News That Matters

French regulators have failed in an attempt to extend the short-selling ban to major European stock market indices in a climbdown that will allow investors to continue to bet on further falls in financial stocks,

Benchmark US borrowing costs fell below 2 per cent for the first time in at least 60 years as markets took fright at increasing signs of global economic weakness and equities worldwide, writes the FT. Bank share prices once again bore the brunt of the equity market sell-off.

Anna Hazare, the Indian anti-corruption campaigner, scored a victory over the country’s government on Thursday after police agreed to remove some of the restrictions on his public hunger strike in Delhi,…

Vice-President Joe Biden is in China to get the measure of the country’s likely next leader, Xi Jinpingr, says Bloomberg. The US is keen to push for economic cooperation, although foreign journalists were bundled out of the room by Chinese security when Biden mentioned the economy in a speech,
Asian shares were sharply lower Friday following a selloff on Wall Street as grim U.S. data triggered fresh concerns of a global economic slowdown.  Japan’s Nikkei Stock Average lost 2.0%, Australia’s S&P/ASX 200 fell 2.6%, South Korea’s Kospi Composite shed 3.9% and New Zealand’s NZX-50 was down 1.0%.  Dow Jones Industrial Average futures were down 46 points in screen trade…

U.S. inflation surged in July primarily because of climbing energy and food prices, but those costs are likely to retreat in coming months as prices for oil, grains, and other raw materials fall in a lagging economy. Underlying price pressures remain strong, however, which could constrain the Federal Reserve from taking more action soon to spur economic growth and hiring. The consumer price index jumped by a seasonally adjusted 0.5% in July, up 3.6% from a year earlier, the Labor Department said Thursday. Higher gasoline prices accounted for about half the gains, reflecting high crude oil prices earlier this year…


Australian Prime Minister Julia Gillard expressed concern Thursday about the outlook for global growth, warning that Europe’s sovereign-debt crisis is far from being resolved and the U.S. is only beginning to deal with its fiscal problems. In a wide-ranging interview, Ms. Gillard said the inability of Europe’s leaders up to now to calm markets worried over the economic health of the euro zone was the world economy’s biggest challenge. Confidence has also been dented by a “spectacular” political deadlock in the U.S. that culminated in Standard & Poor’s decision to strip the country of its triple-A credit rating.…

Central banks are topping up their gold reserves, quadrupling their total purchases from the market in the last quarter as they seek to reduce their dependence on traditional reserve currencies such as the U.S. dollar.  Even with gold prices at record highs, emerging markets’ central banks have revived the official sector’s gold-buying interest. They are diversifying their foreign-exchange reserves, which have grown along with their export industries. More recently, they have also bought gold in reaction to the persistent sovereign-debt crises affecting traditional reserve currencies, like the dollar and the euro. Analysts say this trend is likely to continue

US iscouraging consumers and unsettling businesses.  The Dow Jones Industrial Average lost 419.63 points, or 3.7%, Thursday, and is down 9.5% for August amid soaring trading volume and some of the worst volatility on record. Angst about the health of the U.S. and European economies, and the stability of European banks, sent investors rushing to the safety of U.S. Treasurys. Yields on the 10-year note briefly dropped below 2% for the first time in at least 50 years. Gold jumped to a new record. Asian shares fell sharply in

For at least 50 years, the 10-year U.S. Treasury note yielded nothing lower than 2%—until Thursday. The yield sank to 1.9872% in early trading on Thursday, the first time it has hit that level since at least the 1960s, based on St. Louis Federal Reserve records. Before that, comparisons become murky. Thursday’s move came in response to disappointing data from the Philadelphia Federal Reserve showing the U.S. economy began August on a bleak note. The data gave one of the first views of the economy in August, and it compounded worries that had been growing for the past six weeks. Investors fled stocks—sending the Dow Jones Industrial Average down 419.63 points, or 3.7%, to 10990.58—and moved into Treasurys, sending prices up and yields down. Prices and yields more inversely.…

Bank of America Corp. is cutting 3,500 jobs in the current quarter and working on a broader restructuring that could eliminate thousands of additional positions, people familiar with the situation said. The 3,500 positions are spread across the nation’s largest bank by assets, including investment banking and trading, and the cuts are expected to be completed by the end of September. Some employees already have been notified.
Deutsche Bank on Friday downgraded its China growth outlook, saying the slowdown and even potential for recession in Europe and the U.S. now outweighed domestic credit tightening as the biggest risk to China’s economy. The chances of China’s economic growth decelerating to a 7% annualized rate in upcoming quarters now appeared more likely, Deutsche said
The Fed has done its job of providing cash and liquidity to help the market, but thanks to uncertainty and confusion in Washington that money is sitting on the sidelines, Dallas Fed President Richard Fisher told Larry Kudlow Thursday.

An unexpected jump in weekly U.S. jobless claims and a surprise fall in existing home sales sparked more fears of a recession and sent U.S. stocks to their worst levels since the S&P downgrade. However, one economist is more worried about what is happening in Europe than the U.S., and he sees a growing risk of an eventual breakup of the single currency group. The really worrying thing is a 40 percent chance the eurozone might break up altogether…over the next couple of years or so,” Robin Bew, Editorial Director & Chief Economist at the Economist Intelligence Unit told CNBC on Friday.
Oil prices fell on Friday, extending the previous session’s plunge, on renewed fears of weak demand following a slew of lackluster data from the world’s top oil consumer, the United States. Brent slipped as low as $106.05, after breaking below the 200-day moving average to settle at $106.99 on Thursday. Prices dropped 68 cents to $106.31 at 0437 GMT (12:37 a.m. EDT). The contract has slipped more than 9 percent this month, the worst since a 15 percent drop in May 2010.

Spot gold rose more than 1 percent to an all-time high of $1,844.55 an ounce, before easing to $1,842.41 by 0324 GMT. It was on course for a 5.6-percent weekly rise, its seventh gain in a row and the largest since February 2009. U.S. gold rose to a record of $1,847.9, and stood at $1,845.50

The head of Bank of China, the country’s biggest foreign exchange bank, said on Friday he was concerned about the debt crisis in the United States but expected Washington to deal with the issue. “We are a little concerned, but we are confident that the U.S. government should be able to solve this problem,” said bank president Li Lihui, when asked whether he was concerned about the stability of the dollar and the U.S. debt situation .…
The four candidates competing to become Singapore’s next president are losing out to an unlikely rival on the campaign trail: curry.  As the contenders vie for the mainly ceremonial role before the Aug. 27 election, more than 55,000 people have pledged their support for a Facebook page urging citizens to cook curry this weekend. The online protest began after the Today newspaper said a Singaporean family was pressured by its migrant Chinese neighbors to stop cooking the dish because of the smell.

Japanese Finance Minister Yoshihiko Noda said currency-market intervention needs to surprise and he’s ready to act to stem gains in the yen that could derail an export-led recovery. Noda told reporters inTokyo today that he will continue to monitor markets closely and that both the government and Bank of Japan are doing what they can to support the economy. He said yesterday that he was prepared to take “bold” action and that intervention “is a measure of last resort — it would be meaningless if it were not a surprise.”

Finance Minister Yoshihiko Noda said Group of Seven nations should maintain close contact in coming weeks. Speaking to reporters in Tokyo today, he was addressing a question about what policymakers should be doing to address a global stock decline. On Aug. 8, G-7 finance ministers and central bank governors pledged in a statement to “take all necessary measures to support financial stability and growth” after a global stock sell-off. The group said officials would inject liquidity and act against disorderly currency moves as needed. The G-20, which includes emerging markets, issued a similar communique.
Bailed out insurer American International Group dropped another $2.15 billion into the coffers of the Treasury Department on Thursday. Back in 2008, the government agreed to help the giant insurer get back on its feet with a $180 billion lifeline. AIG has been slowly working toward paying back that loan.
Retail sales grew only slightly last month, as cash-strapped consumers remained under pressure, figures show. Sales volumes excluding petrol rose just 0.2% in July, a slowdown on the 0.8% increase in June, said the Office for National Statistics (ONS).  Sales of household goods, clothing and footwear all declined. Consumer spending continues be affected by a number of factors, including higher inflation, job losses and limited wage rises
The beleaguered housing market has taken another knock, with new lending to homebuyers 6pc lower in July than during the same period last month. Data from the Council of Mortgage Lenders (CML) yesterday revealed gross mortgage lending in July came in at an estimated £12.6bn, down from £12.7bn in June, and £13.3bn in July last year. Bob Pannell, chief economist at the CML, said: “UK economic prospects have deteriorated as a result of weaknesses in some of the major economies and renewed stresses in the eurozone area associated with the sustainability of government finances.…
If there was a fin de siècle feel to Thursday’s market plunge, the bond markets showed it more than any other. UK government bond yields – the rate at which the UK government borrows money – plunged to their lowest levels since the 1890s. Ten-year gilts were paying an interest rate of 2.24% at one stage. The last time a UK chancellor could borrow so cheaply, his name was Sir Michael Hicks Beach, and Queen Victoria was celebrating her diamond jubilee.
A Finnish deal to get collateral from Greece to secure its rescue loans to the debt-ridden country has angered other euro zone nations and could complicate the implementation of the 109 billion euros bailout. Estonian Finance Minister Jurgen Ligi said that Finland’s bilateral agreement with Greece is “a deviation from the common policy of the euro zone.”
Think of Thursday’s run of U.S. economic data like a pair of handcuffs for the Federal Reserve. New reports show that manufacturing in the Philadelphia region contracted by the most in two years in August,sales of existing homes fell 3.5 per cent in July from the previous month, and first-time claims for jobless benefits increased by 9,000 last week, pushing total claims back above 400,000. These data are secondary indicators. Still, the numbers are awful. All things equal, they would prompt a response from the central bank. But that’s not likely to happen.
Coca-Cola, the world’s top soft drink producer, will pour in another 4 billion U.S. dollars into China from 2012 to 2014, announced its chairman and CEO Muhtar Kent Thursday in Shanghai. “We are excited not only with our achievement in China but we are more excited about the prospect of our business in China in the coming years,” said Kent in an interview with Xinhua. This enormous investment plan comes after Coca-Cola invested 3 billion U.S. dollars in the country from 2009 to 2011.

Sales of private homes in Singapore in the second quarter rose 21.6 percent quarter on quarter, real estate advisory DTZ said in a latest report. The number of units bought by Chinese buyers also hit a new high in the second quarter, and the Chinese mainland buyers continued to lead the list of foreign buyers after topping the chart for the first time in the first quarter, local daily Business Times reported on Friday. DTZ said the number of transactions, including new and secondary sales, rose to 8,458 in the second quarter, from 6,958 deals in the first quarter.
Food inflation eased to 9.03 per cent for the week ended August 6 from 9.90 per cent in the previous week even as prices of all edibles, barring pulses, continued to rule at higher levels. Understandably, Finance Minister Pranab Mukherjee, as always, dubbed the over 9 per cent food inflation level as “not acceptable” while hoping that the government’s policies coupled with a good monsoon would help in containing the price spiral.
The next five-year plan is going to maintain its target growth rate at 9% despite recent events pointing to apprehensions of a downturn in western economies. The planning commission is due to firm up its approach to the twelfth plan (2012-17) on August 20 in a meeting chaired by Prime Minister Manmohan Singh. In an earlier meeting, the planning commission had proposed a range of 9-9.5% for the next plan; however it has decided to stick with 9%. The ongoing eleventh plan had also aimed at an average growth rate of 9% during its inception. However, it had to be scaled down to 8.1% during the mid-term appraisal of the plan primarily due to the adverse impact of the global economic downturn.
Industrial production unexpectedly slowed last month as manufacturing growth eased. Output at factories, mines and utilities rose 5.2 percent in July from a year earlier after growing 5.7 percent in June, the State Statistics Service in Moscow said Friday. The median estimate of 18 economists in a Bloomberg survey was 6.3 percent. Economic growth in the world’s largest energy exporter slowed in the April-June period for a second quarter as the pace of industrial production eased. Manufacturing contracted last month for the first time since December 2009 as weaker growth in China and the euro zone damped demand for commodities, according to HSBC Holdings.


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