Europe’s year of reckoning: will extremists triumph?

% of votes for non-mainstream parties in national polls

Following the victory of the populist left-wing Syriza party in Greece, the old order of European politics seems to be under threat. Across the continent new political parties of the left and right are on the rise. Even in countries that have seen a return to growth, falling unemployment and improving consumer confidence, support for non-traditional parties continues to accelerate. Peripheral countries are splintering from the rest of Europe as they are generally seeing more protest votes go toward broadly left-wing soft eurosceptic parties, while the electorate in other countries are largely catching protest votes for right-wing, harder eurosceptic parties.

So far, recent developments in Greece have largely only unsettled the domestic stock and bond markets. But with parliamentary elections in Denmark, Estonia, Finland, Poland, Portugal, Spain and the UK slated for 2015, it may pay investors to read political commentary as closely as the data on Bloomberg screens in the months ahead.

Gareth Colesmith, Insight Investment

Following the victory of the populist left-wing Syriza party in Greece, the old order of European politics seems to be under threat. Across the continent new political parties of the left and right are on the rise. Even in countries that have seen a return to growth, falling unemployment and improving consumer confidence, support for non-traditional parties continues to accelerate. Peripheral … read more

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Will Japan’s snap election cost it dear?

Prime Minister Shinzo Abe has postponed a consumption tax rise originally planned for October 2015, instead opting to call a snap election, but can Japan’s highly indebted government actually afford such a delay? The fiscal hawks worry about the implications for Japan’s public debt, which will amount to almost 230% of GDP by the end of this year, according to the OECD’s May projections. Such worries, however, seem premature. While the debt numbers may seem intimidating, Japan still finances these liabilities with surprising ease. This is partly because the government also owns substantial financial assets. So Japan’s net public debt will be a more manageable 143% of GDP by the end of this year, reckons the OECD. The debt burden is also surprisingly light because interest rates are remarkably low. Japan’s net interest payments will amount to only about 1% of GDP this year, the OECD calculates, which is lower than all but one of the other G7 countries.

 

Simon Cox, BNY Mellon Investment Management Asia Pacific

Prime Minister Shinzo Abe has postponed a consumption tax rise originally planned for October 2015, instead opting to call a snap election, but can Japan’s highly indebted government actually afford such a delay? The fiscal hawks worry about the implications for Japan’s public debt, which will amount to almost 230% of GDP by the end of this year, according to … read more

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Brazil prepares to pass judgement on Dilma’s economic record

With the first round of Brazilian general election this weekend, President Dilma Rousseff looks in real danger of losing out. With a dubious economic record since she assumed power on 1 January 2011, Dilma has been criticised for interventionist policies which, while beneficial to vast swathes of the population in the short term, have hamstrung the economy in the long term. She, by contrast, has blamed the negative effects of crises abroad and a faltering global economy.

The electorate goes to the polls on 5 October. If no candidate gains more than 50% of the vote, a second round run-off will be held on 26 October.

Once the election question has been settled would you be more or less inclined to invest in Brazil? Join the debate and let us know your thoughts using the comment button below.

With the first round of Brazilian general election this weekend, President Dilma Rousseff looks in real danger of losing out. With a dubious economic record since she assumed power on 1 January 2011, Dilma has been criticised for interventionist policies which, while beneficial to vast swathes of the population in the short term, have hamstrung the economy in the long term. … read more

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The week that was…

In the week ending 24th July, what stole the financial headlines?

A week on from the downing of a Malaysian airliner over Eastern Ukraine, the blame-game was in full flow with the West quick to point the finger at Russia for its continued interference in Ukraine. Meanwhile, the West announced plans for a further raft of economic sanctions on Russia. Elsewhere, there was no let-up in Israel’s bombardment of Gaza and, as the death toll rose, John Kerry, US secretary of state, travelled to the region in an effort to broker a ceasefire between the two factions. In other news, there was a focus on hedge funds which, while currently the victims of low market volatility, are being tipped to shine as and when the US Federal Reserve chooses to increase interest rates.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 25/07/14. ISSG is part of The Bank of New York Mellon.

A week on from the downing of a Malaysian airliner over Eastern Ukraine, the blame-game was in full flow with the West quick to point the finger at Russia for its continued interference in Ukraine. Meanwhile, the West announced plans for a further raft of economic sanctions on Russia. Elsewhere, there was no let-up in Israel’s bombardment of Gaza and, … read more

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Waiting for the outcome of India’s election

Who can be trusted to make sure the country’s economy is on the right track?

The country has done well in recent weeks in anticipation of a change in government but we think maybe there is too much optimism there. In India it is quite difficult for things to change quickly on the political front because of entrenched bureaucracy; it is a very cumbersome, chaotic country in many ways. We would like to see improvement in India, the potential there is potentially enormous if one day effective economic policy could be put in place and if corruption levels were to be reduced. It is something we continue to watch very closely. However, for the moment it remains a fairly trading-oriented market that generally looks quite expensive.

Jason Pidcock, Portfolio Manager, Newton.

The country has done well in recent weeks in anticipation of a change in government but we think maybe there is too much optimism there. In India it is quite difficult for things to change quickly on the political front because of entrenched bureaucracy; it is a very cumbersome, chaotic country in many ways. We would like to see improvement … read more

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