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IMF: Global Financial System Risks Escalate
Weak growth, balance sheets and political resolve cause crisis of confidence
Large number of countries affected by government debt risks
Policymakers need to act to repair household, government and financial balance sheets
September 21, 2011--Financial stability risks have risen sharply in recent months, as slower economic growth, market turbulence in Europe, and the credit downgrade of the United States have weighed on the global financial system, according to new analysis by the IMF.
Financial markets have begun to question the ability of policymakers to command broad political support for needed policy actions, the IMF said in its latest Global Financial Stability Report.
“We are in the middle of a crisis of confidence, which is taking its toll on both the economy and the financial system” said José Viñals, Financial Counsellor and head of the IMF”s Monetary and Capital Markets Department, which produced the report. Improvements in financial stability over the past three years have been partly reversed, said Viñals.
view the Global Financial Stability Report
Grappling with Crisis Legacies
FTSE Announces 2011 Country Classification Changes
September 20, 2011--FTSE Group (“FTSE”), the award winning global index provider, today announces the results of its 2011 Country Classification Annual Review.
The FTSE Country Classification Annual Review, carried out every September, is the process by which global equity markets are classified as Developed, Advanced Emerging, Secondary Emerging or Frontier within the FTSE Global Equity Index Series.
The Review has assumed particular importance this year in the light of speculation about the possibility of a sovereign default within the Eurozone. If such a default were to occur, FTSE will immediately review the affected country’s ranking against the country classification criteria, and determine whether any further classification changes are warranted.
2011 Country Classification Changes
As a result of the 2011 annual review, the FTSE Policy Group has approved the following changes:
Thailand will move from Secondary to Advanced Emerging
Ghana will be included as a Frontier market
The change to Thailand’s market status will be implemented in the FTSE Global Equity Index Series in March 2012. The inclusion of Ghana as a Frontier market will take effect from June 2012.
Mining: Sector Results Profile
September 20, 2011-The World Bank has supported 39 mining sector reform projects in 24 countries since 1988. The reforms have contributed to an increase in investment in the mining sector and related economic indicators such as exports, fiscal revenues and gross domestic product (GDP) in most recipient countries. The critical next steps are promoting policies and programs to strengthen governance and the links to the rest of the economy to ensure that the benefits are widespread and sustained.
Challenge
Many countries now view the mining sector as a key engine of economic development. Ample evidence exists that countries which adopt modern mining legislation and offer an enabling environment can attract private sector investment in mining exploration and production. This, in turn, contributes to increased tax revenues, export earnings, employment opportunities, infrastructure development especially in rural areas, and transfer of technology to the host countries. However, there is the risk that mining operations turn into socio-economic enclaves as well as cause environmental damage. Attention to social and environmental considerations, and government commitment to good governance and transparency is important. Countries, communities, and companies face tough questions about opportunities and risks as they develop steps to ensure responsible approaches toward mineral resource development.
IMF: World Economic Outlook - Slowing Growth, Rising Risks
September 20, 2011--Relative to our previous World Economic Outlook last April, the economic recovery
has become much more uncertain. The
world economy suffers from the confluence of two adverse developments. The first is a much slower recovery in advanced economies since the beginning of the year, a development we largely
failed to perceive as it was happening. The second is a large increase in fiscal and financial uncertainty,
which has been particularly pronounced since August.
Each of these developments is worrisome—
their combination and their interactions more so. Strong policies are urgently needed to improve the
outlook and reduce the risks.
Growth, which had been strong in 2010, decreased in 2011. This slowdown did not initially cause too much worry. We had forecast some slowdown, due to the end of the inventory cycle and fiscal consolidation. One-time events, from the earthquake and tsunami in Japan to shocks to the supply of oil, offered plausible explanations for a further slowdown. And the initial U.S. data understated the size of the slowdown itself. Now that the numbers are in, it is clear that more was going on.
view the MF: World Economic Outlook - Slowing Growth, Rising Risks report
FOA Announces Independent Study On The Impact Of Speculative Trading In Commodity Markets
September 20, 2011--The Futures and Options Association (FOA) announces the findings of a report on speculation in commodities markets. The report “The impact of speculative trading in commodity markets – a review of the evidence”, which was compiled by the economic research group, FTI Consulting (FTI), constitutes a literature review of the evidence on market speculation and an investigation into the underlying arguments for and against
financial participation in commodity markets.
The report notes that speculation is one element of financial activity in commodity markets (which may also
include portfolio hedging and investment diversification). FTI found little evidence to support the common
perception that speculation is a direct or major cause of long-term pricing trends but recommends that further
work should be undertaken to fully understand the complex interaction between financial and commodity
markets. In addition, the report concluded:
speculation is not a major cause of market volatility, but can amplify underlying price movements;
the most critical reports accept that, at worst, speculation accounts for no more than 25% of
commodity price movements in recent years, leading to the conclusion that 75% of such movements
Opportunities to hide in murky world of ETFs
September 19, 2011--Director ETF and Delta1 Trading,” read the job title listed on the LinkedIn profile of Kweku Adoboli, the junior trader charged last week with causing a $2.3bn loss at UBS.
Just underneath this line in Mr Adoboli’s profile was a much more telling career detail: the 31-year-old Ghanaian’s former position in the back office of UBS as a “Trade Support Analyst”.
Copper Tumbles Most in 10 Months on Mounting European-Debt Woes
September 19, 2011-Copper futures tumbled the most in 10 months on speculation that Europe’s escalating debt woes will hinder the global economy, eroding demand for industrial metals.
European manufacturing contracted in September for the second straight month, economists said before a report on a purchasing-managers index this week. Europe’s economy is cooling as governments extend spending cuts to narrow budget deficits. In China, home prices in all 70 cities monitored rose for the first time this year, the statistics bureau said yesterday.
Growth Spillover Dynamics from Crisis to Recovery-IMF Working paper
September 19, 2011--Summary: Can positive growth shocks from the faster-growing countries in Europe spill over to the slower growing countries, providing useful tailwinds to their recovery process? This study investigates the potential relevance of growth spillovers in the context of the crisis and the recovery process.
Based on a VAR framework, our analysis suggests that the U.S. and Japan remain the key source of growth spillovers in this recovery, with France also playing an important role for the European crisis countries. Notwithstanding the current export-led cyclical upswing, Germany generates relatively small outward spillovers compared to other systemic countries, but likely plays a key role in transmitting and amplifying external growth shocks to the rest of Europe given its more direct exposure to foreign shocks compared to other European countries. Positive spillovers from Spain were important prior to the 2008 - 09 crisis, however Spain is generating negative spillovers in this recovery due to a depressed domestic demand. Negative spillovers from the European crisis countries appear limited, consistent with their modest size.
view the Growth Spillover Dynamics from Crisis to Recovery
-IMF Working paper
ETFS Precious Metals Weekly: Gold price drop short-lived as bargain hunters emerge below $1,800/oz
September 19, 2011--Gold prices ended last week close to $1,800/oz despite a marginal easing in bank jitters on international liquidity coordination. The announcement that major central banks would coordinate to extend short term loans to Euro-region banks saw risk aversion dialled back a touch, though the move was largely interpreted by markets as yet another stop-gap measure. The intra-week drop in
gold prices below $1,800/oz stimulated a jump in gold trading activity in emerging markets, mirroring recent trends.
Metals consultancy Thomson Reuters GFMS forecast record gold investment
in H2 2011, as spot prices seen breaking $2,000/oz by year end. The
consultancy sees investment demand as the main driver of price growth for the
remainder of 2011, with public sector investment increasingly complementing
emerging market-led private sector demand. Investment is expected to double from H1 levels to $60bn.
Platinum prices hold their ground as the gold:platinum ratio approaches record high. Platinum spot prices have held relatively steady over the past 3 months, in contrast to palladium, as speculative futures investor positioning continues to hold at its highest level in six months. Platinum is now at its cheapest level relative to gold since the height of the post-Lehman credit crisis in 2008.
London to see second new precious metals vault in as many years as sharp rise in investor demand for vaulted gold bars spurs building of extra facilties. Investors own 2,145 tons of metal in exchange traded products according to Bloomberg estimates, holdings that are greater than all but the largest four central banks.
visit www.etfsecurities.com for more info
Dow Jones Indexes Reclassifies Colombia To ‘Emerging’ From ‘Frontier’ Markets Status After Annual Review of Its Country Classification System
11 Countries Added to Classification System as ‘Frontier’ Markets:
4 from Europe, 4 Middle East/Africa, 3 Asia/Pacific
September 16, 2011-- Dow Jones Indexes, a leading global index provider, today announced it reclassified Colombia to “Emerging Markets” status from “Frontier Markets” status, and added 11 countries to Frontier Markets status following the annual review of the Dow Jones Indexes Country Classification System. The changes are effective as of March 19, 2012.
Designed with the global investor in mind, the Dow Jones Indexes Country Classification System is used to classify all countries covered in Dow Jones Indexes’ major index families. Assessments of the countries are used to produce a country classification assignment into one of three categories:
Developed Markets: the most accessible to, and supportive of, foreign investors with a high degree of consistency across these markets;
Emerging Markets, which generally have less accessibility relative to developed markets, but demonstrate a level of openness; and