Obama weighs major tax move
Cautious New Year optimism rippled through Asian and European stock markets on Monday as investors waited for news of tax-cutting plans in Germany and the United States.
The upbeat mood was undented by war in the Middle East and further disruption of Russian gas supplies to Europe in a pricing dispute between Moscow and Ukraine.
President-elect Barack Obama is seeking as much as $310 billion in tax cuts for businesses and the middle class as part of a massive stimulus plan to counter what senior policymakers warned could be a prolonged period of economic stagnation and deflation.
In Germany, Chancellor Angela Merkel meets her Social Democrat (SPD) coalition partners at 1300 GMT (8 a.m. EST) to discuss a second fiscal stimulus package worth up to 50 billion euros.
Merkel, under pressure at home and abroad to do more to lift Germany out of recession, on Sunday came out in favor of tax relief moves she had previously ruled out until after September’s federal election. Her conservatives and the SPD agree on the need to boost infrastructure projects to save jobs but are at odds over other details, including the tax cuts.
The stimulus plans by the world’s no. 1 and no. 3 economies mark the latest attempts to tackle a financial crisis that began with U.S. mortgage defaults in 2007 and now threatens much of the world with a deep and vicious recession.
Along the way, it has reshaped the banking landscape and taken entire countries to the brink of bankruptcy.
Over the weekend, both Janet Yellen, president of the San Francisco Federal Reserve, and Lucas Papademos, vice president of the European Central Bank, flagged the risks of deflation — a damaging spiral of falling prices and demand fast payday loan no faxing.
Data published on Monday showed Spanish inflation in December was the lowest for a decade, at 1.5 percent, while inflation also fell in Italy.
Investors have, however, begun to make tentative bets that the worst of the turmoil, which took a sharp turn for the worse in September with the collapse of investment bank Lehman Brothers, is over.
Kicking off the first full week of 2009, they pushed up stocks, the dollar and commodities while selling safe-haven plays such as government bonds and the Japanese yen.
SURPRISE UPTURN
Sentiment among euro zone investors improved for the first time in seven months in January, with an expectations index recording its strongest rise since August 2005, the Sentix research group said.
Its monthly index of investor morale in the 16-nation euro zone came in significantly higher than economists had expected, recording -34.4, compared to -42.3 in December.
“In the eyes of investors, measures taken by many states and central banks worldwide seem to be having an impact. We assume many indicators will follow the early indication from Sentix in the coming weeks and months,” Sentix said.
Filed under: economics by TheDoor