Japanese economy now in recession
November 17, 2008
This is Japan
Japan’s economy has entered its first recession since 2001 after shrinking by 0.1% in the third quarter.
The world’s second-biggest economy had previous shrunk by 0.9% in the April to June quarter.
German economy now in recession
November 13, 2008
German economy now in recession
Germany has entered a recession after government figures showed that the country’s economy contracted by 0.5% in the third quarter.
This is the second consecutive quarter that the economy has shrunk after a 0.4% contraction in the second quarter.
The fall in economic output was greater than the 0.2% fall that many analysts had expected.
Last week, official figures showed that German industrial output fell 3.6% in September compared with August.
“A negative effect on gross domestic product came from foreign trade, with a strong increase in imports and weakening exports,” the Federal Statistics Office said.
The last time that the German economy was in recession was the first half of 2003.
“This confirms the German economy is in a marked slump,” said Klaus Schruefer at SEB. “We will definitely get a further contraction in the fourth quarter, probably of a similar order,” he added.
Worse to come
Such a pessimistic outlook was echoed by Sebastian Wanke at Dekabank: “There won’t be an improvement in the fourth quarter. The situation will only get worse.”
Such gloomy predictions are based on the glut of recent indicators showing a slowdown in the German economy.
Orders for goods produced by the world’s largest exporter fell 8% between August and September, according to the economy ministry in Berlin. Orders from outside Europe fell 11.4%, while domestic orders dropped 4.3%.
“Anecdotal evidence and leading indicators are scary,” said Carsten Brzeski at ING Financial Markets.
Source: bbc.co.uk/
Stocks surge after China stimulus
November 10, 2008
Japan saw one of Monday
Asian markets have risen sharply, a day after China announced a huge investment plan to kick-start its slowing economy.
Stocks leapt in Japan, China and Hong Kong, buoyed by China’s efforts to sustain its growth rates, on which many Asian economies depend.
IMF approves $16.4bn Ukraine loan
November 6, 2008
Ukraine
The International Monetary Fund (IMF) has approved a $16.4bn (£10.3bn) loan to Ukraine to bolster its economy, shaken by global financial turmoil.
The financial body said it would make $4.5bn immediately available as part of the two-year package.
The plan includes “monetary and exchange rate policy shifts, banking recapitalisation and fiscal and incomes policy adjustments”.
The IMF has agreed loans to several nations to restore their economies.
Hungary and Iceland have both reached agreement with the IMF over loan deals.
‘Considerable stress’
The IMF has forecast that Ukraine will fall into recession next year, with its economic output shrinking by 3%.
“The Ukrainian economy, especially the banking system, is experiencing considerable stress,” said IMF deputy managing director Murilo Portugal.
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He said said the government plan and the IMF loan aimed “to restore financial and macroeconomic stability by adopting a flexible exchange rate regime with targeted intervention”.
The loan for Ukraine was finally approved after being agreed at the end of October.
Increasing access to credit and a property boom had led to rapid growth in Ukraine’s capital Kiev, but investors have withdrawn funds following the recent financial turmoil and uncertainty.
Ukraine is also heavily reliant on commodities, but prices of these have fallen recently.
“Falling prices for Ukraine’s major export, steel, have led to a substantial deterioration in Ukraine’s current account outlook,” said Mr Portugal.
Source: bbc.co.uk/
South Korea in $11bn economy plan
November 3, 2008
Uncertainty over the economy has caused market volatility
South Korea has announced an economic package worth around 14 trillion won ($10.9bn; £6.6bn) to boost the economy.
The stimulus plan, announced by the Ministry of Strategy and Finance, is meant to help avert a recession.
Eleven trillion won is aimed at public projects and three trillion won is for tax cuts to encourage spending.
Recent figures indicated that South Korean’s third quarter economic growth reached a three-year low, as a wider global slowdown hit exports.
In light of the global slowdown the finance ministry said: “The Korean government proposes policy measures to cope with these unprecedented challenges by announcing pre-emptive, decisive and sufficient counter measures”.
The government, amid fears of a repeat of the 1997-98 Asian economic crisis, has been taking steps to increase liquidity.
On Thursday South Korea signed a currency swap deal with the US Federal Reserve, valued at $30bn.
And the country recently reduced its interest rate to 4.25% from 5% during an emergency meeting as a fillip to the economy.
Source: bbc.co.uk/
BMI being taken over by Lufthansa
October 30, 2008
BMI is Heathrow
UK airline BMI is being taken over by Germany’s Lufthansa.
Lufthansa is buying the 50% of firm owned by BMI chairman Sir Michael Bishop, who forced the purchase under a long-standing agreement.
The German carrier was already BMI’s second-largest shareholder, with a stake of 30% minus one share.
The deal will give Lufthansa control of more flights from London Heathrow airport than any other airline except British Airways.
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BMI
10.6 million passengers last year
Flies to 51 destinations
54 planes
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Lufthansa accepted that the deal would have an impact on competition at the UK’s largest airport, but said it was for competition authorities to make a decision on whether to approve the deal.
The deal is set to be completed by 16 January - but the German firm would not confirm what it was paying for Sir Michael’s stake. Reports suggest it is about £318m.
BA competition
The German airline signed an agreement with Sir Michael in 1999 that if he ever wanted to sell his BMI stake, it would make the purchase.
There had been growing speculation in recent months that Sir Michael was keen to sell his share in the business.
Lufthansa, which on Tuesday announced its third-quarter net profit had fallen by 75%, said it would “have to deal with” Sir Michael’s decision, which vice president for Europe, Karsten Benz, told the BBC “was not a surprise”.
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LUFTHANSA
83.1 million passengers last year
Flies to 209 destinations
276 planes
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There has been speculation that parts of the BMI business will be sold off.
But Lufthansa refused to comment on Virgin Atlantic’s suggestion that that BMI and Virgin combine their short-haul and long-haul networks.
There would be no job cuts at BMI “for the time being” Mr Benz added, saying Lufthansa had successfully integrated Swiss Airlines into the business and was confident of doing the same with BMI.
Sector under pressure
BMI flew 10.6 million passengers last year and operates 54 aircraft. It controls 11% of landing and take-off slots at Heathrow.
Its two main hubs are Heathrow and Manchester, but it also operates from 13 other UK airports.
The remaining 20% of BMI is currently owned by Sweden-based Scandinavian Airlines (SAS).
Industry observers say the Lufthansa-BMI deal considerably bolsters the German carrier’s position at Heathrow, where BA is planning to form an alliance with American Airlines.
Lufthansa is Germany’s largest airline
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Like almost all airlines, BMI has seen its profits hit this year by the big rises in the price of aviation fuel in the first half of the year.
Rising fuel costs have led to a number of carriers seeking closer ties with rivals, such as British Airways’ plans for a tie-up with American Airlines.
Other airlines have had to cease operations, including Zoom, XL and Sterling.
Analysts said Lufthansa’s relative financial strength, combined with the current troubles in the airline industry, meant it had been able to go on something of a bargain-hunting spending spree.
Earlier this year, Lufthansa had bought a 45% stake in Brussels Airlines.
Lufthansa blamed its 75% fall in net profit for the July to September period on higher fuel costs.
However, aviation fuel is now falling in price as it trails the recent sharp declines in crude oil costs.
Source: bbc.co.uk/
Rate cut hope lifts global shares
October 29, 2008
Shares have been very volatile in recent weeks
UK and other European shares have risen sharply in early trading, buoyed by growing expectations that central banks will cut interest rates further.
The UK’s FTSE 100 index was up 5.3% to 4,134, while France’s Cac had added 5.9%. The gains followed an 11% jump in the US Dow Jones index on Tuesday.
The Federal Reserve is widely tipped to cut US rates later on Tuesday.
Many analysts expect the Bank of England and European Central Bank to follow suit next week.
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The Fed is expected to trim US rates by half a percentage point to 1%.
UK interest rates are currently at 4.5%, after the Bank of England cut them by half a percentage point earlier this month in a co-ordinated move with both the Fed and European Central Bank (ECB).
The ECB’s interest rate for the eurozone stands at 3.75%.
‘Fuelling optimism’
Growing expectations of a rate cut by the Fed saw the Dow Jones close Tuesday up 10.88%, or 889.35 points, at 9,065, its second biggest one-day points rise.
This helped Japan’s Nikkei index end Wednesday up 7.7%, with Japanese sentiment further lifted by hopes of a rate cut in Tokyo.
“The optimism is fuelled by the prospect of rate cuts,” said Singapore-based investment analyst Nicole Sze of Bank Julius Baer & Co.
“Wall Street’s rally brought some extra confidence to the market, reminding investors that selling might have been overdone and this might be a good time to pick some values.”
While global stocks have rallied in recent days, they remain considerably lower than they were in September.
As of 27 October, the Dow Jones had fallen 25% during the month.
Source: bbc.co.uk/
Japan stocks rise in late rally
October 28, 2008
The Nikkei index briefly fell below the 7,000 mark
Japan’s Nikkei index staged a late rally on Tuesday to close up 6.4%, having earlier fallen below the 7,000 mark for the first time in 26 years.
Authorities said that to stabilise markets they would bring forward a ban on traders selling shares that they do not already own and have not borrowed.
The Nikkei 225 index closed up 459.02 points at 7,621.92.
Exporters were helped by a sharp fall in the value of the Japanese yen against the US dollar.
The yen has been appreciating against the dollar recently, but on Tuesday its value fell to 95.51 yen to the dollar from 93.01.
Asian gains
Share prices across Asia had initially lost ground again on opening, following volatile trading throughout the world.
South Korea’s Kospi index initially dropped 2.6%, but later rose to finish 5% up on the day.
In Hong Kong, shares ended the morning up 6.1%, clawing back some of the losses from Monday’s 12.7% decline.
Early ban
Japan’s Finance Minister Shoichi Nakagawa told reporters that the ban on naked short-selling, which had been due to come into force on 4 November, would be brought forward.
Naked short selling involves making a deal to sell shares that you do not own and relying on being able to buy the shares before the deal has to be settled.
It is done by traders who hope that the price of the shares will fall between the sale and the purchase of the shares, allowing them to pocket the difference.
The announcement follows similar moves by governments in the US, Australia and Europe.
“I decided on the measure because these few days will be critical and stock exchanges are facing risks unless we take quick action,” said Mr Nakagawa.
“Japan was easily under pressure from other sources and that is why is was important to change the rules to US and European standards.”
Meanwhile Japan’s Prime Minister Taro Aso has said he will delay calling a general election in order to handle the economic crisis, according to the Kyodo news agency.
Mr Aso, who took office a month ago, had been widely expected to call an early election to address the deep divisions in the Japanese parliament.
European shares
Stock markets in the US and Europe ended lower on Monday amid a growing belief that key economies are heading into recession.
On Wall Street, the main Dow Jones index fell 2.42%, despite being boosted earlier in the day by a surprise rise in new home sales in September.
The FTSE 100 in London closed down 0.79%, the Cac 40 in Paris ended down 3.96% but the Dax in Frankfurt was up 0.91%.
Earlier the FTSE had fallen 5.6% to 3,665 points - its lowest level since April 2003.
Source: bbc.co.uk/
IMF aid for Ukraine and Hungary
October 27, 2008
The Ukrainian currency has slumped in recent weeks
The International Monetary Fund (IMF) is to offer a $16.5bn (£10.4bn) loan to Ukraine and has agreed an as yet undisclosed package with Hungary.
Ukraine is to receive the loan to help it “maintain confidence and economic and financial stability”, the IMF said.
The country has seen its stocks, banks and currency badly shaken by the global credit crunch.
The “substantial financing package” for Hungary is due to be finalised in the next few days, the IMF said.
It is conditional upon Hungary adopting “strong policies” and will be drawn from the IMF, the EU, and some individual European governments “together with regional and other multilateral institutions”, IMF Managing Director Dominique Strauss-Kahn said in a statement.
“The policies Hungary envisages justify an exceptional level of access to fund resources,” he added.
The BBC’s Sarah Morris in Washington says this suggests the loan is likely to be one of the biggest the IMF has ever made.
Hungary’s currency, the forint, has seen a sharp fall, stocks have tumbled and the country has cut its growth forecast for 2009.
Currency plunge
Internal political turmoil has delayed economic development in Ukraine and the IMF loan depends on the ex-Soviet state being able to balance its budget and make reforms to its banking sector.
Last week, the IMF said it was to give Iceland a £2.1bn loan as its banking system came close to collapse.
Pakistan and Belarus are also in talks about accessing IMF funding.
“The authorities’ programme is intended to support Ukraine’s return to economic and financial stability, by addressing financial sector liquidity and solvency problems, by smoothing the adjustment to large external shocks and by reducing inflation,” said Mr Strauss-Kahn.
“At the same time, it will guard against a deep output decline by insulating household and corporations to the extent possible.”
Easy credit and a property boom have seen Ukraine’s capital Kiev expand rapidly but the global downturn has seen investors and those willing to offer loans withdraw.
Ukraine also relies heavily on steel, but prices have collapsed and its currency, the hryvnia, has fallen sharply in the past two weeks.
Source: bbc.co.uk/
Leaders urge world finance reform
October 26, 2008
The summit was dominated by the financial turmoil
Asian and European leaders have called for comprehensive reform of the global financial system.
Ending a summit in Beijing, they also urged the International Monetary Fund (IMF) to play a greater role in helping countries hit by the market turmoil.
UN chief Ban Ki-moon called for action to help affected developing nations.
Chinese Prime Minister Wen Jiabao said Beijing would take an active role at a summit of world leaders to be held in Washington next month.
Leaders attending the 43-nation Asia Europe Meeting (Asem) agreed to “undertake effective and comprehensive reform of the international monetary and financial systems”.
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  [The crisis] threatens to undermine all our achievements and all our progress  Ban Ki-moon
Asia and West ’seek crisis fix’
Iceland set for $2.1bn IMF help
Oil falls despite production cuts
Credit crisis: World in turmoil
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They said they were moving towards consensus ahead of next month’s summit - which will bring together the 20 largest economies in Washington.
The final statement of the two-day meeting also said: “Leaders agreed that the IMF should play a critical role in assisting countries seriously affected by the crisis, upon their request.”
Speaking for the hosts, Mr Wen said financial innovation needed to be balanced with regulation.
He added: “We need to use every means to prevent the financial crisis from having an impact on the growth of the real economy.”
Poverty challenge
On Friday markets fell back amid fears of a sustained global recession.
Wall Street tumbled following similar falls across Europe and Asia.
Global money markets have showed renewed signs of stress, despite the billions of dollars that central banks and governments have pumped into the markets in recent weeks.
In a meeting with heads of UN agencies, the World Bank and the International Monetary Fund, Mr Ban said the crisis could be the last straw for many of the world’s poorest people.
“It threatens to undermine all our achievements and all our progress,” he said.
“Our progress in eradicating poverty and disease. Our efforts to fight climate change and promote development. To ensure that people have enough to eat.”
Mr Ban said he would put the case for the world’s poor at the Washington summit.
Source: bbc.co.uk/