Morning papers: Japan pledges $60bn to IMF firewall
The morning papers brought to you by Investment Adviser: Tuesday April 17 2012.
Japan has offered $60bn (£37.7bn) in fresh loans to the International Monetary Fund in an effort to prevent the euro debt crisis spreading, reports The Guardian.
Japan’s move has been welcomed in the financial markets, where the euro is currently trading around $1.31 mark, having briefly fallen below $1.30 yesterday.
Christine Lagarde, the IMF’s managing director, said she warmly welcomes Japan’s promise of $60bn in new loans for its euro crisis firewall, describing the pledge as an “important step forward” that would promote global economic stability.
Spain to strip regions of powers in bid to calm markets
Madrid is plotting to strip Spain’s regions of their powers in a radical bid to convince global investors that the nation can control its finances, reports The Telegraph.
Officials said Madrid was ready to intervene if the regions continued to bust their budgets and hamper the central government’s austerity drive.
Spain’s borrowing costs rose to 6.08 per cent yesterday (16 April), plunging deeper into the territory considered unsustainably expensive.
Investors pull €100bn from eurozone bonds
International investors are withdrawing huge sums of money from the euro region’s sovereign bond markets, a phenomenon that may lead to the bailout of Spain and a worsening of the eurozone crisis, reports the Financial Times.
Bankers estimate that €100bn (£82.5bn) has been taken out of the French, Italian and Spanish government debt markets in the past two years as many investors have lost faith in the single currency zone.
India cuts rates by 50bp in growth bid
India’s central bank cut key lending rates for the first time in three years on Tuesday in an aggressive effort to stimulate growth and boost investment at a time when the gloss is rapidly coming off Asia’s third largest economy, reports the Financial Times.
The Reserve Bank of India cut the repo rate – the rate at which the central bank lends to commercial banks – by 50 basis points to 8 per cent. The more-than-expected reduction was widely welcomed by business.
Hedge funds sell commodities amid China growth fears
Hedge funds are cutting their exposure to commodities at an accelerated pace as concerns mount that slowing growth in China will depress demand, reports The Telegraph.
US data showed that hedge funds reduced their positions by around $9bn (£7.4bn) to £90.7bn in the week ended April 10, which was the biggest fall in four months.
UK banks need to raise £20bn to strengthen balance sheets
Barclays Capital has warned British banks need to raise almost €25bn (£20bn) in extra capital to strengthen their balance sheets and convince investors to buy their bonds, according to The Telegraph.
Analysts said banks across Europe may have to boost their capital by up to €120bn in order to bring credit default swap spreads down to “acceptable levels” and spark activity in the debt markets.