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European Markets Prepare to Weather U.S. Recession
by
findingDulcinea Staff
European policy makers are unlikely to coordinate global economic remedies with the United States at the G7 meeting this weekend. Europe believes it can withstand a U.S. recession.
30-Second Summary
Although the United Nations has warned of a "domino effect" if the U.S. economy enters a recession, not everyone is convinced that the world is still dependent on America's financial well-being.
The attitude of European policy makers, and the behavior of European stocks, are a case in point.
U.S. stocks suffered their worst single day fall in almost a year on Tuesday. The next day, Asian markets reflected these losses while European shares posted modest gains.
The U.S. Federal Reserve has already cut interest rates twice this month in an attempt to stave off economic recession and is expected to take further action.
The European Central Bank has not made a similar move. In the meantime, a $156 billion economic recovery package awaits Senate approval.
David McCormick, U.S. Treasury Undersecretary for International Affairs, told reporters that he expects the United States to call on its partners at this weekend’s G7 meeting in Tokyo to adopt some sort of global economic stimulus plan to boost demand worldwide. Such a move could make up for reduced consumption in the United States.
However, the Financial Times reported that it is unlikely the G7 countries will agree on concerted action. These nations have different economic problems and, therefore, different priorities. The finance ministries of Japan, Germany and Britain have said they do not plan to issue fiscal stimulus packages.
Discussions at the World Economic Forum at Davos two weeks ago reflected similar doubts about continued U.S. leadership of the global economy.
The attitude of European policy makers, and the behavior of European stocks, are a case in point.
U.S. stocks suffered their worst single day fall in almost a year on Tuesday. The next day, Asian markets reflected these losses while European shares posted modest gains.
The U.S. Federal Reserve has already cut interest rates twice this month in an attempt to stave off economic recession and is expected to take further action.
The European Central Bank has not made a similar move. In the meantime, a $156 billion economic recovery package awaits Senate approval.
David McCormick, U.S. Treasury Undersecretary for International Affairs, told reporters that he expects the United States to call on its partners at this weekend’s G7 meeting in Tokyo to adopt some sort of global economic stimulus plan to boost demand worldwide. Such a move could make up for reduced consumption in the United States.
However, the Financial Times reported that it is unlikely the G7 countries will agree on concerted action. These nations have different economic problems and, therefore, different priorities. The finance ministries of Japan, Germany and Britain have said they do not plan to issue fiscal stimulus packages.
Discussions at the World Economic Forum at Davos two weeks ago reflected similar doubts about continued U.S. leadership of the global economy.
Headline Links: U.S. market falls but global stimulus package unlikely
"Stocks suffered their worst one-day fall in nearly a year on Tuesday as new figures suggested the U.S. might already be in a recession and other leading economies rebuffed U.S. calls for a global economic stimulus package," the Financial Times reports.
Source: Financial Times
The United States is expected to call on the G7 countries to adopt some sort of global stimulus package to boost domestic demand. “Given current softness in demand growth in the United States, it is especially important that other economies—large and small, advanced and emerging market—take prudent steps to strengthen their economies demand components,” David McCormick, U.S. Treasury Undersecretary for International Affairs, told reporters.
Source: Forbes
Finance ministers from the world’s seven richest countries are unlikely to agree on coordinated measures to address the financial market downturn, Reuters reports. Different economic problems, and thus priorities, are cited as the main reasons.
Source: Reuters
Reactions: Asian markets down while Europe makes modest gains
The Japanese Nikkei 225 Average fell 4.7 percent on Wednesday on concerns about the economic decline in the United States and the health of the global economy. Hong Kong's Hang Seng Index dropped 5.4 percent.
Source: MarketWatch
European stocks registered modest gains Wednesday, even as fears of a global economic downturn sent U.S. and Asian shares plummeting.
Source: Yahoo News
Background: UN warns of domino effect but Europe remains positive
A United Nations report released in early January warned that a U.S. economic recession would drag down the global economy. “The domino effect of a U.S. recession would be to knock down export growth from China, Europe and Japan, in turn reducing their demand for exports from developing countries,” according to the report. The world’s richest economies might need to stimulate domestic demand to make up for a reduced consumption rate in the United States, chief UN economist Rob Vos said in an interview.
Source: Bloomberg News
Europe is optimistic that an economic slowdown in the United States will not have serious implications for European stocks, The New York Times reported. This is one explanation for the European Central Bank’s decision not to imitate the U.S. Federal Reserve’s Jan. 22 emergency rate cut.
Source: The New York Times
Opinion & Analysis: ‘Is America History?’
“The rich and the powerful at Davos are already looking beyond the United States as present and future global leader. The talk is about whether emerging economies, primarily China, India, and resource-rich Russia, can pick up the economic slack if America falters and maintain global growth,” wrote Philadelphia Inquirer columnist Trudy Rubin.
Source: Real Clear Politics
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