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from MacroScope:

Acid test of EU’s resolve over Russia

Emergencies Ministry member walks at the site of a Malaysia Airlines Boeing 777 plane crash near the settlement of Grabovo in the Donetsk region

EU leaders said over the weekend they would be prepared to impose tougher sanctions on Russia, giving Vladimir Putin one more chance to douse the violence in eastern Ukraine and help investigators do their work at the site of the crashed Malaysian airliner or face the consequences.

A statement from the British government said Germany’s Angela Merkel, Britain’s David Cameron and France’s Francois Hollande agreed on a telephone call that their ministers should be ready to announce a fresh round of sanctions at a meeting of the European Union's Foreign Affairs Council on Tuesday.

There is already scope to toughen measures announced last week to hit Russian companies that help destabilise Ukraine and to block new loans to Russia through two multilateral lenders. The EU foreign ministers are tasked with preparing a first list of people and entities from Russia that would be targeted. The number of individuals and companies to be penalized is up for grabs.

The weekend round of diplomacy sounds like a more dramatic move is possible. Could that be the “sectoral” sanctions that Washington has pushed for which could deliver a really serious blow to the already flatlining Russian economy and start shutting it out of international trade and commerce?

from MacroScope:

Sanctions tighten

Britain's PM Cameron, Portugal's PM Passos Coelho, Germany's Chancellor Merkel and Finland's PM Stubb attend an EU leaders summit in Brussels

EU leaders failed to get anywhere on sharing out the top jobs in Brussels last night but did manage another round of sanctions against Russia.

This time they will target Russian companies that help destabilize Ukraine and will ask the EU's bank, the European Investment Bank, to suspend new lending for Russia and seek a halt to new lending to Russia by the European Bank for Reconstruction and Development.

from Breakingviews:

Woolworths pays too-steep ransom in Aussie battle

By Una Galani

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

Woolworths is paying too steep a ransom in its retail battle. The South African group is buying billionaire Solomon Lew’s stake in an Australian unit in an attempt to secure the billionaire’s support in its A$2.1 billion ($2 billion) takeover of upmarket department store chain David Jones. The side deal raises the effective takeover premium – and piles pressure on Woolworths to realise synergies.

from Global Investing:

Anticipating the fallout from South Africa’s ratings reviews

South Africa is due ratings reviews this Friday. Chances are that the Standard & Poor's agency will cut its BBB rating by one, or possibly even two notches.  Another agency Fitch has a stable outlook on the rating but could still choose to downgrade the rating rather than the outlook. What will be the damage?

There is undoubtedly a link between ratings and bond prices.  So a one-notch ratings downgrade tends to lead to roughly a 20 percent increase in bond yield spreads and credit default swaps (instruments that are used to hedge against default), according to calculations by JPMorgan. But in South Africa the lower credit rating may already be already reflected in asset prices -- Panama, Brazil, Colombia, Philippines, Uruguay, Indonesia, and Romania carry lower sovereign credit ratings but boast lower CDS and dollar bond yield premia over Treasuries.  Russia and Turkey have lower average ratings than South Africa but their debt and CDS spreads  are roughly on the same level.

from MacroScope:

PMIs next signpost for ECB

Following a mixed bag of euro zone GDP data last week which showed Germany charging on and Spain holding its own but France stagnating and Italy, Portugal and the Netherlands slipping back into contraction, flash PMI surveys for the euro zone, Germany and France certainly have the power to jolt the markets today.

As things stand, there seems little to dissuade the European Central Bank from loosening policy next month. Five senior sources told us it was  preparing a package of policy options for its early June meeting, including cuts in all its interest rates and targeted measures aimed at boosting lending to small- and mid-sized firms.

from Breakingviews:

South Africa needs neighbors’ growth rates

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

Two decades after Nelson Mandela became president, South Africa’s post-apartheid generation will vote for the first time in next week’s general election. The ruling African National Congress represents his political legacy, but that’s undermined by the party’s weak economic results. Maybe the “Born Frees,” as they’re known, can help change that.

from MacroScope:

IMF stumps up for Ukraine

The International Monetary Fund has announced a $14-18 billion bailout of Ukraine with the aim of luring in a total of $27 billion from the international community over the next two years.

Ukrainian officials say they need money to start flowing in April. The U.S., EU and others in the G7 would row in behind an IMF package, helping Ukraine meet its debt obligations and begin the process of rebuilding. In total, Kiev has talked about needing $35 billion over two years so they are pretty close.

from The Great Debate:

Combatting TB 2.0

Earlier this month, health officials in Los Angeles confirmed they are treating a patient for extensively drug resistant tuberculosis -- a deadly form that does not respond to most of the antibiotics. The United States is one of 100 countries that have reported cases of “XDR-TB” since it was discovered in South Africa less than a decade ago.

Congress is holding public briefings Tuesday and Wednesday to look into the threat posed by tuberculosis, seeking expert recommendations to help develop a U.S. response. To be effective, public health efforts must adapt to the ways TB is evolving.

from MacroScope:

Osborne stakes out election ground with little fiscal leeway

The annual UK budget is always a big set piece but it’s hard to remember one where there have been fewer advance leaks – indicative of a steady-as-she-goes approach by George Osborne.
Having put so much political capital into reducing the deficit, to switch now at a time when the economy is recovering strongly would be politically risky. And with debt falling only slowly there is little fiscal leeway.

That’s not to say this isn’t a big political moment. Yes there is the finance minister’s autumn statement and another budget before May 2015 elections but this is the moment when the narrative for the economy and Britons’ wellbeing is staked out.

from Left field:

Time to rebuild for South Africa cricket

First Jacques Kallis retired. Then Graeme Smith called it quits. In between, South Africa lost a test series against Australia, their first at home since the 2008-09 season.

What stares the Proteas in the face now, however, is a far bigger challenge than just replacing two great cricketers.

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