Category: Markets

Breaking the EU’s Crisis to Crisis Cycle


Just months since taking power in January, Greek’s Syriza coalition faces obstacles at every turn, from an intransigent European Central Bank to an unyielding European Council.  The ECB in particular has rejected Greek proposals for short-term bridge financing to allow more time to negotiate medium- to longer-term structural reforms.  So once again, we are on the cusp of crisis as Greece and its creditors struggle to find a deal before an upcoming June deadline, with the country’s exit from the Eurozone a genuine possibility.

An EU without a UK?


“We would be substantially better off not being in the EU because the opportunity cost of us not being able to make our own trade deals with the emerging economies of the world is holding back British business. In terms of trade, the EU is now a millstone around our neck.” – Nigel Farage, UKIP leader, on the BBC Radio 4’s World at One on May 4.

Ningxia Could Be The Starting Point for Islamic Finance in China


Islamic finance has been growing rapidly across the world in recent years. Today, the operation of Islamic banks and their associated financial institutions has created a trillion-dollar industry and is becoming a crucial mechanism for countries looking to increase their trade with Muslim nations in Asia and the Middle East especially.

Its popularity largely stems from operating under the principles of risk sharing and interest-free transaction. In contrast to conventional finance, transactions under Islamic finance operate under strict, risk-averse conditions.

Published
Categorized as China

Australia Cuts Interest Rates on Currency Slide


After the worst month on record for the Australian dollar, the nation’s central bank cut its key rate to 2%.

That represents a 25 basis point cut which many analysts had expected. The decision was made as Australia fights falling inflation and weakening exports, as a fall in commodity prices—Australia is a net energy exporter—combined with lower demand in China—the country’s largest trading partner—contributed to economic weakness and a fall in the currency’s value.

Is a “bad bank” Italy’s Answer to Economic Reform?


Italy’s third successive unelected Prime Minister is pushing through electoral reforms that make for stronger government’s going forward.  There are two elements of the reform. 

Previously, Italy was proud of its “perfect bicameralism”, where Chamber of Deputies and the Senate shared power to initiate and block legislation.  The political interests of the last elected Prime Minister, Berlusconi, shaped the format.  Current Prime Minister Renzi seeks to emasculate the Senate, cutting its power to obstruct. 

Published
Categorized as Italy

A Preview of Emerging Market News and Events


EM assets remain on the defensive now that the dollar has regained some traction on the back of some firmer US data last week.  This Friday’s US jobs report will be key to determine whether the dollar’s current bounce is sustainable.  The 10-year UST yield has climbed above 2.10% for the first time since mid-March, but a sharp rise in German 10-year yields as well, to 0.41%, the highest level since early March, offsets the positive impact on the dollar.  EM local currency bonds are suffering as a result.

A Weak Euro Begins the Week as European Manufacturing Data Disappoints


The week begins with a narrowly mixed US dollar.  Both Tokyo and London markets are closed today making for somewhat lighter turnover.  The dollar has been trading a quarter of a yen above JPY120.00. 

The euro stands out.  It has lost almost 0.5%, has dragged the Swiss franc with it.  Recall at the end of last week, the euro was fairly resilient to the US dollar’s recovery.  There is a bit of catch-up going on as European dealers returned from their May Day holiday. 

An Emerging Markets Status Update


1) Unconventional policy measure in China could be on the table; 2) Poland sold sells its first international bond with a negative yield; 3) Indonesia executed eight people over drug charges, seven of which were foreigners; 4) Russia’s central Bank stepped up its pace of easing, cutting rates 150 bp to 12.50% vs. the expected 100 bp; 5) The Ukraine government implemented one of the most painful measures, hiking gas and heating tariffs for households; 6) The Thai central bank cut rates unexpectedly.

South Korea’s Migration Policies Are In Need Of Reform


North and South Korea are widely regarded to be ethnically homogenous societies. But with minority populations having grown in numbers and importance in both Koreas, demographic homogeneity has become a myth.

Yet the importance of ethnic nationalism as an underlying identity of the two states prevents a genuine transition to a multicultural society in both cases. In both Koreas, policies that disproportionately focus on reaping benefits from minorities, and a lack of public consensus on what constitutes multiculturalism, have led to human rights violations and social conflict.