News That Matters


Eurozone unemployment has surged to a record level, highlighting the region’s weakening economy in the face of fiscal austerity measures and its increasing divergence from the US. Joblessness across the 17-country region hit 10.9 per cent of the workforce in March, the highest since the euro was launched in 1999, with much of the increase focused on crisis-hit southern Europe, particularly Spain, and among the young.


French President Nicolas Sarkozy aggressively attacked François Hollande in a keenly anticipated television debate on Wednesday night but apparently failed to do serious damage to his Socialist challenger, who fought back blow by blow. The two candidates, meeting in the only face-to-face confrontation of the campaign ahead of Sunday’s presidential election, frequently exchanged bad-tempered barbs as they wrangled over the state of France’s economy, the eurozone crisis and the proper conduct of the country’s head of state.


Britain’s poisonous relations with Brussels erupted on Wednesday as George Osborne, the chancellor, refused to defend watered-down EU bank rules that would make him “look like an idiot”. The bad-tempered exchanges at a late-night meeting of European finance ministers risked scuppering agreement on a 600-page law to implement the Basel III international accord on bank capital.


Repairing the economy and regulating banks is “the biggest challenge the Bank [of England] has faced for decades,” Sir Mervyn King said on Wednesday in a speech in which he conceded for the first time he should have “shouted from the rooftops” about risks before the financial crisis. Giving a lecture for the BBC, the bank’s governor conceded that it had missed the growing signs of fragility in the economy because it thought that controlling inflation was sufficient for a stable economy and failed to imagine the “scale of the disaster that would occur when the risks crystallised”.


Hopes that infrastructure spending might boost the global economy have been hit by a sharp first-quarter slowdown in the market for project finance. The market, which funds projects in areas such as railways, hospitals, airports and power generation, has contracted amid pressures on bank balance sheets and regulatory changes.

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Most Asian stock markets fell Thursday after disappointing data from Europe and the U.S. revived concerns about the global economic outlook, hurting exporters. Regional currencies were generally weaker as the U.S. dollar rose on safe-haven flows. A weak reading on U.S. private-sector hiring and data showing euro-zone’s manufacturing sector shrank at the sharpest pace in almost three years in April disheartened investors. Australia’s S&P/ASX 200 was flat, South Korea’s Kospi Composite dropped 0.1% and New Zealand’s NZX-50 fell 0.4%. Markets in Japan were closed for a holiday. Dow Jones Industrial Average futures were up two points in screen trade.


Energy producers are showing the first significant signs of scaling back their natural-gas output, responding to a glut that has driven prices to the lowest level in more than a decade. Exxon Mobil Corp., Encana Corp. and ConocoPhillips, among the country’s largest natural gas producers, said in recent days they reduced production in the first quarter and pledged to reduce drilling further in coming months. And government data earlier this week showed output in February had the biggest percentage drop in a year. The production decline could be the beginning of a trend that would help alleviate what has been


The Northern Mariana Islands, a U.S. territory in the Pacific Ocean, managed to recover from brutal World War II battles, but its public pension fund couldn’t recover from the financial crisis. The islands’ retirement system on April 17 became the first U.S. public pension fund to seek bankruptcy protection. The reasons cited for the pension fund’s collapse are numerous, ranging from exceedingly generous benefits, to inadequate contributions to the fund by the islands’ government, to what some retirees allege in a lawsuit was bad investment advice from the fund’s advisers, Bank of America Corp.’s BAC -1.81%Merrill Lynch.


Manufacturing activity in the U.S. and Asia expanded in April, by contrast, as the fiscal crisis and austerity programs took a toll on the euro zone. The manufacturing PMI for the euro zone slumped to 45.9 in April from March’s 47.7. That was weaker than the preliminary reading and the lowest index level since June 2009. Economists had forecast the index would be unchanged from the 46.0 preliminary reading.

Hiring has slowed down, with private-employment gains in April the weakest in seven months, according to a report released Wednesday by payrolls-processor Automatic Data Processing Inc. Private-sector employment increased 119,000 in April, the lowest result since September, led by the service-providing sector and small and medium businesses, according to ADP . The April gain is down from average monthly employment increases of about 200,000 in the first quarter of 2012, according to ADP.


The U.S. economy could retreat into stagnation in 2013 and ultimately cast the nation into the second half of a double-dip recession, high-profile economist Nouriel Roubini said Wednesday. Speaking at the Milken Institute’s Global Conference in Beverly Hills, Calif., Roubini noted that real wages for U.S. workers are not growing and that America’s crushing debt is strangling growth. That translates into possible fiscal decay in which GDP will be “lucky” to grow 2% this year and faces the prospect of retreating into near-zero growth next year, according to Roubini.


After warmer weather and the timing of Easter boosted retailers’ sales in March, colder weather along the East Coast toward the end of the month likely slowed sales in April, analysts said. Ahead of retailers’ same-store sales reports on Thursday, analysts expect sales in April to rise 1.5%. That compares with an 8.7% gain in the year-earlier period, Retail Metrics data showed. In March, sales excluding a decline at drugstore chain Walgreen Co. jumped 6.5%, with about two-thirds of retailers topping estimates.

China’s non-Manufacturing Purchasing Managers’ Index (PMI) showed on Thursday that the services sector cooled last month, retreating from March’s ten-month high to hit 56.1 in April. The softer reading underscores the two manufacturing PMI figures for April – one official, one from HSBC – which showed weakness among smaller enterprises despite improved headline figures. The ChinaFederation of Logistics and Purchasing revised its index last month to reflect seasonal adjustments, with the revision helping push the March index to 58, the highest since May, 2011.


Brent crude for June delivery edged up 11 cents to $118.31 per barrel by 22:19 EDT (0219)GMT, after falling more than 1 percent in the prior session. U.S. oil eased 12 cents to $105.10 after dropping nearly 1 percent on Wednesday. Brent and U.S. crude’s percentage losses in the previous session were the biggest since mid-April.


Spot gold edged down 0.3 percent to $1,647.69 an ounce by 23:21 EDT (0321 GMT), extending losses from the previous session. U.S. gold also inched down 0.3 percent to $1,648.70. Though gold is traditionally seen as a safe haven and attracts investors during economic and political turmoil, it has moved largely in tandem with riskier assets in recent months.

U.S. Treasury Secretary Timothy F. Geithner said further appreciation in the yuan is important to aid a reshaping of China’s economy as significant as the nation’s opening of its markets in the 1970s. “A stronger, more market-determined” currency would “reinforce China’s reform objectives of moving to higher value- added production, reforming the financial system and encouraging domestic demand,” Geithner said today at U.S.-China talks in Beijing. “Future economic growth will require another fundamental shift in economic policy” akin to that of more than 30 years ago, he said.


Temasek Holdings Pte., Singapore’s state-owned investment company, sold $2.48 billion of shares in Bank of China Ltd. and China Construction Bank Corp. (939) less than a month after raising its holdings in their larger rival. Temasek received about $1.24 billion selling 3.1 billion Bank of China shares at HK$3.13 apiece, according to a term sheet obtained by Bloomberg News, a 4 percent discount from the close in Hong Kong yesterday. The firm also got a similar amount divesting 1.6 billion shares in China Construction Bank at HK$5.99 each, another document shows, 2.8 percent lower than the stock’s close yesterday.


Asian policy makers are set to announce the doubling of a $120 billion reserve pool as officials step up efforts to shield the region from global financial shocks. Finance ministry and central bank officials from Japan, China, South Korea and 10 Southeast Asian nations are gathering in Manila today to finish the plan to boost the so-called Chiang Mai Initiative Multilateralization agreement to $240 billion. The expansion of the foreign-currency pool by Asean+3, as the group is known, will make it “more effective as a liquidity safety net,” Philippine central bank Governor Amando Tetangco said yesterday.

The European Central Bank will leave rates on hold on Thursday and continue to assess the impact on the economy of two rounds of cheap, 3-year funding for banks, analysts told CNBC, warning that the bank’s ability to fight the crisis is waning. The funding operations, launched in December and at the end of February, were welcomed by many analysts, who argued that they stabilized Europe’s banking system and prevented a credit crunch.They enabled banks in troubled periphery countries to access funds.

As concerns over Iran spike, Roubini expects oil prices to keep rising. And while he thinks there will be a worldwide shift toward natural gas, it won’t happen soon enough to calm fears over Iran. “People are too optimistic about how fast the revolution in natural gas will happen,” said Roubini. The infrastructure simply can’t be built or rebuilt to make it feasible for cars, trucks and trains to use natural gas in the next 12 to 24 months. A more reasonable time horizon, he said, would be 20 to 30 years. Political instability in the Middle East will also keep pressure on oil prices. “The entire Middle East is a mess, and it’s not just Iran and Israel,” said Roubini. “The Arab spring will become an Arab winter.”

Federal Reserve Governor Daniel Tarullo on Wednesday urged the Securities and Exchange Commission to move forward with efforts to reform the $2.5 trillion money market fund industry, arguing that new regulations are necessary to limit future systemic risk. “The combination of fixed net asset value, the lack of loss absorption capacity, and the demonstrated propensity for institutional investors to run together make clear that [SEC Chairman Mary] Schapiro is right to call for additional measures,” said Tarullo in New York at a Council on Foreign Relations event.

The slowing economies of China and other emerging nations are stunting foreign demand for U.S. goods, jeopardizing one of the Obama administration’s most ambitious economic initiatives. In his 2010 State of the Union address, President Obama set a goal to double U.S. exports in five years — from $1.58 trillion in 2009 to $3.15 trillion by the end of 2014. With the world coming out of recession then, exports rebounded strongly at first — soaring 16.7% in 2010 and nearly 15% last year to $2.1 trillion, putting the U.S. ahead of schedule in meeting its goal. A growing number of economists and trade experts say that performance is unlikely to be matched this year — or next — with much of Europe in a mild recession and two of the world’s largest emerging economies, China and India, decelerating from a torrid pace of double-digit annual expansion.

Growth in the UK construction sector slowed in April, according to a closely-watched survey. The Markit/CIPS construction purchasing managers’ index came in at 55.8, down from March’s 21-month high of 56.7. Any figure over 50 suggests growth in the sector. There is particular interest in the sector after its slowdown in the first three months of the year was partly blamed for the economic growth figure that pushed the UK back into recession.

George Osborne has warned the European Union that Britain will refuse to sign up to “idiotic” proposals that would water down tough international rules on bank capital requirements. During angry exchanges, the Chancellor told a meeting of Europe’s finance ministers on Wednesday night that EU measures to implement “Basel III” bank rules would be ridiculed by financial markets and the banking sector because it so clearly failed to enforce clear and tough rules. “We are not implementing the Basel agreement as anyone who will look at this text will be able to tell you. I’m not prepared to go out there and say something that will make me an idiot five minutes later,” he said.


Sir Mervyn King has attacked Britain’s banks for bringing the country to the brink of ruin and demanded urgent reform to spare “our grandchildren” a similar fate. The Governor of the Bank of England has blamed the banks for the recession and stressed that an overhaul of the financial system, including the separation of retail banking from “risky investment banking”, was essential “to make our economy safer”.  The comments will pile pressure on the Chancellor not to cave into the banking lobby and to press ahead with planned legislation to ringfence retail banking by 2015.

Sales of new vehicles in Australia rose 6.6 per cent in April, from a year earlier, with another strong month for sport utility vehicles defying consumer caution elsewhere. The Australian Federal Chamber of Automotive Industries said total vehicle sales in April were 79,097, compared with 74,214 in the same month last year. Sales in April were down 19.0 per cent on March, which is typically a big selling month. Adjusted for seasonal factors, VFACTS estimated sales increased by a hefty 7.6 per cent in April from the previous month.

China’s yuan advanced to a record high against the U.S. dollar for a third consecutive trading day on Wednesday, but the currency is expected to rise more slowly over the long haul as economic growth weakens and trade surplus narrows. The central parity rate of the yuan, or Renminbi, strengthened 117 basis points to 6.2670 per U.S. dollar on Wednesday, according to the China Foreign Exchange Trading System. It followed record highs of 6.2829 and 6.2787 in the previous two trading days.


Air China on Wednesday launched a new regular flight between the southwestern city of Chengdu and the Indian city of Mumbai, marking the first direct air route between the Chinese mainland and the Indian economic center. The flight will take off every Monday, Wednesday, Friday and Sunday using an Airbus A319 aircraft, a spokesman from Air China’s southwest branch said. The flight takes about five hours, the spokesman said.


China, Japan and South Korea have agreed to enhance the regional trilateral financial cooperation during the 12th Trilateral Finance Ministers’ and Central Bank Governors’ Meeting of China, Japan and South Korea hold in Manila on Thursday. The senior financial officials of the three countries exchanged views on various issues, including the current macroeconomic situation and regional financial cooperation. The attendees reaffirmed their commitment to enhance trilateral financial cooperation and promote the bilateral currency swap arrangements among the three countries, which was considered to be significantly beneficial to stability of regional financial markets.


The unemployment rate in New Zealand in the first quarter was revised up Thursday to 6.7 percent of the labor force, putting the government on the defensive over its economic policies. Statistics New Zealand said it had revised the unemployment rate for the quarter to March up from 6.4 percent as the first rise in the jobless rate for a year. “This highlights that the number of people employed has increased at a greater rate than the number of people entering the working-age population. This rise in the employment rate was due to a rise in seasonally adjusted employment of 9,000 people (0.4 percent), coupled with no growth in the working-age population,” said a commentary to the agency’s quarterly Household Labour Force Survey.

Fresh orders boosted India’s manufacturing sector in April, a private survey showed, raising hopes of a pickup in factory output in the months ahead.  The HSBC Purchasing Managers’ Index inched up to 54.9 in April from 54.7 in March, after slowing for two successive months, according to data released on Wednesday. The results are derived from a survey of over 500 manufacturing companies by Markit. A reading of over 50 on the index shows expansion.


The Union government on Wednesday lifted a restriction on urea imports from Iran and asked the State Trading Corporation (STC) to modify its global tender that sought to debar bids by suppliers of Iranian origin. The government had imposed the restriction as it was under the impression that Iran has banned urea exports and participation of Iranian suppliers in bids, invited by STC, would lead to a delay in supplies of the crop nutrient. But the import restriction was removed after India’s ambassador to Tehran clarified that Iran was allowing selective shipments.

South Korea, China and Japan agreed Thursday to invest in each other’s government bonds, reaffirming their commitment to stabilizing the regional financial and currency markets, government officials said.

“We agreed to promote the investment by the foreign reserve authorities in one another’s government bonds, further strengthening our cooperation,” the financial ministers and central bank governors from the three nations said in a joint statement.


A free trade agreement (FTA) with China would benefit South Korea’s economy in the long term by helping boost the latter’s export volume, a report said Thursday. “South Korean exports to China fell sharply in the first four months of 2012, but a bilateral FTA should be very positive for the Korean economy in the long run,” Kwon Young-sun, an economist for Nomura International, said in the report.

Prime Minister Vladimir Putin said his stint in the job sometimes felt like getting an education, as he bid farewell to his Cabinet on Wednesday at its final session. Before approving higher taxes on the gas industry, Putin in a speech thanked the ministers for helping the country to withstand the battering of the global economic crisis. His inauguration for a third presidential term just days away, he conceded that his previous experience of running the country as president wasn’t always sufficient for the hard choices of the past four years. “It was also a special test and a special schooling for me,” he said, speaking almost without looking down at the prepared statement. “I sometimes had the impression that I was taking some advanced training courses.”

Economy Minister Shamseddin Hosseini said on Tuesday that a cabinet approval to import 24 billion dollars of basic goods this year (which began on March 20) will have “no negative effect” on domestic production. First Vice President Mohammad Reza Rahimi announced on Monday that the cabinet has approved a bill allocating 24 billion dollars for importation of basic goods such as rice, cooking oil, meat, rice, etc. The announcement came as food prices has started rising over the past few weeks. he announcement faced some criticism by some economic experts and officials including Akbar Hashemi Rafsanjani, the Expediency Council chief.