June 2009
29 June
Japanese industrial output jumped 5.9% in May as car and electronics production recovered from a deep slump, but analysts said the outlook remained murky once the effects of government stimulus wear off. Manufacturers forecast a further 3.1% rise in June and a tepid 0.9% increase in July, but production is still 29.5% lower than a year ago.
Spain has launched a €9bn fund in case any of its troubled banks needs rescuing. Finance Minister Elena Salgado said the money could be used for capital injections, mergers or restructuring. She said the Fund for Ordered Bank Restructuring would start off with €9bn, but that the size of the fund could rise to €90bn.
Spiraling government debt around the world has prompted the creation of the first tradeable indices tracking the risks of countries defaulting. Markit , the data provider, has launched four indices of credit default swaps (CDSs) - used as insurance against bond defaults - as investors demand more information about the dangers of the growing debt mountain. These will run alongside CDS for individual countries, which are already traded.
26 June
The US economy continued to contract in the first quarter of this year, but at a slower pace than previously thought. Revised commerce department figures revealed that US gross domestic product (GDP) declined by an annualized rate of 5.5% in the first three months of the year. That was better than economists expected and a smaller contraction than the original estimate of a 6.1% contraction and last month’s estimate of a 5.7% decline.
Germany’s powerful export industry is warning of a credit squeeze in Europe’s largest economy even after the European Central Bank’s injection this week of one-year liquidity into the eurozone banking system. The German BGA exporters’ association forecast a ‘dramatic deterioration’ in credit conditions in coming months, which would result in ‘massive financing squeeze’.
Record levels of capital markets activity during the first six months of the year failed to lift the volume of worldwide mergers and acquisitions as chief executives remained cautious about launching big deals. Non-financial groups raised almost US$887bn in the bond markets in the first half, 64% more than the same period last year when US$540.3bn was raised, according to data from Dealogic.
AIG clinched a US$25bn debt for equity swap with the Federal Reserve that will give the authorities a large stake in two of the government-owned insurer’s most prized businesses. Under the agreement, the New York Fed will receive US$16bn in preferred equity in American International Assurance(AIA), AIG’s Asian arm, and US$9bn in preferred shares of American Life Assurance Company (Alico), an international life assurer. Once the deal closes this year, it will cut AIG’s US$40bn debt to the Fed by US$15bn. And it will reduce the size of its US$60bn available loan facility to US$35bn.
Ireland faces a deeper recession than any advanced economy while the collapse of the property market and related financial stress in the banking sector will continue to be a drag on growth until at least 2014, the International Monetary Fund (IMF) said in its annual report on Ireland. The IMF said: “Only a modestly-paced recovery is foreseen.” Gross domestic product (GDP) is projected to contract by 13.5% in the three years to 2010, by which time unemployment will have reached 15.5%.
New Zealand’s economy shrank for a fifth straight quarter, confirming that the nation is in a prolonged and deep recession that has proven to be worse than expected. The economy contracted 2.7% in the January-March quarter compared with the same period in 2008 and 1% compared with the revised figures for the October-December period.
Prices in Japan fell by the most on record last month, raising fears of a new bout of deflation, official figures from the Ministry of Finance show. Consumer prices fell 1.1% in May from the same month a year ago, the most since records began in 1970. Prices of goods excluding fresh food also fell for the third straight month.
25 June
The European Central Bank(ECB) has pumped hundreds of billions of euros in one-year loans into the euro zone’s weakened banking system, making record amounts of emergency finance available in a bid to unlock credit markets and revive the region’s economies. The move came as the US Federal Reserve pushed back against expectations of an early rise in US interest rates. In a dramatic step dubbed ‘stimulus by stealth’ in financial markets, the ECB lent €442.2bn for 12 months to more than 1,100 banks at its current benchmark interest rate of 1%.
The Organization for Economic Cooperation and Development(OECD) has revised down its forecast for the UK economy in 2009. It warns that the UK is in ‘a sharp recession’ with output set to contract by 4.3% in 2009, worse than its previous forecast of a 3.7% fall. The OECD predicts zero growth in the UK economy in 2010 and says the UK budget deficit will hit 14% of GDP next year.
US orders for long-lasting manufactured goods rose unexpectedly in May, figures show, raising hopes that the worst of the recession may now have passed. New orders for durable goods such as household appliances and aircraft rose 1.8% last month from April, according to the Commerce Department. Economists had expected orders to drop by 0.9%.
24 June
Japan’ s exports continued to tumble in May, with even shipments to China showing little sign of improvement, suggesting that hopes for a quick recovery in global demand may be premature. Overall, Japanese exports fell 40.9% in May from a year earlier, more than the median market forecast for a 39.1% fall. On a seasonally adjusted basis, exports fell 0.3% in May from April.
Hypo Real Estate (HRE) is expecting further heavy losses in the second quarter. The German lender said its profits would be burdened by at least a ‘high three-digit million’-euro hit in the second quarter, caused by further risk provisions on real estate loans. HRE has lost €5.5bn amid the crisis in the real estate lending sector and has already received an almost €3bn equity injection from the German government this month.
The US is to make billions of dollars in cheap loans available to Ford , Nissan and Tesla , the California electric carmaker, so they can re-equip their plants to build a new generation of electric and other fuel-efficient vehicles. Ford will receive US$5.9bn, Japan’s Nissan US$1.6bn and Tesla US$465m from US$25bn of government money that was set aside in 2007 for a scheme known as the advanced technology vehicles manufacturing incentive programme.
23 June
The World Bank says the economies of developing countries are expected to grow by just 1.2% this year, compared with 5.9% in 2008 and 8.1% in 2007. And if China and India are excluded, gross domestic product (GDP) in developing countries is projected to fall by 1.6%. It also forecast the global economy as a whole would shrink by 2.9% this year, against an earlier prediction of 3%.
France’s budget deficit will widen to more than 7% of gross domestic product this year and next as tax receipts fall and unemployment rises, said Budget Minister Eric Woerth. Speaking on RTL radio, he said the deficit would come to between 7.0 and 7.5% of GDP in 2009 and 2010, more than twice the 3% ceiling laid down by European Union borrowing rules.
Every state-owned company that has listed in China since 2005 must transfer stock equal to 10% of the shares offered to the National Social Security Fund, according to a government edict. A similar requirement already covers listings of Chinese state-owned companies in Hong Kong and has made the state fund the largest institutional investor in the city’s stocks.
The Japanese government is ready to make an emergency loan to the country's biggest airline. Loss-making Japan Airlines (JAL) could receive up to 100bn yen (US$1bn) in state aid, say reports, on condition that the airline's management improves.
22 June
Firms in Germany , Europe's largest economy, are more confident now than they have been for seven months, according to a key index. The Ifo index climbed for the third month in a row to 85.9 in June from 84.2 in May - better than many analysts had been expecting.
National Australia Bank is to pay A$825m for UK insurer Aviva's Australian wealth management businesses Navigator.
18 June
The US government has announced a major reform of banking regulation to prevent future financial crises. The overhaul will require big banks to put more money aside against future losses to curb excessive risk taking. Consumers will get a special agency to protect their interests and regulate mortgages and credit cards. The US central bank, the Federal Reserve, will be given the authority to monitor major financial institutions.
Italy’s economy, the euro zone’s third largest, might emerge from recession earlier than expected, the Organization for Economic Co-operation and Development (OECD) forecast. The OECD said in a survey on Italy that it had raised its gross domestic product growth forecast for 2010 to 0.4% from a previously estimated 0.4% contraction. But at the same time its outlook for 2009 worsened, with a 5.3% contraction forecast against the last outlook, published in March, of a 4.3% drop. Italy’s GDP shrank 1% last year as it began its worst post-war recession.
China’s fiscal stimulus package would help the country’s economy grow faster than expected this year but it would be premature to say a sustained recovery was under way, the World Bank said. The World Bank raised its year-on-year gross domestic product growth forecast for China to 7.2% for 2009, saying the apparent success of the government’s Rmb4,000bn (US$586bn) rescue package had improved the economy’s outlook since March, when the bank predicted 6.5% growth this year. It warned, however, that Beijing might have little room for more stimulus measures.
Inflation in India has turned negative for the first time in more than 30 years, official figures have shown. Wholesale prices fell 1.61% in the year to 6 June, compared with a rise of 0.13% the previous week, the Ministry of Commerce and Industry said.
_17 June _
The US economy should emerge from recession by the late summer, according to economists from some of the country's top banks. The American Bankers Association's Economic Advisory Committee has said it expects economic activity to increase by 0.5% between July and September.
China has introduced an explicit ‘Buy Chinese’ policy as part of its economic stimulus programme in a move that will increase the likelihood of protectionism around the world.
UK inflation in May remained higher than most economists had expected, signalling that the Bank of England’s room for further easing of monetary policy may be limited. Consumer price inflation fell from 2.3% in April to 2.2% last month, compared with the average forecast by economists of a 2% fall.
UK unemployment rose to 2.261 million in the three months to April, the highest since November 1996, the Office for National Statistics said.
Air Canada , the country’s largest airline, has asked the Canadian government for a loan of at least C$200m (US$176m) as it attempts to meet capital requirements to stay in business.
16 June
Euro zone banks face additional losses of more than US$283bn this year and next as continental Europe’s severe recession intensifies strains on its financial sector, the European Central Bank (ECB) has warned.
The International Monetary Fund (IMF) has said the US economy will recover more strongly and more quickly, than it previously thought. It now believes that the world's largest economy will grow by 0.75% next year, rather than the 0% it forecast earlier this year.
The Bank of Japan (BOJ) has said the Japanese economy has begun to stop deteriorating, but it has still kept interest rates unchanged at 0.1%.
15 June
The world's largest economies are beginning to stabilize but still face major risks amid an ongoing global recession, G8 finance ministers say. At a meeting in Italy of G8 nations, the ministers said stock markets were rising, interest rates more stable, and consumer confidence was returning. However, US Treasury chief Tim Geithner led warnings that it was too early to wind down economic stimulus packages.
The UK economy is stabilizing but it will not be until early next year that a ‘slow and gradual’ recovery will begin, business leaders have said. The economy will contract by 3.9% over 2009 before seeing a return to growth of 0.7% next year, the Confederation of British Industry (CBI) predicted.
For the first time the Hong Kong Exchanges and Clearing (HKEx) and Brazil’s BM &F; Bovespa have overtaken NYSE Euronext, Nasdaq OMX and the London Stock Exchange in the value of shares in the exchange companies themselves. HKEx is now the world’s second-largest exchange by market value, behind CME Group, the largest US futures exchange. BM&F; Bovespa is in fourth place, after Deutsche Börse, the German exchange. The LSE has slipped to 10th place.
11 June
The European Central Bank stepped in to help avert a Baltic financial crisis by lending €3bn to the central bank in Sweden, whose banks dominate the region’s financial sector.
JPMorgan Chase, Morgan Stanley, Goldman Sachs and seven other large financial institutions were granted permission to repay the government US$68bn they received through the Troubled Asset Relief Programme (TARP). Repayment of the rescue funds will allow the banks to get out from under federal restrictions placed on them through their participation in TARP.
German exports in April were 4.8% lower than in March, and 28.7% down on a year earlier, official figures show - the steepest annual fall since records began in 1950. Separately, the economics ministry reported industrial production down by 1.9% in April compared with March.
Japan's economy shrank less than previously thought in the first three months of the year, but still contracted at a record pace. Gross domestic product (GDP) shrank by 3.8%, equivalent to 14.2% over a year.
Chinese exports have dropped by a record amount in May as demand for its goods from the US and Europe slumped. Exports fell 26.4% from the same month earlier, more than February's previous record drop. As the downturn has also affected China, and its imports have also declined. They dropped by 25.2% in May.
9 June
BlackRock looks set to seal the acquisition of Barclays Global Investors and become the world’s biggest money manager, according to the Financial Times. The US group plans to pay Barclays $12bn-$13bn (£7.5bn-£8.1bn) for BGI - half in cash and half in shares - to create a group with more than $3,000bn in assets under management, half as much again as nearest rivals such as State Street, Allianz and Fidelity.
Lloyds Banking Group is to close all 164 branches of Cheltenham & Gloucester, risking up to 1,500 jobs.
8 June
The pace of decline of the world's major economies is slowing, according to the Organization for Economic Co-operation and Development(OECD). The composite leading indicators (CLI) index for the 30 countries in the OECD rose 0.5 points in April, but was still 8.3 points lower than April 2008.
Fresh figures on the UK construction industry could mean the UK economy shrank more than first thought in the first three months of 2009. The Office for National Statistics said that construction output fell by 9% in the first quarter, much more than an initial estimate of 2.4%.
5 June
Industrial and Commercial Bank of China , the world’s largest bank by market value, said it would purchase 70% of Bank of East Asia’s Canadian unit, as it takes steps to expand overseas.
The Bank of England's interest rate setters have kept the cost of borrowing unchanged at 0.5% for the third month in a row.
3 June
BBVA , Spain’s second-biggest bank, is hoping that at least some of its 29,954 Spanish employees will agree not to come to work for up to five years - in exchange for nearly a third of their usual salary and a guaranteed job when they return.
The UK financial services watchdog has roughly doubled its fees for the biggest retail and investment banks, an even greater increase than expected, after bowing to pressure from small financial advisers for less swingeing rises. The Financial Services Authority(FAS) is lifting the overall cost of policing the industry by 35.8% to £435.5m.
Australia has defied international trends to record a 0.4% rise in gross domestic product for the first quarter compared to the same period last year, with economic growth salvaged by strong exports, robust retail sales and the government’s fiscal stimulus measures.
Lloyds Banking Group plans to shed 530 jobs and close one site in the UK. All jobs will go before year-end. Some 210 people will lose their jobs when a customer service unit in Kent in closed, of which 190 are full-time positions, the bank said.
2 June
Shares in Barclays tumbled after one of its largest Middle Eastern shareholders announced plans to offload its stake in the British bank, pocketing a large profit less than seven months after making its £3.5bn investment. International Petroleum Investment Corp , an investment vehicle of the Abu Dhabi royal family, was finalizing a placing of 1.3bn Barclays shares with institutional investors. The group also invited offers for its entire £1.5bn holding of Barclay’s capital notes in a process that will be completed by Wednesday. Both sales are being handled by Credit Suisse.
Goldman Sachs sold up to US$1.9bn worth of shares inIndustrial and Commercial Bank of China (ICBC), in the latest divestment of stock in a mainland China lender.
Switzerland has entered recession after official figures showed that the country's economy shrank by 0.8% in the first three months of 2009. The decline came after a contraction of 0.3% in the last quarter of 2008.
US consumer spending fell for the second month in a row in April, despite an increase in personal income, official data has shown. Consumer spending dipped 0.1%, compared with a revised fall of 0.3% in March, the Commerce Department said.
Factory production in the euro zone shrank more slowly in May than expected, according to a survey byMarkit. The Markit Euro zone Manufacturing Purchasing Managers Index had a better-than-expected reading of 40.7, marking its highest level in seven months. The rise from April's reading of 36.8 was the largest monthly increase in the survey's 12-year history.
1 June
The US economy shrank in the first three months of 2009 at a slower pace than had originally been estimated by the Commerce Department. Gross domestic product (GDP) declined by an annual rate of 5.7% in the first quarter, less than the 6.1% that had been estimated in April.
General Motors will file for Chapter 11 protection in the biggest ever bankruptcy of an industrial company, tapping an additional US$30bn in government financing.
Germany approved a last-minute deal to keep Opel , GM’s European arm that includes Vauxhall, afloat, agreeing €1.5bn of bridge financing while the US group negotiates a stake sale to Magna International , the Canadian auto group, and Sberbank , a Russian bank.