The Star Online: Business
The Star Online: Business |
- Britain's business minister urges rethink of lending scheme
- After decent rally on Wall St, perhaps time for a pause
- EU says G20 will set hard debt targets in Sept
| Britain's business minister urges rethink of lending scheme Posted: 16 Feb 2013 05:39 AM PST COVENTRY, England: Britain's business minister called on the Bank of England on Saturday to consider new ways to unblock the flow of credit to small companies in order to help the country's sluggish economy. Vince Cable said he had written to the number two at the central bank, Paul Tucker, seeking a discussion of possible changes to the Funding for Lending Scheme (FLS) which was launched last year. The FLS is central to efforts by the British government and the Bank of England to snap the UK economy out of two years of stagnant growth after the financial crisis enfeebled many banks. So far, the scheme has boosted mortgage lending but has not been a big help for small and medium-sized enterprises (SMEs). "One of the questions for the immediate future is how Funding for Lending perhaps could be adapted to deal with the needs of SMEs," Cable said. "It's quite a tricky technical issue and I have written to the deputy governor of the Bank of England to seek a meeting to see how we can address that, if we can." The scheme allows banks and building societies to access more than 80 billion pounds ($124.19 billion) in cheap finance if they maintain or increase net lending to households and businesses. Cable, speaking to reporters after delivering a speech at an economics conference organized by the University of Warwick in the English Midlands, said any changes would have to be compatible with European Union rules that prohibit unfair state aid. Cable said ideas proposed by former top BoE policymaker Adam Posen should be looked at, including the possibility of the central bank buying bundles of corporate loans which could help revive lending to companies, and not just government bonds. "The governor has taken the view that anything other than rock-solid gilts are not appropriate to have as part of the balance sheet of the Bank of England," said Cable, who is a senior member of the Liberal Democrats, which forms Britain's ruling alliance with the Conservatives. "I understand where he is coming from but that's quite a rigorous - some critics might say rigid - view. More open-minded thinking about that would be helpful." King is due to retire in June and he will be replaced as governor of the Bank of England by Mark Carney, who is currently head of the Bank of Canada. "Many people are looking forward to the advent of the new Canadian governor for possibly injecting some creativity into this currently log-jammed discussion," Cable said, referring to the debate about what assets the Bank of England should hold. - Reuters |
| After decent rally on Wall St, perhaps time for a pause Posted: 16 Feb 2013 05:31 AM PST NEW YORK: Stocks could struggle to extend their seven-week winning streak as the quarterly earnings period draws to a close and the market bumps into strong technical resistance. Many analysts say the market could spend the next few weeks consolidating gains that have lifted the benchmark Standard & Poor's 500 .SPX by 6.6 percent since the start of the year. The S&P 500 ended up 0.1 percent for the week, recovering from a late sell-off on Friday after a Bloomberg report about slow February sales at Wal-Mart (WMT.N) triggered a slide in the retailer's shares. It was the index's seventh week of gains. Odds of a pullback are increasing, with the market in slightly overbought territory, said Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston. "I do suspect the closing of the earnings season will lead to at least a pause and possibly a pullback," Zaro said. The S&P 500 could shave 3 to 5 percent between now and early April, he said. Fourth-quarter earnings have mostly beaten expectations. Year-over-year profit growth for S&P 500 companies is now estimated at 5.6 percent, up from a January 1 forecast for 2.9 percent growth, and 70 percent of companies are exceeding analyst profit expectations, above the 62 percent long-term average, according to Thomson Reuters data. On Thursday, Wal-Mart, the world's largest retailer, is due to report results, unofficially closing out the earnings period. Investors will be keen to see its quarterly numbers, especially after the Friday's news report that rattled investors. The S&P 500 has gained 4.3 percent since Alcoa (AA.N) kicked off the earnings season on January 8. The approaching March 1 deadline for across-the-board federal budget cuts unless Congress reaches a compromise adds another reason for caution, especially with recent economic data indicating the recovery remains bumpy. Manufacturing output fell 0.4 percent last month, the Federal Reserve said on Friday, but production in November and December was much stronger than previously thought. TESTING RESISTANCE The S&P 500 has been trading near five-year highs, and it notched its highest level since November 2007 this week. But the gains have pushed the benchmark index almost as far as it is likely to go in the near term, with strong resistance hovering around 1,525 and 1,540, one analyst said. As a result, the index is set to move sideways, said Dave Chojnacki, market technician at Street One Financial in Huntington Valley, Pennsylvania. "We just don't have the volume or the catalyst right now" to go above those levels, he said. At the same time, other analysts say, the market has not shown significant signs of slowing, including a break below 15- and 30-day moving averages. Such moves would be needed to show that momentum is slowing or that the market is at risk of a correction, said Todd Salamone, director of research for Schaeffer's Investment Research in Cincinnati, Ohio. The S&P 500's 14-day moving average is at 1,511 while the 30-day is at 1,494. The index closed Friday at 1,519. Recent M&A activity, including news this week of a merger between American Airlines and US Airways Group (LCC.N), helped provide some strength for the market this week and optimism that more deals may be on the way. In the coming days, the market will focus on minutes from the latest Federal Reserve meeting, due to be released on Wednesday, which could provide support if they suggest the Fed will remain on its current course of aggressive monetary easing. The Fed minutes released in January spooked markets a bit when they revealed that some Fed officials thought it would be appropriate to consider ending asset purchases later in 2013. U.S. Treasury yields rose on that news, though market worries about a near-term end to quantitative easing have since faded. Among other companies expected to report earnings next week are Nordstrom (JWN.N), Hewlett-Packard (HPQ.N) and Marriott International (MAR.N) - Reuters |
| EU says G20 will set hard debt targets in Sept Posted: 16 Feb 2013 05:26 AM PST MOSCOW: The Group of 20 nations will pledge to reduce public debt but are likely to agree on concrete targets only at a leaders' summit in September, EU Economic and Monetary Affairs Commissioner Olli Rehn said. "There is a clear commitment to credible medium-term plans of fiscal adjustment and I would expect that in the final communiqu we will state that we will define more precisely G20 policy in the St. Petersburg summit," Rehn told Reuters. The world's 20 biggest economies decided last year in Mexico that they would come up with credible and ambitious country-specific targets for debt-to-GDP ratios beyond 2016, and clear timetables to achieve them. "We expect to have concrete draft proposals on the table (by April) so we can build on that and agree more clear on quantifiable targets, because it's important that you maintain the momentum of fiscal consolidation," given still high levels of public and private debt in advanced economies, Rehn said. He pointed out that in Europe public debt was around 90 percent of gross domestic product. Japan, which wants to stimulate its stagnant economy, has a public debt of more than 200 percent of GDP. "There is no way that we can afford to get away from the medium-term fiscal objectives," Rehn said. European policymakers believe that once debt exceeds 90 percent of GDP it becomes a drag on economic growth, as debt servicing eats up scarce resources. "We have a common view on the need to have a credible medium-term plans for fiscal consolidation, which is also essential so we have foundation for sustainable growth," Rehn said. A debt-cutting pact struck in Toronto in 2010 will expire this year if leaders fail to agree to extend it at a G20 summit of leaders in St Petersburg in September. The United States, which has a debt of 73 percent of GDP, plans to consolidate its public finances, but does not want to do it too abruptly to avoid triggering a recession. European and other G20 countries want Washington to present a plan to reduce its debt, but only in the medium term, because a sharp drop in U.S. government spending would have a highly negative impact on world growth. "It has been underlined in the discussion, and rightfully so, that it is of a paramount importance that the United States will be able to resolve its fiscal cliff building on the partial deal," Rehn said. U.S. politicians were able to avoid an initial year-end deadline for spending cuts with a deal that raised taxes on the wealthiest while leaving lower rates in place for most Americans. The agreement to avoid the so-called "fiscal cliff" postponed automatic cuts for two months. "We support the United States in that endeavour, because we're all in the same boat, we're all depend on each other and it's crucial for the global economy and also for the European economy that the U.S. will be able to have a more comprehensive solution to the fiscal cliff and especially have a credible, medium-term plan of fiscal consolidation." Rehn said. - Reuters |
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