UK, Iran agree to steps to reopen embassies
– Volatility to remain high as tensions around US fiscal talks remain elevated. To keep up with the European data and news as the week goes forward, be sure to sign up for my distribution list . EURO-ZONE ECONOMIC CALENDAR The Euro is weaker in the first part of the European trading day despite a lack of data on the calendar. Indeed, it seems that investors are driving the Euro lower for two-fold: one, that UK data was so weak, suggesting that regional economic activity may have cooled; and two, recent positive headlines out of the US regarding the fiscal debacle. A small pullback in the German Industrial Production figures due today, in context of the UK data, would confirm a slowdown in economic activity and lead to a near-term negative tone for European FX. Later on in the day, after the US equity market closes, ECB President Mario Draghi will be giving a speech at Harvard University. Just last week, President Draghi toned down the ECBs dovish rhetoric and pushed the central bank into a more neutral position . Clarification of this perspective could help the Euro stabilize if loses continue throughout the day. The data represents a significant step backwards in light of the fact that it not only undercut the market consesus, it also represented a steeper decline than the previous month. If UK production data is topping, it could be a sign that the broader region is seeing a cooling of economic momentum; the Euro-Zone accounts for over 40% of the UKs exports. UK Gilt yields slid to multi-week lows (10YY at six-week lows) suggesting that investosr are embracing the data in a negative fashion.
British industrial output fell by 1.1 percent on the month in August, the biggest drop since September 2012, after rising by 0.1 percent in July. This was far weaker than the 0.4 percent rise forecast by economists, and contrasts sharply with upbeat news from private-sector surveys of the manufacturing sector. August’s Markit/CIPS purchasing managers’ index showed the fastest increase in activity for two years, and a quarterly poll by the British Chambers of Commerce showed factories’ sales rising at the fastest rate since the early 1990s. Firms in the basic pharmaceuticals, melectronics and food and beverages sectors led the decline. Output from Britain’s oil and gas industry, which also feeds into the broader industrial output measure, was weak too. Production dropped by 0.1 percent on the month and is 17.0 percent lower than a year earlier, the biggest drop since March. The ONS said that there was no specific reason for the decline in manufacturing, but noted that output in August tended to be weak and that seasonal adjustment to offset this was complicated by the London Olympics in August last year. The manufacturing sector had a stronger performance in the three months to August however, with output up 1.2 percent, the biggest rise since October 2010. Britain’s economy expanded by 0.7 percent in the three months to June, and many economists expect it to beat that rate in the third quarter. Industrial output makes up 15 percent of Britain’s economy. Separate ONS data released at the same time showed that Britain’s goods trade deficit narrowed slightly but was still wider than expected at 9.625 billion pounds. Follow us on Twitter: @CNBCWorld
UK factories drive shock fall in August industrial output
The Japanese company plans to build up to six new nuclear reactors in Britain using its and GE’s Advanced Boiling Water Reactor (ABWR) at sites in Oldbury and Wylfa which it acquired last year. The Office for Nuclear Regulation (ONR) and the Environment Agency, which together license new nuclear reactors in Britain through the so-called Generic Design Assessment (GDA), said on Wednesday that lessons learned from previous assessments would shorten Hitachi’s approval process. “We are estimating that the UK ABWR GDA could be complete in four years from the start of our assessment, i.e. by the end of 2017,” the two bodies said in a joint progress report published on Wednesday. The regulators finished the GDA process for EDF’s European Pressurised Water Reactor (EPR) earlier this year after four and a half years. It was the first nuclear reactor to be licensed through the newly introduced GDA system. The ONR and Environment Agency said they would expand their team working on Hitachi’s GDA this autumn and that they expected Hitachi to provide the first technical documents this month and in December. Britain has an ambitious plan to build new nuclear power stations by the middle of the next decade to replace ageing and polluting plants that are set to shut down. EDF and Hitachi are two of the companies planning to build new nuclear plants. A joint venture between France’s GDF Suez and Spain’s Iberdrola has also announced a nuclear new build project. Iberdrola is in talks to sell its stake in the joint venture to Toshiba’s Westinghouse unit.
He however made it clear that “We are open to more direct contact,” adding that the coming months “may be unusually significant” in British-Iranian relations. Speaking to MPs in the House of Commons , Hague said “It is clear that the new president and ministers in Iran are presenting themselves and their country in a much more positive way than in the recent past. There is no doubt that the tone of the meetings with them is different. We must test the Iranian government’s sincerity to the full, and it is important that our channels of communication are open for that”. Hague further informed that he has had detailed discussions with Iranian foreign minister Mohammad Javad Zarif on how to improve the functioning of the UK-Iran bilateral relationship. The diplomatic relations between London and Tehran suffered a severe setback when UK’s embassy compounds in Tehran were overrun in 2011 and the Vienna Convention flouted. The Iranian Majles later voted to downgrade relations with the UK. “It is understood on both sides that given this history, progress in our bilateral relationship needs to proceed on a step-by-step and reciprocal basis. The Foreign Minister and I agreed our officials would meet to discuss this. The first such meeting has already taken place, and will be followed by a further meeting in Geneva next week” Hague added “I have made very clear to Mr Zarif that we are open to more direct contact and further improvements in our bilateral relationship. We have therefore agreed that both our countries will now appoint a non-resident Charge d’affaires tasked with implementing the building of relations, including interim steps on the way towards eventual re-opening of both our Embassies, as well as dialogue on other issues of mutual concern.” The development comes weeks after President Barack Obama and Iranian president Hassan Rouhani made history with a phone call, thawing three decade freeze between US and Iran. It was the first time that leaders from the US and Iran had directly communicated since the 1979 Iranian revolution.