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from MacroScope:

ECB uncertainty

For European markets, Germany’s March inflation figure is likely to dominate today. It is forecast to hold at just 1.0 percent. The European Central Bank insists there is no threat of deflation in the currency area although the euro zone number has been in its “danger zone” below 1 percent for five months now.

Having appeared to set a rather high bar to policy action at its last meeting, this week the tone changed. Most notable was Bundesbank chief Jens Weidmann, normally a hardliner, who said printing money was not out of the question although he would prefer negative deposit rates as the means to tackle an overly strong euro.

That looked like a significant shift although he did stress there was no need for imminent action.

Has something changed? Certainly the currency seems to be focusing minds though it’s probably too early for anything dramatic at next week’s policy meeting. With inflation running at just 0.7 percent and the euro near $1.40 – buoyed by emerging market outflows – further currency appreciation would cut import prices in a way that will push inflation lower still.

from The Great Debate:

The religion-fueled fight in Syria

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The second round of peace talks in Geneva between representatives of Bashar Al-Assad’s regime in Syria and rebel forces has ended with both sides blaming each other for the lack of progress. Beyond the finger-pointing, however, lies a growing danger to the goal of a negotiated settlement. The civil war’s religious divides are widening, making compromise unthinkable.

Representatives of the Syrian regime went to Geneva solely with the hope of convincing the opposition to let President Bashar al-Assad stay in power so he can forge an alliance against jihadist forces fighting in Syria, most notably the al Qaeda affiliates Jabhat al-Nusra and the Islamic State in Iraq and the Levant. Their argument -- one that many, including former U.S. Ambassador to Iraq Ryan Crocker, have made -- was that Assad is better than any likely alternative.

from David Rohde:

Dooming the Syria talks before they begin

The United States won a short-term diplomatic victory over Iran this week. Under intense pressure from American officials, U.N. Secretary-General Ban Ki-moon withdrew an invitation for Iranian officials to attend the Syria peace conference.

Disinviting Tehran is the latest example of the Obama administration’s continual search for easy, risk-free solutions in Syria. As the conflict destabilizes the region, however, Washington must finally face the hard choice: Either compromise with Iran, or decisively support and arm the rebels.

from The Great Debate:

Is there a ‘right’ path for the U.S. in Syria?

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Key parties to the conflict in Syria are meeting in Switzerland on Wednesday. The participants have been downplaying expectations that the “Geneva II” peace conference -- which will bring together for the first time representatives from the Assad government and various rebel groups along with major international players -- will resolve the conflict, or even bring about a ceasefire.

For the U.S. government, the crucial issue at this meeting and beyond is determining if and how to intervene and provide support in a conflict where there may no longer be real “good guys,” or supporters of U.S. national interests, to back. This is particularly important given Washington’s interwoven interests throughout the region -- not only in Syria, but in Iraq, Iran, Lebanon, Turkey and beyond.

from Ian Bremmer:

Why Saudi Arabia and the U.S. don’t see eye to eye in the Middle East

Give credit to Vladimir Putin and his New York Times op-ed on Syria for sparking a new tactic for foreign leaders hoping to influence American public opinion. In recent weeks, Saudi Arabian political elites have followed Putin’s lead, using American outlets to express their distaste with the West’s foreign policy, particularly with regard to Syria and Iran. In comments to the Wall Street Journal, prominent Saudi Prince Turki al-Faisal decried the United States for cutting a preliminary deal with Iran on its nuclear program without giving the Saudis a seat at the table, and for Washington’s unwillingness to oppose Assad in the wake of the atrocities he’s committed. Saudi Arabia’s ambassador to Britain followed with an op-ed in the New York Times entitled “Saudi Arabia Will Go It Alone.” The Saudis are clearly upholding the vow made by intelligence chief Bandar bin Sultan back in October to undergo a “major shift” away from the United States.

In light of the recent actions of the Obama administration, many allies are also frustrated and confused, and even hedging their bets in reaction to the United States’ increasingly unpredictable foreign policy. But of all the disappointed countries, none is more so than Saudi Arabia -- and with good reason. That’s because the two countries have shared interests historically -- but not core values -- and those interests have recently diverged.

from The Great Debate:

Human Rights Day: Still pursuing religious freedom

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December 10 marks Human Rights Day, the 65th anniversary of the landmark Universal Declaration of Human Rights (UDHR), signed by 48 nations -- with just eight abstentions.

Sixty-five years ago, naysayers insisted it was nobody else’s business how governments behaved within their borders. The declaration confronted this cynical view -- and continues to do so today. Human rights abuses and their consequences spill beyond national borders, darkening prospects for harmony and stability across the globe. Freedom of religion or belief, as well as other human rights, are essential to peace and security. They are everyone’s business.

from The Great Debate:

Too many cooks in the Iran nuclear kitchen

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Last weekend, after years of failed negotiations, the “P5+1” nations -- the five permanent members of the United Nations Security Council (the United States, Britain, France, Russia and China) plus Germany -- finally appeared to be on the verge of a deal with Iran regarding curbs on its nuclear program.

All except France were ready to sign a stopgap agreement that would offer Iran limited sanctions relief in return for a freeze in its nuclear program. But Paris torpedoed the arrangement at the last moment -- denigrating it as “a sucker’s deal.”

from Global Investing:

Pakistan, Nigeria, Bulgaria… the cash keeps coming

The frontier markets juggernaut continues. Here's a great graphic from Bank of America/Merrill Lynch showing the diverging fund flow dynamic into frontier and emerging equity markets.

What it shows, according to BofA/ML  is:

Frontier market funds with year-to-date inflows of $1.5 billion have decoupled from emerging markets ($2.1 billion outflows year-to-date)

from David Rohde:

Changing Assad’s calculus

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A deserted street with building destroyed by what activists said was shelling by forces loyal to Syria's President Bashar al-Assad , near Aleppo International airport, May 20, 2013. REUTERS/Nour Kelze

AMMAN, Jordan – Secretary of State John Kerry and 10 European and Arab foreign ministers gathered here Wednesday night to again talk about helping Syria’s rebels.

from Global Investing:

New frontiers to outpace emerging markets

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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.

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