Europe’s banks, the ECB and pension reform in France

There a plenty of reasons to be cautiously optimistic about Europe’s banks. While the renewed sell-off in bank equities on Friday show that it is too soon to sound the all clear, the latest comments from ECB policymakers suggest that a rate hike in May is still the most probable outcome. That view is likely to be reinforced next week by March’s euro-zone inflation data, which we expect to show a decline in the headline rate but still-strong core inflation.