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Thursday, February 18, 2010


Most Asian markets slide as trading volume remains thin
Qantas' disappointing results weighed on Australian shares, and the International Monetary Fund's plan to sell gold hit miners, resulting in a drop for most Asian markets Thursday. Japan's Nikkei 225 inched up 0.3%, Australia's S&P/ASX 200 gave up 0.3% and Hong Kong's Hang Seng Index shed 0.5%. South Korea's Kospi Composite gave up 0.4%, New Zealand's NZX 50 lost 0.3% and shares in the Philippines fell 0.6%. The Wall Street Journal (18 Feb.)

Commentary: Greece puts off-balance-sheet liabilities in spotlight
The Greek financial crisis is highlighting governments' contingent, off-balance-sheet liabilities, and other Western governments might come under scrutiny as well, columnist Richard Barley writes. The use of derivatives and other complex financial structures to hide a budget deficit might turn out to be of minimal importance compared with the unfunded cost of an aging population, Barley notes. The International Monetary Fund warned that starting about 2015, demographic trends, mostly aging, will put pressure on public finances. The Wall Street Journal (17 Feb.)

Merkel calls bank deals that reportedly hid Greek debt "a disgrace":
German Chancellor Angela Merkel criticized investment banks that are suspected of designing complex derivatives deals to help Greece conceal its debt from the EU. "It would be a disgrace if it turned out to be true that banks that already pushed us to the edge of the abyss were also party to falsifying Greek statistics," she said. EUObserver (Brussels) (18 Feb.)

As U.S. economy recovers, politicians still argue about stimulus
A year after U.S. President Barack Obama launched his $787 billion economic stimulus, Democrats and Republicans marked the anniversary by continuing to argue about the economy. Thanks to the stimulus, Obama said, "a second Depression is no longer a possibility." Republican leaders criticized the program as ineffective, wasteful and likely to lead to runaway inflation. The latest projection calls for the U.S. economy to grow by 2.8% to 3.5% this year. The Federal Reserve expects inflation to continue at a 2% annual rate or less for the next few years. Los Angeles Times (18 Feb.)

AIG changes plans on controversial derivatives portfolio
AIG is backing off plans to unwind the entire controversial derivatives portfolio that has been blamed with having nearly collapsed the company. Instead, the insurer said it will maintain up to 25%, or $500 billion, of the assets, per a news report. Taxpayers propped up the company when the derivatives failed as a result of the housing market's collapse. (2/18)

*this is only a temporary reprieve
Analysis: Losses on bad debt are peaking, declining for Europe's banks
The bad-debt time bomb warned by the International Monetary Fund as a threat to Europe's banks seems to have fizzled. The "evidence from fourth-quarter results is that the pace at which loans are souring has peaked," according to The Economist. Even in Eastern Europe, where bad-debt charges remain high, there is good news. From "Belgium's KBC to the banks of Sweden and Norway, most firms active in the region hinted that the pace at which loans are turning sour is slowing, even if there is still a big stock of rubbish to clean up," The Economist notes. The Economist (17 Feb.)

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