Australia Headed for Recession

Australia's economy has shrunk for the first time in eight years, raising fears that the country may be heading for a recession.


The economy contracted by 0.5% in the last three months of 2008 from the previous quarter. Economists had been expecting it to grow by 0.2%.

Hit Hard:
If Australia's economy shrinks again the current quarter, it will enter recession, usually defined as two consecutive quarters of contraction. Australia's resource-based economy has been hit hard by the decline in commodity prices.
The country's mining firms are cutting back on spending, slashing staff numbers, and shelving projects. This is being seen as an unsurprising outcome illustrative of the magnitude of the global recession and its impact on the continent.

Other developed economies of the world are already reeling under the worldwide meltdown. Japan’s GDP dropped 3.3% in the final quarter of 2008. Japan recorded its biggest deficit in 13 years. The US saw a 1.6% drop and the UK contracted by 1.5%.

Recession was inevitable:
According to analysts, Australia had hoped to duck the worst of the global recession, but this no longer looks possible."After surviving the 1997 Asian financial crisis and the 2000 dotcom bubble, Australia had hoped to complete the impressive hat-trick of not being forced into recession by the global financial crisis," our correspondent says.

Australia is being regarded as faring better than others. However, this seems to be the recession that Australia could not avoid.

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Japan's exports halved in January

Japan's exports halved in January.Japan's current account recorded its largest deficit on record in January, reaching 172.8bn yen ($1.8bn). This is Japan's first deficit in 13 years.In forex trading yen has weakened further.

Corporate blow:
Car exports alone dropped 66.1%, with semiconductor and electronic parts exports down 52.8%.
Consumers around the world no longer want to buy Japanese cars. Consumers in Asia, Europe, the Middle East and the United States are not buying pricey Japanese goods such as cars and electronic goods.

Honda has had to cut production, and Sony is set to register its first annual loss in 14 years.
Shares tumbled on the news, with the benchmark Japanese index, the Nikkei, closing down at a 26-year low.

Dismal Economy:
"We incurred the current account deficit due to a plunge in exports. Our exports to key regions, including the United States, Europe and Asia, were all down sharply due to the deteriorating global economy," a finance ministry official said.
"Japan's export-driven economy is really engulfed by waves of the global economic crisis. “An economist pointed out.


Japan has already passed the legislation to hand out cash to its people as an economic stimulus.

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US jobless rate climbs to 8.1%

U.S. Jobless rate Increases:
The US jobless rate jumped in February to 8.1%, according to official figures from the U.S. Labor Department. The number of people out of work rose by 651,000 during the month.Both figures are bigger than expected.
A total of 12.5 million people are now unemployed in the US.

President Obama said that the number of jobs lost so far in the recession was "astounding" adding that he had signed his economic stimulus package in order to save jobs.Rising unemployment has also meant greater demand for free meals.

Across sectors:
Jobs were cut in most sectors, with only government, education and health services adding staff.
In the manufacturing sector 168,000 jobs were cut in the month.
104,000 jobs went in construction and 375,000 were cut in the service sector.

Grim Future Ahead:
Federal Reserve Chairman Ben Bernanke told Congress earlier in the week that economic indicators "show little sign of improvement" and that "labor market conditions may have worsened further in recent weeks".

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Indian contest for rupee symbol

The Indian finance ministry has begun a public competition to select a design for the symbol of the rupee. Unlike the major currencies of the world like the dollar, the pound, the yen and the euro, the rupee does not have a globally recognized symbol.

Ethos of India:
The rupee is generally shortened to Rs or sometimes the currency is described as INR (Indian rupee).But, the government says, these are not symbols, they are mere abbreviations for rupee.To get an internationally-accepted symbol, the finance ministry has invited entries from the public.

"The symbol should represent the historical and cultural ethos of India," the deputy secretary in the finance ministry's coin and currency department, BS Rawat, told the BBC.

Guidelines for entries:
"The entries can be in any of the Indian languages. They can even be in English which is also an accepted language of use by the government," Mr Rawat said. Each entry has to be accompanied by a fee of 500 rupees ($10) and a participant can send a maximum of two entries. The rules also say that the "symbol should be applicable to the standard [computer] keyboard".

Officials say the winning entry will be chosen by a seven-member jury of experts drawn from various art institutes, the government and India's central bank, the Reserve Bank of India. Five short listed entries for the final selection will be awarded a prize of 25,000 rupees ($500) and the winner will take 250,000 rupees ($5,000).

Implementing new currency symbol can be an expensive exercise:
According to one estimate, when the euro was introduced in 1999 it cost Europe's biggest companies more than $50bn to update their computer systems to deal with the changeover.” We have not thought about the costs yet," Mr Rawat said. "First, we'll select a symbol and then we'll do the costing," he added.

The contest closes on 15 April at 1300 local time (0730G).The contest is open only to resident Indians, a release on the ministry website says. Detailed guidelines on how to prepare the entries have been put up on the finance ministry's website.

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Satyam Given the Go-Ahead

SEBI has approved plans for fraud-hit IT firm Satyam to sell a 51% stake as it seeks to win back clients and restore customer confidence.

As per the reports IBM and Indian engineering firm Larsen & Toubro are frontrunners for the stake.Satyam has struggled since former boss Ramalinga Raju admitted inflating their assets by more than $1bn.Shares in Satyam already jumped 18% after the company's state-appointed board got approval to sell the majority holding.

Satyam had lost more than 80% of its market value following the CEO's confession in January.The auction for the stake will be global and potential buyers who would need to have assets of at least $150m.The buyer then would not be able to sell its stake for at least three years, Satyam said in a statement.

Satyam had been one the biggest players in the booming Indian IT software market, supplying back-office services to firms from around the world.

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Oil price up over petrol demand

Oil prices have risen nearly 9% after the US government reported an unexpected drop in crude stocks and an increase in demand for petrol. Prices were also supported by a rise in China's manufacturing index. China is the second biggest oil consumer
US crude stocks fell by 700,000 barrels for the last week of February.

US crude stocks fell by 700,000 barrels for the last week of February, while demand for petrol over the past four weeks was up 2.2% from a year ago. US light crude rose by $3.73 to $45.38.

"Overall the (US oil inventory) numbers are very bullish... again, gasoline remains the one bright spot in the market that can really pull the complex higher,"pointed out an analyst.

Stock markets around the world have been rising on Wednesday on hopes China will announce an expansion to its economic stimulus plan.However, an analyst at Oil Price Information Service said that crude inventories had been swollen for months and that oil prices won't move higher without some signs that the economic malaise has bottomed out.

"It's going to be a shaky year. The fundamentals are still poor," he added.

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Japan to Hand Out Cash to People

Japan's parliament has passed legislation to give a cash hand-out to every resident in an attempt to boost the recession-hit economy. People will get at least 12,000 yen ($121) under the $20bn plan. In forex trading Yen has been growing weaker.

There are fears however that most Japanese people, who have a strong tradition of saving, will hang on to the cash instead of spending it. The cash hand-out is the centerpiece of a stimulus package to revive Japan's economy. Japan is in a far sharper recession than the US or Europe.

Japan's GDP had dropped 3.3% in the final quarter of 2008, a much steeper decline than in the US, which saw a 1.6% drop. UK’s economy had contracted by 1.5%.

Critics of the plan say it is a ploy to boost the popularity of Prime Minister Taro Aso and this will only expand Japan's already bulging budget deficit.The legislation enacting the stimulus plan has been mired in Japan's parliament for weeks. In a political battle sort of, the bill was passed after the government-controlled lower house overruled a no vote in the upper house, which is dominated by the opposition.

Japan has been one of the first countries in Asia to be hit by the global meltdown and lead the recession into the continent.

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Standard Chartered defies Pessimism

Standard Chartered bank which focuses on Asia, Africa and the Middle East, has defied the gloom afflicting the banking sector by reporting a rise in profits. The bank said its pre-tax profit for 2008 was $4.8bn (£3.4bn), up 19% compared with a year earlier.

A spokesperson for the Standard Chartered said that it was on a "firm footing" for 2009.It warned, however, that its core markets, which have so far proved more resilient to the credit crisis, have begun to feel the heat.

John Peace, the acting chairman of Standard Chartered, said last year's turmoil on the financial markets had been "truly extraordinary" and an extreme test for the banking industry. He warned further the uncertainty and the contraction of economies will continue this year and the situation can worsen.

The company said its focus on Asia and its sensible attitude to liquidity and costs had helped it to weather the storm.

The bank’s chief executive remarked that the over-leverage and over-complexity of the banking crisis in the UK and the US are not present to nearly the same extent in Asia. Asian banks, even while they are feeling the stress of dollar liquidity drying up and credit environment deterioration, are in much better shape than many counterparts in the West.

U.S. has raised its stake in Citigroup. The government has also already extended its aid to AIG this week as part of a new government rescue bid.

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Forex and global stocks fall sharply on fears financial sector could worsen

Forex and financial markets have been gripped by fears the global financial sector may perform worse than calculated. Investor confidence has already been hit by talk that US insurance giant AIG will need a further injection of government cash with its report due to be released today.

In Europe, the UK's FTSE 100 fell by 3.2%, while Germany's Dax was down 2.76% and France's Cac 40 lost 2.67%.Earlier in Asia, Japan's Nikkei 225 index closed down 288.27 points, or 3.8%, at 7,280.15. In Hong Kong, the Hang Seng fell 3.9% to 12,314.5 points.

China's manufacturing sector had declined further last month. South Korean imports and exports slumped to a record as well. Japan reported a steep drop in car sales. Weak economic data from China and South Korea has also underscored fears about Asia's export-dependent economies.

Monday morning slide in forex and stock indices was followed by a poor performance on Wall Street on Friday last week after data showed that economic growth was even weaker than thought.

This is turning out to be one of the most tumultuous times on record in the global financial markets. "You're seeing the U.S. is sinking lower and lower, and we're still desperately searching for a bottom," remarked an analyst.

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Forex-Currency update on Monday

Forex Daily Currency Update
2nd March 2, 2009 Monday

EURO:
Euro fell to a one-week low vs the dollar after European Union leaders rejected calls to back an aid package for eastern Europe, fueling concern the 16-nation region’s recession will deepen.

YEN:
The yen may extend its worst month in 13 years into March on speculation traders will keep reducing holdings of long positions in the currency that bet on a rise in the exchange rate. Japan’s currency weakened 7.9 percent versus the dollar in February, the poorest month since August 1995.

NZD & AUD:
New Zealand’s dollar fell to a 6 1/2-year low and Australia’s currency extended three weeks of declines after U.S. and Asian shares slumped, prompting investors to seek the safety of the greenback.

ASIAN CURRENCIES:
The South Korean won and the Indonesian rupiah led declines in Asian currencies on concern the global recession is worsening, deterring investors from buying emerging-market assets.

RUPEE:
India’s rupee slid to a record low as mounting global stock losses added to concern investors will pull money out of riskier emerging-market assets.The currency extended a two-week slump on speculation Standard & Poor’s will soon cut the nation’s debt rating to junk. The rupee also fell on concern the current-account deficit will widen from a record as exports decline amid a deepening global economic slump.

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