clipping de matÉrias econÔmicas - 13-07-2012 - financial times

8/14/2019 CLIPPING DE MATRIAS ECONMICAS - 13-07-2012 - FINANCIAL TIMES

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CLIPPING DE MATRIAS ECONMICO-FINANCEIRAS EINTERNACIONAIS 13/07/2012 FINANCIAL TIMES

Matrias:

- Chinese economic growth slows to 7.6%

- Emerging markets more positive on economy

- US jobless claims fall to 350,000- Athens cabinet pressed to deepen cuts

- Italy sells debt despite downgrade

- Rate cuts exert pressure on euro

- UK fiscal outlook clearly unsustainable

- Troika says Dublin on track to meet targets

- Banks Libor costs may hit $22bn

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Chinese economic growth slows to 7.6%

By Simon Rabinovitch in Beijing

Chinas growth fell to 7.6 per cent in the second quarter, its slowestsince early 2009, as a property market downturn and weak exportsweighed on the worlds second-biggest economy.

Over the past two months, as evidence of the slowdown hasmounted, the government has shifted its policy to a pro-growthstance, which analysts say is likely to bring about a recovery in thesecond half of the year.

The expectation for weakness in the second quarter was pretty

strong. But the investment number is the surprise. There appears tohave been a significant pick-up. That is policy beginning to work,
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said Ken Peng, an economist with BNP Paribas in Beijing. We arelooking for a small rebound in the third quarter and a bigger reboundin the fourth quarter.

The year-to-date investment figure jumped from 20.1 per cent in May

to 20.4 per cent last month, an indication that the increase ininvestment in June alone must have been considerably stronger,following on the heels of the governments moves to stimulate theeconomy.

The Chinese central bank cut interest rates last week, the secondtime in less than a month. Premier Wen Jiabao has also said that thegovernment will look to increase public investment to stabilise theeconomy.

A steep drop in inflation, to just over 2 per cent from last years highnear 7 per cent, has cleared the way for more aggressive policyeasing.

The latest bank lending figures, published on Thursday, confirmedthat the government is clearly trying to support growth. New loansreached Rmb920bn ($114bn) in June, up from Rmb793bn in May andmore than expected.

Yet officials have also repeatedly vowed that they will not unleash a

massive stimulus programme as they did in late 2008 when theglobal financial crisis erupted. That boom in spending and banklending fuelled debt worries that China is still trying to contain as wellas a property bubble that it has been trying to deflate.

Mr Wen has also been adamant that the government will not relaxthe measures that it has used to dampen property speculation, fearfulthat a big rebound in already lofty housing prices could ensue.

If the second quarter does indeed prove to be the trough of this

economic cycle for China, commentators who have described thecurrent downturn as a soft landing would have some vindication.

The peak-to-trough drop in growth would be 4.5 percentage pointsfrom 2010 to now. That contrasts with a plunge of 8 percentagepoints in the previous downturn, from 2007 to the start of 2009.

The Shanghai Composite, Chinas main stock market, initially roseafter the release, but was soon trading flat, while in Hong Kong, theHang Seng index was slightly higher.
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Emerging markets more positive on economy

By Martha Shanahan in Washington

People in emerging economies are optimistic about their countriesprospects, a contrast with the gloom enveloping the western world asthe global financial crisis continues to put a damper on sentiment,according toa new poll from the Pew Research Center.

While most of Europe and the US has remained exceedingly glumsince the 2007/2008 financial crisis, the Pew survey found a strikingcontrast in China, Brazil, India and Turkey.

People in these countries are twice as likely as Americans and morethan three times as likely as Europeans to think economic conditions

in their countries are good, the survey said. They were also morelikely than counterparts in the US and Europe to say they arefinancially better off now compared with five years ago.

In eight out of the 15 countries with comparable data from previousyears, those surveyed were more negative about the economy thanthey were in 2008.

In Europe, only Germans were positive generally about theireconomy. German confidence in the economy floats above the rest of

the continent at 73 per cent as the countrys economy remainedrelatively strong while other parts of Europe suffera devastating debtcrisis.

Just 2 per cent of Greeks and 6 per cent of Spaniards and Italiansthought things were going well.

In the US, the worlds largest economy, less than a third ofAmericans were positive about the state of the economy, a figure thatwas up from last year but has fallen overall since before the

beginning of the US economic meltdown, the survey said. Americanswere, however, twice as confident in their family finances as theywere in the national economy.

The Chinese were the most upbeat among those from emergingmarkets. A majority said they were satisfied with current nationaleconomic conditions and 69 per cent said they were content withtheir personal financial situation.

This makes China, which has been combating an economic slowdown

and labour market worries, the only surveyed nation whose citizensremained positive about their economic circumstances over the past
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decade. Relative to the countrys population, the Chinese respondentswere disproportionately urban.

The survey also found that the financial crisis dealt a blow toconfidence in capitalism, with the most doubters in Mexico and Japan.

Worldwide, support for capitalism weakened in nine of the 16countries for which there was trend data since 2007.

The survey, conducted by the Pew Research Centers Global AttitudesProject, polled 26,210 people in 21 countries from March 17 to April20 2012. The margin of error varied between countries, and rangedfrom 3.2 to 5.2 percentage points.

US jobless claims fall to 350,000

By Shannon Bond in New York

US jobless claims fell to 350,000 last week, the lowest level in morethan four years, but unusual seasonal factors may have fuelled theunexpected sign of improvement in the labour market.

The drop of 26,000 from the previous week surprised economists whohad predicted a slighter decline to 372,000.

However, the labour department noted that some of the decreasemay be due to fewer temporary lay-offs in the auto industry. Fordand Chrysler announced earlier this year that they would keepfactories running in July to meet strong demand.That may have ledfewer auto workers to file for unemployment benefits, suggesting thatthe apparent strength may not reflect a deeper improvement inemployment.

John Ryding and Conrad DeQuadros at RDQ Economics said: Theclaims data in early July are far less useful than normal in judging theunderlying state of the labour market. It will take two or three weeksfor this distortion to the claims data to unwind, which means thisreport will be of little use in forming early opinions on the Julyemployment data.

The four-week moving average of claims, which smooths outvolatility, fell 9,750 to 376,500.

The pace of hiring at US companies has slowed in recent months

amid uncertainty over the global economy and the strength of the USrecovery.Employers added just 80,000 jobs in June, continuing a run
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of weak employment figures in the second quarter after a pickup injob creation at the beginning of the year.

Continuing claims fell 14,000 to 3.3m in the week ending June 30,while the number of people who have expended traditional benefits

and are now receiving emergency assistance fell to 2.6m in the weekending June 23.

Athens cabinet pressed to deepen cuts

By Kerin Hope in Athens

Greeces technocrat finance minister pressed cabinet colleagues onThursday for immediate spending cuts to put the 2012 budget backon track before talks begin with international lenders on a newmedium-term reform programme aimed at keeping the country insidethe eurozone.

Yannis Stournaras gave ministers responsible for some three-quartersof budget spending a week to come up with cost-cutting measures,including reductions in military procurement and further cuts tohealth and local government spending.

If sufficient savings could be identified, a senior finance ministryofficial said, it might be possible to avert a further 12 per cent wagecut for armed forces personnel, judges, academics and clerics, agreedwith creditors but opposed by politicians in the new three-partycoalition government.

If we are able to propose alternative sources of financing for thebudget, they may be accepted by the troika [the EuropeanCommission, the European Central Bank and the InternationalMonetary Fund], the official said.

The effort to identify new sources of funding ahead of the troikasreturn on July 24 highlights Greeces increasingly desperate fiscalposition, with the economy now forecast to contract by as much as6.9 per cent this year, against earlier projections of 4.5-4.7 per cent.

Two successive election campaigns derailed the budget, leavingAthens to cover a 3bn funding gap equal to 1.5 per cent of grossdomestic product before it can expect to receive any furtherdisbursements from its second bailout package.


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The government also has to push through legislation extending aspecial property tax for another year and raising prices for heatingfuel to the same level as petrol, under a scheme to crack down onwidespread fuel smuggling estimated to cost the budget more than2bn a year in lost tax revenues.

Greece missed a 2.4bn loan disbursement due in June because ofpolitical uncertainty, while another 4.1bn tranche due next month islikely to be delayed until September, pending a deal on the 2013-15programme and a satisfactory progress report from the commissionand the IMF.

The delay will add to Mr Stournarass problems as revenues arelagging budget targets by about 1bn, raising concerns aboutwhether the government will have enough cash to pay August

pensions and salaries.

However, European officials have given assurances that in spite ofdelays in making transfers to the budget, funds will be available tocover a 3.2bn sovereign bond repayment due in August.

Even if the government implements the additional spending cuts

requested by creditors, it will still face problems meeting this yearsbudget deficit target of 6.7 per cent of national output as theeconomy continues to contract.

The jobless rate rose from 22 per cent to 22.5 per cent in April, withunemployment among young workers reaching 51.5 per cent,according to preliminary figures released on Thursday by Elstat, theindependent statistics agency.

Regardless of talk about renegotiating the bailout terms, there is astrong argument for the troika to relax the deficit target to reflect the

ongoing domestic depression, said an Athens-based economist.

Italy sells debt despite downgrade

By Guy Dinmore in Rome and Mary Watkins in London

Italy on Friday managed to sell 5.25bn of medium and long-termnotes at the top of the Treasurys planned issue range, as domesticbanks continued to support government auctions despite thedowngrade of Italys ratings.
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Rome sold 3.5bn of three-year notes at an average rate of 4.65 percent compared with 5.30 per cent at the previous sale in June. It wasthe lowest level since May.

The Treasury also sold a range of other off the run bonds, with

varying maturities. It sold 766m of seven-year bonds at 5.58 percent, 600m of 10-year paper at 5.82 per cent and 384m of 11-years at 5.89 per cent. The bid-to-cover ratio, which measuresdemand, was 1.7 times for the three-year paper and 2.3 times for the11-year paper.

Divyang Shah, global strategist at IFR Markets, said Italys ability tosell at the top end of the range was not surprising, given continuedsupport from domestic banks.

The real action is at the front end of the curve where we are seeingHolland and Finland, for example, with negative yields at two years,he said, as investors continue to gravitate towards assets in the coreof the eurozone.

In the secondary markets, yields on Italian benchmark debt weretrading up 10 basis points at 6.01 per cent following the auction,while Spanish 10-year bond yields were up 3 points at 6.66 per cent.

Moodys cut Italysrating by two notches to Baa2, leaving it just two

grades above junk status on Thursday night, citing increased risks ofhigher borrowing costs in part due to contagion from Spain and apossible Greek exit from the euro, and the absence of foreign buyers

of Romes debt.

Italys deteriorating economic outlook was also a factor, with Moodyspredicting a fall in gross domestic product of 2 per cent this year, inline with International Monetary Fund forecasts, putting pressure onbudget deficit targets.

Keeping Italy on negative outlook, Moodys said: Italys governmentdebt rating could be downgraded further in the event there isadditional material deterioration in the countrys economic prospectsor difficulties in implementing reform.

It said the key driver in the downgrading was Italys increasedsusceptibility to event risk, referring to an increased likelihood thatSpain would require further external support and the increasedprobability of a Greek exit from the euro.

Moodys also questioned the resources available in the eurozonesbailout funds to provide a backstop to Italys debt of 1.95tn.


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Mario Monti, prime minister, has not ruled out the possibility ofapplying for purchases by the funds of Italys debt on the openmarket in an effort to cap its interest rates.

While acknowledging the strong commitment to structural reforms

by Italys technocrat government which had the potential tomaterially improve Italys long-term prospects, Moodys said itsnegative outlook reflected the view that risks to implementing thereforms were substantial. It noted austerity and reform fatigueamong the population as well as political uncertainty as Italy drawscloser to elections early next year.

Some analysts questioned Moodys arguments, suggesting the ratingagency was behind the curve. But they also expressed concern overhow long Italys already stretched banks will continue to make up for

the absence of foreign investors.

Barclays said in a note that it found the agencys decision somewhatperplexing, noting that Mr Montis government had the continuedsupport of the main parties in parliament and that early electionslooked unlikely. Barclays also argued that recent decisions taken inBrussels and by the Spanish and Greek governments went in theright direction of giving more stability to the euro area, while Italywas still maintaining a primary budget surplus before debt interestpayments.

Giorgio Squinzi, head of Confindustria, Italys main businessassociation, said: This is just Moodys opinion. Italy and itsmanufacturing base was much stronger than Moodys suggested, headded.

Nicholas Spiro, a sovereign debt analyst, said the result of Fridaysauction was all the more impressive given Moodys downgrade. Buthe was downbeat over Italys prospects.

Italy is caught in a pernicious circle in which the perennial lack ofgrowth, the heavy public debt burden, mounting political uncertaintyand the absence of a credible backstop for Italian debt are all feedingon each other, Mr Spiro said.
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Rate cuts exert pressure on euro

By Alice Ross

The euro fell below $1.22 for the first time since 2010 as analystssaid last weeksrate cuts by the European Central Bank were puttingsignificant downward pressure on the single currency.

The euro hit a session low of $1.2165, extending its losing streakafter the ECB cut headline rates 0.25 per cent last week and, moreimportantly, cut the deposit rates it pays to European banks by 25basis points to zero.

Analysts said the resulting disillusionment with the euro, with moneymarket funds restricting new investments, helped to explain why the

single currency was falling even as Italys borrowing costs fell at anauction on Thursday.

Chris Walker, foreign currency analyst at UBS, said: The euro hasreally dislocated itself from the wider markets over the past week. Itpoints towards structural outflows out of Europe and weve seensome evidence of that.

BNY Mellon said its trading desk had seen sharp outflows from theeuro in recent days with the main beneficiaries being the Swissfranc and the US dollar.

The dollar was broadly stronger after the release of minutes from theUS Federal Reserves Open Market Committee showed a mix of viewson monetary policy, damping expectations of a further tranche of so-called quantitative easing in the near future.

The pound fell 0.5 per cent to $1.5427 while the dollar rose 0.3 percent against the Swiss franc to SFr0.9841.

The Australian dollar made large losses against the US currency,falling 1.2 per cent to $1.0126 following weak employment data.

The Australian dollar was also weaker against the yen, falling 1.7 percent to Y80.31, as the Japanese currency strengthened after the Bankof Japan announced only a small addition to its asset purchasescheme.

The US dollar fell 0.6 per cent to Y79.27, the euro lost 0.9 per cent toY96.64 and sterling dipped 1 per cent to Y122.29.
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The Bank of Korea surprised markets with a 25bp rate cut to 3 percent, citing downside risks to growth. The dollar rose 1.2 per centagainst the won to Won1,154.

UK fiscal outlook clearly unsustainable

Reuters

LONDON Britains long-run fiscal outlook over the next 50 yearsremains clearly unsustainable, despite the government makingsome progress in reducing current borrowing and public sectorpension commitments, an official watchdog said on Thursday.

The Office for Budget Responsibility said it expected public sector netdebt to fall from 74 per cent of gross domestic product in 2016-17 toa trough of 57 per cent in the mid-2020s, before rising increasinglyquickly to reach 89 per cent of GDP in 2061-62.

This was better than its long-run forecast last year, when it predicteddebt would total 107 per cent of GDP by 2060-61.

However, the OBR said more needed to be done to put Britains publicfinances on a secure footing where total debt was not steadily risingin the long run.

On current policy we would expect the budget deficit to widensufficiently over the long term to put public sector net debt on acontinuously rising trajectory as a share of national income. This isclearly unsustainable, the OBR said.

Danny Alexander, deputy finance minister, said the OBR reportvindicated the decision in 2010 by the new Conservative-LiberalDemocrat coalition to make deficit reduction a priority.

The OBR analysis makes it clear that our medium-term consolidationplan is essential to restoring long-term sustainability in the publicfinances, Mr Alexander said.

A deterioration in the primary balance in 2016-17 worth 1 per centof GDP could increase projected public sector net debt in 2061-62 toaround 130 per cent of GDP. This shows the scale of impact if themedium-term consolidation was not achieved, he added.
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Labour argues that the coalitions pace of deficit reduction is self-defeating during Britains current recession, as it retards the growthalso needed for Britains public finances to be sustainable.

Troika says Dublin on track to meet targets

By Jamie Smyth in Dubin

Dublin remains on track to meet its fiscal targets under its bailoutprogramme despite a challenging economic environment and higherthan forecast spending in the health sector, the troika of internationallenders has said.

The European Commission, European Central Bank and InternationalMonetary Fund said on Thursday Irelands programmeimplementation remained strong and fiscal targets for the first half of2012 were met. However, it called on Dublin to tackle overspendingin the health sector and forecast only modest economic growth for2012 and 2013.

Growth prospects for the remainder of 2012 and into 2013 remainmodest, with weak trading partner growth dampening export demanddespite further competitiveness gains, said the troika in its seventh

review of Irelands bailout.

Dublin is halfway through its EU-IMF bailout programme and hasconsistently received positive assessment from the troika. But on itslatest review mission, which ended on Thursday, the troika called ongovernment to rein in public expenditure.

Irelands budget deficit remains the largest in the euro area, and it isessential that the authorities maintain prudent control of expenditure,including in healthcare, it said in a statement.

Irelands Health Service Executive is 280m over budget for the fivemonths to the end of May, prompting Dublin to order a review ofhealth spending.

Brendan Howlin, Irelands minister for public expenditure, saidministers had discussed the overspend in health with the troikaduring their review mission.

The pressure point in health is clearly identified but I wouldnt

exaggerate it the overspend is 2 per cent of the overall healthbudget, he said. We are committed to meeting the fiscal targets.
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The troika also warned about Irelands very high unemploymentrate and called for a strengthening of job activation programmes,which are designed to get people back to work.

Separately, Irelands national statistics office announced a major

revision of growth figures, which show the Irish economy grew by 1.4per cent of gross domestic product in 2011 and not the 0.7 per centthat it previously forecast. The upward revision of the growth figurein the final quarter also means the Irish economy did not slip backinto recession in the second half of last year as previously suggestedby the office.

However, the new figures show the Irish economy contracted 1.1 percent in the first quarter of 2012, compared with the fourth quarter of2011, due to a dip in net exports and personal expenditure.

Michael Noonan, Irelands minister for finance, said the upwardrevision of the growth figures for 2011 was positive and meant theoverall size of the economy was 2.5bn bigger than expected. He saidthis would have a marginal impact on Irelands deficit and debtfigures, which were keenly followed by investors.

Despite the contraction of the economy in the first quarter, MrNoonan said he saw nothing in the figures that would make Dublinshift from its forecast of 0.7 per cent GDP growth in 2012.

Banks Libor costs may hit $22bn

By Brooke Masters in London and Alex Barker in Brussels

Twelve global banks that have been publicly linked to the Libor rate-rigging scandal face as much as $22bn in combined regulatorypenalties and damages to investors and counterparties, according to

Morgan Stanley estimates.

The analysis, which the authors admit is crude, assumes that 11more banks will be penalised like Barclays, which paid $456m lastmonth to US and UK authorities for attempting to manipulate theLondon Interbank Offered Rate, the benchmark for $360tn inderivatives, loans and mortgages.

The calculation excludes the potential fallout from ongoing US andEuropean Union cartel investigations, which could result in

multibillion-dollar fines.
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interest rate contracts at the end of 2011, while RBS reported 39tnbutLloyds had just 2tn, he wrote.
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clipping de matÉrias econÔmicas - 13-07-2012 - financial times

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