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OECD: Member economies to contract -4.3% in 2009. ECB should cut rates, commit to quantitative easing
The OECD forecasts the world economy will shrink far faster than originally expected, sending unemployment soaring and highlighting the need for extra steps to halt the crisis.
The body now sees world growth falling -4.3% in 2009, way below its last official forecast of -0.4%, but in line with a broad figure given by General Secretary Gurria Monday.
Stimulus measures taken so far are expected to stop the world from seeing a repeat of the 1930s Great Depression and growth should return in 2010.
But there are substantial risks to downside and central banks and governments need to use room they have for more aggressive policy.
The OECD urges the ECB to cut its main policy rate further from 1.5% and said it should commit to the quantitative easing hinted at by the banks’ policy makers in recent days.
Ordonez: May be necessary to restructure some small/medium-sized banks
Bank of Spain Governor Ordonez says the restructuring of some of Spain’s small and medium-sized banks may be necessary if the present financial crisis drags on. He feels the number of Spanish banks could fall through the restructuring.
The spectre of further euro zone bank woes has served to take a little of the edge off the euro, EUR/USD trading off its high, presently at 1.3255.
JPY, and to a lesser extent USD, weaker in Asian forex trade
The main change overnight in Asia has been weakness in the JPY, with USD/JPY up at 98.10 from a North America close Monday around 97.25, while EUR/JPY is at 130.15 from around 128.35. The support the JPY had been garnering from year-end repatriation flows has now seemingly dried up. Rather the market is concentrating on the release of tomorrows Tankan report. Speculation is that the BOJ report will show business confidence slumping to a 30-year low.
Elsewhere the USD is a little lower, EUR/USD up at 1.3250 from a North American close Monday around 1.3200, while cable is up at 1.4310 from around 1.4265. The USD’s reserve currency status is again being called into question. A source at the BOJ has raised the spectre of the IMF raising funds through issuing SDR bonds which China would buy to the tune of about $250 bln equivalent.
Talk of a new Japanese stimulus package has helped lift sentiment in Asia, which has also weighed on USD and JPY a little.
We’ve already had the release of German February ILO unemployment, which rose to 7.4% from 7.3% in January.
Economic data releases for the rest of the day are as follows:
07:55 GMT: German unemployment change (Mar) expected 52k
07:55 GMT: German unemployment rate s.a (Mar) expected 8.0%
08:00 GMT: Italian retail sales s.a (Jan) expected -0.2% m/m, -2.0% y/y
08:30 GMT: UK index of services 3m/3m (Jan) expected -1.0%
09:00 GMT: Italian CPI (Mar) provisional expected 0.1% m/m, 1.0% y/y
09:00 GMT: Euro zone CPI estimate (Mar) expected 0.7% y/y
Australia’s House Prices To Hold Up Better Than Those Overseas
The RBA has said that housing prices in Australia will hold up better than those overseas largely due to the quality of the loans underpinning the market.
RBA Assistant Gov Debelle Currently Speaking
- Disruptions of global markets undermining impact of policy stimulus at home.
NBNZ March Business Confidence at -39.3
NBNZ March business confidence numbers have just come in at -39.3 Vs -41.2 previously. The Kiwi has done little on the release of the numbers.
Things Look Grim for the Release of Japan’s Tankan Survey Tomorrow
At 23:50 GMT tomorrow we have the release of Japan’s quarterly Tankan Survey and analysts are not painting a rosy picture with some expecting it match the worst level on record of -50 back in Q3 1975. For a more in depth analysis please click here.
Australia Feb Housing Credit +0.6% m/m
February Housing credit rose 0.6%.
February private sector credit was flat, 0.0% m/m. Forecast was for a rise of 0.4%.
Australian Central Bank Deputy Governor says scope to cut rates further if required
Deputy Governor Bettellino warned that Australia could not escape the global slowdown, but substantial monetary and fiscal easing meant it would weather the storm better than others, leaving the door open for further cuts if needed.
He also went on to say he sees further falls in GDP for the year ahead.
BoC Governor: Reserve currency structure to remain unchanged
Bank of Canada governor Carney (another member of the shadowy Goldman Sachs cabal) says that he expects the structure of currency reserves to remain unchanged (a polite way of saying the dollar will retain its role as the global reserve currency for the foreseeable future).
On the Goldman Sachs’s thing, here’s the US Congress investigating the matter…
[youtube]http://www.youtube.com/watch?v=OFvnL3npQgY[/youtube]
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