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World equities wobble as bond yields rise after positive U.S. jobs data, earnings

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Stock indexes around the globe traded mixed despite strong Amazon earnings and upbeat economic data on Friday, while gold prices slipped under pressure from a firmer dollar and higher U.S. Treasury yields, potentially bolstering the case for Federal Reserve rate hikes.

Earlier in the session, a sell-off in bonds briefly pushed Germany’s 5-year yield positive for the first time in four years after the European Central Bank was more hawkish than expected.

Asian equities held firm overnight after better-than-expected earnings from Amazon, in contrast to the heavy selling on Thursday following Facebook owner Meta Platforms’ earnings miss.

The pan-European STOXX 600 index lost 1.38% and MSCI’s gauge of stocks across the globe gained 0.77%.

On Wall Street, U.S. stocks rose after trading mixed earlier. U.S. government bond yields moved up amid the positive jobs data and better earnings.

“So much for the good news from Amazon – today’s jobs data puts 50 basis points back on the table for the Fed’s March meeting,” said John Lynch, chief investment officer for North Carolina-based Comerica Wealth Management.

The Dow Jones Industrial Average rose 0.4% and the S&P 500 gained 1.14%. The Nasdaq Composite added 2.25%.

Market sentiment has been dominated by speculation about the trajectory for rate hikes from major central banks this year, as pressure mounts for policy moves to combat inflation. Rate hikes typically hurt riskier assets such as stocks.

In a move labeled by analysts as a “pivot,” European Central Bank President Christine Lagarde was more hawkish than expected at the central bank’s meeting on Thursday. She acknowledged mounting inflation risks and declined to repeat her previous guidance that an interest rate increase this year was “very unlikely.”

The dollar index rose 0.111%, with the euro up 0.09% to $1.1448.

“Central banks are actively trying to tighten financial conditions … they are moving faster than expected,” said Colin Asher, senior economist at Mizuho.

European government bond yields also rose. Germany’s 5-year yield briefly turned positive as traders priced in ECB rate hikes this year. Germany’s 2-year yield was set for its biggest weekly rise since 2008.

Yields of benchmark 10-year U.S. Treasuries hit their highest levels since December 2019 on Friday after strong payrolls data showed that the U.S. economy added 467,000 jobs last month.

Morgan Stanley said markets were now facing “the largest quantitative tightening in history” from May onwards, with G4 central bank balance sheets set to shrink by $2.2 trillion over the next 12 months.

But Australia’s central bank was still content to keep policy ultra-loose in its quarterly statement on monetary policy, even as it sharply revised up its outlook for inflation and projected unemployment at 50-year lows.

The Bank of Japan also brushed aside the view it could follow in the footsteps of its more hawkish U.S. and European peers.

The cryptocurrency bitcoin has strengthened in the past week but, at just under $38,000, remains far below the all-time high of $69,000 it hit last November.

Oil prices surged to fresh seven-year highs on Friday, heading for a seventh straight weekly increase, built on ongoing worries about supply disruptions fueled by frigid U.S. weather and ongoing political turmoil among major world producers.[O/R]

(Graphic: Global inflation surge, https://fingfx.thomsonreuters.com/gfx/mkt/znvnejljlpl/Pasted%20image%201643969150921.png)

 

(Additional reporting by Elizabeth Howcroft, Sujata Rao-Coverley and Marc Jones in London; Editing by Frank Jack Daniel, Chris Reese and Chizu Nomiyama)

Economy

Arabs believe economy is weak under democracy – BBC

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Illustration of men and women

Arabs are losing faith in democracy to deliver economic stability across the Middle East and North Africa, according to a major new survey.

Nearly 23,000 people were interviewed across nine countries and the Palestinian territories for BBC News Arabic by the Arab Barometer network.

Most agreed with the statement that an economy is weak under a democracy.

The findings come just over a decade after the so-called Arab Spring protests called for democratic change.

Less than two years after the protests, just one of those countries – Tunisia – remained a democracy, but a draft constitution published last week could push the country back towards authoritarianism, if approved.

Michael Robbins, director of Arab Barometer, a research network based at Princeton University which worked with universities and polling organisations in the Middle East and North Africa to conduct the survey between late 2021 and Spring 2022, says there has been a regional shift in views on democracy since the last survey in 2018/19.

“There’s a growing realisation that democracy is not a perfect form of government, and it won’t fix everything,” he says.

“What we see across the region is people going hungry, people need bread, people are frustrated with the systems that they have.”

Chart showing the proportion of people who believe that the economy is weak under a democracy. In all eight locations, there has been a rise since the previous survey in 2018-2019.

Across most of the surveyed countries, more than half of respondents, on average, agree with the statement that the economy is weak under a democratic system.

In every country surveyed, more than half also say they either agree or strongly agree that they are more concerned about the effectiveness of their government’s policies, than they are about the type of government.

Chart showing the proportion of people who agree with the statement: As long as a government can solve our country's economic problem, it does not matter what kind of government we have. In every location, at least 60% of respondents agree. Iraq is the highest, with 79% followed by Tunisia and Libya with 77%

According to the EIU Democracy Index, the Middle East and North Africa is the lowest ranked of all regions covered in the index – Israel is classed as a “flawed democracy”, Tunisia and Morocco are classed as “hybrid regimes”, and the rest of the region is classed as “authoritarian”.

In seven countries and the Palestinian territories, more than half of respondents to the Arab Barometer survey agree with the statement that their country needs a leader who can “bend the rules” if necessary to get things done. Only in Morocco do fewer than half agree with that statement. However there is also a sizeable proportion of people disagreeing with the statement in the Palestinian territories, Jordan, and Sudan.

In Tunisia, eight in 10 of those surveyed agree with the statement, with nine in 10 saying they supported President’s Saied’s decision to sack the government and suspend parliament in July 2021, which his opponents denounced as a coup but he said was necessary to overhaul a corrupt political system.

Chart showing split responses to the statement: This country needs a leader who can bend the rules to get things done. Iraq had the highest proportion who agree (87%) with only 13% who disagree. Followed by Tunisia and Lebanon. In Morocco and the Palestinian Territories, the responses were more evenly split.

Tunisia was the only country that managed to form a lasting democratic government following the 2011 Arab Spring uprisings. However, Tunisia appears to be slipping back into an authoritarian rule under President Saied. According to the EIU democracy index for 2021, the country fell 21 places in the rankings and has been reclassified as a “hybrid regime” rather than a “flawed democracy”.

The survey in Tunisia was conducted between October and November 2021. Since then there have been protests against the president, as he has tightened his grip on power by dissolving parliament, taking control of the electoral commission, and pressed ahead with holding a referendum on a new constitution which many say will boost his authority. The country’s economy has meanwhile sunk deeper into crisis.

“Now, unfortunately, for Tunisia, it’s reverting to authoritarianism, or what we call democratic backsliding, which is a trend across the world today,” says Amaney Jamal, co-founder of Arab Barometer and dean of the Princeton School of Public and International Affairs.

“I think one of the key drivers is not a commitment to authoritarianism or an authoritarian political culture, it’s really a belief now that democracy has failed economically in Tunisia.”

Chart showing how different challenges are perceived in each location. The economic situation is seen as the greatest challenge in eight of 10 locations, whereas Covid-19 is only seen as the second-largest in 3. Corruption and Instability rank lower in all locations apart from Libya.

The economic situation is seen as the most pressing challenge for seven countries and the Palestinian territories, ahead of corruption, instability, and the spread of Covid-19.

Only in two countries is the economic situation not seen as the most crucial issue – in Iraq, where it is corruption, and in war-torn Libya, where it is instability.

At least one in three people in every country surveyed agree with the statement that, over the past year, they ran out of food before they next had sufficient funds to buy more.

Chart showing how many people were unable to keep food on the table before getting enough money to buy more. The Palestinian Territories and Morocco had the lowest proportion, but still higher than one in three. Egypt had the highest proportion with more than two in three people (68%) saying this happened sometimes or often.

The struggle to keep food on the table was most acutely felt in Egypt and Mauritania, where around two in three people said this happened sometimes or often.

The survey was for the most part conducted before Russia’s invasion of Ukraine in February, which has further exacerbated food insecurity across the region – particularly for Egypt, Libya, and Tunisia – which heavily rely on Russian and Ukrainian wheat exports.

The survey’s respondents who reported being unable to buy more food when they ran out were less supportive of democracy in a number of the countries surveyed, especially in Sudan, Mauritania, and Morocco.

Chart comparing the proportion of respondents who believe the economy is currently good to those who believe it will improve in 2-3 years, by country. In Lebanon, a mere half a percent of all respondents would describe the economy is good, but they show more optimism for the future with 17% who believe the situation will improve. In Egypt, which has the most positive view of the present economy, 45% of respondents believe the situation is currently good and 50% believe it will improve. Tunisia has a dim view of the current economy (only 14% think it is good) but has the highest level of optimism for the future - some 61% of people agree.

The economic outlook is bleak across the region, with fewer than half of all respondents willing to describe the economic situation in their country as good.

Lebanon is ranked lowest out of all the countries in the survey, with less than 1% of Lebanese questioned saying that the current economic situation is good. The World Bank has described Lebanon’s economic crisis as one of the most severe in the world since the mid-19th Century.

Overall most people don’t expect the economic situation in their country will improve in the next few years. However there is some optimism. In six countries, over a third of surveyed citizens say the situation will be better or somewhat better in the coming two to three years.

Despite the economic turmoil currently gripping Tunisia, its respondents are the most hopeful about the future, with 61% saying things will be much better or somewhat better in a few years.

The future is “uncertain”, says Dr Robbins of Arab Barometer. Citizens in the region may be looking to alternative political systems, such as the Chinese model – an authoritarian one-party system – that he says has “brought a huge number of people out of poverty in the last 40 years”.

“That type of rapid economic development is what many people are looking for,” he says.

Additional data journalism by Erwan Rivault.

Methodology

The survey was carried out by the research network, Arab Barometer. The project interviewed 22,765 people face-to-face in nine countries and the Palestinian territories. The Arab Barometer is a research network based at Princeton University. They have been conducting surveys like this since 2006. The 45-minute, largely tablet-based interviews were conducted by researchers with participants in private spaces.

It is of Arab world opinion, so does not include Iran, Israel or Turkey, though it does include the Palestinian territories. Most countries in the region are included but several Gulf governments refused full and fair access to the survey. The Kuwait and Algeria results came in too late to include in the BBC Arabic coverage. Syria could not be included due to the difficulty of access.

For legal and cultural reasons some countries asked to drop some questions. These exclusions are taken into account when expressing the results, with limitations clearly outlined.

You can find out more details about the methodology on the Arab Barometer website.

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Boris Johnson Is in Trouble But the British Economy Will Do Better Than Most. – Bloomberg

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Boris Johnson Is in Trouble But the British Economy Will Do Better Than Most.  Bloomberg



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BOE's Cunliffe Says Economy Is Slowing Due to Spending Squeeze – Bloomberg

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BOE’s Cunliffe Says Economy Is Slowing Due to Spending Squeeze  Bloomberg



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