Sunday 21st January 2018
January 19th 2018: The Deferred Action for Childhood Arrivals (DACA) programme looks to be a continuing stumbling block for Democrats who were expected to ink the US government spending bill, with an attendant effect on the US dollar. According to Miles Eakers, chief market analyst at Centtrip the dollar continues to show weakness ahead of possible US government shutdown. “Late last night the House of Representatives passed concessions on a major increase in defence spending and a hardline immigration bill. But Senate Democrats said they would likely block the measure unless President Donald Trump and Republicans include protection for young immigrants. An impasse could result in Trump celebrating his first anniversary in office with the first shutdown in four years, despite his party holding a majority in both houses. After reports of the vote, [the market] saw continued, but muted, dollar weakness, pushing the GBP/USD pair back above $1.39 and EUR/USD nearer the $1.23 resistance level.” The question is now whether a short=term patch will be agreed today, or whether the Republicans and the White House will be compelled to get serious about a longer-term solution. The last time a short-term bill was passed was December last year, which passed by a grand majority of 66 votes to 32. This time round it looks more difficult - Mike van Dulken, Head of Research at Accendo Markets commented to clients this afternoon: “Equities are positive to close out the week, rebounding from a negative US close and ahead of a key Senate vote to stave off a government shutdown tonight. Weaker than expected UK Retail Sales have seen the UK’s blue-chip index take a leg higher, benefiting from Sterling's retreat from fresh post-referendum highs earlier this morning. Interestingly, Germany’s DAX is the rank outperformer, this in spite of additional Euro strength after hawkish ECB comments, whilst US equities point towards a positive open this afternoon. The FTSE has climbed higher thanks to GBP weakness benefiting names such as ULVR, BATS, SHP, RELX, CCL and GSK, while Miners are embracing the weaker USD's fillip for metals. This is easily offsetting weakness for BP (Oil lower on IEA report), HSBC (US forex fine), BT (pension scheme deal) and KGF (Carpetright profits warning). Germany’s DAX outperforms with just Linde in the red, as Thyssenkrupp, Adidas, BASF and Fresenius lead the way higher. The FTSE 100 has broken back above 7715. The DAX 30 has broken above 13350 to flirt with a 13420 breakout. Dow Jones Futures have rebounded to re-test 26055. Gold has broken back above $1332.” --

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Patrick Artus

Patrick Artus

A graduate of Ecole Polytechnique, of Ecole Nationale de la Statistique et de l'Adminstration Economique and of Institut d'Etudes Politiques de Paris, Patrick Artus is today the Chief Economist at Natixis. He began his career in 1975 where his work included economic forecasting and modelisation. He then worked at the Economics Department of the OECD (1980), before becoming Head of Research at the ENSAE. Thereafter, Patrick taught seminars on research at Paris Dauphine (1982) and was Professor at a number of Universities (including Dauphine, ENSAE, Centre des Hautes Etudes de l'Armement, Ecole Nationale des Ponts et Chaussées and HEC Lausanne).

Patrick is now Professor of Economics at University Paris I Panthéon-Sorbonne. He combines these responsibilities with his research work at Natixis. Patrick was awarded "Best Economist of the year 1996" by the "Nouvel Economiste", and today is a member of the council of economic advisors to the French Prime Minister. He is also a board member at Total and Ipsos.

Website URL: http://cib.natixis.com/research/economic.aspx

Following Italy’s resounding ‘No’ vote to a constitutional reform package in December’s referendum, further political and economic instability beckons for the already-fragile banking sector. Indeed, up to eight of the country’s banks require financial restructuring to address their bad loans – which are worth approximately €360bn compared to the banks’ €225bn of equity. 

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Led by the European Central Bank’s (ECB) monetary policy, the eurozone has confronted past economic crises through inventive means. Indeed, the central bank’s quantitative easing (QE) programme, outright monetary transactions (OMT) – i.e. the option to buy short-term sovereign bonds – and the Juncker Plan to invest upwards of €315 billion in the “real economy”, have all been established in order to shield peripheral eurozone states from severe economic harm.

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During previous eurozone crises, economists and political commentators invariably called for both France and Germany to spearhead any contingency planning – a theme that has resurfaced since the UK endorsed a vote to leave the European Union (EU).

 

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Post-Brexit, it is difficult to envisage the UK enjoying the same unfettered access to the EU’s single market it enjoys today. Should the UK’s market access become restricted after its departure, a period of decreased output can be expected, with two prevailing consequences. The first, a British pursuit of a highly aggressive expansionary monetary and fiscal policy in order to attract direct investment is likely. The second, a co-ordinated response from both the ECB and the remaining EU members – the ‘EU-27’ – to ensure Europe’s economic growth isn’t hindered by a British comeback.

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Thursday, 04 August 2016 11:38

What can the UK economy expect post-Brexit?

The UK economy is now navigating through unchartered territory. Indeed, the decision to withdraw from the world’s largest free trading bloc marks the beginning of a profound shift in the country’s trading relationships and, in turn, its economic potential. So, what is our verdict on the UK’s long-term outlook following this historic vote? In short, uncertainty around such relationships will fuel a major downgrading of the UK’s economy and plummeting foreign direct investment (FDI) – causing permanent damage to UK GDP growth.

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Since 2014, two opportunities for economic growth have landed at the eurozone’s feet – the effects of the quantitative easing (QE) programme and plummeting oil prices. But, has the eurozone taken advantage of this gifted chance to recalibrate the economy’s structure for long-term advancement? Only partially.

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In the current climate, eurozone investors are confronted with numerous countries showing symptoms of economic malaise – France, in particular, remains under scrutiny. Indeed, the world’s ninth largest economy faces difficulty passing labour reforms and strike action is grinding the economy to a standstill. This has left investors pondering whether France is still the sick man of Europe. In fact – it is not.

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Even those in favour of Brexit – the risk of the United Kingdom (UK) withdrawing from the European Union (EU) – acknowledge that a vote to leave will trigger a decline in the pound’s value. But could that not stimulate exports – offsetting any downsides from leaving the free trade area? In my view, not enough. The stimulating effects of currency depreciation have been gravely overstated. 

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