Member Info for Gate13Boy

Far more than £350m extra a week has been pumped into the NHS since Brexit. I do wonder why people keep pumping the myth that it hasn't been......

Mach,

Scotland is part of Great Britain. You appear to be having an identity crisis. Best ask around if you're still not sure......

The UK as an entity voted to leave the EU Mach. Scotland was and still is part of the UK last time I looked.

Tell me, if the had UK voted to remain in the EU but Scotland had voted to leave, where would that leave you with your position ? Would you accept the will of the majority in the UK ?

I'm sure the majority would elect to stay within the UK again in a referendum but I see no reason why there should be another one so soon.

There seems to be a correlation between some Remoaners and some SNP voters......they can't accept democracy.

Below 69bn is good. Of course MS is limited to what they can buy every day but they do seem to be holding Lloyds up around this price. We shall see if that dam gets burst......

Fingers crossed LTI,

MS seems to prop up the SP around 42p I've noticed recently so if they wanna hold it there whilst the sellers dump their holdings, get hoovering......

42p seems to be a bit of a resistance level of late. Morgan Stanley seems to get busy when it drops to this price level.

Very true. Waste of space broadsheet that paper is.....

Chickens are coming home to roost alright LTI……

Here we go again……..lol

Not possible unless you are a subscriber. Interesting article I thought.

“ The International Monetary Fund has warned in the past that these debt holdings remain excessively concentrated. It said a serious shock would compress the Tier 1 capital ratios of banks by 230 points in Italy, 150 in Portugal, and 120 in Spain. That shock is now here. “The nexus could spread sovereign strains across the financial system through a complex web of interactions and negative feedback loops,” it said.

Bear in mind that Club Med states are sub-sovereign borrowers. They do not control their monetary system and cannot print their way out of trouble via the ECB without the acquiescence of Germany. The pain threshold of public debt is therefore lower than in Japan or the UK.

The ECB is trying to conjure up a new (non-inflationary) debt shield to replace QE. Markets are sceptical. This so-called anti-fragmentation mechanism has yet to see the light of day, probably because the northern governors insist on ferocious conditions.

Even the cleverest EU lawyers have yet to find ways to reconcile a pure bailout instrument with the no-bailout clause of the Maastricht Treaty, and therefore to find a way to head off a fight in the German constitutional court.

The EU has not resolved the fundamental incompatibility between two halves of the eurozone that should not be trying to share a currency. The contours have changed over the last cycle but the gap remains as wide as ever.

Europe’s leaders and authorities – above all Germany’s political class – will do what they always do when trouble arrives. They will prevaricate until matters become perilous. They will then do the minimum necessary to hold the structure together. German judges will let it pass whatever the law says. The alternative is to let monetary union disintegrate, and that is too awful to contemplate.

So yes, European bank stocks are cheap. They are cheap for a reason.”

“ Club Med public debt is higher today as a share of GDP than before the last episode of the doom loop in 2011-2012. The ratios have jumped from 120pc to 151pc in Italy, 69pc to 118pc in Spain, and 109pc to 127pc in Portugal. In France, a borderline case, it is up from 87pc to 113pc.

Debt service costs have fallen and maturities are longer. Italy’s interest payments have dropped to 3.3 of GDP from 4.5pc 15 years ago. But markets know that the era of free money is over and they have a habit of pulling forward changes in trajectory.

Lorenzo Codogno, chief economist at the Italian treasury during the last blow-up and now at LC Macro, said there are “disturbing similarities” with stresses before the dam burst in 2011. On that occasion it was monetary tightening by the ECB – two catastrophically ill-timed rate rises into the teeth of a European recession.

This time it is the double punch of ECB rates rises and the end of QE, forced upon the governing council by 8.1pc inflation and by the rising fury of Germany. This is colliding with Putin’s energy crisis.

Mr Codogno said markets are likely to test the ECB’s policy of “constructive ambiguity” on backstop measures for Italian debt. While the Italian banks are better capitalised than a decade ago – and bad loans are back to pre-Lehman ratios – these lenders have nevertheless just suffered a wicked haircut on their Italian bonds.

It is not clear how many have unmatched liabilities that must eventually be marked to market, eating into their capital ratios. This in turn forces them to curb credit, worsening the recessionary effect in a vicious circle.

A perverse side-effect of ECB bond purchases is that foreign investors were able to offload Club Med debt at a profit. Italian, Spanish, Portuguese banks more or less did the opposite.

They borrowed for free from the ECB to buy bonds issued by their own government, enjoying a risk-free rent from the spread on the carry trade. Prof Werner says absurd Basel banking regulations encouraged them to do so.”

“ Oxford professor Richard Werner, a German banking expert, said negative rates have been the kiss of death for Germany’s regional cooperative and savings banks, which specialise in loans to small businesses.

The policy has eroded the interest margin of lenders, down to 1.2pc in Europe viz 3.3pc in the US, and undermined the traditional banking model of lending to companies for productive investment. “The ECB has been forcing banks to lend to the property sector in various ways. The only source of profit for them is to fund this dangerous bubble,” he said.

Relief for the banks has been short-lived. The Stoxx 600 has fallen by a quarter since the invasion of Ukraine from what was already a carpet-bombed structural level. This partly reflects fears that Vladimir Putin will cut off gas flows entirely through Nord Stream 1 to stop Europe restocking before winter.

Germany’s vice-chancellor Robert Habeck is justified in warning that the EU’s energy market is “in danger of collapsing” with the risk of a Lehmanesque chain reaction. He is right too to warn of serious rationing to come. Pre-emptive demand destruction is the responsible policy.

What is less responsible is Emmanuel Macron’s decision to extend the cap on gas and electricity prices, suppressing the price signal at great cost to the over-extended French state. He is more or less telling consumers that they can keep wasting energy. It has been left to Total, Engie, and EDF to tell the harsh truth and to proselytise hair-shirt frugality.

Above all, the bank slide reflects doom loop fears. We had the first taste of deteriorating debt dynamics two weeks ago when Italy’s 10-year bond yields rocketed to 4pc, a quadrupling of the country’s benchmark borrowing rate since January.

Such a move is enough to intrude on assumptions of long-term solvency. “The rise in yields is dramatic and is very clearly a return of the euro crisis,” said Clemens Fuest, president of Germany’s IFO Institute.

The risk spread over German Bunds briefly touched 250 points, higher than when Mario Draghi was drafted by the Italian elites to save the country. Such levels recall the revolutionary ferment of the Lega and Beppe Grillo’s Five Star Movement in 2017 – that wild Rome spring later snuffed out quietly the Italian way.

“Market rates have already reached a level that, if sustained, could test the sustainability of Italian debt under bearish growth assumptions,” said Silvia Ardagna from Barclays. Debt dynamics “turn dangerous” if trend growth falls below 0.8pc.

Good luck with that. Even 0.8pc is well above the average of the last 20 years.

She said the only way for Italy to avoid a solvency crisis in the long run is through radical reform of the Italian economy. Good luck on that too if the ultra-Right Fratelli d’Italia – leading the polls – take power next year at the head of an anti-system coalition.”

“European bank stocks are priced for an economic depression. Either they are a screaming buy or Europe faces an extreme political and economic stress test.

Analysts at Credit Suisse say equities are discounting a 40pc fall in earnings at current values. This implies a 40pc collapse in house prices, a 9pc-10pc fall in GDP, and a rise in average unemployment to 12pc over the next three years, ceteris paribus.

Such an outcome would be the worst European slump in peacetime since modern records began, exceeding the damage of the global financial crisis and the Great Depression (for Europe) in the 1930s.

Credit Suisse says bank equities are trading at 0.7 times tangible book value, a sign that investors expect a brutal deterioration in underlying assets. It thinks the sell-off has been greatly overdone and that bank stocks are a steal.

It is probably right, but EU leaders never delivered on plans agreed in 2012 for a full banking union. They never tackled the “doom loop”, that lethal and particular Economic and Monetary Union pathology in which sovereign states and commercial banks pull each other down in a self-feeding spiral.

They kicked the issue into touch once the European Central Bank started monetising everything, which masked the problem and sent the doom loop into remission. But the threat remains. That is suddenly front and centre again as inflation forces the ECB to halt purchases of Club Med bonds, and therefore to halt its covert bail-out of Italy and Spain.

The world’s biggest hedge fund sniffs trouble. Ray Dalio’s Bridgewater has doubled bets against European banks and other equities over recent days, disclosing short positions worth $10.5bn on 28 companies. These include Spain’s Banco Santander and Banco Bilbao Vizcaya Argentaria, Italy’s Intesa Sanpaolo, and France’s BNP Paribas.

It is also shorting insurers AXA and Allianz, the energy-intensive chemical group BASF, as well as TotalEnergies and the Dutch semiconductor company ASML Holding. The latter two positions suggest that Bridgewater is turning more bearish on the two big trades of post-Covid reopening: fossil energy and microchips. Perhaps these shorts are just hedges, but I doubt it.

The Stoxx 600 index of European banks is down by 80pc since peaking in 2007, a casualty of the ECB’s negative interest rates. The sector ought to be recovering as the ECB lines up a string of rapid rate rises over coming months.”

These are only going one way......

I’ll plump for 0.75p and a further £1bn buyback provision.

"every by-election under his watch has seen the Tories get trounced"

Incorrect.

The Tories took Hartlepool from Labour and held Southend West and Old Sidcup and Bexley with Boris as PM.

LTI,

"some of us know the real reason - 'peoples vote' Starmer and the LibUNdems do not want to face him"

Quite. And a number of the lefties on here know he is an electoral asset and so want him gone now......

It puzzles me somewhat seeing all the screaming for Boris to go. Surely, you'd want him to stay in position to be an electoral liability at the next election ?? At the last election I was desperate for Corbyn to remain Labour leader as I believed it gave them no chance at poll time. Strange how the lefties desperately want him out now rather than at the next General Election.......

Can't see a special dividend Chips at the interim stage. Another £1bn set aside for further buybacks perhaps ?