Turkey's economy is in deep trouble

Turkey’s economy is in tatters.

Runaway inflation and a collapsing lira are pushing millions of Turks to the brink of financial ruin and slamming factories, farmers and retailers across the country.

More than two-thirds of people in Turkey are struggling to pay for food and cover their rent, according to a survey by Yöneylem Social Research Centre, fuelling a surge in mental illness and debt.

Read more at: https://www.euronews.com

USA: Wall Street in free fall as investors sell everything

Traders are hitting the sell button on virtually every key asset class — including stocks, bonds and bitcoin — ratcheting up the fear factor on Wall Street and sending the S&P reeling to its weakest levels in a year.

Why it matters: The Federal Reserve is laser-focused on taming inflation, and that’s making markets increasingly jittery as the U.S. economy sends mixed signals on growth. While we've seen the economy contract last quarter, the jobs market remains as robust as it’s ever been.

Meanwhile, however, China’s extraordinary push to tamp down COVID infections via lockdowns has sparked

This time it’s really different: The Fed’s pivot from super-accommodative to a “fire and brimstone” approach (in the words of JPMorgan global strategist Marko Kolanovic) to price pressures has sparked market volatility for weeks. But spiking bond yields, which are reacting to inflation and Fed expectations, underscore how government paper has relinquished its traditional role as a safe-haven when stocks are in turmoil.

Read more at: Wall Street in free fall as investors sell everything

USA: pressure on Fed to raise interest rates as US inflation surges to 30-year high | US economy

Although the Federal Reserve has repeatedly insisted price pressures will prove “transitory”, financial markets were taken aback by a 6.2% increase in the cost of living in the world’s biggest economy over the past year.

A labor department report released on Wednesday showed prices rose by 0.9% in October alone – more than double the 0.4% jump in September – to push the annual rate of inflation to its highest level since December 1990, a time when global oil prices had risen sharply due to the Iraqi invasion of Kuwait.

The news came after the Biden administration and the Federal Reserve tried to downplay rising costs, arguing they are a temporary phenomena driven by Covid-19’s unprecedented impact on the global supply chain

Read more at: https://www.theguardian.com/business/2021/nov/10/inflation-us-latest-high-30-years-economy-predictions?CMP=Share_AndroidApp_Other

USA: Dollar falls, emerging markets rally after Trump's Fed attack

The dollar weakened Tuesday after U.S. President Donald Trump slammed the Federal Reserve for raising interest rates, while global equity markets rose as strong economic and earnings growth favored stocks in a relatively benign environment.

Wall Street shares rose, following stock market gains worldwide, with the benchmark S&P 500 edging closer to an all-time high.

Trump said in an interview with Reuters on Monday that he was "not thrilled" with the Fed under his appointee, Chairman Jerome Powell, for raising rates and that the U.S. central bank should do more to boost the economy.

Read more: Dollar falls, emerging markets rally after Trump's Fed attack

US Economy: Dow falls 299 points after Powell signals Fed will keep raising rates to contain inflation - by Thomas Franck and Alexandra Gibbs

U.S. stocks fell for the first time in four days Tuesday after comments from new Federal Reserve Chair Jerome Powell sent rates higher.

The new chair signaled the central bank could hike rates more than three times this year in an effort to keep the economy from overheating, sparking anxiety among equity traders.

The Dow Jones industrial average fell 299.24 points Tuesday to close at 25,410.03, with Disney and Home Depot weighing down the 30-stock index. The S&P 500 fell 1.27 percent to finish at 2,744.28 as real estate, consumer discretionaries and telecommunications pulled the broader market lower.

Read more: Dow falls 299 points after Powell signals Fed will keep raising rates to contain inflation

US Economy: Dow Jones drops another 166.97 points today after a loss of 254 yesterday.

U.S. stocks on Wednesday ended a tumultuous session firmly lower after minutes from the Federal Reserve’s most recent policy-setting meeting sparked a fresh wave of volatility, as bond rates clambered higher and the dollar strengthened, weighing on equities. 

Rea more: Dow gives up 300-point gain to end lower as bond yields rise after Fed minutes - MarketWatch

Brexit: Britain dips to bottom of G7 economic growth table

BREXIT: Too little Too Late

Britain has fallen from the top to the bottom of the league of G7 leading economies in the year since the Brexit vote, with official data recently showing slower growth than previously thought.

The pound dropped as much as 0.7 per cent against the euro on the back of weaker-than-expected GDP figures, a report that London’s house prices fell for the first time in nine years, and higher levels of consumer debt.

But despite the poor economic data, Mark Carney hinted that interest rates were still likely to rise in November. “If the economy continues on the track that it’s been on, and all indications are that it is, in the relatively near term we can expect that interest rates would increase somewhat,” the Bank of England governor said recently..

Some economists who think the BoE will raise interest rates from 0.25 per cent to 0.5 per cent at its Monetary Policy Committee meeting in November were more cautious following  Recent data release. Alan Clarke, of Scotiabank, said: “I’m sticking to my call for a hike in November, but I’m much more nervous now than I was before this data release.”

Having been the fastest-growing economy in the G7 on the eve of the EU referendum, new figures from the Office for National Statistics in Britain showed UK growth below the US, Japan, Germany, France, Italy and Canada. 

EU-Digest

Insurance Industry: "SURE" takes close look at readjustments and consolidations taking place in the European insurance industry

The Summer issue of SURE published by Koster Insurances takes a special look at the readjustments and consolidations taking place in the European insurance industry .

Also in this issue additional information on the upheaval in the European Insurance industry which comes not only as a result of new EU regulations affecting the Insurance market, but also as a direct consequence of changing economic times, circumstances and influences. Among these outside influences, probably one of the most important being the low interest rates.

SURE notes that For multinational companies, including those in the insurance industry, another dark cloud on the horizon seems to be that there is a general consensus among governments around the world, including the EU, that something has to be done about the tax evasion practices by many multinational corporations. To combat this problem the EU is presently developing a common EU tax base.

This issue of SURE also reviews the EU's sustainable energy strategy and how it can positively influence the job market, and looks specifically at market developments in Britain, Poland, Sweden, and the Netherlands concerning the insurance industry.

Koster Insurances, the publisher of the publication also announced in this issue that this would be the last issue of SURE in its present format. The publication was first published in 2006. 

EU-Digest

Banking Industry: Send yourself to Europe, not your portfolio

If you've ever wanted to break bread with a Bavarian or wave to a Walloon, this would be a good time to do it: The falling euro has made Europe much more affordable. But if you're thinking of lending some loot to Latvia, you may want to wait until the euro has stabilized.

Europe's economic growth is so sluggish that the Eurozone – the 18 nations that use the euro as currency – is on the brink of a recession, which would be the third since 2007. What's particularly worrisome is that the Eurozone is also flirting with deflation, a period of falling prices, much as the U.S. experienced in the Great Depression and, to a lesser extent, the Great Recession.

"The European Central Bank's mandate is to keep inflation close to, but slightly below, 2%," says Curt Hollingsworth, portfolio manager at Fidelity Investments. The ECB's estimate for inflation in 2014 is 0.6%, which is uncomfortably close to deflation.

To boost economic growth and avoid deflation, Mario Draghi, president of the European Central Bank, announced Thursday that the ECB would be lowering interest rates in the Eurozone. The ECB's main interest rate would fall to 0.05%, and the ECB would embark on a bond-buying program, similar to the Federal Reserve's quantitative easing in the U.S.

 Read more: Send yourself to Europe, not your portfolio

Turkey Rate Increase Stems Lira Decline as Basci Defies Erdogan - Onur Ant, Taylan Bilgic and Selcuk Gokoluk

The lira swung between gains and losses as traders assessed whether a doubling of interest rates would be enough to stem capital outflows in the face of further reductions in U.S. monetary stimulus. Stocks fell.

The Turkish currency strengthened more than 4 percent following the central bank’s midnight rates decision before depreciating as much as 2.4 percent. It climbed 0.5 percent to 2.2407 per dollar at 7:23 p.m. in Istanbul. Yields on two-year benchmark notes decreased 18 basis points to 10.88 percent and the Borsa Istanbul 100 Index (XU100) of shares slumped 2.3 percent.

Governor Erdem Basci is fighting to restore credibility eroded by a currency run that gained speed amid domestic upheaval and a global rout of emerging markets. Prime Minister Recep Tayyip Erdogan, who said yesterday he’s always opposed higher rates, is embroiled in a graft scandal that has ensnared several ministers and the chief executive officer of a state-owned bank. It spooked investors just as the reduction of U.S. monetary stimulus began sucking money out of riskier assets.

“The immediate knee-jerk reaction last night was that the Central Bank of Turkey had in some sense passed an important test,” David Simmonds, the head of currency and emerging-markets strategy at Royal Bank of Scotland Group Plc in London, said in an e-mail. “The broader perspective that having to raise rates to defend your currency is ultimately a very tough place fundamentally to be, so broader macro pressures persist.”

Read more: Turkey Rate Increase Stems Lira Decline as Basci Defies Erdogan - Bloomberg

ECB monetary policy decisions

At today’s ( June 6, 2013) meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.50%, 1.00% and 0.00% respectively.

ECB: Webcasts: ECB monetary policy decisions

Sweden´s repo rate left unchanged - by Mats Öhlén

Riksbanken, Sweden's Central Bank announced yesterday that it will leave its main steering rate, the repo rate, unchanged at 1.50 per cent.

While most of Europe discuss a lower interest rate in order to help the sluggish economy, most experts in Sweden have rather discussed a higher interest rate. The Riksbank prognosis during the spring was indeed based on this judgement. To lower the interest rate is not likely due to the relatively high private housing debt in Sweden.

However, there was a slight change in the Riksbank prognosis. The current estimate is that the Swedish repo rate will have to stay on this low level at least one more year. Thereafter it is expected to be raised gradually.

The inflation in Sweden is very low now, around 1.00 per cent. But also the unpredictable economic future in the export-dependent Swedish economy lead to the decision to keep the interest rate at a low level.


Read more: Sweden´s repo rate left unchanged - Stockholm News

Poland's main interest rate likely to be cut this week

The National Bank of Poland's interest-rate setting Monetary Policy Council (RPP) is widely expected to cut interest rates by a further 25 basis points at its meeting this week. Currently, the NBP's reference rate stands at 4.50 percent, after the council cut rates by 25 bp in November. That put interest rates back where they were before May, when the council surprised many by hiking the reference rate to 4.75 percent.

However, some economists are arguing that the council should take an even stronger stance, and cut deeper, perhaps by 50 bps, considering the sharp slowdown the economy has taken. On Friday, Poland's statistical office revealed that GDP in the third quarter only grew by 1.4 percent – down from 2.3 percent in the second quarter and 3.6 percent in the first quarter. The biggest factor in the slowdown, experts say, was a precipitous drop in private consumption, which grew by just 0.1 percent.

“We actually think that a more aggressive rate cut next week would be appropriate given the sharp slowdown of the economy,” said economists from Danske Bank in an e-mailed note.

Forecasts show that inflation should continue to fall across the next few months, yet the RPP’s general consensus seems to point to gradual rate cuts and and waiting for the turn of events.

Read more:Poland's main interest rate likely to be cut this week - Warsaw Business Journal - Online Portal - wbj.pl

ECB: Upbeat Draghi looks beyond euro zone indicators - Eric Reguly

Mario Draghi, the president of the European Central Bank, was not all gloom and doom on Thursday, though the man has every right to be given this week’s dismal stream of economic data.

Only the day before the ECB’s monthly rate-setting meeting, the European Commission dropped its estimates for euro zone growth to a mere 0.1 per cent next year, against its previous forecast for 1 per cent growth, and said that Germany, Europe’s economic powerhouse, will expand by only 0.8 per cent.

German factory orders and industrial production are falling alarmingly fast. And the economies of Spain and Greece continue to sink, with the chances of a Spanish bailout rising by the day as the jobless rate climbs and growth remains deep in negative territory.

Yet in response to a question during the press conference about the euro zone’s ability to emerge from its vat of mud, he seemed surprisingly optimistic, which made some of us wonder whether he had been infected by Barack Obama’s cheery victory speech, which made Americans think that ambition, fairness and hard work would make anything possible.

Certainly the worst is over, he said, for the euro zone as a whole and its 17 member countries. “I would not have made this statement a year ago,” he said. “Both have a fundamental position which is way more balanced than the U.S. but also other countries – Japan and the UK . The euro has a current account balance, which is basically in balance, corporate debt and household debt is relatively low all over the euro area, savings ratios are high, unit labor costs are down.”

Read more: Upbeat Draghi looks beyond euro zone indicators - The Globe and Mail

ECB: Draghi tosses euro zone mess back to politicians - by Eric Reguly

Mario Draghi

The European Central Bank went on hold at its monthly meeting in every sense of the word. It did not change interest rates, had little to say about its new sovereign bond purchasing program and gave no hint that it was on the verge of offering assistance to Spain, even though a bailout seems virtually certain as its economy stays stuck in reverse.

But ECB president Mario Draghi assured the markets once again that the euro was “irreversible” and that the ECB’s bond-buying program, known as Outright Monetary Transactions (OMTs), could swing into action quickly if a financially distressed country were to ask for help. “We are ready and have a fully effective backstop in place,” he said after the regular monthly ECB governing council meeting, which was held in Slovenia.

His comments delivered some momentum to the stock markets and sent the euro up almost half a percentage point to $1.296 (U.S.).

At the press conference after the meeting, Mr. Draghi was asked repeatedly if Spain was on the verge of a bailout or could avoid one. He would not comment directly, reiterating the ECB’s stance that it is up to governments to request assistance, not for the ECB to offer it in the absence of a request. “That’s up to Spain to decide, and the other euro area governments to decide,” he said.

Read more: Draghi tosses euro zone mess back to politicians - The Globe and Mail

ECB cuts interest rates as expected

European Central Bank (ECB) cut interest rates to a record low on Thursday to breathe life into a deteriorating eurozone economy and back up measures agreed by government leaders last week to tackle the bloc’s debt crisis.

The quarter-point cut in the ECB’s main refinancing rate, to 0,75%, was in line with market expectations and followed a dire batch of economic data that show even eurozone powerhouse Germany is entering a modest downturn.

Of 71 economists polled by Reuters, 48 had expected the bank to cut, most of them by 25 basis points, though some others forecast a larger decrease.

Read more: BusinessDay - ECB cuts interest rates as expected

ECB Raises Key Interest Rate to 1.25% to Stem Faster Inflation

The European Central Bank lifted interest rates for the first time in almost three years to quell inflation even as Portugal became the third nation to succumb to the region’s sovereign debt crisis.

ECB policy makers meeting in Frankfurt today raised the benchmark interest rate to 1.25 percent from a record low of 1 percent, as predicted by all 57 economists in a Bloomberg News survey. It also raised the marginal lending rate to 2 percent from 1.75 percent and increased the deposit rate to 0.5 percent from 0.25 percent, maintaining 75 basis-point corridors either side of the benchmark.

While ECB President Jean-Claude Trichet said last month that a move today is “certainly not the start of a series,” investors expect two more increases to 1.75 percent by the end of the year as inflation accelerates and Germany’s economy booms. The risk is that higher borrowing costs may boost the euro and exacerbate the sovereign debt crisis, which last night forced Portugal to follow Greece and Ireland in seeking a European Union bailout.

FOR MORE; ECB Raises Key Interest Rate to 1.25% to Stem Faster Inflation - Bloomberg

ECB may be preparing new tightening strategy - Paul Carell

Tough talk on inflation from the European Central Bank suggests it may be considering a plan to raise official interest rates even as it keeps emergency funding support for commercial banks in crisis-hit countries.

ECB President Jean-Claude Trichet surprised markets on Thursday when, as the central bank kept its main refinancing rate at 1.0 per cent, he warned that risks to price stability in the medium term “could move to the upside”.

For more: ECB may be preparing new tightening strategy - The Globe and Mail

European Loan Growth Accelerated in November, ECB Report Shows

Loans to households and companies in Europe grew at a faster annual pace in November as the economic recovery boosted demand for credit.

Loans to the private sector rose 2 percent from a year earlier after growing an annual 1.5 percent in October, the European Central Bank in Frankfurt said today. That’s the fastest since April 2009. The rate of growth in M3 money supply, which the ECB uses as a gauge of future inflation, was 1.9 percent, up from 0.9 percent in October.

The ECB, which has held its benchmark interest rate at a record low of 1 percent since May 2009, this month predicted economic growth of 1.4 percent next year after about 1.6 percent in 2010. While Germany’s economy, Europe’s largest, is expanding at the fastest pace in two decades, other euro-area members such as Ireland, Spain and Portugal are struggling to create growth as they cut spending to rein in budget deficits.

For more: European Loan Growth Accelerated in November, ECB Report Shows - Bloomberg

Telegraph: Fiscal ruin of the Western world beckons - by Ambrose Evans -Pritchard

For the complete report from the Telegraph click on this link

Fiscal ruin of the Western world beckons - by Ambrose Evans -Pritchard

"For a glimpse of what awaits Britain, Europe, and America as budget deficits spiral to war-time levels, look at what is happening to the Irish welfare state. No doubt Ireland has been the victim of a savagely tight monetary policy - given its specific needs. But the deeper truth is that Britain, Spain, France, Germany, Italy, the US, and Japan are in varying states of fiscal ruin, and those tipping into demographic decline (unlike young Ireland) have an underlying cancer that is even more deadly. The West cannot support its gold-plated state structures from an aging workforce and depleted tax base. As the International Monetary Fund made clear last week, Britain is lucky that markets have not yet imposed a "penalty interest" on British Gilts, given the trajectory of UK national debt – now vaulting towards 100pc of GDP – and the scandalous refusal of this Government to map out any path back to solvency. France and Italy have been less abject, but they began with higher borrowing needs. Italy's debt is expected to reach the danger level of 120pc next year, according to leaked Treasury documents. France's debt will near 90pc next year if President Nicolas Sarkozy goes ahead with his "Grand Emprunt", a fiscal blitz masquerading as investment.

The imperative for the debt-bloated West is to cut spending systematically for year after year, off-setting the deflationary effect with monetary stimulus. This is the only mix that can save us. My awful fear is that we will do exactly the opposite, incubating yet another crisis this autumn, to which we will respond with yet further spending. This is the road to ruin."