Written by Econintersect
Early Bird Headlines 24 November 2015
Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.
Note: From now to 03 December there may be occasions where Early Bird appears at irregular times and may have some shorter than usual content because 1/2 of our limited staff is on vacation.
Global
Asian shares wobble, dollar close to eight-month peak (Reuters) Asian shares struggled on Tuesday, while the dollar took a breather from its run to eight month highs on rising convictions that the Federal Reserve will raise interest rates next month. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS wavered in and out of positive territory, and was last down 0.2%. Japan’s Nikkei .N225 dipped about 0.1% after a long weekend. Markets were closed for a national holiday on Monday.
Bank of America: The ‘Great Divorce’ Between the World’s Two Largest Economies Will Drive Currency and Rates Markets in 2016 (Bloomberg) Don’t sleep on the prospect of more currency depreciation from the People’s Bank of China, warns Bank of America Merrill Lynch, calling for a “great divorce” between the U.S. and the world’s second-largest economy in the coming year. You may wake up in a new world. See more on this in China section below. This devaluation will ripple through all global exchange markets in 2016, says BoA.
U.S.
Fed risks using wrong tool to tighten (Financial Times) Because the Fed has a much expanded balance sheet compared to historical values, the traditional tools for supporting interest rates, selling securities through open market operations may not be used. This article argues that the proposed use of expanded reverse repo operations would not provide a natural trade of collateral (Treasuries) going to the banks in return for cash returned to the Fed as happens with open market traditonal sales of securities. The argument here is that the reverse repo does only half of the job – transferring cash tht Fed – and does not transfer usable collateral to the banks. The term “rusts the plumbing” is used to indicate the author’s contention that the use of large amounts of reverse repo operations could sieze the financial system because of the restriction of collateral.
The Crisis of World Order (The Wall Street Journal) Hat tip to Roger Erickson. This is a lengthy argument for an imperial invasion of the Middle East, framed in beguiling rhetoric:
Americans remain paralyzed by Iraq, Republicans almost as much as Democrats, and Mr. Obama is both the political beneficiary and the living symbol of this paralysis. Whether he has the desire or capacity to adjust to changing circumstances is an open question. Other presidents have – from Woodrow Wilson to Franklin Roosevelt to Bill Clinton – each of whom was forced to recalibrate what the loss or fracturing of Europe would mean to American interests. In Mr. Obama’s case, however, such a late-in-the-game recalculation seems less likely. He may be the first president since the end of World War II who simply doesn’t care what happens to Europe.
If so, it is, again, a great irony for Europe, and perhaps a tragic one. Having excoriated the U.S. for invading Iraq, Europeans played no small part in bringing on the crisis of confidence and conscience that today prevents Americans from doing what may be necessary to meet the Middle Eastern crisis that has Europe reeling. Perhaps there are Europeans today wishing that the U.S. will not compound its error of commission in Iraq by making an equally unfortunate error of omission in Syria. They can certainly hope.
EU
Siemens chief warns on investment after Paris attacks (The Business Times) Companies may put investment plans on hold in the wake of Paris attacks which have sapped investor confidence, the head of industrial giant Siemens said in remarks published Monday. Siemens chief executive Joe Kaeser told the Financial Times:
“The biggest economic damage from these attacks is on confidence, and confidence is a crucial element in this phase.”
Eurozone business growth at 4-year high as firms cut prices (The Business Times) Business activity in the euro zone picked up at its fastest pace since mid-2011 this month – and far faster than expected – as a weak currency and price cutting helped drive new orders, a survey showed on Monday. While the upturn in activity may be welcomed by European Central Bank policymakers the discounting by firms suggests the ultra-loose monetary policy is doing little to get inflation anywhere near their 2% target ceiling.
Greece
Eurozone approves bailout payment to Greece (The Business Times) Eurozone finance ministers approved a two billion euro ($2.3 billion) payment to Greece on Monday, declaring that Athens had successfully met the strict reform commitments demanded in the country’s bailout. The payment confirms that relations between leftist led Greece and its European creditors have significantly appeased after a six month battle earlier this year nearly saw Athens thrown out of the eurozone.
Iran
Iran leader hosts Putin, says U.S. policies threaten Tehran, Moscow (Reuters) Iran’s supreme leader, at a meeting with Russian President Vladimir Putin in Tehran, said on Monday U.S. policies in the Middle East region were a threat to both countries and called for closer ties between Tehran and Moscow. The civil war in Syria has evolved into a wider proxy struggle between global powers, with Russia and Iran supporting Syrian President Bashar al-Assad while Western powers, Turkey and Gulf Arab states want him out.
Ukraine
Crimea hit by power blackout and Ukraine trade boycott (BBC News) Ukraine has suspended deliveries of goods to Crimea, where a power blackout has caused major disruption. Only essential services and government offices are operating in Crimea after key electricity pylons connected to the peninsula were knocked down in Ukraine. Protesters, including Crimean Tatars, are preventing the repair work. Russia has warned of retaliatory measures. Ukraine is planning new rules for cargo traffic for the southern peninsula, which was annexed by Russia in 2014. There has been disruption to road and rail traffic to and from Crimea since Ukrainian nationalists and Crimean Tatars began a border blockade in September.
China
Masters of the Finance Universe Are Worried About China (Bloomberg) Goldman Sachs and hedge-fund managers are expressing currency concerns, looking for a yuan devaluation in the near future. Hedge funds have been reducing holdings in U.S.-listed Chinese firms to avoid dollar losses when the anticipated devaluation occurs.
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