Friday, June 19, 2009

NEW YORK: The rates banks charge one another for loans fell again on Thursday, with the three-month lending rate marking a fresh low for a fifth straight session, while short-term lending rates for euros also eased. Ongoing action by central banks world-wide to provide financial institutions with massive short-term liquidity has helped take the pressure off the interbank money markets, allowing rates to drift lower.

Even Standard & Poor's move on Wednesday to cut its credit ratings on 18 US banks failed to stall the downtrend in rates. S&P said increased regulation and market volatility would hurt the already weakened sector. "Central bank support and the prospect for the low yield environment to stay have helped these fixings to come in lower and lower," said Christoph Rieger, rate strategist at Dresdner Kleinwort in Frankfurt.

However, ICAP's New York Funding Rate (NYFR) rose again amid some jitters about potential funding pressures at the end of the first half of the year. The three-month NYFR rose 1.75 basis points to 0.6306 percent versus a 0.125 basis point decline in three-month Libor to 0.60875 percent.

In a further effort to encourage banks to lend money, the European Central Bank is offering 12-month funds for the first time next week at its longer-term refinancing operations and analysts expect money market rates to fall even further.

The three-month Euribor rate, traditionally the main gauge of interbank euro lending, has already dropped to a new all time low of 1.235 percent. The three-month euro London interbank offered rate was set at 1.23438 percent, near the record low of 1.23188 percent on May 19, while the equivalent dollar Libor was fixed at an all-time low of 0.60875 percent.

Analysts and traders said lenders could borrow up to 600 billion euros at next week's ECB 12-month refinancing operation, although many believe a more conservative figure of 200 to 400 billion euros was likely. Given the potential for such a large liquidity inflow, short-term rates such as the Euro Overnight Index Average (Eonia) are likely to fall even further.

Eonia, the weighted average of all overnight unsecured lending in the interbank market, was last set at 0.852 percent and analysts expect in the weeks to come it could retest the low of 0.486 percent seen in May. A gauge of money market stress - the spreads between Libor and the equivalent overnight index swap rate, or expected central bank rates - continued to improve.

The dollar spread contracted to 39 basis points, the narrowest since early 2008, well off the highs of around 360 basis points hit in the aftermath of Lehman's collapse. But it remained above the pre-credit-crisis level of around 10 basis points seen consistently before July 2007.


(Reuters)

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Friday, June 19, 2009

CLERMONT-FERRAND: French tyre maker Michelin said on Wednesday it would shed 2,800 jobs through early retirement and voluntary redundancies in the next three years, sparking concern from the government. The company said it will also shut down one of its plants in northern France at Noyelles-les-Seclin but will boost research and development funding at its Clermont-Ferrand plant by more than 100 million euros (139 million dollars).

"We're in a logic of consolidation in France and we want to continue to produce amid very aggressive competition," Thierry Chiche, Michelin's industrial director for Europe, told AFP. France's junior employment minister Laurent Wauquiez told reporters: "It's clearly a report that worries us a lot." He added that the government would ensure "that no-one is left by the wayside." The downsizing will include 1,093 job cuts from 2010 and a programme to allow 1,800 voluntary redundancies over the next three years, the company said, insisting that none of the planned redundancies would be forced.

The company said it also planned however to hire 500 people a year over the next three years in order to ensure a turnover in the workforce. Michelin rival Continental earlier announced the closure of its factory in Clairoix, north of Paris, with the loss of 1,120 jobs, while Goodyear Dunlop has laid off 820 workers at its Amiens plant in the north.


(AFP)

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Friday, June 19, 2009

NEW DELHI: Italian car maker Fiat on Wednesday unveiled plans to increase its share of India's growing automobile market and hinted it may also offer Chrysler models to the country's middle class. Launching the Grande Punto in India, Fiat-India CEO Rajiv Kapoor told reporters he hoped the hatchback would help the company "capture a market share of 11-12 percent."

The car has been priced at 400,000 rupees (8,900 dollars) in a move designed to challenge the dominance of mid-sized models of Maruti Suzuki. Kapoor said Fiat projected a monthly sale of 2,500 units of the four-door Punto, which has sold 1.6 million units since its 2005 launch in Europe.

Fiat, which recently sealed a deal to sell bankrupt Chrysler's top assets, also raised the possibility of offering Chrysler models to the Indian market in future. "Why not?" chief operating officer Silverio Bonfiglioli replied to reporters' questions.


(AFP)

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Friday, June 19, 2009

NEW DELHI: India's wholesale price index fell in early June on an annual basis for the first time in at least three decades, but analysts said this did not signal a weakening economy and would not prod the central bank to cut rates further. The central bank and analysts had forecast negative trends in the price index mainly for statistical reasons, rather than calling it deflation that follows a sharp contraction in demand.

The widely watched wholesale price index fell 1.61 percent in the 12 months to June 6, the government said, sharply below previous week's rise of 0.13 percent. The drop was bigger than 1.52 percent median forecast by analysts. "This is due to the high statistical base, but going forward inflationary risks are already in sight," said Rupa Rege Nitsure, chief economist at Bank of Baroda. The price index has been rising on a week-on-week basis since March reflecting a pickup in demand and ensuing price pressures in Asia's third largest economy.

"The inflation momentum has been picking up and a continued rise in commodity prices will exert upward pressure on input costs," said Sonal Varma, an economist with Nomura. India's factory output unexpectedly rose in April, reviving hopes the economy turned a corner and sparked speculation the central bank may not cut rates again in near future.

The Indian economy expanded 6.7 percent in the 2008/09 year ended in March, slower than a scorching 9 percent in the previous year but faster than many other emerging economies, but policy makers say it could rebound to at least 7 percent this year.

Analysts said the annual fall in WPI had little implication for monetary policy, and firm consumer price inflation, which stood at 8.7 percent in April, has kept policy makers cautious. "I think monetary policy will gradually start building into the inflationary expectation some time around October essentially because of rising commodity prices," said Jyotinder Kaur, economist at HDFC Bank. India's central bank has cut its lending rate by 4.25 percentage points between October and April, while government has slashed duties and increased public spending to stimulate the economy hit by the global slump and falling domestic demand.

(Reuters)

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Friday, June 19, 2009

NEW DELHI: India's wholesale price index fell in early June on an annual basis for the first time in at least three decades, but analysts said this did not signal a weakening economy and would not prod the central bank to cut rates further. The central bank and analysts had forecast negative trends in the price index mainly for statistical reasons, rather than calling it deflation that follows a sharp contraction in demand.

The widely watched wholesale price index fell 1.61 percent in the 12 months to June 6, the government said, sharply below previous week's rise of 0.13 percent. The drop was bigger than 1.52 percent median forecast by analysts. "This is due to the high statistical base, but going forward inflationary risks are already in sight," said Rupa Rege Nitsure, chief economist at Bank of Baroda. The price index has been rising on a week-on-week basis since March reflecting a pickup in demand and ensuing price pressures in Asia's third largest economy.

"The inflation momentum has been picking up and a continued rise in commodity prices will exert upward pressure on input costs," said Sonal Varma, an economist with Nomura. India's factory output unexpectedly rose in April, reviving hopes the economy turned a corner and sparked speculation the central bank may not cut rates again in near future.

The Indian economy expanded 6.7 percent in the 2008/09 year ended in March, slower than a scorching 9 percent in the previous year but faster than many other emerging economies, but policy makers say it could rebound to at least 7 percent this year.

Analysts said the annual fall in WPI had little implication for monetary policy, and firm consumer price inflation, which stood at 8.7 percent in April, has kept policy makers cautious. "I think monetary policy will gradually start building into the inflationary expectation some time around October essentially because of rising commodity prices," said Jyotinder Kaur, economist at HDFC Bank. India's central bank has cut its lending rate by 4.25 percentage points between October and April, while government has slashed duties and increased public spending to stimulate the economy hit by the global slump and falling domestic demand.

(Reuters)

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Friday, June 19, 2009

LONDON: British retail sales fell in May, major lenders have slashed credit lines to firms and export demand slumped at its sharpest rate in more than a decade, taking the shine off recent optimism about economic recovery. There have been signs Britain could emerge from recession before any other big economy, with some forecasters saying the recession may even have ended this quarter - but policymakers are much more cautious and expect a sluggish return to growth.

As such, there has been speculation that the Bank of England could expand its 125 billion pounds ($205 billion) asset-buying programme. The Office for National Statistics said on Thursday retail sales fell 0.6 percent in May after a 0.9 percent rise in April and below forecasts for a reading of 0.4 percent growth. Sales were 1.6 percent lower than a year ago.

"The fundamental drivers of consumer spending including labour earnings and the saving ratio will continue to act as a headwind for household spending growth," said Amit Kara, economist at UBS. The BoE's Trends in Lending report, which takes data from the biggest banks, showed the biggest fall in lending to businesses since June 2000 - down 5.4 billion pounds in April.

"The various policy measures undertaken by both the Bank of England and the government to boost bank lending are still to feed through to have a major impact," said Howard Archer, an economist at Global Insight. "This is worrying for recovery prospects and further increases belief that the Bank of England will have to further extend its quantitative easing programme."

In the minutes to this month's interest rate meeting, BoE policymakers highlighted ongoing credit constraints as a key downside risk to recovery. The Confederation of British Industry said factory orders fell slightly more than expected in June, with the export orders balance falling to -52 this month from -46 in May - the lowest since October 1998.


(Reuters)

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Friday, June 19, 2009

TOKYO: Japanese manufacturers have grown much less gloomy about business over the last month, a Reuters poll showed, but consumer reluctance to spend has reinforced concerns the recovery from a deep recession will be slow. The survey may point to a healthy rebound in the quarterly Bank of Japan tankan survey due out on July 1 from a record low hit in the first quarter, when businesses were reeling due to sliding global demand and a severe squeeze in corporate funding.

But any improvement would come from a very low base and is unlikely to prompt the BoJ into ending its unconventional steps aimed at easing corporate funding strains, analysts say. "Business sentiment may improve sharply and capital spending plans may be revised up in the BoJ tankan," said Naoki Iizuka, senior economist at Mizuho Securities.

Signs that the worst of the recession has passed have led to a global debate about when policy makers should cut stimulus spending and exit the unconventional measures they implemented in the eye of the global financial storm. Rising exports and industrial output have fuelled talk that the world's No 2 economy is over the worst, and that fed into a much higher reading in the Reuters Tankan for both manufacturers and the service sector.

Manufacturers and non-manufacturers expect conditions to improve more in the next three months, the survey showed, but the upbeat tone is partly due to government stimulus spending at home and abroad, raising questions about whether demand for Japanese goods will last.

The Reuters Tankan's index of manufacturer sentiment rose 19 points from May to minus 50, and was up 28 points from a record low hit three months ago. The headline figure has around a 95 percent correlation with the influential BoJ tankan. Confidence among non-manufacturers stood at minus 31 in the Reuters survey, up from a record low of minus 44 in May and 6 points up from three months ago.


(Reuters)

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Friday, June 19, 2009

ISLAMABAD: Advisor to Prime Minister on Finance Shaukat Tarin has said that the National Finance Commission (NFC) would be reconstituted in July and new distribution formula of resources would be announced within three months time.

Responding to the concerns raised by members of the Senate Standing Committee on Finance here on Thursday, the Advisor said that he had discussed the matter with the Prime Minister and the commission would be reconstituted in July. The members of the Committee wanted within two months the re-constitution of the Commission as well as its first meeting.

Tarin said that after NFC award, four percent CVT on immovable property would be converted into Capital Gains Tax (CGT) on real estate and transferred to the provinces. The committee also wanted that the tax refund cases processing period should be reduced from 90 days to 60 days.

The Senate body on Finance met to take up the recommendations of the members and was attended by the Ministry of Finance and Federal Board of Revenue officials. The advisor apprised the committee that he would be holding a meeting with the representatives of Chambers today (Friday) to address their concerns about budget.

He agreed with legislators that Internally Displaced Persons (IDPs) tax to be treated as advance tax and to be collected in four quarterly instalments during 2009-10 and the final adjustment would be made on filing of final return for the income year.

It was agreed that bonus be taxed during July-September period of 2010-11. The advisor agreed with the legislators that tax could not be imposed with retrospective affect. Tarin said that increase in withholding tax at import stage from two per cent to four per cent would not be applicable on food items and edible oil with a view to keep their prices at a reasonable level.

The advisor opposed imposition of more taxes on telecommunication sector, saying it has promised an investment of $2 billion in its network in 2009-10 and would contribute Rs 110 billion to Rs 115 billion in terms of revenue in the coming fiscal.

He assured the Committee that the government would look into fixing tax holiday period for Independent Power Producers (IPPs) as the members strongly protested against giving them unlimited period of tax holidays, saying they were earning huge profits.

Secretary Finance Salman Siddeque assured the Senator from Swat that the government would look into the matter of discouraging the import of coal. Option to impose 15 per cent federal excise duty on import of coal or regulatory duty was also discussed in the meeting. Senators were of the view that coal reserves in NWFP and Fata as well as in Swat would provide much-needed employment to the people of the areas.

The committee opposed the proposal to allow use of confiscated vehicles to tax authorities. The Finance Ministry agreed that misuse of green channels at international airports should be checked by putting in place exemplary punishment.


(BRecorder)

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