How liquidity impacts growth

Transcription

1

2 How liquidity impacts growth Moderator Rick Watson, Managing Director, Head of Capital Markets, AFME Panellists Nick Burge, Managing Director, Head of Strategic Liquidity, Lloyds Bank Matthew Cairns, Senior SSA Strategist, Rabobank David Owen, Managing Director & Chief European Financial Economist, Jefferies

3 Jefferies International Limited European Economic Outlook How liquidity impacts growth AFME European Market Liquidity Conference David Owen Managing Director, Chief European Economist 25 February 2015 European Economics Team David Owen +44 (0) Marchel Alexandrovich +44 (0)

4 Money supply M1 and the equity market in the euro area M o n e y s u p p ly M 1 Y o Y % E q u it y m a r k e t Y o Y % ( R. H. S C A L E ) S o u r c e : T h o m s o n R e u te r s D a ta s tr e a m 4

5 Broad measures of money supply in the euro area and UK E u r o a r e a m o n e y s u p p ly M 3 Y o Y % U K m o n e y s u p p ly M 4 Y o Y % S o u r c e : T h o m s o n R e u te r s D a ta s tr e a m 5

6 Potential impact of QE on euro area M3 & nominal GDP P o t e n t ia l im p a c t o f Q E o n e u r o a r e a m o n e y s u p p ly M 3 Y o Y % E u r o a r e a n o m in a l G D P Y o Y % S o u r c e : T h o m s o n R e u te r s D a ta s tr e a m 6

7 Investment-GDP ratios (constant prices) UK E u r o a r e a S o u r c e : T h o m s o n R e u te r s D a ta s tr e a m 7

8 EU-28 investment at constant prices b illio n s a n n u a lis e d r a t e S o u r c e : T h o m s o n R e u te r s D a ta s tr e a m 8

9 Important Disclosure This document has been produced by a Jefferies & Company, Inc. or a Jefferies International Limited trading desk and is not a fixed income research report prepared by a research analyst. The views of the trading desk may differ from those of the Research Department. The trading desk trades or may trade as principal in the securities that are the subject of this document. The trading desk has or may have proprietary positions in the securities that are the subject of this document. This is a marketing communication and is not and should not be construed as investment research. This material has been distributed in the U.S. by Jefferies & Company, Inc. ( Jefferies ) a U.S.-registered broker-dealer, employing appropriate expertise, and in the belief that it is fair and not misleading. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Additional and supporting information is available upon request. This is not an offer or solicitation of an offer to buy or sell any security or investment. Any opinion or estimate constitute our best judgment as of this date, and are subject to change without notice. Jefferies and its affiliates and its and their respective directors, officers and employees may buy or sell securities mentioned herein as agent or principal for their own account. In the United Kingdom this material is distributed and approved by Jefferies International Limited and is intended for use only by persons who have professional experience, or by persons to whom it can otherwise be lawfully distributed. In the member states of the European Economic Area this document is for distribution only to persons who are "qualified investors" within the meaning of article 2(1)(e) of The Prospectus Directive. For Canadian investors, this document is intended for use only by professional or institutional investors. None of the investments or investment services mentioned or described herein is available to other persons or to anyone in Canada who is not a "Designated Institution" as defined by the Securities Act (Ontario). For investors in the Republic of Singapore, this material is intended for use only by accredited, expert or institutional investors as defined by the Securities and Futures Act and is distributed by Jefferies Singapore Limited which is regulated by the Monetary Authority of Singapore. Any matters arising from, or in connection with, this material should be brought to the attention of Jefferies Singapore Limited at 80 Raffles Place #15-20, UOB Plaza 2, Singapore , telephone: Recipients of this document in any other jurisdiction should inform themselves about and observe any applicable legal requirements in relation to the receipt of this material. Jefferies International Limited is authorised and regulated in the United Kingdom by the Financial Services Authority. Its registered office is at Vintners Place, 68 Upper Thames Street, London EC4V 3BJ; telephone ; facsimile Reproduction or redistribution of this document without the written permission of Jefferies is expressly forbidden. 9

10 Year-on-year % change Mind the Gap! Bank loans to Non-financial corporates Jan-04 Apr-05 Jul-06 Oct-07 Jan-09 Apr-10 Jul-11 Oct-12 Jan-14 Germany France Italy Spain Netherlands Greece Source: Macrobond, Rabobank There is a distinct gap between the ECB s policy response and Draghi s calls for structural reform. Financial Markets Research 10

11 The European Fund For Strategic Investment Source: European Commission Financial Markets Research 11

12 Bridging the Growth Gap Investors with over 9 trillion AUM surveyed 65% cited market fragmentation i.e. lack of information and cross-border differences, holding back investment Europe has a smaller pot of funding than US, 30 trn vs 49 trn, with similar GDP Europe has significantly less equity capital, with 10 trn market cap vs 19 trn in US Europe delivers a larger pot of financing to SMEs, of 2.0 trn outstanding vs 1.2 trn US Majority of European SME financing is bank lending ( 1.4 trn vs 0.5 trn in US).

13 Bridging the Growth Gap continued In US 33% of SME financing provided by private person s wealth vs 9% in Europe Less private equity and venture capital available in Europe bn vs 488 bn in US European pot of private savings is much smaller, at 4.3 trn vs 14.9 trn US Larger percentage of funds managed invested in risk capital/equity in US 53% vs 37% For infrastructure finance, in Europe provides more than US, but larger amount from private sector Key government challenges for projects are post-closing tariff changes, and usage risk guarantees

14 Bridging the Growth Gap continued Next steps: Production of AFME SME Guide assistance with obtaining loan, bond, equity and P2P funding Production of AFME ICMA Infrastructure Guide assistance for issuers and investors, with focus on support for 315 bn EFSI investment programme Support for Pan-European Private Placement (PEPP) initiative, led by ICMA. Provides standardised loan and note/bond templates for corporate PP. Support for Capital Markets Union initiatives

15