Asia Dragged Down by Europe’s Crisis Forced to Hold Rates as Prices Climb
(Source: Bloomberg)
Europe’s failure to end a deepening debt crisis and a faltering U.S. recovery are escalating the danger of a growth slowdown in Asia, putting pressure on central banks meeting this week to refrain from interest-rate increases. Central banks in South Korea, Malaysia, Indonesia and the Philippines will probably all keep their benchmark rates unchanged today, according to four Bloomberg News surveys of economists.
Swiss Pledge Unlimited Currency Purchases
(Source: Bloomberg)
The Swiss central bank imposed a ceiling on the franc for the first time in more than three decades and pledged to defend the target with the “utmost determination,” prompting a record drop in the currency.
Greece: Merkel said to tell CDU Greece must meet conditions for aid
German Chancellor Angela Merkel told members of her Christian Democrats that Greece will not receive aid payments due this month unless it meets conditions of the rescue, two party officials said. “It was very clear that we expect Greece to meet its obligations, that there can’t be more aid without adequate behavior by Greece,” Peter Altmaier, the chief whip for Merkel’s Christian Democratic Union, told reporters after the talks. “But it was also very clear that we stand by our commitments within the euro stabilization and that we’re ready to maintain and defend the euro as our common currency.” (Bloomberg)
EU: Economic recovery slows as governments cut spending
The euro area’s economic recovery lost momentum in the second quarter as governments imposed austerity measures in a bid to tackle the sovereign debt crisis. Gross domestic product expanded 0.2% in the quarter, in line with a 16 Aug estimate, after growing 0.8% in the previous period, the European Union’s statistics office in Luxembourg said. Government expenditures contracted 0.2% after growing 0.4% in the first quarter. Europe’s worsening debt crisis has prompted governments to deepen budget cuts, undermining consumer demand and clouding growth prospects. Investor confidence dropped to the lowest in more than two years in September and economic sentiment weakened last month. The European Central Bank’s so-called shadow council last week called on policy makers to reverse this year’s rate increases to prevent the economy from sliding into a recession. (Bloomberg)
US: Service industries unexpectedly expand at faster pace
Service industries unexpectedly expanded at a faster pace in August, easing concern the biggest part of the US economy was slumping. The Institute for Supply Management’s index of non- manufacturing businesses increased to 53.3 last month from 52.7 in July. Economists forecast the gauge would drop to 51, according to the median estimate in a Bloomberg News survey. A reading above 50 signals expansion. A pick-up among the non-manufacturing industries that account for about 90% of the economy shows the recovery may persist amid dimming job prospects and rising pessimism about the economic outlook. (Bloomberg)
US: Fed’s Kocherlakota says economy doesn’t need more stimulus
Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said the US economy didn’t need additional stimulus in August and probably won’t require more easing this month. “The data in August did not justify the additional accommodation provided” by the central bank on 9 Aug, Kocherlakota said. “It is unlikely that the data in September will warrant adding still more accommodation.”Kocherlakota signaled reluctance to back more stimulus even after the Labor Department reported last week that the economy added no jobs in August and the unemployment rate remained unchanged at 9.1%. (Bloomberg)
US stocks fell, giving the S&P 500 Index its longest slump in almost a month, amid concern that Europe’s debt crisis is worsening. Equities pared losses in the final 30 minutes of trading. The benchmark measure trimmed its drop from 2.9% as companies most-tied to economic growth rebounded, propelling the Morgan Stanley Cyclical Index to a 0.2% gain for the day. Bank of America and JPMorgan Chase & Co. decreased more than 3.4% on concern about a global financial crisis. Exxon Mobil and Alcoa Inc. lost at least 1.3% on speculation that demand for commodities will slow. The S&P 500 lost 0.7% to 1,165.24 at 4 pm in New York. The benchmark gauge has fallen 4.4% in three days, the longest drop since 8 Aug. The Dow Jones slumped 100.96 points. (Bloomberg)
US: Obama said to plan more than USD300bn job-growth package
President Barack Obama plans to propose boosting job growth by injecting more than USD300bn into the economy next year mostly through tax cuts, infrastructure spending and direct aid to state and local governments. Obama would call on Congress to offset the cost of the short-term jobs measures by raising tax revenue in later years. This would be part of a long-term deficit reduction package, including spending and entitlement cuts as well as revenue increases, that he will present next week to the congressional super-committee charged with finding ways to reduce the nation’s debt. Almost half the stimulus would come from tax cuts, which include an extension of a two percentage point reduction in the payroll tax paid by workers due to expire 31 Dec and a new decrease in the portion of the tax paid by employers. (Bloomberg)
Sweden: Companies cheer currency cap after surge crimped profit
Swiss companies from knife-makers to cheese producers welcomed the central bank’s decision to halt the franc’s appreciation against the euro, which had left them struggling to compete and pushed investment abroad. The Swiss National Bank said yesterday it won’t tolerate an exchange rate below 1.20 francs per euro following the currency’s 13% gain against the euro this year. The benchmark Swiss Performance Index rose 4% as the Swiss currency posted a record drop against the euro. (Bloomberg)
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