One of the week’s biggest numbers is out at 0900 GMT with the ZEW report on sentiment in the German economy in October. This could give a first glimpse of perceptions on whether the VW emissions scandal is hurting the wider economy and comes after last week’s data signaling a drop in exports and weak industrial orders, largely down to a slowdown in China and other emerging markets.
Russia has denied assertions by U.S. officials that four cruise missiles it fired at Syria crashed in Iran, sticking to its version that they hit Islamic State targets as intended. With Iran also not confirming the incidents it may be some time before the full truth emerges which will only add to concerns about an escalation of the conflict and the risk of more trouble as U.S. and Russian forces jostle for Syrian airspace. Looking for further comment from U.S. Secretary of Defense Ash Carter during a London visit.
More bad news for the German economy as exports fell in August by the largest amount since the height of the global financial crisis in 2009. That comes after sharp declines in industrial orders and output in August that already signalled the fact that weak demand from abroad, particularly China, could be leaving its mark on the euro zone’s top economy. And this of course does not factor in any future damage to the image of German manufacturing from the VW emissions scandal.
As Germany marks a quarter century since the reunification of East and West in October 1990, Angela Merkel and Francois Hollande make a joint address from 1300 GMT to the European Parliament that needs to provide convincing arguments on the future solidity of a bloc facing unprecedented crises.
Portugal’s Prime Minister Pedro Passos Coelho emerged as the winner of Sunday’s general election, which is more than other pro-austerity leaders around Europe have done since the start of the sovereign debt crisis. But his mandate is far from convincing. He will be trying to form a minority government against Socialist rivals who have already explicitly said they cannot be relied upon to back his reform agenda. It does not augur well for political certainty in the country — not one minority administration has managed to go full term since the 1974 overthrow of dictator Antonio Salazar. Coalition negotiations are likely to start today; Passos Coelho has to reach an understanding that will allow the 2016 budget to pass in coming weeks.
If emerging markets are to lead global economic performance one again as they did in recent years, an important foundation will be to convince as many people as possible that reported growth data are as accurate as they can possibly be.
Russia’s Vladimir Putin will meet leaders of France, Germany and Ukraine in Paris this afternoon for talks originally slated to cover Ukraine but now overshadowed by a conflict in Syria pitting Moscow and Washington in combat in the same country for the first time since the Cold War. While they have the same foe, Islamic State, they have different allies and a divergence of views on the end-game. Not for the first time, Western officials are struggling to work out Putin’s motives and come up with a convincing response. A news conference is due after the talks this evening.
We have already heard enough commentators and economists explain how U.S. payrolls data will not matter much in coming months because we’re at a solid enough pace of hiring to keep the unemployment rate, already at just 5.1 percent, on a steady downward path.
from Ann Saphir:
John Williams, chief of the San Francisco Federal Reserve Bank, happens to have the same name as the guy who wrote the music for the Star Wars films. Judging from his speeches of late, the Fed’s own Williams is something of a sci-fan himself. Thursday in Salt Lake City he borrowed from the iconic greeting of Star Trek’s Spock with a talk titled “The Economic Outlook: Live long and Prosper.” Earlier this month he riffed on Star Wars, with a speech subtitled “May the (economic) force be with you.” In July, he spoke about “The recovery’s final frontier” (see http://www.imdb.com/title/tt0098382/). So it is quite logical that the enterprising captain of the Fed’s farthest-flung Western outpost would be keen on exploring strange new worlds. And here I don’t just mean voyaging to Los Angeles, where he was on Monday, or to Spokane, Wash., where he treks next week. Williams, like most Fed officials, believes that after nearly seven years of extraordinarily easy monetary policy, the U.S. economy is finally ready to leave near-zero interest rates behind. On Thursday, Williams repeated his view that the Fed should raise interest rates this year. Not all U.S. central bankers agree – one can almost hear Minneapolis Fed’s Kocherlakota or Chicago Fed’s Evans echoing Princess Leia’s warning, “I have a bad feeling about this.” Certainly, if the Fed can successfully raise rates without quickly needing to cut them again, it will have pulled off what several other global central banks – the European Central Bank, the Bank of Japan, Sweden’s Riksbank -- have tried to do, but failed. Raising rates this year, as Williams hopes and expects to, would indeed be a bold move; and if the first hike is followed by others, he would indeed be taking the Fed where no other central bank has gone before.