A look at economic developments around the globe

AP News
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Posted: Aug 15, 2011 5:07 PM
A look at economic developments around the globe

A look at economic developments and activity in major stock markets around the world Monday:

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MILAN _ European stocks rebounded on hopes that the recent sharp volatility in the markets has run its course following stronger-than-anticipated economic data.

Though concerns remain over the state of the global economy and Europe's debt crisis, many investors apparently thought the recent sell-off had been overdone and snapped up stocks.

London's FTSE 100 closed up 0.6 percent, Germany's DAX rose 0.4 percent and the CAC-40 in France ended 0.8 percent higher.

Europe's debt crisis will likely return to the forefront of investors' thoughts Tuesday, when French leader Nicolas Sarkozy and German Chancellor Angela Merkel meet and second-quarter eurozone growth figures are published.

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PARIS _ The European Central Bank revealed that it put out euro22 billion ($32 billion) last week _ more than it has ever done before _ to prop up the bond markets of Italy and Spain.

News of the big bond purchases came a day before the leaders of Germany and France meet to discuss the debt crisis that has engulfed Europe for over a year and a half. Speculation that German Chancellor Angela Merkel and French President Nicolas Sarkozy would consider proposals for the eurozone to issue jointly guaranteed government debt appears to have been dashed, however.

Tuesday's meeting in Paris comes after a week of turmoil in financial markets. The volatility was partly blamed on Europe's sprawling government debt crisis, which threatened to sweep up economic heavyweights such as Italy and Spain. Fears that the eurozone's third and fourth largest economies may find it too expensive to service their debts triggered the ECB's intervention in the bond markets.

France itself was caught in the crossfire last week, with investors worrying about the financial health of the country's banks and whether France would be the next country after the U.S. to lose its triple-A credit rating.

France and Germany, which together account for almost half of the eurozone's economic output, are taking the lead in pushing for reforms aimed at pulling the bloc out of its debt crisis.

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WASHINGTON _ Foreign investors cut their holdings of U.S. Treasury debt in June for the first time in more than a year. The decline came at a time of anxiety about whether the United States would raise its borrowing limit.

China, the biggest buyer of U.S. Treasury debt, increased its investment for a third straight month. But Japan, the second-largest buyer, along with Brazil, Russia, Hong Kong, and a group that includes the Bahamas, Bermuda, the Netherlands and the Cayman Islands cut their investments. Overall foreign holdings dropped 0.4 percent to $4.5 trillion.

Congress and the Obama administration reached a deal on Aug. 2 that allowed an increase in the borrowing limit. The agreement came hours before the U.S. faced a potential default on its debt.

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TOKYO _ Japan's economy contracted for a third straight quarter as consumer spending and factory production continued to suffer in the aftermath of the March earthquake and tsunami.

Real gross domestic product contracted at an annualized rate of 1.3 percent in the April-June quarter. The figures did provide a glimmer of optimism, since economists had expected a bigger decline.

Japan's Nikkei 225 index closed up 1.4 percent. Shares elsewhere in Asia also gained. Hong Kong's Hang Seng index shot up 3.3 percent, China's Shanghai Composite Index added 1.3 percent and Singapore's benchmark index rose 0.8 percent.

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BEIJING _ China's finance ministry tried to allay concern about billions of dollars in bank loans owed by local governments, saying risks can be controlled and officials are looking at ways to ease the burden.

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GENEVA _ The Swiss franc tumbled following reports that the Swiss National Bank is planning to set a temporary target range for the currency's exchange rate with the euro.

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TOKYO _ The idea that Japan would ever dump its $900 billion holdings of U.S. Treasurys, the second largest foreign ownership after China, has long been just an idea, never seriously entertained.

But after Washington's credit rating was downgraded for the first time ever earlier this month, some are voicing that taboo idea. Those playing devil's advocate aren't Japan's mainstream policymakers by any means. They aren't totally fringe either.

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BERLIN _ Post-World War II Germany rebuilt its economy on a system of strong rules within which businesses and industries, from auto manufacturing to media competition, were allowed to flourish.

Because of that system, Germany has grown into Europe's strongest economy, a regional powerhouse that its indebted neighbors depend on for billions of euros needed to cope their staggering debts.

Based on this experience, Germans are now insisting that their partners adopt stronger rules for the European Union to emerge from its financial crisis, and only then will Berlin underwrite the project.

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DALIAN, China _ Chinese authorities' swift decision to close and move an urban chemical factory after weekend street protests underscores the ruling Communist Party's fear of alienating the increasingly outspoken middle class.

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