A
“temporary setback” in the “recovery”opines the BBC.
US
GDP shrinks 2.9% in first quarter
The
US economy suffered its worst performance for five years in the first
quarter of 2014, latest figures show.
25
June, 2014
The
economy shrank at an annualised rate of 2.9% in the first three
months of the year, the third estimate from the US Commerce
Department showed.
This
was worse than the previous estimate of a 1% contraction, and also
worse than economists' expectations.
However,
the economy is expected to have recorded a sharp recovery during the
second quarter of the year.
The
White House said the figures showed the economic recovery was still
in progress, but added other indicators for April and May suggest a
rebound in the second quarter.
We
should have a much better second half this year and a much better
2015 than 2014”
Just a chart....
From - Zero Hedge
Spending
downgrade
The
unusually cold weather in the first quarter of the year has been
blamed for the poor performance of the economy.
However,
the gap between the second and third estimates of US growth for the
quarter was the largest on record.
The
latest revision came as a result of a weaker pace of healthcare
spending than previously assumed, which caused a downgrading of the
consumer spending estimate.
Consumer
spending - which is responsible for more than two-thirds of US
economic growth - increased by 1% in the quarter, rather than the
3.1% rate as first estimated.
Trade
was also a bigger drag on the economy than previously thought, with
exports falling by 8.9% rather than a previously estimated 6%.
Emerging
Stocks Rebound as Russian Shares Rally
25
June, 2014
Emerging-market
stocks rebounded from a two-week low as Russian shares rallied after
President Vladimir Putin asked lawmakers to rescind approval to use
force in Ukraine. Dubai’s benchmark plunged the most in 10 months.
The
MSCI Emerging Markets Index added 0.4 percent to 1,046.63. It closed
yesterday at the lowest since June 5. OAO Gazprom jumped 4.1 percent
to an eight-month high, leading the Micex (INDEXCF) Index up 2.2
percent. Arabtec Holding Co. slumped 9.8 percent as Dubai’s DFM
General Index slumped further into a bear market. Housing Development
Finance Corp. led a 1.4 percent gain in Indian equities. The Ibovespa
ended a two-day drop in Sao Paulo.
Putin’s
call came after Pro-Russian rebels in eastern Ukraine called a
cease-fire in fighting against government forces, matching a truce
announced three days earlier by President Petro Poroshenko. Brent
crude rose as an al-Qaeda offshoot consolidates its control over
areas of Iraq, OPEC’s second-largest producer.
“Today
is a reasonable day, recovering a bit from losses yesterday,”
Maarten-Jan Bakkum, an emerging-markets strategist at ING Investment
Management Co. in The Hague, said by e-mail. “The news of the
cease-fire is positive for Russia and Poland.”
The
Micex gained the most since June 2, while the ruble climbed 1.2
percent versus the dollar on optimism the rebel cease-fire in Ukraine
will ease a crisis that’s left hundreds dead in the former Soviet
republic. Putin asked the upper house of parliament to cancel
approval granted March 1 to use force in Ukraine, Kremlin spokesman
Dmitry Peskov said by phone today, confirming an Interfax report.
Ukraine
Bonds
Yields
on Ukrainian dollar bonds due in July 2017 tumbled 71 basis points to
8.41 percent. The UX Index in Kiev climbed 0.6 percent.
Russian Ruble Returns To Pre-Ukraine Crisis Levels
The Russian ruble is back to where it was before all hell broke loose in Ukraine on Feb. 22 with the ousting of pro-Russia president Viktor Yanukovych
Forbes,
24 June, 2014
The ruble was as weak as 36.65 to one on March 14, but has been strengthening ever since and is now 33.83 to the dollar. It’s down 2.99% from the start of the year.
Russian equities have been very resilient since Yanukovych’s ouster, up 5.46%. While that is not better than the MSCI Emerging Markets Index, sanctions by Washington and war talk in the media didn’t exactly destroy the market like many were forecasting.
Regardless of the stronger ruble, and an easing of tensions, large investment firms remain risk averse to Russia as a whole.
Nicolas Jaquier, an emerging markets economist with Standard Life Investments in the U.K., said they’re staying away from Russia.
“From a bond market perspective we would still stay away from Russia,” he told FORBES last week. “Equities might be better because of valuations.”
The bond market has done well in the last two months, almost back to pre-Ukraine crisis levels.
“I think the market now is quite complacent on Russia and sanctions are still not completely off the table. The sanctions that are in place now don’t have much of an economic impact, but you do have the massive capital outflow out of Russia because of it,” Jaquier said. Roughly $70 billion has been taken out of Russia in the first quarter. That’s money that cant be spent in the country and that has investors not very positive on the prospect on the economy.
“We have been bearish on Russia for the last two years. The drivers of growth are not very healthy,” he said.
US
business to run ads against Russian sanctions
Two
top US business lobbies plan to run newspaper adverts warning that
more Russian sanctions risk harming US workers and businesses. The
trade associations warn that economic sanctions will translate into
huge damages from lost trade with Russia.
25
June, 2014
The
adverts will be published in the New York Times, Wall Street Journal
and Washington Post by the US Chamber of Commerce and National
Association of Manufacturers on June 26, Bloomberg cites a
person familiar with the plans, who asked not to be identified.
US
trade associations fear even temporary sanctions would inflict
long-lasting damage on exports to Russia. Besides spoiling relations
with Russia sanctions will force a reassessment of the political risk
associated with exports and raise the cost of future financing.
Even
a limited group of large Russian banks impacted by the sanctions
would slow the national economy and make US imports more expensive as
the ruble declines.
According
to industry executives US energy companies would be required to apply
for licenses for exporting technology to Russia if sanctions were
agreed. Moreover, those companies exporting products with more than
10 percent of US technology content won’t be granted licenses at
all.
If
restrictions on technology transfer applied, exports to Russia will
become more complicated. That will lead to additional expenses for US
companies, especially in the energy sector which is full of high
technology.
The
only effect of imposing additional sanctions will be “to bar US
companies from foreign markets and cede business opportunities to
firms from other countries,” Bloomberg cites a copy provided by the
person familiar with the plans.
The White House’s intentions face opposition from both US business and European countries who say that Washington’s unilateral action will deal nothing than a competitive disadvantage to the national economy.
The
Yamal LNG gas project between France's Total and Russia's Novatek is
highly dependent on US technology and will experience serious
difficulties if sanctions are imposed, says Yves-Louis Darricarrère
the President of the Exploration & Production Division at Total.
“Yes,
we need US technologies. Oil industry involves the use of the
technologies of different countries around the globe. That’s why we
need cooperation instead of a conflict,”
Vedomosti quotes Darricarrère as saying.
German
Chancellor Angela Merkel told members of her party on Tuesday that
further sanctions against Russia could be back on the agenda at the
Brussels summit on Friday, if Russia doesn’t take measures to
de-escalate crisis in Ukraine.
Merkel
praised Russian President Vladimir Putin for asking the Russian upper
house of parliament to cancel his right to deploy troops abroad,
describing it as a “a
first step”
in de-escalating the crisis.
However
the Chancellor stressed that “substantial progress” with which
they can go into sustained negotiations is needed.
“We
help, wherever we can. But when nothing helps, then sanctions can
come back on to the agenda,”
she added.
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