NEWS,12.12.2012

UN condemns North Korean missile launch

The UN Security Council has condemned North Korea's missile launch and will continue discussions on how to respond to Pyongyang's violations of a UN ban on North Korean ballistic missile development, the council president said."Members of the Security Council condemned this launch, which is a clear violation of Security Council resolutions 1718 and 1874," Moroccan UN Ambassador Mohammed Loulichki, president of the Security Council this month, told reporters."Members of the Security Council will continue consultations on an appropriate response," he said after a closed-door meeting on the North Korean missile launch.Loulichki recalled the council's April 2012 warning to Pyongyang that the council would act in the event of any further rocket launches.UN Secretary-General Ban Ki-moon also strongly condemned the launch as a "provocative act" in breach of Security Council resolutions banning Pyongyang from developing ballistic-missile and nuclear technology.Several council diplomats said they hoped the 15-nation body would consider adopting a binding resolution, possibly expanding existing UN sanctions against Pyongyang."We support a strong reaction by the council, it's a clear violation," French UN Ambassador Gerard Araud told reporters before the council meeting. "But we have to see what our friends want.""We do consider it logical to sooner or later have a resolution," he added.British Ambassador Mark Lyall Grant echoed that sentiment: "In our view (the council) should react, it should react quickly, and it should react strongly to this provocation."A senior Western diplomat said on condition of anonymity that the United States, Europe, Japan and South Korea were among those who would like to see UN sanctions expanded.That could include adding more entities to the UN blacklist, banning travel and freezing assets of individual North Korean officials and tightening the cargo-inspection regime.Whether or not the council can agree a resolution - with or without expanding the sanctions will depend largely on China and its diplomatic ally on the Security Council, Russia. Both nations have veto powers and tend to support each other and vote the same way on issues important to either of them.China traditionally acts as the protector of neighbouring North Korea on the Security Council."Exactly what the Chinese will be prepared to accept in form and substance is not yet clear," the diplomat said. He hoped they could have a resolution agreed by the end of next week.North Korea successfully launched a rocket on Wednesday, boosting the credentials of its youthful new leader, Kim Jong-un, who took power a year ago, and stepping up the threat the isolated and impoverished state poses to opponents.The rocket, which North Korea says put a weather satellite into orbit, has been labelled by the United States, South Korea and Japan as a test of technology that could one day deliver a nuclear warhead capable of hitting targets as far away as the continental United States.It was Japan that first appealed to the Security Council to take up the issue of North Korea's missile launch.Ban, a former South Korean foreign minister, expressed concern that the launch could negatively impact prospects for peace and security in the region.A statement issued by his office said the launch was "a clear violation of Security Council resolution 1874, in which the Council demanded that the DPRK not conduct any launch using ballistic-missile technology."The statement said Ban had urged North Korea's leaders not to launch a missile but "instead to build confidence with its neighbours while taking steps to improve the lives of its people.""The Secretary General is concerned about the negative consequences that this provocative act may have on peace and stability in the region," the statement said, adding that Ban was in touch with "concerned" governments.North Korea followed what it said was a similar successful launch in 2009 with a nuclear test that prompted the UN Security Council to stiffen sanctions that it originally imposed in 2006 after Pyongyang's first nuclear test.

Euro zone recovery hopes fade further into 2013

Chances of a recovery for the euro zone economy have faded further into 2013, according to a poll of economists who say the recession has deepened over the last three months. Huge questions over the health of some of the region's biggest economies make any kind of major rebound for the euro zone extremely unlikely next year. That may have to wait until 2014, and quite possibly later. The currency union will see no better than stagnation early next year, before finally achieving paltry growth of around 0.2% in the second quarter, today's poll of more than 70 economists showed.The outlook represents a new low since started polling on the 2013 outlook in January. No economist in the survey now believes the euro zone economy grew in the current quarter.Overall, economists expect a full year average growth rate of zero for next year.The region as a whole is reliant on Germany as the biggest driver of economic growth, and the signs from there have been ominous."Key German surveys have shown few signs of recovery in Q4 so far and industrial production collapsed by 2.6% in October," said Philip Shaw, chief economist at Investec, in a research note."Hence the upturn is further away than seemed to be the case and we have slashed our 2013 euro area GDP forecast to -0.4% from 0.3% previously."Economists now believe the economy has shrunk this quarter by 0.3% rather than the 0.2% forecast last month, which would mean the recession has deepened from the 0.1% decline reported for the third quarter.Despite a clear consensus on the poor health of the economy, respondents were split right down the middle over what else the European Central Bank will do about it, if anything.Thirty-nine economists think it will hold its main refinancing rate at its current record low of 0.75% through the first quarter of next year, while 38 believe the ECB will cut it to 0.5%.That analysts are so divided is little wonder as the ECB's Governing Council members are similarly split."At least one member of the Governing Council has voted for a rate cut, which ECB President Mario Draghi said could happen if the outlook deteriorates further," said Azad Zangana, economist at Schroders, who thinks the ECB is more likely to stay on hold.Whatever the ECB eventually decides to do, inflation looks unlikely to stand in its way.The poll showed inflation falling beneath the bank's 2% target ceiling in the second quarter next year, where it looks set to stay through to midway next year.Economists put only a median 25% chance on Greece leaving the euro zone next year, echoing the findings of an October poll which found that just eight of 34 fund managers foresaw such an event.

IEA sees sluggish oil demand in 2013

Global oil demand will be sluggish throughout 2013 as economic expansion remains tepid and oil supply levels comfortable, which could alleviate oil price pressures on consumers, the West's energy agency said on Wednesday."Global demand growth is expected to stay relatively sluggish through 2013, based on the continued assumption of tepid global economic expansion," the International Energy Agency said in a monthly report.It forecast global oil demand growth for 2013 at 865 000 barrels per day, 110 000 bpd higher than in its previous report, taking consumption to an average of 90.5 million bpd.On the supply front, the IEA said spectacular growth in US production on the back of a boom in shale oil will be one of the top developments for the market in 2013.The United States will contribute around two thirds of an aggregate increase of 890 000 bpd in non-OPEC output in 2013, for  a total of 54.2 million bpd, IEA said."If confirmed, this would be the fourth-largest annual growth for nonOPEC supplies in the last decade. In fact, growth could exceed expectations in the US if prices remain high and if producers of light tight oil are able to find economic transport options for their incremental barrels," it said.The IEA also said its estimate of demand for OPEC oil was unchanged for 2013 at 29.9 million bpd, much lower than the group's current production of 31.22 million in November.It said, however, that it did not expect OPEC ministers, who were meeting in Vienna on Wednesday, to decide on any production cuts but that they would probably roll over their current 30 million bpd target, given relatively robust oil prices."Indeed, Brent futures prices are on track to surpass 2011 record levels this year, buoyed by heightened political risks in key producing countries, both in OPEC and nonOPEC countries," it said.The IEA said it believed Iranian production had edged lower in November, down 20 000 bpd to 2.70 million bpd, and that preliminary shipping data indicated volumes may fall further in December due to international sanctions.Shipments of Iranian crude, based on arrival data, fell to multi-year lows of 1.07 million bpd in September but recovered to 1.3 million in November as reduced oil buying from China and India was offset by a rise in purchases from Malaysia, Taiwan and the UAE, the IEA said."Iranian crude exports are expected to turn lower next month and into the New Year - reaching a level closer to 1 million bpd - as EU and Asian countries reduce further their crude imports from Iran in order to secure continued access to the US financial system," it said.The IEA expected top global exporter Saudi Arabia to cut shipments in coming months due to increased demand for crude supplies at its domestic and international refinery operations.It said it believed Saudi Arabia's output edged higher in November, by 100 000 bpd to 9.9 million, significantly higher than data given by Saudi Arabia to OPEC earlier this week showing output of 9.49 million.The IEA said that, although on the surface the oil market appeared calm, recent data showed radical structural changes including an apparent acceleration in the eastward shift of global oil demand growth.In the third quarter of 2012, European oil demand went through its steepest year-on-year contraction since the 2008/2009 financial crisis, while Asian oil demand remained robust.Oil demand by the European members of the OECD plummeted by 895 000 bpd in the quarter to 13.8 million bpd due to a combination of near record product prices and a weak economy."The last time European oil demand nosedived as it did this summer, international oil prices had been in freefall. Not only are crude prices holding up, but European consumer prices hovered near record highs this summer, buoyed in part by a weakening currency. This was likely part of the reason for the dip in demand," the IEA said.It also noted that five of the world's top 10 oil consumers were now nonOECD countries. While the United States still leads the top 10, Brazil, Russia, India, China and Saudi Arabia together took five of the next six spots, the IEA said.

Eurozone recovery hopes fade further

Chances of a recovery for the eurozone economy have faded further into 2013, according to a poll of economists who say the recession has deepened over the last three monthsHuge questions over the health of some of the region's biggest economies make any kind of major rebound for the eurozone extremely unlikely next year. That may have to wait until 2014, and quite possibly later.The currency union will see no better than stagnation early next year, before finally achieving paltry growth of around 0.2% in the second quarter, Wednesday's poll of more than 70 economists showed.The outlook represents a new low since started polling on the 2013 outlook in January. No economist in the survey now believes the eurozone economy grew in the current quarter.Overall, economists expect a full year average growth rate of zero for next year.The region as a whole is reliant on Germany as the biggest driver of economic growth, and the signs from there have been ominous."Key German surveys have shown few signs of recovery in Q4 so far and industrial production collapsed by 2.6% in October," said Philip Shaw, chief economist at Investec, in a research note."Hence the upturn is further away than seemed to be the case and we have slashed our 2013 euro area GDP forecast to -0.4% from +0.3% previously."Economists now believe the economy has shrunk this quarter by 0.3% rather than the 0.2% forecast last month, which would mean the recession has deepened from the 0.1% decline reported for the third quarter Despite a clear consensus on the poor health of the economy, respondents were split right down the middle over what else the European Central Bank will do about it, if anything. Thirty-nine economists think it will hold its main refinancing rate at its current record low of 0.75% through the first quarter of next year, while 38 believe the ECB will cut it to 0.5%.That analysts are so divided is little wonder as the ECB's Governing Council members are similarly split."At least one member of the Governing Council has voted for a rate cut, which ECB President Mario Draghi said could happen if the outlook deteriorates further," said Azad Zangana, economist at Schroders, who thinks the ECB is more likely to stay on hold. Whatever the ECB eventually decides to do, inflation looks unlikely to stand in its way.The poll showed inflation falling beneath the bank's 2% target ceiling in the second quarter next year, where it looks set to stay through to midway next year.Economists put only a median 25% chance on Greece leaving the eurozone next year, echoing the findings of an October poll which found that just eight of 34 fund managers foresaw such an event

China's drugs market to grow by $165bn

Drug companies are spending record amounts on acquisitions in emerging markets, with China the most attractive target nation, reflecting sharply rising sales of western medicines in the country.Overall expenditure by both overseas and domestic pharmaceutical companies in emerging markets has reached $20bn so far this year, up two-thirds on the 2011 total, according Thomson data. An analysis of year-to-date deals by law firm Freshfields Bruckhaus Deringer, published on Wednesday, showed China accounted for $6.8bn of the total.Spending by overseas acquirers alone in key growth markets is running at $3.5bn so far this year, an increase of 95% on 2011.The sharp upturn in emerging market activity contrasts with an overall decline in pharmaceutical mergers and acquisitions (M&A) worldwide to $146bn from $225bn last year.After a flurry in 2011, which took deal-making back to pre-recession levels, drug companies been wary of hitting the takeover trail in a big way in Western markets in 2012."Instead, pharma investments in fast growing economies are gathering steam," said Freshfields corporate partner Jennifer Bethlehem. "While M&A is an expensive remedy, 'pharmerging' markets are obvious investment choices for cash-rich drug companies." Emerging markets are expected to account for the bulk of growth in the global pharmaceuticals market in the next few years, as sales in Europe and United States slow due to a wave of patent expiries. China's drugs market, in particular, is forecast to grow by 15-18% annually to between $155bn and $165bn by 2016, making it the world's second-largest market after the US, according to consultancy IMS Health.Freshfields said it expected investment in China's pharmaceuticals sector to pick up further in 2013, following a smooth transition of political leadership in the country.

Mild pick-up for US economy next year

The US economy is expected to remain sluggish next year, despite widespread expectations for more monetary stimulus from the Federal Reserve later on Wednesday, a poll showed. Most consensus forecasts for the first half of 2013 were downgraded to their lowest since began polling for this period more than a year ago. The forecast for the current quarter was slashed again.That underscores a very fragile world economic outlook, given sharp slowdowns in many big emerging economies such as Brazil and India and only a tentative sign of re-emergence of China's economic growth engine."Too much of the global economy is stumbling to support export demand," said Carl Riccadonna, senior US economist at Deutsche Bank. "It's Europe, it's recession in Japan, (and) softer growth out of China for much of the year.""US exports are likely to pose a drag on growth in the current quarter, which is something we haven't see since the collapse in trade during the recession," he said.Much depends on whether politicians can sort out a deal to avoid the "fiscal cliff", a series of automatic tax hikes and spending cuts next year. Uncertainty around that has already damaged business confidence and curtailed hiring.Indeed, the poll showed growth is expected to have slowed to just 1.2% on an annualised basis in the quarter that ends this month, down sharply from 1.6% in the November poll, and well below the economy's potential.Weak exports have dragged on growth, not to mention superstorm Sandy, which hit the US east coast in October and shut down most of New York City and surrounding area for days, damaging business and infrastructure.The outlook for all of 2013 has been chopped to 1.9%, far below the Fed's September prediction of 2.5%-3.0%, and also the lowest consensus for 2013 polled so far this year.Despite a third round of bond purchases from the Federal Reserve to boost the jobs market, employment expectations remained tepid. The consensus for average monthly non-farm payrolls growth was mostly unchanged at 127 000 for the first three months of 2013.That comes despite a strong majority of forecasters, 47 of 51, expecting the central bank to buy more US Treasuries when its Operation Twist program expires at the end of December.The Fed is expected to buy $45bn of Treasuries every month in addition to the already-announced purchases of $40bn every month in mortgage-backed securities. But these new purchases will further expand the Fed's balance sheet. The poll also showed the Fed is likely to continue its monetary stimulus for at least a year, making for an additional $1 trillion of purchases. The Fed has bought bonds worth $2.3 trillion in two prior rounds of quantitative easing.A majority, 31 of 49, also expect the Fed eventually to adopt numerical thresholds for inflation and unemployment, similar to results of a survey taken last week.So far, markets have been sanguine that Washington will avoid the fiscal cliff. US stocks have erased all their losses after the November 6 presidential election and the S&P 500 is up almost 1% so far this month.But signs from lawmakers have been mixed with nothing concrete to indicate a deal will be reached by the end-of-the-year deadline.US House of Representatives Speaker John Boehner offered no signs of progress on Tuesday but said he remains hopeful that both sides would reach an agreement.But Senate Democratic leader Harry Reid said it would be difficult to get a deal before Christmas.If a deal is not reached it could lead to $600bn being sucked out of the economy in 2013 in what is essentially a self activating austerity program built into current law.

NEWS,10.11.2012

Obama 'open to compromise' to avoid cuts

Newly re-elected President Barack Obama has offered to deal with Republicans to avert a looming US fiscal calamity but insisted a tax increase for the very rich must be part of the bargain.Obama reminded Republicans that his approach to avoiding steep tax hikes and spending cuts due in January, which could trigger another recession, had just won the backing of Americans at the polls.He spoke just hours after John Boehner, the Republican Speaker of the House of Representatives, had repeated his party's commitment not to raise anyone's tax rates as part of a deal to address the fiscal crisis.In his first event at the White House since beating Republican Mitt Romney in Tuesday's election, Obama called on Congress to work with him to produce a plan and invited congressional leaders to meet with him next week."I'm not wedded to every detail of my plan. I'm open to compromise. I'm open to new ideas," he said.The "fiscal cliff" of steep government spending cuts and tax increases due to be implemented under existing law in early 2013 is Obama's most pressing challenge after winning a second term.Aimed at cutting the federal budget deficit, the planned measures could take an estimated $600 billion out of the economy and severely hinder economic growth.While striking a conciliatory tone toward the Republican House majority, Obama said voters supported his ideas, including raising taxes on the wealthiest Americans."I just want to point out, this was a central question during the election. It was debated over and over again. And on Tuesday night we found out that the majority of Americans agree with my approach," he said.Earlier, Boehner called on Obama to play a more active role in addressing the issue and urged the president to take the lead in negotiations."This is an opportunity for the president to lead. This is his moment to engage the Congress and work towards a solution that can pass both chambers," Boehner told a news conference.While disagreeing on immediate measures to avert the looming crisis, Obama and Republicans may find common ground in calls for enactment over the next six months of a larger package of deficit reduction measures, including a rewrite of US tax laws.The non-partisan Congressional Budget Office reiterated on Thursday that if left unaddressed, the abrupt fiscal tightening would knock the economy back into recession, with unemployment rates soaring back to about 9%. The rate is now 7.9%.But it also warned of a crisis ahead if the United States does not stem the growth of its exploding deficit.Partisan squabbling over the budget crisis will also harm the US economy, according to a strong majority of economists polled after Tuesday's presidential election.

Chavez On Obama Reelection: President Should Forget Global Wars, Fix Domestic Problems

 

The U.S. government's chief antagonist in Latin America, Hugo Chavez of Venezuela, has advised newly re-elected U.S. President Barack Obama to avoid further entanglement in international conflicts and concentrate on fixing internal problems."He should reflect first on his own nation, which has a lot of economic and social problems. It's a divided, socially fractured country with a super-elite exploiting the people," the socialist president said late on Thursday in his first reaction to Obama's victory this week.The maverick Chavez, who has inherited Fidel Castro's mantle as Latin America's most voluble challenger of U.S. power and policy, said it was time Obama pulled back from global affairs."He should dedicate himself to governing his country and forget dividing and invading other nations," added Chavez, who has constantly criticized U.S. involvement in Iraq, Afghanistan and other hot spots around the world.To the disappointment of the U.S. government, Chavez was re-elected for another six-year term in October, providing a continued platform to implement his self-styled socialist revolution and keep railing against Washington.The 58-year-old Chavez, a quieter figure these days after a year of debilitating treatment for two bouts of cancer, had backed Obama over Republican challenger Mitt Romney in the White House.Nevertheless, he does not disguise his disappointment in Obama, accusing him of perpetuating the same aggressive foreign policies as his predecessor, George W. Bush.Since his Oct. 7 presidential election victory over opposition challenge Henrique Capriles, Chavez has been relatively subdued, only popping up on state television once or twice a week in meetings with ministers.He has made no major new policy announcements, beyond promising more efficiency in government and a widening of socialist "communes" across Venezuelan society.Many Venezuelans expect a devaluation of the bolivar currency in coming months the black market rate is three times the official one and perhaps more nationalizations in an economy where Chavez has radically increased state ownership.Speaking at a Cabinet meeting, Chavez made light of nationalization concerns, urging businesses not to fear him."Come and invest! Don't believe the fairy tale that we're going to expropriate you," he said in comments on state TV.Earlier in the week, Chavez plied the same line, espousing a supposed new moderation toward private business that critics scoff at as hypocritical and barely believable."It's totally false that I have a plan to expropriate everyone," he said then. "Don't be deceived by that tale of 'here comes the wolf.' Lies. I'm urging you to come and work."He was less conciliatory in his view of Venezuela's upcoming state elections on Dec. 16, casting them in his Thursday appearance as a continuation of the state's battle against "counter-revolutionary" candidates of "the bourgeoisie.""We have to keep fighting this ideological confrontation," he urged his candidates for governorships in the 23 states.The most closely watched vote is in Miranda state, where incumbent governor Capriles aims to hold off a challenge from Elias Jaua, a heavyweight Chavez ally and former vice president.Should Capriles lose, it would dent his status as Venezuela's main opposition leader and deal another blow to the coalition of anti-Chavez parties already demoralized by their failure to oust him from the presidency.However, pollster IVAD put Capriles way ahead this week, with 55 percent of voter intentions versus 34 percent for Jaua. The opposition currently holds seven states.

A Trade Policy for President Obama's Second Term

 

President Obama's trade policy in his first term included working with Congress to pass free trade agreements with South Korea, Colombia and Panama, continuing negotiations on the Trans-Pacific Partnership and expanding it to include Canada and Mexico. Moreover, Obama set a goal of doubling exports by 2014, established a trade enforcement council and increased WTO dispute settlement to enforce existing international trade laws. He also effectively managed the complex U.S.China economic relationship, getting China to more effectively protect US intellectual property rights and ending China's so-called indigenous innovation policies. During the next four years the president should build on this progress and develop a comprehensive trade policy that does three things: 1) builds greater cooperation with China 2) pursues comprehensive and high quality free trade agreements; and 3) articulates a vision for moving the WTO Doha Round forward.The size of U.S.-China trade makes building this bilateral relationship key to achieving Obama's goal of doubling exports and for making progress on broader U.S. goals on an international level. But the size and growing trade deficit - which in 2011 was $295 billion and is on track to be even larger in 2012 - feeds concerns about unfair Chinese business practices and American economic and manufacturing decline, which ultimately makes advancing the economic relationship with China rather difficult.The challenge for Obama is that the size of trade deficit is unlikely going to change much in the next four years because of China's role in global supply chains as the major assembly point for goods made from components sourced from South East Asia, Europe, the U.S. and Japan. In this light, the U.S.-China trade deficit is the accumulation of declining U.S. trade deficits with countries like Japan, South Korea and Malaysia as businesses in these countries have shifted production to China. This shift to more efficient and cost-effective production conditions has led to significant decreases in the prices of these imported goods to American businesses and consumers. One way to reduce the bilateral trade deficit would be to address China's undervalued currency. An undervalued renminbi (RMB) has the effect of making Chinese imports cheaper and American exports to China more expensive. Therefore a revaluation would reduce the deficit by increasing U.S. exports to China and reducing imports from China. The dispute about China's undervalued currency has also negatively affected broader U.S. trade goals, such as concluding the WTO Doha Round since the undervalued RMB caused developing country to resist further reductions in tariffs due to concerns about competition from cheap Chinese imports. That said, the net economic impacts of China's undervalued currency for the U.S. are unclear as a lower RMB also leads to cheaper goods for American consumers and businesses. While an appreciating RMB will likely lead businesses to relocate to lower cost countries and thereby reduce the U.S.China trade deficit, it will not lead to a decrease in the overall U.S. trade deficit.But reducing these US concerns about the RMB and the trade deficit, other areas for cooperation with China like clean energy should open up. President Obama supports developing green energy in the U.S. and China's 12th Five Year Plan includes ambitious domestic renewable energy goals. These goals could be complimentary with the U.S. specializing in high-end green technologies and services and China manufacturing components like solar photovoltaic cells. A liberalized trading regime in green energy would underpin this outcome, leading to the most efficient allocation of resources and reducing the costs of renewable energy in both countries. But concerns in the U.S. about Chinese subsidies for renewable energy and a U.S. focus on developing green manufacturing capacity has already led to WTO litigation. Both countries should instead use the trading system to support this common goal and build on the recent agreement in APEC to reduce tariffs on a range of environmental goods by expanding the list of environmental goods and addressing other trade barriers affecting green energy goods and services.Currently, the Trans-Pacific Partnership is the only significant free trade agreement (FTA) the U.S. is pursuing and completing the negotiations should certainly be a priority for the next Obama administration. The main outstanding issue is whether Japan will join the current negotiations. While Japan's participation would slow down the talks, it would secure Japan's support for the trade and investment rules that the U.S. wants for the Asia-Pacific region and provide economic heft to the TPP. All this would increase the incentive for other countries to join the TPP and create further momentum toward an Asia-Pacific FTA, reinforcing Obama's broader strategic "pivot" towards Asia.A big potential new FTA is with the EU the US's largest bilateral trading partner. Most tariffs between the US and the EU are already low, so improving market access will require addressing so-called behind the border regulatory measures such as on genetically modified organisms, vehicle safety standards and pharmaceutical health and safety laws. Prior experience addressing trade barriers in the Transatlantic Economic Council suggests that making progress on these issues will not be easy. However a US-EU FTA would certainly deliver economic benefits for the U.S. and European Union.President Obama can be expected to continue to efforts to conclude parts of the WTO Doha Round, focusing on a services agreement, expansion of the international technology agreement and trade facilitation. However, only multilateral trade liberalization will deliver the largest economic benefits for the U.S. and globally, and the U.S. as the necessary leader and largest beneficiary of the multilateral trading system should develop a strategy for concluding the WTO Doha Round during the next four years.