Wednesday, April 28, 2010
Tuesday, April 27, 2010
Friday, April 23, 2010
US stocks edge lower on mixed economic, earnings data
NEW YORK: Stocks
edged lower on Friday as investors try to balance easing concerns about Greece's debt problems with some mixed earnings and economic reports.
The Commerce Department said durable goods orders fell unexpectedly last month because of a sharp drop in aircraft orders. Investors were also disappointed in Travelers Cos. first-quarter results, sending its shares lower.
European stock markets got a boost after Greek officials said they will tap a rescue package from the 15 other countries that use the euro and the International Monetary Fund. The debt-burdened country will have access to about $53.37 billion.
The move gives Greece better interest rates on its debt than it would be able to get from private investors.
Despite the climb in European stocks, there was still some skepticism about whether the bailout provides a long-term solution. The euro weakened compared with the dollar, falling to its lowest level in a year.
U.S. stocks had suffered Thursday morning as concerns about Greece's debt problem resurfaced after a report showed the country's deficit last year was larger than first thought. Greece's debt crisis has spooked investors who worry that other European nations will also struggle with repaying debt, which would stunt a global economic recovery.
The Greek debt problem has been one of the few issues that have made investors pause in recent months as stocks continue a consistent climb higher. The Dow Jones industrial average is on pace for its eighth straight weekly gain. It rose 9 points Thursday after comments by President Barack Obama about financial regulatory reform didn't provide any surprises.
In early morning trading, the Dow Jones industrial average fell 18.97, or 0.2 percent, to 11,115.32. The Standard & Poor's 500 index fell 2.36, or 0.2 percent, to 1,206.31, while the Nasdaq composite index fell 4.64, or 0.2 percent, to 2,514.43.
Dow component Travelers stock fell after its first-quarter profit missed expectations because of severe winter storms and the earthquake in Chile. Travelers fell 38 cents to $53.42.
Investors looking to focus on the domestic economy got a mixed report on durable goods orders. New orders for big-ticket manufactured goods dropped 1.3 percent in March because of a steep plunge in commercial aircraft orders. Economists polled by Thomson Reuters had forecast a 0.3 percent jump.
But orders did jump at their fastest rate since 2007 excluding the volatile transportation sector, indicating the manufacturing sector is still improving. New orders for goods that are expected to last at least three years rose 2.8 percent last month. Economists were expecting growth of 0.7 percent.
Investors are also awaiting a report on new home sales that comes a day after the National Association of Realtors said sales of existing homes rose more than expected in March. Thursday's report helped buoy homebuilder stocks Thursday.
The Commerce Department's report on new home sales Friday is also expected to show an increase in March after hitting a record-low a month earlier. The report is expected to show sales rose 7.1 percent to a seasonally adjusted annual rate of 330,000, according to economists polled by Thomson Reuters.
23 Apr 2010, 1932 hrs IST,AGENCIES India Economic Times
edged lower on Friday as investors try to balance easing concerns about Greece's debt problems with some mixed earnings and economic reports.
The Commerce Department said durable goods orders fell unexpectedly last month because of a sharp drop in aircraft orders. Investors were also disappointed in Travelers Cos. first-quarter results, sending its shares lower.
European stock markets got a boost after Greek officials said they will tap a rescue package from the 15 other countries that use the euro and the International Monetary Fund. The debt-burdened country will have access to about $53.37 billion.
The move gives Greece better interest rates on its debt than it would be able to get from private investors.
Despite the climb in European stocks, there was still some skepticism about whether the bailout provides a long-term solution. The euro weakened compared with the dollar, falling to its lowest level in a year.
U.S. stocks had suffered Thursday morning as concerns about Greece's debt problem resurfaced after a report showed the country's deficit last year was larger than first thought. Greece's debt crisis has spooked investors who worry that other European nations will also struggle with repaying debt, which would stunt a global economic recovery.
The Greek debt problem has been one of the few issues that have made investors pause in recent months as stocks continue a consistent climb higher. The Dow Jones industrial average is on pace for its eighth straight weekly gain. It rose 9 points Thursday after comments by President Barack Obama about financial regulatory reform didn't provide any surprises.
In early morning trading, the Dow Jones industrial average fell 18.97, or 0.2 percent, to 11,115.32. The Standard & Poor's 500 index fell 2.36, or 0.2 percent, to 1,206.31, while the Nasdaq composite index fell 4.64, or 0.2 percent, to 2,514.43.
Dow component Travelers stock fell after its first-quarter profit missed expectations because of severe winter storms and the earthquake in Chile. Travelers fell 38 cents to $53.42.
Investors looking to focus on the domestic economy got a mixed report on durable goods orders. New orders for big-ticket manufactured goods dropped 1.3 percent in March because of a steep plunge in commercial aircraft orders. Economists polled by Thomson Reuters had forecast a 0.3 percent jump.
But orders did jump at their fastest rate since 2007 excluding the volatile transportation sector, indicating the manufacturing sector is still improving. New orders for goods that are expected to last at least three years rose 2.8 percent last month. Economists were expecting growth of 0.7 percent.
Investors are also awaiting a report on new home sales that comes a day after the National Association of Realtors said sales of existing homes rose more than expected in March. Thursday's report helped buoy homebuilder stocks Thursday.
The Commerce Department's report on new home sales Friday is also expected to show an increase in March after hitting a record-low a month earlier. The report is expected to show sales rose 7.1 percent to a seasonally adjusted annual rate of 330,000, according to economists polled by Thomson Reuters.
23 Apr 2010, 1932 hrs IST,AGENCIES India Economic Times
No time for trade war between US and China: Joseph E Stiglitz
The battle with the US over China’s exchange rate continues . When the Great Recession began, many worried that protectionism would rear its ugly head. True, G-20 leaders promised that they had learned the lessons of the Great Depression. But 17 of the G-20 ’s members introduced protectionist measures just months after the first summit in November 2008. The Buy America provision in the US’ stimulus bill got the most attention. Still, protectionism was contained, partly due to the World Trade Organization.
Continuing economic weakness in the advanced economies risks a new round of protectionism. In the US, for example, more than one in six workers who would like a full-time job can’t find one.
These were among the risks associated with the US’ insufficient stimulus, which was designed to placate members of Congress as much as it was to revive the economy. With soaring deficits , a second stimulus appears unlikely, and, with monetary policy at its limits and inflation hawks being barely kept at bay, there is little hope of help from that department, either. So, protectionism is taking pride of place.
The US Treasury has been charged by Congress to assess whether China is a ‘currency manipulator’ . Although President Barack Obama has now delayed for some months when Treasury secretary Timothy Geithner must issue his report, the very concept of currency manipulation is flawed: all governments take actions that directly or indirectly affect the exchange rate. Reckless budget deficits can lead to a weak currency ; so can low interest rates. Until the recent crisis in Greece, the US benefited from a weak dollar-euro exchange rate. Should Europeans have accused the US of ‘manipulating’ the exchange rate to expand exports at its expense?
Although US politicians focus on the bilateral trade deficit with China — which is persistently large — what matters is the multilateral balance. When demands for China to adjust its exchange rate began during George W Bush’s administration, its multilateral trade surplus was small. More recently, however, China has been running a large multilateral surplus as well.
Saudi Arabia also has a bilateral and multilateral surplus: Americans want its oil, and Saudis want fewer US products . Even in absolute value, Saudi Arabia’s multilateral merchandise surplus of $212 billion in 2008 dwarfs China’s $175 billion surplus; as a percentage of GDP, Saudi Arabia’s current-account surplus, at 11.5% of GDP, is more than twice that of China. Saudi Arabia’s surplus would be far higher were it not for US armaments exports.
In a global economy with deficient aggregate demand, current-account surpluses are a problem. But China’s current-account surplus is actually less than the combined figure for Japan and Germany; as a percentage of GDP, it is 5%, compared to Germany’s 5.2%.
Many factors other than exchange rates affect a country’s trade balance. A key determinant is national savings. US’ multilateral trade deficit will not be significantly narrowed until America saves significantly more; while the Great Recession induced higher household savings (which were near zero), this has been more than offset by the increased government deficits.
Adjustment in the exchange rate is likely to shift to where the US buys its textiles and apparel: from Bangladesh or Sri Lanka, rather than China . Meanwhile, a rise in the exchange rate is likely to contribute to inequality in China, as its poor farmers face increasing competition from the US’ highly subsidised farms. This is the real trade distortion in the global economy, one in which millions of poor people in developing countries are hurt as the US helps some of the world’s richest farmers.
During the 1997-98 Asian financial crisis, the renminbi’s stability played an important role in stabilising the region. So, too, the renminbi’s stability has helped the region maintain strong growth, from which the world benefits.
Some argue that China needs to adjust its exchange rate to prevent inflation or bubbles. Inflation remains contained but, more to the point, China’s government has an arsenal of other weapons — from taxes on capital inflows and capital-gains taxes to a variety of monetary instruments — at its disposal.
But exchange rates do affect the pattern of growth, and it is in China’s interest to restructure and move away from high dependence on export-led growth . China recognises that its currency needs to appreciate over the long run, and politicising the speed at which it does so has been counterproductive. (Since it began revaluing its exchange rate in July 2005, the adjustment has been half or more of what most experts think is required.) Moreover, starting a bilateral confrontation is unwise.
Since China’s multilateral surplus is the economic issue and many countries are concerned about it, the US should seek a multilateral, rules-based solution . Imposing unilateral duties after unilaterally labelling China a currency manipulator would undermine the multilateral system, with little payoff. China might respond by imposing duties on those American products effectively directly or indirectly subsidised by the US’ massive bailouts of its banks and car companies.
No one wins from a trade war. So, the US should be wary of igniting one in the midst of an uncertain global recovery — as popular as it might be with politicians whose constituents are justly concerned about high unemployment, and as easy as it is to look for blame elsewhere. Unfortunately, this global crisis was made in the US, and the country must look inward, not only to revive its economy , but also to prevent a recurrence.
16 Apr 2010, 0903 hrs IST,Joseph E Stiglitz,
(The author is University Professor at Columbia University and recipient of the 2001 Nobel Prize in Economics)
Continuing economic weakness in the advanced economies risks a new round of protectionism. In the US, for example, more than one in six workers who would like a full-time job can’t find one.
These were among the risks associated with the US’ insufficient stimulus, which was designed to placate members of Congress as much as it was to revive the economy. With soaring deficits , a second stimulus appears unlikely, and, with monetary policy at its limits and inflation hawks being barely kept at bay, there is little hope of help from that department, either. So, protectionism is taking pride of place.
The US Treasury has been charged by Congress to assess whether China is a ‘currency manipulator’ . Although President Barack Obama has now delayed for some months when Treasury secretary Timothy Geithner must issue his report, the very concept of currency manipulation is flawed: all governments take actions that directly or indirectly affect the exchange rate. Reckless budget deficits can lead to a weak currency ; so can low interest rates. Until the recent crisis in Greece, the US benefited from a weak dollar-euro exchange rate. Should Europeans have accused the US of ‘manipulating’ the exchange rate to expand exports at its expense?
Although US politicians focus on the bilateral trade deficit with China — which is persistently large — what matters is the multilateral balance. When demands for China to adjust its exchange rate began during George W Bush’s administration, its multilateral trade surplus was small. More recently, however, China has been running a large multilateral surplus as well.
Saudi Arabia also has a bilateral and multilateral surplus: Americans want its oil, and Saudis want fewer US products . Even in absolute value, Saudi Arabia’s multilateral merchandise surplus of $212 billion in 2008 dwarfs China’s $175 billion surplus; as a percentage of GDP, Saudi Arabia’s current-account surplus, at 11.5% of GDP, is more than twice that of China. Saudi Arabia’s surplus would be far higher were it not for US armaments exports.
In a global economy with deficient aggregate demand, current-account surpluses are a problem. But China’s current-account surplus is actually less than the combined figure for Japan and Germany; as a percentage of GDP, it is 5%, compared to Germany’s 5.2%.
Many factors other than exchange rates affect a country’s trade balance. A key determinant is national savings. US’ multilateral trade deficit will not be significantly narrowed until America saves significantly more; while the Great Recession induced higher household savings (which were near zero), this has been more than offset by the increased government deficits.
Adjustment in the exchange rate is likely to shift to where the US buys its textiles and apparel: from Bangladesh or Sri Lanka, rather than China . Meanwhile, a rise in the exchange rate is likely to contribute to inequality in China, as its poor farmers face increasing competition from the US’ highly subsidised farms. This is the real trade distortion in the global economy, one in which millions of poor people in developing countries are hurt as the US helps some of the world’s richest farmers.
During the 1997-98 Asian financial crisis, the renminbi’s stability played an important role in stabilising the region. So, too, the renminbi’s stability has helped the region maintain strong growth, from which the world benefits.
Some argue that China needs to adjust its exchange rate to prevent inflation or bubbles. Inflation remains contained but, more to the point, China’s government has an arsenal of other weapons — from taxes on capital inflows and capital-gains taxes to a variety of monetary instruments — at its disposal.
But exchange rates do affect the pattern of growth, and it is in China’s interest to restructure and move away from high dependence on export-led growth . China recognises that its currency needs to appreciate over the long run, and politicising the speed at which it does so has been counterproductive. (Since it began revaluing its exchange rate in July 2005, the adjustment has been half or more of what most experts think is required.) Moreover, starting a bilateral confrontation is unwise.
Since China’s multilateral surplus is the economic issue and many countries are concerned about it, the US should seek a multilateral, rules-based solution . Imposing unilateral duties after unilaterally labelling China a currency manipulator would undermine the multilateral system, with little payoff. China might respond by imposing duties on those American products effectively directly or indirectly subsidised by the US’ massive bailouts of its banks and car companies.
No one wins from a trade war. So, the US should be wary of igniting one in the midst of an uncertain global recovery — as popular as it might be with politicians whose constituents are justly concerned about high unemployment, and as easy as it is to look for blame elsewhere. Unfortunately, this global crisis was made in the US, and the country must look inward, not only to revive its economy , but also to prevent a recurrence.
16 Apr 2010, 0903 hrs IST,Joseph E Stiglitz,
(The author is University Professor at Columbia University and recipient of the 2001 Nobel Prize in Economics)
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