Asia facing 'stagflationary outlook' amid Ukraine war: IMF

WASHINGTON - Asian nations, like the rest of the world, are being battered by countervailing forces such as the war in Ukraine that are raising prices while holding back growth, the IMF said.

"The region faces a stagflationary outlook, with growth being lower than previously expected, and inflation being higher," said Anne-Marie Gulde-Wolf, acting director of the IMF's Asia and Pacific Department.

The regional outlook, which follows the World Economic Outlook released last week, shows the growth forecast for Asia was cut to 4.9 percent, impacted by the slowdown in China, which is having ripple effects on other closely-linked economies.

Inflation is now expected to rise 3.2 percent this year, a full point higher than expected in January, she said.

"Despite the downgrade, Asia remains the world's most dynamic region, and an important source of global growth," Gulde-Wolf said in remarks prepared for delivery to a press briefing.

But the Russian invasion of Ukraine and Western sanctions on Moscow have driven up food and fuel prices worldwide, while major central banks are raising interest rates to combat inflation, which will pressure countries with high debt loads.

A larger-than-expected slowdown in China due to prolonged or more widespread Covid-19 lockdowns or a longer-than-expected slump in the property market presents "a significant risk for the region."

"This a challenging time for policymakers as they try to address pressures on growth and tackle rising inflation," the IMF official said, noting that the headwinds will exacerbate the damage from the Covid-19 pandemic.

Outlooks vary within the region, depending on countries' reliance on imported energy and links to China, with growth in Pacific island nations slowing sharply, while Australia saw a slight upgrade, she said.

Governments will need strong responses, starting with targeted aid to poor families most harmed by higher prices, the IMF said.

Many will need to tighten monetary policy amid rising inflation, while those with high debt loads may have to cut spending and even seek debt relief, the fund economists said in a blog post.

"Slower growth and rising prices, coupled with the challenges of war, infection and tightening financial conditions, will exacerbate the difficult policy trade-off between supporting recovery and containing inflation and debt," the blog said.

Agence France-Presse

More than 200 groups urge G20 to back IMF issuance to help poor countries in pandemic

WASHINGTON - Jubilee USA Network, Oxfam and 215 other civil society groups on Wednesday urged Group of 20 finance officials to back an issuance of $3 trillion of the IMF's own currency, or Special Drawing Rights, to help countries weather the COVID-19 pandemic.

In an open letter to the International Monetary Fund and G20 finance ministers, the groups said a new allocation of SDRs would boost the reserves of all countries and avoid pushing low- and middle-income countries further into debt distress.

G20 finance ministers and central bankers will discuss a possible SDR issuance - a move akin to a central bank printing money - when they meet by video conference on Friday. Proponents note that such a move will not add cost for the IMF members.

Italy, which leads the G20 this year, is pushing for a smaller $500 billion allocation of SDRs, which can be converted to hard currency by IMF members - a move backed by France, Germany and others, but still lacking support from Washington.

The United States had opposed such a move under former President Donald Trump, but has not yet communicated a firm position on a new SDR allocation under President Joe Biden.

Treasury has declined to comment on the issue.

IMF Managing Director Kristalina Georgieva on Wednesday also called for the G20 to take strong policy action to reverse a "dangerous divergence" that she said threatened to leave most developing economies languishing for years.

In a blog ahead of Friday's meeting, Georgieva said a new SDR allocation would substantially boost countries' liquidity without increasing their debt burdens. It would also expand the capacity of donor countries to provide new resources, she said.

Religious groups have also weighed in. On Tuesday, the US Conference of Catholic Bishops and Jubilee USA Network urged President Joe Biden to back a $3 trillion allocation to help poor countries bolster US trade with the developing world.

Anti-poverty group ONE on Wednesday backed an allocation of $650 billion.

-reuters

Wall Street ends flat as hope for ECB move increases

NEW YORK - U.S. stocks closed little changed on Tuesday after the International Monetary Fund reduced its growth forecasts for 2015 and 2016, increasing speculation central banks would take more aggressive policy moves to spark economic improvement.

The lower forecasts implied less demand for fuel through 2016, contributing to another fall in crude oil, although some bullish results from major energy companies kept the sector afloat. The S&P energy index eked out a gain of 0.09 percent.

The IMF cut its forecasts for both years by 0.3 percentage points and advised advanced economies to maintain accommodative monetary policies to avoid increases in real interest rates as cheaper oil increases deflation risk.

The European Central Bank is expected to announce a bond buying program on Thursday to boost the region's flagging economy.

"Any sense at all that the ECB disappoints, you will see the markets correct rather harshly," said Ken Polcari, Director of the NYSE floor division at O’Neil Securities in New York.

"You can speculate all you want and investors can take the market higher all they want, but until the ECB comes out and says it, you are not really going to know."

The Dow Jones industrial average rose 3.66 points, or 0.02 percent, to 17,515.23, the S&P 500 gained 3.12 points, or 0.15 percent, to 2,022.54 and the Nasdaq Composite added 20.46 points, or 0.44 percent, to 4,654.85.

U.S. crude settled down 4.7 percent to $46.39 per barrel, after hitting an intraday low of $45.89, while Brent settled down 1.8 percent at $47.99.

Halliburton Co and Baker Hughes Inc warned that a fall in drilling activity would hurt 2015 results, though the companies also reported better-than-expected fourth-quarter profits. Halliburton rose 1.8 percent to $39.83 while Baker gained 1.2 percent to $57.26.

Johnson & Johnson fell 2.6 percent to $101.29 as the biggest drag on both the Dow and S&P 500 after adjusted earnings beat expectations but revenue missed forecasts.

Morgan Stanley reported a drop of 81 percent in revenue from trading fixed-income securities, currencies and commodities, though earnings rose on a sharp drop in legal costs. Shares dipped 0.4 percent to $34.75.

FXCM Inc plummeted 87.3 percent to $1.60 on volume of over 91 million shares, its most active day ever. The retail foreign exchange laid out details of a rescue loan after $200 million of losses on last week's shock removal of the cap on the Swiss franc.

After the closing bell, Netflix shares surged 12.1 percent to $391 after posting a quarterly revenue increase of 26.3 percent, while IBM lost 1.6 percent to $154.51 after its results.

NYSE declining issues outnumbered advancers 1,894 to 1,207, for a 1.57-to-1 ratio; on the Nasdaq, 1,639 issues fell and 1,128 advanced, for a 1.45-to-1 ratio favoring decliners.

The S&P 500 posted 47 new 52-week highs and 17 new lows; the Nasdaq Composite recorded 70 new highs and 109 lows.

Volume was moderate, with about 7.2 billion shares traded on U.S. exchanges, roughly in line with the 7.29 billion average so far this month, according to BATS Global Markets.

source: interaksyon.com

Wall Street Week Ahead: Short week, jobs data may bring back swings

NEW YORK - Wall Street may kick off the second half of the year with an uptick in volatility, thanks to the June jobs report and plenty of other market-moving data in a short trading week.

Financial markets will be closed on Friday for Independence Day. So Thursday will bring a blitz of numbers: the nonfarm payroll figures for June, the May trade deficit and the June index on the services sector from the Institute for Supply Management. On Wednesday, U.S. Federal Reserve Chair Janet Yellen is scheduled to speak on financial stability at an International Monetary Fund conference in Washington.

The elevated volatility would shake some traders out of a stupor. They have been limited in their betting by this market, which has been resilient but boring: The S&P 500 has not had a weekly swing of more than 2 percent since mid-April.

"It has been a very frustrating few months in the market for both long-term and short-term traders. It is very tough to outperform in this environment," said Sam Ginzburg, head of trading at First New York Securities in New York.

The S&P 500 has scored 22 record closing highs for the first half of 2014, feeding concerns about a technical pullback. Yet the CBOE Volatility Index, Wall Street's fear gauge, has hovered near multi-year lows, reflecting a market that seemed to grind higher no matter what was thrown at it.

"Markets will probably trade sideways or lower until the VIX gets to a higher level, where it can support some kind of (a meaningful) advance," said Donald Selkin, chief market strategist at National Securities in New York, which has about $3 billion in assets under management.

The VIX is trading around 11, or about half of its long-term average of about 20. While no one would want to relive the financial crisis when the VIX jumped to 89.53 on Oct. 24, 2008, a modest amount of volatility is welcome on Wall Street.

A higher VIX creates valuation imbalances that drive stock picks and boost trading volume, which has collapsed from more than 8 billion shares a day in 2007 to an average of about 5 billion now.

For long-term investors, though, Wall Street is wrapping up a good first half of the year. The S&P 500 has climbed 6.1 percent this year, following a jump of 30 percent in 2013.

A recent Reuters poll showed market participants expect the benchmark index to hit 2,000 for the first time before the year ends, which is a gain of about 8.2 percent from 2013.

If the market closed the year at current levels, it would mark the best three-year run for U.S. stocks since the 1997-1999 period.

source: interaksyon.com

Indian stocks lead Asian markets higher, rupee up

SYDNEY - Asian stocks rose to three-week highs on Thursday as Indian shares and the rupee rallied a day after the country's new central bank chief unveiled measures to support the currency and the banking sector.

But worries the U.S. Federal Reserve will soon scale back stimulus kept markets in check. MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.6 percent, having earlier hit a high last seen on August 19.

Financial spreadbetters expect modest opening gains for key European markets, mirroring Asia's performance. 


India's benchmark BSE index put on 2.1 percent, South Korea's KOSPI rose 1.0 percent, while Thai stocks climbed 1.6 percent.

Tokyo's Nikkei closed a touch firmer, having lost a bit of steam after hitting a one-month high. Still, it is up an enviable 5 percent so far this week.

The moves followed a second day of gains on Wall Street spurred by another set of upbeat U.S. data, though the figures have also added to the chance of the Fed tapering its stimulus program.

"Strong car sales in the U.S. again lifted market confidence in the economy, and lifted expectations that the U.S. Federal Reserve will start cutting back its stimulus this month," said Isao Kubo, an equity strategist at Nissay Asset Management. "There is a sense of caution in the market."

Markets appeared to have cast aside worries about Syria for the moment, even as a possible U.S. military strike moved one step closer after a Senate committee voted in favor of action, clearing the way for a vote in the full Senate, likely next week.

Central bank focus

Former IMF chief economist Raghuram Rajan took the helm at the Reserve Bank of India in grand style on Wednesday, announcing an array of measures to liberalize financial markets and the banking sector.

The rupee rose to as high as 65.53 per U.S. dollar, pulling well away from a record low around 68.85 set last week.

Radhika Rao, an economist at DBS in Singapore, said the path of action plotted by the new governor was a welcome move.

"Still, the external drivers of the rupee weakness will continue to dictate the momentum, along with the urgent need to address domestic structural pitfalls - fiscal and current account deficits, along with reviving investment activity," she said in an email to clients.

As expected, the Bank of Japan maintained the massive monetary stimulus launched in April and revised up its outlook for the economy following a two-day review. Governor Haruhiko Kuroda will give a media briefing later in the day.

The European Central Bank takes centre stage next, although it is widely seen keeping rates low for an "extended period".

U.S. data on Wednesday showed auto sales raced past expectations in August, ahead of the closely-watched payrolls data on Friday, extending a string of upbeat U.S. data that has reinforced expectations the Fed will soon start to pull back support.

Such expectations have underpinned the U.S. dollar, which remained near a six-week high against a basket of major currencies.

The euro briefly popped above $1.3200, before slipping back 0.3 percent to $1.3173. It remained within spitting distance of a six-week low of $1.3138 plumbed earlier this week.

Against the yen, the dollar reached a one-month high of 99.99, while the euro retreated slightly from a two-week peak around 131.81 yen reached overnight.

Among commodities, Brent crude oil added 12 cents to $115.05 a barrel, while copper futures were flat at $7,126.00 a metric ton.

India, along with many emerging markets, has also been hit hard by an outflow of funds as international investors positioned for a world with less central bank support.

The IMF, in a note prepared for the Group of 20 meeting in St. Petersburg, warned that emerging countries were particularly vulnerable to a tightening of U.S. monetary policy.

It urged strengthened global action to revitalize growth and better manage risks, adding some downside risks have become more prominent.

source: interaksyon.com

Greece to Present Debt Inspectors 'Alarming' Data

ATHENS, Greece (AP) — A spokesman for Greece's new government says it will present "alarming" data on its recession and unemployment to international debt inspectors this week, in a bid to renegotiate the terms of its bailout agreements.

Spokesman Simos Kedikoglou said in a television interview Tuesday that the data would demonstrate that the current austerity program was counterproductive. He did not elaborate.

Debt inspectors from the European Commission, the European Central Bank and the International Monetary Fund are due in Athens Wednesday.

Greece is relying on rescue loans from its partners in the eurozone and the IMF to avoid bankruptcy. It is in a fifth year of recession, with unemployment topping 22 percent, roughly double the eurozone average.

source: nytimes.com

World Bank President Known Monday

WASHINGTON (AFP) – The World Bank will meet on Monday to decide which of three candidates will be its 12th president, after a historic campaign that saw the first serious challenge to US leadership of the institution.

According to a source close to the decision making process, the World Bank's board will convene Monday to choose between American nominee Jim Yong Kim and two candidates who embody developing countries' demands to have a bigger say in global governance.

Though Kim remains the odds-on favorite to win, Nigerian finance minister Ngozi Okonjo-Iweala and Colombian Jose Antonio Ocampo have transformed what is normally a US coronation into a fully-fledged battle of succession.

Thanks to a tacit agreement, the US, the Bank's biggest stakeholder, has always chosen its leader, with support from Europe, which in turn nominates the head of the International Monetary Fund.

Widely respected Nigerian finance minister Okonjo-Iweala and Colombian former finance minister Ocampo, have given voice to demands from Africa, Asia and Latin America, that the arrangement must end.

Forced onto the back foot, President Barack Obama and his administration have pushed back hard for Kim's nomination.

The Korea-born, US-raised physician has gone on a global charm offensive.

In an interview statement to the board of directors on Wednesday, Kim vowed to bring a listening ear and objectivity to the post.

As head of the World Bank, the president plays a crucial running an organization that doled out $57.3 billion last year and has more than 9,000 employees worldwide.

"If I were entrusted with the responsibility of leading this institution, you would find in me someone who asks hard questions about the status quo and is not afraid to challenge existing orthodoxies," he said.

A Harvard-trained doctor and anthropologist, Kim, 52, is the former director of the department of HIV/AIDS at the World Health Organization. He became the president of the Ivy League college Dartmouth, in New Hampshire, in July 2009. "You'd also find someone interested in listening – to the Board, to our clients, to staff both here and in the field and to stakeholders in the private sector and civil society."

source: mb.com.ph

People living longer but cost of aging rising faster -IMF

People worldwide are living three years longer than expected on average, pushing up the costs of aging by 50 percent, and governments and pension funds are ill prepared, the International Monetary Fund said.

Already the cost of caring for aging baby boomers is beginning to strain government budgets, particularly in advanced economies where by 2050 the elderly will match the numbers of workers almost one for one. The IMF study shows that the problem is global and that longevity is a bigger risk than thought.

"If everyone in 2050 lived just three years longer than now expected, in line with the average underestimation of longevity in the past, society would need extra resources equal to 1 to 2 percent of GDP per year," it said in a study to be released in its World Economic Outlook next week.

For private pension plans in the United States alone, an extra three years of life would add 9.0 percent to liabilities, the IMF said in urging governments and the private sector to prepare now for the risk of longer lifespans.

Demographers for many years have assumed that the lengthening of lifespans would slow in developed countries. But with continual advances in medical technology, that has not happened as acutely as expected. In emerging economies, rising standards of living and the expansion of health care also are adding to lifespans.

To give an idea of how costly this could prove, the IMF estimated that if advanced economies were to plug the shortfall in pension savings of an extra three years immediately, they would have to stash away the equivalent of 50 percent of 2010 GDP, and emerging economies would need 25 percent.

These extra costs fall on top of the doubling in total expenses that countries can expect through 2050 from an aging population. The faster countries tackle the problem, the easier it will be to handle the risk of people living longer, the IMF said.

These estimates cover only pensions. They do not account for healthcare costs, which also rise the longer someone lives.

In a December 2009 study, the MacArthur Research Network on Aging estimated that Americans are living between three and eight years longer than commonly expected, adding $3.2 trillion to the Medicare and Social Security, the government-backed healthcare plan for the elderly and pension program.

In North America and advanced Europe, lifespans increased by eight years between 1970 and 2010, and are projected to increase by an additional four years through 2050 -- that's about five weeks more per year.

At the same time old-age dependency, or the ratio of population over 65 to those in the prime working ages of 15 to 64, is expected to increase from 24 percent to 48 percent of the total population in advanced economies by 2050 -- in other words roughly one worker for every retired person.

Emerging Europe has seen lifespans grow more slowly by 1.1 years in the 40 years to 2010 but can expect longevity to rise sharply by 6.8 years in the next 40 years, the IMF said. For emerging economies, their old-age dependency ratios are expected to rise from 13 percent today to 33 percent by 2050.

Steps governments can take to manage the risk of people living longer are to raise the retirement age, increase taxes to fund public pension plans and lower benefits -- all steps most advanced economies are already considering.

They also could help the private sector by educating citizens better on how to prepare for their retirements and by promoting retirement products that protect people against the risk that they outlive their assets.

"Although longevity risk is a slow-burning issue, it increases the vulnerability of the public and the private sector to various other shocks," the IMF said in its study.

source: interaksyon.com