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President Obama announcing a debt deal, Sunday, July 31, 2011.
After weeks of turmoil, the US House of Representatives on Monday
supported a deal to raise the US federal debt ceiling from $14.3trn to avert a
default on federal debt.
The 269 to 161 vote in the House broke down as follows: 174 Republicans
and 95 Democrats supported the deal, while 66 Republicans and 95 Democrats
opposed it. The Democrat-controlled Senate is all but certain to approve the
The New York Times said in
an editorial on Monday that the "deal would avert a catastrophic
government default, immediately and probably through the end of 2012. The rest
of it is a nearly complete capitulation to the hostage-taking demands of
Republican extremists. It will hurt programs for the middle class and poor, and
hinder an economic recovery."
The NYT added: "There will be no second hostage-taking on the debt ceiling
in a few months, as Speaker John Boehner and his band of radicals originally
demanded. Democratic negotiators decided that the automatic cut system, as bad
as it is, was less of a threat to the economy than another default crisis, and
many are counting on future Congresses to undo its arbitrary butchering.
Sadly, in a political environment laced with lunacy, that calculation is
Property group Balmoral International Land, the Fyffes spin-off) has
today announced an extraordinary general meeting (EGM) of shareholders on Aug
25, to approve a reorganisation of the company which will involve the
cancellation of its stock market listings in Dublin and London.
Toyota, the Japanese car giant, today reported that net profit plunged
99% from a year earlier in the quarter to the end of June, mainly resulting from
the devastating March 11 earthquake and tsunami.
The world's biggest car maker reported a net profit of ¥1.16bn yen ($14.9m) in
its first fiscal quarter despite the serious disruption to production since
Barclays, the UK bank, announced today that it will cut about 3,000
jobs this year in response to tougher regulation and a drop in investment
First-half earnings dropped by a third after a decline in bond trading activity
at Barclays Capital and a charge to compensate customers who were mis-sold
insurance. However, the bad debts situation showed a significant improvement.
Pre-tax profit for the six months to the end of June was £2.64bn, off 33% from a
year ago but better than the average forecast of £2.4bn among analysts.
Barclays Capital's half-year profit dipped 9% on the year and revenue at the
investment banking arm was off 11% to £6.26bn, led by a dip in fixed income
Debt Deal White House Reaction:
Economic View: The US looks set to avert debt
default; Juliet Tennent, economist at
Goodbody, comments -- "The US debt ceiling deadlock is going all the
way to the wire. While the compromise deal passed the crucial House of
Representative vote last night, the Senate is yet to give its approval.
Expectations are that the deal will pass
through the Senate later today, the official deadline, but it has been a close
run thing. The deal allows the $14.3trl debt ceiling to be raised by over $2trl
in exchange for spending cuts of $2.4trl over the next 10 years. Needless to
say, neither side of the political divide is entirely happy with the compromise
However, at least a technical default on the
part of the world’s most important economy looks set to be averted. Financial
markets, which had already been subject to massive uncertainty due to the debt
crises in Europe and were under pressure following an unexpectedly weak July
ISM, steadied somewhat as it emerged that a compromise agreement had been
reached and a default would be averted.
With concerns surrounding the health of the US
economy intensifying in recent weeks, the uncertainty surrounding the debt
ceiling was an additional destabilising influence on financial markets. Now that
an agreement has been reached it remains to be seen what, if any, impact it has
on the US’s AAA rating and whether the planned spending cuts will further slow
US economic growth."
US set to pass €2.4trn fiscal consolidation and raise debt ceiling; Conall
Mac Coille, chief economist at Davy, comments - -
"The US Congress appears to be ready to pass a new $2.4trn fiscal
consolidation package today, while at the same time raising the US Treasury's
debt ceiling by $2.1trn. So, the immediate threat of default by the US
government has been averted. However, it remains to be seen whether ratings
agents will maintain the US's AAA status. A downgrade could put further pressure
on funding costs across the US economy. Also, only $917bn of the overall $2.1trn
has been agreed thus far, with further measures to be negotiated later in the
The agreed fiscal consolidation programme follows news that US economic
growth has been far weaker than anticipated in the first half of 2011. GDP data
released on July 29th indicated annualised growth of 1.3% in Q1, following a
downwardly revised expansion of just 0.4% in Q1. The downward revisions
reflected a strong negative contribution from government spending in the first
In addition, purchasing managers indices released yesterday indicated that
economic conditions are likely to remain weak in the third quarter of the year.
The UK manufacturing index fell to 49.1, below the 50 no-change level in July,
suggesting that manufacturing will continue to push down on GDP growth in Q3.
Similarly, the US Institute of Supply Management survey fell to 50.9, well below
the 54.5 reading expected. Although above the 50 no-change level, the past
statistical relationship with the official data suggests that the reading is
probably consistent with a contraction in the US manufacturing sector."
In New York
Monday, despite the debt ceiling deal, the Dow fell 11 points or 0.09% to 12,132.
The S&P 500
declined 0.41% and Nasdaq dipped 0.43%.
The MSCI Asia Pacific Index fell
1.6% Tuesday, the most since July 12.
Japan's Nikkei 225 dropped 1.21%;
China's Shanghai Composite index dipped 0.91%; Australia's S&P/ASX 200 lost
1.43% and the Bombay Stock Exchange's Sensex index declined 1.36% in Mumbai.
The BDI closed at 3,005 on
Thursday, Dec 31st - - a rise of 289% in 2009. The index averaged 59% lower in
2009 than a year earlier.
On Thursday, July 15, 2010,
the index fell for the 35th straight session, by 9 points, or 0.537%, to 1,700
July16th, the BDI rose 20 points or 1.12% to 1,700 to break the 35-session
On Monday this week, the BDI fell 8 points or
0.63% to 1,256.
Financial Times reported in January, that Australia’s flooding and fears of ship
oversupply has pushed down a gauge of the cost of hiring ships to carry coal,
iron ore and other dry bulk by nearly half since October to the lowest level
since the aftermath of the financial crisis. The Baltic Dry index, the widely
watched measure of dry bulk charter rates, fell to 1,453, nearly half the 2,784
peak reached on October 27, 2010.
The margin between the US
benchmark WTI (West Texas Intermediate) used on the New York Mercantile Exchange
and Brent is over $21.
The US Energy department
recently said that growing volumes of Canadian crude oil imported into the
United States contributed to record-high
levels at Cushing, Oklahoma of over 41m barrels at the end of March 2011
(86% of working capacity at Cushing), and a price discount for WTI compared with
similar-quality world crudes such as Brent. A discount for WTI is expected to
persist until transportation bottlenecks impacting the movement of mid-continent
crude oil to the Gulf coast are relieved. Consequently, the projected US refiner
average acquisition cost of crude oil, which was about $2.70 per barrel below
WTI in 2010, is $1.60 per barrel above WTI in 2011 and $1.10 per barrel above
WTI in 2012.