BANGKOK (AP) — Asian stock markets soared Thursday after major central banks acted in concert to lower borrowing costs, hoping to prevent a global credit crisis similar to the one that followed the collapse of Lehman Brothers in 2008.
Benchmark oil rose above $100 per barrel and the dollar fell against the euro but rose against the yen.
Japan's Nikkei 225 index jumped 2.4 percent to 8,638.72. South Korea's Kospi surged 4.2 percent to 1,925.17 and Hong Kong's Hang Seng vaulted 5.9 percent to 19,041.36. Benchmarks in Australia, India, Singapore and Taiwan all rose more than 2.5 percent. Mainland Chinese shares on benchmark indexes in Shanghai and Shenzhen rose more than 3 percent.
On Wednesday, the central banks of Europe, the U.S., Britain, Canada, Japan and Switzerland reduced the rates that banks must pay to borrow dollars in order to make loans cheaper so that banks can continue to operate smoothly.
"The moves were cheered by markets as it shows central banks are willing to work together to ease Europe's sovereign debt crisis," Stan Shamu of IG Markets in Melbourne said in a report.
Separately, China's central bank also acted to release money for lending and help shore up slowing growth by lowering bank reserve levels for the first time in three years. The action late Wednesday signaled a key change in monetary policy, analysts said.
"I think the government has the faith now that inflation has peaked, and that now it's time to change the monetary policy from a tight one to a loose one," said Francis Lun, managing director of Lyncean Holdings in Hong Kong.
Chinese banks soared on the news. Hong Kong-listed Industrial & Commercial Bank of China, the world's largest bank by market value, surged 10.4 percent.
By easing reserve requirements, the central bank made available some 350 billion yuan ($55 billion) that otherwise would have been locked up in reserves. Given typical investment trends, much of that money could find its way back into the property sector.
Hong Kong-listed China Resources Land rose 11.6 percent and Poly Real Estate Group added 8.7 percent.
Steel and industrial shares also jumped. Japanese steel producer JFE Holdings shot up 9.6 percent and South Korean steel giant POSCO gained 7.5 percent.
Worries about Europe's financial system — and the reluctance of the European Central Bank to intervene — have caused borrowing rates for European nations to skyrocket. Central banks will now make it cheaper for commercial banks in their countries to borrow dollars, the dominant currency of trade.
But it does little to solve the underlying problem of mountains of government debt. Analysts said that unless there is dramatic action at an upcoming summit of European leaders on the debt crisis, markets are in for further shaky times.
"Until we see some definitely agreed on and, when necessary, legislated initiatives from Europe, optimism can be premature," said Ric Spooner, chief market analyst at CMC Markets in Sydney. "Until we see that sort of thing, there will be a ceiling on the rally."
The central banks' move sent the Dow Jones industrial average soaring 490 points, its biggest gain since March 2009 and the seventh-largest of all time.
The Dow rose 4.2 percent to close at 12,045. The Standard & Poor's 500 closed up 4.3 percent at 1,247. The Nasdaq composite index closed up 4.2 percent at 2,620.
In energy trading, benchmark crude for January delivery was up 39 cents to $100.75 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 57 cents to settle to $100.36 on Wednesday.
In currencies, the euro rose to $1.3463 from $1.3435 late Wednesday in New York. The dollar rose to 77.67 yen from 77.56 yen.
by Associated Press Dec 1, 2011
Asian stocks soar on joint central bank action | CanadianBusiness.com
Showing posts with label central banks. Show all posts
Showing posts with label central banks. Show all posts
Thursday, December 1, 2011
Thursday, October 27, 2011
Sarkozy Turns to Hu for China Aid as Europe Expands Rescue Fund
Oct. 27 (Bloomberg) -- French President Nicolas Sarkozy said he plans to call Chinese President Hu Jintao today to discuss China contributing to Europe's efforts to resolve the region's debt crisis.
The European Financial Stability Facility will be worth $1.4 trillion after European leaders agreed to leverage existing guarantees by as much as five times, Sarkozy estimated when speaking to reporters at a briefing in Brussels at 4 a.m. local time after the end of a summit of European leaders. Chinese support for the effort would be welcomed, Sarkozy said. The presidents will speak about noon Brussels time, he said.
Chinese Premier Wen Jiabao has signaled willingness to aid the European Union as financial turmoil within the region threatens to crush export demand in China's biggest market. The expansion of the rescue fund and a deal for bondholders to take 50 percent losses on Greek debt may help Sarkozy and German Chancellor Angela Merkel to convince the world that Europe is getting to grips with the crisis.
"China will need time to evaluate this plan very carefully," said Shen Jianguang, a Hong Kong-based economist for Mizuho Securities Asia Ltd. "What worries China is that there is so much disagreement among European policy makers. It doesn't want to be seen spending money on a plan that even Europeans don't want to support."
Sarkozy and Hu's conversation comes a day before a planned visit to Beijing by Klaus Regling, chief executive officer of the EFSF, to court investors. China has the world's largest foreign currency reserves at more than $3.2 trillion.
Sovereign Bonds
The EFSF, established last year to sell bonds to finance loans for distressed euro nations, has since also gained the authority to buy sovereign bonds on the secondary and primary markets, offer credit lines to governments and recapitalize banks as the Greece-triggered debt troubles have spread. The EFSF said Regling's visit to China this week is linked to the fund's original debt-issuance role.
"It is a normal round of discussion with important buyers of EFSF bonds," Christof Roche, spokesman for the Luxembourg- based facility, said by e-mail yesterday. He declined to comment further when contacted by Bloomberg News by telephone. Agence France-Presse reported that Regling will travel on to Tokyo, citing a European Union official in Asia.
China may be willing to respond to a European request to help them fund a package to solve the euro region's debt crisis, AFP said, citing unidentified government officials familiar with the situation.
Chinese Reserves
A press official at the People's Bank of China said he wasn't aware of the issue and asked for faxed questions, which weren't immediately answered. The Ministry of Foreign Affairs and the State Administration of Foreign Exchange, which manages China's foreign-exchange reserves, didn't immediately respond to faxed questions.
Calls to the press office of China Investment Corp., the nation's $300 billion sovereign wealth fund, weren't immediately answered.
Europe is facing international calls to end a debt crisis that President Barack Obama has said "is scaring the world" and U.S. Treasury Secretary Timothy F. Geithner has described as a "catastrophic risk." With a Group of 20 meeting looming on Nov. 3-4, euro-area government heads gathered in Brussels yesterday for the 14th time to tackle troubles that began in Greece two years ago, then engulfed Ireland and Portugal and now threaten Spain and Italy.
Premier Wen said last month that while China was willing to help, that developed nations also needed to put "their own houses in order."
European Responsibility
In Canberra today, Australian Treasurer Wayne Swan echoed that sentiment. "We think it's appropriate that the international community look at what resources the International Monetary Fund has available to it," Swan told reporters. "But in the first instance, any bailout fund in Europe is a responsibility of the Europeans."
Bank of Korea Governor Kim Choong Soo said today the nation hasn't been approached to and hasn't considered joining the effort. Indonesian Vice Finance Minister Mahendra Siregar said the nation hasn't been asked to aid in Europe's effort.
The question of leveraging the AAA rated EFSF has arisen because of the political hurdles in countries such as Germany, the biggest European economy, to increasing the national guarantees that back the fund.
Aid Package
As part of its original role, the EFSF is providing 17.7 billion euros under Ireland's aid package of 67.5 billion euros and 26 billion euros under Portugal's rescue of 78 billion euros. So far, the EFSF has sold two five-year bonds and one 10-year security, all in the first half of this year. The Japanese government bought more than a fifth of the inaugural issue in January.
On Oct. 13, the EFSF announced changes to its bond-sale program for the two countries in the second half of 2011. Instead of selling four "benchmark" bonds in the period, as outlined in mid-May, the fund will sell one security for Ireland valued at 3 billion euros and delay issues planned for Portugal until "early 2012."
The EFSF may have to finance more than 70 billion euros of a planned second aid package for Greece. The initial Greek rescue of 110 billion euros in May 2010 was composed of loans directly from euro-area governments and the IMF.
by Jonathan Stearns and Helene Fouquet Bloomberg News Oct 27, 2011
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/10/26/bloomberg_articlesLTPGNJ0YHQ0X.DTL#ixzz1bzpDPC4m
Sarkozy Turns to Hu for China Aid as Europe Expands Rescue Fund
The European Financial Stability Facility will be worth $1.4 trillion after European leaders agreed to leverage existing guarantees by as much as five times, Sarkozy estimated when speaking to reporters at a briefing in Brussels at 4 a.m. local time after the end of a summit of European leaders. Chinese support for the effort would be welcomed, Sarkozy said. The presidents will speak about noon Brussels time, he said.
Chinese Premier Wen Jiabao has signaled willingness to aid the European Union as financial turmoil within the region threatens to crush export demand in China's biggest market. The expansion of the rescue fund and a deal for bondholders to take 50 percent losses on Greek debt may help Sarkozy and German Chancellor Angela Merkel to convince the world that Europe is getting to grips with the crisis.
"China will need time to evaluate this plan very carefully," said Shen Jianguang, a Hong Kong-based economist for Mizuho Securities Asia Ltd. "What worries China is that there is so much disagreement among European policy makers. It doesn't want to be seen spending money on a plan that even Europeans don't want to support."
Sarkozy and Hu's conversation comes a day before a planned visit to Beijing by Klaus Regling, chief executive officer of the EFSF, to court investors. China has the world's largest foreign currency reserves at more than $3.2 trillion.
Sovereign Bonds
The EFSF, established last year to sell bonds to finance loans for distressed euro nations, has since also gained the authority to buy sovereign bonds on the secondary and primary markets, offer credit lines to governments and recapitalize banks as the Greece-triggered debt troubles have spread. The EFSF said Regling's visit to China this week is linked to the fund's original debt-issuance role.
"It is a normal round of discussion with important buyers of EFSF bonds," Christof Roche, spokesman for the Luxembourg- based facility, said by e-mail yesterday. He declined to comment further when contacted by Bloomberg News by telephone. Agence France-Presse reported that Regling will travel on to Tokyo, citing a European Union official in Asia.
China may be willing to respond to a European request to help them fund a package to solve the euro region's debt crisis, AFP said, citing unidentified government officials familiar with the situation.
Chinese Reserves
A press official at the People's Bank of China said he wasn't aware of the issue and asked for faxed questions, which weren't immediately answered. The Ministry of Foreign Affairs and the State Administration of Foreign Exchange, which manages China's foreign-exchange reserves, didn't immediately respond to faxed questions.
Calls to the press office of China Investment Corp., the nation's $300 billion sovereign wealth fund, weren't immediately answered.
Europe is facing international calls to end a debt crisis that President Barack Obama has said "is scaring the world" and U.S. Treasury Secretary Timothy F. Geithner has described as a "catastrophic risk." With a Group of 20 meeting looming on Nov. 3-4, euro-area government heads gathered in Brussels yesterday for the 14th time to tackle troubles that began in Greece two years ago, then engulfed Ireland and Portugal and now threaten Spain and Italy.
Premier Wen said last month that while China was willing to help, that developed nations also needed to put "their own houses in order."
European Responsibility
In Canberra today, Australian Treasurer Wayne Swan echoed that sentiment. "We think it's appropriate that the international community look at what resources the International Monetary Fund has available to it," Swan told reporters. "But in the first instance, any bailout fund in Europe is a responsibility of the Europeans."
Bank of Korea Governor Kim Choong Soo said today the nation hasn't been approached to and hasn't considered joining the effort. Indonesian Vice Finance Minister Mahendra Siregar said the nation hasn't been asked to aid in Europe's effort.
The question of leveraging the AAA rated EFSF has arisen because of the political hurdles in countries such as Germany, the biggest European economy, to increasing the national guarantees that back the fund.
Aid Package
As part of its original role, the EFSF is providing 17.7 billion euros under Ireland's aid package of 67.5 billion euros and 26 billion euros under Portugal's rescue of 78 billion euros. So far, the EFSF has sold two five-year bonds and one 10-year security, all in the first half of this year. The Japanese government bought more than a fifth of the inaugural issue in January.
On Oct. 13, the EFSF announced changes to its bond-sale program for the two countries in the second half of 2011. Instead of selling four "benchmark" bonds in the period, as outlined in mid-May, the fund will sell one security for Ireland valued at 3 billion euros and delay issues planned for Portugal until "early 2012."
The EFSF may have to finance more than 70 billion euros of a planned second aid package for Greece. The initial Greek rescue of 110 billion euros in May 2010 was composed of loans directly from euro-area governments and the IMF.
by Jonathan Stearns and Helene Fouquet Bloomberg News Oct 27, 2011
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/10/26/bloomberg_articlesLTPGNJ0YHQ0X.DTL#ixzz1bzpDPC4m
Sarkozy Turns to Hu for China Aid as Europe Expands Rescue Fund
Greece to get 100 bil euros in more rescue loans
BRUSSELS, Belgium - European leaders agreed this morning on a crucial plan to reduce Greece's debt and provide it with more rescue loans so that the faltering country can eventually dig out from under its debt burden.
After a marathon summit, EU President Herman Van Rompuy said that the deal will reduce Greece's debt to 120 percent of its GDP in 2020. Under current conditions, it would have grown to 180 percent.
That will require banks to take on 50 percent losses on their Greek bond holdings - a hard-fought deal that negotiators will now have to sell to individual bondholders.
Van Rompuy also said the eurozone and International Monetary Fund - which have both been propping the country up with loans since May 2010 - will give the country an additional $140 billion. That's slightly less than the amount agreed upon in July, presumably because the banks will now pick up more of the slack.
"These are exceptional measures for exceptional times. Europe must never find itself in this situation again," European Commission President Jose Manuel Barroso said after the meetings.
The question of how to reduce Greece's debt load had proved the sticking point in European leaders' efforts to come up with a grand plan to solve its debt crisis.
But it was just one of three prongs necessary to restore confidence in Europe's ability to pay its debts and prevent the 2-year-old crisis from pushing the continent and much of the developed world back into recession.
The first details of such a plan emerged hours earlier, when European Union leaders announced they would force the continent's biggest banks to raise $148 billion by June - partially to ensure they could weather the expected losses on Greek debt.
Van Rompuy also announced that the eurozone would boost the firepower of their bailout fund to about $1.4 trillion to protect larger economies, such as Italy's and Spain's, from the market turmoil that has pushed three countries to need bailouts.
"We have reached an agreement which I believe lets us give a credible and ambitious and overall response to the Greek crisis," French President Nicolas Sarkozy told reporters as the meeting broke this morning. "Because of the complexity of the issues at stake, it took us a full night. But the results will be a source of huge relief worldwide."
Efforts to increase the clout of the bailout fund got a boost earlier in the day when German Chancellor Angela Merkel won a strong endorsement from German lawmakers for her plan to reinforce the fund.
Italian Prime Minister Silvio Berlusconi, meantime, came to Brussels with plans to change his country's pension system and take other steps to balance the budget. Other European leaders had pressed him to accelerate those steps to help build confidence that his nation can manage its large levels of public debt.
Because the plan to shore up the banks applies to European economies both inside and outside the euro area, the initiative was the subject of deliberations by the full EU.
Along with increasing bank capital, the plan calls for a new effort by governments to ensure that banks have the funds they need to operate.
European banks rely heavily on short-term loans, and the vulnerability of that funding played a role in the recent collapse of the French-Belgian Dexia bank.
Concerns about the European economy have caused many investors, including U.S.-based money-market funds, to pull out of European banks. This development has raised banks' operating costs and generated fear that Dexia would be just the first in a series of casualties.
The new plan asks the European Central Bank, the European Investment Bank and other agencies to "urgently explore" a guarantee system so that banks could wean themselves from short-term loans, which often must be renewed weekly or even daily.
Under the plan, banks would have to set aside capital equal to 9 percent of their assets. That represents a significant increase from the 5 percent level used as a standard by the European Banking Authority, when it recently analyzed whether the region's financial firms could weather a new economic downturn.
One concern about increasing relative capital levels is that banks could reach the 9 percent threshold by decreasing their total assets, in other words reducing how much money they loan to businesses, consumers and governments. This pullback could stymie economic growth at a time when it is already slowing in much of Europe.
To head off this prospect, the bank capital plan calls for heightened oversight by regulators to ensure that banks don't achieve the new targets by selling off assets or restricting new loans.
by Associated Press Oct. 27, 2011 12:00 AM
Greece to get 100 bil euros in more rescue loans
After a marathon summit, EU President Herman Van Rompuy said that the deal will reduce Greece's debt to 120 percent of its GDP in 2020. Under current conditions, it would have grown to 180 percent.
That will require banks to take on 50 percent losses on their Greek bond holdings - a hard-fought deal that negotiators will now have to sell to individual bondholders.
Van Rompuy also said the eurozone and International Monetary Fund - which have both been propping the country up with loans since May 2010 - will give the country an additional $140 billion. That's slightly less than the amount agreed upon in July, presumably because the banks will now pick up more of the slack.
"These are exceptional measures for exceptional times. Europe must never find itself in this situation again," European Commission President Jose Manuel Barroso said after the meetings.
The question of how to reduce Greece's debt load had proved the sticking point in European leaders' efforts to come up with a grand plan to solve its debt crisis.
But it was just one of three prongs necessary to restore confidence in Europe's ability to pay its debts and prevent the 2-year-old crisis from pushing the continent and much of the developed world back into recession.
The first details of such a plan emerged hours earlier, when European Union leaders announced they would force the continent's biggest banks to raise $148 billion by June - partially to ensure they could weather the expected losses on Greek debt.
Van Rompuy also announced that the eurozone would boost the firepower of their bailout fund to about $1.4 trillion to protect larger economies, such as Italy's and Spain's, from the market turmoil that has pushed three countries to need bailouts.
"We have reached an agreement which I believe lets us give a credible and ambitious and overall response to the Greek crisis," French President Nicolas Sarkozy told reporters as the meeting broke this morning. "Because of the complexity of the issues at stake, it took us a full night. But the results will be a source of huge relief worldwide."
Efforts to increase the clout of the bailout fund got a boost earlier in the day when German Chancellor Angela Merkel won a strong endorsement from German lawmakers for her plan to reinforce the fund.
Italian Prime Minister Silvio Berlusconi, meantime, came to Brussels with plans to change his country's pension system and take other steps to balance the budget. Other European leaders had pressed him to accelerate those steps to help build confidence that his nation can manage its large levels of public debt.
Because the plan to shore up the banks applies to European economies both inside and outside the euro area, the initiative was the subject of deliberations by the full EU.
Along with increasing bank capital, the plan calls for a new effort by governments to ensure that banks have the funds they need to operate.
European banks rely heavily on short-term loans, and the vulnerability of that funding played a role in the recent collapse of the French-Belgian Dexia bank.
Concerns about the European economy have caused many investors, including U.S.-based money-market funds, to pull out of European banks. This development has raised banks' operating costs and generated fear that Dexia would be just the first in a series of casualties.
The new plan asks the European Central Bank, the European Investment Bank and other agencies to "urgently explore" a guarantee system so that banks could wean themselves from short-term loans, which often must be renewed weekly or even daily.
Under the plan, banks would have to set aside capital equal to 9 percent of their assets. That represents a significant increase from the 5 percent level used as a standard by the European Banking Authority, when it recently analyzed whether the region's financial firms could weather a new economic downturn.
One concern about increasing relative capital levels is that banks could reach the 9 percent threshold by decreasing their total assets, in other words reducing how much money they loan to businesses, consumers and governments. This pullback could stymie economic growth at a time when it is already slowing in much of Europe.
To head off this prospect, the bank capital plan calls for heightened oversight by regulators to ensure that banks don't achieve the new targets by selling off assets or restricting new loans.
by Associated Press Oct. 27, 2011 12:00 AM
Greece to get 100 bil euros in more rescue loans
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