FTSE: Bullish momentum’s gone as this index struggles at the 50 per cent retracement resistance area. Chart/Levels from Analyst, Nicole Elliott – Investors Chronicle.

 

EU banks should borrow a lot more
To take advantage of favourable markets

City AM reports this morning on an Analysis forum in Milan yesterday where Andrea Enya, the ECB’s chief supervisor, said commercial banks might be caught unprepared when the unwinding of ultra-loose monetary policy starts. ‘’Market conditions are now very favourable [but] banks are not paying sufficient attention to this. To see banks are not yet issuing [paper] massively worries me a little.’’ Reminding how the Italian government last year saw credit dry up suddenly after the general election he added, ‘’that should teach banks that market windows must be rapidly seized.’’ Other commentators are warning that negative interest rates are hurting banks’ bottom line.

Ahead of today’s Fed FOMC rate-setting decision, where President Trump has leaned heavily on Fed chairman Jerome Powell to cut the Fed Funds target, yesterday overnight funding unexpectedly hit the top of its current band at 2.25 per cent. In parallel, the repo market, where banks can swap Treasury paper for cash on agreed terms to buy it back the following day, saw overnight rates on ‘general collateral’ spike up to 9.00 per cent. For the first time since 2008 the Federal Reserve Bank of New York was forced to wade in, lending $53 billion, and promising another $75 billion today, to ease the strains created by this lack of liquidity.

Financial Markets and Political Commentary