EUR 100.00 For Business Accounts Only

IBERIAN DAILY 19 AUGUST (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: TELEFÓNICA, BANKING SECTOR.

MARKETS YESTERDAY AND TODAY

Embellishing the week’s performance
Stock markets recovered on Friday by around +1.5%, embellishing the losses from the beginning of the week. Within the Euro STOXX, Banks and Basic Resources led gains, whereas Chemicals and Energy were the sectors that rose less. On the macro side, in Spain, the AiREF lowered its GDP growth estimate for the 3/4Q’19 below its previous forecast of 0.5% as a result of the weak demand levels. In Germany, the Minister of Finance suggested that the country might spend € 50,000 M to stimulate the economy, softening its budget balance rule. In the US, housing starts contracted further than expected, although building permits for July climbed notably, which hints at higher growth rates in construction in the 4Q’19. Lastly, U. of Michigan’s consumer confidence fell more than expected to 7-month lows. On the political front, new comments pointing to a rapprochement between China and the US were made, although no specific dates for an agreement were given. However, Trump warned that the conflict with China is not affecting the US economy and showed less optimism that a deal will be struck with the country. Trump also warned that the US does not wish to do business with Huawei, despite extending the exemption period for another 90 days. In Argentina, S&P cut the country’s rating to B- from B, maintaining the negative outlook. In US business results, Deere posted results below expectations, cutting the guidance further.
What we expect for today
European stock markets would open with gains of around +0.5%. .
Currently, S&P futures are up +0.6% (the S&P 500 closed +0.15% above its price at the closing bell in Europe). Volatility in the US fell (VIX 16.6%). Asian markets are rising (Japan +0.7% and Hong Kong +2.1%).
Today we will learn the Euro zone’s final inflation figure for July. In US business results, Estee lauder will release its earnings.


COMPANY NEWS

BANKING SECTOR. Increased contribution to the FGD.
According to a draft circular letter from the BoS, all contributions to the Deposit Guaranteed Fund (abbreviated in Spanish as FGD) will increase once the bill is passed to include in the calculation basis the amounts maintained by retail clients in cash accounts in investment companies. This modification was expected since, at the end of last year, the legal regime of investment companies was changed. The impact is expected to be minimal, considering that these balances are usually temporary.
News without a significant impact. Spanish banks paid last year € 1.33 Bn to the FGD, which we recall covers retail deposits of up to € 100,000. With respect to the total deposit basis in Spain, this represents less than 0.2% of the total deposit base, and we do not believe that the amounts in these accounts may represent more than 5% of total deposits. This will mean a rise in regulatory costs of less than € 70 M or below 0.3% of the sector’s Net Profit’18.