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All shall win prizes

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  • The weekend saw the release of the ECB's asset quality review (stress tests). Almost everyone won prizes. And most of those that did not win prizes were told that they won prizes on the basis of what they have done subsequently. The handful that failed were given the lightest of capital raising requirements.
  • Does the asset quality review herald a new golden age for Euro area bank credit growth? It does not. It heralds a new age for bank regulation (harmonised under the ECB), but banks still seem unwilling to lend at a price that borrowers will borrow at - we do not see credit growth supporting the economy.
  • Euro area M3 data will confirm the realities of credit in the Euro area, but it is all a little academic in the wake of the AQR. Meanwhile the German ifo institute comes out with confidence data - while confidence numbers are subject to distortion, markets seem hypersensitive to the German economic outlook.
  • The UK offers the Land Registry house price data, of some note as Bank of England's use of regulation to curtail credit growth has reportedly had an impact. The US offers the Dallas Fed business confidence data, ahead of Wednesday's FOMC meeting and Thursday's Q3 GDP report.

Listen to the audio version of this briefing.