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It’s a nail-biter: shaky global economy as China softens and IEA’s plan B doesn’t dent the current economic status

It’s a nail-biter: shaky global economy as China softens and IEA’s plan B doesn’t dent the current economic status

Concerns grow over sustainability of EU's Greece bailout while signs of a slowdown show in China and the US desperately finds its feet.

July 5, 2011 11:24 by



Brent crude was lower on Tuesday, weighed down by lingering concerns over the health of the global economy, the Greek debt crisis and a stronger dollar, according to a Reuters report.

And for your ease of reading, here are ripple effects of the current events:

  • The market’s optimism over efforts by European policymakers to approve an emergency bailout for Greece was tempered by Standard & Poor’s negative view on the private sector involvement in a second Greek bailout package.
  • Oil prices were depressed by a stronger US dollar, which rose 0.3 percent against a basket of currencies by 0442 GMT, making dollar-denominated oil more expensive when purchased in foreign currencies.
  • US Treasury Secretary Timothy Geithner has warned of huge risks if Congress fails to raise the $14.3 trillion debt ceiling by August 2, potentially triggering a default that could send shivers through an already-fragile banking system.
  • The euro slipped from one-month highs against the dollar as the greenback was bought back broadly on a flurry of stop-loss buying and short-covering by macro-funds.
  • Adding to the market’s nervousness are signs of a slowdown in China, after data last Friday showed the country’s factory sector grew at its slowest pace in 28 months.
  • China’s fledgling services sector also fell slightly in June but still pointed to solid business expansion as new order growth quickened to an eight-month high, a report on Tuesday showed.

And remember the International Energy Agency’s unanimous vote to inject the market with 60 million barrels from their emergency reserves to keep oil supply up?

Well, looks like the agency’s efforts may have not had the desired effect as analysts pointed out that there was a “a lack of coordination and transparency outside the US and that the full volume of 60 million barrels may not be absorbed due to globally weak demand.”

In fact, according a Reuters report, Goldman Sachs said it had become clear that the impact of the IEA’s 60-million-barrel oil release would be much smaller than the initial announcement suggested.

The extra supply was released to take over some of the supply that stopped coming from Libya at the peak of its unrest.



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