China’s Commerce Ministry issued a statement today saying that the country faces “severe challenges” as exports fall due to faltering demand in the U.S. and Europe. It is expected that November’s export totals will be down significantly from the previous year.
The outlook remains poor considering that the U.S. and Europe account for 40% of China’s exports. Both regions – particularly the Eurozone – are expected to continue to struggle with debt and weak output into 2012.
“There is a lot of concern in Beijing about weakening demand from the developed world, especially from Europe,” said Michael Pettis, economics professor at Peking University. “China is still overly reliant on domestic investment and net exports to generate growth”.
Source: BBC News
Recent event, including stock market falls, the escalating sovereign debt crises, US credit rating downgrade and a near-stalling of growth in the developed world is leading increasing numbers of experts to wonder if the world is facing some fundamental changes.
In reality, many of the ideas reflect trends that have been under way for many years, but the crisis had accelerated the process of change.
Four years after the financial crisis began and the world has certainly not returned to normal.
No major developed economy has yet fully regained the output lost during the recession and global share prices remain almost a third lower than their peak prior to the crisis.
Financial stocks have lost two-thirds of their value. Government debt has spiralled due to the bank bailouts, although it has become apparent that not all governments can finance this debt.
If stage one of the crisis involved the transfer of liabilities from the financial sector to governments via bank bailouts, stage two is witnessing transfers from weaker governments to stronger governments, as the latter seek to prevent the former from defaulting and causing more financial turmoil.
BBC News
AUD/USD broke higher as expected. It’s superior fundamentals have continued to cause it to head higher, especially when directly compared to the weak fundamentals of the U.S. and its dollar.
See the comments from RBA Governor Stevens below:
Reserve Bank of Australia Governor Glenn Stevens struck a decidedly hawkish tone at a speech in Sydney, driving home the point that going forward the central bank is now actively trying to time a return to higher interest rates. Stevens said Australia is faring better through the global downturn than other developed economies, noting that “confidence has recovered ground” and boasting that “unemployment is rising slower than expected”. He went on to stress that central banks should not relax their commitment to keep inflation anchored through the recession, a clear hint that global tightening of monetary policy should now be on the table. That said, Stevens conceded that some stimulus needs to remain in place for now and conceded that the timing of unwinding expansionary policy presents a challenge. The market greeted the RBA chief’s comments, with the Australian Dollar surging 50 pips in a mere 30 minutes.
EUR/CHF continues its overall ascent, as expected. The SNB continues to hold the pair above 1.52 and its only a matter of time before we see the high 1.53’s. Keep in mind too, that through our broker, you do earn some interest on this on a daily basis too (on their standard mini accounts). Not all have this on this pair right now.
Sean Hyman
www.forextradingblog.com
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