WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS: Major European equity markets were firmer in early trade supported by news that the Hellenic Parliament endorsed late last night a draft bill incorporating the second set of prior actions for the commencement of formal discussions on a 3-year ESM loan facility to Greece. In FX markets, the NZD and the GBP were among the main outperformers. New Zealand’s Central Bank RBNZ cut its key interest rate by 25bps to 3.0%, disappointing those who were poised for a more aggressive 50bps rate easing while the minutes from the July BoE policy meeting added the view that the Central Bank is poised to embark on a rate tightening cycle before the end of this year. Elsewhere, the 2/10-yr UST yield curve undertook some further bearish flattening today amid increased expectations for a Fed rate hike in the not too distant future.
GREECE: The 300-seat Hellenic Parliament approved with a strong majority in the early hours on Thursday the second set of prior actions required for the inception of official discussions on a 3-year ESM loan facility as envisaged in the 12 July Euro Summit agreement. Out of a total of 298 attending deputies, the bill passed with 230 lawmakers voting in favour. In other news, the ECB reportedly decided yesterday to increase the provision of emergency liquidity assistance (ELA) to Greek banks by c. €900mn to c. €91bn and retained unchanged the haircut imposed on eligible collateral. On the data front, the current account balance recorded a surplus of €407.2mn in May, marking an improvement by €706.5mn compared to the same month a year earlier.
SOUTH EASTERN EUROPE
ROMANIA: The National Executive Committee of the ruling Social Democratic Party (PSD) convened yesterday to select an interim national leader after Prime Minister Ponta resigned. The candidate backed by Prime Minister Ponta-Mrs. Plumb- lost to former deputy premier Mr. Dragnea, in reflection of the weakening party support for the government leader.
CESEE MARKETS: The majority of emerging stock markets fell in European trade on Thursday extending the prior session’s losses, with technology companies leading the way lower following disappointing US earnings results for the sector announced earlier in the week. Against a similar backdrop, regional currencies broadly weakened and government bonds fell earlier on Thursday. Turkish assets broadly underperformed their regional peers amid mounting domestic political tensions.
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