General News

Greetings again from Ireland. One of the many mysteries about the current crisis is why anyone listens to the IMF or anyone that supported its anti-regulatory policies. Prior to the crisis, even the IMF had begun to confess that its austerity programs made poor nations' financial crises worse. In the lead up to the crisis the IMF was blind to the developing crises. It even praised nations like Ireland during the run up to the crisis, missing the largest bubble (relative to GDP) of any nation, an epidemic of banking control fraud, and the destruction of any pretense to effective Irish banking regulation. Crises reveal many deficiencies and one of the most glaring was the European Central Bank (ECB). The ECB was set up, unlike the Federal Reserve, to have only one mission and one function – securing price stability through monetary policy. The Fed has three missions and three primary functions. The missions are systemic financial stability, price stability, and...

Economic News On Friday, the German Bundesbank said the nation may start to see a slowdown in its economy, which would be a further blow to the European Union as it struggles to contain a debt crisis in peripheral nations. Also, Greece is not helpingthe EU, Fitch downgraded Greece’s credit rating to junk-bond status. The Philadelphia Fed’s business activity index tumbled to 3.9 in May from 18.5 in April, which was not only a surprising drop but alarming as well. Economists had expected the index to rise to 20, according to Reuters. The Philadelphia Fed’s business activity index tumbled to 3.9 in May from 18.5 in April, a surprising drop. Economists had expected the index to rise to 20, according to Reuters. Initial claims for unemployment fell by 29,000 to 409,000 in week ended May 14 from an upwardly revised 438,000 claims the week before. Economists surveyed by Reuters expected claims to fall to 420,000 from the previously reported 434,000. The four-week moving average of...

The past week in monetary policy saw six emerging market central banks announce interest rate decisions. Those that altered interest rate levels were: Israel +25bps to 3.25%, and Nigeria +50bps to 8.00%. Meanwhile those that held interest rates unchanged were: Pakistan 14.00%, Turkey 6.25%, Georgia 8.00%, and Mexico 4.50%. The Central Bank of Nigeria also raised its bank cash reserve requirement by 200bps to 4% from 2%. Looking at the central banks that held monetary policy settings unchanged, there was a growing sense of a need to balance growth risks with inflation risks. Indeed some of the messaging in their media releases included points about increasing risks to the global growth outlook, meanwhile inflation risks are seemingly tapering off in most places, particularly as higher policy rates and stabilizing commodity prices take effect.

Fitch Rating Services cut its outlook on Japan’s sovereign debt rating from stable to negative. In doing so the company followed in steps of the S&P. The difference is that Fitch only issued a warning, while the S&P actually cut its rating on Japan’s debt by one notch to AA- from AA. In spite of Fitch’s fine expression that the country’s “credit worthiness is under negative pressure from rising government indebtedness”, an outlook cut is not much in real steps and markets barely responded. In fact, by the end of the day, the Yen was significantly stronger than the Dollar at 80.77. Perhaps the USD was not the best measuring yardstick, since the Dollar lost a lot of ground. It dropped to yet another all time low against the Swiss Franc, at 84.61 in a sharp move during the last hour of trading. However, most of the daily moves happened very early on, during the Asian session. The AUD-USD rallied over 100...

Investors were feeling optimistic on Friday after data from the United States showed that personal income and spending continued to rise at a moderate pace in line with expectations, while inflation remained subdued, and consumer confidence rose, which bolstered optimism in European and U.S. markets. The optimism in markets encouraged investors to target higher yielding assets, and accordingly, major currencies rose against the dollar, while commodity prices rose on Friday. Stocks in the United States dropped at opening on Friday, where the Dow Jones Industrial Average was up by nearly 0.55% to trade around 12,470, while the S&P 500 index rose by nearly 0.60% to trade around 1,334. European stock indexes were also higher before closing on Friday, where FTSE 100 was up by nearly 1% trading at 5940 and the DAX was higher by nearly 0.40% to trade around 7142. The U.S. dollar was slightly higher against a basket of major currencies after opening with a downside gap on Friday, where the...

  "The global recovery is gaining strength and is becoming more self-sustained", said the group of right leaders in a statement at a two-day summit that will end today in Deauville, France, fueling confidence and risk appetite. This statement was enough to fuel optimism as a strengthening global economy will diminish debt concerns that increased recession worries lately, especially as woes mounted yesterday with Juncker saying the IMF may not release its 12 billion euros portion of the bailout for Greece next month. Leaders from the U.S., Italy, Japan, Germany, France, UK, Canada and Russia vowed to fight fiscal woes and focused on how to cut debt as "downside risks remain, and internal and external imbalances are still a concern". As the global economy is believed to gain strength, speculations are for demand on commodities to be sustained, especially since the weaker dollar raised the appeal of commodities. Oil is trading today above the $100 level, while gold is above the $1525.00 level. The rise...

Pessimism continued to dominate global financial markets on Thursday, where worse than expected economic data from the United States spread jitters across markets and weakened the U.S. dollar against majors, while the European debt crisis continued to weigh down on confidence levels, although news that China will buy Portuguese bailout bonds boosted the Euro against other majors. The U.S. Commerce Department released on Thursday, the second estimate for Gross Domestic Product for the first quarter of 2011, where the GDP report showed that the U.S. economy expanded at an annualized pace of 1.8% unchanged from the prior estimate, and worse than median estimates of 2.2%. Moreover, jobless claims rose unexpectedly last week, where jobless claims rose to 424,000, compared with the prior revised estimate of 414,000 and also worse than median estimates. Stocks in the United States dropped at opening on Thursday, where the Dow Jones Industrial Average was down by nearly 0.45% to trade around 12,345, while the S&P 500 index dropped...

  Optimism is seen across broad markets today although there were no fundamentals to support it. However commodities gained today, as investors were more confident about the global recovery, dragging the Asian and European stock markets higher. As the global economy seems to be in a good shape, investors seized the opportunity to turn there attention for a while from the deepening credit crisis, Japan’s economic struggle and the disappointing European and US economic data released lately. The rise in commodity prices gave investors an opportunity to catch their breath, however it doesn’t mean caution is off the table. Volatility will continue as Europe is facing some serious problems, as it tries to put someone in charge of the IMF and find solutions for Greece, Portugal and Ireland. There are no major economic data from Europe and UK today, therefore investors will continue focusing on Greece, as its cabinet passed new austerity measures and accelerated the asset-sale plans as the nation tries to avoid...

Greece continues to find ways to avert a default/restructuring of its debt. The problem here is that the austerity measures are not enough, there aren't enough assets to privatize (at fire sale prices) and the country just cant get its act together. (NYT) Despite pressure from lenders for Greece to show a unified front in solving its debt crisis, Prime Minister George Papandreou had little apparent success Tuesday in persuading his political rivals to back additional tax increases and spending cuts. The ruling Socialists have a comfortable six-seat majority in the 300-seat Parliament and should be able to pass the measures without the support of the opposition. But Greece’s creditors have been pressing Mr. Papandreou to seek consensus for the deeply unpopular reforms before presenting them to a Greek public weary of a year of austerity, arguing that some degree of political consensus would make implementation easier. - New Democracy, a resolute "NO", Communists "NO", Popular Orthodox Rally "Unclear" (the Fed...