Another twist to the US midterm election

When the newly elected President Obama started implementing his legislative agenda in 2009, Republicans were met with the message that “Elections have consequences. I won.” With a majority of the popular vote, sky-high approval ratings, a majority in the House of Representatives and a super-majority of 60 votes in the Senate, Democrats could do anything…

What did OPEC decide?

When OPEC met on 22 June, the oil-producing countries faced a dilemma. On the one hand, production has declined much more than was agreed in November 2016 (compliance in May was 152% of the agreed cut of 1.2 million barrels a day). On the other hand, the renewed US sanctions against Iran create a delicate…

When the dust settles

It has been quite a week A G7-summit that ended in mutual distrust among hitherto close allies. A historic Singapore-summit where North Korea gained much of what it has always wanted. A British prime minister, who again displayed astonishing political survival skills by fending off a rebellion among pro-EU conservatives on the EU (Withdrawal) Bill,…

Central banks take center stage

After two major political summits, market attention is now on the next moves from Federal Reserve (meeting 12-13 June) and the European Central Bank, ECB (meeting 14 June). Both central banks are expected to take further steps in the normalization of monetary policy, but also to highlight the large divergence in economic performance and the…

US trade war is back on

Trade hardliners regained President Trump’s ear after the surprise announcement two weeks ago of a truce in the trade spats with China. Thursday’s announcement that the US is applying a 25% tariff on steel and 10% on aluminum products from Canada, Mexico and the EU is disheartening, but hardly surprising. Commerce Secretary Ross explained that…

Changing of the guard

In Italy, M5S/Lega finally completed the long foreplay and agreed to propose a new finance minister, thus removing the road block to a populist government. New prime minister is Guiseppe Conte, but the two party-leaders – Lega’s Salvini and M5S’s Di Maio – are the strongmen behind the scene. Both parties have railed against technocratic…

Déjà vu all over again

After days of nervousness, the Italian crisis has snowballed into a much more systemic event. On Tuesday, Italian government yields increased significantly, especially shorter-dated securities. A 6-month auction returned a yield of 1.21% against -0.42% at the previous auction end-April. It was the highest auction yield for this maturity since February 2013. The daily jump…

Political chaos in Italy

Italy was thrown into political turmoil after the President Mattarella on Sunday (27 May) rejected the proposed finance minister, Paolo Savona. Savona is an 81-year-old economist with previous government experience but also sharply Eurosceptic. The President reasoned that participation in the euro was a fundamental choice and that an exit should not happen by stealth…

Fading European momentum

Not much is left of the exuberance about the European economic outlook that was ubiquitous just months ago. The US trade agenda, Russia sanctions and US withdrawal from the Iran-deal have hit European industry particularly hard. Add to that the political uncertainty from Italy, where the new government promises a showdown with the fiscal rules…

China trade war on hold – for now

On May 18, the United States and China issued a joint statement reporting a breakthrough in the ongoing trade negotiations. Hailed by the US government as a significant victory, the wording in the statement is vague with no firm commitments. The White House economic advisor Larry Kudlow created some confusion by stating that China had…