Daily Overview of Global Markets & the SEE Region (Tuesday, May 23, 2017)

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Dr. Platon Chief Market Economist, Deputy General Manager, Eurobank Ergasias S.A.,

HIGHLIGHTS

WORLD ECONOMIC & MARKET DEVELOPMENTS

GLOBAL MARKETS: Major European bourses opened modestly higher on Tuesday with investors adopting a cautious stance following a suspected terrorist attack at a concert in the UK’s city of Manchester late on Monday. In reaction to the above, GBP moved lower and UK Gilts gained some ground. EUR/USD hit a fresh six-month high following comments by German Chancellor Angela Merkel that the EUR is currently “too weak… due to the ECB’s policy”.   Elsewhere, UST yields were modestly lower in European trade while Bund yields rose with the 10-yr UST/Bund yield spread narrowing to the lowest level since early November 2016. Focus today is on the US administration’s budget proposal for the full fiscal year 2018 that reportedly envisions, inter alia, large cuts to social safety-net programs and increased spending on defense and border-security.

GREECE: The Eurogroup that convened yesterday did not produce definite results as regards the completion of the 2nd programme review, the debt relief framework and the disbursement of the next loan tranche. With regard to the prior actions in the context of the 2nd programme review, all sides – including the IMF – acknowledged the significant progress but pointed out that out of the 140 prior actions, 25 are still pending. With regard to debt relief, it was agreed that the primary surpluses of 3.5% of GDP are to be maintained until 2022. Additionally the Eurogroup reiterated its position that in terms of debt relief there are two guiding principles: firstly, the solution needs to be inside the package that was agreed in May 2016 and secondly, that the final decision on what is actually needed and will be put in place will be taken at the end of the programme

SOUTH EASTERN EUROPE

CESEE MARKETS: Emerging market assets were mostly under pressure earlier on Tuesday amid rising risk aversion in the aftermath of a terror attack in Manchester and lingering US political jitters. Weak import data from China and an ongoing political turmoil in Brazil also weighed.

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