China Slashes Interest Rates to Spur Economic Growth
China's central bank unexpectedly slashed interest rates on 21st November, Friday, to re-energize the world's second largest economy, joining a growing list of major economies that are trying to encourage growth in the face of a global slowdown. The president of the European Central Bank said recently he was ready to step up stimulus for the 18-country Eurozone economy, where growth is meager and unemployment is soaring. And Japan's government this week delayed a tax increase after the country slipped back into recession. Japan's central bank late last month increased its purchases of government bonds and other assets to try to revive growth.
News of China's actions and the ECB's hints of further stimulus triggered a surge in stock markets, particularly in Europe. Germany's DAX rose 2.6 per cent, while the Dow Jones industrial average rose 0.5 per cent to close at a record high. Asian stocks had closed before the Chinese announcements. Friday's moves highlighted an increasing divide in the global economy. The United States is showing signs of steady growth, prompting the Federal Reserve to rein in its stimulus efforts. So far, the US has escaped any drag from the slowdown overseas. Fed policy-makers said at a meeting last month that the impact on the US would be "quite limited."
US, India End Impasse that Threatened WTO Pact
The United States and India said 13th November, Thursday, they had resolved a dispute over stockpiling of food by the Indian government, clearing a major stumbling block to a deal to boost world trade. India had insisted on its right to subsidize grains under a national policy to support hundreds of millions of impoverished farmers and provide food security amid high inflation. The US and others in the World Trade Organization, meanwhile, were more focused on ensuring their food exporters weren't disadvantaged by the possibility of surplus Indian grain flooding the world market. The dispute had held up implementation of a WTO agreement to reduce customs red tape that the organization estimated could boost global trade by $1 trillion. WTO agreements require ratification by all member countries.
India and the US did not announce details of their new deal, but India had objected to a four-year limit on a so-called "peace clause" that protected developing nations from being punished if they breached the WTO's cap on food subsidies. To ensure poor farmers continue to grow grain, even when market prices are low, India guarantees them a certain price and then stores the crops either for welfare or sale on the open market. India is one of the world's largest grain exporters and the low cost of its production and procurement system means it can sway world prices. Both countries said their agreement should clear the way for immediate implementation of the WTO pact.
Oil Prices Likely to Fall Further, Says IEA
Oil prices are likely to continue falling well into 2015, the International Energy Agency has said. The IEA, a consultancy to 29 countries, said weak demand and the US shale gas boom meant crude's recent fall below USD 80 a barrel was not over. "It is increasingly clear that we have begun a new chapter in the history of the oil markets," the IEA said. "Barring any new supply problems, downward price pressures could build further in the first half of 2015." The organisation, set up after the "oil shock" of the early 1970s to advise major oil importing countries, said that pressure was building on the OPEC oil producers' group to restrict supply to bolster prices.
However, there have been reports that Saudi Arabia, OPEC's key member, is not yet willing to turn off the taps. OPEC members are due to meet on 27 November to discuss the supply and demand issues. Most OPEC members rely on oil revenues to support economic growth and spending. Also, it is likely that oil and gas explorers will become increasingly worried that falling prices will make exploration uneconomical. Brent has fallen for eight weeks in a row, its longest losing streak since 1988, according to Reuters' data. The US energy department said this week that it expected low fuel prices to last into next year. Earlier this week, the IEA's Global Outlook, a report into the industry's long-term challenges, warned that the US shale gas boom was masking serious risks to global energy security.
Citibank, JPMorgan Chase, Other Banks Fined Over Forex Scandal
Financial regulators on both sides of the Atlantic imposed multibillion-dollar fines on five global banks on 12th November, Wednesday, as part of investigations into rigging of key foreign exchange markets. The UK's Financial Conduct Authority has imposed fines totaling more than UK Pound 1.1 billion (USD 1.7 billion) on Citibank, HSBC, JPMorgan Chase Bank, The Royal Bank of Scotland and Switzerland's UBS, it announced. It added that the fines were the largest ever imposed by the FCA, or its predecessor the Financial Services Authority. Meanwhile in the U.S., the Commodity Futures Trading Commission ordered the same banks to pay over USD 1.4 billion in penalties.
The formal settlement is for the "attempted manipulation of, and for aiding and abetting other banks' attempts to manipulate, global foreign exchange benchmark rates to benefit the positions of certain traders," it said. The more detailed breakdown shows that the FCA is fining Citibank USD 358 million, HSBC USD 343 million, JPMorgan Chase USD 352 million, RBS USD 344 million and UBS USD 371 million. The CFTC is imposing fines of USD 310 million each for Citibank and JPMorgan, USD 290 million each for RBS and UBS, and USD 275 million for HSBC. UK lender Barclays is also part of the investigation but did not settle.
Indian Finance Minister Pledges Land, Tax Reforms
India will push ahead with tough land acquisition and tax reforms aimed at boosting investment and kickstarting the economy, Finance Minister Arun Jaitley said on November, 9th Sunday. He added that changes were needed to existing legislation to speed up the process of buying land for industrial use, a contentious issue in India which has long delayed projects. "Some changes may be necessary (to the Land Acquisition Act)," Jaitley said at an economic forum in New Delhi. "We will first try to reach a consensus and if that is not possible we will go ahead and take the decision," he said.
Although the government has introduced smaller initiatives since taking power in May, critics say it has lacked the boldness needed to eliminate regulatory hurdles to doing business as it seeks to attract crucial investment. The comments came as Prime Minister Narendra Modi expanded his government on Sunday, appointing 21 new ministers, in a bid to step up the pace of promised economic reforms. The Indian economy expanded last year by a near-decade low of 4.7 per cent -- half the scorching pace seen during the country's boom a few years back. Land acquisition is a politically charged issue, which has delayed many projects, sometimes for years, including construction of a USD 12-billion plant by South Korean steel giant POSCO in eastern India.
US Unemployment Falls Again in October
The US economy added 214,000 jobs in October, while the unemployment rate has fallen to 5.8 per cent , official Labor Department figures show. The number of jobs created is slightly below forecasts of about 230,000 new posts, but still indicates a healthy US jobs market. The figures are a significant gauge of the health of the economy. US employers have added at least 200,000 jobs for nine months in a row, the longest growth period since 1995. Jobs figures for August and September were also revised higher. The burst of hiring lowered the unemployment rate to 5.8% from 5.9%. That is the lowest rate since July 2008.
Chris Williamson, of financial information service Markit, said: "Anyone disappointed by the October number, which came in below expectations... needs to bear in mind that payrolls have now risen by more than 200,000 in each of the past nine months. "This means that, so far this year, the economy has added some 2.285 million jobs, of which 2.225 million were in the private sector." The number of unemployed in the US has dropped to 8.995 million, below nine million for the first time in six years. The work force participation rate, which counts those with jobs and those actively seeking jobs, was barely changed in October at 62.8 per cent. The financial crisis of 2008 has dented that rate, with some people simply giving up the search for work.