The bank expects the economy to grow slightly below last year’s 2.3 percent. In its last forecast in January, the World Bank estimated the world economy would expand 2.4 percent this year. In 2014 the growth rate is expected to accelerate to 3 percent and reach 3.3 percent in 2015. “Growth is not slower because of inadequate demand but rather because, in our view, the very strong growth we saw in the pre-crisis period was due to that bubble phenomenon,” the lead author of the report Andrew Burns explains. Countries like Brazil, India, Russia and China will grow at their slowest pace in a decade, at 5.1 percent as commodities prices moderate and countries rebalance their economies, the World Bank said. Growth in these countries should slowly pick up in the future, to 5.6 percent next year and 5.7 percent in 2015, according to the report. The bank warned that large developing economies, which have driven global growth in recent years, will not experience the same boom as they did before the global financial crisis and will have to focus on structural reforms to keep expanding. “What we’re seeing now is more in line with the underlying growth potential,” Andrew Burns says. “Therefore, this is a case of moving towards the new normal of the post crisis.” China’s economy that was booming at an annual rate of 10 percent before the crisis is now expected to grow 7.7 percent in 2013, down from its earlier projection of 8.4 percent, according to the report. Economists are abandoning their rosy recovery forecasts and bracing for what could be the country’s slowest growth rate in 23 years, Reuters reports. China’s rapid expansion would moderate as its economy rebalanced away from investment-led growth to focus more on consumption, Reuters quotes Andrew Burns. The World Bank is warning developing nations to watch out for the side effects from the massive monetary expansion in advanced nations like the US and Japan. Among major risks to the global economy are the recession in the Eurozone, and fiscal uncertainty in the US, the World Bank reports. The World Bank has slashed Russia GDP growth forecast in 2013 to 2.3 percent from 3.6 percent. … Read More
Market Buzz: Concerns escalate over slow China growth, US mfg data
Most Russian stocks ended Monday lower following weak performances on Asian and European floors: The MICEX finished 0.95 percent lower at 1337.0, while the RTS lost 0.93 percent to close at 1319.0. European stocks likewise posted sharp losses on Monday, plunging to their lowest closing levels for the past month over weak manufacturing data from the US and escalating concerns on Chinese growth. The HSBC released its final reading on China’s manufacturing PMI, which fell to 49.2 from a preliminary reading of 49.6, pointing to a slowdown in the manufacturing sector. However, the official PMI rose to 50.8 from 50.6; most Asian markets saw losses amid the contradictory data. In Europe, the manufacturing PMI for the eurozone climbed to 48.3 from 46.7 in April, its highest level in 15 months. In Spain, the PMI rose to a 24-month high of 48.1, while Italy’s climbed to its highest level in four months at 47.3. A reading above 50 indicates economic expansion. The Stoxx Europe 600 index lost 0.8 percent to close at 298.59. The UK’s FTSE 100 was down 0.9 percent, Germany’s DAX lost 0.8 percent and France’s CAC 40 slid 0.7 percent. Turkish stocks also saw a significant slump following anti-government protests in Istanbul. US stocks rose, though the US Dollar fell after fresh data revealed that the US manufacturing sector contracted for the first time in six months. The Institute for Supply Management reported a 49 PMI, down from 51 last month; the news has raised concerns about the recovery of the US economy. The Dow Jones Industrial Average rose 0.92 percent to 15,254.03, the S&P 500 was up 0.59 percent to 1,640.42 and the Nasdaq advanced 0.27 percent to 3,465.37. Asian stocks traded mixed Tuesday. Japan’s Nikkei 225 jumped 1.5 percent to 13,456.39 following a Bank of Japan report that the country’s monetary base increased 31.6 percent in May over the expected 24.3 percent, after gaining 23.1 percent in April. Hong Kong’s Heng Seng fell 0.3 percent to 22,219.48 and South Korea’s Kospi fell 0.3 percent to 1,983.55. Benchmarks in mainland China, Singapore, the Philippines, Indonesia and Thailand also fell. Australia’s S&P/ASX 200 rose 0.2 percent to 4,989.90, and India’s benchmark Sensex also rose. Oil is currently lower, with Brent down 0.2 percent to $101 and WTI down 0.3 percent to $93. … Read More
Ex-Riksbank official bashes rate policies
Lars E O Svensson, the former Deputy Governor of the Riksbank who left in a dispute about interest rates, has renewed his criticism of the central bank’s monetary policy, arguing it has increased unemployment. … Read More
Market Buzz: Starting summer lower
On Friday the Russian stock exchange ended the session lower with the MICEX having lost 0.81 percent to close at 1350.17, while the RTS slipped 1.41 percent to 1331.43. Europe also ended last week with a decline of major indicators. The UK’s FTSE100 dropped 1.11 percent to 6583.09, the DAX in Germany slid 0.61 percent to 8348.32, while in France the CAC 40 retreated 1.19 percent to end at 3948.59. On Monday Spain, Italy and the UK will publish data on manufacturing activity, while Switzerland is to publish its SVME PMI. The US floors ended Friday sharply lower despite expectations of an upward movement. Investors’ sell-offs were related to due to mixed economic reports. The Dow Jones industrial average slid more than 200 points, while some 100 were lost in the last 15 minutes alone, marking the worst drop in six weeks. The Dow closed down 1.4 percent at 15,115.57. The S&P 500 ended 1.4 percent lower at 1,630.74. The NASDAQ Composite declined 1 percent to close at 3,455.91. The Institute of Supply Management will release a closely-watched report on manufacturing activity in the US Friday. Asia was mixed on Monday after contradictory data from China. Over the weekend, China’s National Bureau of Statistics said the country’s official PMI for May rose to 50.8 from 50.6 in April. That topped the 50.1 reading economists expected. In this light Hong Kong’s Hang Seng added 0.36 percent in Monday’s trade, while the Shanghai Composite also advanced 0.10 percent. Japan’s Nikkei 225 traded significantly lower, losing 2.17percent after the International Monetary Fund warned Japan that the yen is weak enough, as opposed to its earlier comments saying the Japanese yen was overvalued. Statement from the European Central Bank chief Mario Draghi who predicted a “very gradual recovery” to start in the eurozone later this year also contributed to the confusion. Oil is currently trading slightly lower with Brent losing a mere 0.05 percent and trading at $100, while WTI is 0.1 percent down trading at $92. … Read More
Market Buzz: Focus on global growth, US Fed plans
On Wednesday the Russian floors slumped to 1360 points area. The MICEX ended the day at 1361.43, losing 2.6 percent, while the RTS closed at 1360.06 short of 2.8 percent. Equities of Russia’s major natural gas company Gazprom slipped to a four-year-low, setting a new anti-record, while the shares of Russia’s biggest bank – Sberbank – fell lower than 100 rubles ($3) per share. European stock markets also retreated on Wednesday. Investors’ sentiment was affected by global news, which pointed to weak growth and rising bond yields. The losses came after the Organization of Economic Cooperation and Development and the IMF lowered their global growth forecasts. The International Monetary Fund cut its 2013 growth outlook for China to “around 7.75 percent”, against previous estimates of 8.0 percent in the world’s second-biggest economy this year. Meanwhile the OECD cut its growth forecast for the world’s leading economies, except Japan. The organization however noted that growth should pick up later this year. Unemployment in Germany increased in seasonally adjusted terms in May, but the labor market is continuing to hold up relatively well to the eurozone debt crisis, official data showed on Wednesday. On growing concerns with global growth, shares in most European markets fell. London’s FTSE 100 index of leading companies lost 1.99 percent to 6,627.17 points. In Frankfurt the DAX 30 lost 1.7 percent to close at 8,336.58 points, and in Paris the CAC 40 dropped 1.89 percent to 3,974.12 points. Stocks in Milan dropped 1.61 percent, while Madrid slid 0.82 percent. Concerns with global economic growth and ongoing uncertainty of the US Federal Reserve’s plans for unwinding its bond-buying program sent the US stocks downwards Wednesday. The Dow Jones Industrial Average fell 0.68 percent to close at 15,304.64. The broad-based S&P 500 slid 0.7 percent ending at 1,648.50. The NASDAQ Composite dropped 0.61 percent to 3,467.52. On Thursday investors will be eyeing US’ revised data on first quarter economic growth, in addition to the weekly report on initial jobless claims and data on home sales. Most Asian markets fell Wednesday on growing concerns that the Fed will be withdrawing its aggressive stimulus program soon. Japan’s Nikkei 225 index fell 2.8 percent to 13,932.92. Hong Kong’s Hang Seng lost 0.2 percent to 22,518.85. Australia’s S&P/ASX 200 dropped 1.5 percent to 4,900.90. Benchmarks in Singapore, Taiwan, Indonesia, and the Philippines also fell. South Korea’s Kospi rose adding 0.2 percent to 2,005.99. Already on Friday Japan is expected to release official data on household spending and inflation as well as preliminary data on industrial production, a leading economic indicator. Oil prices have stalled, showing little movement this week. Brent is currently trading 0.2 percent higher at $102.6, while WTI is 0.04 percent lower trading at $93. … Read More
OECD gloomily cuts global growth outlook to 3.1%
The leading economic think tank says, the world economy should grow 3.1 percent this year and then accelerate to 4 percent in 2014. That’s a more pessimistic outlook than its 3.4 percent forecast in November. The euro zone will remain the drag on global growth. The OECD sees its economy remaining in recession for a second year, contracting 0.6 percent. The growth may resume next year at 1.1 percent. The OECD’s chief economist, Pier Carlo Padoan called on countries to cooperate to facilitate growth: “While still disappointing, the global economy is moving forward, and it is doing so at multiple speeds. These multiple speeds reflect different paths towards self-sustained growth, with each path carrying its own mix of risks.” The grim outlook for Europe contrasts with the forecast for the US, which is expected to grow almost 3 percent next year. The organization has praised Washington’s successful re-capitalisation of its banks that helped revive the economy. “In the United States, the combination of a repaired financial system and a revival in confidence is driving growth. Private sector demand is stabilising as household de-leveraging is far advanced, house prices are rebounding and wealth accumulation is supporting consumption. Employment is growing, adding to confidence”, Pier Carlo Padoan says. However, he criticized the US Congress decision to impose public spending cuts, a so-called sequester, before the recovery firms up. The think tank has slashed its forecast on China cutting growth rates to 7.8 percent this year from a previous 8.5 percent. The OECD has lifted its estimate for Japan, saying the BOJ aggressive monetary stimulus would help its economy grow by 1.6 percent this year. It has blessed the country’s central bank’s policy and said further moves could be used to boost the economy. The OECD said central banks of most countries in recovery mode should also keep monetary policies easy. It has called on the European Central Bank to dramatically step up its efforts to get credit flowing to the economy. … Read More
Bank of Japan to continue monetary easing
The board confirmed their intention to continue with the easing until inflation reaches the desired target of 2 percent. Some policy makers argue that the target of 2 percent might be illusive. They say it’s “highly uncertain whether changes in inflation expectations would lead to a rise in the actual rate of inflation,” according to the record of the April 26 meeting. “Most members expressed the view that the year-on-year rate of change in the CPI was likely to follow a rising trend, reflecting factors such as the improvement in the aggregate supply and demand balance as well as the rise in medium to long term inflation expectations, and it was likely to reach around 2 percent – the price stability target – toward the latter half of the projection period,” the minutes said.The minutes also revealed that the board members spoke of a contradiction which arose from the BoJ’s desire to push down interest rates through large-scale purchases of government bonds and at the same time the intention to boost inflation. “A few” members said this had led to volatility in financial markets, while according to Bloomberg, one member said he fears instability could return to the bond market. At the meeting the bank kept its benchmark interest rate at the record low of 0 to 0.10 percent. The board also agreed to help increase the monetary base with about 60 to 70 trillion yen annually.Forecasts for economic growth and consumer prices have been revised as well. The BoJ said it expects Japan’s economy to return to moderate recovery closer to mid-2013. The GDP forecast for fiscal 2013 was also updated from January’s projection of 2.3 percent growth to 2.9 percent. For the next fiscal year the BoJ foresees growth at 1.4 percent, against earlier estimations of 0.8 percent.Inflation is expected to reach 1.9 percent in fiscal 2015, close to the central bank’s goal of 2 percent. Before the minutes were made public, Japan’s central bank had already said that at least two members see inflation of less than 1 percent in the fiscal year ending March 2016, Bloomberg reports.a … Read More
