Stock markets rise as US inflation data, ECB rate loom

NEW YORK -- Global markets rose on Monday at the start of a busy week that includes the release of key US inflation data and a European Central Bank decision on interest rates.

Wall Street pushed higher, with traders already focused on Wednesday's consumer price index (CPI) report, which could determine the Federal Reserve's next move on interest rates.

"Today's generally quiet session means that attention is focusing squarely on the US CPI data and ECB decision due this week," said Chris Beauchamp, chief market analyst at online trading platform IG.

"With the risk that both could deliver nasty surprises, risk appetite has been limited," he added.

Investors have worried that the Fed's rate-hike campaign to combat high inflation could tip the world's biggest economy into a severe recession.

But US Treasury Secretary Janet Yellen said Sunday she was optimistic that the economy was on course for a soft landing.

"I am feeling very good about that prediction," she said. "I think you'd have to say we're on a path that looks exactly like that."

She added: "Every measure of inflation is on the road down."

The Paris and Frankfurt stock exchanges closed higher even though the European Commission cut its 2023 growth outlook for the eurozone, from 1.1 percent to 0.8 percent.

The data will give the ECB more food for thought when it meets Thursday to decide whether to continue or pause its own rate hikes.

The commission said the higher borrowing costs had an impact on the eurozone economy.

"The new forecasts won't come as a major surprise and may even prove overly optimistic over time but they do come days ahead of the next ECB meeting and could tempt some policymakers into voting to pause the tightening cycle," said Craig Erlam, senior market analyst at the OANDA trading platform.

"Weaker economic readings will probably drive a lively debate and they obviously won't suggest, if they do hike, that it's job done," he added.

Elsewhere, London also rose while Tokyo and Hong Kong finished lower.

After a slow start, Asian traders turned more positive through the day and tracked last week's gains on Wall Street, with data showing a pick-up in Chinese inflation lifting sentiment.

Traders took heart from news that China's consumer price index rebounded in August, having contracted the month before.

While the 0.1 percent rise was less than expected, it gave traders some hope that the economy is slowly on the mend after a painful 2023 so far.

On currency markets, the yen picked up after sinking last week to a 10-month low against the dollar, with support coming from comments seen as hawkish by Bank of Japan boss Kazuo Ueda.

He told the Yomiuri newspaper that policymakers would have a better idea later in the year about wage rises, a key data point for rate decisions.

The yen has tumbled around 10 percent owing to the BoJ's refusal to move away from its ultra-loose monetary policy while the Fed pushed borrowing costs to a two-decade high.

The yuan also bounced back from a 16-year low against the dollar after the People's Bank of China said it would crack down on speculation that distorts the value of the currency after months of volatility.

In energy markets, gas prices rallied as strikes continued at Chevron plants in Australia.

Agence France-Presse

European Central Bank signals rate hike as soon as July to combat inflation

FRANKFURT, Germany - European Central Bank chief Christine Lagarde hinted Wednesday at a first interest rate hike in July to tackle soaring inflation, echoing the actions of other major central banks and heralding the end of the eurozone's cheap money era.

The ECB should end its bond-buying stimulus "early in the third quarter" and could raise interest rates "only a few weeks" later, Lagarde said in a speech in the Slovenian capital Ljubljana. 

The comment is the clearest sign yet from Lagarde that the ECB is ready to move on rates sooner rather later, as the institution trails rate hikes made by the US Federal Reserve and others to tame global inflation.

Any hike would be the ECB's first in over a decade and would lift rates from their current historically low levels.

These include a minus 0.5 deposit rate which effectively charges banks to park their excess cash at the ECB overnight.

Inflation in the eurozone climbed to 7.5 percent in April, an all-time high for the currency club and well above the ECB's own two-percent target.

The surge, driven in no small part by steep increases in prices for energy due to the Russian invasion of Ukraine, has strengthened calls for the ECB to follow its peers towards hikes. 

ECB policymakers will decide their course of action in upcoming June 9 and July 21 meetings, with the July date now seen as the most likely opportunity for a rate announcement.

- Rate rise -

At its last meeting in April, the ECB's governing council resolved to end its vast monthly bond purchases "in the third quarter".

Over recent years, the scheme has hoovered up billions of euros in government and corporate bonds each month to stoke economic growth and keep credit flowing in the 19-nation currency club.

The ECB should draw a line under it "early" in the third quarter, which starts in July, Lagarde specified on Wednesday.

Ending net purchases under the programme would open the door to an interest rate rise that could follow "only a few weeks" after, she said. 

After the initial move the process of monetary policy "normalisation", taking interest rates out of negative territory, would be "gradual".

- July pressure -

"To sum up Lagarde's speech: first rate hike on July 21," Carsten Brzeski, head of macro at ING bank, said on Twitter.

Decisions by the Fed and the Bank of England to raise rates aggressively to counter inflation have added to the pressure on the ECB to act.

German central bank president Joachim Nagel said Tuesday he "will advocate a first step normalising ECB interest rates in July".

The call made by the head of the traditionally conservative Bundesbank has been echoed by other members of the governing council.

On Wednesday, the head of the French central bank Francois Villeroy de Galhau also said the ECB would "progressively raise rates from the summer" to steer inflation towards the ECB's two-percent target. 

The central bank is set to ratchet up interest rates at a delicate moment for the economy.

The war in Ukraine has both pushed up prices and added to supply chain disruptions, putting further strain on households and businesses.

In response to the invasion, the European Union has sought to reduce its reliance on Russian energy imports and is in discussions over an embargo of Russian oil that would add to the economic stress.

The ECB would raise its rates in July "followed by a return to zero in September" Gilles Moec, chief economist at Axa insurance, told AFP.

But "between the war in Ukraine, a complicated coronavirus situation in China", which has seen a series of lockdowns and spillovers from rate hikes in the United States, the ECB will not be able to "pursue normalisation easily", Moec said.

Agence France-Presse

IMF/World Bank: 75 years as the world's financial firefighters

WASHINGTON -- At the critical moment of a Hollywood movie starring A-lister Sandra Bullock, Bolivia's newly elected president calls in the International Monetary Fund (IMF) to bail out the poverty-stricken country, violating a campaign promise. 

The streets erupt in violent protest.

The movie, "Our Brand is Crisis," is a fictionalized version of the 2002 Bolivian elections and it drastically simplified the situation. But the writers knew the IMF would be unquestionably accepted as the arch enemy of the people.

After 75 years putting out financial fires around the world, the IMF and World Bank face criticism for repeatedly failing to prevent crises and for making things worse for the people they were meant to help.

That makes them easy scapegoats.

Even if the criticism is not always entirely fair -- no one blames the doctor for prescribing a painful but life-saving treatment -- the institutions have been trying to rebrand themselves in recent years, putting more emphasis publicly on protecting vulnerable members of society in their lending programs.

But they will need more than a better communications strategy as they contend with a wave of anti-globalization sentiment and technological transformation -- while also helping Africa through a transition requiring massive investment in infrastructure and job creation just to keep up with population growth.

The challenges "are huge," World Bank president David Malpass told AFP in an interview.

The IMF and World Bank were created July 22, 1944 in the shadow of World War II to help rebuild Europe and later Japan, and to try to head off the kind of economic strife that had led to the war.

"The original concept of reconstruction and development ... was clarified to include poverty alleviation as the bank grew," Malpass said.

Dismal record

On the surface, their record, especially for the IMF, seems dismal, with each of the prior three decades marked by a severe crisis: the Latin American debt crisis in the 1980s, the Asian and Russian crises in the 1990s and the global financial crisis in 2007, which begat the Great Recession that still looms over the world economy today.

In each case, the damage lasted for a decade or more and the IMF was blamed for inflicting even more pain with its rigid demands and policy advice that, according to the fund's harshest critics, too often favored corporate interests in the rich countries over the poor nations in trouble.

But at the same time extreme poverty has plummeted worldwide -- falling by a billion people since 1990.

"In the history of the world there has never been so much progress in improving people's lives as we have seen in the last 75 years," said Masood Ahmed, who worked alternately either at the IMF or World Bank for nearly half their existences.

But the institutions missed the problems growing beneath the surface. 

The world "was doing so well on the macro level, and there were so many people being lifted out of poverty, that we glossed over the fact that there were many people who were increasingly uncomfortable with the pace of change," said Ahmed, who leads the Center for Global Development, an anti-poverty research organization.

"And I think we're paying a bit of a price for that now."

Without prompting, Malpass volunteered criticism of the "Washington consensus" -- sneering shorthand for policies imposed on developing nations that centered on privatization and steep cuts in government spending and employment.

The consensus was this policy menu would work for every country in crisis -- advice that flies in the face of economic theory calling for spending to increase during a downturn.

Instead, Malpass said he wants to focus the World Bank's programs on what is best for each country.

"I want it to be more and more effective at helping countries find a path to growth and to good outcomes for the people of those countries."

Greater representation

Agustin Carstens, former head of the Mexican central bank and once a deputy managing director of the IMF, credits the organizations with providing needed oversight and policy advice that has prevented "many more crises."

The problem is that, when the IMF is called in, "it goes into an economy at the most difficult time," when all other sources of financing have closed and there are no good options.

But he worries the institutions have failed to adapt to the changing global economy, giving only lip service to the far greater weight of countries like China and India.

With IMF managing director Christine Lagarde set to leave her post on September 12 to take over the European Central Bank, the old powers are poised to continue the tradition of naming a European to lead the fund while an American runs the World Bank, despite past pledges to change.

Carstens, who was a finalist to take over the IMF leadership in 2011 when Lagarde was selected, said the reform is urgently needed to "give more legitimacy to the advice that the fund provides."

source: news.abs-cbn.com

IMF's Lagarde 'honored' to be tapped to head European Central Bank

WASHINGTON -- International Monetary Fund chief Christine Lagarde on Tuesday announced she would step down "temporarily" from the global crisis lender after being nominated to lead the European Central Bank.

EU leaders announced a deal to fill the top positions in the political and economic bloc, including picking Lagarde to succeed ECB chief Mario Draghi, whose single, eight-year term ends in November.

"I am honored to have been nominated for the Presidency of the European Central Bank," Lagarde said in a statement, adding that she would "temporarily relinquish my responsibilities as Managing Director of the IMF during the nomination period."

The nomination means Lagarde will step down two years before the end of her second five-year term at the helm of the IMF, which will open a search for her replacement.

The fund's executive board met Tuesday and named American economist David Lipton, Lagarde's chief deputy, as interim leader of the institution.

"We accept Ms Lagarde's decision to relinquish her IMF responsibilities temporarily during the nomination period," the board said in a statement. 

"We have full confidence in First Deputy Managing Director David Lipton as Acting Managing Director of the IMF."

By tradition, since the institutions were created in the wake of World War II, a European has always led the IMF and an American has been at the helm of the World Bank, although emerging market nations in recent years have pressed for more representation.

When Lagarde was selected in 2011, it was the first time the fund had an open leadership search process, in which any board member or country representative could nominate a candidate. Lagarde was selected over Agustin Carstens, then the head of the Mexican central bank.

She has drawn praise for her role leading the IMF in the wake of the global financial crisis.

"She's been a tremendous ambassador for the fund, a great salesperson, a very good communicator," said Mark Sobel, a former US Treasury official and chairman of the Official Monetary and Financial Institutions Forum.

He told AFP that Lagarde has experience in monetary policy even if she has never led a central bank and, like US Federal Reserve Chairman Jerome Powell, is not an economist.

"She's been involved in all the monetary debate and it's not like they don't discuss monetary policy at the fund."

Her second term in office coincided with the rise of US President Donald Trump and a wave of confrontations among major economies over trade, which the former French finance minister described as the major threat to the world economy.

Lagarde has at the same time acknowledged the strains caused by globalization, which has disrupted industries and marginalized some workers.

source: news.abs-cbn.com

IMF studying Argentina request for early help as peso crashes

BUENOS AIRES -- The International Monetary Fund said it was studying a request from Argentina to speed up disbursement of a $50 billion loan program after a collapse in investor confidence in President Mauricio Macri's government sent the peso tumbling more than 7 percent on Wednesday.

It was the biggest one-day decline in the peso since the currency was allowed to float in December 2015. It closed at a record low of 34.10 per US dollar and is down more than 45.3 percent against the greenback this year, prompting massive central bank interventions.

Nerves are frayed in Latin America's No. 3 economy as it struggles to break free from its notorious cycle of once-a-decade financial crises. The last one, which was punctuated by a 2002 debt default, tossed millions of middle-class Argentines into poverty.

The run on the peso prompted Argentina to turn to the IMF for the $50 billion credit line earlier this year. As part of the deal, Argentina's government pledged to speed up plans to reduce the fiscal deficit.

But given the peso's continued depreciation, which makes the country's dollar-denominated debts more expensive to pay, investors are increasingly concerned that the IMF help may not be enough.

"We have agreed with the International Monetary Fund to advance all the necessary funds to guarantee compliance with the financial program next year," Macri said in a televised address on Wednesday. "This decision aims to eliminate any uncertainty."

"Over the last week we have seen new expressions of lack of confidence in the markets, specifically over our financing capacity in 2019," Macri said.

IMF Managing Director Christine Lagarde responded by saying in a statement that the multi-lateral lender's staff would "reexamine the phasing of the financial program." She said that the "more adverse international market conditions" had not been "fully anticipated" when the IMF and Argentina reached the deal in June.

"Authorities will be working to revise the government's economic plan with a focus on better insulating Argentina from the recent shifts in global financial markets, including through stronger monetary and fiscal policies," Lagarde said.

Argentina has $24.9 billion in peso- and foreign currency-denominated debt payments due next year, according to official data.

Speaking to reporters after the IMF statement was issued, Treasury Minister Nicolas Dujovne said the government would reduce the size of its financing program, but did not provide specifics

UNION TO PROTEST BELT-TIGHTENING

If Macri was trying to calm investors, it did not work.

"The market is saying: 'Just the fact that you are engaging in this conversation makes me very, very nervous,'" Daniel Osorio, president of New York-based consultancy Andean Capital Advisors, said in a telephone interview.

The peso's decline has contributed to a jump in inflation, which hit a 12-month rate of 31.2 percent in July. In response, the central bank has hiked interest rates to 45 percent and sold more than $13 billion in reserves, including $300 million in an auction on Wednesday.

All that, combined with the budget cuts promised to the IMF that will slow down public works projects, is contributing to a recession that will result in an economic contraction of 1 percent this year, according to the government. That could hurt Macri's re-election prospects in next year's presidential race.

The June signing of the IMF deal reduced the need for costly bond market funding and briefly steadied the peso. The government has since announced more than $2 billion in budget savings, a process Macri promised to continue.

"We will accompany the IMF support with all necessary fiscal efforts," said Macri, who was elected in 2015 on a free market platform after eight years of deep government intervention in the economy under previous President Cristina Fernandez.

Argentina's biggest labor group, the CGT, said on Wednesday it will call a 24-hour general strike on Sept. 25 to protest Macri's belt-tightening measures. Two smaller union groupings said they will go on a 36-hour strike on Sept. 24 to protest the IMF, which many blame for the 2002 crisis.

"I know that these tumultuous situations generate anxiety among many of you," Macri said. "I understand this, and I want you to know I am making all decisions necessary to protect you." 

source: news.abs-cbn.com

IMF chief says growth strong but countries must prepare for change

JAKARTA - International Monetary Fund Managing Director Christine Lagarde said on Tuesday the global economy was showing broad-based growth, but the landscape was shifting with heightened risks of trade disputes, monetary policy normalization and technological change.

Lagarde, speaking to an IMF conference in Jakarta in preparation for the Fund's annual meetings in Bali in October, said the IMF was expecting global growth to reach 3.9 percent in 2018 and 2019. This is unchanged from the IMF's forecast in January and up from 3.7 percent in 2017.

She said ASEAN countries were preparing for higher interest rates in advanced economies such as the United States and Europe, but cautioned that policymakers needed to stay vigilant about its effect on financial stability and volatile capital flows.

"We know this will have spillover effects across the world. We have known for some time that it's coming," Lagarde said. "It remains uncertain how this transition is going to affect other countries, companies, jobs, incomes."

ASEAN countries need to embrace new growth models that put a greater emphasis on domestic demand, regional trade and economic diversification and prepare for technological changes such as increased factory automation, artificial intelligence, biotechnology, new financial technologies and digital currencies.

While these could eliminate some jobs, it was important for countries to boost efforts to educate workers to better prepare them to take advantage of new technologies.

"Many jobs will be affected one way or another. Some of them will disappear, but many more will be affected because of automation. So we need to think about the future of work," Lagarde said, adding that there was no single approach, and many countries would forge their own path.

She highlighted Go-Jek, the fast-growing motorcycle hailing and delivery service in Indonesia as an example of a country-specific technology innovation targeted to the country's needs and workforce.

source: news.abs-cbn.com

Global markets seeing 'necessary corrections': IMF chief

DUBAI - The latest volatility in global financial markets represents "necessary corrections," IMF chief Christine Lagarde said in Dubai on Sunday, in the wake of a Wall Street plunge.

"The market trepidations that we have seen in the last few days are not worrying me.

"Those market movements were clearly, in our view, necessary market corrections," she told an audience at Dubai's World Government Forum.

Wall Street stocks ended a bruising week on a benign note, courtesy of a late-session surge on Friday, while equity markets in Europe and Asia fell sharply in volatile trading.

"I would not focus on what has happened in the last few days. I would focus on the imperatives of change going forward and the need to fix the roof," Lagarde said.

On Saturday, she had urged Arab countries to slash public wages and subsidies in order to rein in spending, achieve sustainable growth and create jobs.

Speaking at the one-day Arab Fiscal Forum in Dubai, Lagarde welcomed "promising" reforms adopted by some Arab states, but insisted much more was needed to overcome daunting economic and social problems.

Low oil prices are weighing on the finances of Arab oil exporters, while importers are battling with rising debt, unemployment, conflicts, terrorism and refugee inflows, the IMF's managing director said.

source: news.abs-cbn.com

IMF chief: Make reforms while sun shines on world economy

PARIS - International Monetary Fund chief Christine Lagarde has urged France and other countries to push through reforms "while the sun is shining" on the global economy.

In an interview with France's Le Journal du Dimanche published Sunday Lagarde said the strength of the global economic recovery had taken the IMF by surprise.

"In 2017, for the first time in a long time, we revised our growth forecasts upwards whereas previously we used to lower them," she said.

Global growth of 3.6 percent was both "stronger and more widely shared" in 2017, she said, noting that developed economies were now growing again under their own steam and no longer merely being pulled along by demand in emerging markets.

Lagarde said the favorable climate lent itself to implementing reforms.

"When the sun is shining you should take advantage to fix the roof," she said, using one of her favourite maxims.

This year's global growth is on a par with the average of the 2 decades leading up to the global financial crisis of 2007-2008.

The IMF has forecast a further slight improvement in 2018, to 3.7 percent.

In Lagarde's native France, seen for years as one of Europe's weak links, the recovery kicked in in earnest this year.

From 1.1 percent in 2016, growth is expected to rise to 1.9 percent in 2017 -- still short of the 2.4 percent forecast for the eurozone as a whole but better than the 1.6 percent initially forecast in the eurozone's second-largest economy.

Centrist President Emmanuel Macron aims to consolidate the momentum and bring down stubbornly high unemployment with an ambitious program of labor, tax and welfare reforms.

Lagarde said the changes were key to boosting France's credibility at a time when Macron is pushing for reforms at the European level, including closer integration among eurozone members.

The managing director of the IMF was France's finance minister in 2008, when the euro looked to be in serious jeopardy.

Nearly 10 years later, the currency is out of the woods.

But, Lagarde warned, "the mission has not been accomplished -- and maybe never will -- because Europe is not united on moving towards greater integration while maintaining national sovereignty."

source: news.abs-cbn.com

Trump believes in 'reciprocal' free trade: Treasury chief

The United States, which is considering new protectionist policies, believes in "free and fair" trade, US Treasury Secretary Steven Mnuchin said Saturday.

"President Trump's agenda is to make sure that we have free and fair trade and I think, as you know, the United States is probably the most open trading market there is for both goods, services and investment," Mnuchin said.

But he said the United States expected to be treated as it treats others.

"The president believes in reciprocal trade deals and reciprocal free trade."

Mnuchin's comments came during a public conversation with Christine Lagarde, head of the International Monetary Fund, during the spring meetings of the IMF and World Bank, which are to wind down on Sunday.

With a nationalist economic agenda, the Trump administration has vowed to upend decades of prevailing trade policy by renegotiating or scrapping trade agreements, imposing tariffs and moving to bilateral trade agreements.

US pressure last month forced a Group of 20 finance ministers meeting in Germany to strike the routine commitment against protectionist policies from a closing statement.

The word "protectionism" also did not appear in the final statement of this week's meetings at the IMF.

"If our markets are open, there should be a reciprocal nature to other people's markets," Mnuchin said Saturday.

"What's not free and fair is if our market is open and other people either have high tariffs or have high import barriers."

dg/acb

source: news.abs-cbn.com

Blast at IMF Paris offices after envelope opened, one person hurt

PARIS - A letter exploded when it was opened at the offices in central Paris of the International Monetary Fund (IMF) on Thursday injuring one person.

The Paris police department said an operation was ongoing at the offices of the IMF and World Bank after the incident.

The blast was caused by a homemade device, said the head of the French capital's police force.

"It was something that was fairly homemade," police chief Michel Cadot told reporters.

Cadot said there had been some telephone threats made in recent days, but it was not clear if these were linked to the incident at the IMF's offices.

IMF chief Christine Lagarde condemned an explosion as "a cowardly act of violence."

"I condemn this cowardly act of violence and reaffirm the IMF's resolve to continue our work in line with our mandate. We are working closely with the French authorities to investigate this incident and ensure the safety of our staff," she said.

The incident, just six weeks before a presidential election, comes as a militant Greek group Conspiracy of Fire Cells claimed responsibility for a parcel bomb mailed to German Finance Minister Wolfgang Schaeuble on Wednesday.

French President Francois Hollande said French authorities would do all they could to find those responsible for the incident.

(Reporting by Bate Felix, Sudip Kar-Gupta and Sophie Louet; Writing and Editing by Richard Balmforth, John Irish and Adrian Croft)

source: news.abs-cbn.com

IMF's Lagarde denies any 'panic' of the market after Brexit

WASHINGTON - Financial markets have "grossly underestimated" the outcome of the British referendum on leaving the European Union but did not panic said the Executive Director of IMF international (IMF), Christine Lagarde, on Sunday.

At a forum in Aspen, Colorado, Christine Lagarde said that central bankers had their work Friday at the announcement of the victory of Brexit, and ensured that the broad masses of cash are available.

Political leaders have worked themselves for market participants that "the situation was under control. And it was under control," she said.

"There was a violent movement, brutal and immediate, the pound fell 10 percent," said Christine Lagarde.

"But there was no panic and central bankers have done the work for which they were ready in case, that is to say inject a lot of liquidity in the markets," she continued.

There was no liquidity problem Friday, unlike most severe moments of the 2008 financial crisis, she said.

The market reaction depends now, she continued, measures that take the British and European leaders to handle divorce and limit the uncertainty that results.

"To date, officials both in the UK and Europe take the uncertainty in their hands. The way they act in the coming days will really influence the direction that will take the risk," said the director General of the IMF.

Policy makers and international institutions must cooperate to manage the implications of the vote for the release of the EU the UK, she continued, noting that only Britain could formally initiate divorce proceedings, and Europe can not force his hand.

"We have strongly encouraged the effective continuation of the transition in the most efficient, most predictable, to reduce the level of uncertainty, which in turn will determine the level of risk," she said.

source: www.abs-cbnnews.com

IMF poised to put Chinese yuan in elite currency basket

WASHINGTON - The International Monetary Fund is expected to approve inclusion of China's yuan in its SDR basket of elite currencies on Monday, rewarding Beijing's strong pursuit of the global status.

The IMF executive board is scheduled to meet Monday to decide on the recommendation by staff experts earlier in November to include the yuan, also known as the renminbi, alongside the US dollar, euro, Japanese yen and British pound in the grouping.

While not a freely traded currency, the SDR (special drawing right) is important as an international reserve asset, and because the IMF issues its crisis loans -- crucial to struggling economies like Greece -- valued in SDRs.

China, now the world's second-largest economy, asked last year for the yuan to be added to the grouping of world reserve currencies, but until recently it was considered too tightly controlled to qualify.

It is extremely rare that the executive board, which represents the IMF's 188 member nations, opposes the recommendation of its own experts. IMF Managing Director Christine Lagarde said in mid-November that she supported the experts' finding that the yuan had met the requirements to be a 'freely usable' currency" -- a key hurdle for SDR status.

If accepted, the decision would not take effect before September 30, 2016, to allow users more time to prepare. The last time the SDR basket was modified was in 2000, when the euro replaced the German deutschemark and the French franc.

The remaining question is the yuan's weight in the basket. It could be 10 percent to 16 percent, but the lower estimate is more likely due to the Chinese currency's limited convertibility.

The basket composition is reviewed every five years. At the last rebalancing in 2010, the dollar accounted for 41.9 percent, the euro 37.4 percent, the pound 11.3 percent and the yen 9.4 percent.

That weighting revision was based on the value of the exports of goods and services by country or currency zone, and the amount of reserves denominated in the respective currencies held by other IMF members.

DIPLOMATIC SUCCESS

The entry of the yuan is, above all, a major diplomatic success for Beijing, which will see its money graduate to the inner circle of the world's most important currencies.

The vote of the United States, the largest IMF stakeholder, will be closely watched, as will US political reactions. US officials have long accused China of keeping the yuan artificially low to gain a trade advantage, making its exports relatively cheaper.

The US Treasury Department, in an October 19 report, said that the yuan "remains below its appropriate medium-term valuation."

Paradoxically, China's unexpected devaluation of the yuan last August received good marks from the IMF because it reinforced the currency's movements with market forces and opened the door to future revaluation.

Beijing on Wednesday announced an initial group of foreign central banks has been allowed to enter the Chinese currency market, which likely will promote further internationalization of the yuan in global trading.

Credit rating firm Fitch says it does not expect the yuan's inclusion in the IMF basket "to lead to a material shift in demand for renminbi assets globally in the short term." However, it said, over time the emergence of the yuan as a global reserve currency could support China's credit rating.

An IMF decision to include the yuan among its elite currencies risks angering some lawmakers in the US Congress amid fierce maneuvering for the 2016 presidential election.

Congress, for example, has repeatedly refused to ratify a 2010 IMF reform that would give greater weight to the emerging-market powers, the so-called BRICS - Brazil, Russia, India, China and South Africa.

source: www.abs-cbnnews.com

China jitters send stocks tumbling

LONDON - World stocks and commodity prices tumbled on Tuesday, as poor Chinese data saw fears about its economic health intensify.

After a relatively upbeat few days for world markets, concerns about China were reignited by surveys that showed its giant manufacturing sector shrinking at its fastest pace in three years and its services sector also cooling.

Asian stocks, particularly in Japan and Australia, had swooned overnight, and the gloomy mood remained in Europe as the pan-regional FTSEurofirst 300 opened down 2.5 percent after its worst month in four years.

London, Frankfurt and Paris were down 2.3 to 2.5 percent and oil was also back in the red as it cut almost $1.5 off the $10 it had leapt between Thursday and Monday, which had been its biggest three-day surge in 25 years.

"The problem is that we have these brief spells of optimism like we had last week when U.S. GDP was revised up, but the overall theme is still the weakness in China and that is very hard to dispel from markets," said Philip Marey, a strategist at Rabobank in the Netherlands.

U.S. stock futures were also down 1.5 percent, while the mood was similarly wary in the currency and bond markets.

The safe-haven Japanese yen and the low-yielding euro, which has also been back in favor following its recent Greece-related falls, both rose against the dollar, to 120.16 yen per dollar and $1.1323 to the euro.

Gold another favorite of investors during periods of uncertainty, was up at $1,141 an ounce having risen 3.5 in August, its best month since January

The head of the International Monetary Fund, Christine Lagarde, summed up the situation saying in a speech in Indonesia that global economic growth was now likely to be weaker than had been expected just a few months ago.

She cited both a slower recovery in major advanced economies and a further slowdown in emerging nations and highlighted the need to "be vigilant for spillovers" from China's stutters.

"The transition (in China) to a more market-based economy and the unwinding of risks built up in recent years is complex and could well be somewhat bumpy," she added.

CAUTION! FRAGILE CHINA

The latest bout of volatility had been kicked off by losses on Wall Street overnight after comments from Federal Reserve Vice Chairman Stanley Fischer appeared to keep alive the chances of a U.S. interest rate hike in September.

China's official Purchasing Managers' Index (PMI) then compounded matters, falling to 49.7 in August from the previous month's reading of 50.0, its weakest showing in three years.

"Recent volatilities in global financial markets could weigh on the real economy, and a pessimistic outlook may become self-fulfilling," said He Fan, chief economist at Caixin Insight Group. A separate survey from Fan's organization had also shown the country's services sector slowing.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.6 percent to extend the more than 10 percent it had lost in August.

Chinese shares had remained relatively steady, with the Shanghai Composite Index down a modest 1.2 percent and the CSI300 index almost flat.

Instead the pain was felt elsewhere. Japan's Nikkei slumped 3.8 percent after tanking 8.2 percent in August. Australian, Indonesian and Hong Kong stocks were all down by more than 2 percent.

Metals markets were straining again too. London Metal Exchange copper fell 1 percent to $5,087.50 as markets reopened after a long bank holiday weekend, nickel slid 2 percent while aluminum and tin skidded too.

One of the other recent victims of the China jitters, the Australian dollar, edged up however, adding about 0.2 percent to $0.7125 after the Reserve Bank of Australia held Aussie interest rates steady.

source: www.abs-cbnnews.com

Lagarde: A new Greece program needs debt restructure

WASHINGTON. United States - International Monetary Fund Managing Director Christine Lagarde said Wednesday that a new program to prop up Greece's finances would require creditors to restructure debt.

In addition to the reforms Athens needs to undertake, she said, "the other leg is debt restructuring, which we believe is needed in the case of Greece for it to have debt sustainability."

"Greece is in a situation of acute crisis which needs to be addressed," she told a conference in Washington.

Despite the fact that Greece defaulted on its debt to the IMF on June 30, Lagarde assured that the institution "remains fully engaged in order to help find a solution."

In a report last week the IMF said Greece's official EU creditors should double the payback period for Greece's debts and stump up another 36 billion euros ($40 billion) to ensure the country's finances remain sustainable.

But the European Commission and the European Central Bank are pressing the country hard to accept a package of austere fiscal and policy adjustments that Athens has so far refused to accept.

Lagarde said the numbers themselves "will have to be revisited," but added that Greece, which no longer has access to IMF resources since its default, should not benefit from any special treatment.

"It is certainly my view that the IMF has to follow its rules, should not bend its rules and should be always even-handed."

She justified the Fund's continued participation in new aid talks for Greece even if Athens has been a severe critic of the institution.

"I have heard talk here and there in France saying, 'but what is the IMF doing in this situation? It should be handled by the Europeans,'" she told reporters.

"At the time when I was (France's) finance minister I also supported this viewpoint."

But, she said, the IMF is involved "because the IMF was asked by Greece to be involved."

source: www.abs-cbnnews.com

Greece: What happens when a country defaults on IMF

WASHINGTON - The prospect of Greece missing a 1.5 billion euro ($1.7 billion) payment to the IMF due by the end of June theoretically places the country on track to Fund expulsion.

But that extremely rare consequence of a default on the world's crisis lender could take some time to play out, under the International Monetary Fund's official procedures.

On Thursday IMF Managing Director Christine Lagarde said that Greece would have no grace period if it does not make the scheduled debt payment by June 30.

Under Fund procedures, that means Athens, which has relied almost exclusively on a IMF and European Union bailout for the past five years, would see its access to Fund resources suspended immediately.

The main impact would be to freeze disbursement of the IMF's share of about half of the 7.2 billion euros in aid from the Fund, the European Commission and the European Central Bank.

According to official figures, Greece has to repay more than 5.4 billion euros to the Fund this year on borrowing.

Greece already missed a 300 million euro payment on June 5, but was not called in arrears or default after it invoked an obscure IMF rule that allowed it to roll together four scheduled June payments into one, to be remitted at the month's end.

With that Athens earned a few extra weeks to negotiate with its official bailout creditors. But if the June 30 deadline is missed, Lagarde made clear Thursday that there would be no more relief time.

"There will be no period of grace," she told reporters in Luxembourg.

According to IMF procedures, 30 days after a missed payment, Lagarde has to formally inform the executive board, which represents its 188 member countries.

After two months, the managing director would have to issue a formal complaint on the issue to the board.

At the end of three months, the board would consider the complaint, which could lead to it depriving the country in default of its right to use SDRs, the IMF currency.

The board would continue periodic reviews of the situation, and if it persists, make a declaration of noncooperation, which could then lead to a suspension of the borrower's IMF voting and representation rights.

That step would have little concrete impact but serve to further isolate the country within the Fund. Moreover, within six months of the suspension of voting rights -- or up to 24 months after the default -- the board would have to begin procedures on "compulsory withdrawal" or expulsion of the country from the IMF.

But that fate is unlikely. Expulsion would require support of a large majority of the Fund's members, comprising 85 percent of IMF voting rights.

The members have preferred to avoid an extreme outcome. After falling deeply into arrears on their IMF loans, Zimbabwe, Sudan and Somalia were not threatened with expulsion.

Only one country in IMF history has been kicked out: Czechoslovakia, which was forced out during the Cold War in the 1950s.

source: www.abs-cbnnews.com

IMF cuts US growth outlook, urges Fed to delay rate hike

WASHINGTON - The International Monetary Fund on Thursday cut its 2015 growth forecast for the United States and called on the Federal Reserve to put off a rate hike until conditions are stronger.

In an annual report of the world's largest economy, the Fund said growth would reach only 2.5 percent this year due to the unexpected first quarter contraction, compared to the previous forecast of 3.1 percent in April.

It said growth is already rebounding from the stall. But it nevertheless strongly recommended that the Fed hold off on its planned interest rate hike until more resilience is shown, likely only in early 2016.

It said growth momentum this year had been sapped by "a series of negative shocks", pointing to extremely harsh winter weather in parts of the country, the three-month West Coast ports slowdown that locked up trade, the sharp rise of the dollar and the downturn in the oil industry.

Still, the IMF said, "These developments represent a temporary drag but not a long-lasting brake on growth."

"A solid labor market, accommodative financial conditions, and cheaper oil should support a more dynamic path for the remainder of the year."

IMF chief Christine Lagarde said at a press conference on the report that the Fund sees US growth resuming a 3.0 percent pace over the rest of the year, and achieving that for the whole of 2016.

"We still believe that the underpinnings for continued expansion are in place."

But she pushed for the Fed to hold off on a rate hike, which has been anticipated for as early as July, saying growth conditions are not yet firm enough for it.

The Fed has locked its benchmark federal funds rate at zero since 2008, and has been waiting for proof from a tightening jobs market and rising inflation that the economy is locked into higher gear to make its first increase toward a more "normal" monetary policy.

Without those signs, the IMF report warned, raising rates too soon could result in tighter financial conditions and even financial instability, that could then force the Fed to cut rates again.

That could both stir damaging volatility in world markets, and undermine the Fed's credibility.

The Fed "should remain data-dependent and defer its first increase in policy rates until there are greater signs of wage or price inflation than are currently evident," it said.

"Barring upside surprises to growth and inflation, this would put lift-off into the first half of 2016."

Dollar overvalued

While the IMF picture for the US economy was generally positive, it noted a few weaknesses or danger points that raise risks that would have impacts far beyond US borders.

The US dollar is "moderately overvalued", the IMF said, impacting economic growth and job creation, and holding down inflation.

"There is a risk that a further marked appreciation of the dollar -- particularly one that takes place in an environment where policies to address growth deficiencies languish both in the US and abroad -- would be harmful."

The IMF review also included a new analysis of financial system stability which warned that the US needs to put more effort into monitoring and regulating non-bank financial institutions.

Investors' search for yield in the current easy-money environment has increased the position in financial markets of lightly-regulated non-banks like insurance companies, investment funds and others, which are leveraging more and taking more risks, it noted.

This is pushing up asset valuations to what could be excessive levels, the IMF suggests, and yet for non-banks, "there is less visibility on the size and nature of the embedded risks and fewer regulatory and supervisory levers to manage those risks."

source: www.abs-cbnnews.com

Clinton snaps at Merkel heels in 'powerful women' list

NEW YORK - German Chancellor Angela Merkel tops the Forbes list of the world's most powerful women for the fifth straight year but Hillary Clinton is snapping at her heels, the magazine said Tuesday.

Behind them came Melinda Gates, who co-chairs the Bill and Melinda Gates Foundation with her billionaire philanthropist husband, US federal Reserve Chair Janet Yellen and General Motors CEO Mary Barra.

IMF chief Christine Lagarde was in sixth place and Brazilian President Dilma Rousseff came in seventh.

The top 10 were rounded out by Facebook COO Sheryl Sandberg (No. 8), Susan Wojcicki, CEO of YouTube (No. 9) and US First Lady Michelle Obama.

Newcomers include US pop star Taylor Swift, in at number 64 and the youngest of the bunch at 25.

The annual list of the world's 100 most powerful women includes leaders in eight categories -- technology, politics, business, finance, media, entertainment, philanthropy and billionaires.

Clinton, who in April announced her second run for the White House, was listed at number six last year but as US secretary of state she also ranked number two to Merkel in 2011 and 2012.

"Come next year's US elections, she (Merkel) could lose her title for the first time since 2010 to the one person with a credible and mathematical chance of 'leading' the world," wrote Forbes.

Even if Clinton wins the Democratic nomination for the White House, she has no chance of being elected US president until November 2016 -- after Forbes publishes its 2016 most-powerful women list.

Forbes has put the German chancellor on the list 10 times in the past 12 years, nine of them as most powerful woman. Merkel was first elected in 2005 and won a historic third term in 2013.

Geographically speaking, the United States dominates the list. Fifty-nine on the list are American, including several immigrants.

There are 18 from the Asia-Pacific region, headed by South Korean President Park Geun-Hye at number 11, 12 from Europe, four each from Latin America and the Middle East and three Africans, Forbes said.

Other newcomers include EU foreign policy chief Federica Mogherini, number 36; US Attorney General Loretta Lynch, number 34; and incoming Guardian editor-in-chief Katharine Viner at number 80.

The magazine said the list features eight heads of state and one monarch, who govern nations with a combined GDP of $9.1 trillion and 15 billionaires with a total net worth of more than $73.3 billion.

The top ranking billionaire this year is Oprah Winfrey at number 12 with a personal net worth of $3 billion.

In another measure of influence, the 100 women on the 2014 list have a combined social media footprint that includes 474 million Twitter and YouTube followers, the magazine said.

The list can be viewed at www.forbes.com/power-women

source: www.abs-cbnnews.com

Global economy slowing - IMF

TOKYO - International Monetary Fund chief Christine Lagarde on Friday warned that the global economy was slowing, with a soon-to-be published growth outlook lower than earlier forecasts.

"What I can tell you is that it will be tilted to the downside and certainly lower than the forecast that was published three months ago," she told an economic forum in Tokyo.

In April, the IMF hiked its global growth forecasts to an annual rate of 3.5 percent this year, accelerating to 4.1 percent in 2013, up from the January forecast of 3.3 percent and 4.0 percent respectively.

Lagarde declined to elaborate on its upgraded assessment due later this month but said that the outlook since the last IMF forecast had "regrettably" become "more worrisome".

The IMF had said its improved global forecast in April was due in part to better global financial conditions and easing fears about the eurozone debt crisis.

"The outlook for the global economy is slowly improving again but is still very fragile," it said at the time.

On Tuesday, the Washington-based IMF cut its growth forecast for the US economy and warned that the Obama administration could be slicing the deficit too fast for the weak economy.

The IMF estimated 2012 US economic growth at 2.0 percent, down from an April forecast of a 2.1 percent expansion for the world's biggest economy.

source: interaksyon.com