Conflicting weekly indicators on the US economy: (1) investors regain confidence in US equities, but (2) the bank closure rate increases. (1) Mutual funds investing in US equities saw net inflows for only the second time since early August, but (2) seven banks were closed by FDIC last week, a substantial increase on previous weeks – charts back to 1930s here.
The Ukraine will not receive $3.8bn in additional aid from the IMF unless the president vetoes wage and pension rises. And as UK economists recover from surprise negative GDP data, there are bubbles in several areas of UK financial markets, including property, and central bankers should develop bubble-popping strategies.
“Less developed” countries are faring rather better. The top UN official in the region has said Asian economies would benefit from greater intra-regional trade and a reduced dependence on exports to the West: “The economic crisis has exposed the limitations of a ‘manufactured in Asia – consumed in the West’ model for economic growth.” Sixteen East Asian countries have agreed to consider two development proposals, one from Japan and one from Australia. It is unclear whether either proposal relies on US involvement.
South Korean growth is at a seven-year high, increasing expectations that the central bank may soon raise interest rates to rein in rising property prices and household debt. The news sent shares higher in Japan and South Korea, and the dollar slid after a Chinese article called for increased holdings of yen and euro reserves by Beijing.
China’s foreign exchange regulator, SAFE, has resumed approvals for Chinese institutions to buy overseas securities after a 17-month hiatus. Approval initially covers $1.5bn securities, but the potential and significance are greater. The move underlines Chinese confidence and a return to encouraging outflows to prevent appreciation of the renminbi. Meanwhile Jim O’Neill, chief economist of Goldman Sachs, says there is no chance of a free-floating renminbi while Morgan Stanley Asian chairman Stephen Roach warns of economic slowdown in China in the middle of next year because of an unsustainable growth model.
Dubai is gauging demand for a $6.5bn sovereign debt issuance as it seeks to refinance its short-term loans and bonds and replace them with longer-term debt. The department of finance has issued prospectuses for a medium-term note programme of $4bn and an Islamic bond, or sukuk, worth $2.5bn.
And Finland has topped the global prosperity index, which considers democracy and governance as well as material wealth. Sweden, Denmark and Norway are also in the top five, along with Switzerland.