Will Germany’s Q4 get any better?

November 18, 2014

Traders are pictured at their desks in front of the DAX board at the Frankfurt stock exchange

Germany’s ZEW index will give an indication of whether the fourth quarter will be any better for Europe’s largest economy after it barely escaped recession in Q3. In October, the index dropped to its lowest level in nearly two years.

Markets took heart from European Central Bank chief Mario Draghi’s testimony to the European Parliament yesterday. But there was nothing that suggested the ECB is close to launching full quantitative easing.

Draghi said its existing stimulus was gaining traction, that the trough in credit and lending may have been passed and that next year should see a moderate recovery if governments pursued structural reforms.

That was balanced with the caveat that the ECB would do more if it proved necessary, up to and including buying sovereign bonds.

It doesn’t look like much help is coming from the fiscal side. The EU contingent at the G20 – Britain, Germany, France, Italy and Spain – signed up to a pledge to add an additional 2.1 percentage points to world growth over the next five years but their action cards included nothing over and above existing plans.

UK inflation data bear watching after the main rate dropped to just 1.2 percent in September. That, an absence of wage growth and the struggles of Britain’s main trade destination – the euro zone – are combining to push back the likely timing of a first interest rate rise well into next year. UK interest rate futures are pricing in no move in rates from 0.5 percent until late 2015 or early 2016.

Bank of England chief economist Andy Haldane said on Monday he was watching low inflation expectations “like a dove” while his boss, Mark Carney, said Britain was facing “huge disinflation forces” from Europe and falling commodity prices.

German Foreign Minister Frank-Walter Steinmeier travels to Kiev and Moscow a day after EU foreign ministers agreed to impose more asset freezes and travel bans on Ukraine separatists but failed to reach a consensus on more economic sanctions against Russia. It is Steinmeier’s first trip to Moscow since February.

A Merkel-Putin meeting in Australia at the weekend, which lasted more than three hours and produced no obvious results, suggests the chances of a breakthrough are vanishingly small. Berlin has said Iran’s nuclear deal will also be on the agenda.

Iran and six world powers – the United States, Russia, China, France, Germany and Britain – meet in Vienna to try to reach agreement on ending a long-running dispute over Tehran’s nuclear programme by a Nov. 24 deadline. Russian officials have talking up the prospects of a deal to ensure Iran’s nuclear programme does not enable it to build nuclear weapons. Tehran says its work is for civil needs.

Others say a deal is unlikely by the deadline and the two sides will probably settle for another interim agreement that builds on the limited sanctions relief agreed a year ago as they spend a lot longer chiseling away at their deep disagreements. Western officials say it is unclear if Iranian Supreme Leader Ayatollah Ali Khamenei has given his negotiating team the authority to make compromises. The sticking points include the future scope of Iran’s uranium enrichment and the speed at which sanctions would be lifted.

Iraqi security forces entered the country’s largest refinery for the first time on Tuesday after months of battling Islamic State militants who had surrounded it, a police colonel and state television reported.

Two suspected Palestinian men armed with axes and knives killed up to five people and wounded four in a Jerusalem synagogue before they were shot dead by police. Israeli Prime Minister Benjamin Netanyahu put the blame on both Hamas and Palestinian President Mahmoud Abbas and said he would respond with a “heavy hand”.

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