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Global Economic Weekly Report 15th September 2014



15th September 2014

There may be more important things going on around the world. But UK markets are
now focused almost obsessively on this Thursday’s referendum on Scottish
independence – which could bring to an end a 307-year union and destroy what has
long been considered one of the most stable political entities in the world. To put it into
a broader context, it would be as though Texas had voted to secede from the US.

I said pretty much what I wanted to say last week – and I haven’t changed my tune. The
first thing to emphasise is that the vote is a massive failure of the UK’s political elite, and
PM Cameron must take responsibility for setting the bar sufficiently low that separatists
might win. Why, for instance, were 16-year olds given the vote? Why were Scots who
live in the rest of the UK disenfranchised? Why were 180,000 Poles (and other short-term immigrants) who are temporarily resident in Scotland given a vote? The second

thing to note, however, is something that hasn’t been given enough attention: in the
very short run, nothing will change. Even if Scotland votes for independence, there will
be an 18-month (or more) transition period, in which the terms of the divorce will have
to be worked out. There is no provision for Scotland to change its mind, no room for
‘buyer’s remorse’ (another mistake by Cameron). But the ‘romance’ of independence
will quickly be replaced by endless, petty, nasty bureaucracy – just like in a real divorce.

That is if the separatists win – which seemed likely a few days ago. By Friday, the polls
seemed to suggest a narrow victory for pro-Unionists – though, over the weekend, the
outcome was again too close to call, and Salmond is now confidently predicting a
substantial majority for the Yes campaign. The problem is that even a narrow victory
for the Unionists would not mean the issue is settled. As in Quebec, there would be
continuous pressure for a new vote – until the Scottish electorate “gets it right”.

We are in very dangerous territory. At least two other EU countries have equally strong
separatist movements – Spain (Catalonia and the Basque region) and Belgium
(Flanders). And Italy and Romania are not far behind. (No wonder the IMF warned on
Thursday about ‘secession risk’.) That makes it less likely that Scotland would find it
easy to remain in (or even to join) the EU. And it would make it extraordinarily difficult
for Scotland to negotiate the same exemptions that the UK enjoys over EU budget
contributions and Schengen. At the least, it seems reasonable to conclude that, if it were
accepted as a member, Scotland would have to commit to join the euro – which would
make the current debate over whether it could retain sterling irrelevant.

In fact, the list of problems if Scotland does vote for independence is long – and growing
every day. In addition to the currency, the monarchy, defence and Scotland’s status vis-
à-vis the EU, there is the division of North Sea oil revenues, Scotland’s responsibility for
a share of the UK’s national debt and how to handle Scotland’s substantial financial
services sector. Already, RBS, Lloyds Bank, Clydesdale Bank, TSB, Tesco Bank, Aegon
and Standard Life have all indicated that, if Scotland votes for independence, they will
move their head offices down South so as to ensure that they are supervised by the
PRA/FCA and that they are eligible for BofE support in the event of a crisis. Other
financial firms will have no choice but to follow.

There are many other potential problems. One is whether Scotland can afford Salmond’s
promise to set up its own deposit guarantee scheme. Another is what to do with pension
funds: Under EU law, cross-border funds are not permitted to run actuarial deficits. A
third – which could hit Salmond’s support hard if he does win – is what to do with
Scotland’s OAPs: whose responsibility is it to pay their state pensions? One could go on.
At another level, for instance, how quickly would Scotland qualify for IMF
membership? And, until it did, how could it support a separate currency – if, as
everyone from BofE Governor Carney to former EU Commissioner Rehn has pointed
out, it cannot retain sterling? And then, of course, there are Salmond’s spending
promises – no more austerity, a massive expansion of health spending, an end to
privatization etc. It all sounds a bit like Hugo Chavez on the Clyde. There has even been
talk of capital controls being introduced by the new government in Edinburgh.
It is no wonder that, in recent days, business leaders, economists and politicians have
come out strongly (and almost unanimously) against separation – or that corporates and
individuals are said to have been shifting cash and bank deposits South of the border.

Of course, that isn’t the end of it. If Scotland votes to secede, the rest of the UK would
also be in trouble. There were reports over the weekend that £17 billion has already
been pulled from UK banks, and Citi has recently forecast that sterling would
immediately fall to US $1.56. Bloomberg’s regular survey of FX dealers backs that up; it
suggests a 10% drop within a month. In the longer term, Britain’s (already diminished)
clout within the EU would be eroded, it would almost certainly find it impossible to
retain its UN Security Council seat, and it could well be squeezed out of the G7/G8...
Maybe it will not happen. But it is worth emphasising that a narrow ‘No’ vote won’t
end the debate either; the Scottish issue is going to be a corrosive part of British politics
for a long time to come.

European appointments: The other – almost equally parochial – issue that has
dominated headlines over the last week is the new European Commission that
Commission President Juncker unveiled on Wednesday. For once, I may have been too
pessimistic, in that I (and most other observers) assumed Juncker was going to kick
Cameron when he was down for the nasty things he said about him a few weeks ago. It
seems Juncker is more generous than his reputation suggests – though it may also be
that he is going to leave the kicking to the European Parliament.

The main significance of the new team that Juncker put forward is that it suggests he is
trying to impose a new ‘matrix’ management structure, ending the presumption that all
28 Commissioners are ‘equal’. In particular, he has designated Frans Timmermans (the
Dutch Foreign Minister) as his deputy. There will also be six other vice-presidents, each
overseeing different aspects of different Commission portfolios. The two that affect
financial services most are likely to be:

- Valdis Dombrovskis (Lithuania), who is responsible for the euro; and
- Jyrki Katainen (Finland), who handles ‘jobs and growth’.

Both are said to be fiscal and monetary hard-liners. Beneath them, Juncker has finally
done what had been talked about for a long time: he has split the Internal Market
portfolio and created a separate portfolio for ‘financial stability, financial services and
capital market union’ (note the order – financial stability takes pride of place). That goes
to the UK’s Jonathan Hill – a controversial nomination, not least because the UK is
currently challenging the EU’s bonus cap in the European Court. The other particularly
controversial appointment is Pierre Moscovici, the former French finance minister, who
takes on the economics portfolio – where he will be responsible for implementing the
EU’s fiscal rules, which France is currently flouting. Even though both Moscovici and
Hill hail from bigger member states, they will have to do what their bosses tell them –
and it may be significant that the six super-Commissioners are mostly from second-tier Northern states.

The other key appointments are probably:

- Cecilia Malmgren (Sweden), who will handle trade – the one area where the
EU has a negotiating competency over and above member states;
- Elzbieta Bienkowska (Poland), who gets the rest of the internal market
portfolio (and who is said to be close to the new Council President, Donald
- Margrethe Vestager (Denmark), who covers competition.

Another very important figure going forward is likely to be Juncker’s (German) chief of
staff, Martin Selmayr, 43, who is said to be particularly close to Merkel.

The new Commission takes office on November 1 – provided it has been approved by
the European Parliament.

It is inevitable that the Parliament will object to Hill (indeed, individual MEPs already
have done), and the centre-left S&D group will protest that there are too few Socialists
on the Commission. However, the Parliament does not have the right to pick and
choose; it can reject the entire Commission, but it cannot reject individuals. The
likelihood, therefore, is that, after a bit of political grandstanding designed to make the
UK look bad, the Commission will be approved.

Geopolitics: Middle East/Ukraine: It is at least arguable that the most important
decision of last week was Obama’s decision to attack ISIS/ISIL in Syria – and to try to
build up the kind of regional coalition to handle this as Bush I did against Iraq. Given
the appalling fate of another British hostage over the weekend, it seems inevitable that
(whatever the WSJ – which insists the Brits are staying out – says) we will be part of that
coalition; let’s hope that we can also lean on Turkey to join. The slippery Mr Erdogan is
surely key to bashing the bad guys once and for all. Unfortunately, he seems minded to give this one a miss...

However, from the markets’ point of view, the focus is (once again) on Russia and the
Ukraine, rather than on Syria and Iraq.

The good news is that, last weekend, Kiev and the pro-Russian rebels signed a 12-point
peace plan. On Monday, the EU agreed a new raft of sanctions – but did not specify a
date when they would become operative. It was assumed that, if the peace plan held,
they would not be applied. However, on Thursday, the EU announced that it was
imposing the new sanctions with immediate effect – though it would review them next
month. They hit five more state-owned Russian banks and three energy companies,
plus an extra 24 named individuals. All will be subject to restrictions on using EU banks
and capital markets, and to travel bans. Now, the US has followed up with its own list of new restrictions.

The problem is that Russia is not powerless. Indeed, it was reported on Wednesday that
it had already cut gas supplies to Poland by 20%, and subsequent reports say Austria an
Slovakia are also being targeted. Moscow is now warning that it will impose restrictions
on automobile and clothing imports from Western Europe.

True, the rouble hit a series of record lows last week (it closed on Friday at R37.97/US
$), and the Micex is down sharply (though it is still up for the year). But, while
sanctions do hit Russia, they also hit the German mittelstand hard – as well as exporters
from Finland, Austria and the Czech Republic in particular. And Russia has other
weapons. An article in Friday’s FT (by Gillian Tett, who tends to be very well-informed), hints that Russian hackers are now undertaking cyber attacks on European
firms as retaliation for sanctions.

In comparison with, say, the fight against ISIS/ISIL, this spat is silly; it needs to be sorted out quickly.

The global economy: There was a bit of better news over the weekend. The BIS, for
instance, reported that cross-border bank lending picked up again in the first quarter –
the first significant rise since 2011. However, most of that seems to have been lending to
China; cross-border lending in Europe was down. And the Bank rather undercut the
positive tone of its own message by coupling it with a warning that corporates in
emerging markets are taking on a dangerous amount of debt –and may well be in
trouble when interest rates rise. That is a warning it has sounded before – but no one seems to notice.

Other than that, the main issue continues to be the extent to which an expansionary
monetary policy can/should offset an allegedly restrictive fiscal stance. At the annual
Ambrosetti Forum in Italy last weekend, NYU Professor Nouriel Roubini called it
‘Draghinomics’. More broadly, the debate is whether there is now fiscal space for more public spending.

That is certainly as true in the US (where there is a consensus that public sector
infrastructure is in very poor shape) as it is in Europe. But, even though Congress is
now back in session, big issues like that are not yet on Washington’s agenda. Instead,
the legislative focus is likely to be on:

- a continuing resolution to keep the government funded at least through the
November elections (as noted last week, this may include temporary funding
for ExImBank); and
- the moratorium on internet taxation, which expires on November 1 (a big
issue for GenX, but one which scares old-line pols, who don’t understand
Internet shopping).

Democrats may also pick up on the issue of (increasingly popular) corporate tax
‘inversions’ – though mainly to paint Republicans as patsies for Big Business.

Economically, this has been a relatively slow week in the US. The only releases of note
- the Michigan confidence index for September, which came in at 84.6, up from
82.5 in August – substantially better than expected;
- consumer credit for July, up sharply to US $26 billion;
- the Treasury budget deficit for August, which fell from US $148 billion to
‘only’ US $139 billion;
- retail sales for August, which were up 0.6% (as expected), with sales ex-autos
- wholesale inventories, up 0.1% in July; and
- first-time jobless claims, which were up 11,000 in the latest week.

There is not much of a hint here about the future of Fed policy, though a report from the
San Francisco Fed earlier in the week did warn that the markets are wrong to assume
that US interest rates will stay low for a long time. This week’s FOMC meeting may
give a much clearer picture, but, at the moment, it still looks as though QE will be over in October.

As for the markets, all the major equity indices were up the week before last – despite
the disappointing August payrolls data. Last week, however, anxieties over Fed policy
re-emerged, and equities were soft. Through the close on Friday, the DJIA was off over
150 points, at 16,988. That is a drop of 0.8%. Over the same period, the S&P500 was
down 0.5% and the Nasdaq was broadly flat. As for bond markets, the yield on the
benchmark Treasury 10-year note was up sharply. Two weeks ago, it rose from 2.34% to
2.46%; last week, it rose further, to 2.61%. Same with the 30-year yield; the previous
week, it rose from 3.08% to 3.23%. Currently, it is trading at 3.34%.

If US economic news last week was less than wonderful, the eurozone continues to look
pretty awful – prompting Draghi into an unusually blunt warning on Thursday that
eurozone governments need to use fiscal tools more forcefully to boost growth. He was
supported by two of his most senior colleagues, Christian Noyer and Peter Praet, who
insisted that – with inflationary expectations falling – something must be done to bring
them back into line with the ECB’s 2% target. The significance of that is that both Noyer
and Praet are generally hard-liners (in Noyer’s case, despite pressure from the French government).

At the eurozone level, it was reported last week that the Sentix sentiment index had
gone negative for the first time ever, and that Barclays’ inflation expectations index for
five years ahead had hit a low of just 1.95%. At the member state level, the news was

- In Germany, it was reported that exports hit a record €101 billion in July, and
that the trade surplus was also a record at €22.2 billion. According to the IFO
Institute, this puts the current account surplus for the full year on track for a
record US $280 billion. Although that may be good news for Germany, it is
desperately bad news for the rest of the eurozone, which sees its exports being
priced out of the German market and being hit with German competition in
third markets. Unfortunately for them, Merkel’s approach to trade remains
resolutely mercantilist.
- In France, it was reported that manufacturing output fell 0.3% in July and that
consumer price inflation hit a five year low of 0.5% in August. Finance
Minister Sapin also conceded:
- that French GDP growth will be just 0.4% this year (down from his
previous forecast of 0.5%) and 1.0% in 2015 (down from 1.7%); and
- that the budget deficit, which he had insisted would be 3% this year, will
be at least 4.4% in 2014 and 4.3% next year.

This is pretty devastating, and it accounts for PM Valls’s decision to go to Berlin this
week to lobby Merkel for concessions on growth. (He also faces a confidence vote in the
Assembly.) The problem is that German Finance Minister Schäuble seems to be
doubling down. He was quoted last week as saying that ‘growth and jobs don’t come
about via higher deficits’, and that the focus must remain on balancing the budget –
something that France seems incapable of doing (even if Hollande et al. actually wanted to).

The situation is a bit better in Spain, where house prices were up 0.8% year-on-year in
the second quarter – after six years of falling prices. However, they are still down 40%
from their previous peak. As for Greece, PM Samaras pledged tax relief to jump start
the economy last week – insisting that “over-taxation has to end”. That won’t be good
news for the troika, which is back in Athens later this month. In the meantime, it was
reported that Greece’s unemployment rate fell in June – albeit only from 27.1% to 27.0%.

As for the UK, everything is (as noted) largely on hold, pending the Scottish referendum
this week. However, there were a couple of economic releases last week. In particular,
the trade deficit on goods and services widened in July from £ 2.5 billion to £ 3.3 billion
– the biggest deficit since September last year. On the other hand, it was also reported:
- that industrial production was up 0.5% in June (or 1.7% year-on-year), with
manufacturing up 0.3%; and
- that (according to the CML) first-time home buyers were up 25% year-on-year

The latter was a sort of political bonus for hard-pressed Cameron – though very few
people noticed. In addition, the (semi-official) National Institute predicted that the UK
economy will have grown 0.6% in the June-August quarter (up from 0.5% in May-July) –
which converts to a relatively strong annual rate of 2.9%.

All in all, the UK economy doesn’t look in too bad shape. However, Don Kohn, the
(American) ex-Fed staff member who now sits on the BofE’s MPC, warned on Thursday
that there could be ‘chaos’ if/when interest rates rise, since UK investors are not ready
for a rate hike. The result, he suggested, could be that interest rates end up by
overshooting on the upside. He may well be right.

Whatever, most European equities were down moderately last week – either because of
the threat of tit-for-tat sanctions or because of fears about Scotland. Through Friday,
the Xetra Dax (which had risen 2.9% the previous week) was down 1.1%, the CAC-40
(which had been up 2.4%) was down 1.3%, and the FTSE-100 (which had been up 0.5%)
was down 0.7%. Meanwhile, interest rates were up. The yield on the 10-year German
bund closed on Friday at 1.08%, up from 0.94% the previous Friday, while the 10-year
UK gilt yield was 2.53%, up from 2.47%.

In Japan, however, equities seem to have delinked. The Nikkei-225, for instance, closed
on Friday at 15,948, up 1.7% for the week – or 3.3% over the last two weeks. It is now at
its highest level since January – despite apparently growing dissatisfaction with PM
Abe, and with Abenomics more broadly.

On that score, it was reported last week:

- that the second quarter growth rate had been revised down to the lowest level
since the beginning of 2009 – with the Japanese economy contracting at an
annual rate of 7.1% (down from a preliminary estimate of -6.8%), indicating
that the impact of the April 1 increase in the sales tax was even greater than
- that machinery orders last month were significantly weaker than expected;
- that the current account surplus jumped in July to Y417 billion, largely
because of weaker domestic demand.

The Abe Administration is now badly split on whether or not the second round of the
sales tax increase should go ahead in 2015. What is clear, however, is that, if the
government’s 2% inflation target is not reached (on that, it was reported last week that
the official price index has stopped falling), there will be more easing by the BoJ.

Turning to China it was reported last week that PM Li Keqiang had told a conference
of the World Economic Forum that China cannot rely any longer on loose credit to boost
its economy. That got China-watchers worried. However, he also insisted that China
will hit its 7.5% growth target this year – despite clear signs that deflationary pressures
are building. It was, for instance, reported last week that the headline CPI was up jut
2.0% year-on-year in August – down from 2.3% in July (and weaker than expected0.
Equally worrying, producer prices have now been falling for 30 months, and the
broadest measure of credit growth came in weaker than expected last month.

All in all, one would have to accept that there are strong signs that the Chinese economy
is losing steam. One indicator of that is diversion of goods to export markets – and,
indeed, total exports were up 9.4% year-on-year in August, while imports were off 2.4%,
pushing the trade surplus up to US $49.8 billion from US $47.3 billion in July. That
seems likely to bring Beijing into further conflict with Washington.

As far as the emerging markets are concerned, three have been giving particular
concern over the last couple of weeks:

- Argentina – where Congress has just passed a law that defies US jurisdiction
by requiring banks and payment agents to pay sovereign bondholders either
locally or in other non-US jurisdictions. Judge Griesa is unlikely to be
impressed. However, Citi is also going to court in the US to get the order that
prohibits it from paying bondholders in non-US jurisdictions lifted. Buenos
Aires hasn’t given up yet.

- Venezuela – where markets are starting to focus on the possibility of an
‘Argentine-style’ default. What caused the worry in the first place was a
(tongue-in-cheek) plea from Ricardo Hausmann (a top centre-right
Venezuelan economist, now at Harvard) that Caracas should default on its US
$100 billion debt on the grounds that the government is Socialist, and that it
should not put creditors ahead of ‘the people’. For the moment, the
government is current on its foreign debt obligations, but it is having trouble
finding a buyer for its CITGO US oil refining operation. FX reserves are very
low and if it cannot sell that, it could well be pressed into a restructuring.

- Brazil- where Dilma Rousseff’s campaign for another Presidential term
appears to be imploding. With the Socialists’ Marina Silva ahead (and likely
to win an October 19 run-off), markets are getting scared. Moody’s has
already downgraded Brazil’s bond rating, and other raters may follow. Ms
Silva may be nice and green, but she is also extraordinarily naive in an
idealistic leftie way.

Currencies: While the focus in the press has been on sterling’s (Scotland-related)
weakness, the big loser last week was actually the yen – dragged down by the pledge
from Abe and Kuroda that, if Japanese inflation doesn’t hit 2%, monetary policy will be
True, sterling did fall sharply on Monday, following publication of the YouGov poll that
put separatists ahead for the first time. Having closed the previous Friday at US
$1.632/£ (down 1.7% week-on-week), it fell again on Monday and Tuesday to a 10-
month low of US $1.6053. Since then, however, better news on the polling front pushed
the pound back up to US $1.6268 at the close on Friday – though there seems to be
agreement that a victory by the separatists would see a further fall of 10% (or more). It
will be interesting to see how the markets respond on Monday to the apparently
tightening of the race over the weekend.

As for the yen, it fell the previous week by 0.9%, to close a week ago on Friday at
Y104.9/US $. Last week, it fell pretty steadily, and closed on Friday in New York at
Y107.34 – down 2.3% (or 3.2% in just two weeks). It is now at a six-year low against the dollar.

Meanwhile, for all the fears about a sanctions war with Russia and about the ECB
moving to outright monetary transactions, the euro has been surprisingly stable. It
closed the previous Friday at US $1.296/€ - down 1.6% week-on-week against a
resurgent dollar. It then hit a low of US $1.291 last Tuesday, but since then has bought
back, and closed on Friday at US $1.2963 – essentially flat on the week.

As for gold, nothing seems to be going right. Two weeks ago, it fell US $29/oz, to close
at US $1,261. It recovered a bit last Monday, but then slumped on Tuesday, and ended
the week at a seven months’ low of just US $1,229/oz. This is part of a broader
commodity sell off that has seen silver trade down to a 16-month low, while the R/J
CRB index has dropped from 289.3 to 284. But it is striking that, despite the upsurge in
geopolitical concerns, gold no longer seems like a good hedge.

Energy: Same with oil – with prices of both marker crudes continuing to slide.
Two weeks ago, the price of WTI for October delivery fell US $2.67, to close a week ago
Friday at US $93.29/barrel, while October Brent fell US $2.37, to close at US $100.82 –
pushing the ‘Brent premium’ out slightly, to US $7.53. Last week, WTI fell a further
0.9%, to just US $92.41, which is a 16-month low. As for October Brent, it hit a two-year
low of just US $96.72 on Thursday, and closed on Friday at US $97.11 – down 3.6% on
the week. This was the first week since June last year that front month Brent has been
trading below US $100, and it means that the Brent premium is now down to just US

There seem to be two main forces at work in the market.

In the US, the focus is on supply. On Thursday, in its monthly Oil Market Report, the
IEA emphasised the ‘relentless growth’ in production of unconventional oil in North
America – mostly US shale oil and oil from Canadian tar sands. True, US crude
inventories fell again in the latest week, and have now dropped 1.9 million barrels in
just two weeks. But with refineries cutting back their runs as the driving season ends,
supplies are still very comfortable. That is also true globally. Indeed, the IEA now
estimates that world-wide production in August was 92.9 million b/d – down 400,000
month-on-month, but up 810,000 year-on-year. That is despite the fact that Saudi
Arabian exports are said to be at a three-year low since that has been largely offset by
increased Libyan output, now running at 800,00 b/d.

Elsewhere, however, the emphasis is on demand – which seems to have fallen off a cliff.
The IEA’s September report talked of a ‘remarkable’ drop in oil demand, and the
Agency also announced a new short-term demand forecast. For 2014, it has now cut its
forecast by another 0.9 million b/d; for next year, it has cut 1.2 million b/d, to 93.8
million. As a result, most analysts expect the price slide – which has now been going on
since June – to continue.

However, there is also the issue of the price curve. Both marker crudes are now in
contango (ie forward prices are above spot prices). As a result, there are reports of
traders chartering ULCCs as floating storage, and generally boosting purchases with the
intention of holding stocks. That could start to have an impact on the market – and it has
led to suggestions that prices are bottoming.

Banking and finance: I have already written several times about the growing sense of
unease at the willingness of US courts to impose gargantuan – and apparently
disproportionate – penalties on foreign-owned firms. It is worth banging on about it
again, since the BP Deepwater case seems to have galvanised opinion. Even the FT -
usually a cheerleader for the American tort system – has insisted that:
“...the wave of cash that is still pouring out of BP has crossed the
threshold from legitimate restitution to more or less blatant gouging.”
Too true. In its opinion, the Supreme Court must intervene to re-establish a level
playing field. Don’t hold your breath.

The other big issue last week was the Fed’s proposal for a capital surcharge on the
biggest US banks. This will apparently be tougher than the 2.5% of risk-weighted assets
mandated by international agreement. Indeed, it could be as high as 4.5% for SIFIs that
have high exposure to short-term funding. It won’t make them happy.

As for this week, there is a tremendous amount going on - much of it terrifying.
Politically, even good old, smug old Sweden may be rocked... Over the weekend, there
were national elections that could see Centre-right PM Reinfeldt kicked out, leaving the
anti-immigrant Swedish Democrats with the balance of power. There were also
regional elections in Germany (Thuringia and Brandenburg), where the anti-Europe
AfD was expected to do well. (I am writing this before the results are in.) And President

Obama will meet Ukrainian President Poroshenko in the White House, to discuss
sanctions. Later in the week, French PM Valls goes to Berlin to discuss growth with

There is also a G20 meeting of finance minister and central bankers in Cairns, Australia.
And the 69th General Assembly of the UN begins in New York (making it impossible to
get a reasonably priced hotel room).

Economically, the big event in the US is the FOMC meeting tomorrow – which seems
likely to wind down QE by another US $10 billion. Other US economic releases that are
- industrial production (likely to be down);
- the Empire State and Philadelphia Fed surveys;
- home construction for August (probably down); and
- consumer price inflation (likely to be flat).

In Europe, markets will focus on:
- the eurozone trade balance for July and inflation for August;
- Germany’s ZEW index for September;
- the UK’s inflation data for August and the MPC minutes, also for August.

In Japan, trade data will be released, while in China, markets will focus on industrial
production, investment, retail sales and bank lending. But, of course, it is the Scottish
referendum that is going to occupy most of us. It is clearly too close to call – and,
whichever way it goes, there is going to be a lot of scar tissue. Speaking as someone
South of the Border, it is very clear that our Caledonian friends don’t love us anymore...

Andrew Hilton

Government Australia Advisory Board

Simon Crean MP

John Brumby 

Kristina Keneally

Mark Vaile

Nick Greiner

Alexander Downer

Peter Charlton

Trevor Rowe

Warwick Smith


Bob Carr