Thursday, April 22, 2010

20100422 1017 Global Economic News.

US mortgage applications bounced from three-month lows last week as potential buyers locked in lower borrowing costs before the federal tax credit expires, the Mortgage Bankers Association said. Demand for loans to buy a home increased 10.1% to send the industry group's total applications index up 13.6% on a seasonally adjusted basis (-9.6% in the previous week). (CNBC, Bloomberg)

Thailand’s central bank left its benchmark interest rate unchanged at 1.25% for an eighth meeting, refraining from increasing borrowing costs as political unrest threatens to slow the country’s economic recovery. The decision came widely expected. The Thai central bank’s next step will be interest-rate normalization, Assistant Governor Paiboon Kittisrikangwan said. (Bloomberg)

Thai manufacturers’ confidence fell in March to the lowest level in five months as antigovernment protests and drought curbed consumer demand. The Thai Industries Sentiment Index dropped to 101.6 from 114.5 in February, the Federation of Thai Industries said. (Bloomberg)

The International Monetary Fund says the global economy, after enduring a crippling recession, should see better-than-expected growth this year, led by strength in China and other developing nations. It forecast that the world economy would expand 4.2% this year, faster than its previous projection (3.9%) and a sharp improvement from 2009 (- 0.6%). For 2011, the IMF projected global growth of 4.3%, no change from its January outlook.
  • However, it warned that the recovery still remained vulnerable with the biggest threat likely to come from a surge in government debt burdens. China should let the yuan gain to cool growth, while Japan must be prepared to widen its stimulus measures as Asia’s two biggest economies diverge. 
  • For the United States, the IMF expects growth of 3.1% this year. China's economy would surge 10.0% and that India would grow 8.8% in 2010. European countries would see economic growth of just 1.0% in 2010 and that Mideast and North Africa region (MENA) would grow as a whole by 4.5%. (CNBC, Bloomberg)
The International Monetary Fund (IMF) has proposed two new global taxes on banks and other financial institutions to cover the cost of future bailouts. The measures would see all institutions pay a bank levy as well as a further tax on profits and pay. Insurers, hedge funds and other financial institutions would also be required to pay the taxes under the IMF proposals, despite the fact they were less implicated in the recent financial crisis. (Channel News Asia)

There are positive signs Japan will escape deflation, a deputy governor of the central bank, Kiyohiko Nishimura said, but positive growth in consumer prices alone may not appease ruling party calls for higher inflation. “There’s about one-year lag until changes in the economy affect the inflation rate,” he noted. (Financial Daily)

Hong Kong Financial Secretary John Tsang said any swift appreciation in China’s yuan would risk hurting the city’s exports and could push up inflation. A stronger Chinese currency would also boost spending by visitors from the mainland, Tsang added. (Malaysian Reserve)

India’s central bank Governor Duvvuri Subbarao said he will do “everything possible” to prevent Asia’s third-largest economy from overheating, indicating policy rates may be increased again to slow inflation. The central bank is trying to sustain economy recovery, control inflation and also manage the government’s borrowing program in a way that it doesn’t disrupt the financial market, Deputy Governor Subir Gokarn said.
  • To balance these three broad objectives, they have come to a conclusion that moderate action on rates and liquidity provides the best prospect, Gokarn added. (Malaysian Reserve)
Singapore said it will review rules for its investment management industry, including hedge-fund and private-equity managers, as regulators increase oversight globally. The Monetary Authority of Singapore “will consult the public within the next two weeks on proposals to enhance our regulatory regime to ensure that it remains sound and responsive to the changing needs of the various stake holders in the fund management industry,” it said. “This is essential for the long-term and sustainable growth of the fund management industry.” (Bloomberg)

Banks in Singapore are raising charges for mortgages tied to two key interest rates even after borrowing costs declined, the Straits Times reported. DBS Group Holdings, Standard Chartered Plc and Oversea-Chinese Banking Corp. are among lenders that have increased the spreads for home loans tied to the 3-month Singapore interbank offered rate, or Sibor, as well as the Singapore dollar swap offer rate, in part because of a surging property market, the newspaper said. (Bloomberg)

China’s export orders fell 19% at the opening session of the nation’s biggest trade fair from the same period in 2008, before the global financial crisis deepened, the commerce ministry said. Orders at the Canton Fair in Guangzhou totaled US$17.1bn from April 15 to 19. “Enterprises generally reported that foreign trade is still facing many unstable and uncertain factors and they took a cautiously positive outlook,” the ministry said. (Bloomberg)

Faced with a growing volume of capital inflows, large emerging market economies will need to use macro prudential policies to avoid excess currency appreciation and asset bubbles, but also are likely to join the pressure on China to allow the yuan to float, a senior World Bank official said. World Bank's outlook for the region shows a faster recovery than most of the world and better outcomes than in previous crises. The lack of inflation in this crisis/recovery phase, as well as the degree of financial stability means the region has built reserves and has become a net creditor to the rest of the world. (Xinhua)

China currency appreciation, as part of a move to boost domestic consumption and reduce savings, would be "desirable" for that nation's own interests, but also "useful" in supporting the adjustment advanced economies must make, a senior IMF official said. Output in advanced economies is now 7% below pre-crisis trend and "this output gap is expected to remain large for many years to come," said Olivier Blanchard, director of the IMF Research Department. Blanchard said advanced economies must implement fiscal adjustment policies which will slow growth. "To offset these adverse effects and maintain growth, advanced countries as a whole may need to depreciate their currencies so as to increase their net exports," he said. (Xinhua)

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