9/8/2014: WLASze: Weekend Links on Arts, Sciences and zero economics

This is WLASze: Weekend Links on Arts, Sciences and zero economics.

Flyfishing in the Dolomites right ahead of the approaching rain is a borderline crazy form of fun. The fish are rising to the shallower waters to feed, the insects are forced closer to the water surface and the rumblings of thunder seem so distant, so non-threatening… until within seconds air turns water and within a minute you can't tell weather you've been wading knee-deep or took a full swim in a 2 meters deep hole.

Here's a picture of my fishing hole just an hour before the storm rolled in.

Water is amazing - it is an artist and a menace, a nurturer and a destroyer, a living thing that is ice-cold and hostile, yet reads like a mystery novel.

Water is what makes Earth. Or we think it makes the surface of Earth and small bit of the subterranean kingdom of aquifers and underground rivers. But no more. Most recent scientific research strongly indicates that in fact oceans worth of water exist some 400 miles below Earth's surface, stored in mantle rocks. Here are two links on this research: http://www.sciencedaily.com/releases/2014/06/140612142309.htm and http://www.sciencedaily.com/releases/2014/03/140312150229.htm?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+sciencedaily%2Ftop_news%2Ftop_science+%28ScienceDaily%3A+Top+Science+News%29

I doubt the oceans at 250-400 miles below Earth surface have trout in them. And I doubt there will be any fishing trips planned for the location any time soon, but that water shapes, just as surface water does, Earth's 'climate'. Instead of actual atmospheric weather, however, that climate is geological. Per one of the articles linked: "One of the reasons the Earth is such a dynamic planet is the presence of some water in its interior," Pearson said. "Water changes everything about the way a planet works."

Of course, climates are possible absent water, for otherwise the skies of the waterless planets that surround us would have been un-animated. They are not. In fact, waterless worlds generate much more extreme weather than our planet, even when you control for the global warming. Here's a neat summary of some spectacular weather you can expect were you to be able to travel there: http://theweek.com/article/index/257040/the-wildest-weather-in-the-universe?utm_source=links&utm_medium=website&utm_campaign=twitter


"Heavy-Metal Frost on Venus"… may be so... down on Earth, rushing from my flyfishing hole tonight, soaked through to the insides of layers of my gear, and listening to AC/DC's 'Hell's Bells' the fog of clouds stuck around me on the mountainsides looked like a frost-covered forest. Venus it was not, but the Dolomites above and ahead of my bike were looking more like an exoplanet of sorts, full of heavy-metal frost of an entirely different chemical composition…

And for what it's worth, an advice, don't try flyfishing in the alpine thunderstorms at home. It takes a pro… and a good dry room nearby…

Oh...and I almost forgot... a piece of music: https://www.youtube.com/watch?v=6Rt2pJ2AFpY by Nikolai Medtner, Piano Concerto number 1 (op.33). It is about memory, which is like water, slave of gravity and shaper of gravity simultaneously.

9/8/2014: Europe's bank risks back under the spotlight: ECR

Euromoney Country Risk report this week is covering rising risks in the European banking systems, with a brief comment from myself:

And unloved European banks chart, showing risk scores (higher score, lower risk):

7/8/2014: Russian response to new sanctions

Sanctions tit-for-tat between Russia and the West keeps going on.

Yesterday, Canada announced new economic and travel sanctions against Russian banks and high-ranking officials to match the latest round of of the EU and the US measures (see: http://trueeconomics.blogspot.it/2014/08/282013-sanctions-v-russia-some-fallout.html).

Canadian Prime Minister Stephen Harper said that: "Export restrictions announced by the European Union with respect to military and military dual-use goods destined to Russia are already in place in Canada. We are also committed to imposing the necessary regulations to enact export restrictions on technologies used in Russia's oil exploration and extraction sector. Those will be implemented in parallel with our allies."

The Russian entities hit by the sanctions are:

• Bank of Moscow
• Dobrolet Airlines
• Russian Agricultural Bank 
• Russian National Commercial Bank
• United Shipbuilding Corporation
• VTB Bank OAO

Canada's list of sanctioned individuals excludes three business owners who are sanctioned by the US and EU, but have extensive business interests in Canada. The full list of entities and individuals impacted by Canadian sanctions is available here: http://www.ctvnews.ca/politics/canada-to-deploy-military-supplies-equipment-to-ukraine-ctv-news-1.1948163

What Russia is doing to mitigate the adverse effects of sanctions?

1) Imports substitution (long-term process) - ramping up production of components usually imported by its own defence industries to replace supplies lost due to sanctions and Ukraine trade disruption. For example:

• Sukhoi jets and other aircraft components imported from Ukraine; 
• Caterpillar & JCB sales in Russia have been falling while those of their major competitors, such as Russian Kamaz and Belorussian Belaz have been rising. This trend continues since 2008-2009. Russian manufacturers share of the domestic market rose more than 30% since 2009, but this is now likely to accelerate, rapidly; and 
• Switching to Russian-manufactured foreign equipment, e.g. Komatsu plant in Yaroslavl

2) Imports switching by substituting new longer term contracts for supply of goods and services in favour countries that are not imposing sanctions. Three examples:

• In aircraft leasing (Dobrolet and Aeroflot) contracts are being moved from Ireland to Hong Kong; 
• Turkey will be the alternative source of supply of fresh fruit and vegetables to Russia, as announced yesterday; 
• Russia has negotiated a major beef deal with Brazil and there are advanced talks on same with Argentina aiming to largely replace European shipments. Russia also announced it will switch to purchasing New Zealand dairy products, especially cheese.
• So Russia is not going for an autarchy in food markets, but rather for switching away from EU and US suppliers.

3) Longer-term exits from the markets:

• In June, Gazprombank raised EUR1 billion at 4% pa in the foreign markets via a bond sale on the Irish Stock Exchange. Gazprombank has one of the largest exposures to international funding markets of all other Russian financial institutions - it has 78 outstanding eurobond issues denominated in a number of currencies. All these will be migrating on maturity to different geographies as long as sanctions continue. It is also highly likely that even once sanctions are listed, Russian banks and corporates are likely to hold back their debt issuance in Western markets.
• Rosneft has a finance arm in Dublin : Rosneft International Finance Ltd. which placed on December 6, 2012 two bond issues totalling $3bn, the oil major said in a statement. The first $1bn issue carries a 3.15% coupon rate and is scheduled to mature on March 6, 2017. The second $2bn issue carries a 4.20% coupon rate and is scheduled to mature on March 6, 2022. The bonds were listed and admitted to trading on the Irish Stock Exchange on December 7, 2012.
• Irish law firms advise a range of Russian companies, including on Russian LPN, bond issues and ECP programmes: AHML, Federal Grid, Gazprombank, VTB, VEB, Rosneft, Uralkali, Norilisk Nickel, EDC, Borets, Metallionvest, Brunswich Railways, RenCredit, Alfa Bank, ABH Financial, Domodedovo Airport, Russian Railways, Promsvyaz and Probusinessbank.(see: http://www.arthurcox.com/practice_area/capital-markets/debt-capital-markets/).
• VTB, via its VTB Eurasia Limited (an Irish company) issued U.S.$2.25bn Perpetual Loan Participation Notes via an Irish branch.

Retaliatory sanctions

In retaliation against Western sanctions, Russian President Vladimir Putin on Wednesday signed a decree limiting the import of agricultural, raw and food products from countries that imposed sanctions against Russia. Moscow banned, for one year (mating duration of Western sanctions) imports of all meat, fish, dairy, fruit and vegetables from the US, EU, Canada, Australia and Norway.

Further sanctions are likely. These are expected to impact:

• Possible bans on breeding stock sales, biotech agricultural inputs sales, as well as
• Possible ban on drinks imports from the EU.

Irish agricultural sales to Russia (see here: http://trueeconomics.blogspot.it/2014/07/1772014-irish-bilateral-trade-in-goods.html) are

• EUR202.2 million in 2013, roughly 52% of Canada's trade of CAD563 million (EUR385 million) agricultural trade with Russia.
• Roughly 1/3 of these sales comes from coffee, tea, cocoa, and products thereof, and another 1/3 from meat & meat preparations
• Beverages - on top of the above - ca EUR12.1 million in 2013 in officially recorded exports. This excludes sales by major international brands which are predominantly imported into Russia via European subsidiaries and distributors. One example is Jameson Whiskey is now leading brand in whiskey sales in Russia since 2012. In 2012/2013 Jameson sales in Russia grew by 23% by volume (http://pernod-ricard.com/files/fichiers/Commun/Documents/RA2012_13_VGB_MiseEnLigne_28102013.pdf)

Conservatively estimating the sales via subsidiaries and distributors, Irish exports to Russia run at around EUR800 million, with roughly 1/3 of these coming from Agriculture, Food and Drinks sectors.

Some estimated 42% plus of these sales come from sectors dominated by Irish indigenous companies with roughly 50% of these accounted for Irish SMEs. There are some really brilliant examples of smaller Irish firms entering Russian markets in recent years and obtaining long term contracts to provide specialist goods and services that are provided from Ireland with zero tax arbitrage component to value added. In other words, when it comes to our trade with Russia, we have much higher indigenous jobs creation and real economic activity generation per euro of exports to Russia than from our exports to other major trading partners.

Few aside facts:

• Russia is the fifth largest (by volume) importer of food in the world (http://www.businessinsider.com/worlds-leading-food-importers-2014-8)
• Russia imported USD43 billion worth of food in 2013
• Russia is the biggest consumer of EU fruit and vegetables
• Russia is the second biggest buyer of U.S. poultry 
• Russia is one of the largest importer fish, meat and dairy in the world
• Russia bought 28% of EU fruit exports and 21.5% of its vegetables exports in 2011
• Russia purchased 8% of US chicken meat exports last year.

Chart via Business Insider:

Net conclusions: sanctions response by Moscow will cost Russian consumers through increased prices. That is beyond any doubt. But the sanctions will be supportive (in the medium term) of improved agricultural production and food sector development in Russia. This effect is similar to the one achieved in the devaluations of the ruble post-1998 crisis. Sanctions by Moscow can have a significant impact on smaller open economies of Europe, like Ireland, with this impact concentrated on smaller domestic indigenous producers. If sanctions are broadened to include drinks, there will be even more substantial declines in Irish exports. It is clear that there will be no winners from the tit-for-tat sanctions wars.

6/8/2014: Italy's New Old Recession...

In Q1 2014, Italian GDP shrunk 0.1%, in Q2 2014 it fell 0.2% just as all indicators were suggesting that the Italian economy was starting to regain some growth momentum.

Meanwhile, latest data for new orders in Germany posted a fall of 3.2% in June compared to May.

Much has been made of the effects of Russia-EU trade sanctions on both figures. And much has been made of the effects of slower global growth on both figures. Little has been made of the fact that absent foreigners' demand for European goods, there is no real growth in Europe. That is because this fact hides horrific truth - European consumers and households have been hit by a freight train of banks bailouts, Government deficits adjustments and the need to support EU and national politically connected cronies - corporate, sectoral and individual. While pensions provisions for currently working middle classes shrink, taxes rise, indirect taxes, crates and levies climb sky high, there is hardly any decline in subsidies pots distributed by Europe to predominantly wealthy landowners, industrialists and an entire class of NGOs/R&D/Social Enterprises.

Thus, European investors' confidence is a feeble organism so vulnerable to shocks that a war in Ukraine's East can knock it out of its tracks. Thus, the only hope still remaining in European capitals is for the ECB to prime the proverbial printer. On the eve of the ECB monthly interest-rate-setting meeting, European banks still prefer to lend to the Governments rather than to the real companies. Why? May be it is because of some technical mumbo-jumbo of 'markets fragmentation' or may be it is because the real economy is left holding the bag for banks bailouts and Governments bailouts and cronies bailouts and as the result, European producers need Russian, Ukrainian, Chinese, Turkish and so on consumers?

Spanish economy, in contrast with Italian, posted 0.6% growth in GDP, but much of this (and previous 3 quarters) growth is down to the rate of economic activity destruction in previous years.

Meanwhile, Bundesbank is prepping the public to what might be a lacklustre growth release for Q2 figures due on August 14. Consumer and producer confidence indicators in Germany are pointing to a slowdown in economic activity there. Ifo German business sentiment indicator posted three consecutive months of declines in July 2014, falling to the levels last seen in October 2013. German investor confidence index published by ZEW has been now on the decline for seven consecutive months.

All in, the much-publicised recovery in euro area economy remains fragile and prone to reversals on foot of external shocks. Meanwhile, internal growth dynamics remain weak and unyielding to the PR blitz promoting the reversals of the crisis. Italy is just a proverbial canary in the mine… the only question is whether it is motionless from something that hit it before it was brought to the ICU in 2013, or from something new it caught in the ICU… 

5/8/2014: Two Maps, Two Roads Ahead... Choose Wisely...

In the context of often heard Russian grievances vis-a-vis Nato, here is a handy set of maps - via Der Spiegel:

And another map showing years of expansion:

With Nato forces fully controlling Skagerrak Strait and Sea of Marmara, Russia is de facto left landlocked on its South-Western and Western borders. With Nato previously implicitly acting as an anti-Russian alliance and now explicitly moving toward acting as a de jure and de facto containment mechanism against Russia, is anyone surprised Russia is not too keen on 'engaging' with the West and is rather re-orienting itself toward East?

After all, even its trade routes are now landlocked by the EU and Nato. EU forcing Russia to fund gas pipelines to which Russia subsequently is required to grant access for other suppliers shows that EU has no problem with distorting international trade to suit its own objectives.

Security-wise and trade-wise, isolation of Russia is not a solely self-inflicted wound. Rather, it is in part a logical outcome of the largely Eastern European hostility to Russia that has been allowed to dominate the EU and Nato policies since the late 1990s.

In my view, there is an urgent need to rethink Nato's role in Europe. One point of this exercise should be to strengthen sense of security within the alliance. Currently, a number of Eastern European member states express their concerns that Article 5 common defence clause is not enforceable. These fears should and can be alleviated. Another point is that Nato must act to reduce its adversarial position vis-a-vis Russia. Engagement, not containment; reform of Nato, not elbowing of Russia by courting Ukraine, Georgia, Moldova and Azerbaijan; recognition of mutual security interests (security of Eastern Europeans and security of Russians are not contradictory objectives, but complementary) not relentless push into Russian security space must be the main objectives.

5/8/2014: Of Coming Russian Debt Showdown...

September and December 2014 are going to be crunch time for redemptions of Russian bonds, followed by 3rd and 4th quarters of 2015... All data below is in billions USD.

To the above: red bars = government debt issuance, pink = banks and blue = corporates.

And here is how Russian economy's dependence on external funding markets has grown over time:

Per above: red bars are state-owned banks external debt, pink bars are state-owned non-financial corporates, darker blue private banks, lighter blue private non-financial corporates.

All data sourced from RBKDaily which cites as sources Central Bank and Morgan Stanley Research.

The big question is how these maturities will be met, as EU and US are prohibiting issuance of any new debt in excess of 90-days duration...

5/8/2014: BRIC PMIs Signal Some Improvements in Economic Growth in July

Markit released all BRIC PMIs for July, so here is the summary of top-of-the-line changes:

As the above shows, Manufacturing PMIs improved m/m in all BRIC countries, although Brazil remained at levels below 50.0. For Services, PMIs deteriorated in all BRIC countries, and in Russia these remained at the levels below 50.0.

Year on year, Manufacturing PMIs are stronger in all BRIC countries, with Russia reaching into above 50.0 territory in July 2014. Russia PMIs are covered in detail here: http://trueeconomics.blogspot.ie/2014/08/582014-russia-manufacturing-services.html while BRIC Manufacturing PMIs are covered in detail here: http://trueeconomics.blogspot.ie/2014/08/282014-bric-manufacturing-rebound-july.html

Now, Services PMIs. Y/y these deteriorated in Brazil and China, improved in Russia, but remained below 50.0 line, and strongly improved in India.

Combined PMIs-signalled activity:

5/8/2014: Russia: Manufacturing, Services & Composite PMIs: July 2014

Russia Services and Composite PMIs are out for July (released by Markit and HSBC). Here are the top-level numbers:

• Recall that Manufacturing PMI cam in at 51.0 in July, up on 49.1 in June and 49.2 in July 2013. This marks the first month of above 50.0 reading. Manufacturing went below 50.0 mark in July 2013, so this means we had 11 months of contracting output from July 2013 through June 2014 and one month of expansion at 51.8 back in October 2013. This is evidence of a structural slowdown in the economy, compounded by the Ukrainian crisis, although the effects of the crisis are not the only explanatory factor here.
• Services PMI came in at 49.7 - marginally below 50.0 and slightly lower than 49.8 reading in June 2014. In July 2013 the index stood at 48.7. All in, we now have 5 consecutive months of readings below 50.0 with marked slowdown in growth starting around July 2013 and accelerating from March 2014 through June 2014. 3mo MA is now at 48.5 which is nearly identical to 48.4 3mo MA through April 2014. 3mo MA for 3 months through July 2013 was at 49.6. Again, structural slowdown is evident in the series and again, the slowdown is being exacerbated by the Ukrainian crisis.
• Composite PMI came in at 51.3, marking second consecutive month of above 50.0 readings (although June reading of 50.1 was extremely weak). 3mo MA through July 2014 is at 49.5 and 3mo MA through April 2014 was 48.5, while 3mo MA through July 2013 was at 49.9. Exactly the same story as with the above sectoral indices: manifestation of a slowdown in July 2013, followed by continued weakness through February 2014 and deepening in slowdown from March 2014 through May-June 2014.

Chart to illustrate:

All PMIs remain in 'troubled waters' per trend - it will take at least 3 months to reestablish any upward trend and there is significant risk that fragile July improvements can be reversed in months ahead. The Ukrainian crisis is now starting to bite - gradually ramping up downward pressure on the economy.

3/8/2014: This Week in Corporate 'Not Tax Haven' News

Some links from recent press articles on Irish Corporate Tax regime:

• BloombergView on the U.S. politicians' logic concerning the issue of tax breaks: http://www.bloombergview.com/articles/2014-07-28/by-lew-s-logic-all-tax-breaks-are-unpatriotic With respect to Ireland, it no longer matters if there is any logic whatsoever to the U.S. Government and senior officials' statements on the matter. What does matter, however, is that we are now being increasingly / more frequently presented as an international tax arbitrage facilitators. That is the reputational cost of our decades-long policies. The real economic cost of our tax policies is that we no longer have any meaningful strategy or long-term outlook on manufacturing, productivity growth and/or investment. Instead, we have a strategy that relies, in part explicitly, but in full implicitly, on beggar-thy-neighbour tax arbitrage facilitation. 
• Vox provides its own musings on the matter in "Tax inversions: 9 questions about the hottest new trend in tax avoidance" article. It describes tax inversion with a direct reference to Ireland (and Switzerland) as: "So a company whose business is subject to relatively heavy taxation in one country (say, the United States) can buy a smaller company located in a country where its business is taxed at a lower rate (say, Ireland) and then declare the merged entity to be domiciled in the low-tax country for the purposes of taxation. Walgreens, for example, is in the process of buying a Swiss company called Alliance Boots and is considering re-labelling itself as a subsidiary of the Swiss company to pay lower Swiss tax rates." This is not a debate about Double-Irish scheme or other aggressive tax optimisation loopholes, but about the actual headline tax rate - the sacred Irish cow of 12.5%. And this is serious, real danger to Ireland, as we have no meaningful industrial / manufacturing / services etc growth pillars outside our reliance on tax-attracted FDI. The full article is here: http://www.vox.com/2014/7/28/5944263/corporate-tax-inversions-deserters-vs-economic-patriotism
• Reuters wades in with an excellent piece on the potential costs of Ireland losing the war on international tax regime. "Ireland has too much to lose to deter U.S. companies re-homing" (http://www.reuters.com/article/2014/07/30/us-usa-tax-ireland-analysis-idUSKBN0FZ1FA20140730?feedType=RSS&feedName=businessNews) also dives into the issue of our 12.5% rate. "It would be difficult to block inversions without jeopardizing the broader benefits," says the author. Which I agree with. We have lost the leadership momentum in the global debate on tax optimisation and now our headline rate is firmly in the crosshair. But our delirious tax advisory experts are still not getting the picture: ""It's a dangerous road to go down," said Kevin McLoughlin, who as head of tax at accounting firm Ernst & Young… I really struggle to see how they can legislate against companies choosing Ireland as a destination in a way that's confined only to these types of situations. I think it's extremely unlikely because I just don't know what they can do." Well, the problems of legislating outside of Ireland may be tough, but I'd love to see Kevin struggling to fill the potential void left in our economy if the legislators abroad do succeed in legislating on the matter. Somehow, I doubt EY will be that creative with coming up with economic development strategy ideas as they are with coming up with tax optimisation ideas.
• Robert Reich writes in Salon.com that “American” corporations are a farce (http://www.salon.com/2014/07/29/robert_reich_american_corporations_are_a_farce_partner/) and names a list of the Irish-based European operations of blue-chip corporates as the "American farce". Reich pushes the agenda of tax optimisation to R&D supports… which is… oh, surprise surprise, at the top of Irish Government agenda… Now, is there an area of tax arbitrage we haven't captured yet?..
• Last, but not least, remember the solemn, stern statements from Irish senior public figures arguing that Ireland does not promote itself as a tax arbitrage play, but rather focuses on 'human capital', 'regulatory environment' (aka - regulatory arbitrage) and 'headline rate of tax' (aka - inversions-enabling rate)? Well, they don't have to - instead of senior political and state leaders, we have a swarm of senior lawyers and accountants and corporate finance specialists and… to do the bidding, as reported by Reuters in "Irish, Dutch, UK law firms in tax inversion beauty contest in U.S." (http://www.reuters.com/article/2014/07/24/deals-taxinversions-lawfirms-idUSL2N0PK1L820140724).

Time to cut some FDI ribbons, Ministers…

Note: you can track previous links and discussions relating to Irish corporate tax policies and debates by using 'search' option for 'corporate tax' on this blog or by following blog-links from here: http://trueeconomics.blogspot.ie/2014/07/2672014-this-week-in-corporate-not-tax.html

3/8/2014: EUObserver on EU sanctions

EU Observer run a brief comment by myself on EU sanctions against Russia: http://euobserver.com/foreign/125168

2/8/2013: Sanctions v Russia: Some Fallout, Some Fizzle

One of possible fallouts from the latest round of sanctions against Russia is the effect of banking sector restrictions on funding of Russian banks.

I commented on this before, but left out some specifics. One area of concern is syndication markets - currently not covered by sanctions explicitly. Bloomberg reported yesterday that some banks might be scaling back their syndication operations with Russian banks. VTB is facing refinancing USD3.1 billion worth of syndicated loans - this has been put on ice since June. One factor is high risk of US fines should sanctions expand and the banks get caught in the middle of transacting with Russian counterparts.

In related news, UK RBS cut back funding for Russian clients. RBS has GBP2.1 billion exposure to Russia, with net exposure of GBP1.8 billion, down GBP100 million in the H1 2014. Some GBP900 million is exposure to Russian corporates and GBP600 mlm to Russian banks. Russia accounts for roughly 3% of RBS balance sheet and the bank is now aggressively cutting new operations in Russia, in line with sanctions.


Meanwhile, MSCI is now offering a new EM index excluding Russian equities and is planning a new MSCI Russia index excluding VTB shares. All in the name of giving investors comfort that they comply with the US sanctions. VTB is being excluded because it is the only listed Russian bank that faces restrictions on credit issuance and equity trading in the US (other banks - Bank Rossiyi and Rosselkhozbank are not listed), European sanctions cover same operations for the above three, plus Gazprombank and Sberbank. Sanctions are set with duration of 12 months from issuance and are subject review every 3 months. S&P and DJ are expected to follow MSCI indices revisions. More on this : http://www.bloomberg.com/news/2014-08-01/msci-creates-indexes-excluding-russia-reviews-vtb-on-sanctions.html?cmpid=yhoo

On liquidity effects of the sanctions, Moody's issued a note yesterday saying that Russian markets are facing no liquidity risk as corporate balance sheets are enjoying significant cash buffers, sufficient to cover bonds redemptions over 18 months period. More: http://www.vestifinance.ru/articles/45479

And Bloomberg View agrees, on the aggregate: http://www.bloombergview.com/articles/2014-07-30/mr-putin-can-ignore-mr-market "Russia owes its bond creditors about $153 billion, according to data compiled by Bloomberg. Some $126 billion of the nation's debt, though, is denominated in rubles. A further $26 billion is dollar debt, with just $1 billion owed in euros. That makes Russia relatively immune to the need to raise foreign capital to refinance its debts… Russia has raised about $3.5 billion through domestic bond sales this year, and has also tapped the state pension fund for a further $2.9 billion. Raising rubles won't be a problem; the finance ministry can always strong-arm domestic institutions into showing up at the auctions and accepting lower yields. So, just in case anyone was expecting Mr. Market to do any work for them in punishing Russia for its Ukrainian adventures, think again."

2/8/2014: Irish Manufacturing PMI: July 2014

Markit and Investec released Irish Manufacturing PMI this week. The numbers are pretty good:

• Headline PMI stood at 55.4 in July 2014, against 55.3 in June.
• 12mo average is at 54.0 and 3mo average is at 55.2. Readings above 54.3 are strong, so that's good news. Previous 3mo period average was 54.8 and both current 3mo average and previous are strongly above same period averages for 200-2013.
• No comment from me on the rest of the index components as Investec no longer publishes any actual readings. Press release is here: http://www.markiteconomics.com/Survey/PressRelease.mvc/28b6c4cab7b94cef8d7f0b557c894220

Couple of charts: Index deviations from 50.0 and snapshot to current period, highlighting two periods of growth gains:

Dynamically, the data is showing significant reductions in volatility in recent months, with standard deviations trending around pre-crisis averages.

Top takeaways: improved trading conditions in the sector seem to be linked to overall gains in the external outlook in key exporting markets, which means Irish manufacturing remains locked into exogenous demand (subject to possible shocks) and remains anchored to the fortunes of the MNCs (subject to longer term risks to production relocations). Good news on short-term dynamics, but Ireland still lacks over-arching strategy for the sector.