August 21, 2018 / 7:39 AM / a month ago

Daily Briefing: Odyssey not over for Greece's Tsipras

LONDON (Reuters) - After Greece's exit from its bailout programme this week, many are looking to Prime Minister Alexis Tsipras to set the direction of his country's future - and with it, his own uncertain political career ahead of next year's elections.

FILE PHOTO: Greek Prime Minister Alexis Tsipras arrives for the second day of a NATO summit in Brussels, July 12, 2018
"Nothing changes for us. We are a bankrupt country, and it won’t change for many more years"

After first railing against euro zone post-crisis austerity policies, the left-winger finally agreed to pursue Brussels-ordained reforms and deficit-cutting that have shrunk the domestic economy and sent his popularity ratings spiralling down.

This summer has been a painful one, with his shaky coalition further weakened in June by a lawmaker's resignation and himself under attack for his handling of deadly forest fires. His gamble to settle a decades-old name dispute with neighbouring Macedonia was a brave move but it also angered many Greek voters.

Local media say Tsipras is expected to give an address today on Ithaca, the island where Odysseus returned home from the Trojan war after the 10-year voyage recounted by Greek classical poet Homer. But Tsipras, like his country, is far from home and dry.

Britain wants more trade with the rest of the world - but most definitely not with Russia. Trade Secretary Liam Fox will today set out a new strategy aimed at boosting exports to 35 percent of gross domestic product from around 30 percent now, for example by better using online tools and promoting export finance.

At the same time, Foreign Secretary Jeremy Hunt will call on a U.S. trip for European Union allies to follow Washington in imposing more sanctions on Russia. Britain, the EU, and the United States blame Russia for a nerve agent attack against a Russian double agent in the English city of Salisbury earlier this year.

Although the Kremlin denies involvement, Washington imposed sanctions against Russia covering national-security-related goods. With the EU split in their approach to Russian ties, Hunt’s call is unlikely to be answered quickly - or at all.

MARKETS AT 0655 GMT

U.S. President Donald Trump’s dig at the Federal Reserve for raising interest rates too far, too fast has buoyed world markets by dragging on U.S. Treasury yields and the dollar, taking pressure off ailing emerging market stocks in particular.

U.S. President Donald Trump reacts to a question during an interview with Reuters in the Oval Office of the White House, August 20, 2018

In an interview with Reuters,  Trump said he was “not thrilled” with the Federal Reserve Chair Jerome Powell’s rate rise campaign and appealed to the central bank for some “help” during trade negotiations – referring to how China and other countries were offsetting U.S. tariffs with by allowing their currencies to weaken.

“We’re negotiating very powerfully and strongly with other nations. We’re going to win. But during this period of time I should be given some help by the Fed.” While the Fed is independent of political control, the president does appoint the chair and board members.

The comments are somewhat at odds with Trump’s boast only last week that global investors were “pouring into our cherished dollar like rarely before,” but he did manage to knock the greenback lower across the board late Monday and early Tuesday.

The dollar’s DXY index fell about 0.4 percent on Tuesday to its lowest in almost two weeks, with the euro recapturing the $1.15 handle and sterling climbing back above $1.28.  Ten-year Treasury yields fell to their lowest level overnight since July 6, with the two- to 10-year yield curve dipping briefly below 23 basis points for the first time in 11 years last night.

Euro/dollar’s jump also coincides with shifting trends in U.S. and euro zone economic surprises. While both are still slightly negative overall, the euro zone index popped above the U.S. equivalent yesterday for the first time since January.

Wall Street stocks continued to nudge higher back toward record highs meantime. Trump’s comments on trade come amid some renewed optimism that low-level talks between Washington and Beijing later this week will see some improvement in relations, even though Trump himself held out little hope for a breakthrough this week.

The combined effect of a lower dollar and some light in the dark trade tunnel helped emerging market equities recover some more ground. MSCI’s benchmark emerging equities index was up for the third day in a row and gained more than 0.8 percent on Tuesday.

Shanghai and Seoul stocks were up more than 1 percent and Hong Kong was up 0.4 percent. European stocks were marked a touch lower and S&P futures were flat.

The Turkish lira got little solace against the weaker dollar in holiday-thinned trade and remained weaker than 6 per dollar after Trump ruled out agreeing to any demands from Turkey to gain the release of a detained American pastor.

Pressure on Russia over alleged election meddling continued to mount. Microsoft said it had thwarted attempts by hackers associated with the Russian government to steal user information from conservative groups. Britain will also call on the EU today to increase sanctions against Russia.  

— A look at the day ahead from European Economics and Politics Editor Mark John and EMEA markets editor Mike Dolan. The views expressed are their own —

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