20110809 1505 Global Economy Related News.

Singapore: Singapore narrows 2011 growth forecast range as global risks threaten Asia
Singapore reduced the top end of its growth forecast for 2011 as a faltering US economy and the European debt crisis heightened the risks to global expansion. The Southeast Asian nation’s gross domestic product will probably rise 5% to 6% this year, Prime Minister Lee Hsien Loong said in a televised message yesterday on the eve of the island’s National Day. The government previously predicted growth of as much as 7%. “Asia, led by China and India, is expected to continue growing but the global outlook remains uncertain,” Lee said. “Europe’s debt problems are far from solved despite the recent bailout of Greece by the European Union. The U.S. economy remains sluggish.” (Bloomberg)

China : China’s central bank raised its reference rate for the yuan by 0.23% to 6.4305 per dollar, the biggest gain since Nov. The currency is allowed to trade as much as 0.5% on either side of the daily fixing, which was set at the strongest level since a dollar peg ended in 2005. (Bloomberg)

China : China sold Japan’s medium- and long- term debt for the first time in nine months in Jun as the yen traded near a record high against the dollar and benchmark yields approached their lowest level since Nov. China sold a net JPY508.5bn (US$6.5bn) of the fixed-income securities in Jun, according to a statement released by Japan’s Ministry of Finance. China was a net seller of JPY8.4bn in short-term notes maturing in less than a year, data also showed. (Bloomberg)



Japan : Japanese bank lending fell 0.5% yoy in Jul (-0.6% in Jun), marking the 20th straight month of declines, the Bank of Japan said. Outstanding loans held by the country's four main categories of banks, including "shinkin" or credit unions, stood at JPY455.07tr (US$5.80bn). Excluding factors such as loan write-offs, the loan balance fell 0.2% yoy. (Reuters)

Japan :
Japan’s surplus in the current account fell 50.2% yoy to JPY526.9bn (US$6.72bn), the fourth straight drop since the disaster, the ministry of finance said. Economists had expected a 35.8% yoy decline in the surplus to JPY678.3bn, but said the bigger-thanexpected drop was due mainly to a minor fallback in investment income following recent jumps. (WSJ)

G-7: G-7 vows to take ‘all necessary measures’ to stabilize economies, markets
Group of Seven nations sought to head off a collapse in investor confidence after the U.S. sovereign- rating cut and a slump in Italian and Spanish debt intensified threats to the global economy. G-7 finance ministers and central bank governors pledged in a statement to “take all necessary measures to support financial stability and growth.” Officials will inject liquidity and act against disorderly currency moves as needed, they said after a call late yesterday European time. The G-20, which includes emerging markets, issued a similar communiqué. Stocks extended declines that have wiped USD5.4trn off equity markets since 26 July, driven investors to Treasuries and gold and rattled consumer confidence already hurt by European fiscal tightening and elevated American unemployment. The European Central Bank signaled it will buy Italian and Spanish bonds, and Japan warned it may intervene again to stem gains in the yen. (Bloomberg)

EU: ECB buying Italian, Spanish bonds in high-risk strategy to defuse crisis
The European Central Bank bought more Italian and Spanish government bonds to drive yields lower, according to four people with knowledge of the transactions. The ECB also bought Irish and Portuguese bonds, said two of the people, who asked not to be identified because the deals are confidential. A spokesman for the central bank declined to comment. The yield on the Italian 10-year bond slid 74 basis points to 5.35% at 1:55 p.m. in London, with the Spanish yield dropping 82 basis points to 5.24%. The Irish two-year yield declined 27 basis points to 13.29%, while the Portuguese note yield tumbled 117 basis points to 12.34%. (Bloomberg)

EU: ECB financing to Portuguese lenders rose 0.8% last month on debt crisis
The European Central Bank’s financing to Portuguese lenders rose in July for the first time in three month as the sovereign-debt crisis drove up bond yields across Europe’s periphery. ECB financing increased 0.8% to EUR44.2bn (USD62.7nn) from EUR43.9bn in June, the Lisbon- based Bank of Portugal said today on the BPStat portion of its website. ECB financing levels peaked at EUR49.1bn in August 2010. Portugal in April became the third euro-area country to seek a bailout after Greece and Ireland. It will receive EUR78bn under the agreement with the International Monetary Fund and the European Union. (Bloomberg)

US stocks sink, treasuries rally
US stocks sank the most since December 2008, while Treasuries rallied and gold surged to a record, as S&P’s reduction of the nation’s credit rating fueled concern the economic slowdown will worsen. The Dow Jones Industrial Average plunged 634.76 pts, or 5.6%, to 10,809.85 as approximately USD2.5trn was erased from global equities. The S&P 500 Index lost 6.7% to 1,119.46 as all 500 stocks fell for the first time since Bloomberg began tracking the data in 1996. A surge in Treasuries sent the 10-year note yield down 22 basis pts to 2.34%, the lowest since January 2009, and the two-year rate slid to a record low. The S&P GSCI commodities index lost 3.9%. Equities extended losses after the ratings cut prompted S&P to also lower debt rankings on Fannie Mae, Freddie Mac and other lenders backed by the government. (Bloomberg)

US: Senate probing S&P downgrade of AAA rating
The Senate banking committee has begun probing last week's decision by Standard and Poor's to downgrade the US credit rating, a committee aide told Reuters Monday. The aide said the panel was gathering information about the S&P move but no decision had been made on whether it will hold hearings into the downgrade. But, the aide added, "all options [are] on [the] table." The S&P downgraded the U.S.'s triple-A credit rating Friday for the first time after it said "political brinkmanship" over the fight to raise the debt ceiling had called into question the U.S.'s ability to manage its finances. “It’s always possible the rating will come back, but we don’t think it’s coming back anytime soon,” said David Beers, head of S&P’s government debt rating unit. (CNBC)

US: Fannie Mae, Freddie Mac ratings cut by S&P amid reliance on US backing
Standard & Poor’s lowered credit ratings on debt issued by U.S.-backed lenders including mortgage giants Fannie Mae and Freddie Mac, citing its own 5 August downgrade of the federal government’s AAA status. Fannie Mae and Freddie Mac, which own or guarantee more than half of the almost USD11tn in outstanding U.S. mortgage debt, were lowered one step from AAA to AA+, S&P said in a statement yesterday. The downgrade reflects their “direct reliance on the U.S. government,” the ratings firm said. The two companies have operated under U.S. conservatorship since September 2008, when they were seized amid subprime mortgage losses that pushed them toward insolvency. Since then, the government-sponsored enterprises have drawn almost USD170bn in Treasury Department aid. In cutting the nation’s credit rating on 5 Aug, S&P faulted lawmakers for failing to reduce spending or increase revenue enough to reduce the nation’s budget deficit.
Banking regulators including the Federal Deposit Insurance Corp. said that day that government-issued securities would be unaffected by the sovereign downgrade. (Bloomberg)

US: The  U.S.  is unlikely to regain its top long-term  credit rating  quickly even as the dollar remains the world’s main reserve currency, said Standard & Poor’s analysts David Beers and John Chambers. (Bloomberg)