G20 To Warn Of 'Uneven And Fragile' Recovery

June 23, 2010

WASHINGTON (AFP) -- Leaders from the group of 20 top economies will warn that the global recovery remains "uneven and fragile" when they meet in Toronto later this week, according to a leaked draft communique.

According to the document, obtained by Greenpeace -- an environmental lobby group -- leaders noted a still patchy recovery from the worst economic crisis in a generation.

"While growth is returning in many countries, the recovery is uneven and fragile, and unemployment remains at unacceptable levels," the text said.

Skirting a contentious issue that has divided Europe and the U.S., leaders were to say stimulus spending had helped stabilize the global economy.

Washington has urged Europe not to cut government spending before the recovery is assured, for fear of plunging a swathe of the world -- including the U.S. -- into a double-dip recession.

European nations, led by Germany, France and Britain, argue drastic cuts are needed to put their books in order and create a firm basis for future growth.

"Fiscal and monetary stimulus has helped restore private demand and lending, and we have taken strong steps toward increasing the stability of our financial systems," said the largely incomplete text.

Leaders were also expected to ask trade ministers to move toward the "endgame" of much-delayed World Trade Organization negotiations.

"We instruct our Trade Ministers to prepare a full assessment of the state of the negotiations and a plan of the way forward for our consideration at the Seoul G20 summit in November of this year."

They will also push forward with a "voluntary" plan to "identifying inefficient fossil fuel subsidies that encourage wasteful consumption.

"We agree to continue working to develop voluntary, member-specific approaches for the rationalization and phase out of such measures."

The Federal Open Market Committee (FOMC), stated today that financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad. Bank lending has continued to contract in recent months. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be moderate for a time.

Prices of energy and other commodities have declined somewhat in recent months, underlying inflation has trended lower. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its tools as necessary to promote economic price stability.

New U.S. home sales plunge to a record low, dropping 32.7% to an annual rate of 300,000 in May, as buyers faced a lackluster job market without a longtime government subsidy for purchases. Economists expected sales to drop by 20.6%.

US residential home foreclosure actions, modifications continue to rise as unemployment in the US continues to trouble the economy, potential buyers, banks, Cities and States as taxable income sources continues to fall.

U.S. crude inventories showed a large, unexpected build last week, but the draw seen in gasoline stocks bucked analysts' expectations, according to data released Wednesday by the U.S. Department of Energy.

Crude oil stockpiles rose by 2.0 million barrels to 365.1 million barrels for the week ended June 18, compared with an average survey estimate of a 1-million barrel decline. Late Tuesday, the American Petroleum Institute, an industry group, reported that crude inventories rose by 3.7 million barrels.

On the New York Mercantile Exchange, crude oil futures held on to early losses with August contracts recently down 2.9% at $75.64 a barrel. Benchmark gasoline futures for July were recently down 2.9% at $2.0720 a gallon and July heating oil was down 7.7% at 2.0565 a gallon.

The EIA's weekly data show a smaller-than-expected build in distillate stocks and an unexpected draw in gasoline inventories, but the report failed to stir the markets. Inventories for crude oil and refined products remain at unusually high levels for this time of the year.

Gasoline stockpiles fell by 762,000 barrels to 217.6 million barrels, the department's Energy Information Administration said in its weekly report versus the forecast of a 300,000-barrel build based a Dow Jones Newswires survey of 14 analysts.

Distillate stocks, which include heating oil and diesel fuel, edged up by 297,000 barrels to 156.9 million barrels versus analysts' estimate for a 1.2-million barrel increase.

Refining capacity utilization rose 1.5 percentage points to 89.4%. Analysts had expected it to rise by 0.2 percentage point.

API reported that gasoline stocks had risen by 810,000 barrels and distillate inventories expanded by 1.1 million barrels last week while refinery runs rose by 2.1 percentage points to 87.1% of capacity.

U.S. Oil Inventories:
For week ended June 18:
Crude Distillates Gasoline Refinery Use
EIA data: +2.0 +0.3 -0.8 +1.5
Forecast: -1.0 +1.2 +0.3 +0.2

Figures in millions of barrels, except for refining use, which is reported in percentage points. Forecasts are the average of expectations in a Dow Jones Newswires survey of analysts earlier in the week.

U.K. Prime Minister Cameron says cuts needed to stave off a Double Dip Recession.
The Prime Minister is to argue that far from choking the economic recovery, the spending cuts and tax hikes announced in Tuesday's budget were needed to keep it on track.
Sovereign borrowers sought to play down the potential effects of the 440 billion European Financial Stability Facility at this week's Euro-money debt conference, but a lack of clarity on the issue means it is very hard to tell whether the new vehicle will crowd the market for high-quality debt.