In Struggling Spanish Town, Hopes of Reopening Mine Are Delayed
The original Rio- Tinto. Notice the Watermelons have shut this down like Astur’s project.
JPM-London Destablizing Global Capital Market With Prop Trading as Evil Jamie Thwarts Volcker Rule
Another Greek Icarus in flight. This devil holds all Americans hostage for his spec trades. Arrest him and Dimon and Masters. It always goes to London where if you destroy the USA, you get Knighted.
Europes Capital Flight
The euro area’s financial troubles appear to be flaring up again, as this week’s gyrations in the Spanish bond market show. In reality, they never went away. And judging from the flood of money moving across borders in the region, Europeans are increasingly losing faith that the currency union will hold together at all.
In recent months, even as markets seemed calm, sophisticated investors and regular depositors alike have been pulling euros out of struggling countries and depositing them in the banks of countries deemed relatively safe. Such moves indicate increasing concern that a financially strapped country might dump the euro and leave depositors holding devalued drachma, lira or pesetas.
The flows are tough to quantify, but they can be estimated by parsing the balance sheets of euro-area central banks. When money moves from one country to another, the central bank of the receiving sovereign must lend an offsetting amount to its counterpart in the source country — a mechanism that keeps the currency union’s accounts in balance. The Bank of Spain, for example, ends up owing the Bundesbank when Spanish depositors move their euros to German banks. By looking at the changes in such cross-border claims, we can figure out how much money is leaving which euro nation and where it’s going.
This analysis suggests that capital flight is happening on a scale unprecedented in the euro era — mainly from Spain and Italy to Germany, the Netherlands and Luxembourg (see chart). In March alone, about 65 billion euros left Spain for other euro- zone countries. In the seven months through February, the relevant debts of the central banks of Spain and Italy increased by 155 billion euros and 180 billion euros, respectively. Over the same period, the central banks of Germany, the Netherlands and Luxembourg saw their corresponding credits to other euro- area central banks grow by about 360 billion euros.
The seven-month increase is about double the previous 17- month rise, and brings the three safe-haven countries’ combined loans to other central banks to 789 billion euros, their highest point on record. In essence, the central banks of the three countries — and, by proxy, their taxpayers — have agreed to make good on about 789 billion euros that were once the responsibility of Italy, Spain, Greece and others.
The worries about Italy and Spain reflect the inadequacy of Europe’s efforts to stem what has become a combined banking, sovereign debt and economic crisis. The European Central Bank’s efforts to prop up bond markets with more than 1 trillion euros in emergency bank loans have only encouraged Italian and Spanish banks to buy more of their governments’ bonds, tying their fates to those of the afflicted sovereigns. The harsh austerity measures required by Europe’s new fiscal compact are making things worse by stunting the economic growth needed to help the countries reduce their debt burdens. Should markets balk at lending to Italy and Spain, Europe’s bailout fund — with only about 600 billion euros in spare capacity — remains far too small to cover the two countries’ financing needs, which amount to more than 1 trillion euros over the next five years.
If Europe’s leaders want to stop the rot, they’ll have to change their approach. The least bad solution, as Bloomberg View has argued, is a combination of overwhelming force and deeper integration. Together with the European Union and the International Monetary Fund, the ECB would provide large enough guarantees — more than 3 trillion euros, by our estimate — to erase any doubt that solvent governments such as Italy and Spain can cover their financing needs and banks can raise capital. If the amount pledged were big enough to tame markets, it wouldn’t have to be spent.
Aside from adopting tougher fiscal rules to get government debts under control, the euro area should also forge a closer fiscal union to provide some support for struggling countries, much as federal transfers in the U.S. cushion downturns in individual states. This could help Greece, Portugal, Ireland, Spain and Italy extract themselves from the downward spiral of budget cuts and weakening economies.
The idea that Europe’s current incremental approach has the advantage of saving money is an illusion, and not just because the disintegration of the currency union could trigger a global financial meltdown. As the capital flight figures demonstrate, the stricken nations of the euro area are bleeding private money and becoming increasingly dependent on taxpayers. In all, the debts of struggling banks and sovereigns to official creditors such as the EU, the ECB and national central banks now exceed 2 trillion euros, much of which would be lost if the debtor nations dropped out of the currency union.
Hopefully, Europe’s leaders will recognize that it would be a lot cheaper to put up the money needed to restore confidence in the common currency. If they wait too long, the cost of the crisis could prove to be more than their taxpayers can bear.
European Stocks Drop on Slower China Growth; SAP Declines
EU Credit Markets- Bunds Rally, Spain Hammered
panish 10-year debt fell as the euro-region’s higher-yielding sovereign bonds underperformed German securities amid concern budget cuts and European Central Bank measures are failing to stem the financial crisis.
Ten-year German bunds advanced, pushing yields toward record lows, after government reports added to evidence the global expansion is slowing and spurred demand for the safest assets. Spain’s 10-year yield climbed toward 6 percent after data showed Spanish banks’ borrowings from the ECB jumped by almost 50 percent in March. The nation’s government will today approve measures to crack down on tax fraud.
“Spain’s significant budget measures have proved unable to convince the market that the new government has the fiscal situation fully under control,” said Norbert Aul, a fixed- income strategist at Royal Bank of Canada in London. “The market reaction to the more-or-less-expected borrowing increase only shows the nervousness in the current environment. Spain should remain under pressure and 10-year Spanish yields could move above 6 percent.”
Spain’s 10-year bond yield rose nine basis points to 5.91 percent at 11:22 a.m. London time. The 5.85 percent bond due in January 2022 slid 0.62, or 6.20 euros per 1,000-euro ($1,316) face amount, to 99.575. The rate has climbed 55 basis points over the past two weeks.
The 10-year bund yield fell four basis points, or 0.04 percentage point, to 1.75 percent. The benchmark yield slid to 1.639 percent on April 10, within a basis point of the record 1.636 percent set Sept. 23…..
German inflation, calculated using a harmonized European Union method, slowed to 2.3 percent in March from 2.5 percent a month earlier, matching a preliminary estimate. China’s gross domestic product expanded 8.1 percent in the first quarter from a year earlier, the least in almost three years, the National Bureau of Statistics said in Beijing…
China’s Less-Than-Forecast 8.1% Growth May Signal Easing
China’s growth slowed more than forecast last quarter to the least in almost three years, prompting economists to predict a rebound as Premier Wen Jiabao loosens policy to counter weak domestic and European demand.
Gross domestic product in the world’s second-biggest economy expanded 8.1 percent from a year earlier after an 8.9 percent gain in the fourth quarter, the National Bureau of Statistics said in Beijing today.
An unexpected surge in March new yuan loans shows the ruling Communist Party is trying to avoid a deeper growth slide amid a once-a-decade power transfer to younger leaders. Pickups in industrial production and retail sales reported today may limit concerns that the world recovery is losing steam after job gains in the U.S. lagged forecasts and Europe’s sovereign-debt crisis threatened to worsen.
“The Chinese economy may be starting to bottom out and possibly will reaccelerate going forward,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “The pickup in lending in March and the slight gain in momentum for industrial production and retail sales suggest that growth might pick up in the months ahead.”
The Shanghai Composite Index pared gains following the report, rising 0.2 percent at the 11:30 a.m. local-time break after advancing as much as 0.5 percent. The MSCI Asia Pacific Index rose to a one-week high and South Korea’s won gained after a rocket launched by North Korea broke up and fell into the sea.
Industrial & Commercial Bank of China Ltd., the world’s biggest lender by market value, jumped 2.8 percent in Hong Kong. Aluminum Corp. of China Ltd., the nation’s largest producer of the metal, climbed 3.3 percent.
China’s government bonds gained, with the yield on the 3.94 percent bond due January 2021 falling three basis points to 3.52 percent as of 10:27 a.m.
The median estimate in a Bloomberg News survey of 41 economists was for an 8.4 percent first-quarter expansion. Growth trailed forecasts by the most since the third quarter of 2008, based on Bloomberg calculations.
Analysts at Bank of America Corp., Nomura Holdings Inc. and IHS Global Insight said the first quarter may mark a trough.
China and other countries in Asia are increasingly important for global growth, with expansion in developing East Asia and Pacific nations forecast by the World Bank to be triple the entire world’s pace this year.
Indian industrial production rose less than predicted in February, a report showed yesterday, with January’s figure revised lower because of a data error. Singapore’s economy rebounded last quarter, the government said today.
A moderation in China could drag down growth in commodity- exporting nations including Australia, which grew at half the pace economists forecast in the fourth quarter. It may also weigh on sales of foreign companies such as Bayerische Motoren Werke AG, the world’s largest luxury automaker, which delivered more cars in China than in the U.S. for the first time last quarter.
Wen in March pared this year’s economic-growth target to 7.5 percent, the lowest since 2004, as the government seeks to cut reliance on exports and capital spending and make expansion more sustainable.
At the same time, economists at Deutsche Bank AG, Nomura Holdings Inc. and Morgan Stanley last month raised their China growth forecasts for 2012 partly on anticipation of policy loosening.
Data yesterday showed new yuan lending was the highest in a year and money-supply growth quickened in March. Local-currency- denominated loans were 1.01 trillion yuan ($160.1 billion), the People’s Bank of China said, exceeding all 28 estimates in a Bloomberg News survey.
Wen has said economic policies will be fine-tuned as needed even as he prolongs a campaign to curb property prices and speculation. The value of first-quarter home sales fell 17.5 percent. During a visit to Fujian and Guangxi provinces April 1 to 3, the premier pledged to push ahead on key investment projects, accelerate export tax-rebate payments and ensure “reasonable” liquidity.
“More monetary easing will be needed to facilitate a controlled deceleration,” said Yao Wei, a Hong Kong-based economist at Societe Generale SA and the only analyst who correctly predicted the first-quarter figure. She said growth will slow to 7.8 percent this quarter and pick up to 8.1 percent in the third period.
Slowing Yuan Gains
The government has also slowed gains in the yuan to help cushion exporters against sluggish demand from developed countries. The currency is little changed against the U.S. dollar this year after a 4.7 percent rise in 2011. It strengthened 0.1 percent today.
Industrial production increased 11.9 percent in March from a year earlier, up from an 11.4 percent gain in January and February combined, today’s statistics bureau report showed. Retail sales advanced 15.2 percent in March, compared with 14.7 percent in January and February.
Fixed-asset investment excluding rural households rose 20.9 percent in the first quarter, compared with the 21 percent median estimate of economists.
“Growth will stabilize and recover modestly over the rest of the year,” said Brian Jackson, a Hong Kong-based economist with Royal Bank of Canada, who forecast an 8 percent rise in GDP. “External conditions look set to improve in coming months, and domestic growth should also get a boost as the impact of previous policy tightening fades and is replaced by the impact of more accommodative policy in recent months.”
South Korea Rate
Elsewhere in Asia today, the Bank of Korea kept borrowing costs unchanged for a 10th straight month after North Korea’s launch and as austerity measures in developed economies limit demand for exports. Governor Kim Choong Soo and his board held the benchmark seven-day repurchase rate at 3.25 percent.
In the U.S., the cost of living probably rose at a slower pace in March as the run-up in energy prices lost steam, economists said before a report today. The consumer-price index increased 0.3 percent last month after rising 0.4 percent in February, according to the median forecast of 80 economists surveyed by Bloomberg News.
China Reserve Ratio
China has lowered banks’ required-reserve ratio twice since November to boost liquidity and spur loan growth. At the same time, authorities have refrained from cutting interest rates amid inflation concerns. The central bank may lower the ratio, currently 20.5 percent for large lenders, by another 100 basis points this quarter after two cuts since November, according to the median forecast in a Bloomberg survey last month.
“The economic growth slowdown is a natural result of the government’s moves to curb inflation and control the property market,” said Fan Jianping, Beijing-based chief economist at the State Information Center, a researcher under the government’s National Development and Reform Commission.
Sheng Laiyun, spokesman for China’s statistics bureau, said at a press conference today that “major economic indicators in March all improved from the previous two months” and he had “a lot of confidence in achieving relatively fast growth” this year.
Even so, he said that “great attention should be paid to some outstanding contradictions and problems” in the economy, including export growth and increasing operating difficulties at some companies.
Spain Banks Boost Borrowing From ECB by 50 Percent in March
Asian Stocks Rise as USA Knocks Down North Korean Rocket