CommStock Israel Investor
Insights Newsletter
Monday, March 16, 2009
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1) G20 tries to find common ground on recession
G20 finance ministers, meeting ahead of
next month's summit, agree that struggling countries need help
- but differ on how to prop up global economy.
March 14, 2009: 10:15 AM ET
HORSHAM, England (Reuters) -- G20 finance ministers
sought on Saturday to reassure struggling countries that they could
rely on international aid, but they differed on what to do next
about fighting the worst economic crisis since the 1930s.
China, India, Brazil and Russia called for stricter
control of hedge funds, for example, but one European official
said the matter was "not the priority of priorities" for Britain,
which holds a crucial summit on the crisis on April 2.
The ministers, meeting south of London to lay the ground
for that meeting, were expected to paper over splits on the emphasis
and urgency to be given to anti-recession spending on the one hand
and regulation on the other.
Nor was there any more clarity from the United States
on how it plans to clean up banks' toxic assets, which many say
is essential to get the world economy moving again.
That shifted the primary focus to securing pledges that
the International Monetary Fund, Asian Development Bank and other
agencies have the financial firepower to come to the rescue of
countries in difficulty.
"We need a commitment from countries that they will
do whatever is necessary and as for long as necessary to support
their economies," said Alistair Darling, Britain's finance minister,
host to the talks at a luxury countryside hotel.
Perhaps mindful of the massive exodus of money that
occurred during the Asian financial crisis of the 1990s, Darling
added:
"We really must take action to stop damage being done
to the emerging economies, who are seeing money coming out of their
systems."
The IMF has spent close to $50 billion bailing out countries
in eastern Europe in recent months and is asking for its funding
for rescue duties to be doubled to $500 billion, while the Asian
Development Bank is also hoping for more ammunition.
China, India, Russia and Brazil backed the call and
officials said a communique to be issued by the G20 as a group
later in the day was expected to cover similar ground.
"It is imperative that multilateral financial institutions
should expand their lending to offset the massive decline," said
a statement by China, India, Russia and Brazil, the four emerging
economic powers known as the BRIC nations.
They and the rest of the G20 account for over 80 percent
of the world's output, or gross domestic product, which is expected
to shrink this year and by more than any year since the 1930s as
a financial crisis that spilled from the United States in 2007
hits confidence, activity, trade and jobs worldwide.
Banks key
Officials speaking on condition of anonymity indicated
that the meeting would gloss over differences on issues such as
how much governments should spend by just saying in general that
all must to their utmost to support demand with fiscal stimulus.
The United States was demanding earlier this week that
other governments commit two percent of GDP to such stimulus and
more than they are currently doing in certain cases, but that exposed
a rift with the likes of Germany and France.
"You should not expect any big numbers or any concrete
demands," said one official involved in the proceedings.
France considers Washington's call a distraction from
G20 pledges at a summit last November to combine stimulus with
a host of reforms to rein in the excesses of banks and financial
markets that led to the current crisis.
Two meeting sources also said a relatively brief G20
communique would lay out a broad framework but leave specifics
for the April summit that British Prime Minister Gordon Brown is
billing as delivery time on last November's G20 pledges.
World Bank chief Robert Zoellick, also attending the
meeting on Saturday, said government spending would give the economy
no more than a brief "sugar high" if governments failed to rid
banks of toxic assets that continue to undermine confidence, trust
and the desire to lend or invest.
Canadian Finance Minister Jim Flaherty said too that
this was the nub of the problem now.
"Hopefully we will have an agreement on steps to be
taken and I would hope some timeline about steps to be taken to
isolate toxic assets in banks, that is fundamental," he said.
"There has been some delay with respect to solving it....In
the U.S. and Europe there is still work to be done."
Along with regulation of hedge funds, France is pushing
for progress on tougher control of credit ratings agencies, which
stand accused of fuelling the crisis by granting high ratings to
many derivatives that have now turned into toxic assets.
The ministers can be expected to take some of the credit
for at least one small advance in recent days.
Under mounting international pressure, Switzerland,
Austria and Luxembourg offered on Friday to partly relax strict
bank secrecy in some tax evasion cases.
Welcome as the moves are to many other countries which
fear tax evasion, German Finance Minister Peer Steinbrueck said
that Swiss promises to relax secrecy in some cases was no substitute
for more ambitious goals formulated by the OECD.
2) Commentary by David Zwebner, CEO of CommStock Trading
U.S. Economy
The University of Michigan's consumer sentiment index crept up
from 56.3 to 56.6 in early-March, a little better than expected,
but still pessimistic. The March 2010 eurodollars ended up .02
at 98.375.
U.S. export activity still looks soft. The U.S. Census
Bureau said that exports were down 6% in January to $124.9 billion
while imports were down 7% to $160.9 billion. The result was $36.0
billion of net imports, less than expected. Commodity prices, in
general, were mixed after yesterday's gains.
Grains and Cotton
The USDA said that 120,000 tons of soybeans were sold to China
for 2009-2010. May soybeans ended down 5.5 cents at $8.765.
By now, everyone knows the U.S. winter wheat crop is
dry, but May wheat closed down 6.75 cents anyway at $5.182.
Sugar
May sugar closed down .21 at 12.88, pressured by concerns that
the bear market in commodities may not yet be over.
Energies
OPEC members meet on Sunday and traders are watching with interest.
Will OPEC cut production again or encourage producers to stick
to their current quotas? May crude oil closed down .94 at 47.03.
Currencies
Statistics Canada said that the unemployment rate increased from
7.2% to 7.7% in February with a net loss of 82,600 jobs. It is
the highest unemployment rate in over five years. The June Canadian
dollar was up .24 at 78.54.
Exports in Canada were down 9% to C$31.7 billion in
January while imports were down 8% to C$32.7 billion. The result
was just under C$1 billion of net imports.
David Zwebner, CEO
CommStock Trading Ltd.
Tel: +972-(0)2 624-4963
Fax: +972-(0)2 624-4876
www.ecommstock.com
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