China Unhappy over the PCA South China Sea Ruling


China’s reaction to the Permanent Court of Arbitration’s relatively harsh ruling against it on the South China Sea has been angry. The court upheld nearly all of the 15 points on which the Philippines approached the Court in 2013. China boycotted the proceedings, questioning the Court’s jurisdiction and publicly claiming historic rights to the South China Sea and its resources. The Court rejected this claim, concluding ‘there was no legal basis for China to claim historical rights to resources’.

Cause and Effect, and then there is Monetary Policy


Contrary to conventional wisdom, we think monetary policy remains an important variable for asset prices. Interest rates and foreign exchange are two dimensions of the price of money.  There is a relationship, even if it is not linear or temporally consistent.

Is there Additional Upside for the Dollar and S&P?


The US dollar gained against all the major currencies over the past week.  It also rose against many emerging market currencies.  A notable exception was the Chinese yuan.  The yuan rose before the weekend, extended its advancing streak to four consecutive sessions, and in so doing, it snapped a six-week slide.

The Brexit in a Flash (PMI)


As the week draws to a close, there are three main developments in the capital markets.  First, the profit taking seen in US equities yesterday has continued in Asia and Europe today.  The MSCI Asia Pacific Index and the Dow Jones Stoxx 600 in Europe are both off around 0.5%.  

Tanzania Walks Away from the Trade Table


Tanzania’s refusal to sign a new trade deal between the East African Community (EAC) and the European Union (EU) has generated anxious reactions. If news reports are to be believed, plans had been made for a signing ceremony to take place during the just-concluded United Nations international conference on trade in Nairobi.

With Whom Will the UK Trade?


With Brexit on the horizon, the UK must decide what kind of trade relationship it should craft with the European Union. The cases of Norway, Switzerland, Canada and other members of the WTO offer inspiration. All have varying degrees of access to the single European market, and particular rights and obligations. So how do they differ?

1. Norway

Fishing freedom. samot from www.shutterstock.com

ECB President Draghi’s Comments are In Line with Expectations


Draghi said nothing that surprised the market.  He acknowledged the resilience of the markets in the aftermath of the UK referendum.  He also noted that with new staff forecasts, next September, and the upcoming data, the ECB would be in a better position to assess the macroeconomic situation. The risks to growth remain tilted to the downside. 

The Philippines and China Look to the AIIB


The Philippines’ new President Rodrigo Duterte has indicated that China could play a key role in developing the Philippines’ infrastructure. Even before the election, Duterte announced that he is willing to back down on the South China Sea dispute with China if it can build railway systems in the Philippines within his six-year term. So could infrastructure investment offer a way forward for the China–Philippines relationship?

South Korea’s Bridge Between the U.S. and North Korea


US and North Korean diplomats attended the Northeast Asia Cooperation Dialogue (NEACD) in Beijing on 22 June. Despite having talked at dinner, the US State Department insisted they did not ‘meet’ with North Korean officials. Also in June, Han Song-ryol, Director-General of the department of US affairs at North Korea’s Foreign Ministry, reportedly met with retired US ambassador Thomas Pickering in Sweden. So do these diplomatic movements mean we should expect some change on the Korean peninsula? Unfortunately, they do not.

Post-referendum Fear of Contagion Lessens


It is a bizarre turn of events.  Just as the Game of Throne’s Westeros is a map of the UK put on top of an inverted Ireland, so too do UK events seem to be a strange permutation of the pre-referendum views. 

Although sterling and interest rates have not fully recovered from the Brexit decision, equity markets have, and fear of contagion has died down.  Indeed, it appears the UK may not be in the back of the queue from trade deals after all, and the IMF’s more pessimistic scenario about the contagious impact has been significantly revised away.