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Broadgate: Market News 22/4

22 April 2013

Global policy makers and economists are staging a retrial of austerity as new evidence arises. Facing another slowdown in the world economy, the U.S. and International Monetary Fund are pitched against the euro area and U.K. over whether axing budgets and debt is the recipe for recovery or recession. In academia, professors Kenneth Rogoff and Paul Krugman remain at odds.

The biggest gain in U.S. consumer spending in two years probably helped the world’s largest economy accelerate in the first quarter and housing made further progress, economists said reports this week will show. Gross domestic product rose at a 3.1 percent annual rate after expanding at a 0.4 percent pace in the final three months of 2012, according to the median forecast of 67 economists surveyed by Bloomberg ahead of Commerce Department data due April 26. Sales of new and previously owned houses climbed, other reports may show.

Australia has lost A$7.5 billion ($7.7 billion) in revenue since the October mid-year budget review due to its strong currency and lower terms of trade, worsening its budget position, Treasurer Wayne Swan said. “We’ve been hit in Australia with a high dollar, lower terms of trade, which has had a dramatic impact upon the profitability of companies and prices more generally in the economy,” Swan said in an interview on the Australian Broadcasting Corp.’s ‘Insiders’ program yesterday.

Group of 20 finance chiefs pledged to stay alert to any fallout from easy monetary policies even as they backed the Bank of Japan (8301)’s plan to buy more than 7 trillion yen ($70 billion) a month of bonds. In a nod to concerns that stimulus in one economy often creates challenges elsewhere and could fuel asset bubbles, the G-20 officials meeting in Washington heightened their commitment to being “mindful of unintended negative side effects stemming from extended periods of monetary easing.”

Plans in the euro area to allow the direct recapitalization of failing banks must stick to a hierarchy of responsibility that starts with the banks’ shareholders, the German Finance Ministry said. In its report for April, the ministry said a “liability cascade” must prevail in any attempt to save a bank, allowing the European Stability Mechanism to allocate resources on its main job of averting state insolvencies.

Source:  Reuters.com

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