Australian home-loan approvals jumped in December by the most in seven months and exceeded economists’ forecasts as buyers responded to central bank interest-rate reductions. The number of loans granted to build or buy houses and apartments increased 2.3% to 48,453, the highest in almost two years, from a revised November increase of 1.8%, the statistics bureau in Sydney yesterday. The median estimate in a Bloomberg News survey of 20 economists was for a 1.8% gain in approvals. (Bloomberg)
South Korea is preparing to launch talks on a free trade agreement with Vietnam as part of efforts to strengthen economic ties with the fast-growing market, the finance ministry said. "Based on the results of the joint study, we are taking domestic procedures to launch FTA negotiations with Vietnam," the ministry said, adding that Seoul will try to include not just products, services and investment but other areas such as intellectual property rights in the talks. (AFP)
The Bank of Korea announced that it plans to maintain an accommodative policy stance to help shield the economy from the euro-zone sovereign debt crisis, in its clearest indication yet that it would not change its benchmark interest rate just yet. "The Bank of Korea held the base rate during the latter half of 2011 at 3.25%. It intends to retain [a] financial accommodative stance," the BOK said in a statement. (WSJ)
China: May need to fine-tune economic policy this quarter, Premier Wen says
Chinese Premier Wen Jiabao said the nation needs to start “fine-tuning” economic policies this quarter, the first indication of a timeframe for an adjustment he has pledged since October. Economic circumstances in January and the first quarter deserve attention, Wen told business executives last week in Beijing as he sought opinions on a government report, the official Xinhua News Agency reported yesterday. “We have to make a proper judgment as early as possible when things happen and take quick action,” Wen was cited as saying by Xinhua. Wen’s remarks may fuel speculation that the government will soon ease policy further to preserve growth in the world’s second-biggest economy after weaker exports and slower lending last month. (Bloomberg)
Japan: Economy swings to contraction as yen undermines exports
Japan’s economy shrank an annualized 2.3% in the fourth quarter, more than economists estimated, as slumping exports undermine a recovery from last year’s record earthquake. The contraction compared with the median forecast for a 1.3% decline in a Bloomberg News survey of 26 economists. Growth was a revised 7% in the previous quarter, the Cabinet Office said yesterday in Tokyo. (Bloomberg)
Japan: Noda tax, reactor closures narrow deflation bets
Japan’s bond market is pricing in the lowest deflation in more than two years as investors bet that spending ahead of a sales tax increase along with higher energy costs will push up consumer prices. The breakeven rate, the difference between yields on 5-year government notes and inflation-indexed securities, a gauge of trader expectations for consumer prices over the life of the debt, rose to negative 0.02% Feb 10, the highest since Jun 2009 when Bloomberg started compiling the data. The rates were 1.89% in the US and 1.38% in Germany. (Bloomberg)
Hong Kong: Economy may contract on exports
Financial Secretary John Tsang said Hong Kong’s economy may shrink this quarter if exports fail to improve amid faltering global growth. In a sign of the toll that weakness in global demand is taking on Asian economies, Japan on Monday reported a contraction for 4Q 2011. China’s exports and imports fell for the first time in more than two years in Jan, partly because of the disruption of a weeklong Lunar New Year holiday, the government said last week. (Bloomberg
EU: European leaders ‘confident’ Greece meeting bailout demands
Germany and the European Commission welcomed Greek approval of the austerity steps demanded for a financial lifeline, suggesting euro finance chiefs will pull Greece back from the brink when they meet in two days. The Greek parliament’s backing “is a crucial step forward toward the adoption of the second program,” EU Economic and Monetary Affairs Commissioner Olli Rehn told reporters in Brussels yesterday. “I’m confident that the other conditions, including for instance the identification of the concrete measures of EUD325m (USD430m), will be completed by the next meeting” of finance ministers. (Bloomberg)
EU: Moody's downgrades Italy, Spain, Portugal and others; UK, France on credit watch negative
Moody's just downgraded Italy, Malta, Portugal, Slovakia, Slovenia, and Spain. The rating agency also issued negative outlooks for Austria, France, and UK who are all 'still' keeping the Aaa rate. The adjustments on the sovereign debt ratings of selected EU countries reflect their susceptibility to the growing financial and macroeconomic risks emanating from the euro area crisis and how these risks exacerbate the affected countries' own specific challenges. (Moody’s)
UK: CBI says economy to avoid recession and will gain momentum in 2012
The Confederation of British Industry said UK’s economy will avoid a technical recession and the recovery will gain momentum this year, avoiding the need for more quantitative easing by the Bank of England. CBI Director-General John Cridland said that there will be marginal growth this quarter. He noted that they did not assume that there will be a further package of QE in their growth forecasts. (Bloomberg)
US: GOP drops objection for extending payroll tax cut
In a surprise about-face, Republican leaders in the US House of Representatives dropped their demand on Monday for spending cuts to offset the costs of extending a soon-to-expire payroll tax cut for 160m workers. The Republican offer represented a potential breakthrough in deadlocked negotiations with Democrats but it could draw fire from budget-slashing conservatives within the party who are staunchly opposed to adding to a trillion-plus deficit. Notably, the offer was issued by House Speaker John Boehner, the top Republican in Congress, and his deputy Eric Cantor, who has often taken a more hardline approach in budget negotiations with Democrats over the past year. Talks on extending the payroll tax, which is due to expire on Feb 29, have been stalled over how to pay for it, with both sides refusing to make significant compromises and accusing each other of bad faith negotiations. (Reuters)
US: Growth forecast in Obama budget exceeds economist estimates
The Obama administration’s budget predicts the US economy will grow 2.7% this year, a forecast that’s more optimistic than those of private economists and Federal Reserve policy makers. The White House raised the 2012 estimate from 2.6% in Sept. Economists forecast an expansion of 2.2% at an annual rate, according to the median of 79 estimates in a survey by Bloomberg News conducted from Feb 3 to Feb 9. The White House’s growth forecast for 2013 was cut to 3% from 3.5% in Sept. The administration’s projections released Monday are based on information available as of Nov. The president’s economic team has become more optimistic about the economy, leading them to lower their unemployment forecast. Obama’s advisers see employers adding 2m jobs this year if administration policies are adopted. (Bloomberg)
US: Obama budget seeks funding for trade as China’s Xi arrives
President Barack Obama asked Congress for $26m and at least 50 people for a new US panel to investigate unfair trade practices by nations including China, whose Vice President Xi Jinping arrives today for a US visit. Gene Sperling, director of the National Economic Council said the 2013 budget proposal Obama submitted to Congress on Monday contains funds for an Interagency Trade Enforcement Center that would monitor and enforce trade agreements and laws. Obama announced his intention to create the panel, which includes lawyers, researchers, analysts and agents supported by the Commerce Department and US Trade Representative, in his Jan 24 State of the Union speech. (Bloomberg)
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