June 2012 International Economic Fundamentals

[Ally]

In U.S., Europe, and China, the economic clouds darken





A new reading of the U.S. labour market was particularly disappointing, suggesting America still has a long, hard climb back and that its recovery is losing stream.




"Today`s weak payrolls report is unlikely to allay recent intensified concerns about deceleration after a seemingly promising start to the year," said CIBC World Markets economist Peter Buchanan.




The day kicked off with purchasing managers indexes, which take the temperature of manufacturing, in China and then in Europe. Jobs numbers across Europe were equally disappointing, highlighting the struggles, particularly of the region's weaker nations.





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[Ally]

World of hurt: Economy under threat as U.S., Europe, Asia falter





The global economy`s foundations are weakening, one by one.




Already hobbled by Europe`s debt crisis, the world now risks being hurt by slowdowns in its economic powerhouses.






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[Ally]

Asian markets hit by poor U.S. job figures




Asian markets tumbled further on Monday as poor US jobs data added to already weak sentiment caused by Spain's banking crisis and political uncertainty in Greece.




Dealers were also digesting a string of manufacturing figures from Asia to the United States that pointed to a global economic slowdown.




Tokyo ended 1.71 percent, or 144.62 points, lower at 8,295.63, with electronics giant Sony the stand-out loser as it fell below 1,000 yen for the first time since 1980, ending at 996 yen.





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[Ally]

G7 backs fiscal union in Europe, vows to help solve crisis



After months of political rhetoric and fiscal sabre rattling, European leaders are being prodded by the world`s biggest countries to finally tackle the region`s debt problems before it is too late.





With Spain finally admitting it needs help to save its banking sector, finance chiefs of the Group of Seven industrialized nations on Tuesday pledged to help Europe look for ways to resolve its fiscal crisis.





That followed a conference call by G7 finance ministers and central bankers, which Finance Minister Jim Flaherty had announced the previous day to reporters in Toronto.





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[Ally]

Australia cuts rates, sites economic uncertainty





Australia`s central bank cut interest rates for a second month running on Tuesday in a bid to shore up confidence at home, just as finance chiefs of advanced economies around the world prepare to hold emergency talks on the euro zone debt crisis.






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[Ally]

Unemployment in Greece rockets to 21.9%





ATHENS ` Greece`s unemployment shot up to 21.9 per cent in March, rising sharply from the 15.7 per cent rate in the same month last year and up from 21.4 per cent in February, the country`s statistics agency said Thursday.




Greece has been struggling through a financial crisis for the past two years, and has been relying on billions of euros in international rescue loans from other eurozone countries and the International Monetary Fund since May 2010. In return, it has made deep spending cuts and imposed major tax hikes, leaving the country mired in a deep recession.






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[Ally]

Austerity and growth both necessary, and possible, to fix Europe's economic crisis



That was a good answer Stephen Harper gave to Peter Mansbridge the other day. Asked how Europe, as it seeks a way out of its current crisis, could have `both austerity and growth at the same time,` the prime minister rightly denied there was a contradiction. Both are necessary, and both are possible.




Certainly austerity, or what he preferred to call `fiscal discipline,` was unavoidable: `You can`t borrow your way out of a debt crisis.` But more growth was not synonymous with more public spending, as in the simple Keynesian model that dominates media thinking about economics. Rather, he prescribed a range of measures to `increase the growth capacity` of the economy: expanded trade, more flexible labour markets, higher productivity.







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[Ally]

Harper meets with French president, urges action on economic crisis





PARIS ` Prime Minister Stephen Harper called for an overhaul to the euro zone Thursday and urged European leaders to move "decisively" to resolve the economic crisis that has gripped the continent before the contagion spreads to the entire world.







The prime minister made the public plea after meeting with Francois Hollande ` the newly elected French president who has rejected international pressure to impose austerity and has moved instead to provide a more generous pension system for some of his citizens.



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[Ally]

Russian shale oil play could be 80 times larger than North Dakota's Bakken, says Forbes





Unless you`ve been living under a rock for the past couple of years, you know that shale oil production in the U.S. from fields like North Dakota`s Bakken has soared, reversing a decades-old decline in America`s crude output.


The Bakken play has created a Fort McMurray-like oil boom in the northern U.S., and helped widen the price discounts on Canadian crude as a gusher of new supplies swamps the sluggish U.S. market.


That`s why the Harper government is pushing so hard for new oil pipelines to the B.C. coast. Without access to Asian markets, Canada`s oil industry could literally find itself stuck in the mud, costing the industry ` and the Canadian economy ` tens of billions of dollars in future export revenue.





Read the full article here.

 

[Ally]

A golden idea to save (or doom) the Euro





Gold is back in the news, big time, and not just because the price may be on the verge of another upswing or that Peter Munk is turning Barrick, the world`s biggest gold company, into a CEO meat grinder. It`s because Germany, it appears, wants to make gold the effective currency of the euro zone before the region plunges to the bottom of the seas like a concrete U-boat.






Read the full article here.

 

[Ally]

Stumbling economies have central banks girding for more intervention



Central banks are back at the barricades as mounting troubles in Europe, the United States and emerging markets threaten the fragile global recovery.





An interest rate cut Thursday by the People`s Bank of China, its first since the height of the 2008 financial crisis, underscored the sudden weakness of an economy that until recently had been the primary engine of the global rebound. And in Washington, while he signalled no new stimulus measures, Federal Reserve chairman Ben Bernanke said the U.S. central bank is poised to act if the global turmoil deepens.





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[Ally]

20 countries with the highest probability of default





As the economic crisis in Europe continues to flare up, investors holding sovereign debt have had to pay substantially higher rates to insure themselves from default via Credit Default Swaps.








Business Insider compiled data on some 59 countries where investors can buy protection.




The results: issuers of credit default swaps don't see the U.S., Germany or Norway defaulting anytime soon.






Read the full article here.

 

[Ally]

Spain relieved, angered by humiliating bank rescue



MADRID`Spain`s grinding economic misery will get worse this year despite the country`s request for a European financial lifeline of up to $125 billion to save its banks, Prime Minister Mariano Rajoy said Sunday.





A day after the country conceded it needed outside help following months of denying it would seek assistance, Rajoy said more Spaniards will lose their jobs in a country where one out of every four are already unemployed.





`This year is going to be a bad one,` Rajoy said Sunday in his first comments about the rescue since it was announced the previous evening by his economy minister.





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[Ally]

China's May output not as bleak as expected





Policy makers in Beijing seemed to be breathing a little easier on Monday, and not just because of the city`s astonishingly blue skies this weekend.





An interest rate cut late Thursday had economists forecasting that May`s economic indicators ` scheduled for release over the weekend ` would be even gloomier than April's results. But the data has not looked as bleak as expected.





Industrial production recovered slightly from last month, to 9.6 per cent year on year, from April`s three-year low of 9.3 per cent. Inflation was also down from April, to an even 3 per cent ` a full percentage point below the government`s year-end target of 4 per cent.






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[Ally]

China's housing market correction is sending shock waves through its economy




Chinese policymakers have for a while been trying to deflate the nation`s property bubble.




While its housing market has been correcting, and prices are deflating at a moderate speed, it hasn`t bottomed yet, according to Societe Generale analyst Wei Yao.




The National Bureau of Statistics (NBS) reports that new apartment prices have declined under 1.5 percent in average terms since their peak in the second half of 2011.




The strong balance sheets of Chinese households are supporting property prices, according to Yao, since few homeowners are in a rush to sell their homes and in turn pressure property prices in the primary market.





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[Ally]

Pro-Euro parties' narrow victory buys Greece some time





Greece`s voters have held off a crisis in financial markets ` for now.


The immediate market chaos that investors feared the Greek election could trigger was narrowly averted after the country`s pro-austerity, pro-euro parties garnered enough support to start talks on forming a new government.






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[Ally]

Pressure builds on China to ease home buying





Will China`s officials try to reverse a slowing economy by easing up on tight property ownership policies? That is the question analysts, investors, and household buyers are all now mulling. And it has a new urgency as Beijing`s economic-boosting efforts to date are having limited effect. Those include three reductions in bank reserve requirements since last November and a cut in interest rates on June 7, the first time since 2008.





`There has been constant push from some quarters for the central government to ease the current restrictions on the property sector,` says Hong Kong-based Tao Wang, an economist at UBS Securities in a June 21 research note. `Restrictions on purchases should be relaxed for high-end residential properties in first-tier cities,` said a proposal by members of the Chinese People`s Political Consultative Conference, a government advisory body, the China Daily reported on June 20.





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[Ally]

Is this 1931 all over again?



Is the world about to repeat the economic catastrophe of 1931?





A growing chorus of economists of all stripes thinks so.





`Suddenly normally calm economists are talking about 1931, the year everything fell apart,` writes Nobel prize winning economist Paul Krugman in the New York Times.





`The parallels between Europe in the 1930s and Europe today are stark, striking, and increasingly frightening, write Bradford DeLong and Barry Eichengreen in the new preface to Charles Kindleberger, The World in Depression 1929-1939.





Read the full article here.

 

[Ally]

Eurozone 'game changer' boosts markets






BRUSSELS ` Under pressure to prevent a catastrophic breakup of their single currency, eurozone leaders agreed on Friday to let their rescue fund inject aid directly into stricken banks from next year and intervene on bond markets to support troubled member states.




They also pledged to create a single banking supervisor for eurozone banks based around the European Central Bank in a landmark first step towards a European banking union that could help shore up struggling member Spain.





Read the full article here.

 

[Ally]

China economy will stabilize, meet 7.5% growth target in 2012, officials say






SHANGHAI ` China`s cooling economy should stabilize in the third quarter and the government is confident it can meet its growth target of 7.5% for the year, the chief researcher at the finance ministry said on Thursday.




Beijing is `cautiously optimistic` about China`s economic prospects because it has scope to loosen monetary and fiscal policies to shore up activity, said Jia Kang, director of the Research Institute for Fiscal Science at the Ministry of Finance.





Read the full article here.