MSCI World Equities Index 10% Off May High A measure of global equities fell 10 percent from this year’s high in May, entering its first so- called correction in more than a year, as concern grew that the economic recovery is faltering.
Mohamed El-Erian: US debt ceiling deal is a debacle It is discouraging that several months of disruptive political bickering and posturing failed to deliver a well-defined medium-term fiscal reform effort. Instead, the legislation signed into law by President Barack Obama on Tuesday is terribly unbalanced in design, lacks proper operational details and leaves key issues to at least one more round of political brinkmanship. This incomplete endeavour could be dismissed as business as usual in Washington except for one important consideration: it materially darkens an already fragile outlook for economic growth and job creation.
US corporate bond yields hit fresh lows Investors put a premium on safety
Industrial groups ring alarm bells Risks to global economy are increasing and growth is slowing
Signs of Stress on the Rise Across Europe The European sovereign-debt crisis placed new strains on Europe’s banks amid signs that some lenders are finding it harder and more expensive to fund themselves. (See also LIQUIDITY “RED ALERT”)
Spain’s Borrowing Costs Rise Again The Treasury paid an average yield of 4.813% on the April 2014 bond, compared with 4.037% at the previous auction June 2. It also paid an average yield of 4.984% on the January 2015 bond, compared with 2.862% at its previous auction held October 15, 2009.
Italy’s Woes Weigh on Europe By the end of trading on Wednesday, the yield on 10-year Italian bonds stood at 6.07%. That makes it more expensive for Italy to borrow money, with investors demanding a premium of 3.66 percentage points over benchmark German bonds. Borrowing costs in Spain—long considered the next most vulnerable euro-zone economy after Greece, Portugal and Ireland, which have already received official bailouts—also continued to rise, with the yield on 10-year Spanish bonds closing at 6.23%. Lower growth makes it harder for heavily indebted economies to escape their debt burdens. Hints that the weakness is starting to affect the euro zone’s hitherto stronger economies will heighten the dilemma facing the European Central Bank, which holds a regular meeting Thursday and has begun tightening policy to make sure it keeps inflation in check.
ECB Meets Amid Debt Crisis The European Central Bank’s policy council meets amid some expectations that it may resume the purchase of euro-zone government bonds to prevent the debt crisis from spreading to Italy and Spain.
Signs of Slowdown Creep Into Europe’s Powerhouses After expanding at an annualized pace of more than 3% in the first quarter, the euro zone probably grew at less than half that in the second. Meanwhile, purchasing-manager reports for July suggest euro-area manufacturing was broadly flat to start the third quarter. And Germany is no longer bucking such trends. Its own manufacturing purchasing managers’ index fell to a two-year low last month. New plant and machinery orders fell 2.4% in June from the previous month.
German Factory Orders Rose Unexpectedly in June Orders, adjusted for seasonal swings and inflation, increased 1.8 percent from May, when they rose a revised 1.5 percent, the Economy Ministry in Berlin said in a statement today.
Ex-Fed Officials Back More Stimulus The Fed should consider a new round of securities purchases to spur the economy if growth and employment keep languishing and inflation recedes, former top Fed officials said in a roundtable with The Wall Street Journal.
Calls Grow for Global Effort to Address Debt Crisis Some investors are speculating that an international agreement to ease tensions in the world’s currency markets could be in the offing.
Japan Launches Campaign to Weaken Yen Japan stepped into the currency market Thursday, launching a yen-selling campaign that was backed up by ¥10 trillion (nearly $126 billion) in easing measures from the central bank, as officials say they needed to tame market speculation threatening a fragile economic recovery.
Turkey Surprises With Rate Cut Turkey’s central bank unexpectedly cut its key interest rate to a fresh record low, sending the lira plunging as markets appeared to reject the bank’s strategy to counter gathering global risks.
CEO Confidence Slipped in July Confidence among American chief executives fell for the first time in a year at the start of the third quarter as their outlook on sales, employment, and investment all slipped, according to a private survey. The Young Presidents’ Organization, a nonprofit network of young CEOs with members in the U.S. as well as abroad, said its “overall confidence index” fell to 61.1 in July-down from 64.1 in April.
China Lets Food-Oil Prices Rise Chinese authorities sanctioned a rise in the retail prices for cooking oil, producers said, a sign Beijing is letting households feel some inflation effects after months of price controls. The permission to raise prices, granted by the National Development and Reform Commission, the government planning agency, follows recent increases in other prices that will be felt by consumers. The upward adjustments also come ahead of a July inflation report next week that is expected to show overall price increases leveled after surging to 6.4% in June from the year earlier.
Kal’s cartoon from The Economist