Higher support for the euro after the Brexit vote

Transcription

1 Higher support for the euro after the Brexit vote Pernille Bomholdt Henneberg Senior Analyst / January 2017 Investment Research Important disclosures and certifications are contained from page 10 of this report.

2 Higher support for the euro as a single currency after Brexit vote The European Commission s Eurobarometer for autumn 2016 showed higher support for the euro as a single currency. Support was at 70% in the euro area, which equals the record highs reached in autumn 2004, spring 2007 and autumn On the other hand, optimism about the future of the EU was unchanged at 50%. The figure was at 58% in spring 2015 and the 50% level is the lowest since the debt crisis in Immigration was still seen as the most important issue facing the EU followed by terrorism, but both were considered slightly less important than in the spring 2016 survey. Across countries, especially Italy and France remained countries with low optimism about the EU. In Italy, the ratio for the common currency was 53% below the average in both the euro area and the EU and EU optimism weakened to 42% the lowest since the debt crisis. In France, optimism about the EU also remained low at 41%, but the ratio for the euro as a common currency was only a little weaker and stayed at 68%. In Germany, on the other hand, support for the euro as a common currency jumped by 8pp to 81%, while optimism about the future of the EU increased to 50%, having declined sharply to below crisis levels in autumn

3 Higher support for the euro as a single currency after Brexit vote Higher support for the euro after Brexit vote: The European Commission s autumn 2016 Eurobarometer survey showed higher support for the euro as a common currency. Of people in the euro area, 70% support the euro as a single currency. This equals the record highs reached in autumn 2004, spring 2007 and autumn Of people in the euro area, 70% support the euro as a common currency 90% 80% 70% 60% 50% IE 85% Ratio being for the euro as a common currency DE November % FI 78% NL 77% BE 76% PT 74% SP 71% EA 70% FR GR 68% 68% AT 62% EU 58% IT 53% The survey was carried out between 3-16 November and is the first since the UK s vote to leave the EU. There is a risk that upcoming Brexit negotiations between the UK and EU as well as the UK leaving the EU are affecting sentiment and optimism about the EU. Among the four biggest euro area countries the support for the euro as a common currency was 81% in Germany (+8pp), 71% in Spain (+3pp), 68% in France (-2pp) but only 53% in Italy (-1pp). 40% 30% 20% 10% 0% Share being for one single currency, the euro Source: European Commission Eurobarometer, Danske Bank Markets DK 30% SE 27% UK 24% 2

4 Higher support for the euro as a single currency after Brexit vote Ratio for the euro equalled record highs 80% Ratio being for the euro as a common currency 70% 60% 50% In Germany, higher ratio for the euro 90% 80% 70% 60% 50% IE +2pp DE Ratio being for the euro as a common currency Spring 2016 compared with Autumn 2016 FI NL BE PT SP EA +3pp FR GR AT +2pp -2pp+6pp-7pp +8pp +2pp0pp -1pp +5pp EU +3pp IT -1pp Spring 2016 Autumn % 30% 40% 30% 20% DK +1pp SE +2pp UK +7pp 20% 10% For (Euro area) For (EU) Against (EU) Against (Euro area) 0% Ratio being for one single currency, the euro Source: European Commssion Eurobarometer, Danske Bank Markets Source: European Commission Eurobarometer, Danske Bank Markets 3

5 Optimism about the future of the EU remained low Optimism about EU still at debt crisis levels: Optimism in Germany improved in autumn 16 At an EU level, optimism about the future of 80% Optimistic about the future of the EU the EU remained unchanged at 50% in 75% autumn Optimism was at 58% in 70% spring 2015 and the 50% level is the lowest 65% level since the debt crisis in In Germany, optimism about the EU s future improved in the autumn 2016 survey after declining sharply to below crisis levels in autumn In France and Italy, future EU optimism weakened to 41% and 42% respectively and in Italy, the optimism is at the lowest level since the debt crisis. Immigration is still seen as the most important issue facing the EU followed by terrorism, but both were considered slightly less important than in the spring 2016 survey (see page 5). 60% 55% 50% 45% 40% 35% 30% EU DE FR IT SP IE UK Source: European Commission Eurobarometer, Danske Bank Markets 4

6 Immigration and terrorism were seen as important EU issues Immigration the most important EU issue Most important issues facing the EU Immigration Terrorism Economic situation The member states' public finances Unemployment EU's influence in the world Crime Rising prices/ inflation/ cost of living Cimate change The enviroment Taxation Unemployment most important for countries Most important issues facing the countries Unemployment Immigration Economic situation Health and social security Rising prices/ inflation/ cost of living Pensions Terrorism Crime Goverment debt The education system Housing Pensions Energy supply Autumn 2016 Spring 2016 Taxation The environment, clamate and energy Autumn 2016 Spring Source: European Commssion Eurobarometer, Danske Bank Markets Source: European Commission Eurobarometer, Danske Bank Markets 5

7 LU MT PT ES FI PL IE DE EE SE LT DK LV SK SI BE HU NL RO EU AT FR HR UK CZ CY IT BG GR Two-thirds in the euro area felt like EU citizens In the euro area, 67% felt like EU citizens 8 LU MT PT ES FI PL IE DE EE 75 You feel you are a citizen of the EU (%) SE LT DK LV SK SI BE HU NL RO EU AT FR 61 HR UK 55 CZ CY IT BG 50 GR 47 High support for free movement of people Percentage of EU-citizens for the following topics (% - EU) Free movement of EU citizens Common defence and security policy Common energy policy Common migration policy Common foreing policy A digital single market within EU Economic and monetary union Trade and investment agreement between US and EU Further enlargement of the EU with more countries Autumn 2016 Spring 2016 Total 'Yes' Total 'No' Don't know Source: European Commssion Eurobarometer, Danske Bank Markets Source: European Commission Eurobarometer, Danske Bank Markets 6

8 Political uncertainty will not vanish in 2017 Will EU-sceptic parties acquire some power? Many political events and risks during 2017 DE: Alternative for Germany FR: Front national IT: Five Star SP: Podemos NL: Dutch Freedom Party BE: Vlaams Belang AT: Austrian Freedom Party FI: Finland's Finns Party GR: Syriza GR: Golden Dawn PT: Left Bloc IE: Sinn Fein UK: UK Independence Party SE: Sweden Democrats DK: Danish People's Party 0% 5% 10% 15% 20% 25% 30% 35% 40% Latest polls (Nov-Dec) Last national election EP 2014 EP 2009 Source: Danske Bank Markets Source: Danske Bank Markets 2017 Dutch general election before 15 March The UK to trigger Article 50 before the end of March French presidential election 23 April and 7 May German general election Between 27 Aug and 22 Oct 2018 Italian general election Before 23 May

9 Political uncertainty has not weakened the economic recovery Resilient economic and financial sentiment: The euro area economic recovery has continued as political uncertainty has not derailed consumer and business optimism. High policy uncertainty no economic impact Given the limited economic impact of political events, we expect GDP growth to remain positive and for the unemployment rate to continue to decline in We forecast investments will contribute relatively more to economic activity in 2017 as they are supported by accommodative financing conditions, the synchronised global rebound and a need to modernise the capital stock following very weak investments during the crisis. Source: Economic Policy Uncertainty, Markit PMI, Danske Bank Markets 8

10 Political uncertainty has not weakened the economic recovery Business confidence strengthened in Q4 16 Consumer confidence remains at a high level Source: Markit PMI, Eurostat, Danske Bank Markets Source: European Commission, Eurostat, Danske Bank Markets 9

11 Disclosures This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S ( Danske Bank ). The author of the research report is Pernille Bomholdt Henneberg, Senior Analyst. Analyst certification Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the research analyst s personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report. Regulation Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority (UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from Danske Bank on request. The research reports of Danske Bank are prepared in accordance with the recommendations of the Danish Securities Dealers Association. Conflicts of interest Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high-quality research based on research objectivity and independence. These procedures are documented in Danske Bank s research policies. Employees within Danske Bank s Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to Research Management and the Compliance Department. Danske Bank s Research Departments are organised independently from and do not report to other business areas within Danske Bank. Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions. Financial models and/or methodology used in this research report Calculations and presentations in this research report are based on standard econometric tools and methodology as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be obtained from the authors on request. Risk warning Major risks connected with recommendations or opinions in this research report, including a sensitivity analysis of relevant assumptions, are stated throughout the text. Date of first publication See the front page of this research report for the date of first publication. 10

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