By The Associated Press (AP)
A look at economic developments and activity in major stock markets around the world Tuesday:
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BEIJING — The United States and China pledged closer cooperation on financial regulation and the environment but did not announce any breakthroughs on a currency dispute after a high-level dialogue overshadowed by Korean tensions.
The two sides made no announcements on progress on China's currency controls, a key irritant in relations with Washington. Chinese President Hu Jintao promised currency reforms Monday but gave no timeframe and said Beijing would set the pace of change.
Washington and other trading partners complain China's yuan is undervalued, giving its exporters an unfair advantage and swelling its multibillion-dollar trade surplus. The yuan has been frozen against the dollar since late 2008 to help Chinese exporters compete amid weak global demand.
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WASHINGTON — A Federal Reserve official says the European debt crisis isn't likely to throw the global economy back into a recession.
James Bullard, president of the Federal Reserve Bank of St. Louis, says he doesn't think the Europe crisis will spread into a broader financial contagion.
He says that in the past when countries defaulted on their debt, the episodes generated financial turmoil, but they didn't throw the world economy into a downturn. He points to the Russia's default in 1998 as a case in point.
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BERLIN — The German government is considering widening curbs on speculative trading practices under draft legislation that would extend a ban on so-called naked short selling of some securities to include all stocks.
Germany's market regulator surprised markets last week with an immediate ban on naked short-selling of eurozone government debt and shares of major financial companies. It applies through March 31, 2011.
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MILAN — The Italian government is asking citizens to make sacrifices to help get public finances in order and protect the country from the sort of market speculation that pushed Greece to the brink of bankruptcy.
The Cabinet meets to approve euro24 billion ($30 billion) in hotly contested spending cuts in 2011-2012.
Italy's measures are part of a wider wave of austerity cuts under way across Europe as the continent tries to convince markets that it can manage its debt load and avoid another near-default like Greece's.
Britain's FTSE 100 closed down 2.5 percent, Germany's DAX index dropped 2.3 percent and France's CAC-40 sank 2.9 percent. Markets in Spain and Italy, both carrying high debt levels, both fell around 4 percent.
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TOKYO — Asian markets were hit hard by reports that North Korean leader Kim Jong Il ordered his military to be on combat alert amid rising tensions on the peninsula. South Korea's benchmark stock index finished down 2.8 percent at its lowest close in more than three months.
Japan's Nikkei 225 stock average shed 3.1 percent, Hong Kong's Hang Seng index fell 3.3, benchmarks in Australia and Indonesia lost more than 3 percent, stock markets in India, Singapore and Thailand were down more than 2 percent and China dropped 1.9 percent.
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LONDON — Queen Elizabeth II delivered a somber message of austerity in a speech outlining the plans of the new coalition government.
The government has drawn up an 18-month program that includes steps to reduce Britain's record 163-billion-pound ($235 billion) budget deficit.
There was a small bit of good economic news just before the speech, as the Office of National Statistics raised its estimate of the increase in GDP in the first quarter from 0.2 percent to 0.3 percent. But the report also highlighted a continuing imbalance in the economy: government consumption rose 3.1 percent during the year while household spending actually fell.
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MADRID — Four Spanish savings banks have announced plans to merge amid concerns over solvency in the sector.
Over the weekend, the Bank of Spain bailed out an Andalusian savings bank after merger talks with another savings bank broke down.
The new four-bank entity would have a total of euro135 billion ($167 billion) in assets, making it Spain's third-biggest savings bank and the country's fifth largest bank overall.
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BERLIN — Germany's foreign minister says his country will push for comprehensive reforms of the eurozone's fiscal rules in order to regain citizens' faith in European unity.
Guido Westerwelle said Europe needs stricter controls on budgets, the creation of a European rating agency and better coordination on economic policies. He said countries notoriously running excessive budget deficits must be cut off from European Union financial support.
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COPENHAGEN — Denmark's center-right government struck a deal to trim public spending by 24 billion kroner ($4.37 billion) over the next three years.
The austerity package, which includes lowering welfare benefits and delaying planned tax reductions, is designed to meet European Union requirements to keep the budget deficit below 3 percent of economic output by 2013.
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CAIRO — Mideast and North African oil exporters will see a "strong recovery" in 2010, pulled ahead by increasing capital inflows and oil prices, the International Monetary Fund said, even as it lowered its projection for the countries' growth.
The IMF also warned that concerns remained about the banking sector in these nations, mainly stemming from slow credit growth. Link
