ECB may buy European corporate debt

Euro-zone annual inflation may be a record low

Irish national property prices back to February 2005 levels

Russia’s economy may contract by -4.5%

Egypt cuts interest rate for second month

House prices rise thanks to luxury apartments

ECB may buy European corporate debt

The vice-president of the European Central Bank (ECB), Lucas Papademos, recently said at the European Business Summit in Brussels that the ECB was actively considering a programme to start buying European corporate debt in a bid to get the market flowing again.

Such a move, known as quantitative easing, would help SMEs and larger European companies who are currently finding it difficult to fund further investment. The US Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank have all adopted varying policies of quantitative easing in recent months to fight the current financial crisis.

However the policy of buying corporate bonds is more problematic in the EU as member states are likely to compete over which companies should receive the funds. Papademos also indicated that the ECB was considering lengthening its lending period to other banks.

In addition, Papademos pointed out that since the crisis had started the ECB has pumped huge amounts of liquidity into the financial sector in the form of loans in an attempt to unblock lending. As a result, the ECB’s balance sheet has increased by 70%.

Euro-zone annual inflation may be a record low

Euro-zone annual inflation is expected to be 0.6% in March 2009 which will be a record low, according to a flash estimate issued by Eurostat, the Statistical Office of the European Communities.

It was 1.2% in February and the European Central Bank’s (ECB) target annual inflation rate is below but close to 2%. At the meeting of the Governing Council later on this week, the ECB is expected to cut the benchmark rate from 1.5% to 1%.

The ECB meeting coincides with the opening of the G-20 summit of the leaders of the leading developed and emerging economies, in London. Jean-Claude Trichet, ECB’s president, recently appealed to the world leaders, when speaking in the European Parliament, to “show the public there is an exit strategy” from the current global economic crisis.

Irish national property prices back to February 2005 levels

Irish average national house prices fell by -0.8% in February 2009, according to the latest edition of the permanent tsb/ESRI House Price Index, compared to decreases in January (-1.4%), December 2008 (-0.9%) and November 2008 (-0.5%).

Measuring the rate of growth in the 12 months to February, national prices were down by -9.7%, which is a slight improvement on January’s year-on-year figure. In the first two months of 2009 national house prices have fallen by -2.1% which compares to a reduction of -1.5% in the same period in 2008.

This means the average price paid for a house in Ireland in February 2009 was €255,999, compared with €261,573 in December and a peak of €311,078 in February 2007.

Russia’s economy may contract by -4.5%

Russia’s economy will contract by -4.5% in gross domestic product (GDP) terms in 2009 amid a further massive retreat of capital, according to the World Bank.

The new GDP figure represents a major revision of the bank’s earlier forecast of +3% growth and is double the latest estimates for a contraction of -2.2% issued by the Russian government.

The bank’s chief economist for Russia, Zeljko Bogetic, said in the report: ‘The scale of this revision reflects the dislocation of the global economy in the intervening months.’

The country’s economy also faces further downside risks due to the uncertainty surrounding the price of oil ( Russia's chief export) and the timing of a possible global recovery, according to Bogetic.

However, the World Bank’s estimates are based on the $135bn debt obligations that the banking and corporate sectors face this year as well as a significant slowdown of foreign direct investment and further outflow of capital from the country, believes Bogetic.

The bank also said Russia’s unemployment rate may exceed 12% and that the Government needs to boost its social spending to aid the unemployed and the poor to prevent any social unrest.

Egypt cuts interest rate for second month

Egypt’s central bank cut its benchmark interest rate for a second consecutive month by 0.5% to 10% and the overnight lending rate was cut by the same amount to 12%, according to the bank.

Economic growth is expected to slow to between 4-4.5% in the fiscal year through June, according to Investment Minister Mahmoud Mohieldin. Growth has exceeded +7% in the past three years. In February, the central bank cut interest rates for the first time since April 2006 and the 1% reduction was the biggest since at least 2005.

Hisham Ramez, Egypt’s deputy central bank’s Governor said, that the central bank expects “single digit” inflation by June. Urban inflation (the rate that Egypt targets) declined to 13.5% in February from 14.4% a month earlier, which was the lowest since February 2008.

House prices rise thanks to luxury apartments

Due to luxury residences in Hong Kong being Asia’s second most expensive, house prices in Hong Kong rose by +5.5% in the first quarter from the end of 2008, according to a report by Centaline Property Agency.

Lower mortgage rates and an average price decline of -20% from the same period last year may have encouraged buyers back to the market. However, Li Ka-Shing, Hong Kong billionaire, said that Cheung Kong, his property flagship, no longer needed to line up banks to lend as the mortgage market is “much better”. The value of new mortgages in the city, in its first recession since 2003, fell for the seventh month in February.

Of the 10 biggest housing estates tracked by Centaline, prices at Taikoo Shing in the eastern part of Hong Kong island rose the most by 9.9%. Mei Foo, located in Kowloon, ranked number two after posting a +9.6% gain, according to the report.