Reuters blog archive
A reported 0300 GMT deadline, which Russian forces denied had been issued, for Ukraine’s troops to disarm in Crimea or face the consequences has passed without incident and in the last hour President Vladimir Putin has ordered troops that took part in military exercises in western Russia to return to base.
That has helped lift the euro but the situation remains incredibly tense. Russia’s stock market is up a little over two percent and the rouble has found a footing but they are nowhere near clawing back Monday’s precipitous losses.
The West may have no military card to play – and its ability to impose meaningful sanctions is untested as yet – but the markets reminded Putin in no uncertain terms yesterday that there is a price to pay for war mongering.
The rouble plunged, Russian stocks dropped 11 percent and the central bank raised interest rates by a full point and a half and then blew $12 billion of its reserves trying to prop up the currency, hardly an ideal policy response for an economy that is already struggling. If in the longer term foreign investment dries up things could get quite nasty.
Russia’s next move remains the great unanswered question for Ukraine but there are glimmers that things might be starting to move elsewhere.
IMF chief Christine Lagarde said last night she would send a technical support team to Ukraine soon if Kiev makes a request. It can’t do so until an interim government is formed, probably tomorrow. That would be step one, but only step one, down the road to an international aid package.
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.
Turkish Prime Minister Tayyip Erdogan will make his first visit to Brussels for five years where he will meet EU Council President Herman Van Rompuy, European Commission President Jose Manuel Barroso and European Parliament President Martin Schulz.
The EU has been critical of Erdogan’s response to a sweeping corruption inquiry, clearing out hundreds of police officers and raising concern about a roll-back of reforms meant to strengthen independence of judiciary.
Ukraine continues to top the European worry list.
Monday demonstrated how quickly the financial side of the equation can spiral out of control. The hryvnia currency slumped and the cost of insuring against Ukrainian default soared, forcing the central bank to intervene and urge its citizens not to spark a bank run.
Having turned its back on the EU, Kiev must find more than $17 billion next year to meet gas bills and debt repayments. Presumably Russia will have to help out if it is not to have a basket case on its doorstep.
New European Commission macro forecasts for the euro zone and the EU have been given added significance by an alarming drop in inflation to 0.7 percent which has heaped pressure on the European Central Bank to ward off any threat of deflation.
There are myriad other questions – Will the Commission predict that Italy will miss its deficit target? What will it say to those countries in bailout programmes – particularly Greece, where the troika returns for a bailout review today, and Portugal? And what about France’s sluggish economy? PMI surveys on Monday showed it is acting as a drag on the euro zone recovery.
from Photographers' Blog:
By Bogdan Cristel
Getting to Jiu Valley – once home to a powerful coal mining industry that has since fallen on bad times – is difficult. The main road there is currently closed to traffic three days a week because of repair works, so I arrived in the small Jiu Valley town of Aninoasa after driving for 7 hours on detour roads. It is roughly 330 kms (205 miles) to Aninoasa from the Romanian capital Bucharest.
Aninoasa is the oldest town in Hunedoara County, mentioned as far back as 1453 AD. But earlier this year it also became the first town in Romania to have filed for insolvency. It is a small town, with simple houses and ramshackle communist-era apartment buildings to house coal miners.
The Bank of England will give the government its blueprint for “forward guidance” when it publishes its quarterly inflation report, a big moment in British policymaking.
Canadian Mark Carney, in his second month at the helm, was heralded in advance as the man to kick start a languishing economy but with green shoots sprouting all over the place that may not be needed. Nonetheless, if companies and households can be convinced interest rates will stay at record lows for a prolonged period, that could boost investment and spending and help solidify a recovery that now looks to be in train.
from Global Investing:
Fund managers searching for yield are increasing exposure to frontier markets (FM) as a diversification from emerging markets (EM), as the latter have been offering negative relative returns since January, according to MSCI data.
Barings Asset Management said on Monday it plans to launch a frontier markets fund in coming weeks, with a projected 70 percent exposure to frontier markets such as Nigeria, Saudi Arabia, the UAE, Sri Lanka and Ukraine.
from Global Investing:
With the U.S. Fed having cranked up its printing presses, there seems little to stop emerging central banks from extending their own rate cut campaigns this week.
The most interesting meeting promises to be in the Czech Republic. We saw some extraordinary verbal intervention last week from Governor Miroslav Singer, implying not only a rate cut but also recourse to "unconventional" monetary loosening tools. Of the 21 analysts polled by Reuters, 18 are expecting a rate cut on Thursday to a record low 0.25 percent. Indeed, in a world of currency wars, a rate cut could be just what the recession-mired Czech economy needs. But Singer's deputy, Moimir Hampl, has muddled the waters by refuting the need for any unusual policies or even rate cuts. Expect a heated debate (forward markets are siding with Singer and pricing a rate cut).