Browsing all articles tagged with recession

Record Unemployment Low Inflation Highlight Europe’s Pain

Unemployment has reached a new high in the euro zone and inflation remains well beneath the European Central Bank’s target, pacing pressure on EU leaders and the ECB for action to stimulate the bloc’s sickly economy.

Joblessness in the 17 nation currency area climbed to 12.2 percent in April, EU statistics office Eurostat stated on Friday spoting a new record since the data series began in 1995.

With the euro zone in its greatest recession since its creation in 1999, consumer price inflation was far lower the ECB’s target of just below 2 percent, coming in at 1.4 percent in May slightly higher then April’s 1.2 percent rate.

That augment may quieten concerns regarding deflation, however the deepening unemployment crisis is a threat to the social fabric of the euro zone. Almost two-thirds of young Greeks are not capable to find work exemplifying southern Europe’s lost generation.

Policymakers and economists including Germany’s finance minister Wolfgang Schaeuble have stated the greatest menace to the unity of the euro zone is now social collapse from the crisis, rather than market-driven factors.

In France, Europe’s second biggest economy, the number of jobless rose to a record in April while in Italy the unemployment rate hit its highest level in at least 36 years, with 40 percent of young people out of work.

Thousands of demonstrators from the anti-capitalist Blockupy movement cut off access to the ECB in Frankfurt on Friday to protest against policymakers handling of Europe’s debt crisis.

Some economists suppose the ECB, which meets on June 6 will have to go beyond an additional interest rate cut and consider a US style money printing program to breathe life into the economy.

Nick Matthews, a senior economist at Nomura International in London said we do not expect a strong recovery in the euro zone. It puts pressure on the ECB to deliver even more conventional and non conventional measures.


Italy and France See Leeway on Budget Rules At EU Conference

Italy and France won support for a somewhat further growth friendly explanation of European Union budget rules at a meeting on Thursday following French President Francois Hollande challenged German driven fiscal austerity.

The 27 EU leaders agreed following discussion how to overcome recession and mass unemployment unleashed by three years of the euro zone’s sovereign debt crisis, to allow superior scope for public investment when reducing government deficits.

The potential’s presented by the EU’s existing fiscal framework to balance productive public investment requirements with fiscal discipline objectives can be exploited in the defensive arm of the Growth and Stability.

Exceptions would have to be permitted by the euro zone states and executive European Commission, however Italy’s and Hollande Europe minister drew support from what they depicted as a concession.

The Socialist French leader said that they were summiting their deficit reduction commitments however in a way that does not challenge our objective of growth.

He further said that’s the discussion that is now going to start with the Commission and the leadership we were given today permit us to approach this discussion with confidence.

Germany, the leading stickler for fiscal regulation, is worried that any straying from the course of deficit reduction will lift debt burdens and reignite financial market turmoil.

However Chancellor Angela Merkel avoided any clash with France, they made clear in a very consensual conversation that structural reforms, budget consolidation and growth are not in contradiction however are mutually reinforcing.

Hollande recognized this week that France’s budget deficit would strike 3.7 percent of GDP this year, omitted the 3 percent it had promised EU partners because of flat economy. That illustrate criticism from Germany’s central bank chief who stated French economic restructuring seemed to have floundered.


Gold Holds Below $1,590 Per Ounce Following Upbeat US Statistics

Yellow metal firmed beneath $1,590 per early on Thursday following sliding in the earlier session when optimistic US retail sales strengthened the position for the world’s top economy and damaged gold’s safe haven appeal.

US retail sales extended at their best pace in five months in February, the newest signal of momentum for an economy facing headwinds from higher taxes and pricier gasoline however production at factories in the euro zone knock down more than expected at the start of 2013 and fabrication in Germany and France fall in the latest sign the bloc is struggling to come out from recession.

The head of the People’s Bank of China said that China must stabilize inflation outlook, , undertake to carefully manage the risks of increasing prices as the central bank’s first priority as also vowed additional capital market reforms.

The Shanghai Gold Exchange will launch over the counter trading for precious metal forward agreement on March 25 as the bourse appear to expand its offerings and boost trading volumes.

Spot gold float at $1,588.55 per ounce by 0020 GMT. Indications that the global economy lead by current positive statistics from the US is on a enhanced footing this year has driven investors away from precious metal, with spot prices losing 5 percent this year.

US gold was similarly stable at $1,587.60 per ounce in early deals.

Gold futures traded with a modest loss on Wednesday following a failed effort to break $1,600 per ounce, stress by the dollar’s addition to a seven month high following statistics demonstrate a rushed in February US retail sales.

Gold futures for April delivery knock down $3.30 or 0.2%, to settle at $1,588.40 per ounce on the Comex division of the New York Mercantile Exchange. It had rise to as high as $1,598.80 per ounce during the session.


Ally Financial Inc. Was Only Bank Below Fed standard In Stress Test

The primary stage of a extensive awaited two stage stress test for the giant banks is in, and all except one stayed over lowest financial ratios set out in the test. That was according to early Federal Reserve results released on Thursday, seeking to discover whether 18 of the biggest financial institutions could survive a deep recession like the credit crunch of 2008.

Ally Financial Inc. most of them owned by the government was the only bank that failed to meet one of the key ratios. The test demonstrate that Ally had 1.5% in capital set apart under a measure recognized as Tier 1 common ratio, which compares the bank’s general equity to its risks weighted assets.

That is considerably beneath the commonly accepted standard of 5%. The other 17 institutions priced better, however many experienced major securities, mortgage and loan losses under the recession scenario.

With the experiment, Fed and the banks measured a hypothetical nine quarter scenario with an unemployment rate of approximately 12% climbed up from 7.9% in January. Banks also appraised how their capital shield would withstand real GDP deteriorating by about 5% and equity prices decreasing by more than 50%. These results assumed an average of the previous four quarters of dividend payments at each bank.

The final results will be released on March 14, could alter considerably for some banks as they are based on each institution’s planned capital distribution plans, including share and dividends repurchases for the next 12 months.

The Fed stated banks cannot pass or fail Thursday’s examination as the regulatory thresholds don’t count this time. However on March 14 Fed will announce whether or not it support each institution’s payout plans.


Ben Bernanke Said Premature Fed Recoil could short Course recovery

Ben Bernanke, the chairman of the Federal Reserve stated on Friday that pulling back on violent policy measures too rapidly would create a real risk of damaging a still delicate recovery.

There has been some dissimilarity within the Fed of whether the US central bank’s bond buying program, which is planned to push down long term interest rates should be segmented out.

Jeremy Stein, Fed Board Governor argued recently there were symbols of overheating in some financial markets and that the central bank should believed in using monetary policy to address such risks if they continue.

The Fed chief Ben Bernanke was not convinced, saying that even for the reason of financial stability, a persistence of the central bank’s aggressive incentive, conducted through purchases of mortgage securities and Treasury, leftovers the best approach.

Bernanke said in remarks, in light of the reasonable pace of the recovery and the sustained high level of economic loose, dialing back adjustment with the goal of preventing extreme risk taking in some areas poses its own risks to development, financial stability, price stability.

In reaction to the financial crisis and deep recession of 2007-2009, the Fed not only cut official rates to effectively zero, however also bought more than $2.5 trillion in assets in an effort to keep long term rates low. Still economic growth leftovers submissive and is expected to register just 2 percent this year, although the jobless rate remains high at 7.9 percent currently.

Bernanke said premature rate boost would carry a high risk of short circuiting the revival, perhaps leading ironically enough to an even longer time of low long term rates.

He illustrious that a stimulative monetary policy was simply a reaction to economic conditions, rather than any effort to keep rates unnaturally low to inflate asset prices

Policymakers are cognizant of potential risks to financial stability, although indicating a preference for employing authoritarian and supervisory tools to mitigate any potential fallout from the Fed’s low rate policy.




President Barack Obama And Senate Leaders to Construct Last Channel of Fiscal cliff Effort

US congressional leaders and Barack Obama agreed on Friday to make a last effort to prevent the United States to over coming the fiscal cliff, setting off strong bargaining regarding Americans tax rates as a New Year’s deadline looms.

Days left to prevent steep spending cuts and tax hikes that could originate a recession, two Senate veterans will try to build a deal that has avoid the Congress and White House for months.

Obama stated he was discreetly optimistic an agreement could be found. However neither side appeared to give much space at a White House conference of congressional leaders on Friday.

He further stated that the American people are not going to have any tolerance for a politically self inflicted wound to our economy,the Congressional Budget Office has stated that if Congress does not act the spending changes and tax might cause a recession in the first half of 2013.

Obama told reporters that the hour for instant action is here. They are now at the point where in just four days, every American’s tax rates are scheduled to increased by law. Every American’s paycheck will get significantly smaller.

A total of $600 billion in tax climb and routine cuts to government spending will create kicking in on Tuesday New Year’s Day if politicians cannot reach a deal. Economists fear the measures will push the US economy into a recession.

A core of fiscal conservatives there strongly opposes Obama’s efforts to elevate taxes for the wealthiest as part of a plan to close America’s budget deficit. House Republicans also want to observe Obama commit to major spending cuts.

Meeting among Obama and Republican House Speaker John Boehner collapsed previous week when several dozen Republicans defied their leader and rejected a plan to raise rates for those earning $1 million or more.