China: Cuts some reserve ratios in Zhejiang, market news reports
China’s central bank cut reserve requirements for five rural credit cooperatives in the eastern province of Zhejiang, Market News International said, citing three unidentified people in the interbank market. Bond traders said the reduction to 16% from 16.5% would have a tiny impact on overall liquidity because of the small size of the banks, the news agency said yesterday. The central bank’s press office declined to comment immediately. The city of Wenzhou in Zhejiang has been the focus of complaints by small businesses that they face a credit squeeze after the government tightened monetary policy to cool inflation and the property market. The Shanghai Composite Index has fallen 14% this year on concern that the world’s second-biggest economy faces a deeper slowdown. (Bloomberg)
Sri Lanka: Devalues LKR, plans tax cuts to support growth
Sri Lanka said it devalued its rupee and plans to cut taxes to spur economic growth as Europe’s debt crisis spoils export demand. The central bank has given a guidance to state banks to buy USD at LKR113.50 and sell at LKR113.90 to help weaken the local currency by 3%, Governor Ajith Nivard Cabraal said. The move was first announced by President Mahinda Rajapaksa yesterday in his budget speech, as he also unveiled proposals to raise salaries for civil servants and increase spending in 2012. Asian nations including the Philippines, Indonesia and Malaysia have taken fiscal or monetary stimulus steps this year, while the SLR has slumped 14.6% against the USD in 2011. The SLR had gained 0.5% this year before today’s depreciation, making the nation’s goods relatively expensive in overseas markets. (Bloomberg)
EU: November consumer confidence drops to 2-year low
European consumer confidence dropped to the lowest in more than two years in November, as the economy edged toward a recession and companies eliminated jobs. An index of household sentiment in the 17-nation euro area fell to -20.4 from -19.9 in Oct, the Brussels- based European Commission said in an initial estimate. That’s the lowest since Aug 2009. Economists had forecast a drop to minus 21, the median of 28 estimates in a Bloomberg survey showed. Confidence has weakened for five straight months, the longest stretch of declines since 2008. (Bloomberg)
US: Fed tells top banks to submit annual capital plans
The Federal Reserve told the 31 largest US banks to test their loan portfolios and trading books against a deep recession and a European market shock. The test’s severest point will assume a 13% jobless rate and an 8% decline in US GDP. Bank-holding companies with assets of USD50bn or more are being asked as part of their 2012 capital plan review to project revenues, losses and capital positions through the end of 2013 using four different scenarios, two provided by the Fed and two defined by the banks. (Bloomberg)
US: Supercommittee failure threatens recovery as rating affirmed
The implosion of the congressional supercommittee is likely to delay any major deficit-reduction agreement until after the next presidential election and may pose an immediate threat to the struggling US economy. The committee’s failure to reach a deal means several tax programs, including a payroll tax holiday, risk expiring at the beginning of next year, weighing on the household spending that accounts for about 70% of the world’s largest economy. The panel’s inability to agree on USD1.2trn in budget cuts stoked doubts about US lawmakers’ ability to overcome partisan gridlock and deal with the nation’s fiscal future. (Bloomberg)
US: Inventory drop sets stage for growth pickup
The economy in the US expanded less than previously estimated in the third quarter, reflecting a drop in inventories that points to a pickup in growth as 2011 comes to a close. GDP climbed at a 2% annual rate from July through Sept, less than projected and down from a 2.5% prior estimate, revised Commerce Department figures showed. The median forecast of 81 economists surveyed by Bloomberg News called for no revision. Excluding stockpiles, so-called final sales climbed 3.6%, the most since last year’s fourth quarter. (Bloomberg)
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