China: Reduces US treasury holdings as debt ceiling debated
China, the biggest foreign owner of U.S. government debt, trimmed its holdings of Treasuries for a fifth straight month in March as lawmakers debate how to expand borrowing after reaching a statutory threshold. The Asian nation owns USD1.145 trn of the debt, down USD9bn, or less than 1%, from the previous month, according to Treasury data released yesterday. The holdings reached a record USD1.175 trn in October. China’s concern that U.S. government securities may become more risky because of the nation’s deficits and debt burden prompted its call this month for President Barack Obama’s administration to lay “a solid fiscal foundation” for long- term growth. (Bloomberg)
China: Foreign direct investment climbed 15% YoY in April as companies including Starbucks Corp. and Walt Disney Co. expand to tap rising incomes in the world's fastest-growing major economy. Investment rose to USD 8.5b. The increase compared with a 33% YoY gain in March. For the first four months, the total was USD 38.8b, a gain of 26% YoY. (Source: Bloomberg)
Vietnam: Raises interest rate, revives Vietcombank share sale
Vietnam raised a key interest rate for the second time this month and revived a state-bank share sale as the government struggles to damp the fastest inflation in Asia and shore up public finances. The State Bank of Vietnam raised the repurchase rate to 15% from 14%, effective from 17 May, according to an email from the central bank. The Joint-Stock Bank for Foreign Trade of Vietnam, or Vietcombank, said Credit Suisse will advise it on a plan to sell a maximum 20% stake to foreign investors by early 2012. (Bloomberg)
New Zealand: May cut retirement subsidies in budget to pay quake costs
New Zealand’s government may cut pension subsidies and review other social payments in an election-year budget aimed at returning the nation’s fiscal position to a surplus and maintaining its credit rating. Prime Minister John Key has said he may lower contributions to a workplace savings program and review entitlements to family payments in the 19 May budget, a four-year plan starting 1 July. New spending on health and education must be funded by reductions in outlays elsewhere as the country faces an estimated NZD8.5bn (USD6.7 bn) of costs from two earthquakes in its second-biggest city, Christchurch. (Bloomberg)
Germany: Investor confidence declined for a third month in May as faster inflation threatened to curb consumer spending and Europe's sovereign-debt crisis worsened. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months in advance, fell to 3.1 from 7.6 in April. (Source: Bloomberg)
EU: Finance ministers approve EUR78bn Portugal bailout
European Union finance ministers cleared the way for Portugal to receive EUR78bn (USD111bn) in aid, making it the third euro-area country to fall back on official loans. The endorsement came at a meeting of EU finance ministers in Brussels, European Commission economics spokesman Amadeu Altafaj said. (Bloomberg)
UK: Inflation quickens to 4.5%, forcing letter from King
UK inflation accelerated more than economists forecast in April to the fastest since October 2008, forcing Bank of England Governor Mervyn King to explain publicly why officials haven’t raised interest rates yet. Consumer prices rose 4.5% in April after a 4% increase in March, data showed. The median forecast of 32 economists in a Bloomberg News survey was 4.1%. Core inflation quickened to the fastest in at least 14 years. King said in a letter to Chancellor of the Exchequer George Osborne that the surge is being driven by higher sales tax and increases in energy and import prices. (Bloomberg)
US: April industrial production unexpectedly stalls on autos
Industrial production in the US unexpectedly stalled in April, reflecting a drop in automobile output after supplies of parts were disrupted by the Japanese earthquake and tsunami. Output at factories, mines and utilities was unchanged after a 0.7% gain in March, figures from the Federal Reserve showed. Manufacturing fell 0.4%, while it rose 0.2% excluding automobiles. Economists had forecast a 0.4% gain in industrial production, according to the median estimate in a Bloomberg News survey. Production of automobiles and parts dropped 8.9% in April, a decline that may be temporary as Japanese manufacturers recover from the March disaster. (Bloomberg)
US: Housing starts unexpectedly fell in April to 523,000 pace
Housings starts in the US unexpectedly fell in April as home builders continued to struggle almost two years into an economic recovery. Work began on 523,000 houses at an annual pace, down 11% from the prior month and less than the 569,000 median forecast of economists surveyed by Bloomberg News, figures from the Commerce Department showed in Washington. Building permits, a sign of future construction, also decreased. Falling home values and the prospect of more foreclosures entering the market mean home construction will be slow to gain traction. Unemployment at 9% and stagnant wages indicate any recovery in housing may take years to unfold. (Bloomberg)
U.S: Global demand for long-term assets slowed in March as investors shifted into shorter-term securities and China trimmed its portfolio of Treasuries. Net buying of long-term equities, notes and bonds totaled USD 24b during the month, compared with net buying of USD 27.2b in February. Including short-term securities such as stock swaps, foreigners purchased a net USD 116b, compared with net buying of USD 95.6b the previous month. (Source: Bloomberg)
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