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from MacroScope:

Swedish shift

Opposition leader Stefan Lofven speaks at the election night party of the Social Democrats in Stockholm

Sweden's centre-left Social Democrats topped the poll in Sunday’s election but fell well short of an overall majority to the extent that it will struggle to form a strong coalition.

The Social Democrats and the Greens and hard Left, who would be natural coalition allies, garnered 43.7 percent of the vote. The anti-immigrant far right emerged as the third biggest party to hold the balance of power with nearly 13 percent.

It looks like there will be plenty of time for market jitters before a government is formed.
What looks more certain is the ousting of the centre-right means years of falling taxes and liberal economic reforms may come to a juddering halt.

A flurry of polls over the weekend didn’t materially change the Scotland independence story.
The poll of polls – which because it collates a far higher number of votes than an individual survey should have a smaller margin for error than the 2 or 3 percentage points in any single survey – puts the pro-union vote on 51 percent, the independents on 49, still too close to call.

from MacroScope:

What’s it all about, Mario?

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It’s ECB day and after Mario Draghi’s recent dramatic utterances, expectation for fresh action has grown, expectations which are likely largely to be dashed.

Draghi told the world’s central banking elite in Jackson Hole last month that market inflation expectations were falling markedly and the European Central Bank would use everything in its power to stabilize them in order to avoid a deflationary spiral. He also ripped up central banking orthodoxy by calling for more fiscal spending by governments at the same time as redoubling economic reform efforts. How to read that?

from MacroScope:

EU cuts off Russian banks, puts ball in Moscow’s court

Russia's President Vladimir Putin talks to reporters during a meeting in Brasilia

True to its word, the EU agreed sweeping sanctions on Russia yesterday, targeting trade in equipment for the defence and oil sectors and, most crucially, barring Russia’s state-run banks from accessing European capital markets. The measures will be imposed this week and will last for a year initially with three monthly reviews allowing them to be toughened if necessary.

There was no rowing back from the blueprint produced last week – having already agreed to exempt the gas sector – and the United States quickly followed suit, targeting Russian banks VTB, Bank of Moscow, and Russian Agriculture Bank, as well as United Shipbuilding Corp.

from MacroScope:

ECB: talk but no action

EThe European Central Bank holds its monthly policy meeting and after launching a range of new measures in June it’s a racing certainty that nothing will happen this time. However, ECB President Mario Draghi has plenty of scope to move markets and minds in his news conference.

We are still waiting for details of the ECB’s new long-term lending programme which is supposed to be contingent on banks lending the money on to companies and households. Last time they got a splurge of cheap money, the banks largely invested in government bonds and other financial market assets. With euro zone yields now at record lows, the ECB would not like to see a repeat.

from Photographers' Blog:

Seeking refuge in Sweden

Stockholm, Sweden

By Cathal McNaughton

Gaining the trust of asylum seekers I met in Sweden and taking pictures that would grab the viewer's attention and convey the tremendous struggles and dangers they had faced was a challenge.

They were scared and suspicious and in most cases had family back in their homeland who were in danger.

from MacroScope:

We need to talk about Juncker

Swedish Prime Minister Fredrik Reinfeldt will host Germany’s Angela Merkel, Britain’s David Cameron and Dutch premier Mark Rutte at his private residence over two days to discuss reforming the EU and "achieving a more efficient EU that is focused on creating jobs and growth". 

After EU elections delivered strong returns for far-right and far-left parties, EU leaders say they have recognized the need to refocus on what matters to their people. But at the same time, the orthodox camp is determined to keep bearing down on debt and the bloc’s heads are arguing over who should take the top jobs in Brussels which set the tone.

from MacroScope:

A question of gas

Vladimir Putin will meet senior Russian government officials to discuss Russia's economic ties with Ukraine, including on energy after state-controlled natural gas producer Gazprom said Kiev missed a deadline to pay a $2.2 billion bill.

In previous years, gas disputes between Moscow and Kiev have hurt supplies to Europe. The Ukraine government has said it would take Russia to an arbitration court if Moscow failed to roll back gas price hikes.

from MacroScope:

Decision day for Kiev … and Moscow

Decision day for Ukrainian President Viktor Yanukovich as he heads to the Kremlin seeking a financial lifeline while demonstrators in Kiev gather again to demand he steps down.

Vladimir Putin seems set to agree a loan deal, and possibly offer Ukraine a discount on the Russian natural gas.
It seemed he was the only game in town after an EU commissioner said the bloc was suspending talks on a trade agreement with Kiev. But yesterday, European Union foreign ministers said the door remained open, which in a way makes Yanukovich’s predicament harder.

from MacroScope:

Humdrum summit

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.

from MacroScope:

Can we have a German government please?

Angela Merkel’s CDU and the centre-left SPD have agreed to begin formal coalition talks conditional on securing support from a meeting of 200 senior SPD members scheduled for Sunday. The party is scarred by its experience of coalition in the last decade, when its support slumped, but it’s probably the lesser of two evils since a new vote would be quite likely to increase Merkel’s support. She only just missed out on a rare overall majority first time around.

Assuming Sunday’s vote gives assent, talks proper will start on Wednesday. Hold your horses though. An entire policy slate will have to be thrashed out so the betting is an administration won’t be in place until late November at the earliest. In the meantime, euro zone policy negotiations are pretty much on hold.

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