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Wednesday, September 26, 2012

Spain and Greece Overtaken by Anti-Austerity Protests

Protesters and police clashed in Madrid and Athens today as people demonstrated against austerity measures imposed on Spain and Greece that have stunted economic growth. This was the biggest protest in Athens in over a year as more than 70,000 people joined a 24-hour general strike, and the city saw some of its most violent confrontations. Rioters threw molotov cocktails and police responded with tear gas. Demonstrations also continued in Madrid on the eve of Spanish Prime Minister Mariano Rajoy’s presentation of the government’s 2013 budget, which analysts say will include a fresh round of spending cuts thought to set the stage for a bailout package. The markets, which had eased up on Spanish assets, retreated again, sending borrowing costs for the nation above six percent. Talks among top European Union leaders said the new permanent rescue fund, the European Stability Mechanism that was recently given a green light a German constitutional court, should have limited liabilities in bank recapitalizations, leaving indebted nations to bear the losses. This contributed to spooking investors, who sought safety in U.S. and German securities.

Germany, EU Propose Laws to Limit High-Speed Trading

Germany’s government presented today legislation that would force financial companies that use high-speed trading to register with the authorities. The law would also limit how quickly the system can operate. High-speed trading takes advantage of the changes in security prices to trigger sales or acquisitions. The European Union echoed Germany hours later by proposing a broader version of the law that would apply to all EU nations should it be accepted. High-speed trading has been blamed for major incidents on the stock markets, more recently a computer glitch that cost U.S. market maker Knight Capital $440 million in August, prompting it to seek rescue funds to survive. So far, the U.S. have no plans to regulate this kind of system. Canada has already implemented rules on the trading floor to curtail risks incurred by high-speed trading, with some success. Australia is also looking at regulating its use.

French President Calls for U.N. Support in Mali

French President François Hollande asked the United Nations Security Council (UNSC) today to heed calls for a military intervention in northern Mali, which has been overrun by Islamic militants and Tuaregs demanding independence. He spoke at a summit on the Sahel region, organized on the sidelines of the 67th U.N. General Assembly, three days after Mali and the Economic Community of West African States (ECOWAS) reached an agreement on a plan for armed intervention with 3,300 troops. Hollande is now seeking support from the U.N. for this initiative, asking for a UNSC meeting “as soon as possible.” He added France is prepared to do ”everything it can to support the troops that are being planned.” Mali Prime Minister Cheick Modibo Diarra also asked the UNSC to back “an international military force, one which would be composed of all those willing and able to help us reconquer occupied territories in the north of our country.” The U.S. replied that the African country must first accept to hold democratic elections. Mali’s government came to power after a coup in March.

China Accuses Japan of  ”Severe Infringement” over Islands

The Chinese government said today its Foreign Minister Yang Jiechi accused Japan of “severe infringement” against China’s sovereignty in a conversation with his Japanese counterpart Koichiro Gemba at a meeting in the United Nations headquarters in New York. The foreign ministers from China and Japan met yesterday to discuss the dispute over the string of uninhabited islands known as Diaoyu in China and Senkaku in Japan. “The Chinese side will by no means tolerate any unilateral action by the Japanese side on the Diaoyu Islands,” Yang reportedly told Gemba. This was the first serious diplomatic contact between the two nations since Japan bought the islands from a private owner earlier this month. Japan said it did so to prevent a bid by Shintaro Ishihara, the governor of Tokyo, who wanted his government to develop the islands, something Japan feared would provoke China. Meanwhile, production at Japanese-owned factories in China slowed, after violent protests forced them to shut down in the past two weeks. Analysts estimate sales of Japanese cars in China will drop 20 to 30 percent. Nippon Airways also announced they received 40,000 cancellations for seats in flights between Japan and China between September and November.

Brazil’s Currency Slides on Talk of Government Intervention

Brazil’s real fell today on reports that the government may intervene to depreciate the currency to keep Brazilian goods competitive on the international market. Brazil President Dilma Rousseff, who spoke yesterday at the United Nations, criticized the U.S., Europe and Japan for how they handled the crisis by lowering interest rates and injecting cash into the real economy. She said such policies weaken the dollar, the euro, and the yen while causing an “artificial appreciation” of emerging market currencies, thereby giving exports from rich economies an unfair advantage. The nation’s Finance Minister Guido Mantega said last week the government is ready to act against a real increase. The Brazilian government announced last month a $60 billion package to revive its economy, which was hit by the global slowdown.

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