News That Matters

Italy production faaaals...

Asian markets fell Friday following a surprise rate cut in China, as investors were disappointed by the Federal Reserve’s failure to commit to further easing. China surprised markets late Thursday by cutting interest rates for the first time since December 2008. The 0.25-percentage-point reduction brings the benchmark lending rate to 6.31% and the benchmark deposit rate to 3.25%. There was also an element of liberalization, as Chinese banks are now allowed to lend at a discount of up to 20% below the benchmark, compared with a previous floor of 10%. Hong Kong’s Hang Seng Index was down 0.7%, the China Shanghai Composite dropped 0.3%, and Australia’s S&P ASX 200 dropped 1.2%. South Korea’s Kospi fell 0.5% and Singapore’s Straits Times Index was 0.6% lower.

Private-equity firms operating in India are facing headwinds. In heady years like 2005 and 2010, investors such as Warburg Pincus and Citi Venture Capital International generated high returns in India, benefiting from the country’s economic growth of more than 8% and its frothy stock market.  But many of the private-equity funds that hoped to duplicate those successes are now struggling to raise fresh capital as India faces concerns about its fiscal and current-account deficits, slowing growth and a clouded outlook for stocks. Returns in the sector have been disappointing in recent years, many analysts and investors say, as stock-market

The head of China’s giant sovereign-wealth fund sees mounting risks of a breakup of the euro zone, and says the fund has scaled back its holdings of stocks and bonds across the continent. The comments by Lou Jiwei, chairman of China Investment Corp., are among the most bearish pronouncements yet on Europe by a senior Chinese official. They reflect growing dismay in Beijing at how European leaders are handling the escalating crisis in China’s largest export market, and anxiety over the potential for global contagion


Singapore will bar about 15,000 more citizens and permanent residents, including low-income and unemployed people, from entering its two casinos as part of efforts to contain the social impact of casino gambling in the city-state. Starting July 1, about 12,000 residentsincluding the unemployedwho are receiving short- to medium-term financial aid from the government will be barred from the casinos, the Ministry of Community Development, Youth and Sports said late Thursday in a statement. The government will also bar, starting Aug. 1, about 3,000 public-housing tenants who are in arrears of six or more months on their subsidized rental payments, the ministry added.

Authorities in Europe’s emerging economies are girding for the possibility of serious market turmoil in the event of a Greek exit from the euro zone, which could drive down currencies, tighten credit and slam the brakes on export-driven growth. Government officials and central bankers in the European Union’s eastern wing say they are in better shape to weather any storm than they were four years ago when the collapse of U.S. investment bank Lehman Brothers sparked a global financial crisis. But they are still vulnerable. Investors fearful that Greek elections next week will spark Athens’s disorderly departure from the euro have already been selling Polish, Hungarian, Romanian and Czech assets, hitting local currencies and stock markets.

European interior ministers moved to give states that are part of their passport-free travel zone more leeway to reinstate border controls, including an emergency mechanism that could allow identity checks for up to two years. The so-called Schengen area includes 26 European countries that no longer control people crossing from one of these states to another. An influx of refugees into Italy following unrest in the Arab Spring countries last year, as well as Greece’s difficulties controlling its border with Turkey, has triggered demands from several states to temporarily reintroduce ID checks.

As sluggish global growth prompts central banks to spring into action once again, the greenback is emerging as the best of a bad bunch of currencies. Even recent speculation that the Federal Reserve may flood the market with more dollars to combat continued weakness in the U.S. economy has done little to scare investors away from the currency.

It is a tale of two cities: Paris and Madrid. Or at least of the government bond markets of Spain and France. In a bond auction on Thursday, France sold €1.6 billion ($2.01 billion) of bonds maturing in April 2060 and paid investors an average 3.27% interest rate. On the same day, Spain managed to shift just €611 million of 10-year bondsout of a total sale that barely surpassed €2 billionand paid more than 6% for the privilege. What explains the difference? How can France sell 50-year paper and, despite an improvement in sentiment in recent days, neighboring Spain has to pay nearly double to sell bonds that mature much earlier?

Federal Reserve Chairman Ben Bernanke cited significant risks to the U.S. economic recovery but stopped short of signaling Fed action to combat them, during testimony on Capitol Hill Thursday. When asked whether the Fed is planning to take more measures to boost growth, Mr. Bernanke said he and his colleagues “are still working” on that question ahead of their June 19-20 meeting. The main question they need to answer, he said, is whether the economy will be strong enough to make material progress on bringing down unemployment. “We have a number of different options” for action if they decide to

The Federal Reserve shocked bankers Thursday by approving a proposal that would force even the smallest lenders to comply with the elaborate international bank-capital standards known as Basel III. The draft requirements would apply to all 7,307 U.S. banks, according to a proposal circulated by the Fed. Many bankers had expected regulators to exempt some small lenders from the new rules, which are aimed at shoring up the biggest global banks whose troubles fueled the financial crisis. While the core Basel III rules will apply to all banks, other aspects of the new regime single out the biggest, most complex
Japan’s economy expanded at a faster pace in the January to March period than estimated earlier, revised figures by the government showed Friday. The country’s gross domestic product expanded at an annualized rate of 4.7% in the quarter, or 1.2% from the three months ended Dec. 3, according to data released by the Cabinet Office. The data marked an improvement over the 4.1% annualized growth, or a 1% quarter-on-quarter expansion reported earlier, with the higher growth resulting from a smaller rate of decline in private investments and a greater increase in private consumption.

Australia’s seasonally-adjusted trade deficit totaled 203 million Australian dollars ($201.9 million) in April, the Australian Bureau of Statistic reported Friday. That was down from a deficit of A$1.28 billion recorded in March. April exports rose 3% to A$26.1 billion, compared to March, while imports fell 1% to A$26.29 billion. Economists had expected a trade deficit of A$900 million, according to figures compiled by Dow Jones Newswires.
Outgoing World Bank chief Robert Zoellick on Thursday called for a new partnership in the Americas, criticizing the United States for insufficient leadership on trade and saying that Venezuelan President Hugo Chavez’s political influence is waning. In a politically pointed speech, which is unusual for the head of the global development institution, Zoellick urged strengthened ties between North and South America through more cooperation in trade, energy and security. Chavez, a long-time antagonist of the United States, is embarking on his most challenging re-election campaign while battling cancer, with an opposition united behind his rival Henrique Capriles.
Mortgage rates in the U.S. dropped to record lows for a sixth straight week as concerns over slowing job growth pushed investors into the safety ofgovernment bonds that guide interest costs. The average rate for a 30-year mortgage dropped to 3.67 percent in the week ended today from 3.75 percent,Freddie Mac said in a statement. It was the lowest in the McLean, Virginia- based mortgage-finance company’s records dating to 1971. The average 15-year rate declined to 2.94 percent, also a record, from 2.97 percent.

Japan posted a smaller-than-expected current-account surplus in April, highlighting weak global demand that is depressing exports. The excess in the widest measure of the nation’s trade was 333.8 billion yen ($4.2 billion), the Ministry of Finance said in Tokyo today. The median estimate of 22 economists surveyed by Bloomberg News was for a surplus of 440.8 billion yen. Gross domestic product in the first quarter grew an annualized 4.7 percent, a separate report showed.

Oil fell a second day in New York, heading for the longest weekly losing streak in more than 13 years, on speculation the economies of the U.S. and China, the world’s biggest crude consumers, will slow and curb fuel demand. Futures dropped as much as 2.6 percent. Federal Reserve officials need to assess the risk from Europe’s debt crisis and U.S. budget cuts before deciding on stimulus measures, Fed Chairman Ben S. Bernanke said to the Joint Economic Committee yesterday. China reports economic data tomorrow after cutting interest rates for the first time since 2008. Global crude supply is sufficient, Youcef Yousfi, Algeria’s energy minister, said before OPEC meets next week in Vienna.

Billionaire Kenneth Fisher, who bought Chinese shares as they rallied from a 2-1/2 year low in the fourth quarter, said the stocks will beat global equities as the government takes further steps to boost growth. China will loosen monetary policy for another 12 to 18 months after announcing the first interest-rate cut since 2008 yesterday, Fisher, chief executive officer of Fisher Investments, said in a phone interview yesterday. China represents about 6 percent of the Woodside, California-based firm’s holdings, a bigger proportion than in benchmark indexes, Fisher said. Morgan Stanley said it’s now “fully invested’ in its emerging-market asset allocation after the rate cut.

The Bank of Korea held off from altering borrowing costs for a 12th straight month as easing inflation gave policy makers room to wait and see how Europe’s debt crisis and China’s slowdown affect the economy. Governor Kim Choong Soo and his board kept the benchmark seven-day repurchase rateunchanged at 3.25 percent as predicted by all 15 economists surveyed by Bloomberg News. The decision was unanimous and the board didn’t discuss a possible increase or cut, Kim told reporters after the meeting.
Global oil markets are better prepared for possible disruptions to Iranian exports than they were last year when civil war in Libya displaced just under 2 percent of world supply, Maria van der Hoeven, the Executive Director of the International Energy Agency, told CNBC. “The market was not prepared and the suppliers were not prepared” when the conflict that ousted Muammar Qaddafi from power engulfed Libya’s strategic oil industry, halting supply and sending Brent crude oil prices to a three-year high of $127 a barrel in April 2011.

An International Monetary Fund report on Spanish banks will show the country’s troubled lenders need a cash injection of at least 40 billion euros ($50 billion), sources in the financial sector said Thursday. The report, due to be published Monday, will also outline overall needs of 90 billion euros to clean up Spain’s entire banking sector, with healthy banks covering a big chunk of this sum, one of the sources said. “The capital shortfall for the Spanish banks will be around 40 billion euros after taking into account the capacity from some of the entities to cover expected losses with their own resources,” the source told Reuters.
After years of neglect, the nation’s failed food policies have now become a subject of intense debate in New Delhi, with lawmakers, advocates for the poor, economists and the news media increasingly calling for an overhaul. The populist national government is considering legislation that would pour billions of additional dollars into the system and double the number of people served to two-thirds of the population. The proposed law would also allow the poor to buy more rice and wheat at lower prices. Proponents say the new law, if written and executed well, could help ensure that nobody goes hungry in India, the world’s second-most populous country behind China. But critics say that without fundamental system reforms, the extra money will only deepen the nation’s budget deficit and further enrich the officials who routinely steal food from various levels of the distribution chain.
Australia’s seasonally-adjusted trade deficit totaled 203 million Australian dollars ($201.9 million) in April, the Australian Bureau of Statistic reported Friday. That was down from a deficit of A$1.28 billion recorded in March. April exports rose 3% to A$26.1 billion, compared to March, while imports fell 1% to A$26.29 billion. Economists had expected a trade deficit of A$900 million, according to figures compiled by Dow Jones Newswires.
Reserve Bank of Australia Governor Glenn Stevens expressed optimism about the nation’s economy and cautioned against monetary policy settings that could reignite asset bubbles, the risk of which he said was low. “The intended effect of recent policy actions is certainly not to pump up speculative demand for assets,” Stevens said in the text of a speech today in the southern city of Adelaide. “Our judgment is that the risk of re-igniting a boom in borrowing and prices is not very high, and this was a key consideration in decisions to lower interest rates over the past eight months.” Stevens’s speech, titled “The Glass Half Full,” urged Australians to embrace more subdued spending and borrowing, and steadier asset prices, as a path to sustainable economic expansion and wealth. Employment growth this year and a gross domestic product report showing the economy grew 1.3 percent last quarter, more than twice the level forecast, underscore the nation’s resource-fueled strength.
The Bank of England has held interest rates at 0.5pc and left quantitative easing unchanged at £325bn despite mounting speculation that it would take steps to stimulate growth this month.  The decision contrasts with the recommendation from the International Monetary Fund (IMF), which last month urged the Bank to restart QE to help restore Britain’s faltering recovery. Surveys in the past week of the manufacturing and construction industries added to fears that the economy is continuing to slow, although today’s report on the powerhouse services sector offered some consolation by beating expectations. Rates have now been on hold at a record low since March 2009, the longest unchanged period since decade spanning the Second World War and the subsequent austerity that ended in 1950.

Growth in Britain’s dominant services sector was stable in May as new business rose, lessening the prospect of £50bn of stimulus from the Bank of England on Thursday. The Markit/CIPS services Purchasing Managers Index was unchanged in May at 53.3, where anything above 50 indicates expansion. It beat economists’ expectations of a fall in the index to 52.4 in May, and boosted hopes that the second quarter would not be quite as dire as the first, when gross domestic product fell by 0.3pc.
George Osborne delighted Tory MPs yesterday and fired a shot across the bow of European leaders as he signalled that ministers were prepared to call a referendum over Britain’s place in the European Union. The Chancellor also warned that the Government was ready to wield its veto in Brussels if there was an attempt to impose fresh controls on British banks as a result of moves to tackle the deepening eurozone crisis.
Brazil’s annual inflation rate fell below 5 per cent for the first time since late 2010, a shot of good news for the government’s efforts to stem a slowdown in Latin America’s largest economy. While other emerging market economies such as India are struggling with high inflation and low growth, Brazil’s 4.99 per cent May inflation reading suggests the central bank’s strategy of simultaneously reducing interest rates and prices is working. “As long as inflation continues to fall that means policy makers can continue to focus on the growth problems,” said Neil Shearing, economist with Capital Economics in London.
German Chancellor Angela Merkel said on Thursday that she would work towards a reinforced political union in Europe with willing partner countries even if that meant a two-speed approach. ‘We need more Europe… a budget union… and we we need a political union first and foremost,’ Dr Merkel told German public television. ‘We must, step by step, cede responsibilities to Europe.’ The German leader, who has been criticised for staunch opposition to some proposals to resolve the euro zone debt crisis, added: ‘We must not remain immobile because one country or another does not want to follow yet.’
Latin America’s largest economies, including Brazil, Mexico and Argentina, have heavily counted on the upcoming G20 summit to help push the sluggish global economy toward recovery and growth. As the first Latin American country to host a G20 summit, Mexico has put substantial resources into the preparation for the meeting, scheduled for June 18-19 in its southern resort city of Los Cabos. Mexico has also been very keen on drafting an agenda for discussion. A “priority agenda” unveiled in March by the Mexican government include topics such as green economies and food security, issues rarely highlighted at the forum which focuses mainly on economic growth and global financial stability.

A report by the International Monetary Fund (IMF) that warns New Zealand’s currency needs to be significantly lower in value to contain a rising current account deficit sparked a debate Friday of the government’s handling of the economy. The IMF 2012 staff report on New Zealand said the pace of the country’s economic recovery was “likely to remain modest” with projected growth of 3.25 percent next year led by the reconstruction of the earthquake-battered Canterbury region. It said the government’s aim of returning to a spending surplus in 2014-2015 would limit any adverse affect on economic growth during the recovery and put the government in a better position to deal with future shocks.
China, the world’s second-biggest oil user, may today announce its biggest cut to gasoline and diesel prices since at least 2008 after a slump in global crude costs.  State-controlled fuel prices will drop by 620 yuan ($97) a metric ton, equivalent to 28 cents a gallon, starting tomorrow, according to C1 Energy, a Shanghai-based commodity researcher that has correctly reported the timing and size of changes before government announcements. Costs at the pump are “almost certain” to be adjusted under rules set by the National Development and Reform Commission, the nation’s top economic planner, the official Xinhua News Agency reported June 6.
In line with the global spike in bullion prices, the government, on Thursday, raised the import tariff value of gold to $531 per 10 grams from $507 for May. The tariff value for silver imports was kept unchanged at $899 a kg. Released fortnightly, the tariff value on precious metals, such as gold and silver, is the base price on which customs duty is levied to prevent under-invoicing. The changes were effected through a notification by the Central Board of Excise and Customs here.

The Finance Ministry has said that with no apprehension of further deterioration in the external situation, the rupee will bounce back from current levels. The rupee slipped below the 55-level mark against the dollar on Thursday, but recovered to close at Rs 54.94, 42 paise stronger than on Wednesday.  This, along with other positives, will be at the core of the Government’s pitch during its road-shows on ‘India: The Incredible Investment Destination.’  These road-shows are aimed at qualified foreign investor (QFIs) in the Gulf, and will take place between June 10 and 15. The Economic Affairs Secretary, Mr R. Gopalan, said: “I feel the external situation may not deteriorate, and with the kind of steps we take, we are seeing that the rupee will not remain at this level and market forces will bring it back.”
The Centre has decided to shift its financial inclusion goalpost to accommodate a wider section of the population under the banking net, which is expected to curb leakages and generate more savings in a slowing economy. Banks have been asked to reach out to villages with population of 1,600 and above, as per the 2001 census, either through branches or business correspondents. According to the earlier government mandate, the population benchmark was 2,000. The government uses the banking network to route payments to poor job cardholders and beneficiaries of the central poverty alleviation schemes. In a circular issued on May 18, the finance ministry directed all statelevel bankers’ committees, or SLBCs, to draw the action plan and identify villages by June.
Speaking after legal experts listed anti-corruption laws that companies must follow on Russian soil, Yelena Panfilova, general director of Transparency International Russia, had the opposite message: a list of globally accepted anti-corruption standards lacking in Russian law. Though a legal and cultural framework has been evolving since the 2008 launch of then-President Dmitry Medvedev‘s anti-corruption campaign, and even since the mid-2000s, building blocks are still missing in the country’s transparency framework, Panfilova and other anti-corruption analysts are saying. In her presentation to corporate compliance officers at the Association of European Businesses on Thursday, Panfilova said whistleblower protections and centralized law enforcement need to be added to the legal system, while the concept of conflict of interest has yet to take hold among businesspeople.
South Africa’s manufacturing output was weaker than expected in April as export demand remained sluggish, adding to signs that economic recovery is hesitant and supporting the case for an interest rate cut later this year. Other data released on Thursday indicated Africa’s biggest economy is headed for prolonged strain as production and demand for its minerals remains tepid, its trade partners are buying fewer of its manufactured goods and local businesses see the outlook as being the bleakest in about a decade.