Negative inflation to herald QE launch

March 2, 2015

US dollars and euros banknotes are seen in this illustration photo taken at a change bureau in Paris

The European Central Bank is about to start printing money. Euro zone data today will show why.

They are forecast to show the bloc’s inflation rate was -0.4 percent in February though higher than expected numbers from Germany, Italy and Spain could push the figure for the currency area up a little.

Manufacturing PMI surveys for euro zone countries will show whether the more upbeat than expected start to the year continued into February.

The news from China is not so good. The People’s Bank of China cuts its benchmark lending and deposit rates on Saturday, pre-empting official data on Sunday that showed a second consecutive month of shrinking manufacturing activity.

It’s been a weekend of more Greek brinkmanship. Its new government has issued more warnings about running out of money and Germany’s Wolfgang Schaeuble said he had no certainty that Athens would enacted the required economic reforms during its four-month bailout extension.

Greece could run out of money this month. The euro zone and ECB have so far refused to countenance raising the limit on short-term T-bill issuance by Athens.

Several billions unused from Greek bank bailout funds appear to be off limits and while the Greek government wants to use 1.9 billion euros in profits that the ECB has made on its holdings of Greek government bonds, that also appears to be off the table … at least until more concrete reform progress has been made.

But there is a glimmer of a shift. Eurogroup chairman Jeroen Dijsselbloem told the FT that if Alexis Tsipras and co. embarked on some reforms immediately, part of the 7.2 billion euros remaining in the Greek bailout pot could be paid out as early as this month. Until now, the line had been that that money would only be made available once the agreed reform programme had been implemented in full.

There has also been more verbal jousting. In a speech on Saturday to his Syriza party, Tsipras accused Madrid and Lisbon of attempting to sabotage negotiations for political reasons.

Spanish premier Mariano Rajoy hit back, saying he had shown solidarity with Greece, urging it to meet its obligations and observing that he was not responsible for the new leftist government making promises to its people that it couldn’t deliver.

Tsipras denied on Friday that Greece would need a third international bailout, though it is hard to see how it can be avoided though it could be called something else, and a poll showed surging support for his government even though it had to back down to win a temporary lifeline from the euro zone.

The U.N. nuclear watchdog’s board of governors quarterly meeting begins today. Iran’s stalling of two aspects of the IAEA’s investigation into its atomic programme will be top of the agenda although frustration is expected to be muted as the world awaits any progress at talks between Iran and six world powers in the run-up to an end-March deadline for a new framework agreement.

U.S. Secretary of State John Kerry said he expected to know soon whether Tehran was willing to agree to an acceptable and verifiable plan to satisfy major powers that it is not seeking a nuclear weapon and that  the United States deserved the benefit of the doubt on getting a deal that would prevent any need for military action to curb Tehran’s atomic ambitions.

Tens of thousands of Russians marched through central Moscow on Sunday, chanting “Russia without Putin” in memory of Kremlin critic Boris Nemtsov who was assassinated on Friday night. Vladimir Putin’s authorities have suggested the opposition may have been behind his shooting in an attempt to create a martyr and unite the fractured movement. Nemtsov’s supporters have blamed the authorities.

Pro-Russian rebels say they have completed withdrawal of heavy weapons back from the frontline in eastern Ukraine and Kiev’s forces have started their withdrawal under the Minsk peace deal of Feb 12.  The Ukrainian military keeps saying it fears the port of Mariupol is next for attack.

The energy ministers of Russia and Ukraine energy ministers will attend talks at the European Commission in Brussels to try to resolve a dispute over gas supply to Ukraine.

Estonia’s centre-right prime minister claimed victory in an election on Sunday, cementing pro-NATO policies after a campaign dominated by fears of interference by neighbouring Russia following Moscow’s annexation of Ukraine’s Crimea region.

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