Friday 23rd February 2018
February 23rd 2018: Michael van Dulken and Henry Croft at Accendo Markets report this morning that FTSE 100 Index called to open +15pts at 7310, still in a bearish rising wedge pattern, but at least now 7300, making a bullish challenge on 6/7 Feb highs of 7315 overnight, retracing more of that early month sell-off and breakdown. Bulls still need a break above 7325 overnight highs. Bears need to see 1-week rising support at 7300 in jeopardy. Watch levels: Bullish 7325, Bearish 7300. Calls for a positive start to the week come as Asian equities (excl. China and Hong Kong for Lunar New Year) built on last week’s global recovery, even if Wall St closed well off highs (Mueller Russia indictments) to close mixed on Friday into a long Presidents’ Day weekend that is likely to sap volumes today. FTSE is supported by the USD off three-year lows, helping GBP edge further from last week’s highs to offer less resistance for UK blue chips. Note Australia’s ASX higher, but miners in the red, as copper and gold trade off their highs, and despite oil trending higher -RWC Partners says Pierre Giannini will be joining the organisation as part of the ongoing growth RWC sees in Continental Europe. Giannini previously led Daiwa SB Investment’s business development efforts in Southern and Western Europe, where he focused on both institutional and wholesale channels - John Hardy, head of FX Strategy at Saxo Bank says in a client note this morning says, “The US treasury market faces an important test this week with three large auctions of 2-year, 5-year and 7-year treasuries on Tuesday through Thursday and the latest FOMC minutes on Wednesday. The big surprise many noted last week was the fresh highs in US yields failing to derail the ongoing equity market recovery. On the currency side, the narrative is that the US dollar can continue to fall as US interest rates rise because the rise in US yields reflects concerns on the US fiscal/current account balance sheet more than it reflects a strengthening US economy. The US 10-year benchmark came within hailing distance of the huge 3% level last week, widely considered a critical structural chart point – it is hard to believe, last week’s action notwithstanding, that a persistent rise above this level would be met with a shoulder shrug by asset markets, from equities to EM. The most interesting development this week would be strong US treasury auctions that see a sharp drop in US yields as a test of the recent weak USD trend - Aquaterra Energy, the offshore engineering solutions provider, has appointed Christian Berven as business development director, as it strengthens its EMEA operations by opening offices in Stavanger, Norway. Headquartered in Norwich, Aquaterra Energy UK, was the first to secure a multimillion pound investment from EV Private Equity, as part of its pledge last year to support fast-growing North Sea businesses. EV’s investment supports Aquaterra Energy’s global growth strategy and allows it to invest in capex. Berven joins the company following ten years as managing director of Norwegian oil service company, Toolserv - Alliance Etiquettes has merged with wine labeler Groupe Etienne. This is the sixth build-up for the Alliance Etiquettes “buy-and-build” platform created in 2015. Following the operation, Alliance Etiquettes will become the market leader in France of premium wine bottle labels, with turnover of €50m -- SendGold, a Gold-as-a-Service app that enables physical gold investment and payments in a digital environment, will launch its app in March in Singapore.. With the growing demand for gold across Asia, SendGold changes the way consumers can transact gold by allowing the user not only to buy and sell gold but also to send it as a payment or gift to friends or family members via their mobile devices, targeting the 2bn millennials who are in control of 16% of Asia Pacific's wealth -

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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.

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Eurozone commentators are increasingly agreeing on one calculation: the region’s economic situation will continue deteriorating if current strategies remain in place. Such decline is obviously concerning, particularly when the region is already experiencing negative growth and rising unemployment – while the reduction of fiscal deficits has come to a halt.

Indeed, the prospect of ‘radicalisation’ has been raised – as the situation worsens, many are expecting countries to choose political routes that are problematic for the European Monetary Union. But could a political crisis within the eurozone become a reality? Let’s explore the possibilities.


Judging from the unemployment figures released last month (i.e. a record 12.1 percent for the whole region), there is a noticeable jobs and growth crisis occurring in the eurozone. This isn’t a new phenomenon – the European labour market has been in free-fall for the past two years. But if the eurozone’s economic situation does not change, the growth outlook for both supply and demand for goods and services will remain weak, impacting jobs and potential growth.


Austerity measures in the eurozone are becoming an increasingly hot topic, with many global financial players calling for an end to such fiscal restriction. As economic recovery remains desperately sluggish, such demands are justified – and there is little denying that new thinking is required.

However, any new measures to kick-start economic activity and stimulate growth would need to do so while meeting the objectives of the current policies – i.e. stabilising public debt ratios and preventing insolvency. Addressing these two issues is a significant challenge – but if current efforts aren’t working, options for alternative policies (if indeed there are any) must be considered.

Friday, 19 April 2013 15:10

The eurozone's inability to deleverage

Temporarily removing Germany from the picture, the lack of deleveraging taking place in the eurozone partly explains why the market remains mired in recession. Indeed, the region is experiencing great difficulty in reducing the private-sector debt ratio and stabilising the public debt ratio.

Two questions spring to mind: How has this happened? And what are the consequences?


To a large extent, the European Central Bank’s principles are preventing it from boosting the eurozone economy. Indeed, despite an extremely weak economic situation across most of the euro zone coupled with a poor outlook, the ECB has made clear that its main job is to prevent liquidity crises – it is not responsible for restoring the solvency of governments or banks. For this reason, the central bank avoids stepping in for governments to help solve budgetary or banking crises.

In light of this, the market should not count on the ECB to buy significant amounts of government bonds or put risky assets held by banks on its balance sheet – and this may explain why the central bank is struggling to drive down interest rates on public or private debt.

But if these are the principles that the ECB adheres to, what are the options for it to improve the region’s economy?


Clearly, central banks in the United States, the United Kingdom and Japan are looking at ways to deleverage their public and private sectors. Often, they are doing so via a policy known as ‘monetary creation’, which they hope will lead to a reduction in debt via inflation.

Yet inflation does not reduce the debt burden. Nominal interest rates that are lower than nominal growth drive down debt ratios. So if inflation increases in line with nominal interest rates and nominal growth, there will be no reduction in these countries’ debts. Moreover, given the high level of unemployment and the slowdown in wages in these countries, it would be virtually impossible to generate higher domestic inflation.

For investors, the salient point is that deleveraging will occur more from the decline in nominal interest rates, than from inflation. Caution is therefore called for when considering these inflation-based strategies.


Following the outcome of the recent elections in Italy – where the public overwhelmingly voted against pro-austerity political parties – it seems plausible that, overtime, more anti-austerity governments will form in troubled euro zone countries.

Two potential scenarios could take shape if the public were to continue voting in this direction. One would be a ‘cooperative’ situation, where the rest of Europe and the European Central Bank accept the determination of the public’s requests – a development that could lead to a changed pace in fiscal consolidation, as alternative policies are implemented.

Or, there would be a ‘non-cooperative’ scenario, in which the Northern euro zone countries and European institutions reject the public’s opinion on policies, while the country (or countries) attempt to abandon austerity regardless.

If this second option were to take shape, the troubled countries would find their situation incredibly difficult. Not only would disagreements with the Northern euro zone countries be more frequent, but more importantly they would have difficulties financing their external deficits, because, without European support, these countries would lack the credibility to issue debt successfully.

Tuesday, 12 March 2013 13:46

Can French state spending be reduced?

Despite the potential growth outlook in France remaining low, the French government is maintaining its pledge to eliminate the fiscal public deficit by 2017.

This means that – given the low growth forecasts and the expected fiscal deficit for 2013 (which the European Commission has forecast at 3.7% of GDP) – government spending must be reduced by €50 billion. Given this, where should these cuts be applied? Clues exist within the current structure of government spending.

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