Trade deficits and tariff wars

President Trump believes that if you are running a large deficit it should be easy to “win” a trade war. The problem with this argument is the EU and China may decide to engage. In 2016 the US ran a deficit of $505bn on trade in goods and services, according to the World Bank. Germany … Continue reading “Trade deficits and tariff wars”

Time to revisit the Italian election

Markets have been relaxed about the Italian election.1 Last year it was on the investment radar as a potential risk to the euro and the Eurozone, with the Five Star movement leading in the polls and expressing scepticism about the single currency. As they did well so the new leadership of Five Star toned down … Continue reading “Time to revisit the Italian election”

Can European politics damage the euro?

It is often fashionable to worry about European politics as newer parties of the right, left and centre emerge to challenge the economic orthodoxy of the Eurozone. We saw this at its most spectacular in Greece, where Syriza swept aside the old parties and gained a majority in a proportional system designed to make that … Continue reading “Can European politics damage the euro?”

Germany shows there is still political risk in the Eurozone

When the Netherlands kept Mr Wilders out of power and Mr Macron swept into office in France, the immediate threats to the Euro disappeared. The recent collapse of coalition talks in Germany does not presage any undermining of majority support for the single currency in its heartland. The next major political issue facing the Euro … Continue reading “Germany shows there is still political risk in the Eurozone”

Eurozone: Political risk still simmering

The major political obstacles, which had held back European risk assets, have now been overcome. However, events in Austria, Spain and Italy highlight the ongoing trend towards populist, nationalist and now regionalist sentiment. In Austria, although the far right Freedom Party (FPÖ) was recently defeated in elections for the legislative parliament, it could enter government … Continue reading “Eurozone: Political risk still simmering”

Mr Draghi worries about growth

ECB President Mario Draghi brought a surfeit of pessimism to the Jackson Hole meeting of central bankers. He argued that the 2% trend rate of growth for the Organisation for Economic Co-operation and Development (OECD) rich countries prior to the banking crash of 2008 has now halved to a trend rate of around just 1%. … Continue reading “Mr Draghi worries about growth”

The case for ending negative rates early

Few interventions in history of central banking have been as dramatic as the European Central Bank’s (ECB) expansion of its balance sheet to over €4tn to support the eurozone. The strengthening economic recovery in the eurozone and pickup in inflation mean the debate on how to make an elegant exit from its emergency measures is … Continue reading “The case for ending negative rates early”

European politics: how real are the risks?

The result in the Dutch election has been a relief to markets all round. As it was Far-right candidate Geert Wilders made only a relatively small impact, with his PVV winning fewer seats than it achieved in 2010. This begs the question, are markets making too much of the risk of populism in Europe? Of … Continue reading “European politics: how real are the risks?”

The UK economy as pictured in the Budget

The UK budget will be remembered for the controversy over a proposed increase in National Insurance Contributions for the self-employed. This measure is designed to raise just £645m or less than 0.1% of total revenues in 2019-20.   Instead it was notable for the large movements of money brought about by changes in forecast. Where … Continue reading “The UK economy as pictured in the Budget”

No Brexit plan – but a clearer destination

Theresa May has given much more detail than previously on what the UK’s negotiating objectives will be when it starts on the road out of the European Union (EU). The speech did not answer all the questions that Britain’s business community and trading partners might have, or remove all of the uncertainties hanging over Britain’s … Continue reading “No Brexit plan – but a clearer destination”

The euro on the ballot paper?

What impact will the looming elections in Europe have on the euro and the markets? Revolts against the political establishments of advanced countries are becoming commonplace. The Brexit and Trump decisions have so far been positive for shares in the UK and US, despite big doubts and unhappiness for many in markets on the news. … Continue reading “The euro on the ballot paper?”

Brexit is not Brexit?

Much to the surprise of legal experts, the government and, presumably, to those who voted to leave the European Union, Brexit is now once again in doubt. The High Court has declared that the Government cannot trigger Article 50 without a parliamentary vote. The Government will appeal, of course, but sterling is already higher on … Continue reading “Brexit is not Brexit?”