Sunday, 30 September, 2012

PARIS

AGENCIES

The Socialist governmentunveiled a tough 2013 budget

on Friday that slaps higherlevies on business and a 75-per-

cent tax on the super-rich butdoes not reduce public spending, to

the dismay of pro-reform lobbyists.Moscovici defended the ap-

proach in an interview with LeMonde newspaper, arguing that

harsher austerity meas-ures being im-

posed in

Spain, Greece and Italy were not ap-propriate for France and would under-mine its independence.

“Other countries succumbed tobudgetary carelessness and ended upin the hands of the market, hands andfeet chained,” he said. “They fell intorecession and their unemploymentrates have worsened in a climate ofwidespread social tension.”

“That’s why the 3-percent target -a condition for debt-clearing and re-turning to growth - is neither biasednor out of reach. France can and mustachieve it.”

With record unemployment and abarrage of data pointing to economicstagnation, economists have high-

lighted a risk of missing the target ifFrance were to fall short of a modest 0.8percent forecast for growth next year.

Moscovici called the growth target“ambitious, but realistic”, and said thegovernment should be judged on theresult of its economic policies, nottheir method.

“I accept Europe’s demands, I re-spect France’s commitments, but I re-fuse to have outsiders put their fingersinto the French welfare system. It needsto be reformed, not broken,” he said.

As German Chancellor AngelaMerkel and European Central Bankgovernor Mario Draghi maintain pres-sure on euro zone states to pursuestructural reforms, Moscovici pointed

to overhauls of labor and welfareplanned for next year.

However, the 55-year-old pouredcold water on Merkel’s calls for a newEuropean treaty to deepen integrationin the bloc, saying it was “not a currentquestion” - despite another public offi-cial hinting at openness to the idea.

On a planned merger between Eu-ropean aerospace group EADS(EAD.PA) and British defense contrac-tor BAE Systems Plc (BAES.L),Moscovici said a variety of “complex”concerns still needed to be addressed.

“France has a particular stake onthis issue, that of a state that is bothsovereign and stakeholder, and wantsto remain so,” he said.

ISLAMABAD

ONLINE

THE Asian DevelopmentBank (ADB) has committeda financing facility of $2.9billion over a medium termfor the government of Pak-

istan to enhance power generation sys-tem in the country.

Well informed sources told Onlinehere on Saturday that following the tightenergy crises in the country the govern-ment approved a package of power sec-tor reforms to settle this energy crisis

which are under implementation. The source said key pillar of these

reforms in the power sector of thecountry was to further develop thepower sector of the country especiallyto enhance power generation and to re-place inefficient power productionplants in the country.

Sources informed that another ob-jective by the government was to im-prove the power sector which iscausing 3 to 4 per cent loss to the na-tional economy while power sector in-efficiencies and losses have eaten Rs1.2 trillion of the national exchequers

during last four years. Sources informed that to improve

the transmission and distribution sys-tem in the country government has en-tered into an agreement with ADB forenhancement of investment program tothe tune of US $ 243 million.

Under this program new transmis-sion lines would be layed and perform-ance of inefficient power generationplants would be improved. This wouldhelpful to reduce the transmission anddistribution losses that have beenreached to 22.42% thus resulting intoloss of billion of rupees to the economy.

“These reforms would provide ade-quate and reliable power supply tocommercial and residential consumerswhile it would also provide an opportu-nity to complete the requirements ofindustries,” said sources, adding thatindustrial units which were suffering alot due to the power outages and capac-ity of industries have been reduced to30 percent.

Sources said that another worse af-fected to inefficiencies of power sectorwas resulting into promotion of corruptactivities at the end of power distribu-tion companies (DISCOs).

Countieshanker afterPakistanisports goods

Export of sports goodsgo up in two months

ISLAMABAD

APP

Exports of sports good increased by1.31 percent during the first twomonths of the current fiscal year ascompared to the same period of lastyear. According to the data of PakistanBureau of Statistics (PBS), the exportsof sports good were recorded atUS$.53.229 million in July-August(2012-13) against the exports ofUS$.52.543 million during July-August(2011-12). Among the sports goods, thehighest growth of 73.40 percent waswitnessed in the exports of gloves,exports of which decreased fromUS$.13.607 million last year toUS$.23.595 million during the currentyear. Trade of footballs witnesseddecrease of 12 percent during theperiod under review as its exportsdecreased from US$25.803 million toUS$22.707 million. The exports of allother sports goods decreased fromUS$13.133 million last year toUS$6.927 million during the currentyear, showing decrease of 47.26percent. Meanwhile, during the monthof August 2012, the exports of sportsgood increased by 13.82 percent whencompared to the exports of same monthof last year, however decreased by 0.09percent when compared to the exportsof July 2012. Exports in August 2012were recorded at US$26.602 millionagainst the exports of US$23.373million in August 2011 and exports ofUS$26.627 million in July 2012.During July 2012 the exports of glovessurged by 291.49 percent and 9.49when compared to the exports ofAugust 2011 and July 2012. The exportsof gloves during August stood atUS$12.332 million against the exportsof US$3.150 in August 2011 andUS$11.263 million in July 2011, thedata revealed. However, the exports offootballs decreased by 13.25 percentand 3.93 percent during August 2012when compared to the exports ofAugust 2011 and July 2012 respectively.Similarly, the exports of all other sportsgood decreased by 57.50 percent and16.89 percent in August whencompared to the August 2011 and July2012 respectively.

ISLAMABAD

ONLINE

The International Monetary Fund (IMF) has revealedthat public debt has surpassed 100 percent of GrossDomestic Product (GDP) in Japan, the United States,and several European countries in recent years.

The IMF’s World Economic Outlook notes that pub-lic debt has surpassed because of the low growth, persist-ent budget deficits, and looming liabilities due to aging

populations in these countries. A result, particularly inEurope, has been ratings downgrades and higher bor-rowing costs.The main IMF forecast for the global econ-omy will be released on October 9 next month in Tokyo.

According to World Economic Outlook there is wide-spread debate about the best way to reduce public debt.Some advocate strict budgets or fiscal austerity; others,reinvigorating growth through spending, or fiscal stim-ulus; and still others cite the successful post–World WarII U.S. strategy of “financial repression”—governmentschanneling funds to themselves. It study said countriesbattling high public debt must combine policies that sup-port economic growth with lasting changes in govern-ment spending and taxation.

The World Economic Outlook further said inJapan, weak growth prevented fiscal consolidation.

Debt continued to climb until the authorities addressedweaknesses in the banking system and corporate sectorthat limited the efficacy of monetary policy. And in Bel-gium, Canada, and Italy, debt did not fall until mone-tary conditions were supportive. These countries allimplemented large fiscal adjustments. But it was onlyafter real interest rates fell that all three countries wereable to reduce their debt. In some cases, reforms towage-setting mechanisms broke a wage-price spiral.And exchange rate depreciation supported external de-mand and growth.

“The case of the United Kingdom offers a caution-ary lesson for countries contemplating internal deval-uation today. The U.K. government combined tightmonetary policy and severe fiscal austerity to cut theprice level and return the pound to prewar parities,”the study continued.

The IMF in his studyadded that the U.S.experience in theimmediatepostwary e a r sc o n -f i r m e dthe im-portance ofsupport ivemonetary pol-icy. Limits onnominal interestrates and bursts ofinflation quickly re-duced the debt ratio,while growth re-mained strong.

ADB provides powergeneration clout

French Finance Minister Pierre Moscovici says cutting public deficit to three percentof economic output next year is a realistic goal and France must set its own courseto reaching it to preserve its independence

Public debt soars!

$2.9b to be given to Pakistan to enhance power generation system

‘France must chart own path to EU deficit goal’

The ecstasy of gold$2.7b IMF gold sales profits to help poor

WASHINGTON: The International Monetary Fund approved Friday $2.7 billion in gold sales profits toboost financing to low-income countries. The IMF executive board earmarked the money for the globallender’s concessional lending program, the Poverty Reduction and Growth Trust. The distribution of thewindfall profits will occur “only when members have given satisfactory assurances that an amount equivalentto at least 90 percent of the distribution will be made available to the PRGT,” the institution said in astatement. “This is a major step towards putting our important concessional lending operations for low-income members on a sustainable footing,” IMF managing director Christine Lagarde said. “During the 2009financial crisis, we were able to boost financial assistance to our low-income country members, helping themweather the storm and preserve their hard-fought gains in the battle against poverty.” Jubilee USA Network,an alliance of activists advocating debt cancelation to fight poverty, cheered the board’s decision, sayingcombined with a first installment of $1.1 billion, the IMF has put nearly $4 billion into the PRGT from thewindfall gold profits. “This translates into real relief for some of the world’s poorest people,” said EricLeCompte, executive director of Jubilee USA Network. “This has been a global campaign more than two yearsin the making and our work paid off.” The IMF sold more than 400 tonnes of gold in 2009-2010 in a bid toput the Washington-based lender’s finances on a sound long-term footing. Due to the high price of gold at thetime, the IMF booked $3.8 billion in profits. AFP

Surpasses 100% in US,Japan, several EUcountries, IMF reveals

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02

Sunday, 30 September, 2012

Business

Oil prices rise

on Middle East

frictionNEW YORK

AFP

Crude oil prices rose modestly Friday asworries over Middle East tensions stokedconcerns about supply from the oil-richregion. New York’s main contract, lightsweet crude for November, gained 34cents from Thursday in choppy trade,closing at $92.19 a barrel. In London,Brent North Sea crude for Novemberdelivery settled at $112.39 a barrel, up 38cents, after spending part of the sessionin the red. Matt Smith at Summit Energysaid the oil market was “very undecided— we are just trading sideways.” Oilprices, which had jumped sharplyThursday, were still supported “becauseof the overhang from the geopoliticalrhetoric yesterday and this week fromthe UN General Assembly, specificallywith (Israeli Prime Minister Benjamin)Netanyahu’s comments yesterday,”Smith said. During his address before theUN, Netanyahu called for a “clear redline” to stop Iran from getting a nuclearbomb. He used a red marker pen to drawa line through a cartoon diagram of abomb to illustrate what the internationalcommunity’s limit for Iran’s nuclearenrichment program should be. He saidIran had 70 percent of the necessaryuranium for a bomb and warned that atthe current pace of enrichment, theIslamic republic could have nearly all thematerial needed to create a first bomb bynext summer. “Tensions between Iranand the West reinforced concerns aboutpotential supply disruptions,” PhillipFutures said in a market commentary.“Israeli Prime Minister BenjaminNetanyahu drew his ‘red line’ for Iran’snuclear program in a speech at theUnited Nations... and voiced confidencethe United States shares his view.”

NEW YORK

AGENCIES

THE S&P 500 climbed 5.9percent over the past threemonths as central banksgeared up to boost liquidityto markets and kick-start

their flagging economies. The move haslifted the benchmark index as much as 17percent this year, recently pushing theS&P to its best level in five years.

But on Friday, investors grappled withmore disappointing U.S. economic data asbusiness activity in the U.S. Midwest con-tracted for the first time since 2009. Thenews came on the heels of other weak re-gional manufacturing reports and a sharpdrop in U.S. durable goods orders lastmonth. “The reality is that the funda-mentals of the market certainly don’tsupport a 17-plus-percent run-up yearto date, but with all the QE (quantita-tive easing) action, that has had a huge,huge impact,” said Oliver Pursche, pres-ident of Gary Goldberg Financial Serv-ices in Suffern, New York.

The Dow Jones industrial average.DJI fell 48.84 points, or 0.36 percent,to close at 13,437.13. The Standard &Poor’s 500 Index .SPX lost 6.48 points,or 0.45 percent, to finish at 1,440.67.The Nasdaq Composite Index.IXICdropped 20.37 points, or 0.65 percent,to close at 3,116.23.

For the third quarter, the Dow rose4.3 percent and the Nasdaq climbed 6.2percent. For the month of Septemberalone, the Dow gained 2.6 percent andthe S&P 500 rose 2.4 percent, while theNasdaq advanced 1.6 percent.

In contrast, the trend for the weekwas down, with the Dow off 1.1 percent,while the S&P 500 shed 1.3 percent andthe Nasdaq dropped 2 percent.

In Friday’s session, stocks came offtheir lows after Spanish bank stress testswere released, and were mostly withinexpectations. The independent auditshowed banks will need 59.3 billioneuros ($76.3 billion) in extra capital to

ride out a serious downturn.But Spain still remains mired in dif-

ficulties. Moody’s review of the country’scredit rating, due later in the day, couldadd to its challenges. On Thursday, rat-ings agency Egan-Jones cut Spain’s sov-ereign rating further into junk status,citing the country’s faltering banks andstruggling regional governments.

The euro fell against the dollar onFriday, declining for a second straightweek, as uncertainty persisted aboutSpain’s prospects for receiving a bailoutto prop up its ailing banks.

Recent protests in Spain and Greece

against austerity plans have also height-ened investors’ concerns as the turmoilcould impede political maneuvering.

On the earnings front, U.S.-listedshares of Research in Motion (RIM.TO)(RIMM.O) jumped 5 percent to $7.50 aday after a smaller-than-expected quar-terly loss. Pledges by the European Cen-tral Bank, the Federal Reserve and theBank of Japan to buy government bondshelped cement a summer rally in stocksand commodities. But markets have lostsome of their luster after the announce-ments from the central banks in the firsthalf of September. After pulling back 1.7

percent over the last two weeks, the S&P500 is now up 14.6 percent so far thisyear. The S&P 500’s drop of 1.3 percentthis week is its worst weekly decline sincethe start of June. The coming monthshold a series of difficult challenges formarkets, including third-quarter earningsseason, which is expected to show thefirst drop in earnings since 2009, and theU.S. presidential election in November.

Reflecting Friday’s defensive tone,nine of the 10 S&P sectors fell. Only theS&P utilities index .GSPU was positive, upjust 0.5 percent. The decline in the S&Ptechnology sector index .GSPT was lim-ited, as Accenture PLC (ACN.N) climbed7.1 percent to $70.03. Accenture’s gain fol-lowed its forecast of full-year earningshigher than analysts’ estimates as the com-pany bolsters its outsourcing business.

Nike Inc (NKE.N) warned of slowingorders in China, becoming the latest com-pany to sound a note of caution about howeconomic weakness in the world’s second-largest economy was affecting its busi-ness. Nike’s stock fell 1.1 percent to$94.91. Trading was light on the quarter’slast day, when money managers reposi-tion their portfolios. About 6.15 billionshares changed hands on the New YorkStock Exchange, Amex and Nasdaq, com-pared with the average daily volume of6.38 billion. Decliners outnumbered ad-vancers on the NYSE by a ratio of 3 to 2,while on the Nasdaq, nearly two stocks fellfor every one that rose.

NEW YORK

AGENCIES

Spain plans to ask for around 40 billioneuros ($51.46 billion) in European aid torecapitalize its weak banks, Bank of SpainDeputy Governor Fernando Restoy saidon Friday.

An independent audit of Spanishbanks by consultancy Oliver Wymanshowed the country’s troubled lenderswould need 59.3 billion euros in extracapital to ride out a serious economicdownturn. Spain will remain in focus, an-alysts said, with Moody’s Investors Serv-ice expected to finish a credit ratingreview soon that may cost Madrid its sov-ereign investment-grade status.

“At some point that (Spanish) credi-bility issue is likely to come back,” saidDerek Halpenny, European head of FXresearch at Bank of Tokyo Mitsubishi in

London. “This is the fifth package - so thehistory of previous packages is that theyweren’t enough and lacked credibility.”

The MSCI index .MIWD00000PUSof world stocks was down 0.6 percent.Madrid’s IBEX .IBEX index led the falls,down 1.7 percent as an early lift fromSpain’s new round of spending cutsfaded. The Dow Jones industrial average.DJI was down 48.96 points, or 0.36 per-cent, at 13,437.01. The Standard & Poor’s500 Index .SPX was down 6.30 points, or0.44 percent, at 1,440.85. The NasdaqComposite Index .IXIC was down 20.40points, or 0.65 percent, at 3,116.20.

Equities were hit by a report showingbusiness activity in the U.S. Midwest con-tracted this month for the first time inthree years, while the dollar strengthenedagainst the euro as investors shunnedrisk. “We had been seeing good data re-cently, but now we seem to be following

the slowdown in China and Europe andwe’re seeing weakness,” said Paul Nolte,managing director at Dearborn Partnersin Chicago.

Still, the S&P 500 index closed outthe third quarter with a gain of around5.8 percent.FRANCE ALSO IN THE SPOTLIGHT:

France was also under the microscope onFriday. President Francois Hollande’sfirst annual budget, the country’s tough-est in 30 years, raised taxes to bring in 30billion euros ($39 billion) to keep deficit-cutting promises.

France announced its public-sectordebt rose almost 2.0 percent to 91 per-cent of gross domestic product.

Investors this week have again ex-pressed concern that the euro zone is fail-ing to gain control over its debt crisisthough spending cuts announced inSpain’s budget on Thursday helped the

yield on Madrid’s 10-year bond fall backbelow 6.0 percent.

However, euro zone inflation datalimited any falls in yields on Friday as asurprise rise in Eurostat’s flash Septem-ber reading cast doubts over the near-term chances of another interest rate cutfrom the European Central Bank.

The euro fell 0.5 percent to $1.2847as risk aversion rose after the U.S. data.The dollar gained 0.6 percent against theyen, while the euro managed to gain 0.1percent against the Japanese currency.

In other currency markets, China’syuan hit an all-time high versus the dol-lar, despite slowing Chinese economicgrowth recently.

Concerns about progress solving the

euro-zone debt crisis and slowing globaleconomic growth helped to support U.S.Treasury prices. U.S. Treasury debt priceswere higher. The benchmark 10-year U.S.Treasury note was up 6/32, with the yieldat 1.6335 percent

In commodity markets, gold surren-dered gains on Friday as the U.S. dollarrallied but the metal stayed on track forits biggest quarterly gain in more thantwo years on the back of this month’s cen-tral bank easing measures.

Oil markets were steady with thoseinvestors more inclined to look at tightgasoline supply in the United States.

Brent crude futures for Novemberrose 0.1 percent to $112.17 per barrel.U.S. crude rose 0.2 Percent to $92.03.

Global stocks drop, euro fallson euro zone worriesStocks in the United States and Europedeclined and the euro dipped after initialoptimism about Madrid’s debt-cutting plansgave way to anxiety over its troubled banksand faltering global economic growth

Wall Street marks best thirdquarter since 2010 Wall Street closed its best third quarter since 2010 after a wave of central bankactions sparked a dramatic reversal in equity markets, but signs of weakness inthe economy drove stocks lower

Wall street banks not among Fed borrowers in Q3 2010

NEW YORK: The U.S. Federal Reserve on Friday named the banks that borrowed at its discount window during the thirdquarter of 2010 but the period showed limited activity and none of the biggest Wall Street firms had turned to the emergencyfacility for help. The disclosure of the once closely guarded information was forced on the Fed by the Dodd-Frank financialreform law. Some of the decline in borrowing may have reflected banks steering clear of the discount window because theyknew their visit wouldbe published, albeit with a two-year lag. Lending activity was very modest compared to the peaksreached during the 2007-09 financial crisis, when banks borrowed billions of dollars to stay afloat. The 360 borrowers weremostly small institutions and were widely spread across the country from Anchorage in Alaska down to Winter Park inFlorida. The central bank had strenuously opposed naming banks which accessed the window, arguing it could put them offusing it in times of future stress out of fear it might make them look weak, which in turn could weaken the financial system.The Fed last year had to disclose details on discount window lending during the financial crisis after media organizations suedfor access, but Friday’s release was the first quarterly batch of data mandated by Dodd-Frank. AGENCIES

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