By Abdulselam Durdak
Frankfurt Letter, week beginning Nov. 28

-ECB: Global risk repricing endangers financial stability

The euro area financial system has shown resilience in the face of repeated bouts of financial market turbulence over the past six months, according to the latest Financial Stability Review report of the European Central Bank. However, risks to euro area financial stability in possible global asset market corrections have intensified.

Compared with the previous assessment, the review sees the possibility of further asset price changes, triggered by political events in advanced economies, amid existing vulnerabilities in emerging markets.

According to the report, the risks of global asset market corrections have escalated, partially due to political uncertainty and expected U.S. policy changes.


-Eurozone PMI signals strongest growth so far this year

The preliminary ‘flash’ Markit Eurozone Purchase Managers Index (PMI), based on approximately 85 percent of final survey replies, rose to 54.1, up from 53.3 in October.

The pace of economic growth in the Eurozone accelerated to the fastest so far this year in November. Rising order books meanwhile prompted firms to take on extra staff at the fastest rate since early-2008, and prices charged inched higher, indicating that inflationary pressures are at their highest for over five years

The latest reading signaled the strongest monthly increase in output since last December.


-News from Germany

In Germany, last week saw slow economic growth not helped by Lufthansa’s four-day pilot strike.

German economic growth lost some momentum. As the Federal Statistical Office (Destatis) already reported in its first release of Nov. 15, gross domestic product (GDP) increased 0.2 percent on seasonal and calendar adjustment in the third quarter of 2016 compared with the previous quarter.

In the first half of the year, the GDP had increased somewhat more, by 0.4 percent in the second quarter and 0.7 percent in the first quarter.

German pilots union Vereinigung Cockpit (VC) announced strikes at German airline Lufthansa. The airline cancelled nearly 2,800 flights during the four-day strike from Wednesday that affected more than 350 thousand passengers.


-The week ahead

This week, markets will continue to monitor the developments on global markets and focus on the European Central Bank’s statements. On the data side, flash estimate Euro area inflation and unemployment data will be released.

28 Nov,2016