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from Hugo Dixon:

Markets right to worry about euro zone

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

The markets are right to worry about the euro zone, the epicentre of last week’s fright. Its three big economies – Germany, France and Italy – are, in their own ways, stuck.

There is, in theory, a grand bargain that might shift the malaise. This would involve deep structural reform by Berlin as well as Paris and Rome; quantitative easing by the European Central Bank to boost inflation; and some loosening of fiscal straitjackets.

But such a deal – hinted at by Mario Draghi, the ECB president, in his Jackson Hole speech in August - is unlikely to materialise soon, if at all.

from Global Investing:

Strong dollar, weak oil and emerging markets growth

Many emerging economies have been banking on weaker currencies to revitalise economic growth.  Oil's 25 percent fall in dollar terms this year should also help. The problem however is the dollar's strength which is leading to a general tightening of monetary conditions worldwide, more so in countries where central banks are intervening to prevent their currencies from falling too much.

Michael Howell, managing director of the CrossBorder Capital consultancy estimates the negative effect of the stronger dollar on global liquidity (in simple terms, the amount of capital available for investment and spending) outweighs the positives from falling oil prices by a ratio of 10 to 1. Not only does it raise funding costs for non-U.S. banks and companies, it also usually forces other central banks to keep monetary policy tight, especially in countries with high inflation or external debt levels. Howell says:

from Breakingviews:

Weaker euro won’t do much to stoke inflation

By Swaha Pattanaik

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

The European Central Bank has been egging on the euro’s slide. It has a not-so-secret hope: a cheaper currency will bring some much desired inflation into the euro zone. Good luck.

from Breakingviews:

AbbVie U-turn shows Shire was mostly about tax

By Neil Unmack

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

AbbVie’s U-turn shows its Shire deal was mostly about tax, after all. Despite initially holding firm as the Obama administration clamped down on tax-driven “inversions,” the American group has now cooled on a $55 billion takeover of its Dublin-based peer. There’s an unwelcome read-across for AstraZeneca.

from Breakingviews:

Commodity producer/trader boundary starts to blur

By Swaha Pattanaik

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

Commodity producers and traders were once very different beasts. But the distinctions between the two are increasingly fuzzy.

from Breakingviews:

Markets finally side with economy on bad news

By Edward Hadas

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

Market historians could call the last five years the QE period. Quantitative easing, a polite term for money creation by central banks, has pushed free and ultra-cheap money into almost all financial markets, supporting or pushing up prices. The era is coming to a close. As investors overcome their monetary dependence, they have to look at the real economy. It’s not encouraging.

from Hugo Dixon:

Italy has no good Plan B

Matteo Renzi’s Plan A is to push through domestic reforms, hope the European Central Bank manages to get inflation ticking up, and keep his fingers crossed the Italian economy stops shrinking. But if this fails, a mega wealth tax, debt restructuring and/or exit from the euro beckons.

There is no Plan B that wouldn’t tip both Italy, where I spent part of last week, and its neighbours into a severe crisis. That makes it all the more important that Plan A works.

from Breakingviews:

European IPO wobble is about more than volatility

By Quentin Webb

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

Europe’s IPO wobble is about more than volatility. With initial public offerings in France and Italy being pulled, companies and advisers are, as ever, blaming choppy markets. There’s some truth in this old bromide. But the misfiring of two big internet debuts also matters. Europe’s economy is faltering. And a busy year for new deals has made investors both less flush and more discriminating.

from Breakingviews:

Asset price disinflation may be next big thing

By Edward Hadas

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

The great divergence may be about to come to an end. For investors in almost everything but the safest bonds, that is bad news.

from Breakingviews:

Rocket and Zalando call top of Europe’s IPO market

By Olaf Storbeck

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

Highflying hopes of a renewed surge in European new issues have been hit by two rockets. Weak market debuts for internet fashion retailer Zalando and tech company incubator Rocket Internet appear to mark an early zenith for initial public offerings in the region.

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