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A Look At The Global Economy

moneyThere were two economic events of note last week. Here they are.

US Debt ceiling

It seems that luck is on President Obama’s side as polls have shown that the public places more of the blame for the government shutdown on the Republicans. A Pew Research Center survey found that 38% of Americans say Republican leaders are more to blame compared with 30% who mention Obama.

With the deadline for the debt ceiling fast approaching, Republican lawmakers have proposed a short-term increase in the debt ceiling and delay the day of reckoning from October 17 to November 22. However, President Obama has rejected the latest proposal.

Nevertheless, most stock markets are hopeful of a resolution and have rallied the most since January. U.S. and Europe markets jumped over 2% while the Straits Times Index (SGX: ^STI) gained around 1% last week.

Japan and China have expressed concern over the looming US debt ceiling deadline as the two nations are the America’s largest external debt holders. Together they own about US$2.5 trillion worth of US Treasuries. However, both countries are optimistic that a solution will be found.

Unexpected Drop in China Exports

China’s exports unexpectedly fell in September compared to the previous month. The slowdown in exports may continue given a downbeat report from the IMF’s that worldwide growth could be 2.9% this year and 3.6% next year. This is lower than previous predictions of 3.1% for 2013 and 3.8% for 2014 respectively.

However, some observers remain optimistic. A Chinese customs spokesman said: “Sometimes a single month’s data can’t tell the true story, and there are other factors as well”. Zheng Yuesheng added: “I see this as a seasonal thing”.

Elsewhere, Shen Jianguang, the Hong Kong-based chief Asia economist at Mizuho Securities Asia, listed several reasons for the meagre results. They included inflated export data last year, fewer working days due to the Mid-Autumn Festival holiday and currency volatility in Southeast Asia. The benchmark Shanghai Composite Index (SHCOMP) rose 2.5% on the week.

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