Tuesday, 24 April 2018

Angie... with no loving in our souls and no money in our coats

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I had the extraordinary good fortune to be at Wimbledon for the men’s final between Roger Federer and Andy Murray – not some corporate boon-doggle – and what a privilege. I was of course duly asked how I would build it into my morning comment on Monday, but how? Then this morning, I saw a picture of Chancellor Angela Merkel and President Francois Hollande during their little love-in in Reims where they celebrated the 50th anniversary of Franco-German reconciliation.

Anthony Peters, SwissInvest Strategist

On the tennis court there is a winner and a loser. Irrespective of how much the spectators and the commentators might have been willing the lesser player to win, Murray met with a four set reality check. In intra-eurozone politics, there still seems to be something of a belief that the stronger player can be encouraged to lose intentionally for the benefit of the weaker one.

Mutti Merkel might once again have made all the right noises about greater integration and strengthening the bonds within the eurozone but am I alone in gaining the distinctive feeling that these assertions sound hollower and hollower as time goes on?

I am still a long way from believing that the euro will collapse in a pile of dust but if it were to, I would not place the blame at the door of the German Chancellor. She remains the principal voice reminding her partners that the future of the currency can only be guaranteed by more rigour and more discipline and not by less. Hollande reminds me of the alcoholic who wants to quit the booze but reckons he needs just one more drink in order for him to pluck up the courage to do so.

Merkel’s “hic et nunc” is still falling on deaf ears in France but according to the more liberal elements in the press, Hollande has a popular mandate to bury fiscal discipline and therefore must be doing the right thing.

Economic cocktail

Meanwhile, the economic fundamentals are not looking too clever. US payroll figures disappointed and although 80,000 jobs were added to the non-farm payroll, that is far too few to keep up with the need on the job creation front and leaves the US economy a long way from un-stick speed. Although the unemployment rate remained stable at 8.4%, the underemployment rate crept higher again, although, even a 14.9%, it is the third lowest reading since January 2009. That index peaked in October 2009 at 17.2% and has been trending lower ever since. Nevertheless, markets were spooked by the overall Labor Report and US equities shed around 1% on the day.

Asian stocks followed on today, trading lower on a cocktail of the US move mixed with the news of China’s inflation hitting a 29 month low, Japan’s May machinery orders falling a thumping 14.8% which takes the annual growth from a forecast of 7% to an actual of only 1% and downward revisions in growth forecasts from both Hong Kong and Viet Nam. Chinese Prime Minister Wen Jiabao seems to have been rattled by the figures as a whole and immediately promised an intensification of government response. However, I cannot forget the cause of so many of our current problems which is to be found in one Alan Greenspan’s attempt to use monetary policy to counter the natural forces of the economic cycle.

I can’t tell whether the markets are trading weaker because of the news of slowing activity in Asia or because they have learnt to be wary of repeated easing and the negative long term effects of trying to neutralise economic cycles. Greenspan at least had the defence that America was not in a state in 2001 to deal with the psychological effects of 9/11 and with a cyclical downturn in the economy at the same time and that therefore it was his patriotic duty to postpone the recession. Premier Wen has no such defence – all he needs is to keep things ticking over until he cedes power in October. However, the new Beijing plutocracy won’t want to enter office and immediately engineer a slow-down so we must hang in there and continue to pray that the wheels don’t fall of China before those in Europe and the United States have been bolted back on again re-inflated.

The Chinese are certainly making sure that we live in interesting times.

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