time when markets are in turmoil, with investors seeing a general sell-off in major global markets and large increases in interest rates on sovereign debt in the euro area.

As the central bank itself acknowledges, in a statement released this Wednesday, The pandemic has left persistent vulnerabilities in the eurozone economy that are actually contributing to the uneven transfer of our monetary policy normalization across different jurisdictions.”

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As such, “as the gradual process of monetary policy normalization began in December 2021, the Governing Council has committed itself to acting against the risks of renewed fragmentation.”

In press conferences following the ECB’s last two meetings, one in April and the other last week, monetary authority president Christine Lagarde has already stressed that “the ECB has the tools to fight fragmentation and will introduce new tools if necessary.” , emphasizing also the need for flexibility when the time calls for it.

Faced with reporters in April on rising eurozone prices and yields, the ECB president already recalled that “flexibility has served us well” in the past and provided new tools to contain the impact of escalating inflation and deteriorating interest rates on debt were among the options for monetary authorities. .

At the latest policy meeting, the ECB pointed to a 25 basis point hike in interest rates as early as July and opened the door for more growth in September, also confirming regular acquisition program (APP) net purchases end in July.

After the monetary authorities released this statement, interest rates on sovereign debt in the euro area fell significantly, and major European markets strengthened.

Germany’s 10-year bond yield, the region’s benchmark, is subtracted 13.6 basis points to 1.609%. Interest on Italian debt with the same maturity recorded one of the largest declines in the eurozone, falling 36 basis points to 3.804%, trailing only the yield on Greek debt, which fell 42 points to 4.248%. In turn, the 10-year Portuguese debt yield follows this trend and declines by 24.7 basis points to 2.844%, the biggest drop since March this year.

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In the stock market, the main European markets gained strength, with the exception of Lisbon, which account for more than 1%. The European benchmark Stoxx 600 added 1.20%, the Spanish IBEX added 1.24% and the German DAX added 1.25%. London rose by 1.20%, Amsterdam by 1.25% and Milan by 2.38%. The PSI value is only 0.67%.

(News updated at 14:04 to reflect market reaction).

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ECB hands tied to fight housing boom, expert warns



ECB hands tied to fight housing boom, expert warns

The European Central Bank (ECB) has its hands tied because its monetary policy tools are not enough to deal with a house price boom, John Mullbauer, a professor at the University of Oxford, warns in Real Estate Booms and Busts. .: Implications for Monetary and Macroprudential Policy in Europe”, released as part of the ECB Forum, which continues this Wednesday in Sintra.

The study concludes that there is little room for the ECB to “go against the tide” due to the heterogeneous environment among its 19 member states and therefore calls for a change in the models applied by the Monetary Policy Council led by President Christine Lagarde.

For a specialist, there is a direct relationship between the transmission mechanisms of monetary policy and real estate purchase and rental prices, which, in turn, indicates signs of a country’s economic health.

The paper highlights that financial crises are often preceded by easing lending standards and a subsequent increase in lending, as well as an increase in loans, accompanied by a sharp increase in property prices.

And at the epicenter of the housing crisis is the banking crisis. “There is an important relationship between lending conditions and non-performing loans (non-performing loans, i.e. non-performing loans). NPLs are important components of credit cycles. [e consequentemente] banking crises,” explains John Mullbauer.

NPLs are a problem for banks for several reasons. On the one hand, the lending institution may lose some or all of the funds it has loaned and no longer have the expected income from collecting interest and fees.

“This is a good paper. It is necessary to know how to calibrate monetary policy in moments of calm and more agitated moments. [para o mercado]”, comments Giovanni Del’Ariccia during the forum.

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The deputy director of the International Monetary Fund’s “research” department also insisted on distinguishing between what he classified as “good” and “bad” housing booms, citing growth or slowdown in employment in various sectors as a “good measure”. ., from construction to “communal services” between these two phenomena.

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The cost of living. Lisbon falls in the table and behind Madrid and Barcelona



The cost of living.  Lisbon falls in the table and behind Madrid and Barcelona

The spread of telecommuting and flexible work, the war in Ukraine, currency fluctuations and widespread inflation are having a significant impact on employee pay, which could have serious implications for companies in the global battle for talent. Conclusion from the Cost of Living 2022 study launched by a consulting company Mercer, which estimates the cost of living in 227 world cities for expatriates based on a pooled analysis of the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, home and entertainment. Leadership again belongs to Hong Kong. Zurich (2nd), Geneva (3rd), Basel (4th) and Bern (5th) round out the top five most expensive places in the world for expats.

Thiago Borges, business leader at Mercer Portugal, said: “The volatility caused by COVID-19 and exacerbated by the crisis in Ukraine has added to global economic and political uncertainty. This uncertainty, which goes hand in hand with significant increases in inflation in much of the world, worries expatriates about their purchasing power and socioeconomic stability.”

Foreigners paid using the origin approach usually receive a living wage allowance to maintain their purchasing power in destination countries. This subsidy is calculated by applying a cost-of-living index to a portion of workers’ net wages (their “disposable income”, i.e. the amount they spend on goods and services used daily in their place of residence).

Both inflation and exchange rate fluctuations directly affect the purchasing power of workers working outside their country of origin. The rise of remote and flexible work has also forced many employees to rethink their priorities, work-life balance and where they live. These conditions could have serious implications for companies that need to rethink their mobility strategy to stand a chance in the global battle for talent. On the other hand, this situation also provides cities with an opportunity to attract foreign investment.

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“For organizations, the financial well-being of employees is a key factor in their ability to attract and retain the best talent, and with reliable and accurate data, organizations can define clear strategies for structuring their employee mobility packages. International players in unstable times”. , added Thiago Borges.

He adds: “Working and economic conditions around the world are evolving faster than ever before. Companies must carefully navigate international contract costs/packages during times of uncertainty and adapt to the new world of work to ensure business sustainability and a sustainable future for their expatriates. “, also noting that “companies need market intelligence and clear strategies to put into practice expatriate mobility packages that are competitive in uncertain times while ensuring the financial well-being of their employees, as well as business efficiency, transparency and fairness,” it said. Marta Diaz, Head of Compensation at Mercer Portugal, holds key talent,” he added.

Mercer cost-of-living data helps organizations understand the importance of tracking currency fluctuations and assessing inflationary and deflationary pressures on goods, services and housing across regions of operation. The data also helps define and maintain compensation packages for employees in international operations. In addition, the cost of living in a location can have a significant impact on its attractiveness as a place for talent and influence the decision of organizations to choose a location to expand and transform their geographic footprint.

TOP 10 most expensive

Mercer’s Cost of Living 2022 study places Copenhagen (Denmark) 11th in the world rankings, London (UK, 15th), Vienna (Austria, 21st) and Amsterdam (Netherlands, 25th) , as well as other well-known cities in Western Europe, in addition to the aforementioned Swiss cities of Zurich, Geneva, Basel and Bern.

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The most expensive city in Eastern Europe is Prague (Czech Republic), which ranks 60th out of 227 cities. It is followed by Riga (Latvia, 79th), Bratislava (Slovakia, 105th) and Tallinn (Estonia, 140th). The cheapest city in Eastern Europe is Sarajevo, Bosnia and Herzegovina, ranked 209th.

In turn, Lisbon, which has dropped 26 positions in the ranking, is now below the middle of the table of European cities, yielding to cities such as Madrid or Barcelona.

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Tech sell-off throws Wall Street to the ground – Bolsa



Wall Street is drowning in recession fear.  S&P 500 at 14-month low - Stock Exchange

Major stocks across the Atlantic closed in negative territory and technology pulled Wall Street into the red. The report, which showed Americans more pessimistic about the outlook for the economy, didn’t help.

The Dow Jones industrial index fell 1.56% to 30,946.99 points, while the Standard & Poor’s 500 fell 2.01% to 3,821.55 points.

For its part, the Nasdaq Composite Technology Index fell 2.98% to 11,181.54. Despite this, it was the downfalls of giants like Amazon and Tesla that mostly took place.

Operators have taken another “reality shower” following a disturbing consumer confidence report, Bloomberg reports. The barometer of consumer expectations for economic development, reflecting a six-month forecast, fell to almost a decade’s low, discouraging investors.

The data comes at a time when analysts are still optimistic about corporate earnings in the quarter that is about to end, as record net profits are forecast for the S&P 500 group of companies.

However, the bleak economic outlook pushed Wall Street’s major indexes into negative territory after gaining about 1%.

The quarterly recovery in asset portfolios also caused volatility in Tuesday’s session.

For strategists at Goldman Sachs, earnings forecasts for companies this quarter are overly optimistic, which the bank says puts stocks at risk of further losses as Wall Street analysts cut their estimates.

Max Kettner, strategist at HSBC, also believes that stocks are not yet reflecting the impact of a potential recession and corporate results expectations are likely to be revised down.

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