By Kartik Goyal and Daniel Moss - Feb 3, 2012 9:29 AM GMT+0530
Enlarge image India Prepared for Rate Cut on Visible Easing Inflation
Shoppers browse handbags at a stall in the Colaba Causeway in Mumbai, India. Photographer: Kainaz Amaria/Bloomberg
Enlarge image Reserve Bank of India Deputy Governor Subir Gokarn
Reserve Bank of India Deputy Governor Subir Gokarn speaks during an interview in Mumbai. Photographer: Dhiraj Singh/Bloomberg
Reserve Bank of India Deputy Governor Subir Gokarn said the monetary authority will cut interest rates once it’s confident inflation will keep slowing.
“The stance now is that we have reached the peak and any further action will be toward easing,” Gokarn, 52, said in an interview at his office while discussing the rupee, the government’s budget deficit and bond repurchases. The central bank isn’t concerned about the currency’s record monthly advance in January “because in a sense it’s a correction,” following last year’s 16 percent decline, he said.
Emerging-markets have stepped up efforts to shield growth from the impact of Europe’s debt crisis, with Brazil, Russia and the Philippines cutting rates in recent months. The Indian government can help reduce borrowing costs by narrowing its budget deficit as the pace of price increases slows to 7 percent by March from 9.68 percent a year earlier, according to Gokarn.
Once the central bank has confidence that the “direction will continue, that’s really going to be the trigger,” Gokarn said in the interview yesterday. “The visibility of the decline, I think, is the most important indication.”
Higher government spending on subsidies in the run-up to federal elections in two years threatens to stoke prices and limit the scope for monetary policy easing to support growth in Asia’s third-largest economy. The nation’s budget deficit reached 92.3 percent of the fiscal-year target in the nine months through December, a report showed this week.
“The comments clearly indicate the direction of the monetary policy is towards reducing rates,” said Shubhada Rao, Mumbai-based chief economist at Yes Bank Ltd. (YES) “The timing and the quantum of rate cuts will still be dependent on the cut in the budget deficit.”
Asian Stocks Slip
Asian stocks fell as Greece and its creditors struggled to reach an agreement on a debt swap and companies from Mazda Corp. to Nippon Sheet Glass Co. forecast losses. The MSCI Asia Pacific Index declined 0.21 percent as of 12:23 p.m. in Tokyo.
Elsewhere in Asia, a gauge of China’s non-manufacturing industries expanded at a slower pace in January, a report showed today. The non-manufacturing purchasing managers’ index fell to 52.9 from 56 in December, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement in Beijing. A reading above 50 indicates an expansion.
Australia’s services industry expanded in January, snapping three straight months of declines, a report showed today. The performance of services index advanced 2.9 points to 51.9 in January, the highest reading since August, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. Fifty is the dividing line between expansion and contraction.
Sri Lanka Raises
The Central Bank of Sri Lanka unexpectedly boosted interest rates today for the first time since 2007 to curb credit growth and ensure inflation stays low. It raised the reverse repurchase rate to 9 percent from 8.5 percent and the repurchase rate to 7.5 percent from 7 percent. All seven economists in a Bloomberg News survey predicted rates would be unchanged.
In Indonesia, growth probably exceeded 6 percent for a fifth quarter, a Bloomberg survey showed ahead of a government report due Feb. 6. Gross domestic product increased 6.45 percent in the fourth quarter from a year earlier, compared with a 6.5 percent pace in the previous three months, according to the median of 17 estimates.
In Europe, a rescue plan for Greece may be completed in coming days, European officials and creditors say. The plan may include a loss of more than 70 percent for bondholders in a voluntary exchange and loans likely to exceed the 130 billion euros ($171 billion) now on the table.
Fastest in BRIC
In the U.S., Federal Reserve Chairman Ben S. Bernanke said the central bank will seek to keep prices rising at a 2 percent rate and rejected suggestions that it would sacrifice its inflation goal to boost employment.
India’s benchmark inflation rate of 7.47 percent is the fastest among the so-called BRIC nations, even as it slowed to a two-year low in December. Consumer prices rose 6.5 percent in Brazil, 6.1 percent in Russia and 4.1 percent in China the same month.
“While we have a medium-term goal of 4 to 4.5 percent for inflation, that’s not a threshold that we have to reach before we consider action,” Gokarn said in his office, adorned by photographs and books, including a biography of Apple Inc. founder Steve Jobs. “It’s the directionality.”
Maruti Suzuki India Ltd. (MSIL), maker of half the cars sold in India, has raised prices of all its models this year, citing higher raw material costs and the decline in the currency.
Indian Bonds Climb
The yield on the 8.79 percent government bonds due November 2021 declined one basis point, or 0.01 percentage point, to 8.12 percent in Mumbai today, according to the central bank’s trading system.
The rupee plunged 16 percent last year, making it the worst performing currency in Asia and prompting the central bank to clamp down on speculation. It rose 0.1 percent to 49.10 against the dollar today after gaining 7.3 percent in January.
The central bank last year tightened rules on trading in the domestic currency-forwards market and said it will reduce the amount of open positions dealers can maintain overnight.
“The measures we have taken always come at a cost,” Gokarn, a former Asia-Pacific chief economist with Standard & Poor’s, said. When markets return to “normality, then of course these measures will be considered and taken back.”
Yesterday the central bank asked lenders to “rigorously evaluate” risks from their clients’ unhedged foreign-exchange positions. Gokarn in the interview said the central bank wants to encourage hedging.
Cash Injection
To control inflation, the Reserve Bank raised borrowing costs by a record 375 basis points in 13 moves from mid-March 2010 before pausing for a second straight meeting in January. Last month, it cut India’s growth forecast to 7 percent in the year through March from the 7.6 percent predicted in October. It kept the inflation estimate at 7 percent.
The central bank lowered the cash reserve ratio to 5.5 percent from 6 percent, reducing the amount of deposits lenders need to set aside as reserves for the first time since 2009 in a move it estimated would add about 320 billion rupees ($6.5 billion) into the banking system.
In an indication of cash shortages, banks borrowed 1.3 trillion rupees on average a day from the monetary authority in January, compared with 1.16 trillion rupees in December, according to data compiled by Bloomberg. Overnight rates surged to 9.45 last week, near a three-year high.
To ease the cash squeeze in the banking system, the Reserve Bank resumed open-market purchases of government notes after 10 months in November and has so far purchased 719 billion rupees of the securities in auctions, official data show.
Indian bonds fell the most in 26 months on Jan. 24 on speculation the central bank will halt buying government bonds after reducing reserve requirements for banks.
“To the extent that pressures remain, we are always open to carrying out” bond repurchases, Gokarn said. “The other form of liquidity infusion is to buy dollars. If circumstances are right, we’ll certainly consider it. When we’ll have those circumstances is difficult to say.”
To contact the reporters on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net; Daniel Moss in Washington at dmoss@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
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Friday, February 3, 2012
India Prepared for Rate Cut on Visible Easing Inflation: Economy By Kartik Goyal and Daniel Moss - Feb 2, 2012
Reserve Bank of India Deputy Governor Subir Gokarn said the monetary authority will cut interest rates once it’s confident inflation will keep slowing.
“The stance now is that we have reached the peak and any further action will be toward easing,” Gokarn, 52, said in an interview at his office while discussing the rupee, the government’s budget deficit and bond repurchases. The central bank isn’t concerned about the currency’s record monthly advance in January “because in a sense it’s a correction,” following last year’s 16 percent decline, he said.
Emerging-markets have stepped up efforts to shield growth from the impact of Europe’s debt crisis, with Brazil, Russia and the Philippines cutting rates in recent months. The Indian government can help reduce borrowing costs by narrowing its budget deficit as the pace of price increases slows to 7 percent by March from 9.68 percent a year earlier, according to Gokarn.
Once the central bank has confidence that the “direction will continue, that’s really going to be the trigger,” Gokarn said in the interview yesterday. “The visibility of the decline, I think, is the most important indication.”
Higher government spending on subsidies in the run-up to federal elections in two years threatens to stoke prices and limit the scope for monetary policy easing to support growth in Asia’s third-largest economy. The nation’s budget deficit reached 92.3 percent of the fiscal-year target in the nine months through December, a report showed this week.
“The comments clearly indicate the direction of the monetary policy is towards reducing rates,” said Shubhada Rao, Mumbai-based chief economist at Yes Bank Ltd. (YES) “The timing and the quantum of rate cuts will still be dependent on the cut in the budget deficit.”
Asian Stocks Slip
Asian stocks fell as Greece and its creditors struggled to reach an agreement on a debt swap and companies from Mazda Corp. to Nippon Sheet Glass Co. forecast losses. The MSCI Asia Pacific Index declined 0.21 percent as of 12:23 p.m. in Tokyo.
Elsewhere in Asia, a gauge of China’s non-manufacturing industries expanded at a slower pace in January, a report showed today. The non-manufacturing purchasing managers’ index fell to 52.9 from 56 in December, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement in Beijing. A reading above 50 indicates an expansion.
Australia’s services industry expanded in January, snapping three straight months of declines, a report showed today. The performance of services index advanced 2.9 points to 51.9 in January, the highest reading since August, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. Fifty is the dividing line between expansion and contraction.
Sri Lanka Raises
The Central Bank of Sri Lanka unexpectedly boosted interest rates today for the first time since 2007 to curb credit growth and ensure inflation stays low. It raised the reverse repurchase rate to 9 percent from 8.5 percent and the repurchase rate to 7.5 percent from 7 percent. All seven economists in a Bloomberg News survey predicted rates would be unchanged.
In Indonesia, growth probably exceeded 6 percent for a fifth quarter, a Bloomberg survey showed ahead of a government report due Feb. 6. Gross domestic product increased 6.45 percent in the fourth quarter from a year earlier, compared with a 6.5 percent pace in the previous three months, according to the median of 17 estimates.
In Europe, a rescue plan for Greece may be completed in coming days, European officials and creditors say. The plan may include a loss of more than 70 percent for bondholders in a voluntary exchange and loans likely to exceed the 130 billion euros ($171 billion) now on the table.
Fastest in BRIC
In the U.S., Federal Reserve Chairman Ben S. Bernanke said the central bank will seek to keep prices rising at a 2 percent rate and rejected suggestions that it would sacrifice its inflation goal to boost employment.
India’s benchmark inflation rate of 7.47 percent is the fastest among the so-called BRIC nations, even as it slowed to a two-year low in December. Consumer prices rose 6.5 percent in Brazil, 6.1 percent in Russia and 4.1 percent in China the same month.
“While we have a medium-term goal of 4 to 4.5 percent for inflation, that’s not a threshold that we have to reach before we consider action,” Gokarn said in his office, adorned by photographs and books, including a biography of Apple Inc. founder Steve Jobs. “It’s the directionality.”
Maruti Suzuki India Ltd. (MSIL), maker of half the cars sold in India, has raised prices of all its models this year, citing higher raw material costs and the decline in the currency.
Indian Bonds Climb
The yield on the 8.79 percent government bonds due November 2021 declined one basis point, or 0.01 percentage point, to 8.12 percent in Mumbai today, according to the central bank’s trading system.
The rupee plunged 16 percent last year, making it the worst performing currency in Asia and prompting the central bank to clamp down on speculation. It rose 0.1 percent to 49.10 against the dollar today after gaining 7.3 percent in January.
The central bank last year tightened rules on trading in the domestic currency-forwards market and said it will reduce the amount of open positions dealers can maintain overnight.
“The measures we have taken always come at a cost,” Gokarn, a former Asia-Pacific chief economist with Standard & Poor’s, said. When markets return to “normality, then of course these measures will be considered and taken back.”
Yesterday the central bank asked lenders to “rigorously evaluate” risks from their clients’ unhedged foreign-exchange positions. Gokarn in the interview said the central bank wants to encourage hedging.
Cash Injection
To control inflation, the Reserve Bank raised borrowing costs by a record 375 basis points in 13 moves from mid-March 2010 before pausing for a second straight meeting in January. Last month, it cut India’s growth forecast to 7 percent in the year through March from the 7.6 percent predicted in October. It kept the inflation estimate at 7 percent.
The central bank lowered the cash reserve ratio to 5.5 percent from 6 percent, reducing the amount of deposits lenders need to set aside as reserves for the first time since 2009 in a move it estimated would add about 320 billion rupees ($6.5 billion) into the banking system.
In an indication of cash shortages, banks borrowed 1.3 trillion rupees on average a day from the monetary authority in January, compared with 1.16 trillion rupees in December, according to data compiled by Bloomberg. Overnight rates surged to 9.45 last week, near a three-year high.
To ease the cash squeeze in the banking system, the Reserve Bank resumed open-market purchases of government notes after 10 months in November and has so far purchased 719 billion rupees of the securities in auctions, official data show.
Indian bonds fell the most in 26 months on Jan. 24 on speculation the central bank will halt buying government bonds after reducing reserve requirements for banks.
“To the extent that pressures remain, we are always open to carrying out” bond repurchases, Gokarn said. “The other form of liquidity infusion is to buy dollars. If circumstances are right, we’ll certainly consider it. When we’ll have those circumstances is difficult to say.”
To contact the reporters on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net; Daniel Moss in Washington at dmoss@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
“The stance now is that we have reached the peak and any further action will be toward easing,” Gokarn, 52, said in an interview at his office while discussing the rupee, the government’s budget deficit and bond repurchases. The central bank isn’t concerned about the currency’s record monthly advance in January “because in a sense it’s a correction,” following last year’s 16 percent decline, he said.
Emerging-markets have stepped up efforts to shield growth from the impact of Europe’s debt crisis, with Brazil, Russia and the Philippines cutting rates in recent months. The Indian government can help reduce borrowing costs by narrowing its budget deficit as the pace of price increases slows to 7 percent by March from 9.68 percent a year earlier, according to Gokarn.
Once the central bank has confidence that the “direction will continue, that’s really going to be the trigger,” Gokarn said in the interview yesterday. “The visibility of the decline, I think, is the most important indication.”
Higher government spending on subsidies in the run-up to federal elections in two years threatens to stoke prices and limit the scope for monetary policy easing to support growth in Asia’s third-largest economy. The nation’s budget deficit reached 92.3 percent of the fiscal-year target in the nine months through December, a report showed this week.
“The comments clearly indicate the direction of the monetary policy is towards reducing rates,” said Shubhada Rao, Mumbai-based chief economist at Yes Bank Ltd. (YES) “The timing and the quantum of rate cuts will still be dependent on the cut in the budget deficit.”
Asian Stocks Slip
Asian stocks fell as Greece and its creditors struggled to reach an agreement on a debt swap and companies from Mazda Corp. to Nippon Sheet Glass Co. forecast losses. The MSCI Asia Pacific Index declined 0.21 percent as of 12:23 p.m. in Tokyo.
Elsewhere in Asia, a gauge of China’s non-manufacturing industries expanded at a slower pace in January, a report showed today. The non-manufacturing purchasing managers’ index fell to 52.9 from 56 in December, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement in Beijing. A reading above 50 indicates an expansion.
Australia’s services industry expanded in January, snapping three straight months of declines, a report showed today. The performance of services index advanced 2.9 points to 51.9 in January, the highest reading since August, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. Fifty is the dividing line between expansion and contraction.
Sri Lanka Raises
The Central Bank of Sri Lanka unexpectedly boosted interest rates today for the first time since 2007 to curb credit growth and ensure inflation stays low. It raised the reverse repurchase rate to 9 percent from 8.5 percent and the repurchase rate to 7.5 percent from 7 percent. All seven economists in a Bloomberg News survey predicted rates would be unchanged.
In Indonesia, growth probably exceeded 6 percent for a fifth quarter, a Bloomberg survey showed ahead of a government report due Feb. 6. Gross domestic product increased 6.45 percent in the fourth quarter from a year earlier, compared with a 6.5 percent pace in the previous three months, according to the median of 17 estimates.
In Europe, a rescue plan for Greece may be completed in coming days, European officials and creditors say. The plan may include a loss of more than 70 percent for bondholders in a voluntary exchange and loans likely to exceed the 130 billion euros ($171 billion) now on the table.
Fastest in BRIC
In the U.S., Federal Reserve Chairman Ben S. Bernanke said the central bank will seek to keep prices rising at a 2 percent rate and rejected suggestions that it would sacrifice its inflation goal to boost employment.
India’s benchmark inflation rate of 7.47 percent is the fastest among the so-called BRIC nations, even as it slowed to a two-year low in December. Consumer prices rose 6.5 percent in Brazil, 6.1 percent in Russia and 4.1 percent in China the same month.
“While we have a medium-term goal of 4 to 4.5 percent for inflation, that’s not a threshold that we have to reach before we consider action,” Gokarn said in his office, adorned by photographs and books, including a biography of Apple Inc. founder Steve Jobs. “It’s the directionality.”
Maruti Suzuki India Ltd. (MSIL), maker of half the cars sold in India, has raised prices of all its models this year, citing higher raw material costs and the decline in the currency.
Indian Bonds Climb
The yield on the 8.79 percent government bonds due November 2021 declined one basis point, or 0.01 percentage point, to 8.12 percent in Mumbai today, according to the central bank’s trading system.
The rupee plunged 16 percent last year, making it the worst performing currency in Asia and prompting the central bank to clamp down on speculation. It rose 0.1 percent to 49.10 against the dollar today after gaining 7.3 percent in January.
The central bank last year tightened rules on trading in the domestic currency-forwards market and said it will reduce the amount of open positions dealers can maintain overnight.
“The measures we have taken always come at a cost,” Gokarn, a former Asia-Pacific chief economist with Standard & Poor’s, said. When markets return to “normality, then of course these measures will be considered and taken back.”
Yesterday the central bank asked lenders to “rigorously evaluate” risks from their clients’ unhedged foreign-exchange positions. Gokarn in the interview said the central bank wants to encourage hedging.
Cash Injection
To control inflation, the Reserve Bank raised borrowing costs by a record 375 basis points in 13 moves from mid-March 2010 before pausing for a second straight meeting in January. Last month, it cut India’s growth forecast to 7 percent in the year through March from the 7.6 percent predicted in October. It kept the inflation estimate at 7 percent.
The central bank lowered the cash reserve ratio to 5.5 percent from 6 percent, reducing the amount of deposits lenders need to set aside as reserves for the first time since 2009 in a move it estimated would add about 320 billion rupees ($6.5 billion) into the banking system.
In an indication of cash shortages, banks borrowed 1.3 trillion rupees on average a day from the monetary authority in January, compared with 1.16 trillion rupees in December, according to data compiled by Bloomberg. Overnight rates surged to 9.45 last week, near a three-year high.
To ease the cash squeeze in the banking system, the Reserve Bank resumed open-market purchases of government notes after 10 months in November and has so far purchased 719 billion rupees of the securities in auctions, official data show.
Indian bonds fell the most in 26 months on Jan. 24 on speculation the central bank will halt buying government bonds after reducing reserve requirements for banks.
“To the extent that pressures remain, we are always open to carrying out” bond repurchases, Gokarn said. “The other form of liquidity infusion is to buy dollars. If circumstances are right, we’ll certainly consider it. When we’ll have those circumstances is difficult to say.”
To contact the reporters on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net; Daniel Moss in Washington at dmoss@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Thursday, February 2, 2012
Gokarn Says Visible Drop in Indian Prices Will Trigger Reduction in Rates By Kartik Goyal and Daniel Moss - Feb 2, 2012
Reserve Bank of India Deputy Governor Subir Gokarn said the monetary authority will cut borrowing costs once it’s confident inflation will keep slowing.
“The stance now is that we have reached the peak and any further action will be toward easing,” Gokarn, 52, said in an interview at his office while discussing the rupee, the government’s budget deficit and bond repurchases. The central bank isn’t concerned about the currency’s record monthly advance in January “because in a sense it’s a correction,” following last year’s 16 percent decline, he said.
India’s central bank is under pressure to lower borrowing costs and protect the economy from the European debt crisis after counterparts in Brazil and Russia cut rates in recent months. The Indian government can help reduce rates by narrowing its budget gap as the fastest pace of price increases among the so-called BRIC nations slows to 7 percent in March from 9.68 percent a year earlier, according to Gokarn.
Once the central bank has confidence that the “direction will continue, that’s really going to be the trigger,” Gokarn said in the interview yesterday. “The visibility of the decline, I think, is the most important indication.”
Higher government spending on subsidies in the run-up to federal elections in two years threatens to stoke prices and limit the scope for monetary policy easing to support growth in Asia’s third-largest economy. The nation’s budget deficit reached 92.3 percent of the fiscal-year target in the nine months through December, a report showed this week.
“The comments clearly indicate the direction of the monetary policy is towards reducing rates,” said Shubhada Rao, Mumbai-based chief economist at Yes Bank Ltd. (YES) “The timing and the quantum of rate cuts will still be dependent on the cut in the budget deficit.”
‘Directionality’
India’s benchmark inflation rate of 7.47 percent is the fastest among the BRIC nations, even as it slowed to a two-year low in December. Consumer prices rose 6.5 percent in Brazil, 6.1 percent in Russia and 4.1 percent in China the same month.
“While we have a medium-term goal of 4 to 4.5 percent for inflation, that’s not a threshold that we have to reach before we consider action,” Gokarn said in the office, adorned by photographs and books, including a biography of Apple Inc. founder Steve Jobs. “It’s the directionality.”
Maruti Suzuki India Ltd. (MSIL), maker of half the cars sold in India, has raised prices of all its models this year, citing higher raw material costs and the decline in the currency.
The yield on the 8.79 percent government bonds due November 2021 declined two basis points, or 0.02 percentage point, to 8.13 percent, a nine-month low, in Mumbai yesterday, according to the central bank’s trading system.
Encourage Hedging
The rupee plunged 16 percent last year, making it the worst performing currency in Asia and prompting the central bank to clamp down on speculation. The measure rose 0.2 percent to 49.16 against the dollar yesterday after gaining 7.3 percent in January.
The central bank last year tightened rules on trading in the domestic currency-forwards market and said it will reduce the amount of open positions dealers can maintain overnight.
“The measures we have taken always come at a cost,” Gokarn, a former Asia-Pacific chief economist with Standard & Poor’s, said. When markets return to “normality, then of course these measures will be considered and taken back.”
Yesterday the central bank asked lenders to “rigorously evaluate” risks from their clients’ unhedged foreign-exchange positions. Gokarn in the interview said the central bank wants to encourage hedging.
Cash Shortage
To control inflation, the Reserve Bank raised borrowing costs by a record 375 basis points in 13 moves from mid-March 2010 before pausing for a second straight meeting in January. Last month, it cut India’s growth forecast to 7 percent in the year through March from the 7.6 percent predicted in October. It kept the inflation estimate at 7 percent.
The central bank lowered the cash reserve ratio to 5.5 percent from 6 percent, reducing the amount of deposits lenders need to set aside as reserves for the first time since 2009 in a move it estimated would add about 320 billion rupees ($6.5 billion) into the banking system.
In an indication of cash shortages, banks borrowed 1.3 trillion rupees on average a day from the monetary authority in January, compared with 1.16 trillion rupees in December, according to data compiled by Bloomberg. Overnight rates surged to 9.45 last week, near a three-year high.
To ease the cash squeeze in the banking system, the Reserve Bank resumed open-market purchases of government notes after 10 months in November and has so far purchased 719 billion rupees of the securities in auctions, official data show.
Indian bonds fell the most in 26 months on Jan. 24 on speculation the central bank will halt buying government bonds after reducing reserve requirements for banks.
“To the extent that pressures remain, we are always open to carrying out” bond repurchases, Gokarn said. “The other form of liquidity infusion is to buy dollars. If circumstances are right, we’ll certainly consider it. When we’ll have those circumstances is difficult to say.”
To contact the reporters on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net; Daniel Moss in Washington at dmoss@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
“The stance now is that we have reached the peak and any further action will be toward easing,” Gokarn, 52, said in an interview at his office while discussing the rupee, the government’s budget deficit and bond repurchases. The central bank isn’t concerned about the currency’s record monthly advance in January “because in a sense it’s a correction,” following last year’s 16 percent decline, he said.
India’s central bank is under pressure to lower borrowing costs and protect the economy from the European debt crisis after counterparts in Brazil and Russia cut rates in recent months. The Indian government can help reduce rates by narrowing its budget gap as the fastest pace of price increases among the so-called BRIC nations slows to 7 percent in March from 9.68 percent a year earlier, according to Gokarn.
Once the central bank has confidence that the “direction will continue, that’s really going to be the trigger,” Gokarn said in the interview yesterday. “The visibility of the decline, I think, is the most important indication.”
Higher government spending on subsidies in the run-up to federal elections in two years threatens to stoke prices and limit the scope for monetary policy easing to support growth in Asia’s third-largest economy. The nation’s budget deficit reached 92.3 percent of the fiscal-year target in the nine months through December, a report showed this week.
“The comments clearly indicate the direction of the monetary policy is towards reducing rates,” said Shubhada Rao, Mumbai-based chief economist at Yes Bank Ltd. (YES) “The timing and the quantum of rate cuts will still be dependent on the cut in the budget deficit.”
‘Directionality’
India’s benchmark inflation rate of 7.47 percent is the fastest among the BRIC nations, even as it slowed to a two-year low in December. Consumer prices rose 6.5 percent in Brazil, 6.1 percent in Russia and 4.1 percent in China the same month.
“While we have a medium-term goal of 4 to 4.5 percent for inflation, that’s not a threshold that we have to reach before we consider action,” Gokarn said in the office, adorned by photographs and books, including a biography of Apple Inc. founder Steve Jobs. “It’s the directionality.”
Maruti Suzuki India Ltd. (MSIL), maker of half the cars sold in India, has raised prices of all its models this year, citing higher raw material costs and the decline in the currency.
The yield on the 8.79 percent government bonds due November 2021 declined two basis points, or 0.02 percentage point, to 8.13 percent, a nine-month low, in Mumbai yesterday, according to the central bank’s trading system.
Encourage Hedging
The rupee plunged 16 percent last year, making it the worst performing currency in Asia and prompting the central bank to clamp down on speculation. The measure rose 0.2 percent to 49.16 against the dollar yesterday after gaining 7.3 percent in January.
The central bank last year tightened rules on trading in the domestic currency-forwards market and said it will reduce the amount of open positions dealers can maintain overnight.
“The measures we have taken always come at a cost,” Gokarn, a former Asia-Pacific chief economist with Standard & Poor’s, said. When markets return to “normality, then of course these measures will be considered and taken back.”
Yesterday the central bank asked lenders to “rigorously evaluate” risks from their clients’ unhedged foreign-exchange positions. Gokarn in the interview said the central bank wants to encourage hedging.
Cash Shortage
To control inflation, the Reserve Bank raised borrowing costs by a record 375 basis points in 13 moves from mid-March 2010 before pausing for a second straight meeting in January. Last month, it cut India’s growth forecast to 7 percent in the year through March from the 7.6 percent predicted in October. It kept the inflation estimate at 7 percent.
The central bank lowered the cash reserve ratio to 5.5 percent from 6 percent, reducing the amount of deposits lenders need to set aside as reserves for the first time since 2009 in a move it estimated would add about 320 billion rupees ($6.5 billion) into the banking system.
In an indication of cash shortages, banks borrowed 1.3 trillion rupees on average a day from the monetary authority in January, compared with 1.16 trillion rupees in December, according to data compiled by Bloomberg. Overnight rates surged to 9.45 last week, near a three-year high.
To ease the cash squeeze in the banking system, the Reserve Bank resumed open-market purchases of government notes after 10 months in November and has so far purchased 719 billion rupees of the securities in auctions, official data show.
Indian bonds fell the most in 26 months on Jan. 24 on speculation the central bank will halt buying government bonds after reducing reserve requirements for banks.
“To the extent that pressures remain, we are always open to carrying out” bond repurchases, Gokarn said. “The other form of liquidity infusion is to buy dollars. If circumstances are right, we’ll certainly consider it. When we’ll have those circumstances is difficult to say.”
To contact the reporters on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net; Daniel Moss in Washington at dmoss@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Wednesday, February 1, 2012
Asian Stocks’ Rally May Be Sustainable After Break Out: Technical Analysis By Jonathan Burgos - Feb 1, 2012
Asian stocks may extend their longest rally in more than a year after regional indexes broke out of so-called triangle congestion patterns, according to Chart Partners Group Ltd.
The MSCI Asia Pacific Index surged 8 percent last month, its best such performance since September 2010 and the first time the gauge recorded consecutive monthly advances since October 2010. India’s BSE Sensitive Index and Hong Kong’s Hang Seng Index posted the biggest advances, each rising 11 percent.
“Many Asian indexes have broken to the upside of triangle congestion patterns,” Thomas Schroeder, managing director at Bangkok-based technical research company Chart Partners, said in a telephone interview. “It started in Hong Kong and we’ve seen similar breakouts in Japan and Korea. These are signs that this rally is sustainable.”
The Hang Seng Index broke above the triangle pattern on Jan. 17, Bloomberg data showed. South Korea’s Kospi Index, which has risen 7.3 percent this year, traded above the same pattern on Jan. 20, while Japan’s Nikkei 225 Stock Average breached the formation on Jan. 25.
The rally across Asia may last through March, especially if China’s Shanghai Composite Index (SHCOMP) can build on recent gains, Schroeder said. The Chinese benchmark index advanced 4.2 percent in January, snapping a two-month slump.
“We’ll find more buying opportunity should shares weaken in February,” said Schroeder. “If the Shanghai Composite Index extends its gains above 2,320, that will add more fuel to the rally. The Chinese benchmark index could rise to between 2,500 and 2,600.”
In technical analysis, investors and analysts study charts of trading patterns and prices to try and predict changes in a security, commodity, currency or index. A triangle is formed when upper and lower trend lines intersect.
To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net
To contact the editors responsible for this story: Nick Gentle at ngentle2@bloomberg.net; John McCluskey at j.mccluskey@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
The MSCI Asia Pacific Index surged 8 percent last month, its best such performance since September 2010 and the first time the gauge recorded consecutive monthly advances since October 2010. India’s BSE Sensitive Index and Hong Kong’s Hang Seng Index posted the biggest advances, each rising 11 percent.
“Many Asian indexes have broken to the upside of triangle congestion patterns,” Thomas Schroeder, managing director at Bangkok-based technical research company Chart Partners, said in a telephone interview. “It started in Hong Kong and we’ve seen similar breakouts in Japan and Korea. These are signs that this rally is sustainable.”
The Hang Seng Index broke above the triangle pattern on Jan. 17, Bloomberg data showed. South Korea’s Kospi Index, which has risen 7.3 percent this year, traded above the same pattern on Jan. 20, while Japan’s Nikkei 225 Stock Average breached the formation on Jan. 25.
The rally across Asia may last through March, especially if China’s Shanghai Composite Index (SHCOMP) can build on recent gains, Schroeder said. The Chinese benchmark index advanced 4.2 percent in January, snapping a two-month slump.
“We’ll find more buying opportunity should shares weaken in February,” said Schroeder. “If the Shanghai Composite Index extends its gains above 2,320, that will add more fuel to the rally. The Chinese benchmark index could rise to between 2,500 and 2,600.”
In technical analysis, investors and analysts study charts of trading patterns and prices to try and predict changes in a security, commodity, currency or index. A triangle is formed when upper and lower trend lines intersect.
To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net
To contact the editors responsible for this story: Nick Gentle at ngentle2@bloomberg.net; John McCluskey at j.mccluskey@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Tuesday, January 31, 2012
Steel Demand Slowing With Europe in Setback to ArcelorMittal: Commodities By Abhishek Shanker - Jan 31, 2012
Steel demand worldwide is growing slower than forecast, eroding profit at producers including ArcelorMittal and Tata Steel Ltd. (TATA) and forcing investors to revise their 2012 outlook for the $430 billion industry.
Global use of the alloy will rise 4.5 percent this year, less than the 5.4 percent forecast in October by the World Steel Association, according to the median estimate of 14 steelmakers, analysts and traders surveyed by Bloomberg. Growth may be as low as 1.2 percent, according to Bloomberg Industries analysts.
The gain, the lowest in three years, is tempered by cooling economies in China and Europe, where orders for steel products for houses, cars and machinery are stagnating and will keep the alloy’s prices and overseas shipments muted, analysts said.
“I’m bearish on Europe’s demand outlook in view of the negative impact from budget deficits and the debt crisis,” said Helen Lau, an analyst with Hong Kong-based brokerage UOB Kay Hian. “China is maintaining its tightening stance on the private property market and developers are still suffering from tight bank credit and high inventory” of homes.
ArcelorMittal may report a profit of $157.6 million in the three months ended Dec. 31, its worst quarterly earnings in a year, according to the mean of five analyst estimates compiled by Bloomberg. Tata Steel, including its European unit, is expected to report a 3.3 billion-rupee ($67 million) net income in the same period, the worst fiscal third-quarter numbers in at least five years, according to the average of 23 estimates.
Becoming Cheaper
Steel companies are forecast to become cheaper, with a price-to-earnings ratio forecast to decline to 8.5 times, from almost 13 times currently, according to data compiled by Bloomberg for the Iron/Steel index.
Prices of benchmark hot-rolled coils may average 5 percent lower at about $734 a ton in 2012, compared with about $772 last year, calculations based on Steel Business Briefing data show.
Steel production in China, which accounted for about 46 percent of the global total in 2011, fell in each of the six months through November before gaining in December, according to the World Steel Association, the Brussels-based trade group that promotes the steel industry.
The World Bank on Jan. 18 cut its global growth forecast by the most in three years, saying that a recession in the euro region threatens to exacerbate a slowdown in emerging markets such as India and Mexico. The world economy will grow 2.5 percent this year, down from a June estimate of 3.6 percent, it said. The euro area may contract 0.3 percent, compared with a previous estimate of a 1.8 percent gain.
Furnace Closings
ArcelorMittal (MT), the world’s biggest producer, said in October it would idle plants in France, Germany, Poland, Spain and Luxembourg and permanently shut its blast furnaces in Liege, Belgium, as demand wanes.
“Global economic conditions remain a concern with the euro-zone facing difficult credit conditions and fiscal policy uncertainty,” Seshagiri Rao, group chief financial officer at JSW Steel Ltd. (JSTL), India’s third-largest producer, said in Mumbai. “Steel production last month fell below previous year’s levels, which means high cost capacities are being closed and there is a lower apparent steel demand.”
Chinese steel producers Angang Steel Co. (000898), the largest Hong Kong-listed Chinese steel mill, swung to a loss last year and Maanshan Iron & Steel Co., Nanjing Iron & Steel Co. and Aluminum Corp. of China Ltd. said on Jan. 30 that profit fell by more than half as China’s economy slowed.
Stock Performance
U.S.-based Steel Dynamics Inc. and Reliance Steel & Aluminum Co. (RS) are the best performers in the Bloomberg World Iron/Steel Index over the past three months. Australian steel mills BlueScope Steel Ltd. and Onesteel Ltd., battling a stronger local currency and rising costs, are the laggards.
ArcelorMittal missed analyst estimates with its third- quarter profit and said it faced volume and price pressures in the final three months of 2011. ThyssenKrupp AG (TKA), Germany’s largest steelmaker, will report “significantly lower” first- quarter earnings, Chief Executive Officer Heinrich Hiesinger said on Dec. 2.
“While Europe is trying to retrieve itself from the brink of a recession, China is aiming to cool demand,” said Niraj Shah, an analyst at Fortune Equity Brokers Ltd. in Mumbai. “China will be a wild card -- there are chances it may lower interest rates that may boost steel demand.”
Global demand climbed 15.4 percent in 2010, 6.5 percent last year and may grow 5.4 percent this year, the World Steel Association said in its Oct. 12 forecast. Consumption contracted in 2008 and 2009, according to the association’s 2011 Steel Statistical Yearbook.
Prices Falling
“It’s going to be a year of lower profits for most steel companies,” Peter Marcus, managing partner at World Steel Dynamics, said in an interview in New Delhi on Jan. 27, predicting demand may contract 2 percent this year. World Steel Dynamics, based in Englewood Cliffs, New Jersey, forecasts steel prices.
China’s economic growth may drop to 8.5 percent this year from 9.2 percent in 2011, according to the median of 15 economist estimates compiled by Bloomberg. Orders continue to remain weak in the world’s fastest growing major economy, according to a Macquarie Group Ltd. report last month.
“Unless China loosens its tightening on the private property sector, it will be hard for steel demand to grow at last year’s estimated growth rate of 8.5 percent,” Lau said.
China Growth
China’s gross domestic product grew 8.9 percent in the fourth quarter from a year earlier, the slowest pace in 10 quarters. The fourth straight quarterly slowdown in the world’s second-largest economy is adding to concerns global expansion is faltering, with the International Monetary Fund warning of near- zero growth in Europe.
The financial crisis in Europe will prompt the region’s steelmakers to cut output and import less iron ore next year, London-based marine consultancy Drewry Shipping Consultants Ltd. said on Dec. 19. Mills have begun to cut production and the full impact of the reduction will be seen in 2012, it said.
Standard & Poor’s downgraded nine European nations on Jan. 13, saying recent policy steps may prove “insufficient” to contain the fiscal crisis.
The global steel trade may fall as much as 5 percent in 2012 after rising an estimated 6.2 percent to 410 million tons in 2011, Phil Hunt, operations manager at London-based International Steel Statistics Bureau, said in an e-mailed reply on Jan. 23. Shipments from India may rise as local producers add capacities, Marcus said.
To contact the reporter on this story: Abhishek Shanker in Mumbai at ashanker1@bloomberg.net
To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net Andrew Hobbs at ahobbs4@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Global use of the alloy will rise 4.5 percent this year, less than the 5.4 percent forecast in October by the World Steel Association, according to the median estimate of 14 steelmakers, analysts and traders surveyed by Bloomberg. Growth may be as low as 1.2 percent, according to Bloomberg Industries analysts.
The gain, the lowest in three years, is tempered by cooling economies in China and Europe, where orders for steel products for houses, cars and machinery are stagnating and will keep the alloy’s prices and overseas shipments muted, analysts said.
“I’m bearish on Europe’s demand outlook in view of the negative impact from budget deficits and the debt crisis,” said Helen Lau, an analyst with Hong Kong-based brokerage UOB Kay Hian. “China is maintaining its tightening stance on the private property market and developers are still suffering from tight bank credit and high inventory” of homes.
ArcelorMittal may report a profit of $157.6 million in the three months ended Dec. 31, its worst quarterly earnings in a year, according to the mean of five analyst estimates compiled by Bloomberg. Tata Steel, including its European unit, is expected to report a 3.3 billion-rupee ($67 million) net income in the same period, the worst fiscal third-quarter numbers in at least five years, according to the average of 23 estimates.
Becoming Cheaper
Steel companies are forecast to become cheaper, with a price-to-earnings ratio forecast to decline to 8.5 times, from almost 13 times currently, according to data compiled by Bloomberg for the Iron/Steel index.
Prices of benchmark hot-rolled coils may average 5 percent lower at about $734 a ton in 2012, compared with about $772 last year, calculations based on Steel Business Briefing data show.
Steel production in China, which accounted for about 46 percent of the global total in 2011, fell in each of the six months through November before gaining in December, according to the World Steel Association, the Brussels-based trade group that promotes the steel industry.
The World Bank on Jan. 18 cut its global growth forecast by the most in three years, saying that a recession in the euro region threatens to exacerbate a slowdown in emerging markets such as India and Mexico. The world economy will grow 2.5 percent this year, down from a June estimate of 3.6 percent, it said. The euro area may contract 0.3 percent, compared with a previous estimate of a 1.8 percent gain.
Furnace Closings
ArcelorMittal (MT), the world’s biggest producer, said in October it would idle plants in France, Germany, Poland, Spain and Luxembourg and permanently shut its blast furnaces in Liege, Belgium, as demand wanes.
“Global economic conditions remain a concern with the euro-zone facing difficult credit conditions and fiscal policy uncertainty,” Seshagiri Rao, group chief financial officer at JSW Steel Ltd. (JSTL), India’s third-largest producer, said in Mumbai. “Steel production last month fell below previous year’s levels, which means high cost capacities are being closed and there is a lower apparent steel demand.”
Chinese steel producers Angang Steel Co. (000898), the largest Hong Kong-listed Chinese steel mill, swung to a loss last year and Maanshan Iron & Steel Co., Nanjing Iron & Steel Co. and Aluminum Corp. of China Ltd. said on Jan. 30 that profit fell by more than half as China’s economy slowed.
Stock Performance
U.S.-based Steel Dynamics Inc. and Reliance Steel & Aluminum Co. (RS) are the best performers in the Bloomberg World Iron/Steel Index over the past three months. Australian steel mills BlueScope Steel Ltd. and Onesteel Ltd., battling a stronger local currency and rising costs, are the laggards.
ArcelorMittal missed analyst estimates with its third- quarter profit and said it faced volume and price pressures in the final three months of 2011. ThyssenKrupp AG (TKA), Germany’s largest steelmaker, will report “significantly lower” first- quarter earnings, Chief Executive Officer Heinrich Hiesinger said on Dec. 2.
“While Europe is trying to retrieve itself from the brink of a recession, China is aiming to cool demand,” said Niraj Shah, an analyst at Fortune Equity Brokers Ltd. in Mumbai. “China will be a wild card -- there are chances it may lower interest rates that may boost steel demand.”
Global demand climbed 15.4 percent in 2010, 6.5 percent last year and may grow 5.4 percent this year, the World Steel Association said in its Oct. 12 forecast. Consumption contracted in 2008 and 2009, according to the association’s 2011 Steel Statistical Yearbook.
Prices Falling
“It’s going to be a year of lower profits for most steel companies,” Peter Marcus, managing partner at World Steel Dynamics, said in an interview in New Delhi on Jan. 27, predicting demand may contract 2 percent this year. World Steel Dynamics, based in Englewood Cliffs, New Jersey, forecasts steel prices.
China’s economic growth may drop to 8.5 percent this year from 9.2 percent in 2011, according to the median of 15 economist estimates compiled by Bloomberg. Orders continue to remain weak in the world’s fastest growing major economy, according to a Macquarie Group Ltd. report last month.
“Unless China loosens its tightening on the private property sector, it will be hard for steel demand to grow at last year’s estimated growth rate of 8.5 percent,” Lau said.
China Growth
China’s gross domestic product grew 8.9 percent in the fourth quarter from a year earlier, the slowest pace in 10 quarters. The fourth straight quarterly slowdown in the world’s second-largest economy is adding to concerns global expansion is faltering, with the International Monetary Fund warning of near- zero growth in Europe.
The financial crisis in Europe will prompt the region’s steelmakers to cut output and import less iron ore next year, London-based marine consultancy Drewry Shipping Consultants Ltd. said on Dec. 19. Mills have begun to cut production and the full impact of the reduction will be seen in 2012, it said.
Standard & Poor’s downgraded nine European nations on Jan. 13, saying recent policy steps may prove “insufficient” to contain the fiscal crisis.
The global steel trade may fall as much as 5 percent in 2012 after rising an estimated 6.2 percent to 410 million tons in 2011, Phil Hunt, operations manager at London-based International Steel Statistics Bureau, said in an e-mailed reply on Jan. 23. Shipments from India may rise as local producers add capacities, Marcus said.
To contact the reporter on this story: Abhishek Shanker in Mumbai at ashanker1@bloomberg.net
To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net Andrew Hobbs at ahobbs4@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Monday, January 30, 2012
Gillard ‘Angry’ as Australian Opposition Calls for Canberra Protest Probe By Phoebe Sedgman - Jan 29, 2012
Australian Prime Minister Julia Gillard expressed anger at opposition demands for an inquiry over her government’s role in clashes between police and aboriginal protesters in Canberra on Australia Day.
A media aide to Gillard resigned Jan. 27 for disclosing opposition leader Tony Abbott’s location at a restaurant in the national capital, information that was passed on to protest organizers. Security officers rushed Gillard and Abbott from the venue, where they were attending a function, as dozens of demonstrators banged on the windows.
Gillard, who trails Abbott’s Liberal-National coalition in opinion polls, had her parliamentary majority reduced to one seat last week when an independent lawmaker withdrew his support saying she’d broken a pledge to tighten gambling laws. The ruling Labor Party, which faces a general election by 2013, received a boost when a Galaxy poll published today showed its support had climbed five percentage points from October.
The Australian Federal Police won’t investigate the disclosure of Abbott’s location as there is no evidence of a criminal act, it said in a statement today. That comes after Abbott yesterday told reporters the prime minister’s office “has done the wrong thing,” and “let’s give her a chance to do the right thing” with an inquiry. Gillard has said no other member of her office was involved in passing information.
Abbott’s calls typify “his tendency to go too far,” Gillard said Jan. 28 at a news conference in Melbourne. “For it to be insinuated that I would play some role in disrupting an event to recognize Australians who had performed miracles during a natural disaster is deeply offensive.”
The federal police “should automatically be reviewing their own processes and procedures,” the opposition coalition’s Christopher Pyne said in an interview broadcast on Sky News yesterday. “But also the prime minister should want to get to the bottom of who is responsible for what happened.”
Tent Embassy
The Canberra protest took place on Jan. 26, the Australia Day holiday marking the arrival of white settlers in the country. Demonstrators were responding to Abbott’s comment earlier in the day, when he replied it’s probably “time to move on” in the debate for the need to an Aboriginal Tent Embassy, which has been standing for 40 years in front of the nation’s former parliament house.
Gillard and Abbott were spirited away in government cars to cries of “racist” and “shame” from the protesters. As Gillard was taken from the building she stumbled and lost her shoe. Members of the Tent Embassy later found the footwear and returned it.
Indigenous Australians
Aboriginal people populated Australia at least 50,000 years before Europeans arrived. Aborigines remain the poorest and most disadvantaged group in Australian society more than 200 years after Europeans settled in 1788.
There are about 400,000 indigenous Australians, who make up 2 percent of the population. Australia Day marks the date in 1788 when Captain Arthur Phillip, commander of the first fleet of convict ships from Britain, landed in Sydney Cove, the site of the modern-day city. Many Aborigines and their supporters refer to the date as Invasion Day.
Gillard will concentrate on Australia’s economic performance when she addresses the Australia-Israel Chamber of Commerce this week, the Sydney Morning Herald newspaper reported yesterday, citing an unidentified official.
“We’re situated in the region of the world that continues to experience economic growth and will during the course of this century, and that gives us particular opportunities for the future,” Gillard said at a news conference in Melbourne yesterday with visiting New Zealand Prime Minister John Key.
Asia Growth
Australia is “looking how we can win in this Asian century of economic growth and so we can be prepared for that economic growth,” she said.
Australia’s economy will expand 3.7 percent in 2012, the fastest pace among Group of 10 nations, according to strategists surveyed by Bloomberg, as benchmark interest-rate cuts boost consumer confidence and a resources boom spurs record exports. China, Australia’s biggest trading partner, may have economic growth of 8.4 percent this year, compared with 2.5 percent globally and a 0.3 percent contraction in the euro area, the World Bank said Jan. 18.
“Our economy is now 7 percent larger than it was before the global financial crisis, while many other advanced economies are yet to make up the ground they lost,” Treasurer Wayne Swan said in his weekly note yesterday. “We’re uniquely placed to deal with the worst the world can throw at us.”
To contact the reporter for this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net
To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
A media aide to Gillard resigned Jan. 27 for disclosing opposition leader Tony Abbott’s location at a restaurant in the national capital, information that was passed on to protest organizers. Security officers rushed Gillard and Abbott from the venue, where they were attending a function, as dozens of demonstrators banged on the windows.
Gillard, who trails Abbott’s Liberal-National coalition in opinion polls, had her parliamentary majority reduced to one seat last week when an independent lawmaker withdrew his support saying she’d broken a pledge to tighten gambling laws. The ruling Labor Party, which faces a general election by 2013, received a boost when a Galaxy poll published today showed its support had climbed five percentage points from October.
The Australian Federal Police won’t investigate the disclosure of Abbott’s location as there is no evidence of a criminal act, it said in a statement today. That comes after Abbott yesterday told reporters the prime minister’s office “has done the wrong thing,” and “let’s give her a chance to do the right thing” with an inquiry. Gillard has said no other member of her office was involved in passing information.
Abbott’s calls typify “his tendency to go too far,” Gillard said Jan. 28 at a news conference in Melbourne. “For it to be insinuated that I would play some role in disrupting an event to recognize Australians who had performed miracles during a natural disaster is deeply offensive.”
The federal police “should automatically be reviewing their own processes and procedures,” the opposition coalition’s Christopher Pyne said in an interview broadcast on Sky News yesterday. “But also the prime minister should want to get to the bottom of who is responsible for what happened.”
Tent Embassy
The Canberra protest took place on Jan. 26, the Australia Day holiday marking the arrival of white settlers in the country. Demonstrators were responding to Abbott’s comment earlier in the day, when he replied it’s probably “time to move on” in the debate for the need to an Aboriginal Tent Embassy, which has been standing for 40 years in front of the nation’s former parliament house.
Gillard and Abbott were spirited away in government cars to cries of “racist” and “shame” from the protesters. As Gillard was taken from the building she stumbled and lost her shoe. Members of the Tent Embassy later found the footwear and returned it.
Indigenous Australians
Aboriginal people populated Australia at least 50,000 years before Europeans arrived. Aborigines remain the poorest and most disadvantaged group in Australian society more than 200 years after Europeans settled in 1788.
There are about 400,000 indigenous Australians, who make up 2 percent of the population. Australia Day marks the date in 1788 when Captain Arthur Phillip, commander of the first fleet of convict ships from Britain, landed in Sydney Cove, the site of the modern-day city. Many Aborigines and their supporters refer to the date as Invasion Day.
Gillard will concentrate on Australia’s economic performance when she addresses the Australia-Israel Chamber of Commerce this week, the Sydney Morning Herald newspaper reported yesterday, citing an unidentified official.
“We’re situated in the region of the world that continues to experience economic growth and will during the course of this century, and that gives us particular opportunities for the future,” Gillard said at a news conference in Melbourne yesterday with visiting New Zealand Prime Minister John Key.
Asia Growth
Australia is “looking how we can win in this Asian century of economic growth and so we can be prepared for that economic growth,” she said.
Australia’s economy will expand 3.7 percent in 2012, the fastest pace among Group of 10 nations, according to strategists surveyed by Bloomberg, as benchmark interest-rate cuts boost consumer confidence and a resources boom spurs record exports. China, Australia’s biggest trading partner, may have economic growth of 8.4 percent this year, compared with 2.5 percent globally and a 0.3 percent contraction in the euro area, the World Bank said Jan. 18.
“Our economy is now 7 percent larger than it was before the global financial crisis, while many other advanced economies are yet to make up the ground they lost,” Treasurer Wayne Swan said in his weekly note yesterday. “We’re uniquely placed to deal with the worst the world can throw at us.”
To contact the reporter for this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net
To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Sunday, January 29, 2012
Davos Tells EU to Fix Crisis for Good By Simon Kennedy and Jana Randow - Jan 29, 2012
European leaders were told by policy makers, bankers and academics from around the world that it’s time to end the region’s debt crisis and measures aimed at simply containing it are no longer enough.
Five days of debating and partying at the World Economic Forum’s annual meeting ended yesterday, with the euro area under pressure to swiftly deliver a bigger bailout fund that could help build a firewall worth more than $1 trillion. Leaders were also told they need to finish crafting tougher budget rules, and finally make Greece’s debt burden manageable.
Failure to comply would threaten economic growth and financial markets, as well as deprive the region of more outside support, said delegates including billionaire investor George Soros and U.S. Treasury Secretary Timothy F. Geithner. How far Europe’s officials are willing to go in response may be revealed at a Brussels summit today.
“There’s a very strong view of get on with it, get this thing done,” Bank of Canada Governor Mark Carney told Bloomberg Television in Davos, Switzerland.
The caution against complacency came toward the end of a month in which signs of stabilization emerged in Europe as market lending rates eased, economic indicators showed some resilience and bond yields fell from Spain (GDBR10) to Italy (GDBR10). At the same time, banks are still cutting lending, Portuguese borrowing costs are surging and Greece faces a 14.5 billion ($19 billion) euro bond repayment in March.
Spillover
Carney estimated Europe’s woes will subtract 1 percentage point from global growth by the end of 2012 “and that’s in a world where this crisis is contained.”
“It’s not just a euro-zone crisis, it’s a crisis that could have spillover effects around the world,” International Monetary Fund Managing Director Christine Lagarde said. She came to Davos promoting her push for $500 billion in new crisis- fighting money for the Washington-based lender.
The main solution proposed was increasing the euro region’s own funds from the planned limit of 500 billion euros that will take effect in July. EU officials already plan to reassess that amount in March and have the option to push it even higher through leverage. That could swell it to a level triggering donations to the IMF from around the world and result in an overall warchest worth at least $1.1 trillion
Stronger Firewall
Both the French and Spanish finance ministers told Davos delegates they’d support increasing the rescue fund even in the face of German opposition.
“The only way Europe’s going to be successful in holding this together, making monetary union work, is to build a stronger firewall,” Geithner said. Soros said in an interview “not enough has been done to ringfence” the region from the risk of a Greek default.
Strengthening the defences was regarded as a pre-requisite by officials from the U.K. to Japan if they are to stump up emergency cash for the region and channel it through the IMF. European governments must show the “colour of their money,” said U.K. Chancellor of the Exchequer George Osborne.
There was unanimity that Greece (GRBD10) remains Europe’s weakest link as talks between the government and bond holders on a debt restructuring dragged on through the weekend. Failure to strike a deal could deprive the country of a second bailout package required to keep its finances afloat.
Greek Fallout
“The fact we’re still at the beginning of 2012 talking about Greece is a sign this problem hasn’t been dealt with,” Osborne said.
Bank chief executives in Davos disagreed over the fallout if Greece reneged on its debt. Deutsche Bank AG’s Josef Ackermann said in an interview that a default would be “playing with fire,” while JPMorgan Chase & Co.’s Jamie Dimon told CNBC it would not be a “disaster.”
For all the angst, conference-goers expressed optimism that European leaders may now be more aware of the risks of failure so more willing to act.
“There is evidence Europe is starting to turn a bit of a corner,” John Phizackerley, Nomura’s chief executive officer for Europe, Middle East and Africa, said in an interview.
While German Chancellor Angela Merkel used her keynote speech to rebuff calls for bigger bailout reserves, she is “absolutely convinced that we will be able to master this crisis.” Merkel meets other euro leaders in Brussels today to continue work on fortifying the region’s budget rules.
ECB Praise
If there was a hero of the week it was ECB President Mario Draghi, who won widespread praise for his decision last month to loan banks an unprecedented 489 billion euros for the next three years. Still, even his fans warned it only gave governments and banks breathing space to remedy their problems.
“I’m really glad the ECB took these actions, but let’s not be complacent,” World Bank President Robert Zoellick said. “This buys time, you still have to act.”
The mood was bleakest among economists and historians. Nouriel Roubini, co-founder of Roubini Global Economics LLC, described Europe as a “slow motion train wreck” and said Greece may be forced out of the euro within a year.
Harvard University professor Niall Ferguson said the crisis remained one of solvency. Only an agreement by Germany to transfer cash to indebted nations and issue joint debt would end it.
“Optimism is ill-advised,” said Ferguson, a Bloomberg News contributor. “As often happens, there is temporary respite and then markets wake up and everyone realises the crisis isn’t over.”
To contact the reporter on this story: Simon Kennedy in Davos at skennedy4@bloomberg.net Jana Randow in Davos at jrandow@bloomberg.net
To contact the editors responsible for this story: John Fraher at jfraher@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Five days of debating and partying at the World Economic Forum’s annual meeting ended yesterday, with the euro area under pressure to swiftly deliver a bigger bailout fund that could help build a firewall worth more than $1 trillion. Leaders were also told they need to finish crafting tougher budget rules, and finally make Greece’s debt burden manageable.
Failure to comply would threaten economic growth and financial markets, as well as deprive the region of more outside support, said delegates including billionaire investor George Soros and U.S. Treasury Secretary Timothy F. Geithner. How far Europe’s officials are willing to go in response may be revealed at a Brussels summit today.
“There’s a very strong view of get on with it, get this thing done,” Bank of Canada Governor Mark Carney told Bloomberg Television in Davos, Switzerland.
The caution against complacency came toward the end of a month in which signs of stabilization emerged in Europe as market lending rates eased, economic indicators showed some resilience and bond yields fell from Spain (GDBR10) to Italy (GDBR10). At the same time, banks are still cutting lending, Portuguese borrowing costs are surging and Greece faces a 14.5 billion ($19 billion) euro bond repayment in March.
Spillover
Carney estimated Europe’s woes will subtract 1 percentage point from global growth by the end of 2012 “and that’s in a world where this crisis is contained.”
“It’s not just a euro-zone crisis, it’s a crisis that could have spillover effects around the world,” International Monetary Fund Managing Director Christine Lagarde said. She came to Davos promoting her push for $500 billion in new crisis- fighting money for the Washington-based lender.
The main solution proposed was increasing the euro region’s own funds from the planned limit of 500 billion euros that will take effect in July. EU officials already plan to reassess that amount in March and have the option to push it even higher through leverage. That could swell it to a level triggering donations to the IMF from around the world and result in an overall warchest worth at least $1.1 trillion
Stronger Firewall
Both the French and Spanish finance ministers told Davos delegates they’d support increasing the rescue fund even in the face of German opposition.
“The only way Europe’s going to be successful in holding this together, making monetary union work, is to build a stronger firewall,” Geithner said. Soros said in an interview “not enough has been done to ringfence” the region from the risk of a Greek default.
Strengthening the defences was regarded as a pre-requisite by officials from the U.K. to Japan if they are to stump up emergency cash for the region and channel it through the IMF. European governments must show the “colour of their money,” said U.K. Chancellor of the Exchequer George Osborne.
There was unanimity that Greece (GRBD10) remains Europe’s weakest link as talks between the government and bond holders on a debt restructuring dragged on through the weekend. Failure to strike a deal could deprive the country of a second bailout package required to keep its finances afloat.
Greek Fallout
“The fact we’re still at the beginning of 2012 talking about Greece is a sign this problem hasn’t been dealt with,” Osborne said.
Bank chief executives in Davos disagreed over the fallout if Greece reneged on its debt. Deutsche Bank AG’s Josef Ackermann said in an interview that a default would be “playing with fire,” while JPMorgan Chase & Co.’s Jamie Dimon told CNBC it would not be a “disaster.”
For all the angst, conference-goers expressed optimism that European leaders may now be more aware of the risks of failure so more willing to act.
“There is evidence Europe is starting to turn a bit of a corner,” John Phizackerley, Nomura’s chief executive officer for Europe, Middle East and Africa, said in an interview.
While German Chancellor Angela Merkel used her keynote speech to rebuff calls for bigger bailout reserves, she is “absolutely convinced that we will be able to master this crisis.” Merkel meets other euro leaders in Brussels today to continue work on fortifying the region’s budget rules.
ECB Praise
If there was a hero of the week it was ECB President Mario Draghi, who won widespread praise for his decision last month to loan banks an unprecedented 489 billion euros for the next three years. Still, even his fans warned it only gave governments and banks breathing space to remedy their problems.
“I’m really glad the ECB took these actions, but let’s not be complacent,” World Bank President Robert Zoellick said. “This buys time, you still have to act.”
The mood was bleakest among economists and historians. Nouriel Roubini, co-founder of Roubini Global Economics LLC, described Europe as a “slow motion train wreck” and said Greece may be forced out of the euro within a year.
Harvard University professor Niall Ferguson said the crisis remained one of solvency. Only an agreement by Germany to transfer cash to indebted nations and issue joint debt would end it.
“Optimism is ill-advised,” said Ferguson, a Bloomberg News contributor. “As often happens, there is temporary respite and then markets wake up and everyone realises the crisis isn’t over.”
To contact the reporter on this story: Simon Kennedy in Davos at skennedy4@bloomberg.net Jana Randow in Davos at jrandow@bloomberg.net
To contact the editors responsible for this story: John Fraher at jfraher@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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