Archive

Reuters blog archive

from MacroScope:

Euro zone inflation to fall further?

draghi.jpg

Euro zone inflation is the big figure of the day. The consensus forecast is it for hold at a paltry 0.5 percent. Germany’s rate came in as predicted at 0.8 percent on Wednesday but Spain’s was well short at -0.3 percent. So there is clearly a risk that inflation for the currency bloc as a whole falls even further.

The Bundesbank has taken the unusual step of saying wage deals in Germany are too low and more hefty rises should be forthcoming, a sign of its concern about deflation. But the bar to printing money remains high and the European Central Bank certainly won’t act when it meets next week. It is still waiting to see what impact its June interest rate cuts and offer of more long-term cheap money to banks might have.

German retail sales, just out, have risen 1.3 percent on the month in June after a fall in May.

One problem for the ECB will be how to remain in ultra-stimulative mode once U.S. interest rates start to rise. The Federal Reserve is on course to end its QE programme in October and repeated its message yesterday that is in no hurry to raise interest rates.
No tightening is expected before mid-2015 but as the realization grows that it is coming, it could start to have an impact. Strong U.S. GDP data yesterday and the Fed’s upgrading of its assessment of the U.S. economy pointed in that direction. There is little chance of euro zone long-term interest rates decoupling from U.S. ones if they start rising.

from The Great Debate:

Clashes with Russia point to globalization’s end

RTR2TV82.jpg

As the European Union and the United States ramp up their sanctions on Russia, President Vladimir Putin’s plans for retaliation seem to include an attack on McDonald’s. There could not be a more powerful symbol that geopolitics is increasingly undoing the globalization of the world economy.

The burger chain was celebrated in the 1990s by the journalist Thomas Friedman’s “Golden Arches theory of conflict prevention,” which argued that the spread of McDonald’s around the world would bring an end to war. But almost 25 years after a McDonald’s restaurant opened in Moscow, it seems that deep interdependence has not ended conflict between great powers – it has merely provided a new battlefield for it.

from Breakingviews:

Review: An American-Chinese morality tale

By Edward Hadas

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

The subtitle of Stephen Roach's new book has an arresting image. "Unbalanced: the Codependency of America and China" describes two economies with mutually reinforcing dysfunctions. This approach is sometimes helpful, but the book's strongest argument concerns the retired Morgan Stanley economist's homeland. He makes a persuasive case that "most of America's deep-seated economic problems...are of its own making."

from Expert Zone:

How to get India on the highway to high growth

(Any opinions expressed here are those of the author and not of Thomson Reuters)

The president's address to parliament this week lays out the new government’s roadmap to get India’s economy back to high growth. That will take time and is not easy either.

True, the BJP government led by Narendra Modi inherited a weak economy - growth was a mere 4.7 percent; industry was static; there was no employment generation; and inflation was at over 8 percent. The only comfort was that foreign exchange reserves exceeded $312 billion.

from Breakingviews:

Abe’s small hits weightier than big trade miss

By Andy Mukherjee 

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

Shinzo Abe’s big miss in prizing open Japan’s farm economy is making investors needlessly glum. The prime minister’s smaller recent successes, from thawing out frozen land and labour markets to reining in healthcare costs, add up to a strong reform push.

from Expert Zone:

The reform club

(Any opinions expressed here are those of the author and not of Thomson Reuters)

That custodian of the English language, the Oxford English Dictionary, describes a bubble as “anything fragile, unsubstantial, empty or worthless; a deceptive show”. Could this description apply to the current frenzy for “reform” that is seemingly sweeping the global economy? The answer is “yes, in part”. While there are some genuine attempts at reform, market expectations for reform will inevitably be disappointed in some parts of the world.

The global financial crisis has prompted politicians to advocate economic reform in two ways. First, the crisis demonstrated that the status quo needed to be changed -- and in many cases that change required sizeable structural change. Second, as the structure of the world economy has changed (lower global capital flows, slower global trade, etc.) so economies have had to adapt the way that their economies are structured.

from Breakingviews:

Companies risk changing euro view at wrong time

By Swaha Pattanaik

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

A rising single currency has confounded and hurt European exporters. An increasing number are becoming euro bulls, but their conversion could be ill-timed. While the currency’s rally may not be over, the ECB seems too unhappy with euro strength for it to last past autumn.

from MacroScope:

Erdogan unfettered

Investors have spent months looking askance at Turkey’s corruption scandal and Prime Minister Tayyip Erdogan’s response to it – purging the police and judiciary of people he believes are acolytes of his enemy, U.S.-based cleric Fethullah Gulen. But it appears to have made little difference to his electorate.

Erdogan declared victory after Sunday’s local elections and told his enemies they would now pay the price. His AK Party was well ahead overall but the opposition Republican People's Party (CHP) appeared close to seizing the capital Ankara. 

from MacroScope:

A question of energy

After two days in The Hague, Barack Obama moves on to Brussels for an EU/U.S. summit with Ukraine still casting the longest shadow.

Europe’s energy dependence on Russia is likely to top the agenda with the EU pressing for U.S. help in that regard while the standoff with Russia could give new impetus to talks over the world’s largest free trade deal.

from Breakingviews:

Rich world exports its way to trouble

By Andy Mukherjee

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

Rich nations are exporting their way to trouble. For eight straight quarters, advanced economies have exported more goods and services than they have imported, suggesting that as a group they are free-riding on world demand, most of which has come from emerging markets. But this growth strategy is both selfish and self-defeating.

  •