Global
IMF says it aims to raise up to US$500 billion for lending
•The International Monetary Fund (IMF) is proposing to raise its lending capacity by as much as US$500 billion to insulate the global economy against any worsening of Europe's debt crisis.
• It is aiming to increase its resources after identifying a potential need for US$1 trillion in financing in coming years.
• IMF managing director Christine Lagarde said her staff is looking at ways to expand the fund's war-chest, which currently has about US$385 billion available.
• While euro-region nations have already pledged to contribute 150 billion euros (US$192 billion), the United States has said it has no plans to make new bilateral loans and leaders of Group of 20 nations ended last year at odds over the issue.
World Bank projects global slowdown
• Developing countries should prepare for further downside risks, as Euro area debt problems and weakening growth in several big emerging economies are dimming global growth prospects, says the World Bank in the newly-released Global Economic Prospects (GEP) 2012.
• The bank has lowered its growth forecasts for 2012:
• Developing countries: 6.2 per cent (June estimate): 5.4 per cent
• High-income countries: 2.7 per cent (June estimate): 1.4 per cent
• Euro Area: 1.8 per cent (June estimate): -0.3 per cent
• Global growth is now projected at 2.5 per cent for 2012 and 3.1 per cent for 2013
• Slower growth is already visible in weakening global trade and commodity prices
• Global exports of goods and services:
• 2012: projected to rise 4.7 per cent
• 2011: estimated at 6.6 per cent
• 2010: 12.4 per cent
• Commodity prices lower from peaks in early 2011:
• Energy: -10 per cent
• Metals and minerals: -25 per cent
• Agricultural products: -19 per cent
United States
The week ended January 20 highlighted economic data on inflation along with weekly jobless claims. Inflation for the month of December measured 3 per cent (year on year) down from 3.4 per cent a month earlier. This slowing trend over the last couple months is in line with the Fed's expectation of moderating inflation levels. The slower inflation rate in December was attributed to lower fuel costs and discounts offered by department stores, which lowered prices. With slower growth projected for the global economy, given the increasing risks in Europe, moderate inflation is welcoming as it gives Fed ample room for further stimulus should another round of quantitative easing be warranted. Initial jobless claims released during the third week in January showed that claims fell to its lowest levels since April 2008. This follows the downward trend over the past month as the labour market shows some signs of improvement. Additions to non-farm payrolls for December measured 200,000 and the jobless rate came down to 8.5 per cent. Although employment figures seem to be improving, seasonal trends need to be considered as there tends to be stronger data in the fourth quarter. The trend will be monitored in the first quarter of 2012 for sustained improvement.
Europe
• The European Financial Stability Facility was downgraded by Standard and Poor's on January 16, 2012, from AAA to AA+ following the downgrade of several euro-zone members, who provide guarantees for the facility.
• Despite the downgrade the generic Italian ten-year yield fell from 7.10 per cent at the start of the year to 6.11 per cent on 23 January. Spain's generic ten-year yield fell from 5.71 per cent to 5.43 per cent during a similar period.
• Signs of a potential improvement in market confidence continue with the ZEW Center for European Economic Research in Germany reporting that its index of investor and analyst expectations surged to minus 21.6 from minus 53.8 in December. The index aims to predict economic developments six months in advance.
• Meetings aimed at resolving the European debt crisis continue with European Union finance ministers meeting in Brussels this week to discuss ways of shoring up budget rules in the hope of finalising the December rescue plan in the coming weeks.
• Negotiations are also continuing in Greece between bondholders and Greek officials. Talks were in danger of falling apart last week, but meeting are set to continue this week. Greece is depending on the successful conclusion of these talks as it is a pre-requisite for receiving additional financing. Greece has euro 14.5 billion in bond repayments falling due on 20 March 2012.
• The proposal being made to Greek bondholders is believed to require a voluntary 50 per cent reduction in the face value of maturing Greek debt, which will then be exchanged for new debt at an average coupon between 3 per cent and 4.5 per cent.
• The economy of Spain contracted by 0.30 per cent in the fourth quarter of 2011. The Bank of Spain forecasts that the Spanish economy will contract 1.50 per cent in 2012.
• The executive board of the IMF completed its review of Poland's qualification for the arrangement under the flexible credit line (FCL) and reaffirmed Poland's continued qualification to access FCL resources. The Polish authorities have indicated that they intend to continue treating the arrangement as precautionary.
Credit ratings:
• Indonesia: The credit rating of Indonesia was upgraded by Moody's Investors Service. The foreign- and local-currency ratings were upgraded from Ba1 to Baa3 with a stable outlook.
Energy prices:
• European Union foreign ministers have imposed an embargo on oil imports from Iran.
The decision may place additional strain on Euro-zone periphery economies if they are forced to switch to a more expensive source of crude oil. Greece, Spain and Italy accounted for approximately 68 per cent of EU oil imports from Iran in 2010.
Commodity Jan 16 Jan 20 Change ($)
Brent Crude Oil price (US$/bbl) 110.95 110.49 -0.46
WTI Crude Oil Price (US$/bbl) 98.70 98.46 -0.24
Henry Hub Nat Gas Price (US$, mmbtu) 2.66 2.25 -0.41
Source: Bloomberg
T&T stock market
TTSE Composite Index sees YTD loss
The Composite Index saw a marginal increase during the week ending January 20, rising by 0.27 per cent to a value of 1,012.38 as nine stocks advanced and five declined.
Capital and Credit Financial Group (CCFG) was the weekly volume leader with 462,342 shares trading at a closing price of $0.30. Guardian Holdings Ltd (GHL) saw the largest price appreciation rising by 2.84 per cent during the week to a close of $14.48.
Plipdeco (PLD) saw the largest price decline falling by 5.06 per cent during the week to a close of $4.50. Year-to-date, the TTSE Composite Index is down 0.05 per cent.
T&T Composite Index
Source: TTSE, First Citizens Investment Services Research Department
First Citizens Investment Services Ltd
research@firstcitizenstt.com