Yesterday, the Federal Open Market Committee (FOMC) statement extended the current near-zero interest rate policy another year to the middle of 2014. The FOMC also addressed the resumption of the Fed’s bond buying program.
The Federal Open Market Committee “recognizes the hardships imposed by high and persistent unemployment in an underperforming economy, and it is prepared to provide further monetary accommodation,” Bernanke said yesterday at a press conference in Washington.
Source: Bloomberg
The Eurozone received a little positive news for a change today when it was announced that Germany’s unemployment rate fell to the lowest level since 1991. For December, unemployment fell from November’s 6.9 percent recording to 6.8 percent.
A strong German economy is seen as being vital as the Eurozone struggles to contain a debt crisis now sweeping several countries including larger economies such as Spain and Italy.
Source: BBC News
Eurozone banks have rushed to take out cheap three-year loans offered by the European Central Bank, borrowing 489bn euros ($643bn; £375bn). The central bank had originally hoped to lend up to 450bn euros to stop another credit crunch crippling the banking system.
“The very heavy take-up of the ECB’s three-year, long-term refinancing operation provides some encouragement that banks’ liquidity needs are being amply met,” said Jonathan Loynes at Capital Economics.
“But while this might help to address recent signs of renewed tensions in credit markets and support bank lending, we remain sceptical of the idea that the operation will ease the sovereign debt crisis too as banks use the funds to purchase large volumes of peripheral government bonds.”
‘Positive number’
Source: BBC News
Weaker global demand for China’s exports due to a slowing global economy continues to drag down China’s manufacturing totals. In November, China’s manufacturing fell to a 32-month low of 49 on the Purchasing Manager’s Index.
“The November PMI dropped further to below the boom-bust line of 50… indicates that the economic growth pace would continue to moderate in the future,” said Zhang Liqun, a researcher with the Development Research Centre of the State Council.
Source: BBC News
The Organization for Economic Cooperation and Development (OECD) revised downwards its growth outlook for the Eurozone countries. The OECD predicted the eurozone economy would shrink in the fourth quarter by 1 percent, and by 0.4 percent in the first quarter of next year.
The technical definition of a recession is two consecutive quarters of negative growth and by these standards, the OECD also predicts a recession for the UK with a 0.03 percent contraction for the 4th quarter, and a 0.15 percent contraction for the first quarter of the new year.
Source: BBC News
China’s Purchasing Manager’s Index (PMI) fell to its lowest reading in almost three years in November. Weaker demand for China’s exports in the U.S. and especially Europe continues to impact China’s manufacturing sector.
“Though a less-than-50 figure was expected, it suggested that China is no exception and is being hit by the euro crisis and global uncertainty,” said Conita Hung, an analyst at Delta Asia Financial Group.
Source: BBC News
There are signs that the long string of depressing news from the Eurozone is starting to have an effect on the region’s main economy. A sale of German bonds earlier today was marred by weak demand and higher yields and in the end, the Bundesbank had to withdraw nearly half of the 6 billion euros ($8.1 billion) worth of bonds slated for sale.
The poor showing comes just one day after Fitch Ratings released a report suggesting that France was on the verge of losing its triple a rating. As a result, the euro declined to $1.3385 just before 9 am in New York.
Source: Reuters
The yield on Italian 10-year bonds rose to a Euro-era record high of 6.73 percent on growing fears that Italy will be unable to meet its debt repayments. Berlusconi’s grasp on the Prime Minister’s office grew more tenuous overnight as more members of his government called for his resignation.
Despite the questions surrounding his political survival, Berlusconi has said he will continue with a vote to implement further fiscal reform to reduce the country’s out0of-control deficit.
“Italy knows, that given the size of the country, it can’t hope to get help from outside,” noted Austrian Finance Minister, Maria Fekter. “That’s why these huge efforts are made in Italy at the moment.”
Source: BBC News
Citing concerns over the expanding European debt crisis and the slowing U.S. economy, the International Monetary Fund (IMF) has reduced its outlook for Asia. The new outlook is for 6.3 percent growth for 2011 and 6.7 percent growth in 2012 – the original expectation was for 7.0 percent growth for both years.
The IMF also advised that an outflow of capital from Asia could further hinder growth. The IMF feels investors may opt to close-out their Asian positions in order to take profits that have accrued since 2009.
Source: BBC News>/a>
Greece and the “troika” consisting of the European Union, the European Central Bank, and the International Monetary Fund, announced that a deal had been reached to provide support for the debt-laden country. Once the final approvals are provided, Greece will be cleared for the next payment in the initial rescue payment scheme.
Source: BBC News
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