Flemming J. Nielsen
Danske Bank A/S
Market movers today
With a very light calendar focus will be on the fate of Banco Espirito Santo (BES) in Portugal. A statement from BES issued last night is expected to pave the way for resumption of trading in the BES stock today.
There is a number of Fed speeches in the calendar in connection with a Fedorganised conference in Jackson Hole. Super-hawk Charles Plosser (voter, hawk) will moderate a debate this afternoon and Charles Evans (non-voter, dove) and Dennis Lockhart (non-voter, hawk) will be speaking about monetary policy this evening. Lockhart and Evans are interesting because they will be voting members of FOMC next year.
The Q2 earnings season picks up pace with the first major financial company, Wells Fargo, reporting Q2 earnings before US markets open today.
Selected market news
Global stock markets yesterday sold off on the back of concerns about the health of Portugal’s second largest bank, Banco Espirito Santo (BES). The concern is related to BES’s potential exposure to the troubled Espirito Santo’s group that BES is part of. Trading in the BES stock was suspended yesterday. The concerns about BES have spilled over to other euro-area peripheral banks. Ten-year government bond spreads to Germany widened by 24bp for Portugal and 9bp and 10bp for Italy and Spain, respectively. The EUR has also weakened across the board. Global stock markets stabilised in late US and Asian trade overnight with S&P closing down 0.5% and Asian stock markets only slightly lower this morning.
BES last night issued a statement in which it said that loans to the troubled Espirito Santo conglomerate will not put BES at risk of running short of capital. The statement gave a detailed breakdown of its exposure to the Espirito Santo group that was somewhat higher than has been previously reported. BES said that it is waiting for the release of the restructuring plan for Espirito Santo’s Group before it can access the potential losses from its exposure to the troubled conglomerate. The statement from BES is expected to pave the way for resumption of trading in the BES stock today.
Kansas City Fed President Esther George (non-voter, hawk) yesterday said that there are signs that the Fed should raise interest rates as early as this year noting positive developments in the labour market and inflation closer to target. George has previously argued that she believes that interest rates should be hiked soon after the Fed has ended its bond purchases, so this is no big change. Nonetheless, the hawks appear to have stepped up their call for an earlier rate hike in the wake of last week’s labour market report.
Scandi markets
There are no data releases in Scandinavia today.
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