News That Matters
Mariano Rajoy, Spain’s prime minister, has called for centralised control of national budgets in the eurozone in an unexpected gesture to mollify Brussels and Berlin on the eve of what is expected to be a crucial week for Madrid. Spain’s Treasury plans to auction sovereign bonds on Thursday, even though analysts say the country may soon need an international bailout and yields on its debt have risen close to the 7 per cent level that heralded previous rescues for Greece, Ireland and Portugal.

Central banks in emerging markets have been dumping euros to shore up their own currencies, contributing to the euro’s drastic slide in recent weeks, according to traders. The euro lost nearly 7 per cent against the US dollar in May its biggest monthly fall since September as fears over a Greek exit from the single currency grew and investors sold the government debt of peripheral European nations. Currency traders said central banks were among the biggest sellers of the euro reversing their normal pattern of buying the single currency when it weakens to diversify their stockpiles of foreign exchange reserves.

The group of billionaire oligarchs who are BP’s partners in TNK-BP have threatened to thwart any attempt by the UK oil group to sell its stake in the joint venture, creating fresh risks for chief executive Bob Dudley as he moves to execute one of the biggest divestments in the UK energy group’s history.  The partners, known as AAR, say their shareholder agreement prevents BP giving out any confidential information about TNK-BP to any third party without AAR’s consent including details of the shareholder agreement itself.

Global manufacturing is on the cusp of a period of radical change but companies in the emerging rather than the developed world will lead the wave of innovation, according to research published on Monday. Advances in fields such as nanotechnology and composite materials are already being incorporated into manufacturing techniques, with 72 per cent of respondents to KPMG’s Global Manufacturing Outlook survey saying that the “next wave of transformational innovation” is either under way or will begin within two years.

Yum! Brands, the operator of KFC, Pizza Hut and Taco Bell, is looking to export its thriving Chinese business model to India, as the US fast-food group steps up its battle with McDonald’s overseas. Managers from the company’s emerging markets teams will visit China on Wednesday to learn how the company has managed to grow so quickly there and how to apply those strategies to India and other developing countries.
Asian stocks slumped Monday with Japan's Topix Index tumbling to its lowest since 1983 after poor unemployment data in the U.S. cast further doubts over the health of the global economy. The flight to safety pushed Hong Kong's index 2.3% down, erasing all of its gains so far this year, while Japan's Nikkei fell 2%, and earlier hit its lowest in 2012. The Topix, a broader measure of the Japanese equity market activity, fell 2%.

Pressure is growing on policy makers around the world to take steps to bolster their economies as the U.S. and China show fresh signs of slowing and the fallout from Europe's debt crisis spreads. Investors across financial markets have reacted with increasing alarm at the drumbeat of bad news from all corners of the world, with economies sputtering just as troubles in Europe flare anew. Concerns that Greece may be forced to exit the euro zone have joined worries that Spain may also collapse under the pressure of a high deficit and fragile banking system.

Germany is sending strong signals that it would eventually be willing to lift its objections to ideas such as common euro-zone bonds or mutual support for European banks if other European governments were to agree to transfer further powers to Europe. If embraced, the move would deepen in fundamental ways Europe's political and fiscal union and represent one of the boldest steps taken by the bloc since the euro was launched. Germany has never before been willing to discuss the conditions it believes necessary to move toward assuming common risks within the euro zone. Now, although the end may be a long way off, it appears willing to discuss those conditions.

The European Commission is set to propose legislation that would give national authorities stepped-up powers to intervene when a bank is on the verge of collapse, including by forcing out management and imposing losses on unsecured bondholders. At the heart of the proposal, to be presented on Wednesday, is an effort to give European Union members the power to intervene before a bank actually collapses and to shift the cost of dealing with a bank failure away from taxpayers onto investors.

At a time when the Federal Reserve looks persistently polarized, Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, has positioned herself as a consensus seeker who tends to find herself right in the middle of the pack. She isn't running with the crowd at the Fed that wants early interest-rate increases to stave off higher inflation. Nor is she running with those arguing for more action to drive down unemployment. For now, at least, Ms. Pianalto wants to keep Fed policy where it is, planning to keep short-term interest rates near zero through late 2014, and be prepared

Cyprus looks increasingly set to become the fourth euro-zone country to seek financial aid under Europe's temporary bailout fund, as early as this month, as it scrambles to protect its banking system from Greece's widening financial crisis that is threatening to engulf its tiny island neighbor. The fallout from the Athens crisis already has forced Cyprus's second biggest bank to seek government support for a planned multibillion euro recapitalization, something that will push the island's public finances deep into the red and cause it to miss this year's budget targets.

Chinese companies have wowed the world with superhighways, high-speed trains and snazzy airports, all built seemingly overnight. Yet a modest highway through Polish potato fields proved to be too much for one of China's biggest builders. The A2 highway between Warsaw and Berlin was supposed to be an opportunity for Chinese construction to shine on a European stage after years of megaprojects at home and in the developing world. Poland badly wanted the project completed before the European soccer championships starting June 8, which Poland is hosting for the first time with Ukraine. Instead, a key 30-mile stretch of the road fell victim to poor planning, strict regulations, higher-than-expected costs andin small part, frogs.
Australian inflation was benign in May, clearing the way for further rate cuts by the Reserve Bank of Australia as early as this week, a private sector survey Monday shows. The TD Securities-Melbourne Institute Monthly Inflation Gauge was unchanged in May at 131.54, after a 0.3% rise in April. Over the year to May, the gauge was 1.8% higher, well below levels that would worry Australia's central bank which has an inflation target of 2%-3%. The RBA board will unveil its latest rates decision Tuesday. TD Securities' head of Asia-Pacific research, Annette Beacher, said it is a "very close call" whether the central bank will hold rates steady at 3.75% or cut further.

China’s services sector expanded at its weakest pace in more than a year, according to an official survey released Sunday, dampening hopes it could take up some of the slack from slowing manufacturing industries. China’s non-manufacturing Purchasing Manager’s Index for May fell to 55.2 on a 100-point scale, easing from 56.1 in April, and marking its lowest reading since the seasonally adjusted figures for the PMI debuted in March 2011.
Russian President Vladimir Putin's stance on Syria and appetite for closer ties with the European Union, Moscow's largest trading partner, will be in the spotlight on Monday at his first summit with the EU since he returned to the Kremlin last month. European diplomats called the meeting at a lavish estate on the outskirts of Putin's hometown of St. Petersburg a chance to get reacquainted with the Russian leader, in power for 12 years and now formally in charge of foreign policy again

When Jean-Claude Trichet called last June for the creation of a European finance ministry with power over national budgets, the idea seemed fanciful, a distant dream that would take years or even decades to realize, if it ever came to be. One year later, with the euro zone's debt crisis threatening to tear the bloc apart, Germany is pushing its partners for precisely the kind of giant leap forward in fiscal integration that the now-departed European Central Bank president had in mind.
German Chancellor Angela Merkel hardened her opposition to joint debt sharing in the euro region as President Barack Obama singled out Europe’s leaders for not doing enough to arrest the financial crisis. With Europe’s debt crisis cited last week for canceled IPOs, weaker-than-expected Chinese manufacturing figures and a rise in the U.S. jobless rate, Merkel rejected joint debt issuance in the 17-nation euro area as a solution, saying “under no circumstances” would she agree to Germany-backed euro bonds.

The European Union is targeting July 9 as the start date for its permanent euro-area rescue fund, the 500 billion-euro ($620 billion) European Stability Mechanism, an EU official said. Parliaments across the 17-nation currency union must ratify the fund before it becomes available to counter the financial crisis spawned in Greece. Until it receives 90 percent of its expected capital allotment, officials must turn to the temporary European Financial Stability Facility, a 440 billion-euro fund with 240 billion euros available.

President Barack Obama told campaign donors in Chicago and Minnesota that Europe’s sovereign debt crisis is largely to blame for the slowest month of U.S. employment growth in a year, seeking to counter an issue weighing on his re-election bid. “We’re not where we need to be; we’re not there yet; you saw that in today’s jobs report,” the president said at a Chicago fundraiser, the fourth of six yesterday in the Midwest. “A lot of that’s attributable to Europe and the cloud that’s coming over from the Atlantic. The whole world economy has been weakened by it, and it’s having an impact on us.”
Despite sectarian bombings and political gridlock, Iraq’s crude-oil production is soaring, providing a singular bright spot for the nation’s future and relief for global oil markets as the West tightens sanctions on Iranian exports.  The increased flow and vital port improvements have produced a 20-percent jump in exports this year to nearly 2.5 million barrels of oil a day, making Iraq one of the premier producers in OPEC for the first time in decades.

Australia’s resources-led economy maybe under pressure from waning demand in China, but it finds itself in a sweet spot to cash in on the growing appetite in Asia for another commodity - natural gas. Australia, which is currently the fourth-largest exporter of Liquefied Natural Gas (LNG) in the world after Qatar, Malaysia and Indonesia is expected to take the number one spot by the end of the decade as more capacity comes online over the next couple of years.
Days before Bank of America shareholders approved the bank’s $50 billion purchase of Merrill Lynch in December 2008, top bank executives were advised that losses at the investment firm would most likely hammer the combined companies’ earnings in the years to come. But shareholders were not told about the looming losses, which would prompt a second taxpayer bailout of $20 billion, leaving them instead to rely on rosier projections from the bank that the deal would make money relatively soon after it was completed.
Germany has signaled that it may be open to euro-zone bonds or further support for the region's banking sector, The Wall Street Journal reported late Sunday. Any lifting of Germany's objections to such moves would depend on other countries agreeing to transfer more power to Europe, the report stated, citing a unnamed German official. "The more that other member states get involved with this development and are prepared to give up sovereign rights to get European institutions more involved, the more we will be prepared to play an active role in developing things like a banking union," the official told the newspaper.
employers added just 69,000 jobs in May--the fewest in a year-- as payrolls gains were disappointingly tepid for a third month, the Labor Department said. The nation's unemployment rate rose to 8.2% from 8.1% as 642,000 Americans surged into the labor force, many of whom could not find jobs. The yield on the benchmark on the 10-year Treasury note plunged to 1.46%, the lowest on record, suggesting investors are flocking to the safety of U.S. government bonds. The price of gold, which was trading at about $1,550 an ounce before the report, shot up $30. For much of the past three years, investors have seen gold as a safe place to put their money during turbulent economic times.
Germany has signaled that it may be open to euro-zone bonds or further support for the region's banking sector, The Wall Street Journal reported late Sunday. Any lifting of Germany's objections to such moves would depend on other countries agreeing to transfer more power to Europe, the report stated, citing a unnamed German official. "The more that other member states get involved with this development and are prepared to give up sovereign rights to get European institutions more involved, the more we will be prepared to play an active role in developing things like a banking union," the official told the newspaper.
Unemployment in the eurozone was 11% in April, unchanged from March, but still the highest since records began in 1995. Spain had the highest rate in the eurozone at 24.3%, while Austria had the lowest at 3.9%, according to the official figures from Eurostat. A seasonally adjusted total of 17.4 million people were unemployed in the eurozone, up from 17.3 million. In the 27-nation European Union, the jobless rate was 10.3%, up from 10.2%.

The rate of contraction in Spain's manufacturing sector was worse than that of Greece in May, according to a business survey.  Markit's eurozone manufacturing purchasing managers' index for the whole eurozone dropped to 45.1 from 45.9 in April. Any figure below 50 suggests a contraction in the sector.  Spain's figure of 42.0 was the worst in the bloc, dropping below Greece's level of 43.1. It was Spain's fastest rate of decline in its manufacturing sector since May 2009.
Bank of England policymakers may opt to inject a further £50bn of stimulus into Britain’s ailing economy this week, according to leading economists.  Worsening economic prospects could force the hand of the Bank’s Monetary Policy Committee, which last month voted to pause its purchase of government bonds after pumping £325bn into the market through quantitative easing. Since then however, the data have painted a picture of a worsening, not improving outlook for the British economy, and there is no sign of a solution to the eurozone crisis.

The Bank for International Settlements (BIS) said cross-border loans fell by $799bn (£520bn) in the fourth quarter of 2011, led by a broad retreat from Italy, Spain and the eurozone periphery. Lending to banks in the eurozone fell $364bn or 5.9pc, with drastic reductions of 9.8pc in Italy and 8.7pc in Spain. The BIS's quarterly report said the decline in lending was "largely driven by banks headquatered in the euro area facing pressures to reduce their leverage".  Banks must raise their core tier one capital ratios to 9pc by the end of this month or face the risk of partial nationalisation. The global Basel III rules are also pressuring banks to retrench.

Spain is in 'total emergency’, the EU in total denial. I’ve never actually heard the term “total emergency” before, at least not in the context of global economics. It sounds like the title of a disaster movie. When it is uttered in sober tones by the elder statesman of an advanced democracy to describe his country’s financial condition, the effect is rather startling. The man who delivered this apocalyptic judgment, former Spanish prime minister Felipe González, being a socialist, might be expected to detest austerity programmes that require cuts to government spending. But there seemed to be few disinterested observers of Spain’s economy prepared to quibble with his assessment.
Worried businesses rushing to protect themselves against the potentially cataclysmic collapse of the euro helped trigger a surprise rush to hire in the Square Mile last month, figures showed today. The City jobs market had its the best month since August last year as it created 4,320 posts in May a 25 per cent rise on the previous month, says financial services recruiter Astbury Marsden. The biggest surge in the jobs market is coming in foreign exchange and interest rate swaps on worries over Spain's struggling banking system as well as the potential impact of a sudden pull-out of the single currency by Greece. Most of London's biggest investment banks, including Barclays Capital and Royal Bank of Scotland, are thought to be adding staff.
The national talent for highlighting the silver cloud's dark lining is on display in the fevered calls for the Reserve Bank to cut its cash rate by 50 points tomorrow. Apparently Australia is in dire straits and urgently needs greater monetary stimulus. Unemployment is skyrocketing, our key trading partners are down the gurgler, there's no investment to speak of, the record low yield on 10-year commonwealth bonds is a forecast of Armageddon and the government and opposition are both run by politicians. Well, one out of five isn't a bad score.

The latest bout of economic figures confirm the economy is limping. From the Australian Bureau of Statistics we have news that business inventories, adjusted for price changes and and seasonal patterns, expanded at a slower pace in the March quarter. As a result, the rise in gross domestic product (GDP) to be reported on Wednesday will be 0.2 percentage points slower than it would have been if inventory accumulation had continued unabated. Other indicators of spending already available - retail trade, foreign trade, building and capital spending - suggest a positive, albeit not very strong, rise in GDP.
Singapore leads the world in terms of the proportion of households classed as millionaires after the ranks of the wealth swelled again last year. A new study found that households with investable assets of US$1 million (S$1.24 million) or more jumped 14 per cent more to 188,000 last year. That means 17.1 per cent of households - more than one in six - are millionaires. The findings come from management consultancy Boston Consulting Group (BCG) in its Global Wealth Report 2012.

The heads of four key European institutions are hammering out a 'master plan' to lead the euro zone out of its crippling crisis, a German Sunday newspaper reported. European Central Bank chief Mario Draghi, European Union president Herman Van Rompuy, EU Commission head Jose Manuel Barroso and Eurogroup chairman Jean-Claude Juncker were tasked last month with working up a reforms roadmap, Welt am Sonntag said. The plan is to be presented at an EU summit in late June, the report said.
China`s relevant agencies like the central bank, China Banking Regulatory Commission (CBRC) and the Ministry of Finance, dispatched a circular concerning further expanding the credit asset-backed securitization pilots, some anonymous told China Securities Journal recently. The relevant agencies demand the potential issuers to carry out more credit asset-backed securitization while considering the returning and orientation. The credit assets should be of stable foreseeable cash flow in the coming days, and the projects should act in close coordination with the national industry policies.

Housing prices in 100 surveyed Chinese cities fell 0.31 percent in May from April, marking a ninth consecutive decline, data from the China Index Academy showed. The average housing price in these cities stood at 8,684 yuan (1,372 U.S. dollars) per square meter last month, down 1.53 percent year on year, the data showed. The figures indicated that home prices in the world's second-largest economy remained the downward trend, the Xinhua-run Shanghai Securities Journal reported Saturday. Meanwhile, the average home price in the country's top ten cities including Beijing and Shanghai reached 15,314 yuan per square meter last month, down 0.5 percent from April, the data showed. However, new home transactions in the ten cities surged 22.6 percent during the first three weeks in May from a month ago, the data showed.
The statistics show an economy growing at its slowest pace in any quarter over the past three years. It clocked just 5.3 per cent in the fourth quarter of last year.(January-March, 2012). This in turn pulled down the estimated annual growth rate to 6.5 per cent last year: even as recently as February, official estimates indicated a growth rate of 6.9 per cent. The economy grew 8.4 per cent during 2010-1 1 on top of an extremely impressive 9.2 per cent increase in the fourth quarter. The slowdown is visible across all sectors. Even services, which have posted robust growth rates in the past, grew just 7.9 per cent.

Nissan Motor India on Friday reported 98 per cent year-on-year rise in sales at 3,138 units in May as against 1,588 units sold in the year ago period. The sales growth continued to be driven by two of the flagship models the Sunny sedan and the Micra compact premium hatchback, a company release said. The Nissan Sunny, launched in September last year and produced at its Chennai manufacturing facility, has become a major contributor to total sales over the past few months, it said.
South Korea's foreign exchange reserves shrank in May from a record high reached in the previous month as a weaker euro and a softer British pound reduced the conversion value of non-dollar assets, the central bank said Monday. The country's foreign reserves reached US$310.87 billion at the end of last month, down $5.97 billion from April, according to the Bank of Korea (BOK). In April, the country's foreign reserves reached an all-time-high of $316.84 billion. Asia's fourth-largest economy first saw its foreign reserves surpass the $300 billion mark in April 2011 amid sustained inflows of foreign capital and robust exports.
The Central Bank has begun large-scale intervention in currency markets as steadily slumping oil prices stoked the plunge of the ruble to levels not seen in three years. The currency closed at 33.68 per dollar Friday, down 0.6 percent. That exchange rate was the lowest since 2009, and Friday was the eighth consecutive day the ruble fell. “We are conducting quite intensive intervention, and we are selling currency,” said Sergei Ignatyev, head of the Central Bank, RIA-Novosti reported.  The ruble’s decline in recent days has pushed it to the upper limit of the Central Bank’s floating corridor, 32.15 to 38.15 against the euro-dollar currency basket. Proximity to the 38.15 point was the reason behind the decision to act, he said.  The Western benchmark, Brent crude oil, dropped below the $100 a barrel mark Friday for the first time in seven months. Urals crude, the Russian benchmark, was also down.
Zimbabwe’s property market is largely given a wide berth by South African property groups, but some players in the industry reckon the time is ripe to start exploiting opportunities there. The opportunities lie in the fact that for decades precious few new commercial properties have been brought to the market and no new retail properties. The country will soon have a new property fund with assets worth $46m.  The property portfolio of the new Ascendant Property Fund will comprise the assets of three listed companies in Zimbabwe and be managed by South African property services group JHI.
Indian Foreign Minister S M Krishna made it clear on Thursday that New Delhi will not bow to U.S. pressure to reduce its oil imports from Iran and called Iran a "key country" for meeting India’s growing energy needs. Krishna also said India feels no obligation to observe United States’ unilateral sanctions on Iran, insisting that India will not cut its “legitimate” trade with Tehran. The U.S. and its European allies have imposed sanctions against Iran outside the UN resolutions for its nuclear program which Tehran insists is only meant for peaceful purposes.  "As far as other sanctions, those decided either unilaterally or regionally, we are aware of such measures. In a globalised world, such actions tend to impact on the market and our commercial entities take these into account. Such measures should not impact legitimate trade interests," Krishna told reporters in a join press conference with Iranian Foreign Minister Ali Akbar Salehi in New Delhi.
A sharp fall is expected in the growth of industrial sectors such as textile machinery, cement and fertiliser in the April-June quarter owing to the rupee’s depreciation, high inflation and fiscal deficit, a study said on Sunday. “The sector-wise analysis on performance of the industry sector clearly indicated that almost all sectors on an average expect decelerating production growth during the first quarter of 2012-13,” said a survey by the Confederation of Indian Industry (CII)-Ascon. “While there are fewer sectors in the excellent and high category for all segments, most of the sectors’ output growth is concentrated in low category,” it added. The survey was conducted across 114 sectors having more than 35,000 companies.
These figures are staggering; the advanced nations typically have between three and ten times as much total debt as they have economic activity. In the United Kingdom the worst example if one year’s economic activity was devoted entirely to paying down debt (impossible people need to eat and drink and pay rent, and of course the United Kingdom continues to add debt) it would take ten years for the debt to be wiped clean. But the real question is why? Why are both debtors and creditors willing to build a status quo of massive unprecedented debt?



No comments yet! Be the first to add yours.