INFORMATION DECK ABOUT YOUR KNOWLEDGE: Growth

DUBLIN, April 12 (Reuters) - The European Union's economic growth strategy has been a failure so far and unless bold steps are taken the economy will continue to stagnate, a study commissioned by EU finance ministers said.

The paper by Brussels-based Bruegel think-tank scholars Zsolt Darvas, Jean Pisani-Ferry and Guntram Wolff was the basis of discussions on the future of growth in Europe among the 27 EU finance ministers this week at informal talks in Dublin.

"Much of Europe suffers from a mutually reinforcing interaction between limited productivity gains, protracted deleveraging, weak banking sectors and distorted relative prices," the Bruegel study said.

"This combination contributes to an overall weakening of economic growth and threatens to turn into self-perpetuating stagnation. This dark picture calls for bold policy action significantly beyond what is currently being undertaken," it said.

The paper said that while 30 years ago, the output of the countries that formed the European Union until its 2004 expansion was 15 percent higher than that of the United States, it is likely to be 17 percent lower in 2017.

This is because productivity in Europe has been falling since 2007, labour markets are inflexible and slow to react to the economic cycle and the economy was more focused on imitation than innovation, among other reasons.

The 17 countries that use the euro were in recession last year and will contract further this year, mainly as a result of the sovereign debt crisis.

WHAT TO DO

The study said that to get Europe growing again, policy-makers should focus on credit, investment and growth because without these any structural reform would be rejected by voters, as would budget deficit cuts, unless they deliver results.

Irish Finance Minister Michael Noonan, who chaired the talks, said the study triggered a "very positive discussion".

For growth and productivity to rise, the financial sector in Europe had to be fully functional and that could only happen if banks acknowledged bad loans and governments strengthened the banks, the Bruegel study said.

"Europe for too long refused to recognise it," the paper said, noting that the takeover of bank supervision in the euro zone by the European Central Bank was a unique chance to complete the overhaul of the banking system.

"Before the ECB carries out the 'comprehensive assessment' of the banks brought under its supervision, national authorities should trigger a recapitalisation of undercapitalised banks and a resolution of the insolvent ones," the paper said.

To give governments an incentive to recapitalise banks the European Commission should make clear it would disregard until the end of this year the costs of such operations as one-offs in its assessment of budget deficit reductions required by EU law.

The study said one way to boost growth would be to establish a euro zone banking union. Apart from single bank supervision, this would create a unified way for the euro to wind down banks and finance such operations.

"Banks that have passed the ECB's comprehensive assessment should fall under the banking union and become truly European banks with clearly defined burden sharing arrangements," the study said.

Governments also should gear budget deficit cuts to the performance of their economies. Instead of deep deficit cuts, which could further slow growth, governments could undertake pension reforms to consolidate public finances, it said.

Another way to help growth would be to subsidise credit to small- and medium-sized companies (SMEs).

"As banks may choose not to lend to SMEs because loans are subject to significant haircuts when taken as collateral in central bank repo operations, there is a case for providing support to the enhancement of this collateral," the paper said.

"The ECB cannot carry that fiscal risk. Instead, the EU should explore temporary collateral enhancement schemes, for example, in liaison with the European Investment Bank," it said.

View the original article here

Saturday, April 20, 2013

Italy's Salini eyes foreign growth after Impregilo merger: report

Salini's Chief Executive Pietro Salini poses for photographers before the news conference in downtown Milan April 23, 2012.

Credit: Reuters/ Stefano Rellandini

MILAN | Sat Apr 13, 2013 5:35am EDT

MILAN (Reuters) - Italian builder Salini, taking over larger rival Impregilo (IPGI.MI), expects the merged group to double revenues over the next three years helped by expansion in the Americas and Australia, its head said in a newspaper interview.

Family-owned Salini, which has built a stake of 86.5 percent in Italy's biggest builder after a takeover bid ended on Friday, told Il Corriere della Sera on Saturday he may consider listing the future merged group on more stock markets.

"It will depend on which markets will offer us more opportunities of raising capital. An option could be a flotation on more markets, with London among the possible options," Chief Executive Pietro Salini said.

The takeover of Milan-listed Impregilo is part of plans by Salini to create a global construction player focused on large civil engineering projects from roads to hydroelectric dams in more than 60 countries.

Salini, who took board control of Impregilo at a shareholder meeting in July, said he expected to reduce the presence of the future merged group in Italy over the next few years.

Italy currently accounts for 15 percent of cumulated turnover at Impregilo and Salini.

"We are looking at different realities all over the world, with the aim of carrying out local acquisitions to then dominate the relative markets," the CEO said.

Salini said on Friday the offer will be reopened for another five working days from April 18 to allow shareholders who have not subscribed the bid to tender their shares.

(Reporting by Antonella Ciancio; editing by Ron Askew)

View the original article here

Wednesday, March 20, 2013

IEA Lowered Global Oil Demand Growth Forecast for 2013

ONG Focus | Insights | Written by Oil N' Gold | Thu Mar 14 13 08:50 ET

Both the IEA and the EIA released their oil demand forecasts. The former estimated oil demand to grow +0.82M bpd this year, down -0.02K bpd from last month’s forecast. The agency said that deterioration in Chinese business sentiment, European slowdown and US budget cuts would weigh on the demand for oil worldwide. As stated in the report, the IEA expects “together these three economic ‘hits’, affecting as they do the three largest economies and oil consumers, appear to further delay an elusive turnaround in global economic and in turn oil demand, growth”. The EIA released their monthly Short Term Energy Outlook with no change in their projection for the year.

The RBNZ left the OCR unchanged at 2.5% and delivered a rather dovish statement signaling that uneven recovery in New Zealand's economy would lead the central bank to maintain the OCR unchanged for the rest of the year. There are 3 issues that the RBNZ is worried the most. Strength in New Zealand dollar remained a key worry as exports were affected. Governor Wheeler warned that prolonged "overshooting" in the currency would trigger reduction in the OCR. Also, policymakers stressed that 'ongoing fiscal consolidation' would slow overall demand. The central bank also stated that 'worsening drought conditions are creating difficulty in much of the country'. Indeed, the drought condition has deteriorated since the RBNZ's economic forecasts and this would probably cause the central bank to lower its forecast of farm activity in the June MPS.

The SNB also left the 3-month LIBOR target at 0-0.25% with policymakers committing to maintain the minimum 1.20 EURCHF exchange rate “with utmost determination”. The central bank remained cautious about the global economic outlook, stating that 'global economic growth was rather weak in the fourth quarter'. Domestically, economic activity also moderated during the inter-meeting period with the jobless rate climbing up slightly. The central bank forecast GDP growth of 1.0–1.5% this year. The central bank said "downside risks to the Swiss economy remain considerable but tensions in the Eurozone might increase again. outlook. Based on the assumption of an unchanged 3-month Libor at 0.0% over the next 3 years, inflation rate would be around -0.2% for 2013, +0.2% for 2014 and +0.7% for 2015, compared to corresponding projections -0.1%, +0.4% and +0.7% previously. Policymakers saw 'no threat of inflation in Switzerland'. The central bank continued to express concerns about strength in CHF and stated that they would 'take further measures at any time" should conditions require. The franc plunged after the announcement.

On the dataflow, US initial jobless claims surprisingly fell to 332K in the week ended March 10, down from a upwardly revised 342K in the prior month.

Latest Analysis from this Author

Gold Weekly Technical Outlook (Saturday, 16 March 2013 10:05 ET)Silver Weekly Technical Outlook (Saturday, 16 March 2013 10:05 ET)Crude Oil Weekly Technical Outlook (Saturday, 16 March 2013 10:05 ET)Natural Gas Weekly Technical Outlook (Saturday, 16 March 2013 10:04 ET)Weekly Fundamentals - WTI- Brent Spread Narrowed o... (Saturday, 16 March 2013 02:38 ET)Strong US Data Sent Shares to New Highs (Friday, 15 March 2013 01:03 ET)Economic Calendar 3/15/13 (Thursday, 14 March 2013 22:13 ET)Crude Weakened on Inventory Increase (Wednesday, 13 March 2013 23:14 ET)Economic Calendar 3/14/13 (Wednesday, 13 March 2013 23:12 ET)Gains in Oil Limited as OPEC Suggested Downside Ri... (Wednesday, 13 March 2013 00:11 ET)

View the original article here

Tuesday, March 19, 2013

OPEC's Forecast on China's Demand Growth in Focus

ONG Focus | Insights | Written by Oil N' Gold | Tue Mar 12 13 06:13 ET

Crude oil price retreated in European session. As the market awaits the OPEC’s monthly oil report, we expect the cartel would acknowledge that US’ imports of OPEC’s oil have continued to decline and a key reason to the situation is the rise in US production. Although OPEC remains contributing over 35% of the US crude imports, the amount has been on the fall steadily since the second half of 2008. In terms of volume, Saudi Arabia and Venezuela take up almost 60% of US’ imports from the OPEC while Angola and Nigeria have shown sharp declines. The implication on Brent crude is that, with the US a less popular destination for exports, producers would need to compete with other (such as Dubai crude) for shipment to other countries, such as those in Asia.

The market would probably be concerned about the new forecasts of global oil demand which are traditionally the most bearish one among the 3 major oil agencies (OPEC, IEA and EIA). The focus is whether there would be a downgrade on China’s demand outlook. If there’s such a case, we would expect the OPEC to consider production cut in coming months.

In the near-term, gold’s outlook should remain damped with ETF holdings weakening further and speculative positions of CFTC futures declining last week. The SPDR Gold Trust reported that holdings have dropped to 39.76M oz, the lowest level in October 2011, as of Monday. Speculative long positions of gold futures fell to 107.58K contracts in the week ended March 5, down -28.3% since the beginning of the year. Meanwhile, retail demand has been soft since the beginning of the year with the US Mint reporting gold coin sales of 25K oz so in March.

On the dataflow, final estimate of Germany’s CPI stayed at +0.6% m/m in February. UK’s industrial production fell -2.9% y/y in January after a downwardly revised -2.1% a month ago. Manufacturing production slipped -3.0% y/y, following a -1.6% drop in December. Trade deficit narrowed to 8.2B pound in January from 8.9B pound in the prior month.

Latest Analysis from this Author

Gold Weekly Technical Outlook (Saturday, 16 March 2013 10:05 ET)Silver Weekly Technical Outlook (Saturday, 16 March 2013 10:05 ET)Crude Oil Weekly Technical Outlook (Saturday, 16 March 2013 10:05 ET)Natural Gas Weekly Technical Outlook (Saturday, 16 March 2013 10:04 ET)Weekly Fundamentals - WTI- Brent Spread Narrowed o... (Saturday, 16 March 2013 02:38 ET)Strong US Data Sent Shares to New Highs (Friday, 15 March 2013 01:03 ET)Economic Calendar 3/15/13 (Thursday, 14 March 2013 22:13 ET)IEA Lowered Global Oil Demand Growth Forecast for ... (Thursday, 14 March 2013 08:50 ET)Crude Weakened on Inventory Increase (Wednesday, 13 March 2013 23:14 ET)Economic Calendar 3/14/13 (Wednesday, 13 March 2013 23:12 ET)

View the original article here

Monday, March 18, 2013

Gains in Oil Limited as OPEC Suggested Downside Risks to Demand Growth

ONG Focus | Insights | Written by Oil N' Gold | Wed Mar 13 13 00:11 ET

Divergence was seen in WTI and Brent crude yesterday. The former initially rallied to a 2-week high to 93.47 before ending the day at 92.54, up +0.52%. This was driven by a report showing a decline in Iranian exports in March. Yet, the bullish was capped as the OPEC reduced its oil demand forecasts. Narrowing in spread between WTI and Brent crudes induced aggressive selling of the spread. Gold jumped to a 2-week high of 1597.6 before ending the day at 1591.7, up +0.87%, as the ECB signaled more room for easing amid moderation of inflation.

OPEC’s monthly report for March suggested that global oil demand would reach 89.7M bpd in 2013, up 0.8M bpd from last year. While this forecast is largely unchanged from previous estimate, the carter warned that there are a number of potential downward risks in this forecast. For instance, the euro’s instability could lead to even deeper recession in some Mediterranean countries” and “the potential impact of a full budget cut in the US could drag down the world economy, consequently reducing oil demand”. Meanwhile, demand for OPEC’s oil would fall to 29.7M bpd in 2013, down from 30.1M bpd a year ago, mainly driven by increase in US oil output. Demand from China is expected to stay unchanged at 10.1M bpd in 2013.

As investors await the Eurozone’s CPI data in February, ECB policymaker Jens Weidmann stated that “inflation pressure is easing”. He also warned that “the crisis is not over despite the recent calm on financial markets”, signaling further easing cannot be ruled out. Last week, IMF director Lagarde stated that "monetary policy should remain accommodative, and we believe that there is still some limited room for the ECB to cut rates further".

On the dataflow, UK’s industrial production surprisingly slipped -2.9% y/y in January, following a downwardly revised -2.1% drop a month ago. Manufacturing production plunged -3.0% y/y in January, compared with consensus of a -1.5% drop and December’s -1.6% slide. Concerning oil inventory, the industry-sponsored API estimated that crude inventory slipped -1.4 mmb in the week ended March 8. For fuels, gasoline and distillate stockpiles dropped -3.1 mmb and -2.2 mmb respectively. The official report from DOE/EIA probably shows that crude inventory added +2.3 mmb while gasoline and distillate dropped -1.5 mmb and -2 mmb respectively.

Latest Analysis from this Author

Gold Weekly Technical Outlook (Saturday, 16 March 2013 10:05 ET)Silver Weekly Technical Outlook (Saturday, 16 March 2013 10:05 ET)Crude Oil Weekly Technical Outlook (Saturday, 16 March 2013 10:05 ET)Natural Gas Weekly Technical Outlook (Saturday, 16 March 2013 10:04 ET)Weekly Fundamentals - WTI- Brent Spread Narrowed o... (Saturday, 16 March 2013 02:38 ET)Strong US Data Sent Shares to New Highs (Friday, 15 March 2013 01:03 ET)Economic Calendar 3/15/13 (Thursday, 14 March 2013 22:13 ET)IEA Lowered Global Oil Demand Growth Forecast for ... (Thursday, 14 March 2013 08:50 ET)Crude Weakened on Inventory Increase (Wednesday, 13 March 2013 23:14 ET)Economic Calendar 3/14/13 (Wednesday, 13 March 2013 23:12 ET)

View the original article here