European Central bank to unwind support for Banks

Ecb to unwind support for banks-

by Ralph Atkin in Frankfurt Dec-3-2009 The European Central bank's emerging financial market support measures are set to be unword from this month after Jean Claude Trichet,Ecb president rebuffed IMF calls to err on the side of delaying 'exit strategies'.

The Ecb moved on thursday to limit demand for one year liquidity in an operation that will take place later this month and told eurozone bank that other,short term liquidity- boosting operation would be scale back in 2010.The ECb took account of the continuing weakness of some euro zone banks.

Measures, however were bolder than financial markets expected,highlighting Ecb fear that some banks have become overdependent on the liquidity.

Currently some 670bn euro in Ecb liquidity is outstanding compared with typical pre- crisis level of about 450bn euro. The Ecb's financial package action are intended to store up the eurozone financial system after the collapse of Lehman brothers last year.

Euro boosted by ECB liquidity The ECB left euro interest rate on hold at a record low of 1% after policy meeting. John Hardy at Saxo bank said "this was a clear signal in the Ecb's exit strategy from its emerging liquidity provisions for this cycle- a far clearer signal than any that the Federal reserve bank of England had come up with". He said "If equities remain supportive, we should see new hights for the euro against the dollar. The euro rose to 0.3%to 1.5089 against the dollar striking distance of 16 month high of $1.5144 it hit last week. The euro also rose to 0.7% to pound 0.9108 against the pound and climbed 1.3% to Y133.10 against the yen.

Euro zone joblessness hits pleatau

Euro zone unemployent levelled off at a 10 year high in October, according to data released on Tuesday, with a seperate figure from Germany even indicating a small fall in the jobless figures last month.The uninterrupted rise in joblessness in the 16 nation bloc since Feb-2008 pushed unemployment rate to 9.8%on a seasonally adjusted basis.The rise in unemployment in the Euro zone has been much muted in the euro zone than in the US thanks to the Govt.sponsored short-time working schemes that encouraged employers to hold on workers. The headline eurozones hides consid- erable divergence between member states.Unemploment rate in Amsterdam remain below 4% where as in spain 1 in 5workers seeking work.Countries in eurozone have 15.6million unemployed, since the most European Commission began compiling data in the mid 1980's Unemployment rate in Germany surprised the economists as naational statistics brought it to 8.2% to 8.1%.,the first rate drop in three months.In spite of the steepest downturn in Germany the crisis has has little impact on labour market so far vindi- cating the Govt.efforts to expand its short-term subsidiary scheme which covered 1 million workers.In spite of return to growth, in eurozone in 3rd quarter, econo- mists unemployment rate 2 digit in 1st half of 2010.According to details of latest eurozone purchasing manager indices also published report saying that Spain and Greece -national output diminishing faster than in October. Diverging economic performance across eurozone complicates the task of ECB as it prepares to withdraw the exceptional measure taken to support the financial system.

Risk appetite pulls yen from peak

Yen- Last week yen upto the 14th year high of Y84.81 to the dollar on Nove-27.But as risk appetite improved from Dubai's debt problem,this week investors re-entered carry trades and pushed the yen lower. The move was given impetus by Friday's US employment.

The bank of japan as many people believed has come under pressure from the govt., undermined the Yen on tuesday by announcing measure to pump more liquidity into banking system.

The yen fell more sharply against Australlian dollar sliding5.6% to Y82.85 on the week as the Reserve Bank of Ausralia delivered a 3rd consecutive rise in interest rate lifting its main lending rate by 25basis points to 3.75%.

Over the week yen fell 4.6% to Y90.54 against dollar lost 3.7% to Y134.43 against the euro and dropped 4.4% to Y149.01 against the pound.

Over the week the dollar rose 0.9% to $1.4872 against the euro, climbed 1%to Sfr 1.0140 against the swiss frank and gained 0.1% to $1.6499 against the pound.

US -employment figures provide recovery optimism

US jobs figures provide recovery optimism

By Dave Shellock Published: December 4 2009 22:42 | Last updated: December 4 2009 22:42 Financial markets might have started the week beset by worries about Dubai’s debt problems but they ended it full of optimism that the US economic recovery was gathering pace.

The crucial turning point came, as it frequently has, from the US monthly employment report. This showed that 11,000 jobs were lost last month, far less than the expected 125,000, while the unemployment rate fell from 10.2 per cent to 10 per cent. Rob Carnell, economist at ING, described the improvement in the report as “remarkable”.

“So remarkable, in fact, that we may take another month or two to fully believe it, if backed up by other data,” he said. “But, for now, markets cannot be blamed for switching fully back to ‘risk on’.”

Indeed, riskier assets such as equities, credit and commodities initially enjoyed strong gains on Friday as investors turned away from the perceived safety of government bonds.

Notably, the dollar also rallied – counter to its recent trend, following encouraging US economic releases – as interest rate expectations underwent a dramatic shift.

Ashraf Laidi, chief strategist at CMC Markets, said the last time a simultaneous rally in stocks and the dollar had occurred was in July – when the employment report showed the first drop in the jobless rate since April 2008. “The dual improvement in unemployment and payrolls is exactly what the doctor must order for the consumer-led US economy in order for the Federal Reserve to take any meaningful steps into an exit strategy,” Mr Laidi said.

The Fed funds futures market brought forward its estimate of the likely timing of a US rate rise by a month, analysts said.

That added fuel to an intensifying debate over the outlook for global policy as divergent moves by several leading central banks took over from Dubai as the issue uppermost in investors’ minds.

“Recent newsflow has continued to support the view that policymakers are fully aware of the medium-term problems potentially brewing from lax monetary, and fiscal, policies, but are yet loath to advocate an alternative course of action given that securing growth remains their number one priority,” said Neil Mellor, of Bank of New York Mellon.

The Bank of Japan triggered much excitement after it said it was holding an unscheduled meeting, although its announcement that it would inject a further Y10,000bn into the banking system via short-term loans initially left many observers disappointed.

However, the yen subsequently retreated against the dollar, easing the pressure on exporters and triggering a strong rally in Japanese equities.

The European Central Bank, in stark contrast to its Japanese counterpart, set the stage for a gradual exit from its unconventional policies.

The ECB left its benchmark interest rate unchanged at 1 per cent but said it would phase out its six-month and one-year refinancing facilities and move to an index-based rate for future operations.“With these steps, the ECB is light years ahead of the Fed when it comes to an unwinding of the extraordinary support programmes,” said Axel Merk, of Merk Investments.

Underlining the divergence in global policy was the Reserve Bank of Australia’s decision to raise interest rates, for a third successive month, by 25bp to 3.75 per cent.The underlying improvement in investor confidence this week was signalled by a drop in the Vix volatility index – a key gauge of risk aversion – to close to its 2009 low.

Equity markets, meanwhile, enjoyed a broadly stronger week. Asia set the pace with the Nikkei 225 in Tokyo jumping 10.4 per cent – its first advance in five weeks – and Shanghai climbing 7.1 per cent. Broad emerging market equity indices were heading for their best week since July.

In Europe, the FTSE Eurofirst 300 index rose 2.6 per cent while the S&P 500 gained 1.3 per cent over the week.In currencies, the dollar rebounded from a recent 14-month low against the yen and Friday’s gain of 2.5 per cent above Y90, was its best one-day rally in a year. The euro dipped below the $1.49 level.

Government bond prices dropped sharply, particularly after Friday’s US jobs numbers. The yield on the 10-year US Treasury rose a hefty 27 basis points to 3.48 per cent. The 10-year Japanese government bond yield touched an 11-month low before recovering to end the week 3bp higher at 1.25 per cent.

Gold hogged the headlines in commodity markets as it reached a record high of $1,226 a troy ounce before falling to $1,170 on Friday. Oil had a choppy week, ending little changed as it traded around $76 a barrel.

Stocks,commodities slide on job data

London: Global stocks and commodities retreated yesterday while the dollar gained and gold hit a record high after US unemployment losses came in much higher than forecast, a blow to optimism on the economic outlook.

US employers cut a more-than-expected 190,000 jobs in October and the jobless rate soared to 10.2 per cent, the highest since April 1983.

This snuffed out tentative optimism that the global economy may see a swift and sustained recovery, clouding the demand outlook and hitting equity and commodity prices. On hold "Should be good for the dollar on risk aversion trade. The Fed will stay on hold even longer with less likelihood of giving a concrete answer to when and how to withdraw quantitative easing. The revision is good but the real shocker is the unemployment rate."

The MSCI world equity index was down 0.1 per cent, retreating from earlier gains. European stocks fell sharply with the FTSEurofirst 300 index down 0.9 per cent.

US stock futures were sharply lower with S&P 500 index futures down 0.8 per cent. The December Bund future marked a session high of 121.35 after the release of US non-farm payrolls data. By 1351 GMT, the contract was up 33 ticks on the day at 121.34 compared with 120.94 before the figures were published.

The two-year Schatz yield was down 4.2 basis points on the day at 1.277 per cent versus 1.313 per cent earlier.

Oil prices fell by more than two per cent yesterday after the unemployment numbers emerged to shake financial markets.

US crude for December delivery was down $1.86 to $77.86 a barrel by 1420 GMT, retracing early gains as high as $80.34 in the trading session.

London Brent crude fell $1.70 to $76.29. Analysts polled by Reuters had predicted a cut of 175,000 jobs, the smallest number for 14 months, and a rise in the overall jobless rate to 9.9 per cent.

In early trade market participants sent oil back up to around $80 a barrel in anticipation of bullish data, but the bearish figures crossed a psychological threshold of 10 per cent for markets.

"There was a lot of talk early in the market that the number would come in lower, but really we're just kicking the can down the road here, and today's numbers have set risk markets on edge," said David Morrison, market strategist at GFT GLobal

"It's the old cliche, but the 10 per cent number really was a key line in the sand." Oil prices have risen from a low of less than $33 a barrel last December to a high for this year of $82 in October.

They were on course to gain nearly four percent this week, but market sentiment had been cautious following inventory data earlier in the week showing oil stocks at record supply levels.

Inventories of distillates, which include heating oil and diesel are near their highest levels in 26 years.

Sharp rise Since the start of the recession in December 2007, the number of unemployed persons in the US has risen by 8.2 million, and the unemployment rate has grown by 5.3 percentage points.

The number of long-term unemployed (those jobless for 27 weeks and over) was little changed over the month at 5.6 million. In October, 35.6 per cent of unemployed persons were jobless for 27 weeks or more.

Construction employment decreased by 62,000 in October. Manufacturing continued to shed jobs (minus 61,000) in October, with losses in both durable and nondurable goods production. Retail trade lost 40,000 jobs in October.

Health care employment continued to increase in October (29,000). Since the start of the recession, health care has added 597,000 jobs, the report said.

Gold rises on Central banks offer to buy

London: Gold rose on Friday, boosted by the prospect of central banks buying the precious metal to diversify their reserves and after unexpectedly high unemployment figures reported by the US government.
Spot gold extended gains to hit a record high at $1,100.90 per ounce yesterday. By 1448 GMT, spot gold stood at $1,098.40 per ounce, compared with $1,089.55 quoted late in New York on Thursday.
The trigger for the latest surge was news earlier last week that the International Monetary Fund had sold 200 tonnes of gold to the Reserve Bank of India for $6.7 billion (Dh24.6 billion).
US non-farm payrolls for October showed a fall of 190,000 compared with a drop of 263,000 in September, and the unemployment rate for the first time reached mor than ten pre cent.
"Now that the unemployment rate breached the psychological 10 per cent level the dollar will come under pressure," a trader said.
A weaker US currency dollar makes commodities cheaper for holders of other currencies, while gold is often used by investors as an alternative to the dollar. Gold rallied $25 on Tuesday, largely driven India's purchase of gold from the IMF, which soothed investor nerves about possible oversupply. But it surprised the market, which had expected China to be the most likely buyer.
"Most central banks outside of the US and Europe have low gold reserve ratios," Calyon said in a note. "Those central banks with low reserve ratios and are keen to diversify into gold, notably those located in Asia, will be potential candidates to buy the remainder of the IMF's 203.3 tonnes of gold."
The high chances of Asian central bank gold purchases were reinforced by Sri Lanka, which said on Thursday it had been buying gold for the last five or six months. Linked in with this is the dollar, which central banks will sell when they switch to gold from US Treasuries.
However, some think Asian central banks may not hurry to follow India's lead given current record prices and the availability of cheaper domestically produced gold. The central bank story has offset some selling by investors as seen in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust. SPDR's holdings fell 0.055 tonnes to 1,108.344 tonnes on Thursday, marking the first decline since October 30

Keynes's idea of public spending relevant to relieve economic crisis

"We are all Keynesians Now," read the headline for the magazine's cover story that would go on to rank him "with Adam Smith and Karl Marx as one of history's most significant economists."

For decades ago, Western economies were in the midst of what is now referred to as the golden age of capitalism. They were operating at nearly full employment and enjoying sustained real growth rates for the better parts of the 1950s and 1960s. Many credited the ideas of Keynes for the economic success story.

Keynes's fiscal principles, developed in the early 1930s, advocated the then radical idea of increased public spending, even in times of recession and even if government did not have the funds, to stimulate economic growth.

For better or worse, deficit-spending, as it is now referred to, has become the central pillar of developed and developing nations' economic policy since the onset of the global economic crisis in the last quarter of 2007.

Critics of Keynes cite the ineffectiveness of increased government spending in correcting economic stagnation and recession in the west in the 1970s and Japan in the 1990s. They also cite concern about possibly uncontrollable inflation in the coming years as central banks around the world, notably the US Federal Reserve, continue to print money feverishly to fund their governments' ballooning budget deficits.,p> Stimulus critics say the benefits of increased government spending will vanish once the funds run out because they do not effectively address issues of consumer and investor confidence needed for sustainable recovery.

"Even if a government stimulus were a good idea, policymakers probably wouldn't implement it the way Keynesian theory would suggest," former US Treasury Senior Adviser Ike Brannon and Chris Edwards of the Cato Institute, a Washington DC-based economic think tank, wrote in opposition to the $787 billion American stimulus package in January.

"To fix a downturn, policymakers would need to recognise the problem early and then enact a counter-cyclical strategy quickly and efficiently."

However, stimulus supporters point to France, Germany and Japan recording positive gross domestic product (GDP) growth in the second quarter, and the decline of contraction rates in the United States and United Kingdom.

But even some Keynesian economists argue the improvement in national outputs may only be the result of temporary inventory replenishing.

Because of the economic crisis, companies all over the world have been reducing their inventories to save cash,Once the inventories have been used up, companies have to produce more which increases output. "In order for that cycle to be sustained, you need demand. That demand at the moment is not there."says one economist at the middle east economic intelligence unit.

UK consumer spending fell by 0.7 per cent in the second quarter compared with 1.2 per cent in the previous quarter.

Asian currencies boosted as recovery gains speed

Singapore: Asian currencies including the South Korean won and Indonesia's rupiah rose last week to the highest levels of 2009, as increasing signs of a global economic recovery bolstered demand for emerging-market assets.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-traded regional currencies excluding the yen, rallied to an 11-month high as record low rates for borrowing dollars increased appetite for higher-yielding investments. Overseas investors added to their holdings of Asian stocks, helping most benchmark share indexes extend this month's gains.

The Korean won gained 1.2 per cent last week to 1,207.80 per dollar in Seoul, according to data compiled by Bloomberg. It touched 1,204.60 on September 17, the strongest level since October. The rupiah appreciated 2.1 per cent to 9,715 and the Philippine peso rose 1.4 per cent to 47.665.

The Asia Dollar Index climbed 0.4 per cent in the five days, a third weekly gain.

Threadneedle Asset Management, Schroders and Ashmore Investment Management said in interviews this month they are buying emerging-market currencies as policy makers in New Delhi and Seoul may raise interest rates to avoid inflation.

job cuts in europe hurt household spending

BloombergPublished: August 05, 2009, 22:38

Madrid: European retail sales fell for a 14th month in July as job cuts hurt household spending

the Bloomberg purchasing managers index showed. The measure of euro-area sales declined to 47.3 from 47.5 in June when adjusted for seasonal swings. It has remained below the 50 mark, indicating contraction, since June of last year. The index is based on a survey of more than 1,000 executives compiled for Bloomberg LP by Markit Economics.

More than 3 million people have joined the euro region's jobless rolls in the last year, and the Organisation for Economic Cooperation and Development expects the unemployment rate to reach 12 per cent in 2010, eroding spending power. Most Europeans think the worst of the crisis is still to come and a third of workers are "very concerned" about losing their jobs, a survey published on July 24 by the European Commission showed.

"The European economies are still in a fragile position," said Howard Archer, chief European economist at IHS Global Insight in London. "Once the summer sales are out of the way, and if later this year inflation starts creeping up a little bit, and if unemployment is still rising, which I'm sure it will be, you've got to wonder how robust consumer spending will be."

The retail-sales measure for Germany, Europe's largest economy, rose to 49.8 from 46, while sales in France and Italy fell more steeply than the previous month, Markit said. Employment in the euro region's retail industry contracted for a 16th month, the survey showed.

Metro AG, Germany's largest retailer, said on July 17 that it plans to eliminate 1,340 jobs at its domestic Cash & Carry wholesale unit to improve profitability. Adidas AG, the world's second-largest sporting-goods maker, said in May it would cut more than 1,000 jobs to save money.

The retail-sales report contrasts with a series of industry and consumer surveys in the last month indicating the worst of the recession may be over. Italy's consumer confidence increased to the highest in almost two years in July, data showed, and German business sentiment rose for a fourth month. European Central Bank Executive Board member Jose Manuel Gonzalez-Paramo said that it was too early to conclude from data that the recovery was near.

"For a few months now, we've been seeing positive data and not so positive data," he told reporters. "We can't yet count on the change in trend being lasting."

Amid the seasonal discount period, sales of clothing rose, on an unadjusted basis, as the measure increased to 50.3 in July from 39.7. Gross margins across the industry fell further, to 41.6 on an adjusted basis from 42.1 in June, the survey showed.

Luxottica SpA, the world's biggest maker of eyeglasses, said on July 28 that second-quarter net income fell 13 per cent to 115.7 million euros (Dh612.96 million). It said the business conditions improved in the first half.

Dollar ends weak on strong note as market news disappoints

the US dollar ended the week as the strongest of the majors largely due to increased risk aversion following the release of the disappointing market news.

Euro- the euro has a volatile week with a host of economic reports being released. However it ended the week almost unchanged from its usual range against the dollar. Forex options market showed that volatility expectations remained high ahead of ECB interest rate decision and the us nonfarm pay roll report, but sharp moves after the reports were incapable of pushing the euro below the 1.40 mark. The ECB had come under pressure to cut further rates with the organisation of economic corporation and development (OEDC) urging the bank to cut rates towards Zero, and to hold them at those levels going to 2010. However rates were left unchanged for the time being. Euro Zone confidence improved for the third month in June, but the European commission warned that problems still persists.

Sterling- sterling fell signficantly during the week from a high of 1.6746 as an increase in risk aversion and news that the first quarter GDP contraction was larger than expected at 2.4% its lower level since 1970's. Year on year GDP growth was revised down -4.9% , the lowest rate since record keeping begin in 1956. Dismal reports from the US also added to the bearing sentiments and spaked risk aversion. Sterling shot higher to start the week after showed house prices gained 0.9% in june, sparking hope that housing sector stablisation lead the way to a recovery range for this week($1.6299-$1.6744)

Yen- The japanese yen may continue strengthen against its major counterpart over the following week as market players curb their appetite for higher risk and the low yeilding currency should benefit from safe haven flows as investor weigh the outlook for global economic recovery. Data released last month showed that the tanka index of japanese sentiments rose from a reading of -58 in march to -48 in june. The index is widely followed because it is fairly correlated with Japanese GDP.

Data also suggested that economy has bound with industrial production rising for the third consecutive month in may while it is still down 30% relative to last year. production rose more than 14% from its all time low last February. Range this week( Yen 95.13- Yen 96.99

What it means to invest in equities

The past year has not been easy for the average investor. Capital markets plunged to all time low, fundamentally healthy stocks(stocks of companies having sound financial health and good business prospects)lost a significant portion of their value,mainly driven by erosion of investor confidence and triggered by negative market sentiment.

The Dubai financial market(DFM) that once rose to a high of over 8000 points has now dropped to around 1,600points and has been around this level for a few months.

Investors started focusing more on preserving their wealth rather than making more out of it. Simply put investors did not want to lose any more of their hard earned money in an attempt to make more. But one cannot remain passive for long and markets do not stagnate at their bottoms. Holding cash yield almost nothing after adjusting for inflation. And moreover, one needs to invest for the future and that is where capital markets more specifically,the equity markets play a crucial role

But what buy equities?

Equity,shares or stock all means the same thing. Equity represents a share in the ownership of a company.It represents a claim on company'sassets and earnings. The owernship stake in the company increase as one aquire more equity. when you buy a share of a company its ownership entiles you to the profits of the company in the form of dividents and other benefits.

But we should bear one thing in our mind that investment world and equity investment do come with certain degree of risks. so, before investing in equity investor has to check risk or profit.In other words if you are capable of taking risks the world of equity investments beackons you.

The next important thing is "how much to invest in equities?

The rule of the thumb is "hundred minus age". So if you are 30, you need to put 70% of your investment in equities and vice-versa. The rational behind it is simple.

Risk bearing capacity and risk tolerance comes in the young age and moreover it provides many more years to recover your fallen fortunes in case the market behaved opposed to your expections.

Another aspect of equity or investment is the way one finance it. No matter how exiciting and buoyant the stock market is you should never stretch borrowing to invest in their asset class. Investment in shares are in essence investment in business of the company and companies provide substantial returns in the long run. So, shares are long term investements that should never be financed by long term borrowing.

The trick to analyse stock for the longer term by way of fundamental analysis. Companies with healthy cash flows,substantial earning, good business prospects, growth potential sound corporate governance and enjoying investor confidence are the one to look out for.

There are various ways to analyse such companies.The popular among them are analysing the key ratios of the company.These key ratios are available in respectable stock exchange website.

The other way to analyse stock is reading charts and graphs. This approach is more directed towards understanding the short term movements that are not fundamental in nature.

European central bank urges cautions as unemployment worsens

us employers cut more jobs than expected in june pushing jobless rate to a 26 year peak and unemployement in Europe hit a 10year high, dampening hopes of a quick recovery from recession. Ecb chief warned that although the downturn had eased, weak economic activity would hamper growth for the rest of the year and only a gradual recovery would emerge by mid 2010.

Data showed that US lost 467,000 jobs in june, more than 100,000 greater than expected by economist breaking a four trend of moderation in job losses.The unemployment rate rose to 9.5% the highest since a matching jobless rate in Aug-1983

"It looks like the economy was still losing substantial momento as the secondquarter came to a close. This report is weak across the board." Said william sullivan , chief economist at JVB financial group in Florida.

unemlopyment is emerging as the biggest challenge to recovery which govts. around the world are trying to stroke with record low interest rates and by pumping trillion of dollars into their economies.

In Europe Central bank president Claude cautioned about economic growth after the ECB left rates at 1% record low. Economic activity over the remainder of this year is expected to remain weak but should decline less strongly than was the case in the first quarter in 2009. He said " The jobless rate in the 16 nation euro-zone area rose to 9.5%, the highest since 1999 data showed.

Economically emerging economies of the world-an overview,The avaerage salary increase is expected 4.7% this year

Economically emerging economies of the world- An overview

During the past quarter of a century around one-third of the countries of the world, has made considerable progress . The best example of countries lies in south-east Asia,middle east, Latin America, Africa and even in Europe.There is considerable change in the occupational structure (i.e-more people left agri culture to industry and trade sectors. So, income difference widened. Because before, 70% of people depend on primary agriculture industries where income too low and so also income difference less. But now the importance of primary agriculture industries declined and more development occured in industries and business sectors. More employment opportunities came up in industrial and service sectors. The educational system changed to produce professionals and labours best suited to the needs of the employment industry. Before the education generally has meant to produce some graduates and post- graduates in science, commerce and arts. But the needs of the job market was discarded.

Now a days education, people view as a means to acquire jobs and serve purpose of development. So they give advantage to the employment industry. Anyhow this has helped a lot to improve development in these economies. Still there are some irregularities which can be overruled. The benefits of education is not deep rooted until now. There is a phenomenon of unemployment underemp- loyment and inequality of income. Even if unemployment is reduced in this so- called economies, still there is partial, seasonal unemployment. Even though education system has produced more technical and engineering graduates, which is best suited to the needs of job market, there is one or other factors like brain drain, lack of skills and lack of skills and talent cause unemployment and difference income earning among the people. Of course, opportunities are not even in the job market. For example an engineering graduate or a graduate in medical science, can be absorbed in a well paid job while a business economic graduate may fail to absor- bed in a high paid job. Even a graduate in arts or social science may fail to get a job and has to satisfy with a back file job.

There are some reasons which may account for this inequality in income distribution. (i) state involvement in economic activities of production,income generation and distribution is nominal. (ii)Public ownership versus private ownership- When publicly owned industries have certain norms to be followed which are socially motivated such as equal distribution of income, public welfare etc. privately owned industries follow profit motive, maximum wealth generation , equal distribution of income is discarded. (iii) Another reason for unequal income distribution of income is that of difference in natural abilities and talents- People taking on high degrees deserving better payments and rewards depend on their nature, skills and mental calibre. These qualities differ from person to person. (iv) Attitude of people towards work- Attitudes differ from person to person among people. Those who have positive desire for work and development will be prompted to do anything business or work to earn income.

The Average salary increase is expected 4.7% this year- On averag the salary is increasing 4.7% this year while a 6.2% rise in salary registered in 2008.Employees in south America,India and south east Asia can look forward to salary increase.

"The economic upheaval since last year prompted many firms to revise salaries significantly from previous predictions".said Lee quine Eca's Asia director

Companies in VeneZuela are set to hand out the biggest pay rise this year, aver- aging 24% and up from 22% last year followed by Argentina where pay rise set 12% . Pay rise is Brazil and chile will be higher than last year. Pay in india is expected to rise by 10.8% this year. pay rise in latin America, Vietnam and indonesia are spared by rising inflation.(10.6% and 9% respectively0 Pay in US is likely to be 2.8%

Apart from last september projection of 4% rise while 40% companies will freeze salaries.Salaries in china Japan, singpore and China's special autonomous region of Hongkong will be marginal. Salaries in HK and singapore will increase by 2%. West europe same as 2%. While East europe increase is likely to be under 5%.

Europe economy expected to shrink by 4.1% this year-" The world economic crisis will be deeper and longer if the Govt. stimulus package are modest and state fail to take to fix their banks" world bank president Robert Zoellick said.

He further said 'state stimulus would give only a short live boost in economic which will soon evaporate unless credit flowed again.

The London consultancy defines a depression 'as growth in the developed world averaging less than 1% a year between 2009 and 2013. There is 60% that fiscal and monetary policies now implemented will stablise the global economy by next year. Deflation would be characterised as mass bankrupcies. Gross domestic product in the euro region declined 1.6% from previous 3months the most in at least at least 13years. The EU's statistics said in march 1.5 % contraction. Investment plunged 4% and household spending fell 0.3%. The crisis forcing companies from from carmaker Volkswagen AG to s/w maker SAG AG to reduce output and cut jobs. The economy which grew 0.8% in 2008 may shrink 4.1% ,the organisation for economic cooperation and devlopment has forecast. The Europe central bank is examining whatever other step after cutting interest rates to a record low. The Europe central bank last month cut interest rate by 25basis points to 1.25% taking its reduction since early octo to 300basis points. The Bank of England ,The Bank of Japan, and the US federal reserve is pumping money into their economies by buying government securities. the Europe Central bank is lagging in its activities like this. Euro area exports fell by 6.7% in the 4th quarter from previous 3months and imports dropped 4.7% as the report said. Further contraction in manufacturing and service industries leading to job cuts and fall in consumer demand continues.

The euro area jobless rate jumped to 8.5% in February.The OEDC experts expects the rank of jobseekers in the group of seven nations to soar to 36 millions by the end of the next year.