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Tue, 28th February 2017

Anirudh Sethi Report

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Archives of “european union” Tag

European Indices Closed in RED

European stock market close 16 February 2017

If you can call a 0.16% gain “standing out” that is.

  • FTSE -0.4%
  • Cac -0.6%
  • Dax -0.4%
  • Ibex -0.4%
  • FTSE Mib +0.2% (I’ve done them a favour and rounded it up)

European bonds

  • Italy 2.14% -10bp
  • Spain 1.59% -9bp
  • Portugal 3.97% -12bp
  • Germany 0.350% -2bp
  • Greece 7.79% +3bp

Greece facing fresh junking without bailout cash, warns Fitch

Greece is at risk of being downgraded further into junk territory should its creditors fail to resolve their latest set of differences over the country’s bailout this month, one of the world’s leading rating agencies has warned.

Ahead of its next decision on Greece in less than two weeks, Fitch Ratings said its current “CCC” junk rating on Greece was contingent on the country securing a successful injection of its latest tranche of bailout cash “well ahead of July” when it faces a major a €7bn repayments crunch.

The warning comes as finance ministers are due to thrash out their differences at a meeting in Brussels on February 20 – their last major discussion before a raft of eurozone elections beginning with the Netherlands in March and ending with Germany in September.

Fitch is due to make its next rating decision days after this month’s meeting of the Eurogroup on February 24. Greece has been unable to raise fresh funding on international markets since 2014, undergoing a fresh €86bn bailout in the summer of 2015 having been bought to the brink of default and introducing capital controls on its banking system.

A rating downgrade would also scupper the Syriza government’s ambitious plans to return to the bond markets before the end of its bailout in the summer of 2018.

Who wants to know the latest European Commission economic forecasts?

what, you all do? Your luck is in boys and girls.

  • Eurozone 2017 GDP 1.6% vs 1.5% prior. 2018 1.8% vs 1.7% prior
  • Eurozone inflation 2017 1.7% vs 1.4% prior. 2018 1.4% unch
  • Eurozone unemployment 2017 9.6% vs 10.0% in 2016. 2018 9.1%
  • Eurozone aggregate budget deficit 2017 1.4% vs 1.7% in 2016. 2018 1.4%
  • Eurozone government debt 2017 90.4% vs 91.5% in 2016. 2018 89.2%

They see every EU member state growing in 2016/17 & 18.

For some reason Reuters has specifically noted that the EC see UK growth this year at 1.5% vs 2.0% last year, and at 1.2% in 2018. Official UK forecasts are 2.0% & 1.6% for those periods. Is the EC trying to say something? 😉

Other highlights;

  • German investment to slow to 2.1% in 2017 vs 2.5% in 2016. 2018 2.5%
  • France budget def 2.9% of GDP 2017 vs 3.3% 2016. To rise above EC target again in 2018
  • Spain budget def 3.5% 2017 vs 4.7% 2016. 2018 2.9%

Here’s the full report if you want to see the rest.

 

Cash No Longer King: Europe Accelerates Move To Begin Elimination Of Paper Money

In the shadow of Donald Trump’s spree of controversial actions, the European commission has quietly launched the next offensive in the war on cash. These unelected bureaucrats have boldly asserted their intention to crack down on paper transactions across the E.U. and solidify a trend that has been gaining momentum for years.

The financial uncertainty amplified by Brexit has incentivized governments throughout Europe to seize further control over their banking systems. France and Spain have already criminalized cash transactions above a certain limit, but now the commission has unilaterally established new regulations that will affect the entire union. The fear of physical money flowing out of the trade bloc has manifested a draconian response from the State.

The European Action Plan doesn’t mention a specific dollar amount for restrictions, but as expected, their reasoning for the move is to thwart money laundering and the financing of terrorism. Border checks between countries have already been bolstered to help implement these new standards on hard assets. Although these end goals are plausible, there are other clear motivations for governments to target paper money that aren’t as noble.

France’s Le Pen says many countries are bound to leave the Euro zone

Marine Le Pen doesn’t like the euro (doesn’t like a lot of stuff)

  • Many countries bound to leave the euro zone
  • Makes no difference if debt repaid in euro or franc
Bloomberg with the headlines, not sure what context She was speaking in …
Ahh … here we go
  • interview on France2 TV (a 2 hour interview! Stamina – kudos for that)
  • “Italy, Spain, Greece” all “dying from the common currency built around the DMK”

ECB sees seeds of next crisis in Trump deregulation plan

The European Central Bank rejected U.S. accusations of currency manipulation on Monday and warned that deregulating the banking industry, now being openly discussed in Washington, could sow the seeds of the next financial crisis.

Arguing that lax regulation had been a key cause of the global financial crisis a decade ago, ECB President Mario Draghi said the idea of easing bank rules was not just worrying but potentially dangerous, threatening the relative stability that has supported the slow but steady recovery.

 Draghi’s words are among the strongest reactions yet from Europe since U.S. President Donald Trump ordered a review of banking rules with the implicit aim of loosening them. That raises the prospect of the United States pulling out of some international cooperation efforts.

“The last thing we need at this point in time is the relaxation of regulation,” Draghi told the European Parliament’s committee on economic affairs in Brussels. “The idea of repeating the conditions that were in place before the crisis is something that is very worrisome.”

The ECB supervises the euro zone’s biggest lenders.

“Big mistake”

Andreas Dombret, a member of the board of Germany’s powerful central bank, the Bundesbank, said that reversing or weakening regulations all at once would be a “big mistake”, because it would increase the chance of another financial crisis.

“That is why I see a possible lowering of regulatory requirements in the U.S., which is under discussion, critically,” said Dombret, who is also a member of the Basel committee drafting new global banking rules.

Overseas Chinese acquisitions worth $75bn cancelled last year

he456Chinese overseas deals worth almost $75bn were cancelled last year as a regulatory clampdown and restrictions on foreign exchange caused 30 acquisitions with European and US groups to fall through.

 The figures, which reveal a sevenfold rise in the value of cancelled deals from about $10bn in 2015, highlight a waning appetite for global dealmaking by the world’s second-largest economy. But despite more deals being abandoned, the analysis by law firm Baker McKenzie and researcher Rhodium shows that Chinese direct investment into the US and Europe still more than doubled to a record $94.2bn in 2016.

Sellers of assets in Europe and the US are becoming increasingly wary of large deals with Chinese buyers, according to people involved with several cross-border transactions involving China.

China notched up a record capital exodus last year, driven by expectations that the renminbi would continue to weaken against the dollar, and as slowing domestic growth diverted investment elsewhere.

Schauble Agrees With Trump That Euro Is “Too Low” For Germany, Blames Mario Draghi

In surprising comments that may rekindle a verbal currency war between president Trump and Europe, German finance minister Wolfgang Schäuble told German newspaper Tagesspiegel that in his opinion the Euro is “too low” for Germany, echoing criticism from Trump’s trade advisor Peter Navarro, who last week told the FT that Germany was exploiting its US and EU partners by using a “grossly undervalued” euro to create a vast trade surplus. The comment placed Germany, alongside China and Japan, in a category of countries that the Trump administration has accused of currency manipulation for competitive advantage.

As the FT reports on Sunday morning, Schauble acknowledged that the ECB had to set monetary policy for the eurozone as a whole, but said: “It is too loose for Germany.” A recent chart from Morgan Stanley confirms that on a PPP basis, the EUR is over 40% undervalued for exporting and current surplus powerhouse Germany on a standalone basis, however for many of Europe’s peripheral countries it still remains expensive.

What was more curious about Schauble statement is that the German finance minister blamed the European Central Bank for the low exchange rate.

Beijing Blasts Washington for Plans to Launch High Taxes on Chinese Steel

On Friday, the US Commerce Department announced its plans to raise import tariffs for the Chinese stainless steel products from 63 percent to 190 percent citing a probe that found they were selling on US market at dumping-level price.

“China is disappointed that the United States continued to launch high taxes on Chinese steel export products and calls into question the unfair way the US conducted its investigation,” Wang said, as quoted by the South China Morning Post newspaper.

The United States did not take into the account the evidence previously submitted by the Chinese steel manufacturers and avoided cooperation with the Chinese government, violating the rules of the World Trade Organisation (WTO), the Chinese official underlined.

This is a second blow for the Chinese steel importers in the recent months. The European Commission imposed in January anti-dumping duties on Chinese stainless steel tubes and pipe butt-welding fittings to protect its industry from steel overcapacity.

According the European Commission, Chinese imports will be taxed with duties ranging from 30.7 to 64.9 as its investigation commission confirmed that Chinese stainless steel products had been sold in Europe at dumping prices.

Le Pen Kicks Off Presidential Campaign Echoing Trump: The Highlights From Her Manifesto

The leader of the anti-immigration French National Front party Marine Le Pen kicked off her presidential campaign on Saturday by echoing many of the same vows that brought Trump to power in the US, hoping promises to shield voters from globalization, promote protectionism, leave the Eurozone, slap taxes on imports and on the job contracts of foreigners, lower the retirement age, increasing welfare benefits and boost defense spending push her above her competitors at a time of sweeping political turmoil in France.

According to opinion polls – which have recently shown their utter irrelevance in the age of Brexit and Trump – the 48-year old daughter of National Front (FN) founder Jean-Marie Le Pen has a solid lead in the first round on April 23 but then losing the May 7 run-off to a mainstream candidate, who after last week’s fireworks may no longer be her main challenger Francois Fillon, thanks to a corruption scandal.

And in the most unpredictable election race France has known in decades, the FN hopes a two-day rally in Lyon where Le Pen is spelling out her electoral platform, will help convince voters to back her. “The aim of this programme is first of all to give France its freedom back and give the people a voice,” Le Pen said in the introduction to the manifesto.