Premier Wen repeated that “China has confidence that it will sustain steady and robust economic growth”, defined as between 7.5% to 8.0%. Yet more monetary easing/stimulus, basically;
S&P lowered the local currency credit outlook of India to negative. S&P cited additional risks from a slower economy, lack of progress on fiscal reforms, large accumulated public debt and a widening current account deficit. The downgrade suggests that there is a 1 in 3 chance of a downgrade within the next 24 months. I cant see how India can avoid a downgrade given it’s current policies;
The WSJ reports that the EU is considering revising 2013 budget deficit targets and/or give more weight to structural deficits. Whilst it is obvious that the original targets were impossible to attain, this constant chopping and changing is clearly adding to lack of credibility that the EU certainly suffers from;
Spain’s Central Government budget deficit was just -0.83% (-0.93% in the same Q in 2011) in the 1st Q of 2012, but rises to -1.85%, as ompared with -1.06% when transfers to regions are taken into account. The authorities state that they are “reasonably” on track to meet the Central Governments target of -3.5% this year. “Reasonably”, Hmmmm, suggests to me that they are suggesting a miss. Add on the regional deficits, who have proved incapable of sticking to their targets and the proposed target for the current year (-5.3% this year) looks near impossible;
The Dutch are to debate the issue of their budget deficit this week. The acting PM (he has resigned) wants to cut spending by E9.5bn and raise revenues (raising in total around E15bn) to reduce Holland’s budget deficit to -3.0% in 2013, from a projected -4.3% at present. The lefter leaning parties are opposed to the expenditure cuts and revenue rises and suggest that Holland can reduce their budget deficit to -3.0% by 2015. As a result, the deficit cutting plans by the acting PM are unlikely to be fulfilled. New elections are likely on 12th September, which means that any crisis in the EZ in coming months is going to prove to be a major problem. Holland has been at the forefront in urging fellow EZ countries to stick to their deficit targets and failure by them (likely) to meet the -3.0% 2013 target will be seen as a huge blow to the recently agreed fiscal compact;
Testimony by James Murdoch is getting embarrassing for a number of UK politicians highlighting, in particular, the close and inappropriate (many would say) ties between politicians and the Murdoch empire. The UK’s Culture secretary looks as if he is in the firing line, in particular – allegedly he provided inappropriate info to the Murdoch’s on their proposed bid for Sky Broadcasting. Rupert Murdoch is to testify today – going to get a lot more interesting;
The UK is technically back in recession. GDP declined by -0.2% in the 1st Q of 2012 on a Q/Q basis (-0.3% in the 4th Q 2011), below the gain of +0.1% expected and unchanged on an YoY basis. The decline was due to a slump of 3.0% in construction, the largest decline since 2009, together with a -0.4% drop in industrial production. Manufacturing declined by -0.1% and services were up by +0.1%. However, the decline in construction is surprising (all you have to do is look around you) and has to be viewed with deep suspicion. The ONS numbers generally paint a worse picture than is the case in reality. Indeed, industry and construction surveys suggest a much stronger economy. It’s high time the UK sorted out the ONS;
US new home sales in March came in at an annualised rate of 328k homes, down from an upwardly revised rate of 353k in February, though above forecasts of 319k. In addition, home prices declined by a slower pace of -3.5% YoY in February in 20 US cities. The Federal Housing Finance Agency reported that property values rose by +0.3% in February MoM or +0.4% YoY, the 1st positive reading since the 12 months to July 2007;
The US Conference Board confidence Index came in at 69.2 in April, slightly lower than the 69.5 in March and the forecast of 69.6. The current conditions component increased to 51.4, the highest level since September 2008, from 49.9 in March. Expectations declined to 81.1, from 82.5 in March;
Mitt Romney won 5 primaries yesterday, moving him closer to the 1,144 delegates he needs to gain the GOP nomination. The battle between Mr Obama and Mr Romney is now on;
Outlook
Asian markets closed higher, with European markets also higher.
Sterling declined on the news that the UK was in technical recession.
The Euro is above US$1.32 – currently US$1.3214.
Spot Brent is trading around US$118.70.
Kiron Sarkar
25th April 2012
