Goldman Sachs Strategists Question Sustainability Of European Equities Inflow

Economic

Forex

Summary:

Investing.com -- The current strong inflow of international capital into European equities may not continue, according to...

The current strong inflow of international capital into European equities may not continue, according to strategists at Goldman Sachs.

The team, including Lilia Peytavin, expressed skepticism about the possibility of this marking a shift towards constant buying or a substantial reallocation to Europe.

The strategists highlighted that Europe’s economic and earnings growth is slower than in other regions. They also pointed out that the region is exposed to risks, such as potential new tariffs from the United States.

Despite recent inflows, the team does not view this as over-positioning, considering it small compared to the cumulative outflows witnessed in recent years.

It’s worth noting that European stocks are currently on track for their largest quarterly outperformance against the US in history.

This trend has been driven by international investors attracted by factors such as Germany’s fiscal spending plan and lower interest rates.

Source: Investing

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Justin

Cryptocurrency

Hurdles to blockchain adoption in capital markets are falling away. The US’ abandonment of Staff Accounting Bulletin 121 was a key step and the Eurosystem’s advancing work on cash settlement solutions are welcome. However, there are still major stumbling blocks to be addressed.

The Eurosystem announced in February 2025 that it is expanding its work to create a solution for the cash leg settlement of distributed ledger technology transactions in central bank money.

This approach has two prongs: first, a rapid delivery of an interoperability link for the Target settlement system, to be followed by a ‘more integrated, long-term solution… [which] will also include international operations, such as foreign exchange settlement’.

The announcement follows the conclusion of the European Central Bank’s wholesale central bank money trials in 2024, where three national central banks collaborated with the private sector in a series of experiments. The three solutions tested were an interoperability link with Target Instant Payments System driven by Banca d’Italia, a trigger solution (a DLT infrastructure to bridge T2 and market DLT platforms) driven by Deutsche Bundesbank and a full DLT interoperability solution with tokenised central bank money pioneered by Banque de France.

It is not yet clear from the ECB’s announcement whether its long-term integrated solution will be the Bundesbank’s trigger solution or Banque de France’s full-DLT interoperability solution. But DLT accessibility to central bank money is coming.

Official endorsement of a DLT solution

For those working on the integration of DLT into capital markets, this is certainly good news. An officially endorsed solution for the cash leg settlement of DLT securities transactions on a delivery-versus-payment basis has been high on the industry’s wishlist for several years now. The ECB is to be commended for its efforts in advancing this issue and fostering the market’s development.

Perhaps a similar solution will emerge in the US. The drafting of Trump’s executive order (which inadvertently implied a ban on Fedwire, the US interbank payment system), suggests that the US may be happy to allow private sector solutions like stablecoins to fill the gap. The political momentum is certainly there and, given the Securities and Exchange Commission’s withdrawal of the much-criticised SAB 121, it clearly extends beyond the White House.

Despite this momentum, there remains at least one major obstacle to DLT adoption by market participants. The Basel Committee’s rules on prudential exposure to cryptoassets will hold back development in this space. These rules were created in 2022 and are set to come into force in January 2026.

Basel Committee rules

The rules begin fairly clearly. DLT-based assets are divided into four categories. Type 1a are traditional assets represented on blockchain that meet certain conditions (tokenised traditional assets). Type 1b are cryptoassets with effective stabilisation mechanisms that also meet certain conditions, for instance, reserve-backed stablecoins.

Then type 2a are cryptoassets that satisfy the hedging recognition criteria (primarily bitcoin and ether because of their formal futures markets). Type 2b are unhedgeable cryptoassets, for example, most other cryptocurrencies, including tokenised traditional assets, stablecoins and unbacked cryptoassets that aren’t included in the previous groups.

These conditions stipulate that, for inclusion in type 1, the tokenised asset must: represent the same credit risk as the traditional asset and provide the same ownership rights; the rights must be legally enforceable in the relevant jurisdictions; be transacted on a network where material risks are effectively mitigated; and be managed by regulated and supervised entities.

While type 1 assets can be treated the same way as their traditional off-chain counterparts, type 2b assets face an extremely punitive 1250% risk weighting, implying that banks must hold capital 1:1 against them. Holdings are also capped at 1% of the bank’s tier 1 capital. JP Morgan’s tier 1 capital as of September 2024 was $278.99bn, so it would be forced to keep its 2b cryptoasset holdings under $3bn.

This is not necessarily unreasonable on its face. Cryptoassets are volatile and banks can create systemic risk. Limiting their exposure to the market might be prudent.

Public and private networks

At present, however, the definition of type 1 assets is understood by industry participants to require that digital assets can only adhere to that category if they are issued on private ‘permissioned’ ledgers. The classification condition referring to the network’s risk management requires that ‘all participants are traceable’, which would seem to rule out a public network like Ethereum where anyone can be a validator and participate in the validation process of transactions.

This means that even high-quality instruments like bonds from the triple A-rated European Investment Bank, if issued on a public blockchain like Ethereum, will be treated as unhedgeable cryptocurrencies (type 2b), effectively making it impossible for banks to take such instruments on their balance sheets.

Even though the end investors will not be so limited, this would fundamentally alter the market’s dynamic, since banks are expected to hold some of a bond in their inventory, in order to make markets in it after issuance. Moreover, banks often engage in repurchase agreements in which they receive securities from their counterparties in exchange for cash, holding the securities as their own for the duration of the transaction.

This view does not appear to be universally held among regulators. The European Banking Authority’s CRR III Article 501d2a distinguishes tokenised traditional assets like blockchain bonds from cryptoassets for the purposes of capital requirements. This allows tokenised traditional assets to be treated as the assets they represent regardless of whether they are issued on a private or public blockchain.

And that is the right approach. Public blockchains offer specific advantages and features that can make them as reliable and secure as any private blockchain or traditional financial infrastructure.

Public blockchains favour accessibility and interoperability. Contrary to private blockchains and much like the internet, public blockchains are open and based on standardised protocols that facilitate the interaction between different systems, fostering accountability, innovation and competition.

Moreover, as no single party controls public networks, no one can willingly or accidentally tamper with its records or data. Public blockchains have, therefore, strong reliability and operational resiliency as they eliminate single points of failure or attack.

While these arrangements may not follow traditional accountability structures, public blockchains introduce new ways to achieve the safety and vitality that are expected from any financial infrastructure.

Developers, validators, nodes and asset issuers all have incentives to keep a check on each other and make sure that the network will work according to its programmatic protocol rules and that changes will be implemented only after proper vetting.

The decentralised nature of public blockchains is not, however, a limitation for having asset controls that issuers can apply according to their compliance needs and regulatory requirements, like know-your-customer/anti-money laundering checks or the possibility of clawing back or freezing tokens.

The Basel Committee’s rules on prudential exposure to cryptoassets are in urgent need of clarification, grounded in a thorough, reasonable and clear assessment of the true characteristics and risks of digital assets. Only then can we approach a logical system for the prudential treatment of blockchain-based assets.

Source: Lewis McLellan

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ING

Economic

Well today's US data is only inflaming stagflation fears. The Federal Reserve’s favoured inflation measure, the core PCE deflator, has come in hotter than predicted at 0.4% month-on-month while real personal spending comes in softer at just +0.1% MoM and January’s contraction is worse than previously thought – revised down to -0.6% MoM from -0.5%.

The inflation print is ugly, but we did suspect that if there was a risk to the 0.3% MoM consensus number it was going to be the upside given the composition of the CPI and PPI inputs that feed through. Remember that we need to average 0.17% MoM (the blue bars need to average where the black line is in the chart below) over time to bring us down to the 2% year-on-year target. We are moving in the wrong direction and the concern is that tariffs threaten higher prices, which mean the inflation prints are going to remain hot. This will constrain the Fed’s ability to deliver further interest rate cuts.

US core PCE inflation metrics look increasingly ugly

US stagflation fears rise ahead of tariff hit_1

From a growth perspective those potential rate cuts can’t come quickly enough. Tariff-related fears about squeezed spending power and job worries tied to the Department for Government Efficiency’s actions have seen sentiment plunge and this appears to be translating into much cooler spending. Fed Chair Powell was fairly dismissive of this narrative earlier this month so it will be interesting to see if he changes his tune next week.

We expect to see another round of downward revisions to first quarter GDP growth forecasts coming through over the weekend from a lot of banks. For example, if March real consumer spending is flat that will mean first quarter annualised consumer spending would be -0.1%, which would be the first negative print since second quarter 2020 when we were in the depths of the pandemic. Given the drag from awful trade numbers this really does run the risk of a negative first quarter GDP growth rate. As we head towards 'Liberation Day' on Wednesday and then the jobs report on Friday followed by Powell's speech on the economic outlook, this sets us up for a volatile week ahead for markets.

Source: ING

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Justin

Economic

British retail sales unexpectedly rose in February, growing 1.0% from January, figures from the Office for National Statistics showed on Friday. Reuters poll of economists had pointed to a monthly fall of 0.4% in sales volumes.

This marked the second straight monthly increase in retail sales, after a dismal reading in December, the key month for holiday shopping.

Sterling rose to a session high of $1.297 after the data, before retreating to $1.295, roughly flat on the day. The euro was last down 0.25% against the pound at 83.20.

The derivatives market shows traders are placing roughly a 50% chance on the Bank of England cutting rates at its May meeting, and Friday’s retail sales data did little to shift this expectation.

Sterling gains as traders eye US tariffs

This week has been turbulent for sterling. On the one hand, the pound has been caught up in the volatility that has affected global markets after U.S. President Donald Trump on Wednesday announced a blanket 25% tariff on all imported cars into the United States, further stoking fears of a full-on trade war.

The U.S. government is expected to release its full suite of trade policies on April 2, including details on tariffs.

On the other hand, UK finance minister Rachel Reeves this week unveiled her budget plans, in which she announced spending cuts, while the UK’s Debt Management Office said it would issue fewer bonds than expected this year and next.

“Wounds run deep in FX markets and the build-up to (Reeves’) Spring Statement was dominated by tough decisions that the chancellor would need to make. In the end, bond vigilantes and the “glass half empty” brigade were left disappointed,” Bank of America strategists Kamal Sharma and Sonali Punhani said in a note on Friday.

“Where from here? Immediate focus turns to the tariff announcement on April 2nd and positive seasonality through next month,” they said, referring to the pound’s tendency to perform well in the month of April, when the new fiscal year begins.

A separate data release on Friday showed the UK economy expanded 0.1% in the fourth quarter, as economists polled by Reuters had expected. On an annual basis, growth expanded by 1.5%, compared with forecasts for an increase of 1.4%.

Source:Reuters

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Devin

Economic

Commodity

Oil fell on concerns that the Trump administration’s tariff onslaught will reduce energy demand.

West Texas Intermediate slid below $70 a barrel, retreating along with equity markets. Crude still was on pace for its third straight weekly advance amid waning expectations of a near-term oversupply. The US is planning to impose tariffs on auto imports and so-called reciprocal levies next week, widening the global trade war.

Oil traders face an uncertain outlook as they grapple with President Donald Trump’s policies and an OPEC+ plan to revive idled output. WTI futures have been rangebound for the past eight months, trading in a band of about $15 between the high $60s and low $80s.

“US stocks are struggling, and longer-term demand fears are on the minds of most traders as tariffs begin to kick in on cars not manufactured in the US,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities.

Earlier this week, Vitol’s chief executive officer said while there are some threats to supply, it’s generally adequate for the next couple of years. Meanwhile, Venezuela is boosting oil exports to China as the Trump administration deploys sanctions and secondary tariffs to squeeze the Latin American nation.

Source: Yahoo Finance

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Thomas

Economic

Since Donald Trump’s return to the White House, US companies have all but abandoned the green bonds that were once touted as a way for corporate America to have a hand in fixing the planet.

Only one such US dollar bond from an American firm has hit the market in 2025, a $350 million note from Oglethorpe Power in January, marking the slowest start to a year in at least a decade. For years the main sellers of the bonds have included banks and utilities, with household names like Apple Inc. and Walmart Inc. also occasionally making splashy issues.

Now companies are shifting their approach to the climate cause, after emboldened Republican leaders have stepped up their attacks on investments that try to achieve environmental goals such as cutting emissions, as well social objectives like promoting equality, or governance targets. Bonds funding environmental projects, known as green bonds, are the most commonly sold type of ESG debt.

Even before Trump’s reelection, green-bond sales were down from their 2021 peak amid GOP pushback, inconsistent cost savings for issuers and scrutiny over greenwashing from the left.

“In the US especially, it’s been a pretty steep, decent decline and a bleak outlook moving forward,” said Andrew Poreda, a senior research analyst on Sage Advisory Services’ responsible investing team. “Even just the label of a green bond might be contentious.”

In other parts of the world, issuance is still going strong, with total green bond sales expected to reach $660 billion this year, about an 8% bump over last year, BNP Paribas said in January. In the US, green municipal bonds are still seeing strong issuance. And companies are still funding projects in the US to improve their efficiency and meet other environmental goals — they’re just doing so outside the green bond market.

Companies that continue clean-energy initiatives have quieted their messaging and sustainable debt has taken a hit, with overall ESG dollar-designated bond sales from American corporations and financial institutions down nearly 89% from the year prior through Thursday. The biggest American lenders have staged an exodus from the Net-Zero Banking Alliance, a global climate coalition, and tempered policies around diversity, equity and inclusion.

Source: Yahoo Finance

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Owen Li

Cryptocurrency

Anticipated Bitcoin price falls may influence cryptocurrency market trends and investor strategies significantly.

Market Prediction and Impact

Veteran trader Peter Brandt has forecast a potential Bitcoin price drop to below $70,000. His prediction aligns with the $16.5 billion options expiry on March 29, 2025, causing market speculation.

Brandt, known for past accurate market predictions, shared his analysis on X, hinting at a possible dip. The cryptocurrency community remains divided in anticipation of the upcoming expiry effects.

Concerns Over Market Stability

The prediction has stirred concerns among traders about immediate market stability. Bitcoin's latest price data shows fluctuations, contributing to broader market uncertainties. "This is not an unreasonable expectation," noted Peter Brandt, veteran trader and technical analyst here.

Financial analysts note the potential for further implications due to additional factors like inflation data and geopolitical events that underscore market volatility, adding pressure on Bitcoin prices.

Pricing and Future Outlook

Bitcoin, the leading cryptocurrency, priced at $83,976, shows recent declines of 3.7% over 24 hours and 0.06% in 7 days. Volume has increased by 18.44%, revealing heightened trading activity. This data is attributed to CoinMarketCap.

Future scenarios may involve enhanced trading strategies and shifts in regulatory frameworks. Investors anticipate new technological advancements, which could reshape the cryptocurrency landscape, offering novel opportunities and challenges.

Source: CryptoSlate

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Goldman Sachs Strategists Question Sustainability Of European Equities Inflow

Source: Investing

Basel cryptoasset rules are too obstructive

Official endorsement of a DLT solution

Basel Committee rules

Public and private networks

Source: Lewis McLellan

US stagflation fears rise ahead of tariff hit

US core PCE inflation metrics look increasingly ugly

Source: ING

Sterling draws strength from UK retail sales

Sterling gains as traders eye US tariffs

Source:Reuters

Oil Falls As Trump’s Trade War Stokes Concerns Demand May Drop

Source: Yahoo Finance

Corporate America Ditches Green Bonds As Trump Emboldens GOP Attacks

Source: Yahoo Finance

Veteran Trader Predicts Bitcoin Dip Before Options Expiry

Market Prediction and Impact

Concerns Over Market Stability

Pricing and Future Outlook

Source: CryptoSlate

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