Kenanga - Macro Bits - 26 Sep 2012

Asia 

 Global Business Fears 'Economic Dislocation' If China-Japan Rift Deepens. Global business leaders are voicing increasing concern over heightened political tensions between China and Japan, sparked by a maritime dispute in the East  China Sea. They fear an escalation may have a spill-over effect on their regional operations and damage trade ties between the world's second and thirdlargest economies. Company executives, diplomats and analysts told CNBC that supply chains across China and Japan and regional trade flows are at risk if the territorial dispute between the north Asian neighbors - believed to be the worst in decades - deepens. (CNBC)

 S. Korea Moves To Maintain Financial Stability. Bank Of Korea (BOK), South Korea's central bank,  said yesterday that it has developed its own systemic risk assessment model for the first time among central banks in Asia, China's Xinhua news agency reported. The bank said the development of the model was part of BOK's efforts to better conduct its mandate of maintaining financial stability granted after the BOK Act's revision late last year.  According to the BOK, the model named "Systemic risk assessment model for macro-prudential policy", will analyse quantitative systemic risks, including macro risk factors, profits and losses in the banking sector, losses from macro-financial linkage, risks in the wholesale funding market under the stringent conditions, multi-period assessment on banks' balance sheet. (Bernama)

USA

 Consumer Confidence In U.S. Rises To A Seven-Month High. Confidence among American consumers jumped more than forecast in September as a budding housing recovery and rising  stock prices gave households reason to be more upbeat. The Conference Board’s sentiment index increased to 70.3, the highest level in seven months, from 61.3 in August, figures from the New York-based private research group showed today. The reading exceeded the most optimistic projection of economists surveyed by Bloomberg. Another report showed home values rose by the most in two years. (Bloomberg)

 U.S. Home Prices Rose More Than Forecast In Year To July. Home prices in the U.S. climbed more than forecast in July from a year earlier, adding to signs that housing will spur economic growth. The S&P/Case-Shiller index of property values in 20 cities increased 1.2 % from July 2011, the biggest 12-month advance since August 2010, a report from the group showed today in New York. The median forecast of 23 economists surveyed by Bloomberg called for a 1.1 % gain. (Bloomberg)

Europe

 Greece Seeks Bailout Extension At 15bn-Euro Cost. Greece has said it would need as much as 15bn euros ($19bn) if it were given a two-year extension to its bailout. Finance Minister Yannis Stournaras told Reuters that the funding gap could be met without more aid from the eurozone. Greece is trying to qualify for the next 33.5bn-euro instalment of its 130bn-euro bailout, which is backed by the IMF and the other 16 euro nations. Its neighbours are reluctant to stump up more money to help Greece. Greece was given a 110bn-euro package in May 2010 and a further 130bn euros in October 2011. (BBC) 

 Spain To Activate Regional Rescue Fund This Week. Spain will this week activate an euro18 billion (RM70.4 billion) liquidity fund to help its stricken regions finance their debts, the government said yesterday .  A handful of Spain’s 17 regions have already asked for about euro10 billion from the fund as they struggle to make spiralling interest payments on their debts. Deputy Prime Minister Soraya Saenz de Santamaria said the fund would start operations “this week”.  “The Budget Ministry is  preparing the whole procedure so that on one hand it can dispose of the funds to give them and on the other set up the mechanism to make those interest payments,” she told Cadena Ser radio. (AFP)

 Funding For Lending: UK Banks Sign Up To New Scheme. Five of the UK's six biggest lenders have signed up to the Funding for Lending scheme, designed to stimulate the economy by making cheaper loans available to firms and individuals. HSBC is the only one of the top six not taking part, as it says it does not need additional funding. The Bank of England, which runs the scheme, said 13 banks and building societies had signed up so far.  They represent 73% of the market and £1.2 trillion  worth of lending. The institutions can borrow the equivalent of up to 5% of their loan books immediately, and more if they meet certain conditions over the next year. Based on their current lending levels, the 13 institutions could initially draw on up to £60bn of Bank of England funding. (BBC)

Currencies

 Dollar Turns Up After Plosser Blasts QE3. The dollar turned higher Tuesday, with the reversal in course coming after a U.S. central banker criticized the Federal Reserve’s latest stimulus effort. The ICE dollar index, which measures the greenback’s performance against a basket of six currencies, rose to 79.673 from 79.573 in North American trade late Monday. Against the Japanese yen, the dollar changed hands at ¥77.79, down a bit from ¥77.88 Monday. It climbed above 79 last week, according to Hastings. The euro edged down to $1.2899 from $1.2923 late Monday, when it touched its lowest level since Sept. 12.  Among other currency crosses, the British pound slipped to $1.6188 from  $1.6211 Monday. The Australian dollar traded at $1.0451 from $1.0423 late Monday. (Market Watch)   

Source: Kenanga