G20 pledges to halve fiscal deficits within three years along with promises of stricter banking regulation to come did little to rally wary stock markets on Monday, with some commentators saying the summit pointed more to disunity than global co-operation.
According to the final communiqué, the G20 acknowledges that there is no one-size-fits-all solution to the world’s economic problems and fiscal consolidation will be “differentiated to national circumstances.” Those with serious debt problems need to step up the pace, while Japan was given an exemption.
The G20 also said banks would be required to hold more and better quality capital, though detailed guidelines won’t be available until the next summit in Seoul, South Korea in November. They also abandoned efforts to introduce a global bank tax acknowledging “a range of policy approaches” to the problem.
“The fact that the phase-in of new regulations will be conditioned to different national starting points and circumstances sets a worrisome precedent for the upcoming negotiations,” TD Bank Financial Group Chief Economist Craig Alexander said in a report.
“The key risk is that an unco-ordinated approach could fuel regulatory arbitrage, as firms adjust to the new regulatory environment.”
The S&P/TSX Index fell 0.86% to close the day at 11,607.00 while crude oil was down 0.7% to about
$78 a barrel. Silver and copper prices rose, while gold edged back to $1,251 an ounce.
On Wall Street, the Dow Jones Industrial Average dropped 0.05% to 10,138.52 while the Nasdaq shed 0.13% to 2,220.65. Investors there were focused more on a better-than-expected consumer spending report than statements from the G20.
“Jobs data on Friday will be the biggest overhang this week,” said Harris Private Bank’s Chief Investment Officer Jack Ablin. “We needed to see spending increase, corporate profits come back and jobs. The missing piece of the puzzle is that jobs are not being created.”
The U.S. had wanted its G20 peers to focus on continued stimulus given the fragile state of the global economic recovery, rather than on austerity.
Many European nations, however, which face some of the worst debt problems, have already begun tightening their belts, with the U.K. announcing the biggest cuts in three decades in its budget last week.
“Countries like the U.S., still have some time before they need to move aggressively,” BMO Capital Markets Deputy Chief Economist Doug Porter said. “The last thing we need is for countries to be entirely focused on austerity all at once.”
BMO Harris Chief Investment Officer Paul Taylor said the G20’s conclusions tended towards the positive for Canadian stocks as there is still a broad commitment to support global growth that will benefit the country’s commodities. At the same time, no punitive measures were announced that
would affect banks, he said.
The Canadian dollar showed little reaction to the weekend’s statements, with focus again on upcoming U.S. jobs data.
According to the final communiqué, the G20 acknowledges that there is no one-size-fits-all solution to the world’s economic problems and fiscal consolidation will be “differentiated to national circumstances.” Those with serious debt problems need to step up the pace, while Japan was given an exemption.
“The fact that the phase-in of new regulations will be conditioned to different national starting points and circumstances sets a worrisome precedent for the upcoming negotiations,” TD Bank Financial Group Chief Economist Craig Alexander said in a report.
“The key risk is that an unco-ordinated approach could fuel regulatory arbitrage, as firms adjust to the new regulatory environment.”
The S&P/TSX Index fell 0.86% to close the day at 11,607.00 while crude oil was down 0.7% to about
$78 a barrel. Silver and copper prices rose, while gold edged back to $1,251 an ounce.
On Wall Street, the Dow Jones Industrial Average dropped 0.05% to 10,138.52 while the Nasdaq shed 0.13% to 2,220.65. Investors there were focused more on a better-than-expected consumer spending report than statements from the G20.
“Jobs data on Friday will be the biggest overhang this week,” said Harris Private Bank’s Chief Investment Officer Jack Ablin. “We needed to see spending increase, corporate profits come back and jobs. The missing piece of the puzzle is that jobs are not being created.”
The U.S. had wanted its G20 peers to focus on continued stimulus given the fragile state of the global economic recovery, rather than on austerity.
Many European nations, however, which face some of the worst debt problems, have already begun tightening their belts, with the U.K. announcing the biggest cuts in three decades in its budget last week.
“Countries like the U.S., still have some time before they need to move aggressively,” BMO Capital Markets Deputy Chief Economist Doug Porter said. “The last thing we need is for countries to be entirely focused on austerity all at once.”
BMO Harris Chief Investment Officer Paul Taylor said the G20’s conclusions tended towards the positive for Canadian stocks as there is still a broad commitment to support global growth that will benefit the country’s commodities. At the same time, no punitive measures were announced that
would affect banks, he said.
The Canadian dollar showed little reaction to the weekend’s statements, with focus again on upcoming U.S. jobs data.
