European leaders clash with new Greek government over bailouts. The Islamic State extends its territorial reach. New U.S. housing data due out. Indian and Sri Lankan leaders meet. A labor dispute leads to delays at U.S. ports. All in this week’s GRI Weekly Risk Outlook.
1. Continued Uncertainty with Greek Bailout Program
Monday marked a Eurogroup meeting that many analysts believed would lead to a compromise deal between the new Greek government and its creditors. Instead, the opposite occurred as European leaders gave Greece an ultimatum to agree to continue with the current bailout program by this Friday or face potential consequences. Greek leaders responded angrily and reiterated that the current bailout agreement was doing more harm than good. These developments were compounded by a JPMorgan Chase report highlighting continued deposit withdrawals from Greek banks. Investors, should carefully monitor the situation this week as markets are likely to be volatile and react quickly to new reports from either side of the negotiations.
2. IS Fight Expands in Aftermath of Mass Beheading
The Islamic State recorded a video of the mass beheading of 21 Egyptian christians carried out in Libyan territory. This development is notable both for its extreme brutality and because it marks a geographic expansion of IS, which had previously been largely contained to Syria and Iraq. Egypt and Libyan forces responded with a series of airstrikes against IS targets in Libya. Libya is in a highly fragile state and its government has struggled to consolidate power after the ousting of Muammar Gaddafi. A further deterioration in the security situation in Libya could put additional pressure on the countries oil and gas exports, which have already been sharply reduced.
3. New U.S. Housing Data
On Wednesday, the Census Bureau of the Department of Commerce will release the latest round of data on U.S. housing starts. This marks the number of new units of housing that came under construction in the proceeding month. The data provides critical insight into a key section of the U.S. economy, as the housing market has implications for other sectors ranging from the labor market to structured finance. Investors should be sure to look at the regional data as volatility can occasionally be explained by localized weather events rather than an actual downturn in demand.
4. Indian and Sri Lankan Leaders Meet
On Monday, the new Indian President met with the new Sri Lankan President. The meeting culminated with the signing of a new nuclear safety agreement between the two countries, which calls for India to help Sri Lanka build out its nuclear energy capacity. The meeting could mark a turning point between the two countries that have often been at odds, but are both under new leadership after recent elections. The meeting is also notable because Sri Lankan President Sirisena chose India as the destination of his first foreign visit rather than China. The two countries have been fiercely competing for influence in Sri Lanka.
5. Labor dispute causes delays at U.S. ports
Workers at docks spanning the west coast of the United States have refused to unload ships for 6 out of the last 10 days in protest over an ongoing contract dispute. The delays are starting to become a significant business problem, with at some least some ocean carriers choosing to reroute their shipments. With negotiations at a standstill the White House has dispatched the Secretary of Labor to attempt to forge a consensus, but it remains unclear when a new deal might be reached. A long-lasting strike could have serious implications for the U.S. economy, particularly for businesses that depend on imports from the Pacific.
The GRI Weekly Risk Outlook (WRO) provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, the WRO presents a series of potential upside/downside risks, shedding light on how political decisions impact economic outcomes.