With Global Economy Still Suffering,GDP Forecast Lowered

The International Monetary Fund has lowered its global GDP growth forecast for 2015 to 3.3% on a number of factors,including China's stock market turbulence and the Greek debt crisis.As well,both the US and Canadian economies have been downgraded by the IMF.A 20% surge in the U.S. dollar brought on by investors taking refuge in US assets has been crimping exports;while in Canada,falling commodity prices have hindered that natural resource-rich country's economic performance.Still,in 2016,the IMF is predicting global growth to rise to 3.8%.
The end result is not a very impressive number,said IMF chief economist Olivier Blanchard,but it's not a catastrophe,either.We're very much where we expected to be.
The Fed can wait a bit longer to raise rates.We're not very far from where we want to be in the US.Take one step back,the US is doing fine.
There has always been a disconnect between the Chinese stock market and the Chinese economy.It may have an effect on spending,but it's more or less octagonal.When you have exchange rates and stock prices moving quickly as they do in China,you don't know how you can handle it.
Any deal in Greece has to have two parts:
1.The Greeks have to do something.
2.There must be aid and debt relief.
The post-financial crisis world is one of high debt,and it doesn't take much,with these debt dynamics,to go wrong.We have to be ready to see other episodes of that kind.*

Stocks Crater on Greece Fears

The S&P 500 Index fell 43.85 on Monday,down 2.09%,on worries that Greece might leave the Euro-zone,or might at least cause unfortunate ripple effects throughout the global economy.The country is expected to miss a Tuesday debt payment of 1.84 billion dollars to the IMF.Technically,that would not be a default,since the IMF payment does not have the status of a bond coupon payment,for instance.Still,it is plenty bad for the stock market,as is the unknown endpoint of Greece's tortured negotiations with its creditors,and the Sunday referendum basically on whether Greece should abandon the euro for its old currency,the drachma.
The run on Greek banks could become contagious,spreading to Spain,Portugal and even Italy.If that happens,the US economy,with its close ties to Europe,could suffer as well.
The market was shaken by S&P's opinion that the probability of the so-called Grexit is 50%,and a commercial default is inevitable within six months.Greece's credit rating was also lowered by S&P to CCC-.
Investors sought refuge in gold,which rose 0.52%,while Treasury bonds were basically flat and utility stocks fell less than the broader market.*
Utilities Select Sector SPDR ETF (XLU),Market Vectors Gold Miners ETF (GDX),SPDR Gold Trust (GLD),iShares 7-10 Year Treasury Bond ETF (IEF)

Australian Bank Shares Strong,Hyundai Slims Down

The major Australian banks Commonwealth Bank of Australia,National Australia Bank and Westpac rose 0.8% in Monday trading,shrugging off news that the four biggest banks will be required to set aside a further 1% of equity capital.The ASX 200 index climbed 0.51%.*
Other Asian markets also rose Monday,cheered by the US beating its GDP forecast last week,and the IMF announcing Sunday it would be raising its outlook for US growth on these strong results and the budget deal recently signed in Washington.The Shanghai Composite was up 0.24%,while the Hang Seng climbed 0.44%.Japanese markets were closed for the Emperor's Birthday holiday.*
South Korea's Hyundai Group is selling its three financial units to raise cash to reduce debt,as well as concentrate on its shipping,logistics and elevator machinery businesses.The sale is expected to bring in 3.1 billion dollars.*
Apple Computer has reached a deal with China Mobile allowing it to sell the iPhone in China as of next month.The move is expected to present Samsung with major competition in the vast Chinese market.*
In golf,Europe came swiftly from behind to win The Royal Trophy match play tournament at the Dragon Lake Golf Club in Guangzhou,China by one point.It was Europe's fifth win out of seven.

Asia This Day:Dreamliner Cleared;Bangladesh's Rising Star

Boeing sighed with relief as All Nippon Airways announced it will return the iconic 787 Dreamliner to service on June 1,following a successful test flight of the revamped aircraft.Ethiopian Airlines has already done so.
Australia's revenue shortfall has widened,Prime Minister Julia Gillard said.This is in spite of the unpopular Minerals Resource Rent Tax which her government imposed,which brought in much less than projected because of falling commodities prices and miners taking deductions.
India's Nifty Fifty futures index rose Monday morning on an upbeat meteorological forecast.A normal monsoon season is expected this year,which is good news for the agricultural sector.
The MSCI Asia Pacific index was up 0.25% in early Monday trading.
Bangladesh is considered the new manufacturing hotspot in Asia as Chinese costs rise,causing companies to shift operations to the poorer nation.Bangladesh manufacturing is worth 18 billion dollars now,with textiles alone accounting for 10% of GDP.Eighty percent of exports are going to the US and the EU.
Asian officials must act early to cool down overheating economies,the IMF said.
Chinese banks are reporting record profits,but manufacturing growth has slowed to 5.3%,below expectations.The current way of growing the Chinese economy by fixed asset growth is unsustainable,said Victor Wang,Deputy Head of Hong Kong/China Research at Macquarie Group.
Macquarie Group Ltd(MQG:ASX),Boeing(BA)

Asia This Day:Cyprus Bank Plan Rattles Markets;Australia's Deficit Balloons

Concern over a Cypriot plan to tax bank depositors and its possible contagion effect in Europe caused Asian shares to drop precipitously in early Monday trading.The MSCI Asia Pacific index fell 1.47%,and the ripples extended to US stock market futures,which declined sharply as well.IMF President Christine Lagarde backs the measure as the cost of an EU bailout of Cyprus.The IMF is also considering kicking in some funding to the bailout,but the amount has yet to be determined,Ms.Lagarde said in Algeria.
The banks in Cyprus are closed today for the first day of Orthodox Lent,Clean Monday,but the government is also closing them Tuesday in an effort to squelch a run on the banks.
New Zealand is suffering its worst drought in 30 years,which may cost the nation up to 2 billion dollars.The entire North Island has been declared a drought zone,along with parts of the South Island.The drought will affect New Zealand's dairy exports,which amount to a quarter of the country's exports or 11 billion dollars.
It was raining over the North Island Monday,but not enough to alleviate the drought.
Australian treasurer Wayne Swan warned that the country faces a massive hit as the deficit grew another 4.6 billion dollars in the first four weeks of the year alone.It could swell to 26.8 billion in the first seven months of 2013.Nonetheless,,the government will not cut spending at the cost of growth.The Julia Gillard government faces elections in September,and opinion polls show her being distinctly unpopular.
Finland's Kimi Raikkonen won the Rolex 2013 Australian Grand Prix,the first race of the Formula One season,at Albert Park in Melbourne Sunday.The former World Champion was joined by Fernando Alonso of Spain and defending World Champion Sebastian Vettel of Germany on the podium.
Update:Cypriot banks will remain closed through at least Wednesday as the country's parliament prepares to vote on the deposit tax plan today,Tuesday.Reportedly 60% of the deposits belong to foreigners seeking a tax haven-mostly Russians and Ukrainians.Asian markets bounced back in early Tuesday trading on optimism the crisis will be short-lived.

EU Prepares for London

The European Union held a summit in Brussels,Belgium recently to prepare for the G20 summit in London in a few weeks' time.The EU pledged 100 billion dollars to the International Monetary Fund's reserves;seven billion to EU projects; and 68 million to non-EU members.It urged the U.S. and others to join in doubling the IMF's reserves to 500 billion dollars.President Obama will attend the G20 summit and the NATO 60th anniversary summit on April 3-4.The G20 is a group of the largest economies and emerging markets.NATO,the North Atlantic Treaty Organization, is the Euro-American defense alliance.

The Essential Task

The British government will work with our partners to establish a new International Monetary Fund as a sentinel,Prime Minister Brown promised,and to achieve the transparency,integrity and responsibility of the financial system.Confidence in the future is the key to bringing back confidence today.I am confident in the future,Mr.Brown asserted,wearing a white bow tie,white shirt and black dinner jacket,a red poppy on his lapel to commemorate Armistice Day.

Shop Talk

A special greeting to Massachusetts,the state that is as difficult to spell as Mississippi.The weekend focus,however, will be on Washington,D.C.,where the G20 leaders will be meeting to discuss the financial crisis.The G20 are the biggest of the developed and developing economies.They will look at what new standards may be applied to the global markets,in order to prevent another crisis of this magnitude,and who should apply them.The International Monetary Fund has been mentioned as a prospective regulator.It was intended to take on such a task,it has been said.France and the U.K. intend to play a prominent role in the deliberations this weekend.They are pushing hard to get the problems addressed in short order.The conference is taking place at the National Building Museum,and is expected to be the first of a series.The world has never been so interconnected,yet the structures to manage the interconnections have not been updated for many decades,if they indeed exist at all.

The Nature of the Crisis

This was a crisis of the system as a whole,according to Mohamed El-Erian.The policy response goes beyond an attempt to stabilize markets.We are in the midst of a major policy regime shift.It will be a gradual and fragile process,a protracted one.The policy regime shift cannot repair all the damage the system suffered.Policy response can change the drivers of markets.No one seems to be turning to the International Monetary Fund for advice.This is the sort of crisis that is at the heart of what the IMF was set up to control,in Mr.El-Erian's opinion.

Shop Talk

A special greeting to California.I advertised there this week.Your economy is as big as that of many countries.Representatives of many countries are meeting in Washington this weekend to work on the financial crisis.The International Monetary Fund,World Bank and G7 group of industrialized countries will all be discussing the global economic dislocation.President Bush will meet with the G7 finance ministers tomorrow morning.It's possible some concrete steps will result.In any event,there's a chance that the U.S. stock market has finally bottomed.This morning it opened with a nearly 700 point dive,followed by some recovery:the sign of a classic capitulation,the climax of a bear market.There's a bit more financial hope this weekend than there has been in some time.

World Economic Outlook

In a semiannual forecast,the International Monetary Fund,a group of 185 member nations,says that the U.S. has entered a mild recession that will affect most of the world.Only the Middle East will escape the downturn,on account of its oil revenue.Global goods and services will rise 3.7% in value in 2008,as opposed to 4.9% in 2007.Extensive damage has been caused by the crisis,which the IMF considers the worst upheaval since the Great Depression.