Top Stories
More stimulus is expected as China's inflation eases
With China's inflation rate at an unexpectedly low 2.2% annual rate for June, Premier Wen Jiabao said Beijing would step up efforts to stimulate the economy. According to a Bloomberg survey of economists, China is likely to cut interest rates an additional quarter-point this year and make two more half-point cuts in the reserve-requirement ratio. "Inflation is dead, and growth is by far the main concern in Asia," said Tim Condon, chief Asia economist at ING Financial Markets in Singapore.
Spain may get additional year on budget; bond yields top 7%
Spain will be given an additional year to meet its budget goals, European diplomats said ahead of a meeting of finance ministers in Brussels. On Monday, the country's 10-year bond yield rose above 7%, a level that is widely considered unsustainable.
Draghi points to ECB rate cut if conditions worsen
Another interest-rate cut may be in store from the European Central Bank, depending on conditions, suggested ECB President Mario Draghi. "We have to look at what the situation is, the data and the developments, and then we will make up our minds on the Governing Council what to do," Draghi said in Brussels.
Output, confidence indexes show further U.K. contraction
The U.K. economy, already in recession, is likely to shrink further as indicated by June's pullback in an output index. A business confidence index also declined, "suggesting more difficult economic terrain is ahead," according to BDO LLP.
Bank of England's Tucker denies political pressure for Libor manipulation
No pressure was applied by official or other sources on Bank of England Deputy Governor Paul Tucker to suggest to Barclays that it lower its Libor submissions, Tucker told members of Parliament on Monday. Tucker also disputed a memo by former Barclays CEO Bob Diamond that suggested Tucker gave tacit approval for Barclays' Libor manipulation.
U.S. Fed official sees vicious circle of poor jobs growth, low spending
Slower job growth in the U.S. is creating a "self-fulfilling dynamic" in which the household spending needed to spur employment fails to materialize, further cutting into hiring, said Eric Rosengren, president of the Federal Reserve Bank of Boston. And with the eurozone crisis continuing to drag out, "slow growth is likely to continue for quite some time," Rosengren said.
Market Activities
INTERNATIONAL MARKETS OVERVIEW
The launch of earnings season on Wall Street and further signs of concern for economies in Asia and Europe rattled global stock markets Monday. The S&P 500 ended the day down 0.16%, while the FTSEurofirst 300 index lost 0.4%. Here is a continuously updated list of global stock indices.
Economic Trends & Outlook
India is in no position for rate cuts, officials agree
While interest-rate cuts appear to be in store in Europe and China, India is unlikely to follow. Duvvuri Subbarao, governor of the Reserve Bank of India, is opposed to such a move unless Prime Minister Manmohan Singh makes progress on the fiscal deficit. And the chairman of Singh's Economic Advisory Council, C. Rangarajan, said Monday that nothing in the way of stimulus or rate cuts could be expected, given India's inflation rate.
China appears better equipped than India for economic challenges
China is in a strong position to tackle its economic problems, but India, facing similar challenges, has fewer tools to work with. For China, "it's more a matter of choice of what policy measures it will take to stimulate the economy, rather than whether it will be able to," said Luis Kuijs, project director at the Fung Global Institute. But India "has no fiscal ammo left to pump-prime the economy, so it has to endure a slowdown and take it on the chin," said Frederic Neumann, co-head of Asian economic research for HSBC.
May machinery orders plunge 14.8% in Japan
Japan's machinery orders, a key leading indicator, fell a sharp 14.8% in May from April, greatly exceeding the 2.6% average forecast of economists. The latest figure, which excludes the volatile power and shipping sectors, indicates a gloomier outlook for the overall economy.
Global ills may cause Hong Kong government to revise 2012 outlook
Extended global uncertainties and Hong Kong's high dependence on trading partners may soon lead the government to adjust its 2012 growth forecast, said Financial Secretary John Tsang. "In August, I will make an assessment whether we need to adjust our forecast," Tsang said.
Mining boom conceals underlying weakness of Australian economy
Australia's economic health in the aggregate is somewhat deceiving, with its heavy reliance on exports of minerals to China. If that source of income slackens, it will quickly become apparent that most other sectors are faring poorly and unable to sustain the overall economy.
Singapore stimulus isn't needed for now, minister says
With a healthy labor market and still-robust exports to partners such as Indonesia, Singapore needs no economic stimulus at this stage even though the global slowdown is taking a toll, said S. Iswaran, second minister for trade and industry. The government still expects growth of 1% to 3% for the year but will keep an eye on developments, Iswaran said.
OECD sees promising second half for South Korea
The Organization for Economic Cooperation and Development projects an expanding economy for South Korea in the second half of the year, in spite of the unresolved crisis in the eurozone. The OECD pegged the country's composite leading indicator of economic activity at 100.1 for April, up from 99.9 in the previous month and marking the first time in 11 months that the indicator has pointed to growth by topping 100.
Taiwan inflation picks up as trade surplus grows
Taiwan's consumer price index rose in June at its highest annual rate in nearly a year -- excluding extraordinary events -- coming in at 1.77%, according to the government. There is now some question whether the rate for the year can be kept below 2%, with much depending on oil prices. Separately, the Finance Ministry reported a fall in exports and imports, and a wider trade surplus for June.
Philippine government sees steady gains in growth
Philippine GDP growth is likely to pick up steadily, rising from a range of 5% to 6% this year to as much as 8.5% in 2016, the end of President Benigno S.C. Aquino III's term, according to the Development Budget Coordination Committee. "Even with the volatility abroad, these growth rates are feasible, although we say that with caution," said Budget Secretary Florencio B. Abad. Abad noted the sustained boost to the economy from investment in high-priority sectors, including tourism, agriculture and services.
Capital Markets & Financial Products
South Korea's issuance of equity-linked securities sets record in first half
Issuance of equity-linked securities in South Korea reached a record 26 trillion won in the first half of the year, according to figures from Tongyang Securities. Issuance in June, however, was down for the third month running, reflecting a downbeat stock market. But the second half is expected to see further gains.
Mainland ETFs for Hong Kong market are launched
On Monday, Chinese mainland retail investors were allowed their first direct access to the Hong Kong stock market with the launch of the first exchange-trade funds for that market. "For professionals ... the coexistence of the primary and secondary markets may provide them certain arbitrage opportunities. The arbitrage mechanism will also help reduce the discount or premium level of the funds in the secondary markets," said an executive from E Fund Management.
PineBridge may be scaling down retail business in Asia
PineBridge Investments might be pulling back from the retail business in Asia, as may be indicated by the departure of the firm's head of retail and intermediary channels for Hong Kong and Singapore. Sources say PineBridge is concentrating instead on selling private banks and institutions its range of traditional and alternative funds.
Ethics & Standards
Japan's Nomura takes more hits from insider trading scandal
Nomura Holdings is facing further repercussions over its insider trading scandal as the Japan Housing Finance Agency canceled the firm's involvement in underwriting an issuance of 30-year bonds in September. Meanwhile, Moody's Investors Service characterized as "credit negative" the recent dismissal of Nomura and Daiwa Securities Group from other underwriting duties.
More stimulus is expected as China's inflation eases
With China's inflation rate at an unexpectedly low 2.2% annual rate for June, Premier Wen Jiabao said Beijing would step up efforts to stimulate the economy. According to a Bloomberg survey of economists, China is likely to cut interest rates an additional quarter-point this year and make two more half-point cuts in the reserve-requirement ratio. "Inflation is dead, and growth is by far the main concern in Asia," said Tim Condon, chief Asia economist at ING Financial Markets in Singapore.
Spain may get additional year on budget; bond yields top 7%
Spain will be given an additional year to meet its budget goals, European diplomats said ahead of a meeting of finance ministers in Brussels. On Monday, the country's 10-year bond yield rose above 7%, a level that is widely considered unsustainable.
Draghi points to ECB rate cut if conditions worsen
Another interest-rate cut may be in store from the European Central Bank, depending on conditions, suggested ECB President Mario Draghi. "We have to look at what the situation is, the data and the developments, and then we will make up our minds on the Governing Council what to do," Draghi said in Brussels.
Output, confidence indexes show further U.K. contraction
The U.K. economy, already in recession, is likely to shrink further as indicated by June's pullback in an output index. A business confidence index also declined, "suggesting more difficult economic terrain is ahead," according to BDO LLP.
Bank of England's Tucker denies political pressure for Libor manipulation
No pressure was applied by official or other sources on Bank of England Deputy Governor Paul Tucker to suggest to Barclays that it lower its Libor submissions, Tucker told members of Parliament on Monday. Tucker also disputed a memo by former Barclays CEO Bob Diamond that suggested Tucker gave tacit approval for Barclays' Libor manipulation.
U.S. Fed official sees vicious circle of poor jobs growth, low spending
Slower job growth in the U.S. is creating a "self-fulfilling dynamic" in which the household spending needed to spur employment fails to materialize, further cutting into hiring, said Eric Rosengren, president of the Federal Reserve Bank of Boston. And with the eurozone crisis continuing to drag out, "slow growth is likely to continue for quite some time," Rosengren said.
Market Activities
INTERNATIONAL MARKETS OVERVIEW
The launch of earnings season on Wall Street and further signs of concern for economies in Asia and Europe rattled global stock markets Monday. The S&P 500 ended the day down 0.16%, while the FTSEurofirst 300 index lost 0.4%. Here is a continuously updated list of global stock indices.
Economic Trends & Outlook
India is in no position for rate cuts, officials agree
While interest-rate cuts appear to be in store in Europe and China, India is unlikely to follow. Duvvuri Subbarao, governor of the Reserve Bank of India, is opposed to such a move unless Prime Minister Manmohan Singh makes progress on the fiscal deficit. And the chairman of Singh's Economic Advisory Council, C. Rangarajan, said Monday that nothing in the way of stimulus or rate cuts could be expected, given India's inflation rate.
China appears better equipped than India for economic challenges
China is in a strong position to tackle its economic problems, but India, facing similar challenges, has fewer tools to work with. For China, "it's more a matter of choice of what policy measures it will take to stimulate the economy, rather than whether it will be able to," said Luis Kuijs, project director at the Fung Global Institute. But India "has no fiscal ammo left to pump-prime the economy, so it has to endure a slowdown and take it on the chin," said Frederic Neumann, co-head of Asian economic research for HSBC.
May machinery orders plunge 14.8% in Japan
Japan's machinery orders, a key leading indicator, fell a sharp 14.8% in May from April, greatly exceeding the 2.6% average forecast of economists. The latest figure, which excludes the volatile power and shipping sectors, indicates a gloomier outlook for the overall economy.
Global ills may cause Hong Kong government to revise 2012 outlook
Extended global uncertainties and Hong Kong's high dependence on trading partners may soon lead the government to adjust its 2012 growth forecast, said Financial Secretary John Tsang. "In August, I will make an assessment whether we need to adjust our forecast," Tsang said.
Mining boom conceals underlying weakness of Australian economy
Australia's economic health in the aggregate is somewhat deceiving, with its heavy reliance on exports of minerals to China. If that source of income slackens, it will quickly become apparent that most other sectors are faring poorly and unable to sustain the overall economy.
Singapore stimulus isn't needed for now, minister says
With a healthy labor market and still-robust exports to partners such as Indonesia, Singapore needs no economic stimulus at this stage even though the global slowdown is taking a toll, said S. Iswaran, second minister for trade and industry. The government still expects growth of 1% to 3% for the year but will keep an eye on developments, Iswaran said.
OECD sees promising second half for South Korea
The Organization for Economic Cooperation and Development projects an expanding economy for South Korea in the second half of the year, in spite of the unresolved crisis in the eurozone. The OECD pegged the country's composite leading indicator of economic activity at 100.1 for April, up from 99.9 in the previous month and marking the first time in 11 months that the indicator has pointed to growth by topping 100.
Taiwan inflation picks up as trade surplus grows
Taiwan's consumer price index rose in June at its highest annual rate in nearly a year -- excluding extraordinary events -- coming in at 1.77%, according to the government. There is now some question whether the rate for the year can be kept below 2%, with much depending on oil prices. Separately, the Finance Ministry reported a fall in exports and imports, and a wider trade surplus for June.
Philippine government sees steady gains in growth
Philippine GDP growth is likely to pick up steadily, rising from a range of 5% to 6% this year to as much as 8.5% in 2016, the end of President Benigno S.C. Aquino III's term, according to the Development Budget Coordination Committee. "Even with the volatility abroad, these growth rates are feasible, although we say that with caution," said Budget Secretary Florencio B. Abad. Abad noted the sustained boost to the economy from investment in high-priority sectors, including tourism, agriculture and services.
Capital Markets & Financial Products
South Korea's issuance of equity-linked securities sets record in first half
Issuance of equity-linked securities in South Korea reached a record 26 trillion won in the first half of the year, according to figures from Tongyang Securities. Issuance in June, however, was down for the third month running, reflecting a downbeat stock market. But the second half is expected to see further gains.
Mainland ETFs for Hong Kong market are launched
On Monday, Chinese mainland retail investors were allowed their first direct access to the Hong Kong stock market with the launch of the first exchange-trade funds for that market. "For professionals ... the coexistence of the primary and secondary markets may provide them certain arbitrage opportunities. The arbitrage mechanism will also help reduce the discount or premium level of the funds in the secondary markets," said an executive from E Fund Management.
PineBridge may be scaling down retail business in Asia
PineBridge Investments might be pulling back from the retail business in Asia, as may be indicated by the departure of the firm's head of retail and intermediary channels for Hong Kong and Singapore. Sources say PineBridge is concentrating instead on selling private banks and institutions its range of traditional and alternative funds.
Ethics & Standards
Japan's Nomura takes more hits from insider trading scandal
Nomura Holdings is facing further repercussions over its insider trading scandal as the Japan Housing Finance Agency canceled the firm's involvement in underwriting an issuance of 30-year bonds in September. Meanwhile, Moody's Investors Service characterized as "credit negative" the recent dismissal of Nomura and Daiwa Securities Group from other underwriting duties.
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