European Stocks Climb on Global Growth; BHP, Mining Shares Jump
By Sarah Jones
June 10 (Bloomberg) -- European stocks rose for a second day, led by a rally in mining companies, as economic reports from China to Australia reassured investors the global recovery is intact. Shares of BP Plc pared some losses.
BHP Billiton Ltd., the world’s largest mining company, and Rio Tinto Group jumped at least 3 percent after a report that Australia will announce “major changes” to its proposed mining tax. Daimler AG led automakers higher after the company forecast Mercedes-Benz sales will advance at twice the rate of the overall market in 2010. BP fell 6.7 percent, paring losses of as much as 12 percent, amid growing pressure over its failure to halt the worst oil spill in U.S. history.
The benchmark Stoxx Europe 600 Index climbed 1.5 percent to 248.24. The gauge is still down 8.8 percent from this year’s high on April 15 amid continuing concern that European nations will struggle to fund their budget deficits.
“We are still seeing global growth,” said Colin Mclean, who helps manage 650 million pounds ($944 million) at SVM Asset Management Ltd. in Edinburgh. “China has brought down its growth rate and the U.S. is still growing, which are powerful drivers for the global economy. BP has also rallied a bit from the U.S. close and we are seeing some institutions switch from Royal Dutch Shell Plc to BP.”
ECB Meeting
European Central Bank President Jean-Claude Trichet said interest rates in the 16-nation euro region are “appropriate,” indicating he sees no immediate need to cut borrowing costs any time soon. He made the comments at a press conference in Frankfurt today after the ECB left its benchmark rate at a record low of 1 percent.
The ECB will extend its offerings of unlimited cash and keep buying government bonds for now as it tries to ease tensions in money markets and fight the European debt crisis, Trichet said.
Germany’s highest constitutional court rejected an attempt by a lawmaker who sought an emergency order blocking the nation from participating in the euro-area rescue fund.
The Bank of England kept its bond-stimulus program in place and left its benchmark interest rate at a record low to aid the economy as Prime Minister David Cameron prepares the biggest budget cuts since at least the early 1980s.
Stocks climbed today after Australian jobs and Japan’s economic growth beat economist estimates, easing concern that Europe’s debt crisis will curb growth around the world. A separate report showed China’s exports jumped 48.5 percent in May from a year earlier, the biggest gain in more than six years.
National benchmark indexes advanced in all of the 18 western European markets except Luxembourg. The U.K.’s FTSE 100 Index rose 0.7 percent. Germany’s DAX Index climbed 1.1 percent and France’s CAC 40 Index increased 1.9 percent.
Spanish Bonds
Spain’s IBEX Index surged 3.9 percent as demand for the nation’s government debt rose. Spain sold 3.9 billion euros ($4.7 billion) of a new 2013 note, with demand increasing as yields driven higher by the region’s debt crisis lured buyers.
Investors bid to take up 2.1 times the amount of the securities on offer. That compared with a so-called bid-to-cover ratio of 1.8 when three-year notes were sold in April.
Banco Santander SA, Spain’s largest lender, rallied 5.3 percent to 8.04 euros, its biggest gain in more than three weeks.
Rudd Tax
BHP climbed 3 percent to 1,872.5 pence after the Herald Sun newspaper reported that Australian Prime Minister Kevin Rudd may announce “major changes” to his proposed resources super profits tax. The Melbourne-based newspaper didn’t say where it got the information.
Rio Tinto, the world’s third-largest mining company, climbed 3.3 percent to 3,252 pence. Xstrata Plc, which has shelved spending on A$6.6 billion ($5.6 billion) of Australian projects because of the planned mining tax, climbed 4.3 percent to 1,003 pence.
Daimler rallied 3.2 percent to 43.26 euros after the world’s second-biggest luxury carmaker forecast Mercedes-Benz sales to double the rate of the overall market in 2010 on demand from China.
“We want to grow at least 7 percent,” sales chief Joachim Schmidt said at a briefing with reporters June 8 at the carmaker’s headquarters in Stuttgart, Germany. “We’re well under way to achieve our goal.”
Damaged Well
BP slipped 6.7 percent to 365.5 pence. The shares earlier tumbled as much as 12 percent to 345.15 pence, its lowest level since 1997 before adjusting for dividends, following a 16 percent selloff in the company’s American depositary receipts yesterday.
The cost to protect against a default on the energy company soared to a record and bond prices plummeted after an estimate its damaged well is leaking more oil than previously calculated.
BP said today in a statement that it was not aware of any reason for recent share price movements and added that it is facing the Gulf of Mexico oil spill as a “strong company” that is generating cashflow.
Lafarge SA, the world’s biggest cement maker, jumped 5.2 percent to 49.18 euros and Cie. de Saint-Gobain SA climbed 6.2 percent to 32.14 euros.
Citigroup Inc. raised its recommendation for both companies to “buy” from “hold,” saying a recent selloff had “presented an opportunity for some shorter-term value trades.”
ARM Holdings Plc, the U.K. designer of semiconductors used in Apple Inc.’s iPhone, rallied 5.8 percent to 290 pence. The shares earlier rose as much as 32 percent amid speculation that Apple may be looking to buy the company. Spokespeople for ARM and Apple didn’t immediately return calls seeking comment.
Denied Speculation
ARM, which has four to five chips in each handset of some smartphones, in April denied speculation that Apple may bid for the company.
The shares also advanced as Taiwan Semiconductor Manufacturing Co., the world’s largest supplier of made-to-order chips, said sales rose 38 percent in May. Separately, the Semiconductor Industry Association today forecast global sales of microchips will rise 28 percent this year. That compares with a November forecast of 10 percent growth.
CSR Plc, a maker of microchips used in Nokia Oyj mobile phones, climbed 1.2 percent to 399.5 pence. Infineon Technologies AG rallied 2.5 percent to 4.68 euros.
Home Retail Group Plc lost 4.1 percent to 228.2 pence after the U.K. owner of Argos catalog stores and the Homebase home improvement chain said sales worsened in the first quarter as consumers pared spending on video games and televisions.
Revenue at Argos outlets open at least a year declined 8.1 percent in 13 weeks through May 29. That compares with a 2.2 percent drop in last year’s second half. Same-store sales at Homebase fell 1.4 percent, after rising 2.6 percent in the second half.
China’s May Exports Rise 48.5%,
China’s May Exports Rise 48.5%, Property Prices Jump (Update1)
By Bloomberg News
June 10 (Bloomberg) -- China’s exports jumped the most in six years and property prices rose at a near-record pace, signs that the economy is withstanding the sovereign-debt crisis in Europe and remains at risk of overheating.
Exports gained 48.5 percent in May from a year earlier, the customs bureau said today, more than the 32 percent median estimate in a Bloomberg News survey of 32 economists. None expected such a big gain. Real-estate prices rose 12.4 percent across 70 cities, the statistics bureau said separately.
Stocks fell, extending the Shanghai Composite Index’s 21 percent decline this year, on concern the government will step up policy tightening. The leap in exports could be a blip before European demand wanes, while falling property sales signal a looming slowdown in investment that may cool the world’s third- biggest economy, investment bank China International Capital Corp. said.
Today’s data “may be the good news before the bad news as the European debt crisis curbs the region’s demand and property- market corrections drag on investment,” said CICC’s Xing Ziqiang, a Beijing-based economist. “Exports may decelerate rapidly later this year and economic growth may slow to around 7.5 percent in the fourth quarter.”
In the first quarter, China’s growth was 11.9 percent from a year earlier.
Shanghai’s stock benchmark dropped 0.4 percent as of 1:18 p.m. local time as the MSCI Asia Pacific index rose 0.8 percent. Chinese stocks jumped the most in more than two weeks yesterday after a Reuters report indicated the size of the export increase and larger growth in new loans than economists had expected.
Betting on Yuan
Non-deliverable yuan forwards were little changed, indicating traders are betting that the currency will gain about 0.5 percent against the dollar in the next 12 months. Since July 2008, the yuan has been held by officials around 6.83 per dollar, after Premier Wen Jiabao’s government allowed a 21 percent advance in the prior three years.
Today’s export number was flattered by the comparison with May 2009, when shipments fell by a record. Exports rose to $131.76 billion last month, the highest value since September 2008, and imports climbed 48.3 percent to $112.23 billion. The trade surplus of $19.53 billion was the biggest in seven months.
The trade gap “suggests that the pressures on the yuan to appreciate remain” and will “provide evidence to some that China’s currency is still undervalued,” said Liu Li-Gang, a Hong Kong-based economist at Australia and New Zealand Banking Group Ltd.
Global Risks
Shipments to the European Union jumped 50 percent from a year earlier, compared with 29 percent in April. Those to the U.S. climbed 44 percent, up from 19 percent. In contrast, the International Monetary Fund warned yesterday that global economic risks have “risen significantly” and Europe’s woes could disrupt global trade.
China’s pegging of the yuan to the dollar has resulted in a 20 percent gain against the euro this year that will make exports to that region less competitive with rivals such as South Korea.
“The strong rebound in exports may be short-lived, with the debt crisis yet to affect Europe’s economy,” said Lu Zhengwei, a Shanghai-based economist at Industrial Bank Co. “Still, solid export growth offers a perfect window of opportunity to allow more flexibility in the yuan by de-pegging from the dollar and widening the trading band.”
The jump in property prices compared with a 12.8 percent increase in April from a year earlier, which was a record for the data series beginning in 2005. China intensified a crackdown on real-estate speculation in April to prevent asset bubbles and keep housing affordable.
Sliding Property Sales
Last month marked the first easing in the annual rate of property price gains in 11 months, while the figure exceeded the 12 percent median estimate in a Bloomberg News survey of seven economists. Month-on-month, prices advanced 0.2 percent and sales slid 25 percent.
Sales by China Vanke Co., the nation’s biggest publicly traded property developer, dropped 20 percent in May from a year ago, and Guangzhou R&F Properties Co.’s contracted sales shrank 48 percent, according to the developers’ stock exchange filings.
Last month’s biggest year-on-year price gains were in Hainan, the southern island being developed as a tourist destination. Hainan’s Haikou and Sanya cities reported annual increases of 52.8 percent and 50.8 percent.
Beijing, Guangzhou
Among the 70 cities covered, 12 had price declines in May from the previous month, including Beijing, Nanjing and Guangzhou. Eastern China’s Hangzhou saw the biggest monthly drop, at 0.6 percent.
In trade, today’s figures contrasted with March, when China posted its first deficit in six years as imports surged, outpacing export growth by 42 percentage points. Inbound shipments will continue to decelerate on falling commodity costs and a slowdown in domestic investment growth, according to Bank of America-Merrill Lynch.
May’s export gain was the biggest in more than six years after smoothing out distortions in January and February each year caused by a Lunar New Year holiday.
--Li Yanping, with assistance from Joyce Koh in Singapore. Editors: Paul Panckhurst, Russell Ward.
Revalue Renminbi or Dogs Unleashed
Revalue Renminbi or Dogs Unleashed, Patterson Says: Tom Keene
By Mary Childs and Tom Keene
June 10 (Bloomberg) -- China has until the end of the month to strengthen its currency before Congressional leaders impose measures to counter what they say is an unfair trade advantage, according to JPMorgan Chase & Co.’s Rebecca Patterson.
Senator Charles Schumer of New York has introduced a bill that would require the Treasury Department to determine if a nation has a currency misaligned with the U.S. dollar. The proposal would let companies seek import duties to compensate for an undervalued currency and impose tariffs. China must begin strengthening the yuan, also known as the renminbi, before the Group of 20 meeting in Toronto on June 25, Patterson said,
“Treasury’s said, ‘We’re going to stay quiet; we’re not going to put any pressure on you,” Patterson, head of foreign exchange at the private banking unit of JPMorgan, said during a Bloomberg Radio interview today on Surveillance with Tom Keene. “‘You have a window to move on the renminbi, strengthen it, and make everything more competitive. If it doesn’t happen by the end of June, we can’t hold the dogs back much longer’ -- no offense to the congressmen.”
Since July 2008, the Chinese currency has been held by officials around 6.83 per dollar, after Premier Wen Jiabao’s government allowed a 21 percent advance in the prior three years. The policy helped exporters weather last year’s contraction in global trade while spurring criticism that China is giving its companies an unfair subsidy.
Treasury Secretary Timothy F. Geithner said before Congress today that China’s exchange-rate policy is an impediment to a more balanced global recovery and allowing the yuan to strengthen would benefit Chinese consumers. The Senate will vote within two weeks on the measure aimed at getting China to raise the value of the yuan, Schumer said yesterday.
Fastest Growing
China’s exports jumped 48.5 percent in May from a year earlier, the biggest gain in more than six years, indicating Europe’s sovereign-debt crisis has yet to pose a restraint on the world’s fastest-growing major economy.
“Chinese officials are smarter than some folks in the market give them credit for,” Patterson said. “Of the policy makers around the world, they’re in a unique situation: China is starting from a position of strength.”
China’s small budget deficit, huge foreign reserves, and huge current account surplus mean that even if global growth slows, it has room to respond, according to Patterson.
“Even if the U.S. and Europe fall off a cliff, China can act,” she said. “It can do something to keep growth up and if growth is getting too tight, boom, they put on administrative measures and they prick the bubbles before they overheat. China is actually able and is trying very hard to engineer its own version of Goldilocks.”
Trade Deficit Widens as Imports, Exports Decline
U.S. Economy: Trade Deficit Widens as Imports, Exports Decline
By Courtney Schlisserman
June 10 (Bloomberg) -- The trade deficit in the U.S. widened in April to the highest in more than a year as exports and imports both declined.
The gap grew 0.6 percent to $40.3 billion, the most since December 2008, Commerce Department figures showed today in Washington. A separate report showed more Americans than anticipated filed claims for jobless benefits last week.
Overseas shipments remained at the second-highest level since October 2008 even after a decline that reflected lower sales of pharmaceuticals, soybeans and generators. Economic growth in Asia may fuel overseas sales at companies including 3M Co., helping cushion the blow from the European debt crisis and a stronger dollar.
The declines in imports and exports follow “big growth in both those categories in March so it could just be some payback,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. Trade’s contributions to growth will diminish, he said, “particularly now that you have the added factor that the dollar is strengthening and foreign growth might be slowing, particularly in Europe.”
Stocks in the U.S. rose as reports from Asia spurred optimism for global economic prospects. China’s customs bureau said the nation’s exports climbed 48.5 percent in May from a year earlier. Japan’s economy grew more than earlier estimated in the first quarter and Australian employers added workers for a third straight month.
The Standard & Poor’s 500 Index climbed 2.3 percent to 1,080.04 at 11:31 a.m. in New York. Treasuries fell, pushing the yield on the 10-year note to 3.25 percent from 3.18 percent yesterday.
March Deficit Revised
The U.S. trade gap was projected to widen to $41 billion, according to the median forecast in a Bloomberg News survey of 75 economists. The Commerce Department revised the March deficit to $40 billion from a previously estimated $40.4 billion.
Jobless claims dropped by 3,000 to 456,000 in the week ended June 5, a Labor Department report showed. Economists surveyed by Bloomberg News projected 450,000 claims, according to the median forecast.
While payrolls rose for a fifth month in May, hiring by companies was less than forecast, underscoring Federal Reserve Chairman Ben S. Bernanke’s comments yesterday that there will be “only a slow reduction” in the unemployment rate. Job gains are needed to spur consumer spending, which accounts for 70 percent of the economy, and ensure a sustained expansion.
Exports Decline
Exports from the U.S. decreased 0.7 percent to $148.8 billion. Imports slipped 0.4 percent in April to $189.1 billion, led by a decrease in demand for pharmaceuticals, crude oil and televisions from abroad.
Imports of capital goods, including computers, semiconductors and telecommunications equipment, climbed in April to the highest level since October 2008, signaling business investment continues to grow. Exports of such products also increased.
The trade deficit with the European Union narrowed to $5.73 billion in April from $7.06 billion in May. The dollar’s 12 percent gain against the euro since April 14 may dim the outlook for exports because it makes American-made goods more expensive in Europe.
St. Paul, Minnesota-based 3M, maker of 55,000 products ranging from Post-it Notes to dental implants, is among companies saying it has yet to feel the effects of the European debt crisis.
Growth Driver
The company “hasn’t really seen a change” in business in Europe and it started the year projecting that region “would be a very slow, low-growth market,” Chief Financial Officer Patrick Campbell said at an investor conference June 8. “Emerging markets remain a critical growth driver for us,” he said.
April sales for Midland, Michigan-based Dow Chemical Co., the world’s second-largest chemical maker, topped the monthly average in the first quarter and May was probably stronger, Chief Executive Officer Andrew Liveris said in a June 2 webcast from New York.
Liveris told investors to “stop panicking” over the European debt crisis or Chinese efforts to cool growth. “Demand is good,” he said.
The U.S. trade gap with China grew to $19.3 billion in April from $16.9 billion the prior month. The U.S. has been trying to pressure China to allow the currency to strengthen. Since July 2008, the yuan has been held by officials around 6.83 per dollar.
“The broad strength of U.S. exports to China and the world is one reason why we are seeing strong growth in manufacturing,” Treasury Secretary Timothy F. Geithner told the Senate Finance Committee today.
Imported Petroleum
The quantity of imported petroleum dropped, swamping an increase in the price per barrel to $77.13, the highest since October 2008, according to today’s report. Excluding petroleum, the trade gap widened to $16.3 billion from $15.5 billion in March.
A rebound in U.S. consumer spending and business investment, combined with the need to replenish depleted inventories, means a retreat in demand for goods made abroad will not persist.
Household purchases climbed last quarter at the fastest pace in two years, while business spending on equipment and software in the six months to March increased by the most in a decade, according to figures from the Commerce Department.
The trade balance adjusted for inflation, which is the figure used to calculate gross domestic product, increased to $44.3 billion in April. The gap was larger than the average $42.3 billion a month in the first quarter, putting trade on track to subtract from growth from April through June.
Stocks, Commodities Rally on Growth Outlook
Stocks, Commodities Rally on Growth Outlook; Euro Gains
By Nikolaj Gammeltoft and Claudia Carpenter
June 10 (Bloomberg) -- Stocks and commodities rallied after economic reports from China, Japan and Australia showed accelerating growth, while the euro strengthened for a third day and gold fell. BP Plc shares touched a 13-year low in London.
The Standard & Poor’s 500 Index increased 2.3 percent to 1,079.77 at 11:32 a.m. in New York, while the MSCI Asia Pacific Index and the Stoxx Europe 600 Index rose more than 1 percent. The euro advanced 1 percent to $1.21, while the New Zealand dollar strengthened versus all 16 of its most-traded peers and Australia’s dollar rose against all but the so-called kiwi. Oil and copper rallied more than 1 percent. Ten-year Treasury yields increased 8 basis points to 3.26 percent.
The biggest rise in Chinese exports in six years bolstered confidence that the world’s fastest-growing major economy will continue to fuel global growth. Japan’s economy extended at an annualized 5 percent rate in the first quarter. Demand for riskier assets was also stoked as the European Central Bank planned to extend offerings of unlimited cash and keep buying government bonds to fight the sovereign debt crisis.
“China’s export numbers are looking better than expected and the European situation is beginning to stabilize so investors are less worried,” said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York. “Plus the sell-off yesterday didn’t make a lot of economic sense so that set us up for a pop today.”
Yesterday’s Losses Erased
The S&P 500 fell 0.6 percent yesterday as a late-day slide wiped out an early 1.5 percent rally. Today’s gains came even as more Americans than anticipated filed applications for unemployment benefits last week, a sign firings remain elevated even as the economy is expanding. Initial jobless claims dropped by 3,000 to 456,000 in the week ended June 5, Labor Department figures showed. Economists surveyed by Bloomberg News projected 450,000 claims, according to the median forecast.
Caterpillar Inc., Alcoa Inc. and American Express Co. climbed at least 3.7 percent to lead gains in all 30 stocks in the Dow Jones Industrial Average as the gauge rebounded above 10,000 after closing below for four straight days.
BP Plc fell 5.4 percent 370.6 pence in London, paring losses of as much as 12 percent that dragged it to a 13-year low. The stock has tumbled almost 40 percent since the April 20 explosion at its Deepwater Horizon rig in the Gulf of Mexico, triggering the worst oil spill in U.S. history. Credit-default swaps insuring BP’s debt for five years surged 208 basis points to an all-time high 594, according to CMA DataVision.
European Markets
Eight shares rose for every one that fell on the Stoxx 600. Automakers were the biggest gainers among 19 industry groups on the European benchmark index. Daimler AG rallied 3.5 percent in Frankfurt after forecasting Mercedes-Benz sales will advance at twice the rate of the overall market on demand from China. Lafarge SA, the world’s biggest cement maker, gained 5.1 percent in Paris after Citigroup Inc. recommended buying the shares.
Asian stocks rose the most in a week. Commonwealth Bank of Australia gained 1.3 percent in Sydney. Dentsu Inc., Japan’s biggest advertising agency, rose 2.6 percent in Tokyo. Developing-nation shares climbed for a third day, with the MSCI Emerging Markets Index advancing 1.4 percent. Benchmark indexes in Brazil, India, Taiwan, and the Czech Republic jumped more than 1.5 percent.
Australian employers added workers in May for a third straight month, the statistics bureau said in Sydney today. The number of people employed gained 26,900 from April, compared with the median estimate of 23 economists surveyed by Bloomberg News of a 20,000 increase.
Euro Strengthens
The euro’s gain against the dollar brought it to a one-week high and the shared currency strengthened 1.1 percent to 110.61 yen.
The 16-nation euro will survive Europe’s debt crisis, the head of China’s national pension fund said, according to a report by Reuters. Dai Xianglong, chairman of the National Council for Social Security Fund, also said China faces the risk of losses on its currency reserves because of growing debt in the U.S., according to the report.
The ECB said it will continue buying state debt and pumping unlimited funds into the banking system as part of a strategy by European policy makers to stop the euro region from breaking apart. The euro extended its advance as Germany’s highest constitutional court rejected an attempt by a lawmaker to preliminarily block the nation from granting guarantees as part of its share in the euro-area rescue fund.
ECB Moves
“The ECB is addressing liquidity issues, there’s news that the German court has rejected efforts to block Germany from participating in the guarantees of the stabilization mechanism,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. “There are some rumors that China may move on its currency and that may also be helping the euro trade higher.”
The dollar weakened against 14 of its 16 most-traded peers and the Dollar Index, which tracks the currency against six major trading partners, lost 0.9 percent to 87.092.
Gold for immediate delivery dropped 0.8 percent to $1,223.30 an ounce, the third consecutive decline. Copper for delivery in three months rose 1.4 percent to $6,427.50 a metric ton on the London Metal Exchange. Crude oil for July delivery rose for a third day, adding 1.8 percent to $75.68 a barrel on the New York Mercantile Exchange.
Spanish bonds rose as the government auctioned three-year notes, with demand higher than at an auction of similar-maturity securities in April. The yield on the 10-year bond fell 10 basis points to 4.47 percent, with the extra yield investors demand to hold the securities instead of benchmark German bunds narrowing 11 basis points to 194. The yield on the 10-year bund was 4 basis points higher at 2.6 percent.
Wednesday, June 9, 2010
How sweet does the South like its tea?
American politics
Democracy in America
Primary elections
How sweet does the South like its tea?
ATLANTA
LIKE a Beckett play, the race in Georgia's 9th congressional district (in the state's northwest corner, home to Dalton, the world's carpet capital) managed to be important, pointless and entertaining. And like an episode of "Law & Order", you'll probably see it again soon. Tom Graves, a tea-party favourite, has defeated Lee Hawkins in a special election to fill the seat of Nathan Deal, who stepped down to focus on his gubernatorial campaign, which looks likely to be a barn-burner, and maybe even a Barnes-burner (sorry). So while the rest of tonight's winners are merely competing for the chance to one day sit in Congress, Mr Graves gets a seat right now. Less than a month ago, Mr Graves came out on top of a seven-member field; 32 days from now, he'll face Mr Hawkins again in an actual primary election. Alas for him, he'll be an incumbent; but because the primary ballots have already been printed, that sordid fact won't appear on them. There is a really weird sidestory to this election. It involves a motel known as the Methamphetamine 6, a sour real estate deal and Georgia's senate majority leader. Better you let the incomparable Jim Galloway tell it.
Another name soon to reappear in election booths is Nikki Haley's, who led the four Republican candidates in South Carolina's gubernatorial primary but fell just short of the 50% needed to avoid a runoff. Ms Haley is also a tea-party darling; Jenny Sanford and Sarah Palin endorsed her as well. The campaign was notable for its viciousness: Ms Haley faced two accusations of extra-marital affairs, both of which she denied, and one of which came from a consultant to Andre Bauer, one of her opponents. Mr Bauer made waves earlier this year when he compared giving free school lunches to poor children to "feeding stray animals" (Mr Bauer received those same lunches when he was a student). Her Democratic opponent will be that South Carolina favourite, Some Guy.
Staying in the state, Bob Inglis, an idiosyncratic yet generally conservative Republican congressman, is headed towards a runoff with Trey Gowdy, an even more conservative tea-party candidate. As this post was published, Mr Inglis trailed Mr Gowdy by over 15 points in the fourth district's Republican primary, and if he loses again in two weeks time he will become the third sitting House member (to go along with two sitting senators) to lose in the primaries.
And in Virginia, establishment Republicans have held the line: NRCC-backed candidates won handily in the state's first, second and fifth districts. In the first, Rob Wittman held off an insurgent challenger; the latter two seats are currently held rather tenuously by freshman Democrats (Glenn Nye and Tom Perrillo).
A pair of intriguing candidate-background notes: Should Ms Haley win election in November she would join Bobby Jindal as the nation's second governor of Indian descent: she was born Nimrata Randhawa; her parents emigrated from Amritsar. And in South Carolina's first-district primary, Tom Scott led the field, though not with a majority; he will face either Tumpy Campbell, son of a former governor, or Paul Thurmond, son of Strom. Should Mr Scott prevail in that runoff and then in November (facing a similar candidate to Ms Haley), he would be the first black Republican in Congress since J.C. Watts stepped down.
Fresh sanctions for Iran
News analysis
Newsbook
Iran's nuclear programme
Fresh sanctions for Iran
NEW YORK
WHEN Turkey and Brazil announced a deal with Iran on its nuclear programme recently, the two countries thought they had made a diplomatic breakthrough. But just a day later Hillary Clinton, America’s secretary of state, revealed that the permanent five members of the Security Council and Germany (the so-called "P5+1") had agreed on the text of a fresh sanctions resolution against Iran. Many thought that Mrs Clinton’s announcement was a slap in the face to Turkey and Brazil. But on June 9th she was proved right when 12 of the 15 members of the Security Council agreed with America and the rest of the six, passing a new sanctions resolution against Iran. Only Turkey and Brazil voted against the sanctions. Lebanon abstained.
Western diplomats they feel that Brazil and Turkey were suckered into agreeing a deal that gave Iran exactly what it wanted: a declaration of its continuing right to enrich uranium, including up to the dangerously-high level of 20% (from which it is not too complicated to enrich up to the level required for a bomb). The Security Council has already demanded in previous resolutions that Iran stop; the Turks and Brazilians thus had no authority to strike a deal telling Iran there was no need to halt enrichment.
This further round of sanctions is unlikely to stop Iran if it is set on making a bomb. The sanctions add a list of heavy weapons that may not be sold to Iran, and forbid Iran to develop ballistic missiles capable of carrying nuclear warheads. They lengthen slightly a list of Iranian officials and institutions on which various travel and financial restrictions are imposed. Perhaps most prominently, the resolution calls on countries to board ships bound for Iran and inspect their cargo, to enforce the resolution (if the country flagging the ships agrees, which is a big if).
What the resolution does not do is take a bite out of Iran's main economic activity, the sale of its oil and gas. China made sure of that. As symbolic a blow as the vote is to Iran, these are not the "crippling" sanctions that the most fretful Iran-watchers have called for.
If these sticks are unlikely to do the trick, what of the carrots? The last annex of the resolution reiterates the P5+1's offer from 2008 to recognise Iran's right to peaceful nuclear power and to co-operate in areas from aviation to trade to security if Iran will suspend enrichment and enter a larger dialogue. The resolution now throws the focus back on Iran's response. Mahmoud Ahmadinejad, Iran's president, is likely to continue his public theatrics against the Western powers and Israel. But the supreme leader, Ali Khamenei, holds a great deal of power in Iran. It remains to be seen whether the new sanctions, combined with some muted sweet-talk from the P5+1 can change his mind.
(Further reading: Did Brazil and Turkey help solve a brewing nuclear crisis, or make it worse?)
The GOP's Western women
American politics
Democracy in America
California's primaries
The GOP's Western women
LOS ANGELES
CALIFORNIA'S Republicans made history on Tuesday. But is that because they nominated, for the first time ever, a woman as candidate for governor and another woman as candidate for the Senate? Or because they allowed money to play a bigger role in these races than in any other comparable election in history?
As predicted, in the gubernatorial primary, Meg Whitman, a billionaire (from her days as boss of eBay, mainly) trounced Steve Poizner, another Silicon Valley tycoon but a mere multi-millionaire, after months of bitter and expensive attack ads in both directions.
In the Senate primary, Carly Fiorina, yet another Silicon Valley multi-millionaire (from her time as boss of HP), outspent her two rivals, Tom Campbell, a former congressman, and Chuck DeVore, a state assemblyman, so crushingly, that the two men in effect conceded the airwaves to her last week.
But oh the toll: Both Ms Whitman and Ms Fiorina had to lurch much further to the right than they ever intended, to avoid being outflanked and to stay with the tea-party Zeitgeist. It remains to be seen whether they can now channel that anger against Jerry Brown, a Democratic former governor who wants another turn in the statehouse, and Barbara Boxer, the state's junior senator. California is a blue state, after all. But at least Ms Whitman and Ms Fiorina will again be much richer than their rivals.
Nothing about the California races, however, can be blamed on or credited to the tea-party movement. (Ms Fiorina was endorsed by Sarah Palin, but the natural tea-party candidate would have been Mr DeVore.)
Not so in Nevada, where Sharron Angle, the tea-party candidate, upstaged Sue Lowden for the Republican nomination for Senate. (Ms Lowden, you may remember, suggested bartering with your doctor as a way to pay for health care.) Ms Angle will now go after Harry Reid, the Senate majority leader and the tea-party movement's single biggest target this year.
Britain and Europe
Britain and Europe
Despite its current sense of Schadenfreude, Britain has much to fear—politically and economically—from the euro crisis
Cameron and Sarkozy: a bit of a bond?WIDE-EYED Labour politicians had their loftier illusions beaten out of them by 13 tough years in power. A boom must end eventually, they learned the hard way, and spending alone cannot build Jerusalem. There was a loss of innocence about Europe, too. It was once modish to regard the public’s anti-Europeanism as a flimsy thing, propped up by tabloid jingoism and easily dispelled by any government willing to make the case for the European Union (EU). Yet under Tony Blair, their most avowedly Europhile prime minister, Britons actually grew more hostile.
Still, despite the euro crisis, membership of the world’s largest economic bloc is a no-brainer for the country’s political and business elites—even those who smugly brandish the currency’s woes as vindication of Britain’s decision to shun the euro. Neither is the government the Eurosceptic monolith of continental dread. The Liberal Democrat chunk of the coalition (and in particular Nick Clegg, the deputy prime minister and a former MEP) should take the edge off any Conservative nativism.
The Tories themselves can be misunderstood. True, as party leader a decade ago William Hague made opposition to the euro his leitmotif. But as foreign secretary now, he takes an essentially quietist position on the EU. A government facing years of austerity at home wants no distracting battles abroad. David Cameron made his first prime-ministerial visit abroad to Nicolas Sarkozy (pictured above right) in France. He has chosen as Europe minister David Lidington, a man as immovably pragmatic as a former Foreign Office adviser should be.
Doom-mongers are right about one thing, however. Even if the government is not agitating for it, there is scope for some sort of showdown with Europe in the euro crisis. Britain has not paid into a €440 billion (£370 billion, or $540 billion) fund set up by the eurozone countries to support their currency. While the crisis primarily afflicts Greece, where French and German banks have most at stake, this abstention will be wearily tolerated on the continent.
But if Spain dips into the pot, Britain may be under pressure to contribute. After all, its banks are heavily exposed to Spanish debt. If it refuses, the coalition could split, and the patience of other EU members with British recalcitrance would be severely tested.
And this is just the immediate danger. In the longer run, a firm proposal may emerge on the continent to back the single currency with some kind of fiscal co-ordination across the EU. Once upon a time, Britain would have opposed this outright. That remains its position currently. But the possibility of at least the 16 eurozone countries pressing ahead regardless, with the tacit consent of a British prime minister unwilling to blow political capital on stopping them, cannot be wholly discounted.
Britain used to fear languishing on the EU periphery while a core of true believers raced towards ever-closer union. For Suez was not the only trauma to have shaped British foreign-policy thinking since the war. Missing out on the first wave of European integration was another “never again” moment. Since then, the Foreign Office in particular has worried that staying out of integrationist projects is a cannier tactic than it is a strategy. Britain would eventually have to join these projects, the diplomats thought, which would by then have been shaped irrevocably by others.
Gradually, however, and without anyone ever expounding it as a doctrine, Europe à la carte has emerged as Britain’s vision for the EU. The approach seems to offer the country what it wants without obstructing others. It also reflects reality: some EU members use the single currency, the rest retain their own; some belong to the Schengen agreement on border controls, others have opted out. And far from isolating Britain diplomatically, the vision is shared by another big EU player and aspiring leader of any core: France.
And herein lies the hazard for Britain. It is hard to quarantine the policy decisions of a core from those of a periphery. The French are usually more skilled players of Brussels hardball than the British, despite excitable and largely forgotten talk of an “Anglo-Saxon takeover” of the EU a few years ago. They could use the core, which would be decidedly suspicious of the market without the more liberal British and eastern Europeans in on deliberations, to shape the European agenda more broadly.
The European Council, which includes all 27 members, is now the EU’s most powerful body. A notionally two-tier Europe could see its meetings preceded by those of a 16-strong inner council that would compete for primacy, perhaps successfully. Something like this already exists in economic policy-making. The Ecofin meeting of the 27 finance ministers is, at times, essentially limited to rubber-stamping agreements reached in the smaller eurozone conference that takes place a day earlier.
The best, and perhaps likeliest, scenario is that nothing as stark as these dilemmas will face Britain; that Spain escapes the need for outside help while the EU fudges its response to the currency crisis, allowing Mr Cameron to continue muddling through with his vague and piecemeal Europe policy. Coherence can be overrated, especially when set against the need to keep together two parties with radically different takes on Europe.
Even if events unfold so benignly, however, Britain’s discourse on the euro crisis remains alarming. At both popular and political level, it makes two mistakes. The first is to treat the crisis as though it were almost exclusively a problem for the euro zone.
The second error is to assume that the crisis has been a lasting blow for European federalists. The reality could be nearer the opposite. For ardent integrationists, the strategy has always been to make grand European projects a reality as quickly as possible, and then solve any problems that result with more Europe. EU enlargement, for example, was pushed aggressively. Soon afterwards, the case for replacing national vetoes with majority voting was made by federalists, who claimed, often wrongly, that the new members had rendered EU institutions unwieldy.
Something similar may happen with the euro. To survive, the currency may come to acquire a level of fiscal-policy co-ordination that will appal the British. Vigilant Eurosceptics are usually keen to see conniving genius in European federalists. For once, the British may have underestimated their determination never to let a crisis go to waste.
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