Tue, 31st May 2016

Anirudh Sethi Report


Archives of “Analysis” Category

Eurozone unemployment rate remains steady at 10.2%

Unemployment in the euro area held steady at 10.2 per cent in April, the lowest level since August 2011, as joblessness in Germany remains staggeringly low, at just 4.2 per cent, while there have even been small improvements in countries such as Greece.

April’s reading was in line with the previous month.

Greece and Spain continue to hold up the rate for the eurozone as a whole but the latest figures for April show signs of improvement, even though joblessness in both countries remains over 20 per cent.

Spain’s unemployment rate, on a seasonally adjusted basis, dropped to 20.1 per cent in April from 20.4 per cent in March, while in Greek joblessness edged down to 24.2 per cent from 24.4 per cent previously.

Unemployment in the euro area has been falling steadily since reaching a peak of 12.1 per cent in April 2013 but is yet to dip to a single figure percentage. The last tiem unemployment was below 10 per cent was in April 2011.

Data published earlier today showed unemployment has continued to drop in Germany, the eurozone’s biggest economy, in May although this will not be reflected in figures for the wider euro area until next month.

European court opinion supports corporate headscarf ban

Companies are allowed to ban Muslim staff from wearing headscarves as long as the rules are part of a general prohibition on political, philosophical or religious symbols in the workplace, according to an opinion from the European Court of Justice

The case stems from a complaint by Samira Achbita, a Muslim woman who was fired by the Belgian division of UK services company G4S for wearing a headscarf to work. Ms Achbita sued G4S in Belgium, where the courts referred the question of whether such bans were legal under EU rules to the ECJ,

A senior judge at the EU’s highest court suggested that rules banning headscarves were sometimes justified under the bloc’s laws, in a non-binding opinion released by the court on Tuesday. Although such opinions do not amount to a final verdict, they are generally followed by the court in its judgement.

Bans on items such as headscarves are allowed as long as they are applied across the board and not targeted at a specific religion, according to Advocate General Kokott, who wrote the opinion. Companies must have a legitimate reason for such bans, such as ensuring “religious and ideological neutrality”, according to a statement from the court.
But what counts as necessary or legitimate should be a matter for national courts, added Mr Kokott.

The statement from the court ended:

While an employee cannot ‘leave’ his sex, skin colour, ethnicity, sexual orientation, age or disability ‘at the door’ upon entering his employer’s premises, he may be expected to moderate the exercise of his religion in the workplace.

The full opinion will be published later today.

Japan may join crackdown on Chinese steel exports

Japan looks to join the U.S. and European Union in imposing anti-dumping tariffs on Chinese steel exports, though findings that domestic steelmakers have not been substantially harmed could make such measures difficult to justify.

Leaders at the Group of Seven summit on Friday said they were prepared “to consider the broad range of trade policy instruments and actions” required to bring excessive global steel production capacity under control. This “could conceivably include such policies as anti-dumping and countervailing tariffs,” a top official at Japan’s trade ministry said. Japan will keep a close watch on imports of a variety of materials, including steel, the source indicated.

 An anti-dumping duty would apply to goods being exported to Japan for less than their market prices at home. In raising these products to a more appropriate price, the policy would combat low-cost imports’ negative impact on Japanese companies. A countervailing tariff would be similarly applied to goods produced with the help of foreign government subsidies.

Both measures are permitted by the World Trade Organization in cases where real damage is being done. But Japan has no experience applying them to steel products.

The government this month began letting industry organizations, including those in the steel sector, request anti-dumping measures more easily. These requests will result in action if an investigation shows that low-cost imports are harming Japanese businesses by distorting the market.

German unemployment hits new low -May -11k vs -5k exp

No-one likes a show-off, but the German jobs juggernaut just keeps rolling on.

The country’s unemployment rate sank to just 6.1 per cent in May, a shade below the previous month’s figure, and below forecasts, and indeed the lowest since the country’s reunification.

The number of unemployed people fell by 11,000, outstripping forecasts for a 5,000 drop

Attempted North Korea missile launch fails: South Korea

North Korea attempted to fire a missile from its east coast early on Tuesday but the launch appears to have failed, South Korean officials said, in what would be the latest in a string of unsuccessful ballistic missile tests by the isolated country.

The launch attempt took place at around 5:20 a.m. Seoul time (04:20 p.m. EDT), said the officials, who asked not to be identified, without elaborating.

Tension in Northeast Asia has been high since North Korea conducted its fourth nuclear test in January and followed that with a satellite launch and test launches of various missiles.

Japan put its military alert on Monday for a possible North Korean ballistic missile launch.

“We have no reports of any damage in Japan. We are gathering and analyzing data. The defense ministry is prepared to respond to any situation,” Japanese Minister of Defence Gen Nakatani told a media briefing.

“North Korea shows no sign of abandoning the development of nuclear missiles and so we will continue to work closely with the U.S. and South Korea in response and maintain a close watch on North Korea,” Nakatani said.

Japanese Opposition Plans to File No-Confidence Vote Against Abe Cabinet

On May 19, the heads of the Democratic Party, Japanese Communist Party, the Social Democratic Party and the People’s Life Party agreed to consider submitting a no-confidence motion against the government over a scheduled consumption tax hike from 8 percent to 10 percent.

Party leaders met again on Monday, deciding to back no-confidence motion action as well as demanding Abe to account for the state of Japan’s economy in parliament, The Nikkei newspaper reported.

Opposition leaders accused Abe of failed economic policies, causing the standard of life to fall and aggravating poverty and inequality, according to the publication. The opposition also cited controversial defense policy legislation and the lack of transparency in the ongoing Trans-Pacific Partnership trade agreement talks as grounds for government resignation, the newspaper added.

New defense laws proposed by Abe’s cabinet and passed by the ruling Liberal Democratic Party (LDP) in September have enabled the country to deploy troops overseas for the first time since World War II and triggered an opposition attempt to make the government resign. Abe survived the no-confidence vote.

In 2012, Abe announced measures to halt economic stagnation, including structural reforms, monetary easing and fiscal stimulus. The plan, dubbed Abenomics, was introduced after Abe’s election in December 2013. It has been described as a failure by the opposition.


As Short Interest Soars To Record Highs, Chinese Stock Futures Flash-Crash 12.5%

Shortly after 1042am local, Chinese stock futures (CSI-300) flash-crashed over 12.5% on extreme heavy volume (while the cash CSI-300 remained unch). This move erased 3 months of gains but within 1 minute was back in the green with stocks up over 2.5%. The shocking collapse, exaggerated by a major lack of liquidity, was made more surprising by the fact that the last week has seen a record short position in the major Chinese stock ETF. Simply put, the heavy hand of market-central-planning has erased any and all depth in futures markets and positioning has become so tilted that price vacuums are likely to continue to occur.

As Bloomberg notes, the swing follows a similarly unexplained tumble in Hang Seng China Enterprises Index futures in Hong Kong on May 16, a move that added to nervousness over the prospects for Chinese stocks amid slowing economic growth and a weakening yuan. The CSI 300 has dropped 16 percent this year, versus a 2.2 percent gain in the MSCI Emerging Markets Index.

“It looks like a fat finger,” Fang Shisheng, Shanghai-based vice general manager at Orient Securities Futures Co., said by phone. “Liquidity in the market is really thin at the moment. So the market will very likely see big swings if a big order comes in. The order looks like it’s from a hedger.”

And for some context of what that move looks like longer term – it erased 3 months of gains instantly…