By Abdulselam Durdak
Frankfurt Letter, week beginning Oct. 3

- Draghi defends ECB policies in Berlin

European Central Bank (ECB) President Mario Draghi was in Berlin on Wednesday to defend the ECB policies against criticism from German lawmakers.

He detailed how the ECB's monetary policies helped the recovery of the Eurozone arguing that the Eurozone economy is in better shape compared to four years ago.


- Economic data

Euro area annual inflation is expected to be 0.4 percent in September, up from 0.2 percent in August, according to a flash estimate from Eurostat, the statistical office of the European Union.

However, the euro area seasonally-adjusted unemployment rate for August remains the lowest rate recorded in the euro area since July 2011 at 10.1 percent. The rate is stable compared to July, but is down compared to August 2015 at 10.7 percent.

The European Union unemployment rate was 8.6 percent in August, stable compared to July, but low compared to 9.3 percent in August 2015. This remains the lowest rate recorded in the EU since March 2009.


-Sentix Euro Break-up Index rises

According to Sentix, the fragile condition of the Eurozone has not improved in comparison to previous months and the September results draw a gloomy picture.

The sentix Euro Break-up Index (EBI) for the Eurozone raised to 16.3 points, while contagion risks have slightly fallen. The Portuguese and Greek economies, in particular, continue to cause investors some concern.


- News from Germany

Last week, Deutsche Bank AG shares dropped to a record low amid concerns that the lender’s capital buffers will be undermined by mounting legal charges including a settlement tied to the sale of U.S. securities.

The German Bank was under pressure following reports that Chancellor Angela Merkel refused to help with its U.S. legal woes. The U.S. Justice Department wants Deutsche Bank to pay $14 billion to settle a probe tied to mortgage-backed securities.

But, on Friday, Deutsche Bank's shares recovered from record lows when a report suggested that the bank was close to a deal to reduce the U.S. settlement.

It was not only Deutsche Bank that had a black week. Germany's second biggest lender Commerzbank said on Thursday that in order to substantially increase profits, it would cut 9,600 jobs over the next four years, although this will be partially offset by 2,300 new positions.


-The week ahead

This week, markets will continue to monitor the developments of the European banking sector. The European Central Bank’s governing council members’ speeches will top the agenda of investors.

Additionally, industrial producer prices and retail trade data will be released.





03 Oct,2016