ARAB TIMES, FRIDAY, AUGUST 24, 2012
S&P removes Egypt from CreditWatch, affirm ‘B’ rating A handout picture released by
the Egyptian presidency
shows Egyptian President
Standard & Poor’s Ratings Services today unchanged at ‘3’, indicating our expecta- The negative outlook reflects our view Mohamed Morsy (right),
affirmed its long- and short-term foreign tion of 50%-70% recovery in the event of a that there is a one-in-three likelihood of a meeting with International
and local currency sovereign credit ratings default. downgrade should political or social ten- Monetary Fund (IMF) chief
on Egypt at ‘B/B’. At the same time, we The ratings affirmation reflects our opin- sions escalate once more. If this happened, Christine Lagarde on Aug 22,
removed the ratings from CreditWatch, ion that a working relationship between the the current short-term approach to policy- upon her arrival in Cairo for
where they were placed with negative military and the dominant political group, making would likely continue, and foreign talks on the ‘Egyptian govern-
implications on June 25, 2012. The outlook the Muslim Brotherhood, is gradually being exchange reserves would likely decline fur- ment’s plans to reform and
is negative. reached. In our view, this could pave the ther absent foreign donor inflows. relaunch the national econo-
The transfer and convertibility (T&C) way for an improvement in medium-term We placed our long-term foreign and my, as well as a ‘loan request
of $4.8 billion (3.8 billion
assessment is ‘B’ in line with the sovereign policymaking. We therefore project that local currency sovereign credit ratings on euros),’ the official news
ratings. The recovery rating on the unse- Egypt’s weak public sector finances and Egypt on CreditWatch with negative impli- agency said. (AFP)
cured foreign-currency debt remains external position could stabilize. cations on June 25, 2012.
Euro zone likely to slip back into recession
Business surveys paint global picture of economic malaise
LONDON/BEIJING, Aug 23, (RTRS): November and well down from July’s single currency area is now firmly in said. Exports from Taiwan, a key part of the ties to further step up their policy accom-
The euro zone is on track for its second final figure of 49.3. recession,” said Jonathan Loynes, chief The euro zone economy shrank by 0.2 global technology supply chain, fell for a modation is therefore growing.”
recession in three years, China’s once Growth in the United States manufac- European economist at Capital percent in the three months to June, fifth straight month in July and South China has been fine tuning policies to
booming manufacturing sector is con- turing sector is also expected to have Economics. according to official data. Economists Korea, home to major carmakers, com- keep growth on track without releasing
tracting at a faster pace than previously slowed in August. US data due at 1258 More worryingly, the downturn in polled by Reuters last week predicted a puter chip and flat-screen producers, curbs on the property sector.
reported, and the United States is widely GMT. smaller euro zone economies is clearly similar outcome for the current quarter, recorded its sharpest export fall in July in In contrast central banks in the devel-
seen as struggling to keep up its pace of “The indicators taken as a whole indi- taking root in the core. The flash com- with no growth until the start of next nearly three years. oped world have slashed interest rates to
growth. cate a material slowdown in the pace of posite PMI for Germany fell to a three- year. Six consecutive quarters of slowing near zero and injected trillions of dollars
Business surveys released on Thursday the world economy,” said economist year low, a fourth straight month of con- Falling demand from debt-ridden Chinese growth have also taken a toll into the money supply in efforts to sup-
painted a global picture of economic Philip Shaw at Investec. traction. Europe, China’s single biggest export on commodities markets, with falling port growth.
malaise from Beijing to Berlin. The euro zone composite PMI, which German economic growth slowed to market, has put the Chinese economy prices and an uncertain outlook The European Central Bank is expect-
The euro zone economy will shrink measures manufacturing and services 0.3 percent in the second quarter on a under pressure, with the ripples now prompting miner BHP Billiton to ed to cut rates by 25 basis points to a new
around 0.5 percent in the current quarter together, was actually slightly better than sharp drop in investment, adding to evi- being felt across the world. shelve a $20 billion expansion project record low of 0.5 percent when it meets
as the economic rot is even spreading a month earlier, nudging up to 46.6 and dence that it can no longer be relied on “It’s very hard to put a positive spin on in Australia. next week, but analysts say that will do
through Germany, the region’s largest just pipping forecasts for it to hold to pull the euro zone out of a deep anything within the (China) data. Bottom “Today’s PMI report is a clear little to stimulate lending.
and strongest economy, Markit’s steady at July’s 46.5. But was still its slump, data showed earlier on line - a very poor update,” said Robert reminder that the slowdown is not yet The US Federal Reserve is likely to
Purchasing Mangers’ Index (PMI) sug- seventh month in a row below 50, the Thursday. Rennie, chief currency strategist at over and that the Chinese economy is still deliver another round of monetary stimu-
gested. dividing line between contraction and “Another reminder that a chronic Westpac Bank In Sydney. too shaky to recover without ongoing lus “fairly soon” unless the economy
It came on the heels of the HSBC Flash growth. lack of economic growth in the euro Japan said on Wednesday that exports policy stimuli,” said Nikolaus Keis at improves considerably, minutes from the
China manufacturing PMI falling to 47.8 “August’s flash euro zone PMI does zone will continue to impede efforts to slumped the most in six months in July as UniCredit. US central bank’s latest meeting suggest-
for August, its lowest level since nothing to challenge the notion that the bring the debt crisis to an end,” Loynes shipments to Europe and China tumbled. “The pressure on the Chinese authori- ed.
Chinese cos keen to tap American mkt
China investment in US
US jobless claims rise; new
rises despite differences
WASHINGTON, Aug 23, (AP): US
presidential candidates talk tough on
fighting what they see as China’s
by Japan proved unfounded. Today,
employ about 700,000 Americans.
home sales up 3.6% in July
unfair trade policies, but Chinese As a strategic and emerging mili-
companies are investing more than tary rival of the US, however, China ‘Unemployment data indicate sluggish labor market’
ever in the US and supporting thou- brings with it more baggage. China
sands of American jobs. still restricts foreign investment in
Investment from China is set to hit much of its own economy. Many of WASHINGTON, Aug 23, (RTRS): The number of Americans tion bid. Republican challenger Mitt Romney is trying to focus voters’ attention on a
record levels in 2012, with two sepa- its biggest companies looking to lofty unemployment rate that has dogged Obama’s presidency.
rate billion-dollar deals in shale oil invest abroad are state-controlled. filing new claims for jobless benefits unexpectedly rose last Many economists think the Federal Reserve could unveil a new bond buying pro-
and gas, a struggling chain of movie Cybersecurity is also a major con- week while US manufacturing improved only slightly in gram to prop up economic growth as soon as its next meeting Sept 12-13, although an
theaters and other major ventures in cern because of repeated reports of August, worrisome signs for an economy struggling to create improvement in hiring this month could make that less likely.
the works. Its cash-rich companies cyber-attacks on Western companies “Jobless claims continue to indicate ... a sluggish labor market,” said Peter Cardillo,
have expanded their presence here in and government departments origi- enough jobs. an economist at Rockwell Global Capital in New York. “The numbers also strengthen
the past three years, keen to get clos- nating from China. That has dented Initial claims for state unemployment benefits rose 4,000 to a seasonally the hand of the Fed to aid the economy with more stimulus.”
er to the lucrative American market the prospects for its telecommunica- adjusted 372,000, the Labor Department said on Thursday. However, Cardillo and other economists said the slow pace of healing in the labor
and tap US know-how. tions and technology giants. The data keeps pressure on President Barack Obama ahead of his November re-elec- market doesn’t necessarily point to immediate action by the Fed.
The jobs created far from offset Attempts by Huawei, a private A separate report by financial informa-
what American politicians and some Chinese company founded by a for- tion firm Markit showed some of the
economists see as the millions of jobs mer army officer, to acquire 3Com in weakest growth in the manufacturing sec-
lost because of China’s currency 2008 and failing US computer com- tor in the last three years, held back by a
policies and theft of intellectual prop- pany, 3Leaf Systems, in 2011 were slowdown in hiring and sluggish overseas
erty. Also, Chinese investment, espe- floored by security concerns. demand for American goods.
cially in telecommunications and US lawmakers have often weighed Expansion
other sensitive businesses, isn’t into the debate. The House
always welcome. Intelligence Committee is investigat- Markit said its US “flash” manufactur-
But the growth in investment ing Huawei, one of the world’s ing Purchasing Managers Index edged up
underscores how the relationship biggest suppliers of telecoms gear, to 51.9 in August from 51.4 in July. A
between the US and China is more and its rival, ZTE, examining their reading above 50 indicates expansion.
complicated than depicted on the ties to the Chinese government. It is Despite the weakness, the August read-
campaign trail. Cheap Chinese prod- also probing reports that ZTE is sup- ing beat analysts’ expectations and
ucts have benefited American con- plying surveillance equipment to Iran. marked the first monthly increase since
sumers, and China’s massive pur- March.
Probe That reinforces the idea that economic
chases of Treasury securities have
helped finance the US budget deficit. Lixin Cheng, CEO of the growth in the United States will pick up in
And while Chinese investment in the American arm of ZTE, says the com- the second half of the year after a sluggish
US is barely off the starting blocks pany has cooperated in the probe but spring. Even so, growth is still expected to
given the size of its economy, some denies that ZTE is influenced by the be lackluster. “The US economy is slowly
believe it could become a major Chinese government. (The company turning the corner ,” said Robbert Van
source for American jobs. is state-owned but has a portion of its Batenburg, head of global research at
“There’s a huge amount of igno- shares publicly traded). He describes Louis Capital Markets in New York.
rance in the US market place of how the allegations as “noise coming Despite the increase in new claims
to take advantage of potential from guys who don’t want competi- filed last week, the data on layoffs a lso
Chinese investment,” said Larry tion here so they can protect their had a silver lining.
Morrissey, independent mayor of market share.” The data covers the same week looked
Rockford, Illinois, a city of 150,000 But Cheng says handset sales have at by the government for its monthly
which hosts three major Chinese been rising and he remains bullish on measure of employment, and showed a
companies. While money is tight in the company’s prospects in supplying slight drop in layoffs from the survey
the US, he said, Chinese firms want American mobile network carriers, week last month, which is a mildly posi-
to invest and have the funds to do it. which account for about 90 percent tive signal for hiring in August.
But in the presidential campaign, of handset sales in the US The four-week moving average for
China seems to attract only negative Pin Ni, president of the American new claims, a measure of labor market
attention. arm of the private Wanxiang Group, an A sold sign stands in front of a home for sale on Aug 22, in San Francisco, California. (AFP) trends, was 368,000 last week. That was
“They steal our intellectual proper- auto parts and renewable energy manu- a slight increase from the prior week, but
ty rights. They block access to their facturer that has close to 6,000 employ- still 2.1 percent lower than in the second
ees in the US, said negative views of week of July.
markets. They manipulate their cur-
rency,” Republican vice presidential China and political tensions between ‘Quantitative easing is still very much on the table’ That week, the government surveyed
candidate Paul Ryan told supporters the two governments deter some com- employers and concluded 163,000 new
in Ohio last week. He accused panies. Yet in reality, he said, that’s lit- jobs were created in July — an improve-
President Barack Obama of allowing
China to treat him like a “doormat”
and vowed Mitt Romney would
crack down on China cheating.
tle impediment to doing business.
Ni set up Wanxiang America from a
home office in Mt. Prospect, Illinois,
in 1994, essentially as a sales outlet
Fed signals new action soon ment from the prior three months though
the unemployment rate still ticked higher
to 8.3 percent.
“No signs here that there’s been a
for the parent company. It now has 27 WASHINGTON, Aug 23, (AP): Federal accommodation would likely be warrant- gram open-ended so it could continue to buy notable pick-up in layoffs, and (that)
Deeper manufacturing facilities across 14 would suggest to us that moderate job
Reserve officials signaled Wednesday ed fairly soon unless incoming informa- bonds until it saw a significant decline in the
Obama, who has sought deeper states, annual revenues of more than that they may be ready to launch a new tion pointed to a substantial and sustain- unemployment rate, now at 8.3 percent. growth continued in August,” said Ellen
ties with China, says his administra- $2 billion, and supplies most of the bond buying program when they next able strengthening in the pace of the eco- An open-ended bond-buying program Zentner, an economist at Nomura
tion has nevertheless stepped up major American auto manufacturers. meet in September. nomic recovery.” would represent a major shift in Fed pol- Securities in New York.
trade complaints, and announced one He said that only about 10 percent of The goal would be to try to lower long- Paul Ashworth, chief US economist at icy, noted Michael Gapen, an economist The government will release its
in response to Chinese tariffs on US the parts it supplies in America are term interest rates to encourage more bor- Capital Economics, said that wording at Barclays. employment report for August on Sept. 7,
auto exports during a campaign trip now sourced from China. rowing and spending. signaled that the Fed won’t be satisfied Even if the Fed announces another round and policymakers at the Federal Reserve
to Ohio in July. “Our labor costs are higher (in the Minutes of the July 31-Aug. 1 policy by the modest improvements the econo- of bond purchases, some economists have will scrutinize the data for signs the econ-
But the administration, as well as U.S) but our overall costs are lower meeting released Wednesday don’t explicit- my has made recently. questioned how much it might help. They omy is improving. Economists at
the Republican-supporting US because it’s more efficient here,” he ly say what action the Fed would most like- “Quantitative easing is still very much note that mortgage rates and other key bor- Barclays said the claims data was consis-
Chamber of Commerce, are actively said. ly take. But they hint that the central bank is on the table,” Ashworth said. rowing rates are already near record lows. tent with payroll growth of 150,000.
seeking Chinese investment. They Mayor Morrissey said Wanxiang preparing to begin more bond buying. After its August meeting, the Fed Minutes from the Fed’s July 31-Aug. 1
want to capitalize on the ambitions of had acquired a struggling auto parts The minutes show that Fed officials
Target announced no changes in its policies. But policy review, released on Wednesday,
state-owned and private Chinese manufacturer in Rockford. Attracted spoke at the meeting with increased The minutes also show many officials in a statement afterward, it appeared to showed the central bank is likely to deliv-
companies to expand from the devel- by the Chinese company’s long-term urgency about the need to provide more favor pushing the timetable for any signal a growing willingness to take fur- er another round of monetary stimulus
oping world to developed countries. commitment to the US, Rockford help for the still-weak US economy. increase in record-low short-term rates ther steps to boost the economy if it “fairly soon” unless the economy
The private Rhodium Group, chose Wanxiang to develop a $12.5 Many felt further support would be need- beyond the Fed’s current target of late 2014 doesn’t improve. The Fed noted that improves considerably. The US economy
which closely tracks Chinese foreign million solar panel manufacturing ed “fairly soon” unless the economy at the earliest. Some economists think the growth had slowed in the first half of the faces a number of threats, including the
direct investment, or FDI, puts the plant employing 60 people, and a large improved significantly. target will be extended to mid-2015. year. In particular, it pointed to lackluster looming possibility the government will
total attracted to the US since 2000 at solar power farm, as part of the city’s The Fed has already sought to drive Reaction in the stock and bond markets job growth and consumer spending. raise taxes and cut spending. That is
$20.9 billion. It predicts that Chinese strategy to attract more green business. down long-term rates by buying more was positive but muted. The Standard & The issue of whether the Fed will already hurting business sentiment.
companies could invest between $1 Two other major Chinese firms than $2 trillion in Treasury bonds and Poor’s 500 stock index, down most of the announce any major moves in September A separate report from the Commerce
trillion and $2 trillion internationally have investments in Rockford, includ- mortgage-backed securities in two previ- day, finished essentially flat. The price of was thrown into some doubt by econom- Department showed sales of new single
by 2020 and a significant chunk ing Dalian Machine Tool Group which ous rounds of bond purchases. The pur- gold rose, as it sometimes does when ic improvements since its last meeting. family homes edged 3.6 percent higher in
could come to the US acquired Ingersoll Production Systems chases are called “quantitative easing.” investors think the Fed will pump more Gains have been made in such areas as July but prices fell, giving mixed signals
“Chinese firms are arriving at the and employs 100 people. Rockford is Based on the minutes, David Jones, money into the economy. Gold hit $1,657 hiring, housing and consumer spending. about the strength of a fledgling recovery
inflexion point at which it makes sense also in talks with Wanxiang about chief economist at DMJ Advisors, said he an ounce, its highest level since May. Many analysts are looking to a speech by in the country’s housing market.
for them to be developing more of a plans to modernize the city center. thought the likelihood of further quantita- The Fed releases minutes of its private Bernanke on Aug. 31 at an annual Fed con- Europe’s festering debt crisis also
commercial presence in the United “A lot of American cities are com- tive easing had risen from evenly split to discussions three weeks after each meet- ference in Jackson Hole, Wyoming, to pro- menaces the global economy. Business
States and Europe,” said Daniel Rosen, pletely on the sidelines,” said as high as a 70 percent chance that the ing. After it meets in September, Fed pol- vide further guidance on any new actions. surveys released on Thursday painted a
partner at the New York-based group. Morrissey, who has made several Fed will make that move when it meets icymakers will also update their econom- In the view of some analysts, the Fed global picture of economic malaise from
While China is still far from emu- trade missions to China. “I don’t see Sept 12-13. ic forecasts, and Chairman Ben Bernanke might still want to put off any major new Beijing to Berlin.
lating the outward expansion of many cities, especially cities of our “I believe the Fed is signaling in very will hold a news conference. bond-purchase program so it would have The euro zone economy will shrink
Japanese companies into the United size, doing what we are doing, of clear terms that a third round of bond pur- Ashworth and some other economists something in reserve in case the economy around 0.5 percent in the current quarter,
States the 1980s, this could be a being proactive and looking to chases will be approved at the September said the minutes suggested that if the Fed goes off a “fiscal cliff” at the end of the with weakness even spreading through
formative example. Fears then that exploit the opportunities there are for meeting,” Jones said. does launch a new bond buying program, it year. That’s when tax increases and deep Germany, the region’s largest and
the US economy might be dominated Chinese investment.” In the minutes, the Fed noted, “Many won’t set a target amount, as it has in the spending cuts will take effect unless strongest economy, Markit’s Purchasing
members judged that additional monetary past. Rather, the Fed could keep a new pro- Congress reaches a budget agreement. Mangers’ Index suggested.