CYPRUS BRINKMANSHIP/BERNANKE IN LONDON/BRICS SUMMIT/MARCH CONSUMER SENTIMENT IN EUROPE/JAPAN INFLATION-JOBS-PRODUCTION/US-UK Q4 GDP REVISIONS
Cyprus has hogged the headlines since Friday, with bank closures now extended to a full week as they try to sort out a very messy bailout - made worse by domestic policy missteps over taxing bank deposits. As with Italy’s elections, the saga certainly challenges any market assumption that the euro crisis had abated for good and it’s also loaded with a series of potential precedents – not least the biggest taboo of them all, a euro exit. This is where the politics, brinkmanship and smoke-filled-rooms come in. Yet as Cyprus is so small and its banks in such a peculiar setup – given the scale of Russian and other foreign depositors – the euro group, ECB and IMF appear determined not to be pressured into a bailout above the already gigantic 60 percent of GDP.
Nor in France… Spain/France bond sales this morn alone more than twice amount Cyprus needs to find for bailout
No sign of Cyprus contagion in that Spanish bond auction… average yields down across all maturities
LONDON, March 15 (Reuters) – Bank of England chief Mervyn
King suggested this week the “black cloud” over the economy may
be lifting, but with assets buoyant and the pound feeble, what
investors think of Britain’s growth prospects is less clear.
King surprised markets by saying on Thursday he saw
“momentum” behind a UK recovery that will emerge this year, and
that sterling was fairly valued after a recent tumble.
FOMC/FRANCO-GERMAN SUMMIT/GERMAN-FRENCH-SPAIN AUCTIONS/GLOBAL FLASH PMIS FOR MARCH/UK BUDGET-JOBS-CPI-BOE MINS/ICC HEARING ON KENYATTA/SAFRICA RATES
The revved-up U.S. dollar – whose trade-weighted index is now up almost 5 percent in just six weeks – could well develop into one of the financial market stories of the year as the cyclical jump the United States has over the rest of G10 combines with growing attention being paid to the country’s potential “re-industrialisation”. As with all things FX, there’s a zillion ‘ifs’ and ‘buts’ to the argument. Chief among them is many people’s assumption the Fed will be printing greenbacks well after this expansion takes hold as it targets a much lower jobless rate. Others doubt the much-vaunted return of the US Inc. back down the value chain into metal-bashing and manufacturing, while some feel the cheaper energy from the shale revolution and the lower structural trade deficits that promises will be short-lived as others catch up. However, with the dollar already super competitive (it’s down 30-40 percent on the Fed’s inflation-adjusted index over the past 10 years) the first set of arguments are more tempting. Even if you see the merits in both sides, the bull case clearly has not yet been discounted and may have further to go just to match the balance of risks. With Fed printing presses still on full throttle, this has been a slow burner to date and it may be a while yet before it gets up a head of steam — many feel it’s still more of a 2nd half of 2013 story and the dollar index needs to get above last year’s highs to get people excited. But if it does keep motoring, it has a potentially dramatic impact on the investment landscape and not necessarily a benign one, even if shifting correlations and the broader macro landscape show this is not the ‘stress trade’ of the short-lived dollar bounces of the past five years.
LONDON, March 8 (Reuters) – A retooling of the U.S. economy
around cheaper domestic energy and a competitive exchange rate
could be a headwind for developing economies more used to seeing
U.S. growth as a boon.
In a week which saw U.S. equity markets stalk record highs
again and many investors again mulling a long-term turn in the
U.S. dollar, investors have simultaneously been puzzling over
what is shaping up to be yet another year of emerging equity
LONDON, March 6 (Reuters) – As western economies hit another
pothole in their stuttering post-crisis recoveries, pressure to
step up economic policy intervention to tackle entrenched
unemployment may be building.
Global business surveys showing a second consecutive retreat
in private sector growth last month, albeit from nine-month
highs in December, have refired investor doubts about whether
policy settings are adequate to protect recovery through 2013.