Reuters blog archive
Is it war if no shots have been fired? The Ukrainians say so but Moscow, its grip on Crimea now pretty much complete, says it is merely protecting its people. The rest of the world and its financial markets watch on very uneasily.
There is virtually no chance of any western military response after Vladimir Putin declared he had the right to invade his neighbour – NATO expressed "grave concern" but did not come up with any significant measures to apply pressure on. But there will be a diplomatic and economic price to pay.
The rouble tumbled by 2.5 percent at Monday’s open and the central bank has already acted to try and underpin it, raising its key lending rate by 1.5 percentage points although the Russian economy is already in poor shape. The main Russian stock index has plunged by about 9 percent with Gazprom doing worse than that and safe haven German Bund futures have jumped.
Already the talk is of shunning Russia’s G8 summit later in the year. America’s John Kerry, who will visit Kiev on Tuesday, has put visa bans, asset freezes and trade isolation on the table, saying U.S. business may well want to think again about involvement in Russia. Putting pressure on Russia’s oligarchs could be one way of exerting leverage.
Slowing growth in the Chinese and U.S. factory sectors earlier this week did nothing to soothe frayed market nerves and put a firm focus on today’s service sector PMI surveys in Europe along with the equivalent U.S. report and a weekly jobless number there.
While the world’s two largest economies suffered a hiccup, euro zone factories had their best month since mid-2011 in January. But it is the service sector that dominates in Europe. Flash readings, which are not usually revised much, showed the euro zone services reading hit a four-month high with France lagging Germany again although even its number rose. Today we’ll get the first numbers for Italy, Spain and Britain.
The European Central Bank meets on Thursday with emerging market tumult bang at the top of its agenda.
It’s probably too early to force a policy move this week – particularly since the next set of ECB economic and inflation forecasts are due in March – but it's an unwelcome development at a time when inflation is already uncomfortably low, dropping further to just 0.7 percent in January.
Day one in Davos showed the masters of the universe fretting about Sino-Japanese military tensions, the treacherous investment territory in some emerging markets and the risk of a lurch to the right in Europe at May’s parliamentary elections which could make reform of the bloc even harder.
Today, the focus will be on Iranian President Hassan Rouhani (and his main detractor, Israel’s Netanyahu). Presumably he’s there to woo the world of commerce now sanctions are to be relaxed in return for Tehran suspending enrichment of uranium beyond a certain level. Anything he says about Syria’s peace talks, which have so far been more hostile than conciliatory, will instantly be headline news.
The surveys are likely to show the currency bloc ended the year on a reasonably robust note with Germany leading the way as always, Italy and Spain showing signs of life and France looking worryingly weak.
No sign of tensions calming on the streets of Kiev, in fact today we could have a new flashpoint.
Prime Minister Mykola Azarov's cabinet is holding its weekly meeting in the government building which protesters have blockaded since Monday, paving the way for a possible showdown.
Ukraine’s shock decision to turn its back on an EU trade deal continues to reverberate with mass rallies on the streets of Kiev in protest at President Viktor Yanukovich’s decision.
To try to defuse tensions, Yanukovich issued a statement saying he would do everything in his power to speed up Ukrainian moves toward the EU. Is this another U-turn or mere semantics? The answer is important.
Euro zone services PMIs and German industry orders data will offer the latest snapshot of the currency bloc’s economy which the European Commission now forecasts will contract by 0.4 percent this year and grow just 1.1 percent in 2014 – hardly escape velocity, in fact barely taxiing along the runway.
We know from flash readings for the euro zone and Germany that service activity expanded but at a slower rate last month. France’s reading crept back into expansionary territory for the first time since early 2012. Any revisions to those figures will be marginal leaving the focus more on Italy and Spain for which we get no preliminary release.
The EU/IMF/ECB troika is due to return to Athens to resume a review of Greece’s bailout after some sparring over budget measures.
Greece’s president and prime minister have said they will not impose any further austerity measures and hope that their ability to run a primary surplus will persuade its lenders to cut it some more slack on its bailout loans to make its debt sustainable. The EU and IMF say there will be a fiscal gap next year that must be filled by domestic measures, be they further wage and pension cuts or tax increases.
A two-day EU summit kicks off in Brussels hamstrung by the lack of a German government.
Officials in Berlin say they want to reach a common position on a mechanism for restructuring or winding up failing banks by the end of the year but with an entire policy slate to be thrashed out and the centre-left SPD saying the aim is to form a new German administration with Angela Merkel’s CDU by Christmas, time is very tight.