News That Matters

Thetrader.se
Should we worry about the Target 2, or not?. Felix Salmon of Reuters shares his views and explains the subject easily. If a Spanish woman writes a check to her therapist, the money comes out of her account and goes into the therapist’s account. So long as both accounts are at Spanish banks, this is just a transfer from one bank to another, and the Target2 balance at the Banco de España is unchanged. But let’s say our Spanish depositor decides to move €1,000 from Banco Santander to an account at Deutsche Bank. http://www.thetrader.se/2012/06/14/to-worry-or-not-to-worry-about-the-target-2/

Ft.com
Angela Merkel, the German chancellor, declared on Thursday that Europe was “in a race with the markets” to turn its monetary union into a fully fledged political union, even as she warned her partners notto overburden the German economy in the eurozone crisis. Her intervention coincided with a new surge in borrowing costs for Spain, following a downgrade by Moody’s rating agency, while Italy moved to reassure the markets by promising further cuts in public spending. http://www.ft.com/intl/cms/s/0/7d1842e2-b642-11e1-8ad0-00144feabdc0.html#axzz1xe4lV9a0

Wsj.com
The U.K. introduced a series of measures designed to shield its financial system from the ongoing European crisis, with plans to flood banks with cheap credit in an attempt to jump-start lending to British businesses and households. The efforts helped push the euro up 0.6% overnight to $1.2633, late in New York, though the single currency weakened slightly in Asia to $1.2625. The dollar weakened against the yen to 79.25, compared with 79.35 on Thursday night. The Australian dollar was trading just above parity against the dollar early on Friday, at $1.0004. Japan’s Nikkei was up 0.2%, ahead of the Bank of Japan’s policy meeting later in the day; South Korea’s Kospi was down 0.8%, while Australia’s S&P ASX 200 was up 0.3%. Hong Kong’s Hang Seng Index gained 1%, the China Shanghai Composite edged up 0.3%, and Singapore’s Strait Times Index was 0.4% higher. http://online.wsj.com/article/SB10001424052702303734204577467353499921894.html?mod=WSJASIA_hpp_LEFTTopWhatNews

The U.K. on Thursday unveiled an extraordinary series of measures designed to insulate the British financial system and economy from the euro zone’s deepening crisis. Chancellor of the Exchequer George Osborne and Bank of England Gov. Mervyn King announced plans to flood banks with cheap funds in an attempt to jump-start lending to British households and businesses and to fend off potential financial problems at big U.K. lenders. The British programs resemble some of the emergency measures enacted by central banks in Europe and the U.S. earlier in the financial crisis. The British announcement on Thursday, at an annual black-tie dinner with bankers in central London, reflects leaders’ intensifying concerns that Europe’s crisis threatens to drag down the U.K. economy and financial system. “These are very difficult economic times—as difficult perhaps as any our country or our continent has faced outside of war,” Mr. Osborne said. “Together we can deploy new firepower to defend our economy from the crisis on our doorstep.” The British programs resemble some of the emergency measures enacted by central banks in Europe and the U.S. earlier in the financial crisis. The British announcement on Thursday, at an annual black-tie dinner with bankers in central London, reflects leaders’ intensifying concerns that Europe’s crisis threatens to drag down the U.K. economy and financial system.http://online.wsj.com/article/SB10001424052702303822204577466790091232290.html?mod=WSJEurope_hpp_LEFTTopStories

Germany alone can’t solve the euro-area sovereign debt crisis, German Chancellor Angela Merkel warned on Thursday, as she urged the world’s largest economies to play their part in helping to restore growth. Speaking ahead of a meeting of the Group of 20 industrial and developing nations, Ms. Merkel told parliament in Berlin: “The causes of the weakening global economy are indeed not only in the euro area. “Everyone must be prepared to overcome their specific weaknesses,” she said. Since the start of the debt crisis, Ms. Merkel and Germany have come under intense pressure to do everything possible to keep the monetary union from breaking apart. As the euro zone’s largest economy, Germany has accepted the greatest financial share of the bailout packages. The country has taken responsibility for as much as €401 billion ($503.54 billion) of the agreed temporary and permanent bailout programs’ entire resources, according to an estimate from Credit Suisse.http://online.wsj.com/article/SB10001424052702303734204577465910985870838.html?mod=WSJEurope_hpp_LEFTTopStories

Spain’s borrowing costs jumped to a record Thursday, fanning concerns that the €100 billion ($125 billion) aid package planned for its banks won’t suffice to stave off a much larger bailout for the entire country.  The yield on Spain’s 10-year government bond ended Thursday’s active trading at a euro-era record 6.931%, up from 6.184% before the deal was announced last weekend. That is worrying because foreign investors’ appetite for new Spanish debt has already dried up, forcing the government to rely heavily on the country’s troubled banks to refinance its debt. Economists say the deepening dependence between the state and its beleaguered banks is unsustainable and will eventually force Spain to follow Greece—which has crucial national elections on Sunday—Portugal and Ireland in seeking a full-blown bailout. http://online.wsj.com/article/SB10001424052702303822204577465882028259536.html?mod=WSJEurope_hpp_LEFTTopStories

Inflation in the euro zone fell to its lowest level in more than a year in May, giving the European Central Bank more leeway to stimulate the flagging 17-nation economy as the intensifying debt crisis takes its toll on confidence. The annual rate of consumer price growth dropped to 2.4% in May from 2.6% in April, statistics agency Eurostat said Thursday, confirming an initial estimate. The last time the rate of inflation was as low was in February 2011. May’s drop still leaves annual inflation above the ECB’s target level of a little below 2%. But the confirmation that inflation is slowing is likely to reassure policy makers that they have room to ease monetary policy and support the economy. http://online.wsj.com/article/SB10001424052702303734204577466072764319712.html?mod=WSJEurope_hpp_LEFTTopStories

France will meet deficit-reduction targets despite question marks over the strength of economic growth, Finance Minister Pierre Moscovici said Thursday, paving the way for tax increases and spending cuts that could prove the first unpopular measures of the country’s new president. “France has made commitments to its partners to reduce its deficit,” Mr. Moscovici said on French television channel France 2. “We will keep to these commitments.” He said surveys are raising questions about growth in France and the government is in the process of adjusting its forecasts. Gross domestic product growth below the government forecast of 0.5% this year and 1.7% in 2013 will make it harder to meet deficit goals without adjustments to taxes and spending.http://online.wsj.com/article/SB10001424052702303734204577466100245388694.html?mod=WSJEurope_hpp_LEFTTopStories

Foreigners are stepping up investment in the U.S. after retreating during the depths of the financial crisis, with the latest flurry spurred partly by Europeans seeking havens amid the Continent’s debt crisis. The U.S. attracted $28.7 billion in foreign direct investment between January and March, the 12th consecutive quarter of positive flows, the Commerce Department said Thursday. Foreign direct investment includes long-term bets by companies and individuals such as corporate acquisitions and real estate, but not purchases of Treasury bonds and other U.S. securities. Foreign investment in the U.S. last year totaled $234 billion, a 14% jump over $205.8 billion in 2010, with around two-thirds of the cash coming from Europe. The government initially estimated that investment flows dropped 4% last year. Foreign investment in the U.S. has now exceeded its average of the past 10 years in 2010 and 2011, suggesting America’s lure for capital has recovered from the crisis.http://online.wsj.com/article/SB10001424052702303410404577466692621011900.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

In the clique of market bears, few have been as reliably and depressingly dour as David Rosenberg. Mr. Rosenberg has been a market Cassandra for years: He was bearish before the financial crisis of 2008 and has remained bearish ever since. As many times as the market cheerleaders jeered him, they later ate their words. So it caused a mini-sensation within financial circles this week when Mr. Rosenberg—the former economist at Merrill Lynch & Co. who’s now at Canadian money-management firm Gluskin Sheff—wrote a morning commentary titled “Parting of the Clouds?” “I do see a light at the end of the dark tunnel,” he wrote. Is Mr. Rosenberg defecting from the dark side? Not quite yet, he says. But he maintains he now is more optimistic than he has been in more than a decade. “I’m so excited I just can’t hide it,” Mr. Rosenberg wrote. “But for now, I’m keeping the powder dry.” Yes, Europe is in the midst of a major crisis. Yes, the U.S. has big, structural problems. However, while most analysts are just catching up with those realities, Mr. Rosenberg has been digesting them for years. Now, he is looking ahead and feels that the long-term outlook is bright.http://blogs.wsj.com/marketbeat/2012/06/14/a-noted-market-bear-gets-a-little-bullish/

Marketwatch.com
The Bank of Japan on Friday left its benchmark interest rate unchanged in a range between 0% and 0.1% and also didn’t announce any fresh monetary stimulus, avoiding further policy action ahead of the weekend elections in Greece. The decisions were unanimous at the policy-setting board of the central bank, and in line with market expectations. The BOJ cited nervousness in the global financial markets, mainly over the European debt crisis, and that particular attention should be paid to these developments for the time being. http://www.marketwatch.com/story/bank-of-japan-holds-policy-moves-before-greek-vote-2012-06-14-231033418

Reuters.com
Central banks from major economies stand ready to take steps to stabilize financial markets by providing liquidity and preventing a credit squeeze if the outcome of Greek elections on Sunday causes tumultuous trading, G20 officials told Reuters. A senior U.S. official cautioned that the Greek election will not provide “the definitive signal on what happens next” in the euro zone debt crisis. But if severe market strains emerge after an unusual confluence of three elections this weekend – there are important polls in Egypt and France as well – central bankers are on standby to ensure enough cash is flowing through the financial system. “The central banks are preparing for coordinated action to provide liquidity,” said a senior G20 aide familiar with discussions among international financial diplomats. His statement was confirmed by several other G20 officials. http://www.reuters.com/article/2012/06/15/us-eurozone-centralbanks-idUSBRE85D1FW20120615

Brent futures rose towards $98 on Friday, extending gains after producer group OPEC agreed to keep its output target unchanged for the second half of the year, although the uncertainty surrounding Europe’s debt crisis capped further gains. The OPEC deal to retain its output limit at 30 million barrels a day implies a cut in supply of 1.6 million bpd. Extra oil from Saudi Arabia has been largely responsible for lifting actual OPEC output to 31.6 million bpd, well in advance of the group’s formal target, first set in December. Brent crude gained 72 cents to $97.89 a barrel by 0214 GMT. U.S. crude rose 67 cents to $84.58 a barrel, after settling $1.29 higher. http://www.reuters.com/article/2012/06/15/us-markets-oil-idUSBRE83H17O20120615

Bloomberg.com
Investors should buy assets in U.S. dollars and other currencies of strong developed nations because Japan may default within five years, said Takeshi Fujimaki, former adviser to billionaire investorGeorge Soros. “Japan is likely to default before Europe does, which could be in the next five years,” the president of Fujimaki Japan, an investment advising company in Tokyo, said in an interview yesterday. Japanese should hold foreign-currency products, such as those denominated in the greenback, Swiss franc, sterling, Australian and Canadian dollars, Fujimaki said.http://www.bloomberg.com/news/2012-06-15/ex-soros-adviser-fujimaki-says-japan-to-probably-default-by-2017.html

Americans are digging themselves out of mortgage debt.  Home equity in the first quarter rose to $6.7 trillion, the highest level since 2008, as homeowners taking advantage of record-low borrowing costs to refinance their loans brought cash to the table to pay down principal. The 7.3 percent gain was the biggest jump in more than 60 years, according to an analysis by Bloomberg of Federal Reserve data.  It’s the strongest sign yet that Americans’ home-loan debt burden is beginning to ease after the record borrowing that created, and ultimately popped, the housing bubble, leaving almost a quarter of homeowners with mortgages owing more than their properties were worth, said Richard DeKaser, deputy chief economist at Parthenon Group LLC in Boston. Half the mortgages refinanced in the fourth quarter reduced loan size, a record, according to Freddie Mac, the government-owned mortgage buyer. http://www.bloomberg.com/news/2012-06-14/americans-see-biggest-home-equity-jump-in-60-years-mortgages.html

Nokia Oyj (NOK1V) reduced its earnings forecast for the second time this year and said it will cut as many as 10,000 more jobs and shut production and research sites in Chief Executive Officer Stephen Elop’s biggest overhaul. The stock fell 18 percent to the lowest level since 1996, pushing Nokia’s market value below $10 billion. As part of the changes, sites in Finland, Germany and Canada will be closed and executives Niklas Savander, Mary McDowell and Jerri DeVard will leave, Espoo, Finland-based Nokia said today. http://www.bloomberg.com/news/2012-06-14/nokia-to-cut-10-000-jobs-as-elop-tries-to-stanch-losses.html

Even Jim O’Neill is asking whether the BRICs need reinforcing 11 years after he coined the term to describe the world’s future powerhouse economies. O’Neill, chairman of Goldman Sachs Asset Management, says his thesis that Brazil, Russia, India and China would together increasingly buoy the global economy faces “a more challenging test” as investors dump the countries’ stocks. China pared its growth target to the lowest since 2004, Standard & Poor’s may cut India’s investment-grade credit rating, Brazil is on pace to expand less than 3 percent for a second straight year and falling oil prices may hurt Russia. http://www.bloomberg.com/news/2012-06-14/o-neill-s-brics-risk-hitting-wall-threatening-g-20-growth.html

Cnbc.com
Venezuela now boasts the world’s largest proven oil reserves but the claim is “irrelevant” because the Latin American producer is struggling to secure enough investment and technical expertise to unlock the resource, Ed Morse, Managing Director and Global Head of Commodities Research for Citigroup Global Markets told CNBC. A founding member of the Organization of Petroleum Exporting Countries, Venezuela’s total deposits stood at an estimated 296.5 billion barrels at the end of last year, according to the annual Statistical Review of World Energy published Wednesday. That compared to Saudi Arabia’s 265.4 billion barrels. http://www.cnbc.com/id/47823420

Is it possible that we are already in a global recession but just don’t know it yet?  And is the U.S. itself—still the epicenter of the world economy—standing on the front edge of another recession? I sincerely hope I’m wrong. But warning signs are everywhere. The eurozone economy is flat on its back. Greece may be headed for a political crackup and an exit from the euro and European Union. Deposit runs in Greece and elsewhere are beginning, and a credit freeze throughout the continent is not out of the question. Meanwhile, emerging economies like China, India, and Brazil are slumping.http://www.cnbc.com/id/47819002

Moody’s Investors Service said on Friday it had downgraded five Dutch banks, four of them by two notches, and warned a Greek exit of the euro would see further cuts, kicking off a long-awaited round of downgrades for major European institutions. Moody’s set a stable outlook to the ratings for four of the groups but kept a negative outlook for ING Bank, meaning it could cut it again. The downgrades will only add to pressure on European leaders to sort out the region’s debt crisis, with a real test to the union coming this weekend as Greeks go to the polls. Moody’s also warned that, were Greece to exit the euro, further ratings actions on European banks could well be needed. http://www.cnbc.com/id/47823574

Foxbusiness.com
Neither Spain nor Cyprus have asked for financial assistance from the International Monetary Fund, a spokesman for the international financial agency said Thursday. The European debt crisis deepened late Wednesday when Moody’s Investors Service downgraded its credit ratings of Spain and Cyprus. An IMF mission is in Spain as part of its annual assessment of the Spanish economy, IMF spokesman Gerry Rice said. The mission is expected to release its findings Friday. Rice defended the size of the $125 billion bailout package for Spanish banks announced last weekend, and called on Spain to continue to implement its economic reform plan. “There has been no request [from Spain] for IMF financial assistance nor are there any plans at the IMF for such assistance,” Rice said.http://www.foxbusiness.com/markets/2012/06/14/spain-cyprus-have-not-sought-aid-imf-spokesman/#ixzz1xpsvbHTG

USAtoday.com
Average rates on fixed mortgages rose this week, the first increase in seven weeks. But mortgage rates remain near historic lows, boosting prospects for home sales this year. Mortgage buyer Freddie Macsaid Thursday that the average rate on the 30-year loan increased to 3.71%. That’s up from 3.67% last week, the lowest since long-term mortgages began in the 1950s. The average rate on the 15-year mortgage, a popular refinancing option, rose to 2.98%. That’s up from 2.94% last week, also a record low. The rate on the 30-year loan has been below 4% since early December. The low rates are a key reason the housing industry is showing modest signs of a recovery this year. http://www.usatoday.com/money/economy/housing/story/2012-06-14/mortgage-rates-rise/55594378/1

Washingtonpost.com
OPEC oil ministers agreed Thursday to keep their production target steady, in a compromise meant to defuse rivalries between Iran and Saudi Arabia and to send a soothing message to economically troubled consuming nations. Oil prices have fallen more than 20 percent over the past two months, and a statement from the Organization of the Petroleum Exporting Countries citied “downside risks facing the global economy” and ample stocks of crude as being responsible for the trend. While agreeing to hold the output target steady, however, the statement suggested that OPEC ministers were ready to come together on short notice if prices fell to levels dictating a production cutback. The ministers, it said, “confirmed their readiness to swiftly respond to developments that might place oil market stability in jeopardy.” OPEC accounts for about a third of world crude production and its decision Thursday corresponded with its professed goal of taking volatility out of global oil markets. With the economies of Europe and the United States feeble and even China seeing a slowdown, keeping production targets steady at a time of falling prices was meant to reassure consuming nations that they do not need to fear the added burden of more pricey energy. http://www.washingtonpost.com/business/industries/opec-ministers-move-toward-consensus-on-output-defusing-saudi-iranian-rivalries/2012/06/14/gJQAxgL9bV_story.html

BBC.co.uk
Coca-Cola will resume business in Burma after a 60-year absence, following a US decision to suspend investment sanctions against the country. Officials suspended the sanctions last month as the country has moved towards democratic reforms. Coca-Cola says it will start doing business in Burma as soon as the US government issues a licence allowing them to do so. The country was one of only three that Coca-Cola does not do business with. http://www.bbc.co.uk/news/business-18453401

Germany’s deputy finance minister has ruled out “eurobond-lite” plans to pool part of eurozone countries’ debt. Speaking exclusively to the BBC, Secretary of State Steffen Kampeter said “debt is a national responsibility”. “I don’t see any strategies where we socialise and redistribute the bad political decisions made by some who are over-indebted.” The German government has already ruled out full “eurobonds” for now.  That may disappoint investors on international markets whose hopes had been raised by reports that the Germany might be inching toward the compromise mutualisation plan.http://www.bbc.co.uk/news/business-18438402

Telegraph.co.uk
Mansion House Speech: UK economy is so depressed there could be little demand for credit. The devil is always in the detail, but on the face of it, news of an extra £140bn of cheap funding for the banks–worth close on 10pc of annual GDP – comes in the nick of time. The euro crisis has sent the cost of bank funding spiralling upwards again, which despite bank rate at a record low, we’ve already seen reflected in more expensive mortgages and business credit. Banks have struggled to find the finance to support even present credit provision, depressed though it is, let along expand it. With the eurozone debt crisis apparently growing worse by the day, there was a real risk of a second credit crunch. There are two elements to the Bank of England’s largesse. One is a “funding for lending” scheme, which could be worth anything up to £80bn and seeks to incentivise banks to expand credit to the real economy by providing all the cheap funding they need. http://www.telegraph.co.uk/finance/comment/jeremy-warner/9332662/Mansion-House-Speech-UK-economy-is-so-depressed-there-could-be-little-demand-for-credit.html

Mansion House speech: Sir Mervyn King says European banks need ‘major recapitalisation’ Banks across Europe urgently need a “major recapitalisation” to rebuild their solvency buffers, help ease the eurozone crisis, and kick-start the recovery, the Governor of the Bank of England said.  Sir Mervyn King claimed Europe’s leaders are failing to deal with a core problem at the heart of the crisis – the weakness of the region’s banks, not just those in Spain that are to receive a €100bn (£80bn) bail-out. His comments came as the Chancellor insisted that “Britain will not take part in [a eurozone] banking union … [and] will not stand behind eurozone banks”.  Sir Mervyn said that the problem with Europe’s lenders was “one of solvency”. He added: “Until losses are recognised, and reflected in balance sheets, the current problems will drag on. An honest recognition of those losses would require a major recapitalisation of the European banking system.”  The comments were made as he and the Chancellor unveiled a radical £140bn state-backed funding plan for Britain’s banks to ensure businesses and households can access credit at affordable rates. The plan was intended “to increase lending to the real economy” and underpin growth. http://www.telegraph.co.uk/finance/economics/9332712/Mansion-House-speech-Sir-Mervyn-King-says-European-banks-need-major-recapitalisation.html

Debt crisis: Francois Hollande and Mario Monti call for more action. The French and Italian leaders warned more must be done to fight the eurozone debt crisis, in a show of unity which marks a growing Latin revolt against the austerity advocated by Germany.  Francois Hollande, France’s new socialist leader, and Mario Monti, his Italian counterpart, met in Rome to discuss ways to tackle the eurozone’s problems, to the sound of angry protests against spending cuts. “The progress made, including in the governance of the eurozone, is not sufficient and we need to strengthen the weak part of the system,” Mr Monti said at a joint press conference after the talks. “The Greek elections will take place in three days: I want to reaffirm the hope, shared with President Hollande, that Athens will remain in the eurozone and respect its engagements.” http://www.telegraph.co.uk/finance/financialcrisis/9332466/Debt-crisis-Francois-Hollande-and-Mario-Monti-call-for-more-action.html

Theglobeandmail.com
The Bank of Canada is warning that growing concern over European debt could severely crimp financial conditions around the world and hit Canada with a “major shock” – a warning that comes as infighting broke out among the euro zone players with the most power to keep the crisis from spreading out of control. With a key Greek election Sunday just as G20 leaders arrive in Los Cabos, Mexico, for a two-day summit, the cohesive economic plans that markets are demanding seem unlikely to emerge in the coming few days.  In their semi-annual assessment of Canada’s financial system, Bank of Canada Governor Mark Carney and his policy team outlined the damage that Europe’s worsening drama could do to the global recovery. http://www.theglobeandmail.com/news/politics/canada-warned-of-major-shock-from-europes-debt-crisis/article4265138/

A monster British Columbia well just south of the 60th parallel is pumping a tremendous volume of natural gas from a globally significant new play that stands to dramatically boost Canada’s gas resources. Until Thursday, it was a secret, drilled in 2009 and kept under wraps while Houston-based Apache Corp. snapped up more potentially prolific land around it. Revealing results from the well, Apache called it “the most prolific shale gas resource test in the world.” And the Liard Basin where the well is situated, about 150 kilometres northwest of Fort Nelson, B.C., stands to be the “best unconventional gas reservoir in North America,” the company said. Initial results show it contains enough gas to match Canada’s entire current output for nearly a decade. http://www.theglobeandmail.com/globe-investor/massive-bc-reservoir-could-double-gas-output/article4264200/

Straitstimes.com
India’s inflation rose marginally to 7.55 per cent on an annual basis in May despite slowing economic growth, data showed on Thursday, posing a dilemma to the central bank ahead of a meeting next week. The closely watched Wholesale Price Index was up from 7.23 per cent in April. The once-booming Indian economy has been hit by a lack of economic reforms, high interest rates, plummeting business confidence and the euro zone debt crisis, analysts say http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_810865.html

Xinhuanet.com
China’s social security fund manager released Friday a bleak annual report for 2011, with an investment revenue of 7.34 billion yuan (1.16 billion U.S. dollars) amid the stock market’s lackluster performance. The rate of return on investment (ROI) was merely 0.84 percent last year, the National Council for Social Security Fund (NCSSF) said in a statement on its website. The fund managed assets were worth 868.82 billion yuan at the end of 2011. Since its inauguration in 2000, the social security fund has outperformed the nominal inflation level by taking in an accumulated investment revenue of 284.59 billion yuan, with an annual ROI rate of 8.4 percent, the fund manager said. http://news.xinhuanet.com/english/china/2012-06/15/c_131654858.htm

The meeting of Nepali Investment Board has approved the new Project Development Agreement (PDA) template for hydropower projects above 500 Mega Watt (MW) which will not only ensure investments worth 6 billion U.S. dollars but also solve current power crisis and generate employment in the country. The caretaker Prime Minister Baburam Bhattarai, who chaired Thursday’s meeting, expressed optimism about the accomplishment of the joint efforts of the Investment Board, the Ministry of Energy and related agencies to develop the PDA template, which will now provide a much needed impetus to enable negotiations on the current four priority projects, which will produce 3000 MW of electricity. “Harnessing Nepal’s hydro resources for Nepal’s socio-economic transformation has always been my number one economic priority,” said Bhattarai, adding that the new PDA template will now equip Nepal with the capability to negotiate good hydropower deals and ensure maximum benefits in terms of revenue, spending, industrial and employment benefits, and electricity. http://news.xinhuanet.com/english/business/2012-06/15/c_131654928.htm

Cs.com.cn
More Americans applied for jobless benefits and consumer prices dropped by the most in three years, giving the Federal Reserve room to spur an economy that’s generating little growth or inflation.
Claims for unemployment insurance payments unexpectedly climbed by 6,000 to 386,000 in the week ended June 9, Labor Department figures showed today in Washington. The cost of living fell 0.3 percent in May, led by the biggest decrease in gasoline prices in three years, the agency also reported. Stocks rose as investors increased bets Fed policy makers meeting next week will take additional steps to boost growth and cut an unemployment rate stuck above 8 percent since February 2009. Cheaper energy costs also provide some relief for Americans against a backdrop of moderating job and wage gains that has slowed consumer spending. http://www.cs.com.cn/english/ei/201206/t20120615_3372535.html
Thehindu.com
Amid weak economic sentiment and falling industrial output, India, on Thursday, reported a 4.16 per cent drop in its exports at $25.68 billion in May, mainly due to slump in global demand and slowdown in domestic industrial growth. Imports also fell by 7.36 per cent to $41.9 billion. The trade deficit also narrowed to $16.3 billion during the month, from $18.5 billion a year ago. “We have also seen the IIP (index of industrial production) numbers. So, you can correlate the reasons why exports have not done too well…we are recalibrating strategy to meet an ambitious 20 per cent growth target in exports for the current fiscal,” Commerce Secretary S. R. Rao told journalists here. He pointed out that contraction of demand in India’s traditional markets, particularly in eurozone economies, was hurting exports.http://www.thehindu.com/business/Economy/article3528938.ece

Global financial services firm Moody’s on Thursday said Indian economy is facing stagflation, where growth is slow and inflation high, and cautioned that the Reserve Bank cannot be too aggressive in cutting interest rates. “India’s economy is in stagflation, with notably weaker growth but inflation still stubbornly high,” said Glenn Levine, Senior Economist, Moody’s Analytics. Amid wholesale price-based inflation ticking up to 7.5 per cent year-on-year in May due to supply-side factors, the agency said it will cause further “headaches” at the RBI. “Yet with the inflation numbers now being driven by supply-side factors, and with the currency being pushed downwards…and India’s weaker growth prospects, we think that the RBI could cut rates without it putting too much upward pressure on inflation,” said Moody’s Analytics. However, it said the Reserve Bank of India (RBI) cannot be “too aggressive” while inflation remains a problem. http://www.thehindu.com/business/Economy/article3528237.ece

Economictimes.com
Non-resident Indians’ bank deposits have risen to record highs in April as they sought to benefit from higher interest rates here, more than double the yields offered in developed countries. However, being just a drop in the ocean, it couldn’t do much to shore up the rupee’s value. Deposits under various special NRI schemes were at $3.213 billion in April, eight times more than the corresponding period last year, but the country needs to draw fresh foreign investment urgently to lift the sagging currency. NRI inflows barely cover a quarter of the country’s trade deficit.
April’s was the largest net deposit addition by NRIs in a single month, while foreign institutional investors withdrew nearly $1 billion from risky local assets in a flight to safety amid fears of a Eurozone breakup. But the record flows failed to stem the rupee’s slide, which fell 9.7% since March 31 to 55.81 against the dollar on Tuesday, as investors avoided risky assets and the dollar strengthened against major currencies. http://economictimes.indiatimes.com/news/nri/forex-and-remittance/record-nri-deposits-not-enough-to-stem-rupee-fall/articleshow/14135081.cms
Yonhapnews.co.kr
South Korea posted a record current account surplus with China in 2011 as exports to the world’s No. 2 economy hit an all-time high, the central bank said Friday. The country’s favorable current account with China hit US$56.84 billion last year, compared with the previous high of $53.53 billion in 2010, according to the Bank of Korea (BOK). It marked the largest surplus since 1998 when the BOK began to compile related data.  The central bank said South Korea’s exports to China reached an unprecedented $134.20 billion in 2011, up 14.9 percent from $116.83 billion in the previous year. Outbound shipments were helped by strong demand for petroleum products and general machinery. Asia’s fourth-largest economy also expanded its current account surplus with the United States and the European Union (EU) thanks to a rise in shipments of autos and machinery products. http://english.yonhapnews.co.kr/business/2012/06/15/47/0501000000AEN20120615001900320F.HTML

South Korea’s import prices rose at a faster pace in May than a month earlier mainly due to increased costs of raw minerals and capital goods, the central bank said Friday. In local currency terms, import prices climbed 2.1 percent on-year in May, up from a gain of 1.7 percent in April, according to the Bank of Korea (BOK). Last month’s increase comes after price gains fell to their lowest figure in more than two years in April. Import prices, however, fell 1.9 percent on-month in May.  “There were gains in raw minerals, capital goods and consumer product prices in the cited month vis-a-vis the year before, that pushed up numbers,” the central bank said. Prices for minerals increased 4.8 percent on-year in May, up from a 4.3 percent gain reported for the previous month. The BOK said this gain pushed up import prices for all commodities by 3.6 percent, a rise from 3.0 percent in April. Farm and fisheries prices were down 7.7 percent from a year earlier.http://english.yonhapnews.co.kr/business/2012/06/14/59/0502000000AEN20120614004300320F.HTML

Themoscowtimes.com
Gross domestic product expanded 4.9 percent last quarter from the same period last year after rising 4.8 percent in the fourth quarter, the State Statistics Service said Thursday. That matched its first estimate on May 15. Retail and wholesale trade grew 9.1 percent in the first three months from a year earlier, while manufacturing expanded 3.5 percent and mineral extraction rose 2 percent, the service said. Consumer prices rose 0.1 percent in the week to June 9, the same pace as in the preceding week, the service said. This brings inflation since the start of the year to 2.5 percent, compared to 4.8 percent in the same period of 2011. http://www.themoscowtimes.com/business_in_brief/article/gdp-rises-nicely-in-q1/460382.html#ixzz1xpxsDzOa

Fin24.com
Opec oil producers are not worried about the shale revolution. They might need to re-run their numbers.  The United States imported 4.5 million barrels per day (bpd) of Opec crude last year, 20% of the cartel’s exports and about half the country’s import needs.  But thanks to new technologies like hydraulic fracturing now sucking away on North American soil, the continent is already self sufficient in natural gas, and is eyeing an even bigger landmark – Opec-free oil supplies.  The US was the fastest-growing non-Opec oil producer in 2011 for the third year in succession, the annual BP statistical review released on Wednesday said.  US oil production is up 1 million bpd since 2006 to 7.84 million bpd, consumption is down 1.85 million to 18.84 million. http://www.fin24.com/Economy/Opec-Shale-gas-no-threat-to-us-20120614

Khaleejtimes.com
Deflation in Dubai eased to its lowest annual rate in four months in May, data showed, dipping to 1.2 per cent to extend the emirate’s longest period of price declines since inflation hit a record 10.8 per cent in 2008.  Month on month prices rose 0.3 per cent, driven by higher food costs, ending a series of five monthly falls in the trade and business hub, Thursday’s Dubai Statistics Centre data showed. Annual price falls eased to 1.5 per cent in April from 1.9 per cent in March. Deflation is being mainly driven by a weak housing market, which has yet to recover from a property decline in late 2008, though the UAE uses price controls to keep some food costs low. http://www.khaleejtimes.com/biz/inside.asp?xfile=/data/uaebusiness/2012/June/uaebusiness_June201.xml&section=uaebusiness