UK bank lending to households jumped slightly in June 2011, but the annual rate of change remains negative at -3%.
Commercial loans continue to shrink at an annual rate of 7.5%, signaling a dearth of new investment and job creation by the private sector.
China’s growth in bank lending has slowed to an annual rate of 15% from its peak of 35% in 2009, but indicates that further tightening is required to bring the inflation hangover under control.
Annual rate of change in Australian household debt is falling but remains in positive territory for the time being.
Commercial debt, however, has fallen by more than A$100 billion since its peak in 2009, signaling a fall in new capital investment and job creation by the private sector.
Total estimated outflows from long-term mutual funds were $16.94 billion for the week ended Wednesday, August 3, the Investment Company Institute reported today.
Replacing all national sovereign bonds (although not loans) with common eurobonds would create a market worth €5,500bn. It would be backed by governments that together owe less debt, run a lower combined deficit and have greater tax-raising capacity than the US and Japan. It would almost certainly lead to lower yields than the current eurozone average and virtually eliminate the possibility of a bond buyers’ strike.
via Europe need not wait for Germany – FT.com.
Creating a common Eurobond would make economic sense but is politically unachievable because of opposition in Germany. Convincing Germans that it is in their best interests will test Angela Merkel’s leadership abilities to the full.
Staggered red candles, rather than free-falling with little or no overlap, indicate the presence of short-term buying support on the Sensex Index. Higher volumes tend to support this. Respect of support at 16500 would indicate another test of resistance at 17500. Failure of support, however, would test 16000*.
* Target calculation: 17500 – ( 19000 – 17500 ) = 16000
So what does the president have to offer the Midwest? The idea that the wave of the future is an ever-larger public sector financed by a more or less stagnant private sector looks increasingly absurd. The Midwest’s public sector has, as Margaret Thatcher put it, run on “other people’s money.” Meanwhile, Mr. Obama’s trip to the Midwest has been preceded by Texas Gov. Rick Perry’s foray into Waterloo, Iowa. Mr. Perry points out that his state, with low taxes and light regulation, has been producing nearly half of America’s new jobs.
via Michael Barone: The Fall of the Midwest Economic Model – WSJ.com.
The main point is that China’s debt burden is far higher than it likes to admit, and much of that debt has piled up in the past few years, as a result of Beijing’s response to the global financial crisis.
“Even though headline sovereign debt levels are low in China, so much quasi-sovereign activity happens through the banking system that if you include some of those contingent liabilities, the number can get very big,” says Charlene Chu, head of Fitch’s China Bank Ratings.
“People forget that China undertook its fiscal stimulus package through the banking system rather than by issuing public debt in the way that other countries did.”
As of the end of March 2011, French banks held $410 billion of Italian debt, by virtue of their holdings of Italian government bonds and loans to the private sector, according to the Bank for International Settlement. They were also on the hook for $86 billion because of credit commitments, derivatives contracts and other loan guarantees in Italy.
The ability of the French financial system to weather an Italian storm is doubtful because French banks are less capitalized than their major European counterparts.
The Shanghai Composite displays a similar bullish divergence on 21-day Twiggs Money Flow to the DJ Shanghai Index. Follow-through above 2660 is likely, but resistance at 2820 is expected to hold.
* Target calculation: 2600 – ( 2800 – 2600 ) = 2400
The Hang Seng Index shows a similar (Twiggs Money Flow) bullish divergence to the Shanghai Composite, but both display a sharp fall on 63-day Momentum below zero, warning of a primary down-trend. Expect a rally to test resistance at 21500, but the bear market will continue.
* Target calculation: 19500 – ( 21500 – 19500 ) = 17500
