Though the markets are rather somnolent or insipid today, certainly the international and political climates are anything but; they look like minefields!  Certainly news of a scramble to keep Russian aircraft at bay off Cornwall rattled my cage this morning.  One day in the not too distant future, there is going to be an almighty accident, which could have grave consequences. So much for the Ukraine ceasefire!  It shows little signs of holding.  Putin is just messing about with Merkel and Hollande, Obama’s two ‘sirrahs’, as he spends time attempting to regroup.   No Russian leader has ever held the West in such wholesale contempt since the days of Krushchev and Breznhev. We live in dangerous times and it is a great pity, President Obama will not engage in a conversation with the jingoistic Putin.  If he were seen to and it all came to naught, at least he tried.  I have to confess that I am horrified at the perceived ambivalence of Obama and Cameron. We are almost back to the days of the ‘Bay of Pigs’ in Cuba – 1962



My colleague Simon French noticed in today’s ECB minutes, which are more transparent than before that Germany never voted for QE.   This is what he analysed – “Those ECB minutes (actually they are being called “accounts”) show a “large majority”, but not universal support, for the ECB’s QE program. So as expected the Germans were against and Draghi pushed things through on a majority vote. The more interesting element of the accounts says that QE is for investment grade assets and “for countries under EU/IMF adjustment programmes”. Translated this means if Greece leaves the troika program then they will not have their bonds bought. This had been widely touted but now confirmed in the minutes – looks a lot like a German trap. Greek debt yields that have been falling all day in the hope of an agreement are showing signs of life….”



Nonetheless the market is wholly ‘chilled out’ Market activists think there will be fudged agreement with Greece.  Otherwise it is the beginning of the end of the EU or if you prefer the ‘beautiful dream!’ Greece and all members states know that.



Simon French also informs us – “HOWEVER the FT is reporting that the Germans have rejected the bail-out extension terms offered by the Greeks – it confirms that the Germans are not up for a compromise on Greek austerity. I still think a debt deal will be done by next Friday and we are not at the Grexit yet BUT when the Germans are effectively dictating fiscal policy in Athens that is when the end game moves materially closer. What has just happened looks dangerously like that and therefore the most material development since Syriza were elected in my opinion. SYRIZA are being told – YOU MAY NOT BE ABLE TO DECIDE YOUR OWN DESTINY.  What a conundrum for the electorate – 70% want to stay in, but regardless of the terms?”



On the domestic front politically; even though in some of the marginal there is little evidence for a UKIP breakthrough, UKIP support could eventually start to drain away further as we head closer to Election Day. It’s been a good week for the Tories defusing the Lord Fink affair and very good UK macro data.


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