Tag: UK

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Europe on the mend

Germany’s DAX is holding above its new support level at 10500. Respect, with follow-through above 10800, would confirm the primary up-trend.

DAX

* Target calculation: 10500 + ( 10500 – 9500 ) = 11500

France’s CAC-40 Index is consolidating in a narrow band between 4400 and 4500. Upward breakout would suggest a primary up-trend. Follow-through above 4600, completing a broad double bottom, would confirm. Rising Twiggs Money Flow reflects buying pressure.

CAC-40

The Footsie retreated from resistance at 7000 but short candles and strong Twiggs Money Flow, high above zero, suggest long-term buying pressure. Expect strong resistance between 7000 and 7100. Correction to 6500 would establish a more stable base for further advances.

FTSE 100

* Target calculation: 6500 + ( 6500 – 5900 ) = 7100

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The “Junckernaut” is driving Britain to inevitable separation | Telegraph

Jeremy Warner on the drive for Britain to separate from the EU:

…Yet getting out entirely doesn’t strike me as either a wise or necessary approach to the developing standoff in relations…..Jacques Delors, who whatever you might think of him remains one of the few leaders of any authority and vision to have emerged from the European quagmire, has suggested a possible way out for Britain – a sort of amicable divorce, but with extensive child visiting rights. He’s called it “privileged partnership”, with apparent access to the single market and some say in its operation. For some eurosceptics, this will not be sufficient, for it would require agreement to the four freedoms: free movement of goods, services, labour and capital…..Yet from a purely economic perspective, this looks like a good and workable solution. For the rest of Europe, the single currency is driving a process of integration which must ultimately require some form of fiscal and political union. It’s still a long way off, but it is coming, and inevitably, it places Britain in a completely different, non participant role…..

Read more at The "Junckernaut" is driving Britain to inevitable separation – Telegraph Blogs.

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Bank of England throws egg all over RBA, APRA | | MacroBusiness

Of all of the financial systems in the world, Australia’s is most similar to the UK. Of all of the restrictive housing planning systems in the world, Australia’s is most similar to the UK. Of all of the house price boom and bust cycles in the world, Australia’s is most similar to the UK. The Bank of England also practices inflation targeting though its cap is 2%. The UK and Australia share a similar economic model reliant upon external borrowing to fund consumption and low export-to-GDP ratios but the main difference is that the UK economy is a more diverse mix of value-adding sectors with a much higher contribution from manufacturing.

But today there is one very new difference. The UK has announced it will henceforth practice macroprudential regulation to control its housing cycles and prevent them from hollowing out the economy…..

Read more at Bank of England throws egg all over RBA, APRA | | MacroBusiness.

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U.K. Aims to Mute Impact of Crisis – WSJ.com

Chancellor of the Exchequer George Osborne and Bank of England Gov. Mervyn King announced plans to flood banks with cheap funds in a dual attempt to jump-start lending to British households and businesses and to fend off potential financial problems at big U.K. lenders. The programs resemble some of the emergency measures enacted by central banks in Europe and the U.S. during peak crisis periods in recent years.

via U.K. Aims to Mute Impact of Crisis – WSJ.com.

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Cameron’s Rejection of EU Summit Isolates Britain

“There is now little point in Britain staying in the EU,” said MacShane, who was a minister in Tony Blair’s generally pro-Europe Labour Party government. “It is an historic turning point and Britain might as well get out now, as Europe’s future will be settled without us.”

…….The economic impact of leaving the European Union would be difficult to predict. British companies might lose easy access to European markets — where they now enjoy open trade, with few barriers — but Britain also might be able to negotiate a favorable trade treaty with Europe, as Israel and Mexico have done.

via Cameron’s Rejection of EU Summit Isolates Britain.

Comment: ~ Withdrawal from the EU could harm the same financial sector that David Cameron has vowed to protect. The UK may view tighter financial regulation and/or transaction taxes imposed by the EU as a threat, but interruption to trade/financial flows posed by isolation from the EU would be an even greater danger.

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BBC News – David Cameron defends decision to block EU-wide treaty

Having failed to reach an agreement of all 27 EU members, the 17 eurozone countries and the other EU states apart from the UK are expected to sign up to the new deal, which includes:

• a commitment to “balanced budgets” for eurozone countries- defined as a structural deficit no greater than 0.5% of gross domestic product – to be written into national constitutions

• automatic sanctions for any eurozone country whose deficit exceeds 3% of GDP

• a requirement to submit their national budgets to the European Commission, which will have the power to request that they be revised

Mr Cameron said the abandoned treaty change involving all 27 members had been in danger of “distorting the single market”.

“I think I did the right thing for Britain,” he said. “We were offered a treaty that didn’t have proper safeguards for Britain and I decided it was not right to sign that treaty.”

via BBC News – David Cameron defends decision to block EU-wide treaty.

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EU Treaty Takes Shape – WSJ.com

[European Union] leaders, who are still deeply divided over key elements of their crisis strategy, decided they would move to form a pact among at least 23 of the members to tighten rules on national fiscal policy.

But details of the proposed treaty remained to be settled. The U.K. stood aside—after Prime Minister David Cameron failed with what officials said was a “shopping list of demands” designed among other things to protect national supervision of its banks—while Hungary, Sweden and the Czech Republic reserved their positions.

“We will achieve the new fiscal union. We will have a euro currency within a stable union,” German Chancellor Angela Merkel said at the end of the meeting. “We will have stronger budget deficit regulations for euro-zone members.”

via EU Treaty Takes Shape – WSJ.com.

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Buiter: no politically feasible route to sustained growth for many years to come | Credit Writedowns

Citigroup chief economist Willem Buiter:

There really is no politically feasible route back to sustained economic growth through monetary and/or demand stimulating policies for the EA, the UK, the US and Japan, for many years to come. As regards demand stimulus, expansionary fiscal policy will not be punished by the markets to the point of being self-defeating for all EA member states except for Germany (which will not do it on any significant scale for domestic political reasons). The US also may be technically able to use fiscal expansion to stimulate demand, but even if markets continue to be tolerant, political gridlock makes it impossible. Expansionary monetary policy is at the end of its rope in the US and Japan. The UK could cut the official policy rate by 50 bps and the ECB by 125 bps, and then they too are restricted to quantitative easing (QE), which I consider to be ineffective.

via Buiter: no politically feasible route to sustained growth for many years to come | Credit Writedowns.

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U.K. Seeks to Revive Growth – WSJ.com

[Treasury chief George Osborne] will also announce an extra £30 billion in new money to be spent on infrastructure such as railways, roads, classrooms and broadband connections, said a person familiar with the matter. Of this, £20 billion will be provided by pension funds. The Treasury has signed a memorandum of understanding with the National Association of Pension Funds to provide this cash. Another £5 billion will come out of savings in other government departments and be spent over the next four years. The other £5 billion will be spent after 2015, but plans will be set out now.

via U.K. Seeks to Revive Growth – WSJ.com.

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