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01/09/2016

News bites: German elephant in the room

German elephant in the room: Eurozone consumer prices rose at a listless 0.2% in the year to August, while eurozone unemployment stood at 10.1% – it has been above 10% for seven years now. The European Central Bank will be mulling over these matters, and further quantitative easing, at its policy meeting next week. Nonetheless, the euro remains stubbornly stronger versus the US dollar over 2016 in spite of huge ECB monetary operations. Perhaps the market acknowledges German opposition to policymakers doing much more. (1/9)

Not rushing home: The latest Nationwide House Price Index shows UK House prices increased by 0.6% in August and by 5.6% on an annual basis – both numbers are better than expected given the recent slowdown in the mortgage market and the drag from higher stamp duties for buy-to-let properties. However, it appears that prices are being supported by dwindling supply, as many UK sellers choose to wait for more favourable conditions. (31/8)

Fudget: Dilma Rousseff has been permanently removed as Brazil’s President for breaking the country’s budget laws. This news came on the heels of second quarter GDP figures showing the sixth quarter in a row of recession, as the economy continues to be decimated by weaker commodity prices and a colossal corruption scandal at state-owned oil behemoth Petrobras. In spite of this, Brazilian equities have returned over 60% in USD terms this year, rallying from a position of deep value and oversold sentiment. (1/9)

Increasing interest: US consumer confidence rose to an 11-month high in August, supported by a strong labour market and rising real wages. If non-farm payrolls this Friday remain robust, as expected, an interest rate hike in September becomes much more likely. As a result, the battered S&P 500 financial sector index – which will benefit with higher rates – has risen to its highest level in 2016. Indeed, the wider market also appears to be taking a likely rate rise in stride with the S&P 500 within 1% of its all-time high. (31/8)

Luck of the Irish: Following yesterday’s landmark European Commission ruling that Apple has underpaid taxes in Ireland by €13 billion, CEO Tim Cook responded as follows: “we [are] in the unusual position of being ordered to [pay] taxes to a government that says we don't owe them any.” Nonetheless, Irish tax authorities are obligated to request payment, and the Irish government could certainly use it – €13 billion would have paid off last year’s budget deficit nearly four times over. (31/8)

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