South Korea on Friday joined a chorus of Asian countries in cooling their economies by raising its benchmark interest rate and removing monetary stimulus from its financial system.
The Bank of Korea (BOK) joined counterparts across Asia by notching its rate up by 0.25 percentage point to 2.25%, lifting its key policy rate for the first time since August 2008 - the beginning of the global financial crisis.
But the BOK stressed it is just nudging rates up from emergency levels to counter the threat of inflation and curb a rise in household credit. Asia's fourth-biggest economy joined other economies during the global financial crisis by slashing interest rates, knocking them down three times and shaving a total of 325 basis points off the benchmark rate.
Don Miller
Article Index
Uncertainty Undermining the Global Economic Recovery
The International Monetary Fund (IMF) said yesterday (Thursday) that the global economic recovery is losing steam because uncertainty in financial markets is keeping businesses and consumers from investing in future growth.
In a revision to its World Economic Outlook released yesterday in Hong Kong, the IMF said worldwide economic expansion will decline to 4.3% next year from 2010's 4.6% pace. The forecast for 2010 was revised upwards by 0.4 percentage points to reflect faster-than-anticipated growth earlier this year.
However, "downside risks have risen sharply," the IMF warned, referring to European governments' debt problems and volatility in financial markets.
In a revision to its World Economic Outlook released yesterday in Hong Kong, the IMF said worldwide economic expansion will decline to 4.3% next year from 2010's 4.6% pace. The forecast for 2010 was revised upwards by 0.4 percentage points to reflect faster-than-anticipated growth earlier this year.
However, "downside risks have risen sharply," the IMF warned, referring to European governments' debt problems and volatility in financial markets.
U.S. Economy: Headed For a Second-Half Slowdown
Constant stock market volatility, a crippled job market and the troubles plaguing the European markets are starting to take their toll on the U.S. economy. After the major market rally of 2009, is the U.S. economy headed for a second-half slowdown... or, worse, the dreaded double-dip recession? Read this report to find out exactly what’s in store for the U.S. economy...
Slowing Factory Output Suggests Global Economic Recovery May be Weakening
A slowdown in manufacturing growth spread across the globe in June, as factory output fell in China, Europe and the United States, suggesting the global economic recovery may be losing steam.
But the overall level of factory activity continued to expand, suggesting that manufacturers may be experiencing a return to more normal rates of growth rather than heading for a contraction.
In China, manufacturing growth slowed more than economists had forecast, and a gauge of factory output in the 16-member euro region fell for the second consecutive month, two surveys showed.
But the overall level of factory activity continued to expand, suggesting that manufacturers may be experiencing a return to more normal rates of growth rather than heading for a contraction.
In China, manufacturing growth slowed more than economists had forecast, and a gauge of factory output in the 16-member euro region fell for the second consecutive month, two surveys showed.
Money Morning Midyear Forecast: The U.S. Economy is Headed For a Second-Half Slowdown
Most textbook economists say that the U.S. economy is engaged in a broad-based recovery. But while there's a consensus that there's no "double-dip" recession on the horizon, the evidence suggests the nation's economy is headed for a slowdown in the second half of 2010.
The reason: In a market that derives 70% of its growth from consumer spending, the last half of this year will be all about those consumers - and about the economy's inability to generate enough jobs to keep the nation's cash registers ringing.
If you add to that concern the end of the various government stimulus efforts, possible fallout from the Eurozone debt contagion, and oil in the Gulf of Mexico defiling the shores of four states, you end up with an economic outlook that's clouded with uncertainty.
And that uncertainty will continue to stifle hiring and will result in another round of consumer belt-tightening - and a continued economic malaise.
The reason: In a market that derives 70% of its growth from consumer spending, the last half of this year will be all about those consumers - and about the economy's inability to generate enough jobs to keep the nation's cash registers ringing.
If you add to that concern the end of the various government stimulus efforts, possible fallout from the Eurozone debt contagion, and oil in the Gulf of Mexico defiling the shores of four states, you end up with an economic outlook that's clouded with uncertainty.
And that uncertainty will continue to stifle hiring and will result in another round of consumer belt-tightening - and a continued economic malaise.
GOP Takes Hardline on Federal Deficit By Killing Unemployment Benefits Extension
Drawing a line in the sand over the federal deficit, Senate Republicans on Thursday killed a spending bill that included an extension of unemployment benefits and increased taxes on bonuses paid to executives at private equity firms.
The collapse of the comprehensive legislation spells the end of assistance for a total of 1.3 million unemployed Americans who were scheduled to lose their benefits at the end of last week. It also will leave a number of states with large budget holes they had expected to fill with federal cash to help with Medicaid.
Even though lawmakers voted 57-41 in favor of the measure, Democrats failed to secure the 60 votes needed to end a GOP-led filibuster. The legislators split along party lines with the exception of Sen. Ben Nelson, D-NE, who voted with the Republicans. Senate Majority Leader Harry Reid, D-NV, said this third vote on the matter would be the last, and that the Senate needed to move on to legislation cutting taxes for small businesses.
The collapse of the comprehensive legislation spells the end of assistance for a total of 1.3 million unemployed Americans who were scheduled to lose their benefits at the end of last week. It also will leave a number of states with large budget holes they had expected to fill with federal cash to help with Medicaid.
Even though lawmakers voted 57-41 in favor of the measure, Democrats failed to secure the 60 votes needed to end a GOP-led filibuster. The legislators split along party lines with the exception of Sen. Ben Nelson, D-NE, who voted with the Republicans. Senate Majority Leader Harry Reid, D-NV, said this third vote on the matter would be the last, and that the Senate needed to move on to legislation cutting taxes for small businesses.
Cost of Gulf Oil Spill Mounts as BP, U.S. Government Errors Complicate Cleanup
As the clock on the Gulf oil spill ticks past 60 days, the costs are approaching $22 billion, with no end in sight. Now, there is growing evidence that errors committed by both the U.S. government and BP PLC (NYSE ADR: BP) may have complicated efforts to clean up the mess. The Coast Guard and […]
Brit Officials Defend BP on Gulf Oil Spill As it Weighs Dividend Cut
British government officials on Friday took shots at the Obama administration for the barrage of criticism it is leveling at BP PLC (NYSE ADR: BP) over the Gulf oil spill, sparking a rally in its beaten-down shares, even as it weighs cutting or deferring its dividend.
In an apparent swipe at the U.S. President's comments about the British company, Deputy Prime Minister Nick Clegg insisted finger-pointing is unhelpful, "I don't, frankly, think we will reach a solution to stopping release of oil into the ocean any quicker by allowing this to spiral into a tit for tat political diplomatic spat," Clegg told the Daily Mail.
Britain's Chancellor of the Exchequer George Osborne also backed BP with a statement after speaking to BP chief executive Tony Hayward by telephone. "We are all concerned about the human and environmental impact and as the prime minister has said we understand the concerns of the U.S. administration," Osborne told Reuters.
In an apparent swipe at the U.S. President's comments about the British company, Deputy Prime Minister Nick Clegg insisted finger-pointing is unhelpful, "I don't, frankly, think we will reach a solution to stopping release of oil into the ocean any quicker by allowing this to spiral into a tit for tat political diplomatic spat," Clegg told the Daily Mail.
Britain's Chancellor of the Exchequer George Osborne also backed BP with a statement after speaking to BP chief executive Tony Hayward by telephone. "We are all concerned about the human and environmental impact and as the prime minister has said we understand the concerns of the U.S. administration," Osborne told Reuters.
Unexpected Drop in Retail Sales a Sign of Trouble For Economic Recovery
Sales at U.S. retailers unexpectedly dropped in May for the first time since September, the Commerce Department said Friday, raising worries that the economy is struggling to recover from the worst financial meltdown since the Great Depression.
Americans slashed spending on everything from cars to clothing to building materials, as retail sales plunged 1.2% last month, following a 0.6% April gain that was larger than previously estimated. It was the largest decline in eight months.
Retail sales were projected to increase 0.2%, according to the median estimate of 76 economists in a Bloomberg News survey.
Americans slashed spending on everything from cars to clothing to building materials, as retail sales plunged 1.2% last month, following a 0.6% April gain that was larger than previously estimated. It was the largest decline in eight months.
Retail sales were projected to increase 0.2%, according to the median estimate of 76 economists in a Bloomberg News survey.
AIG Bailout Second-Guessed by Government Watchdog
A bipartisan Congressional watchdog panel reviewing the government's bailout of American International Group Inc. (NYSE: AIG) has raised doubts about whether U.S. taxpayers "will ever be repaid in full," and concluded that the U.S. Federal Reserve didn't act aggressively enough during the 2008 rescue.
In a lengthy report, the Congressional Oversight Panel also said the bailout had a "poisonous" effect on the U.S. financial system because it demonstrated the government would protect Wall Street firms from their own risk-taking.
The Federal Reserve could have acted earlier to find a privately funded solution for New York-based AIG before deciding on a rescue that transformed banks' financial bets into fully guaranteed government obligations, the panel said.
In a lengthy report, the Congressional Oversight Panel also said the bailout had a "poisonous" effect on the U.S. financial system because it demonstrated the government would protect Wall Street firms from their own risk-taking.
The Federal Reserve could have acted earlier to find a privately funded solution for New York-based AIG before deciding on a rescue that transformed banks' financial bets into fully guaranteed government obligations, the panel said.
Stubbornly High Unemployment Shows U.S. Economy Still Plagued by "Jobless Recovery"
While a surge in corporate profits reflect an improving economy, several government reports show that the United States continues to be plagued by a lingering "jobless recovery."
Most analysts, including President Barack Obama, are predicting a strong May jobs report due out today (Friday) with more than 500,000 new jobs added to the U.S. economy.
"We expect to see strong jobs growth in Friday's report." Obama predicted in a speech in Pittsburg on Wednesday.
Most analysts, including President Barack Obama, are predicting a strong May jobs report due out today (Friday) with more than 500,000 new jobs added to the U.S. economy.
"We expect to see strong jobs growth in Friday's report." Obama predicted in a speech in Pittsburg on Wednesday.
Crack Spread Plummets as Refineries Suffer Through Petroleum Supply Glut
U.S. refineries are in the midst of a petroleum supply glut that's driving down profit margins for refining crude --the crack spread-and depressing prices by over 25% since last week.
U.S. supplies of oil and all petroleum-based fuels were at the highest levels in at least 20 years, jumping to 1.81 billion barrels for the week that ended May 14, knocking profit margins at refineries off a 15 month high.
The crack spread--the profit margin that an oil refinery can expect to make by "cracking" three barrels of oil into two barrels of gasoline and one barrel of heating oil-traded as low as $11.33 a barrel Friday on the New York Mercantile Exchange (NYMEX). It touched $16.909 on May 13, the highest price since Feb. 12, 2009. The margin has dropped 62% from a record $30.479 reached on May 17, 2007.
U.S. supplies of oil and all petroleum-based fuels were at the highest levels in at least 20 years, jumping to 1.81 billion barrels for the week that ended May 14, knocking profit margins at refineries off a 15 month high.
The crack spread--the profit margin that an oil refinery can expect to make by "cracking" three barrels of oil into two barrels of gasoline and one barrel of heating oil-traded as low as $11.33 a barrel Friday on the New York Mercantile Exchange (NYMEX). It touched $16.909 on May 13, the highest price since Feb. 12, 2009. The margin has dropped 62% from a record $30.479 reached on May 17, 2007.
Surge in Strategic Defaults Threatens Housing Market Recovery
A growing number of homeowners who owe more on their mortgages than their property is worth are opting for "strategic default," which means walking away from their homes, even though they can afford to make their monthly payment.
If the trend accelerates, it could put more empty houses on a market that's already overburdened with vacancies and snuff out any recovery in the moribund housing market.
Right now, more than 10% of borrowers are 25% or more underwater on 4.9 million mortgages. The total valuation could saddle banks with as much as $656 billion of bad loans, according to the latest report from Corelogic.
If the trend accelerates, it could put more empty houses on a market that's already overburdened with vacancies and snuff out any recovery in the moribund housing market.
Right now, more than 10% of borrowers are 25% or more underwater on 4.9 million mortgages. The total valuation could saddle banks with as much as $656 billion of bad loans, according to the latest report from Corelogic.
European Debt Contagion Puts U.S. Stock Market on Rollercoaster Ride
Panic over European debt contagion sent the U.S. stock market on a wild ride today (Thursday), at one point sending the Dow Jones Industrial Average briefly below 10,000 for the first time since November 2009 before the market turned again.
The Dow was down nearly 1,000 points at 9,869.62 at about 2:40 p.m. EDT when it suddenly rebounded. The Dow ended up closing at 10,517 down 350.97 points or 3.2 % on the day. The Nasdaq Composite Index closed at 2319 down 82.65 points or 3.4%, and the Standard & Poors 500 Index closed at 1127 down 37.85 points or 3.2%.
The trading left the Dow down 6.1% from its yearly high of 11,205, set less than two weeks ago on April 26.
The Dow was down nearly 1,000 points at 9,869.62 at about 2:40 p.m. EDT when it suddenly rebounded. The Dow ended up closing at 10,517 down 350.97 points or 3.2 % on the day. The Nasdaq Composite Index closed at 2319 down 82.65 points or 3.4%, and the Standard & Poors 500 Index closed at 1127 down 37.85 points or 3.2%.
The trading left the Dow down 6.1% from its yearly high of 11,205, set less than two weeks ago on April 26.
Slower Productivity Growth May Force Businesses to Increase Hiring
U.S. productivity rose faster than expected in the first three months of the year, as employers continued to squeeze existing workers to boost output before hiring new ones, Labor Department figures showed today (Thursday). But the rate of growth slowed, which may force businesses to increase hiring in the coming months.
Separately, fewer Americans filed claims for unemployment benefits for the third consecutive week, in a sign the labor market is slowly recovering from the worst recession since the 1930s.
Productivity rose at a 3.6% annual rate in the first quarter, exceeding the 2.6% median forecast of economists surveyed by Bloomberg News but down sharply from 6.3% in the previous three months.
Separately, fewer Americans filed claims for unemployment benefits for the third consecutive week, in a sign the labor market is slowly recovering from the worst recession since the 1930s.
Productivity rose at a 3.6% annual rate in the first quarter, exceeding the 2.6% median forecast of economists surveyed by Bloomberg News but down sharply from 6.3% in the previous three months.
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