Early Headlines: Japan Machine Orders Surge, India – US Tax Pact, Huge China Stock Rally, Household Liquidity Surge in South Korea and More

Early Bird Headlines 09 July 2015

Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.

Global

• Greece and China expose limits of ‘whatever it takes’ model (Business Standard) The phrase best captures the all-powerful, self-aware central bank activism that’s cosseted world markets since the financial collapse of eight years ago. But even if you believe central banks will do whatever it takes – to save the euro, stop the recession, create jobs, boost inflation, prop up the stock market and so on – it doesn’t necessarily mean it will always work.

U.S.

• NYSE, SEC Suspect Software Update Triggered Trading Halt (Bloomberg Business) A computer malfunction that knocked out trading at the New York Stock Exchange for more than three hours Wednesday probably stemmed from a software update that went awry. The NYSE must now verify the cause and report its conclusions to the U.S. Securities and Exchange Commission.
  

EU

• ECB Lifts Veil on Emergency Liquidity Assistance (The Wall Street Journal) The European Central Bank has lifted the veil a bit on a program that typically operates in the shadows but has gained prominence in recent months during Greece’s debt drama: Emergency Liquidity Assistance, or ELA.

On Monday, the ECB said in a statement that it had maintained its cap on ELA for Greek banks and also raised the haircuts on collateral that must be posted for new loans. That was a departure from the ECB’s usual practice of not making formal announcements about ELA, though the bank has been more open about its decisions as Greece’s debt crisis has escalated.

In a section of a report published Tuesday (pages 33-35), the ECB summed up ELA this way:

“As distinct from the Eurosystem’s credit operations, national central banks can temporarily provide emergency liquidity assistance (ELA) to euro area credit institutions which are solvent but face liquidity problems,” the ECB wrote. “ELA is not a monetary policy instrument.”

• Guy Verhofstadt plenary speech on Greece with Alexis Tsipras 8-7-2015 (YouTube) There is no hope if this is the negotiation position of the EU. Guy Verhofstadt is the former prime minister of Belgium (1999-2008) and currently a member of the European Parliament. See response from Greek Prime Minister Alexis Tsipras later below.
  

Greece

• Alexis Tsipras reply to Guy Verhofstadt plenary speech on Greece (YouTube) Greek Prime Minister Alexis Tsipras responds from notes hastily scratched while Guy Verhofstadt was speaking and itemizes reforms implemented by Greece, which he says no other government has done. Verhofstadt is shown nodding in agreement as Tsipras spoke. Econintersect: At this point can we modify our statement above that there is no hope?  Maybe a little hope?

India

• India, U.S. to sign tax pact Thursday: sources (Reuters) India and the United States will sign a tax information sharing agreement on Thursday, under a new U.S. law meant to combat offshore tax dodging by Americans. Washington has so far signed pacts covering more than 80 tax jurisdictions to implement the Foreign Account Tax Compliance Act 2010, or FATCA, requiring financial institutions to share information about Americans’ accounts worth more than $50,000. By signing the agreement, India hopes to garner Washington’s support for its own efforts to bring back illicit funds stashed by Indians in foreign tax havens and boost revenues

China

• Who Blew Up China’s Stock Bubble? (Bloomberg) Beijing urged people to buy stocks. Now it’s begging them to stop selling. And all the government’s moves to support the market so far have not stopped the decline – until Thursday. See next article.
• CORRECT: China’s Stocks Cap Biggest Gain Since 2009 (Bloomberg) China’s benchmark stock index capped the biggest gain since 2009 in volatile trading as the government battled to restore investor confidence in a market that lost $3.9 trillion in less than a month. The Shanghai Composite Index jumped 5.8% to 3,709.33 at the close Thursday 09 July, erasing a loss of much as 3.8%. About 600 stocks rose by the daily 10 percent limit on the benchmark index. Another 1,439 companies were halted on mainland exchanges, locking sellers out of 50 percent of the market.

Taiwan

• CPI edges down 0.56% on fuel prices (Taipei Times) The government said that deflation fears can be dismissed. Without fuel the core CPI rose 0.57%.

South Korea

• S. Korea’s M2 money supply grows most in nearly 5 years (Yonhap News Agency) South Korea’s M2 money supply expanded at the fastest clip in almost five years in May, due mainly to increased liquidity of households, central bank data showed Wednesday. The M2 surged 9.3% year-on-year to 2,170.5 trillion won (US$1.9 trillion) in May, quickening from a 9% increase in the previous month, according to the Bank of Korea (BOK). The on-year growth marks the fastest increase since July 2010 when the M2 expanded 9.3%.

Japan

• Japanese machine orders at best pace in 16 months (Financial Times) Instead of losing momentum as expected, Japanese machinery orders just recorded their best year-on-year growth rate since January 2014. Core machine orders in Japan, a proxy for private capital expenditures, rose 0.6% month-on-month in May, in stark contrast to forecasts looking for a 4.9% decline. The upward move is the third in a row, following a 3.8% gain in April. On a year-to-year basis orders were up 19.3%.

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