MacroScope

Crisis in Kiev

Ukraine’s shock decision to turn its back on an EU trade deal continues to reverberate with mass rallies on the streets of Kiev in protest at President Viktor Yanukovich’s decision.

To try to defuse tensions, Yanukovich issued a statement saying he would do everything in his power to speed up Ukrainian moves toward the EU. Is this another U-turn or mere semantics? The answer is important.

Kiev must find more than $17 billion next year to meet gas bills and debt repayments. Another sovereign meltdown is far from impossible.
Yanukovich is due to embark on a trip to China. Dare he go? And is the opposition cogent enough to threaten him? The call for a national strike will be an acid test.

After a week off, I’m in recap mode and there’s plenty to chew on.

The ratings agencies gave some interesting food for thought. The Netherlands lost its AAA status, leaving only Germany, Finland and Luxembourg in that exalted club in Europe. Moody’s raised Greece by two notches and S&P upgraded Cyprus, though both are still firmly in junk territory. And S&P followed Fitch by raising its outlook on Spain’s rating.

With France further downgraded last month the picture of southern Europe’s high debtors starting to close the gap on their northern counterparts (Germany excepted) is slowly gaining momentum.

Trichet says spend, spend, spend

The financial crisis is causing people to do some funny things, but when the head of one of the world’s biggest central banks looks down the lens and tells people to stop being so cautious and go and spend, spend, spend, you know something strange is going on.

Despite European high street stores offering up to 90 percent off, rattled Euro consumers have reacted to the financial crisis by slamming the brakes on spending.

It is not exactly an irrational response. Jobs are being slashed at an eye-watering rate and savvy shoppers know that, as stores become ever more desperate, there is a good chance the
must-have jeans, gadget or new car they have been eyeing may be even cheaper in a few weeks.

Crouching Buyer, Hidden Bargain

The terrible U.S. retail sales  racked up in December — called a “horror show” by ING — were all the more gruesome because of the sales on offer to customers in the run up to Christmas. Shops weren’t exactly giving things away, but their generosity knew few bounds.

Consider the experience of one visitor to a heaving handbag department in a Maryland Macy’s.
 
    Customer: “I would like to buy this handbag please. Oh dear, it appears to be the only one that is not on sale.”
    Salesman: “So it is. Tell you what, sir, I’ll give you 15 percent off anyway.”

Happy customer, happy new handbag recipient, unhappy sales figures.

Jack’s shoes

Florsheim mens shoes are reasonably classy. They were imortalised, for example, by snappily dressed Jack Nicholson in Roman Polanski’s “Chinatown“. He was rather distressed, film buffs will recall, by what a flood drainage canal did to them.

So it was something of a sign of the times last week that a visitor to a normally genteel Florsheim shoe shop in a Maryland mall got the hard sell from two salesman. Simply popping in to ask a question, our hero was essentially told — firmly — that he could not afford to leave without purchasing some footwear. The price was right, he was told.

No shoes were purchased, as it happens, but the pitch was nonetheless enlightening as a sign of desperation. The mall was relatively empty, despite cut down sales at nearly every shop. Very few people were buying, judging by the shopping bags. Sales staff everywhere looked pretty lonely.