WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS: The PBOC announced yesterday its decision to cut the benchmark lending and deposit interest rates by 25bps to 4.6% (effective today) and the reserve requirement ratio for all financial institutions by 50bps to 1.75% (effective on Sept 6), in response to the recent market turbulence. Despite the PBOC’s monetary easing decision, Wall Street closed with losses overnight and Chinese bourses shed all of their earlier gains on Wednesday while European indices were losing ground in early trade.
GREECE: According to the local press, Greek bank officials have expressed their optimism about the outcome of the new round of stress tests that is currently under way, in parallel with the asset quality review (AQR), the first stage of a comprehensive assessment of Greek banks’ balance sheets which commenced earlier this month. The AQR which is based on data reported on June 30, 2015 is reportedly expected to be completed within September. As per the same sources, the stress testing exercise is expected to be finalized by the end of October and the banking sector recapitalization to be completed by end-December. In other news, government spokesman Olga Gerovasili was quoted saying to a local TV station earlier this week that, as things stand at this point, it is feasible general elections to be held on September 20.
SOUTH EASTERN EUROPE
ROMANIA: The consolidated general government budget ran a surplus of RON 7.4bn or 1.1% of projected GDP (on a cash basis) over the first seven months of the year, up from a surplus of 0.6% recorded in H1 2015.
SERBIA: Public finances continued to improve in July, with the non-consolidated general government balance swinging into a surplus (RSD 2.2bn) for the third month so far this year from a deficit of RSD 1.9bn in the prior month.
CESEE MARKETS: Taking their cue from the negative tone in major Asian and European bourses earlier today, emerging stock markets lost ground in European trade on Wednesday, after a short-lived rebound in the prior day, amid ongoing concerns about the prospects of the Chinese economy. The picture in regional FX markets was somewhat mixed, with the Polish zloty leading the winners’ pack and the Hungarian forint broadly underperforming its CESEE peers.
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