At a given moment during the month of February, the S&P500 was down 10% from its historical high. Using the commonly used definition, this meant it was in correction territory. This was considered by some as a healthy correction whereas others argued it might very well mark the beginning of an era of structurally higher volatility. Econometric research and model-based simulations show that the economic impact of equity market corrections is rather small. The stylised facts however show the key role of the reciprocal influence between equity markets and growth expectations. In this respect, particular attention should be devoted to the evolution of the corporate bond spread.
Results for 2017 from major Spanish banks have been encouraging. Since 2013, the Spanish banking system has accounted relatively stable revenues, mainly driven by net interest income and net fee and commission income. The active management of non-performing loans and the strengthening of foreign activities have contributed to the recovery of profitability. The Spanish banking system might continue to benefit from its previous efforts to restructure and consolidate. Still, significant disparities between individual banks subsist whereas solvency ratios remain under pressure.
