News That Matters

France, Italy, Spain and Belgium have banned all short selling of financial stocks for 15 days in response to sharp share price falls this week, the FT reports, with the bans to take effect on Friday morning

As much as €1bn (£877m) of distressed Irish properties backed by debt from Lloyds Banking Group could be transferred to a new venture with one of Ireland’s best-known property groups, the FT says. The aim is to help recover the properties’ values,

Business leaders’ confidence in their industries and the global economy deteriorated sharply in the months preceding the latest market turmoil, according to the FT/Economist Global Business Barometer. The survey of more than 1,500 executives worldwide

The Swiss franc dropped sharply on Thursday on speculation that the Swiss National Bank was preparing fresh measures to weaken its currency, the FT reports. The currency lost ground after Thomas Jordan,

Food commodities prices surged after the US government slashed its forecast for the country’s crops due to the impact of a heatwave and drought, the FT reports. The US Department of Agriculture painted a bullish picture in particular for corn prices, saying:

North American chief executives and their senior managers are buying their companies’ shares on a scale not seen since March 2009, the FT says. The heads of Morgan Stanley, Chiquita Brands, General

An auction of 30-year US Treasury bonds saw weak demand from bidders, after a sharp decline in yields, the FT reports. After the sale, yields on the 30-year bond were up 27 basis points for the session to 3.78 per cent.

George Osborne has faced down fierce pressure to reverse police cuts in the wake of this week’s riots, warning that any deviation from his deficit reduction plan could “plunge Britain into the financial whirlpool of a sovereign debt crisis”,

Chinese regulators have told banks to tighten lending for real estate on concern credit risks will increase as the impact of government curbs deepens in the next three to five months, a person familiar with the matter told Bloomberg. The China Banking Regulatory Commission told lenders in July not to extend the maturity of loans to developers,

The Securities and Exchange Commission has asked credit rating agency Standard & Poor’s to disclose who within its ranks knew of its decision to downgrade US debt before it was announced last week, as part of a preliminary look into potential insider trading, people familiar with the matter say.  The inquiry was made by the SEC’s examination staff, which has oversight of credit rating firms, one person familiar with the matter said. The exam staff can make referrals to the SEC’s enforcement division if it believes any laws have been violated, but the inquiry might not result in a referral
Asian stock markets were buoyed Friday by a sharp rise on Wall Street and a positive reading on weekly U.S. jobless claims, which fell to their lowest level in four months. Japan's Nikkei Stock Average rose 0.1%, Australia's S&P/ASX 200 added 1.5%, South Korea's Kospi Composite climbed 1.1%, and New Zealand's NZX-50 jumped 0.5%. Dow Jones Industrial Average futures were down 58 points in screen trade.

The legal stakes are rising for Bank of New York Mellon Corp. in a widening controversy over the way it prices currency trades for pension funds and other big clients. On Thursday, attorneys general in Virginia and Florida filed civil suits against BNY Mellon alleging that the bank cheated pension funds in those states by choosing improper prices for currency trades the bank processed for the funds. The Virginia lawsuit, filed in a Fairfax, Va., state court, cites internal bank emails allegedly showing that senior bank officials knew about, and endorsed, a currency-trading method that hurt state pensioners

The nation's major credit-ratings firms have historically not been effective predictors of a government's risk of defaulting on its debt, according to a Wall Street Journal analysis of 35 years of data. Standard & Poor's Corp.'s downgrade late Friday of U.S. debt to AA+ from triple-A has highlighted a key role of credit-rating firms: helping investors measure the likelihood of default so they can calculate the appropriate rate of interest to charge on bonds.

China signaled that it intends to take a more active role in trying to calm chaotic global and domestic markets, pumping cash into its banking system and allowing its tightly controlled currency to climb higher for a fourth straight day. There was a widespread belief among domestic investors that the country's state pension fund had started heavily buying shares. That perception reversed a sharp fall in the Shanghai stock market and helped it to close higher in a tumultuous trading session.

Bank Indonesia is temporarily halting issuance of permits for investors to buy banks in the country as the central bank is still deliberating a new regulation on bank ownership, an official said Friday.  "Hopefully the regulation can be issued later this year," Bank Indonesia spokesman Difi Johansyah said.  Bank Indonesia has been mulling lowering the maximum percentage of shares that any single investor can own in local commercial lenders from

France's President Nicolas Sarkozy and Germany's Chancellor Angela Merkel will meet in Paris on Tuesday and make proposals on how to strengthen the euro zone's economic governance, as investor worries over sovereign debt in the region rattle financial markets. The French presidency said in a statement Thursday that Mr. Sarkozy and Ms. Merkel would make proposals as part of a wider agreement reached by the euro zone's leaders at a summit July 21 to extend a second aid package to debt-troubled Greece.

The market's recent losses threaten to awaken the dormant bankruptcy beast. Yields on risky debt are creeping higher, raising borrowing costs and threatening tougher times for companies that need to refinance billions in obligations. The gap between rates tied to "junk" bonds issued by risky companies and U.S. Treasurys continued to widen Thursday, to well above seven percentage points, up from more than five at the end of July, according to Bank of America Merrill Lynch's High Yield Master II Index. The spread is even higher for the riskiest debt.

Japanese Prime Minister Naoto Kan's Cabinet approved Friday a medium-term fiscal framework and growth projections based on an expected ¥19 trillion ($247 billion) in spending on reconstruction from the March 11 earthquake and tsunami. The government projects real gross domestic product to grow 0.5% in the current fiscal year, slowing from 2.3% in the previous year. But growth in the following fiscal year should pick up to between 2.7%-2.9%. "Relatively strong growth should be realized in the second half of (the current fiscal) year, as consumption and investment are picking up, and export gains are expected," the Cabinet Office said in a report.
Some gold traders said they wouldn’t be surprised if the CME Group Inc. CME, the parent company of the main commodities exchanges, decides to increase margin requirements for gold again. The reason? Pure math. Margin requirements, or the money needed to put up and trade commodities, hover around 5% to 10% of a contract value. Gold’s margins are at about 4% of the value of the 100-ounce contract, compared to 6% for silver and 7% for corn, for example. Most traders also expect gold prices to keep rising, implying higher margins so to act as an insurance and risk management tool.
Spot gold stood at $1,765.99 an ounce by 0338 GMT (11:38 p.m. EDT), little changed from the previous close and off a session low of $1,747.54. The precious metal dropped more than 2 percent from its record high of $1,813.79 set in the previous session, but was still headed for a weekly rise of 6.2 percent, marking its best week since January 2009. U.S. gold gained 1 percent to $1,768.90, on course for a sixth consecutive week of gains, matching a similar run in August 2007.

Brent slipped below $108 a barrel on Friday, reversing direction after two straight days of gains, as the dollar strengthened and demand concerns from industrialized nations weighed on prices. Brent crude for September fell as low as $107.20 a barrel and traded 48 cents lower at $107.54 by 0406 GMT. The benchmark is poised to gain 1 percent on the week, reversing the previous week's slump of 9.3 percent. U.S. oil slipped as low as $84.85 a barrel and traded 81 cents down at $84.91. In its third consecutive week of decline, the contract is set to fall 2.6 percent against a fall of 9 percent last week.

President Barack Obama distanced himself from a deeply divided U.S. Congress on Thursday, pledging to deliver fresh ideas to create jobs and slamming lawmakers for "bickering" that gets in the way of recovery. In a passionate speech to auto workers in Michigan, Obama described last week's U.S. credit rating downgrade as "a self-inflicted wound" and said the refusal on Capitol Hill to put country ahead of party was suppressing

Prime Minister David Cameron risks his government's austerity drive, particularly its plans to cut police funding, becoming the focus of Britons' fears about the future after the worst looting and rioting in decades hit English cities this week. The Conservative party leader took a hardline approach to the violence on Thursday, vowing "the lawless minority" would be hunted down and punished, and blaming the police for their initial response.

A leading Republican lawmaker would not rule out tax increases on Thursday if they fostered economic growth, adding that "everything is on the table" for a U.S. congressional panel charged with forging a deal to cut the deficit. Representative Dave Camp, head of the tax-writing Ways and Means Committee in the House of Representatives, told Reuters in a telephone interview that the deepening global financial crisis would prompt him and other "super committee" members to pull together.

Authorities in China's southwestern city of Kunming have identified another 22 unauthorized Apple retailers weeks after a fake of the company's store in the city sparked an international storm. China's Administration for Industry and Commerce in the Yunnan provincial capital said the stores have been ordered to stop using Apple's logo after Apple China accused them of unfair competition and violating its registered trademark, state media said on Thursday.
Silvio Berlusconi’s government is preparing to pass measures to balance Italy’s budget in 2013 as part of an effort to convince investors it can tame the region’s second-biggest debt. The government will discuss the plan at noon in Rome with local and regional officials and the Cabinet may meet in the evening to approve it, media including Il Messaggero newspaper reported. Finance Minister Giulio Tremonti told lawmakers yesterday Italy seeks to ease labor-market laws, sell local services and possibly raise the capital-gains tax to eliminate the budget deficit and secure European Central Bank support for its bonds after Italian borrowing costs reached a euro-era high last week.

Chinese regulators have told banks to tighten lending for real estate on concern credit risks will increase as the impact of government curbs deepens in the next three to five months, a person familiar with the matter said. The China Banking Regulatory Commission told lenders last month not to extend the maturity of loans to developers, not to grant new credit to help developers repay maturing debt and to set significantly higher standards on loans for commercial properties than residential, the person said, declining to be identified as the discussions were private.

The Obama administration may call on Syrian President Bashar al-Assad to step down soon, a U.S. official said as the State Department said the Syrian government has detained more than 30,000 people, some in cages. U.S. Secretary of State Hillary Clinton said she wants to see more pressure on Assad to step down from Europe, India and China, including the sanctioning of Syria’s oil and gas industry, speaking in an interview with CBS News yesterday.

Global financial strains, government fiscal austerity and a lack of jobs will hurt U.S. growth over the next couple of years, according to economists surveyed this month by Bloomberg News. The world’s largest economy will expand at an average 2.3 percent annual rate in the second half of the year, about a percentage point less than projected last month, according to the median forecast of 53 economists polled from Aug. 2 to Aug. 10. Gross domestic product will grow 2.4 percent next year and 2.8 percent in 2013, also less than previously estimated.
Behind Its Lectures, China Is a Sinner Too.Indeed, the Chinese central government’s declared gross debt was only about 17 percent of gross domestic product at the end of 2010 — tiny when compared with the debt-to-GDP ratios for the U.S. (87 percent), U.K. (80 percent) and Japan (210 percent). By including a range of other liabilities that Beijing is explicitly or implicitly on the hook for — such as ballooning debt at the railway ministry, bonds issued by so-called policy banks that lend on behalf of the state, and bad debts in the state-owned banking system — GaveKal-Dragonomics estimates that China’s real debt-to-GDP ratio could be as high as 90 percent. Other analysts believe the total is more like 70-80 percent, and Fitch Ratings makes a conservative estimate of about 48 percent gross general government debt by the end of last year, based on the opaque and incomplete information available.
Ever since Lehman Brothers collapsed nearly three years ago, Europe’s leaders have repeatedly vowed to prevent any major European bank from failing. But as bank shares plummeted this week, the question on investors’ minds was not whether governments would rescue their banks if necessary. It was how much a bailout might cost them. By one measure, according to a recent report from the Peterson Institute for International Economics, 90 of Europe’s biggest banks hold 4.7 trillion euros ($6.7 trillion) in short-term loans that must be repaid over the next two years. That burden alone is more than half of the combined gross domestic product of the 17 nations that share the euro currency.
Meanwhile, fewer people defaulted on their mortgages in July, with default notices falling 7% from the month earlier to 59,516 U.S. properties, according to RealtyTrac, an online marketplace for foreclosure properties. Defaults were down 39% year-over-year. Even as key housing numbers and optimism improve, however, industry trackers will not go so far as to call it a full housing recovery, and some even claim the sector could face downfalls through 2015. “While it would be nice to report that foreclosure activity is dropping because of an improvement in the housing market or even in the overall economy, that’s simply not the case,” said Rick Sharga, senior vice president of RealtyTrac.
The road to economic recovery in Britain will be "longer and harder than had been hoped" and will require continued commitment to the government's deficit-reduction program, Chancellor of the Exchequer George Osborne told lawmakers Thursday, Speaking at a specially convened meeting of Parliament, Osborne -- a Conservative member of parliament who was appointed head of the UK's treasury in May 2010 -- said a reason for the recent turmoil in global markets was because the world had now realized how difficult it would be to overcome the "huge overhang of debt" many nations face.
The US trade deficit with the rest of the world widened to $53.1bn (£32.9bn) in June, as exports fell faster than imports, official figures have shown. The trade gap rose from an upwardly revised $50.8bn in May, the Commerce Department said, a bigger rise than analysts had expected. Industrial goods accounted for much of the fall in exports.
The dollar should be replaced with a global currency, the United Nations has said, proposing the biggest overhaul of the world's monetary system since the Second World War.  In a radical report, the UN Conference on Trade and Development (UNCTAD) has said the system of currencies and capital rules which binds the world economy is not working properly, and was largely responsible for the financial and economic crises. It added that the present system, under which the dollar acts as the world's reserve currency , should be subject to a wholesale reconsideration.
Home repossessions are dropping and the number of mortgages in arrears has stabilised as homeowners continue to feel the benefit of interest rates held at an all-time low, the Council of Mortgage Lenders (CML) said yesterday. Repossessions fell by 7 per cent in the first half of the year, with 18,100 houses taken back by mortgage holders from owners behind on payments, according to CML statistics that offer a rare bright spot in the recent procession of gloomy economic data.
With more questions hanging over the economy and global markets this week than last, the real estate industry holds little hope for an increase in buyers this weekend. Even before the dramatic volatility on the sharemarkets seen this week, auction clearance rates in Melbourne and Sydney had hovered around 50 per cent this year, from highs of 80 per cent in 2010, while home prices had declined. After the latest sharemarket wobbles, investors have now begun to price in interest rate cuts, giving buyers more reason to pause before taking the plunge.
Stephen Harper said his government is sticking with its plan to chop billions of dollars in spending instead of enacting a new round of fiscal stimulus in the face of concern over the economic recovery. The Prime Minister, speaking during a four-country, Latin American trade mission, said he still believes Canada is on track for “slow but steady” economic growth.
China may join Asian nations from South Korea to India in delaying interest-rate increases after the nation's leaders called for global cooperation to stabilize financial markets. The People's Bank of China is likely to leave borrowing costs unchanged for the rest of this year, according to eight out of 10 analysts surveyed this week. South Korea's central bank held rates steady at 3.25 percent yesterday, as expected, after market turmoil hit the country's stock market harder than others in Asia, even though the decision risked further damaging Seoul's inflation-fighting credentials.

The Ministry of Finance said on Thursday that the country's fiscal revenues rose 26.7 percent year-on-year to reach 986.41 billion yuan (154.13 billion U.S. dollars) in July. The central government posted revenues of 522.86 billion yuan last month, a rise of 24.5 percent year-on-year, the ministry said in a statement on its website. Local governments claimed the rest of the money. [ Expenditures increased by 19.6 percent from one year earlier to hit 694.99 billion yuan last month.

South Korea's import price growth hit an 8-month low in July due to the local currency's appreciation against the U.S. dollar, the central bank said Friday. In local currency terms, the country's import prices rose 9.8 percent in July from a year earlier, slowing from a 10.5 percent on-year gain in June, the Bank of Korea (BOK) said in a monthly report. The July figure marked the slowest growth since an 8.2 percent on-year advance in November 2010. From the previous month, import prices fell 1.1 percent last month.

Economy and finance ministers and central bankers of the Union of South American Nations (Unasur) met in Argentina on Thursday to discuss ways to strengthen the bloc and fend off the global economic crisis. The meeting, which will end on Friday, is expected to name the directors of a program called the Task Force on Financial Integration (FTIG) among its member states, and sign a document that defines a common position approved by the regional group.
Union Finance Minister Pranab Mukherjee on Thursday said the information and technology (IT) industry might be affected due to the current economic crisis in the U.S., but cautioned that there was no need to press the panic button yet.  “It is too premature to say what the final shape of the downgrading of the U.S. economy would be … there is no doubt that our IT industry may be affected,” Mr. Mukherjee said replying to a debate on the Appropriation Bill that was passed by the Rajya Sabha. Notably, Indian IT sector earns $60 billion from exports of software and services, of which over 60 per cent comes from the U.S. market.

Much to the concern and dismay of the government and the Reserve Bank of India (RBI), food inflation surged yet again to a high of 9.90 per cent for the week ended July 30 from 8.04 per cent in the previous week, driven mainly by higher prices of onions, fruits and protein-based items. The fresh bout of inflationary pressure is not unexpected as both the RBI and the Prime Minister's Economic Advisory Council (PMEAC) have projected the wholesale price index (WPI) headline inflation to hover at a high of about 9 per cent for a major part of the fiscal year till December before tapering down to about 6.5-7 per cent by March 2012.

Exports in July grew by an astonishing 81.8 per cent to $29.3 billion, according to provisional data released by the Commerce Secretary, Dr Rahul Khullar, on Thursday. The drivers of this growth - the fastest since April 1995, according to Bloomberg - were sectors such as engineering, petroleum products, readymade garments, gems and jewellery. The strategy to diversify to new markets in Asia, Africa and Latin America has helped in maintaining high growth rates.
The government approved the state debt policy for the next three years on Thursday, with a plan to increase the size of the state debt to 12 trillion rubles ($400 billion) by 2014 and work toward improving the country's credit rating. The current debt stands at 4.6 trillion rubles. The policy drafted by the Finance Ministry earlier this week, was discussed at a Presidium meeting chaired by Prime Minister Vladimir Putin. According to the document, the government will seek to maintain "the high level of Russia's credit ratings" and create "a base for increasing the ratings to A."