LONDON, June 6 (Reuters) – European shares traded with solidgains early on Wednesday on speculation central banks across theworld could act to stimulate the global economy, hit by adeepening debt crisis in the euro zone.
Madrid’s dramatic statement – that its borrowing costs had become prohibitive due to a banking crisis – came as the Group of Seven major economies, afraid of a possible run on Spanish banks, held urgent but inconclusive talks on the euro zone.
Although this would apply chiefly to the euro zone, it would affect other EU countries.
As if to underline the dangers to the entire 17 nation zone of inaction, Moody’s Investors Service cut the credit ratings of several German banks on Wednesday, citing the greater risk of further shocks stemming from the region’s debt crisis.
Spain’s Budget Minister Cristobal Montoro urged the country’s eurozone partners to act quickly before its access to credit markets is totally choked off.
And even after the elections, as they are unlikely to bring a clear cut decision either way,” said Dirk Schumacher, senior European economist at Goldman Sachs.. Markit’s Eurozone Composite PMI fell to 46.0 in May from April’s 46.7, its lowest reading since June 2009 and its fourth month below the 50 mark that divides growth and contraction. It was little changed from a preliminary reading.. Of particular note was the suggestion Germany is no longer generating the sort of economic growth that kept the wider euro zone out of recession in the first quarter.. “Companies report business activity to have been hit by heightened political and economic uncertainty, which has exacerbated already weak demand both in the euro area and further afield,” said Chris Williamson, chief economist at survey compiler Markit.. German industrial orders on Tuesday added to signs that Europe’s largest economy is heading for a slowdown, falling in April at their fastest rate since November 2011 as orders from abroad dried up.. Elsewhere, business activity in the Brazilian services sector fell in May for the first time since July 2009, reflecting how manufacturers’ persistent woes have started to drag on the main engine of Brazil’s recent economic growth.. Australia’s central bank decided on Tuesday to cut interest rates for a second month running to try to boost confidence in that country. The Bank of Canada, meanwhile, held rates steady and softened its previous hawkish language, in part nodding to the deepening crisis across the Atlantic.. The PMIs have a good record of tracking economic growth and appear to counter predictions from ECB President Mario Draghi for a gradual recovery over the course of the year.. “While the ultimate solution has to be in some form or shape political, the ECB can at least make sure there’s time to come up with a solution.
If the rouble remains at the current level, then we may see some impact, but we think it will not be strong and will be spread over time,” he said.. Last year, Russia saw inflation of 6.1 percent, its lowest in 20 years, while the economy expanded 4.3 percent in gross domestic product terms. The government envisages GDP growth this year at 3.4 percent.. Ignatyev said that he does not see any danger to Russian banking system at the moment, echoing comments his First Deputy Alexey Simanovsky made on Tuesday.. Simanovsky said he still believes domestic banking sector to see loan growth of 20 25 percent in 2012, with even the worst of euro zone debt crisis not pushing Russia to the crisis position two years ago.. Ignatyev also added that if European Central Bank resumes buying Italy’s and Spain’s treasury bonds “it may have positive impact on financial and commodity markets.
RUNNING OUT OF RUNWAY”The US Treasury, which chaired the G7 phone hook up, said in a statement that the group’s finance chiefs had discussed “progress towards a financial and fiscal union in Europe” and agreed to monitor developments closely. But the group made no joint statement and took no immediate steps.Japanese Finance Minister Jun Azumi added on Thursday that major economies needed to ease market fears and referred to a G20 meeting in Mexico on June 18 19.The G20 summit, to include both Japan and China, the world’s top creditors, is shaping up as a key focus of global efforts to contain the euro zone crisis.”.
The problem with the Euro zone crisis that the Finance Ministers of the various countries are looking for quick fix solutions instead of addressing the structural problems underlying the European economies.
We will cooperate and share responsibility to ease market worries through these meetings,” Azumi told reporters.The United States, which is pressuring European governments to take a bold step toward financial and fiscal union, would like to see the makings of a plan by the G20 summit.US President Barack Obama, whose re election chances this year could be jeopardised by another global financial crisis, has been anxious not to be seen dictating to Europe.But Canadian Prime Minister Stephen Harper was more forthright on Tuesday: “we don’t want to sound too alarmist, but we are kind of running out of runway here.
“Indeed, the senior European G7 source, said just before the teleconference that the call was set to turn into a “Germany bashing session”, with other partners applying severe pressure on Berlin to do more to stimulate growth and move away from its prescription of fiscal austerity for the region’s weaker economies.EU leaders meet on June 28 29 to discuss a strategy for overcoming the crisis, which began in late 2009 when Greece revealed it had covered up a huge budget deficit.”.
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