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Reuters blog archive

from MacroScope:

Middle East war takes another step

Shi'ite fighters from Mahde Army launch rockets during heavy fighting against Islamic state members at Bo Hassan village, near Tikrit

The United States and some Gulf allies have launched air strikes inside Syria against Islamic State militants.

A combination of fighter, bomber and Tomahawk attack missiles sounds like a formidable barrage so if intelligence about where the militants are is good, a significant blow could have been dealt.

Washington said Saudi Arabia, UAE, Jordan, Bahrain and Qatar were involved though their precise role is unclear. It made no mention of European involvement and Britain has said it was not part of it.

The targets included Raqqa city, the headquarters of Islamic State, an extremist Sunni Muslim force that has seized large expanses of territory in Iraq and Syria and proclaimed a caliphate. President Barack Obama will be in New York later for the U.N. General Assembly where he will try to rally more nations behind his drive to take on IS.

from Breakingviews:

ECB’s trillion-euro race may start slowly

By Neil Unmack

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The latest parlour game in financial markets is guessing the size of the European Central Bank’s upcoming four-year targeted long-term liquidity operations (TLTROs): how many banks will tap the ECB, for how much?

from Breakingviews:

No-debt mania continues to dictate German policies

By Olaf Storbeck

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Angela Merkel’s rhetoric on higher public investment is changing for the better. But the German chancellor remains unruffled by growing calls from her euro partners and the European Central Bank to change tack on fiscal policy. Germany’s excessive focus on balanced budgets remains unchanged and is likely to prevent any swift and significant increase in public infrastructure spending.

from MacroScope:

Showdown for Hollande

French President Hollande and Finance Minister Sapin take part in the assizes for financing and investment at the Elysee Palace in Paris

The French government faces a confidence vote in the national assembly after President Francois Hollande and his prime minister, Manuel Valls, ousted dissident ministers in a signal perhaps that they are prepared to push ahead with unpopular structural reforms to breathe life into a moribund economy.

Rebel lawmakers in Hollande’s Socialist party say they may abstain. On top of the reshuffle, they are angry at Hollande's policy switch in January to favour tax cuts to business in a bid to revive the economy - a move that has failed to kickstart a flatlining economy.

from MacroScope:

An almighty gamble

Britain's Prime Minister David Cameron leaves Downing Street in London

Having woken up to the very real possibility of Scotland going it alone, the leaders of Britain’s main parties have scrapped their parliamentary business and headed north to campaign in what amounts to a huge gamble.

The “No” campaign has been criticized for many things – being too negative (though no is negative by definition), being too aloof, failing to address the hole’s in Alex Salmond’s manifesto. The question is whether it is too late to do anything about it. It is risky to deploy Prime Minister David Cameron who, by his own admission, is not catnip to the Scots.

from MacroScope:

Over to Obama

U.S. President Barack Obama walks towards Air Force One before departing for Estonia while at Andrews Air Force Base outside Washington

Barack Obama is in Estonia before the NATO summit in Wales intending to pressure Vladimir Putin to back off in Ukraine. The rhetoric will be strong – not least about protecting the Baltics under NATO’s umbrella.

But with zero chance of western military action in Ukraine the hope is that economic pain via sanctions will bring Moscow to heel. Existing sanctions are clearly hurting the economy – the rouble has plumbed record lows as capital flees or shuns the country – but that hasn’t stopped Putin so far.

from Counterparties:

MORNING BID – ‘You don’t wanna go long into the weekend’

Get ready for one of those days where people say a lot about not wanting to be “long going into the weekend.” Except perhaps in bond markets, where the rush to government debt intensified with President Obama’s remarks that the US is ready to provide air support through airstrikes against ISIS, which now controls a big swath of Syria and Northern Iraq. That’s forced a big move into U.S. and German yields, among other things, which is undermining some of the recent strength in the dollar as well. (That’s not to say it’s a strong-euro move, more of a weak-dollar move, given the declines in the dollar against the yen as well.)

What’s striking here about the rallies in U.S. debt and German debt is that even though there’s a substantial safe-haven bid behind both markets, the difference is the German 2/10 spread has narrowed from about 1.73 percentage points to 1.04 percentage points since the beginning of the year thanks to a big move in the 10-year, a bull “flattening” trade that reflects ongoing concerns about economic growth in Germany, and more broadly, in Europe.

from Breakingviews:

Euro zone’s biggest problem is debt, not slow growth

By Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Suppose that the euro zone economy was exactly the same as it is now, except that the ratio of sovereign debt to GDP was 9 percent instead of 92 percent. In that alternative reality, recent economic data would be depressing, but not worrying.

from Breakingviews:

BES bail-in leaves CDS traders struck out

By Neil Unmack

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Banco Espirito Santo’s bail-in has been a nice earner for some bond traders. Anyone who bet that Portuguese authorities would save senior creditors but burn bonds lower down has made a killing. But anyone who tried to follow suit with BES credit default swaps will be feeling much less cheery.

from Counterparties:

MORNING BID – On GDP, the Fed, Argentina, and lots of other things

To paraphrase Kevin Costner in Bull Durham, we’re dealing with a lot of stuff here. The U.S. economy did end up rebounding in the second quarter, with a 4 percent rate of growth that’s much better than anyone anticipated – and the first-quarter decline was revised to something less horrible, so investors worried about the economy are a bit less freaked out at this particular moment.

Of course, that still means that the economy only grew 0.9 percent in the first half of the year, and that’s not all that amazing, but the economy in the second quarter grew in areas that matter the most – business spending, consumer spending and to a lesser extent government, which was such a drag on GDP for a good long time that can’t be just ignored. In tandem with the GDP figure, the ADP report said 218,000 jobs were added for private payrolls for July, another strong month that portends a good showing out of the Labor Department figures on Friday. That’s all at a time when the housing indicators continue to weaken, which is still a concern, and some even believe that auto sales have probably hit their apex as well for this cycle, given so much of the buying was based on incentives, but we’ll get better clarity on that on Friday.

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