World Markets Simplified

Consumer price inflation in the People's Republic of China (PRC) rose to 6.5% year-on-year (y-o-y) in July from 6.4% in June. The increase in consumer prices was driven primarily by rising food costs. In contrast, the rate of increase for producer prices remained unchanged in July at 7.5% y-o-y. Retail sales in the PRC rose 17.2% y-o-y in July following 16.8% growth in June. Total fixed assets in the PRC expanded 25.4% y-o-y in the first 7 months of the year, with the bulk of the increase in fixed assets coming from the manufacturing sector. 

Hong Kong, China's GDP growth dramatically slowed in 2Q11 to 5.1% y-o-y from 7.5% y-o-y in 1Q11. Meanwhile, Singapore's GDP rose 0.9% y-o-y in 2Q11, down significantly from 9.3% growth in 1Q11. Japan's real GDP shrank at an annualized rate of 1.3% in 2Q11.Growth in the PRC's industrial value-added output slowed in July to 14.0% y-o-y from 15.1% in June. In Malaysia, the industrial production index rose 1.0% y-o-y in June, an improvement over the revised 5.6% decline in the previous month. Malaysia's manufacturing sales increased 12.9% y-o-y, up from revised growth of 7.5% in May. Machinery orders in Japan rose for a second straight month in June, increasing 17.9% y-o-y. 

The PRC's export growth rate increased to 20.4% y-o-y in July from 17.9% in June, due to strong demand from the European Union (EU). Japan's current account surplus narrowed to JPY526.9 billion in June from JPY590.7 billion in May as exports continued to suffer in the aftermath of the 11 March earthquake and tsunami. Philippine merchandise exports plunged 10.2% y-o-y in June-the largest decline since September 2009-due to weakened consumer demand in the United States (US) and EU. 

At its meeting on 9 August, Bank Indonesia's (BI) Board of Governors decided to keep its reference rate steady at 6.75%. The BI rate has been kept at this level since February. Also, the Bank of Korea decided on 11 August to hold the 7-day repurchase rate steady at 3.25%. Producer price inflation in the Republic of Korea climbed to 6.5% y-o-y in July from 6.2% in June.

The money supply (M3) in Japan expanded 2.3% y-o-y in July. In the Philippines, M3 growth quickened to 11.4% y-o-y in June from 8.0% in May, with domestic liquidity reaching PHP4.4 trillion. The Philippine's total outstanding government debt stood at PHP4.8 trillion in May, rising PHP65 billion from April.

Last week, Korea Eximbank issued CNH200 million worth of 1-year bonds at a coupon rate of 1.0%. Thailand's Charoen Pokphand Foods priced THB10 billion worth of bonds, including THB4 billion in 30-year bonds-Thailand's first-ever 30-year corporate bond. Thai property developer, Quality Houses, started book building for its THB2 billion bond issue last week. In Indonesia, property firm Agung Podomoro priced IDR1.2 trillion worth of bonds last week, while financing firm Clipan Finance Indonesia plans to issue up to IDR500 billion worth of bonds in mid-October.

Government bond yields fell last week for all tenors in the Republic of Korea and the Philippines, and for most tenors in the PRC; Hong Kong, China; Malaysia; Singapore; Thailand and Viet Nam, while yields rose for most tenors in Indonesia. Yield spreads between 2- and 10- maturities widened in the Republic of Korea, the Philippines and Viet Nam, while spreads narrowed in most other emerging East Asian markets.

Three days ago regulators issued a statement saying they would not ban short-selling. They repeated that statement earlier today, then reversed course.  In France, the short-selling ban includes a group of select bank and financial institutions.  Here is the AMF News Release. The Chairman of the Autorité des marchés financiers (AMF), acting in accordance with Article L. 421-16 II of the Monetary and Financial Code, has decided to place a ban on creating any net short position or increasing any existing net short position, including intraday, by any person established or residing in France or in another country, in the equity shares or securities giving access to the capital of the following credit institutions and insurance companies:  April Group Axa BNP Paribas CIC CNP Assurances Crédit Agricole Euler Hermès Natixis Paris Ré Scor Société Générale This decision shall enter into force as soon as it is published on this AMF website as from 22.45 today and shall remain in effect for a period of fifteen days. It may be extended beyond that date pursuant to the conditions provided in the aforementioned Article L. 421-16 II.  This decision does not apply to financial intermediaries acting as market makers or liquidity providers when they are operating under a contract with the relevant market undertaking or with the issuer concerned, or when acting as counterparty for block trades in equities.  The AMF will publish a FAQ to deal with the technical questions raised by this decision. Spain Bans Shorting and Derivatives Based Shorting  FT Alphaville, in Will the short-selling ban come up short? notes the Spain ban includes artificial shorting via derivatives.  Here's the Spanish statement (translated using Google Translate). Note the specific references to derivatives:  ....  The ban will remain for a period of 15 days from the date, may be extended if deemed neces.

NICOLAS SARKOZY, France's president, rushed back from his holiday on August 10th to defend the country from financial attack. In a day of rumour, panic and denials, shares in Société Générale, the country's third-biggest bank, fell by almost a fifth before recovering some ground and closing down 15%.

The immediate cause for worry was a question-mark over whether France will keep its triple-A rating after Standard & Poor's cut America's on August 5th. France's debt stood at 82% of GDP last year, from 64% in 2007. This is one of the highest of any AAA-rated country. That, investors fear, means it could be the next target for a downgrade, especially if already anaemic economic growth falters further. The extra yield required by investors to hold French debt instead of German Bunds jumped to almost triple the average level of 2010 while the cost of insuring against a default by France reached new highs during the week.

After an emergency meeting of ministers, Mr Sarkozy pledged to fulfil recent promises on debt reduction, regardless of whether economic growth slows. More reassuringly, Moody's, S&P and Fitch, the three major credit-rating agencies, all said France's rating was stable.

As Société Générale's shares tumbled, the cost of insuring its debt against default soared by 55 basis points, suggesting it will face a significant increase in borrowing costs. Shares of other French banks were also hit. Those in BNP Paribas, the euro zone's biggest bank, fell by 9.5%; Crédit Agricole's fell by 12%.

"French banks have a bit of everything—exposure to Greece and to Italy—and investors are extremely worried about their funding costs," says one analyst. Some investors feared that Mr Sarkozy's meeting was held to address a sudden crisis at Société Générale. The Elysée palace denied that any bank had been present at the meeting and Société Générale denied "all market rumours".

The ultimate fear is that if France's rating was cut then the European Financial St 

Financial Turmoil Evokes Comparison to 2008 Crisis By NELSON D. SCHWARTZ It feels eerily familiar: Stocks are plummeting. The economy is slowing. Politicians are scrambling to find solutions but are mired in disagreement.

Many Americans are wondering whether they are in for a repeat of the financial crisis of 2008.

The answer is a matter of fierce debate among economists and market experts. Many say the risks are lower today — at least in terms of an immediate crisis — because the financial system over all is healthier and there are fewer hidden problems. But the experts add that there are reasons to worry, and they do not rule out a quick downward spiral if politicians in the United States and in Europe cannot calm investors by addressing fundamental financial threats.

The core problem, as it was three years ago, is too much debt that borrowers are having a hard time repaying — but this time it is government debt rather than consumer debt.

"So far it's not as bad as 2008, but it could get much worse because the sovereign debt concerns are much more global than the subprime mortgage risk of 2008," said Darrell Duffie, a professor of finance at Stanford and an expert on the banking system.

A growing lack of confidence is perhaps the most troubling similarity to 2008 and the biggest worry. "There's a level of fear out there that is a little similar," said Michael Hanson, a senior economist with Bank of America Merrill Lynch. "It's not just the fundamentals. It's the fear of the unknown."

Most of the attention so far has been focused on volatility in stocks, with investors spooked by three heart-stopping declines in the last five trading days — including Wednesday's 4.6 percent drop in the Dow Jones industrial average.

But the bigger concern of many financiers and government officials was signs of stress on Wednesday in European credit markets, which are essential to financing the day-to-day operations of banks and companies there.