Greek election is just the first step in latest phase of euro crisis

Greek conservatives' victory in elections Sunday brings with it a likely new set of demands from the resulting coalition government. Among other things, more time to implement mandated spending cuts and a spending package to restore the least generous pensions are on the agenda. These and other requests are likely to puncture any euphoria over the election and dim the outlook for a speedy resolution to the euro crisis. 

G20 gathers with euro crisis firmly at top of agenda

The first order of business for Group of 20 leaders meeting in Mexico is the euro crisis, with the focus on Spain for a time as Greece forms a coalition government friendly to staying in the common currency. German Chancellor Angela Merkel and U.S. President Barack Obama were meeting Monday, with Merkel expected to repeat demands for restraint in government spending. Obama, meanwhile, and others are expected to press Germany for more flexibility.

As borrowing rate tops 7%, Spain's market access appears at risk

Spain's market access was in jeopardy Monday as borrowing costs surged past 7%, the point at which other sovereigns in Europe have had to seek bailouts. The sell-off came as the central bank reported bad debts held by Spanish banks climbed to an 18-year high in April. 

India's central bank stays the course on rates

Maintaining that high interest rates are not the problem restraining growth, the Reserve Bank of India elected not to cut rates Monday, counter to widespread expectations. The central bank says it is up to the government to take action, though the scope for that is narrowed by the country's fiscal deficit. Meanwhile, Fitch lowered its estimate of India's sovereign credit outlook from stable to negative. 

Chinese cities see cooling housing market in May

China's restrictions on the nation's housing market appeared to be achieving the desired end, as prices declined year-on-year in May in 54 of the 70 cities tracked. "China’s property market is approaching gently the bottom of its decline path, and I expect we'll see a touch-down sometime over the next three to four months. They've definitely succeeded in slowing the market down," said Peter Churchouse, managing director of Portwood Capital, a Hong Kong-based property investment firm. 

U.S. Fed may move to stimulate as outlook darkens

With an expected switch to a lower outlook for U.S. growth for the year and a jobless rate pegged above 8%, the Federal Reserve may be prepared to adopt a risk management strategy as officials meet this week. The question is whether to extend the Fed's program of selling short-term debt and buying longer-term bonds in its so-called Operation Twist.

Market Activities
INTERNATIONAL MARKETS OVERVIEW

Global markets ended the day mixed Monday after early optimism over Sunday's election outcome in Greece yielded to sustained concerns over the euro crisis. Many investors, meanwhile, waited for any indications that might emerge from the Group of 20 summit in Mexico. Here is a continuously updated list of global stock indices. 

Economic Trends & Outlook
Credit Suisse report sees emerging markets slowing globally

Lagging exports in a sluggish world economy are putting a damper on emerging markets globally, a Credit Suisse report says. But previous efforts to restrain inflation also are having an effect. Stimulus in several countries may be in order, the report says, although the scope for such action is more limited than in 2009-10. 

China experiment would free up bank funds for lending

In a bid to free up funds for lending, Chinese banks will be allowed to turn loans into securities in a trial program expected soon from Beijing. As much as $7.9 billion could be removed from banks' balance sheets in a move that would take China another step toward reform in line with market forces. 

Cooling economies are cited in 2nd sub-3% growth outlook for Taiwan

A second forecast for sub-3% growth for Taiwan has been issued, this one from the Taiwan Research Institute as it cites slowing economies domestically and overseas. The prediction of 2.52% growth is in line with Taiwan National University-Cathay Group's outlook for 2.45% growth issued last week. 

China offers 600 billion yuan in loans to Taiwan companies

Taiwanese businesses struggling to obtain bank loans will get a lift from China, which has pledged to extend 600 billion yuan in loans over the next three to four years. The planned lending is part of a package designed to improve ties and ease tensions between Taiwan and the mainland announced by Wang Yi, director of the Taiwan Affairs Office of the State Council, during the Strait Forum in Xiamen.

Philippine growth outlook brightens on domestic strength

A variety of factors in the Philippines, including robust private spending and strong employment numbers, are cited for a higher 2012 growth forecast in the 6%-to-7% range by First Metro Investment and the University of Asia and the Pacific. The report also says inflation should moderate to 3.2% to 3.4% for the year. 

New forecast slashes Malaysia growth outlook to 2%

Even absent a global recession, Malaysia's growth is likely to come in at about 2% for the year, according to Manu Bhaskaran, CEO of Centennial Asia Advisors. The estimate is considerably lower than an earlier forecast of 4% to 5% growth by Bank Negara Malaysia. Manu cites poorer prospects in China, the U.S. and Europe.

Capital Markets & Financial Products
Chinese firms may help fund British nuclear power project

A new nuclear power project in Britain is likely to get a big infusion of Chinese cash as two Chinese state companies join with Western investors to bid for the $24 billion development, according to sources in the industry. Areva and Westinghouse have selected China's State Nuclear Power Technology Corp. and China Guangdong Nuclear Power Holding to help bid for the Horizon project. 

HKEx shares extend slide on prospect that LME bid will win approval

With the prospect that Hong Kong Exchange & Clearing's bid for the London Metal Exchange may win regulatory clearance, HKEx's shares extended their sharp decline since the bid was disclosed in February. The offer price, at 180 times the LME's net income for 2011, is considered "extremely expensive." 

Japan reassures U.S. on dollar holdings

Despite some recent slippage, Japan says it intends to maintain substantial dollar holdings for the foreseeable future. The reassurance comes at an opportune time for the U.S., as China continues its moves to diversify its holdings away from U.S. assets.

Industry & Regulatory Update 

S. Korea's hedge fund restrictions are termed too strict

South Korea's rules for the newly launched onshore hedge fund industry are coming in for criticism from the industry, which is urging liberalization. As the rules stand, only 10% of financial institutions qualify for the market because of capital restrictions and other restraints focused on operating and servicing a local hedge fund. 

New Philippine laws target money laundering

Two measures aimed at curbing money laundering and terrorist financing have been signed into law in the Philippines. The laws will also help bring the country into line with standards set by the Financial Action Task Force of the Organization of Economic Cooperation and Development.

Ethics & Standards
Gupta verdict may inspire more vigorous enforcement

The conviction of former Goldman Sachs director Rajat Gupta is considered likely to encourage further vigilance on Wall Street by regulators and prosecutors. The U.S. Justice Department is said to have a young staff eager to pursue such cases, finding in the Gupta outcome a particular incentive, given that the case was based on circumstantial evidence