Important developments today:
1. EU unveils new rules for financial markets
2. U.S. Industrial Production up in August
EU unveils new rules for financial markets. The European Union proposed on Wednesday tougher new rules to curb derivative trading and short-selling, two loosely regulated forms of speculative trading activities that have been blamed by some for contributing to the global financial crisis. The new rules would require over-the-counter (OTC) contracts to be cleared centrally and be reported to “trade repositories” in order to allow regulators to have a better grip on the market activity. The proposed rules would also give national regulators in Europe the power to temporarily restrict or ban short-selling in case of serious financial instability. Short-selling—selling a borrowed security with the intention of repurchasing it later at a lower price—has been blamed for exacerbating some of the sharp downswing in share prices during the financial crisis. In particular, the controversial practice of naked short-selling, which sell shares without having made any arrangements to secure them, has been heavily criticized. The proposals still need to be approved by EU member states and parliament.
U.S. industrial production up in August. In signs of a continued recovery, U.S factories, mines and utilities increased output in August, the 13th monthly increase since July 2009 [see chart]. In figures released by the Federal Reserve today, U.S. industrial production increased by 0.2%, a decline from the 0.6% recorded in July. Unlike the July production figures that were driven by an 8.3% rise in the production of motor vehicles and parts, in August motor vehicle production served as a drag, falling by 5.2%. On the brighter side, August figures show that the increase was driven by increases in the purchase of business equipment (0.7% m/m), thereby confirming that U.S companies continue to replace outdated equipment. With consumer demand still in the doldrums, business investment has been important to US growth. In Q2 2010, non-residential fixed investments, which includes industrial output, contributed 1.54% to U.S GDP growth of 1.6%. However, going forward, industrial production could be more constrained as global growth prospects moderate on the back of a waning inventory cycle and winding down of government stimulus programs.
Source: World Bank DEC Prospects Group and Thomson Reuters.
Among emerging markets:
In East Asia and the Pacific, China’s foreign direct investment (FDI) in August increased by 1.4% to $7.6 billion, in a release by the Ministry of Commerce.
In Central and Eastern Europe and the CIS, Russia’s industrial production increased 7% y/y in August, in a release by the Federal State Statistics Service.
In Sub-Saharan Africa, Ghana’s inflation reached 9.4% y/y in August compared to July 9.5%, stated the country’s Statistical Service. Inflation in Ghana has been decreasing since last year’s 20.7% in June.