[RED DEMOCRATICA] CFR.org Daily Brief, February 5, 2010

 

February 5, 2010 View this newsletter as a web page on CFR's website. EXECUTIVE SUMMARY - Markets Fear Sovereign Debt Defaults - Iraq Bombings Against Shias Continue - McChrystal Says Afghanistan to Improve - Northern Ireland Reaches Power-Sharing Deal Top of the Agenda: Markets Fear Sovereign Debt Defaults Fears over European countries' debt problems rocked international financial markets for the second consecutive day, raising concerns (NYT) about a prolonged slump in the global economic recovery. In the United States, the Dow Jones industrial average slid 2.61 percent Thursday over growing concerns about the ability of Greece, Portugal, and other eurozone countries to repay heavy debts. Europe's stock market slid as much as 6 percent Thursday, driving the euro to $1.37, a seven-month low against the dollar. A sharp sell-off in Asia Friday depressed European markets further, as European debt woes continued and the U.S. labor market reported worse-than-expected results. Investors are awaiting news about January's U.S. employment report, which, if weaker than expected, could further depress (WSJ) investor confidence. Better results could negatively impact European markets, showing that the United States' economic recovery is outpacing Europe's. Analysis: In the Financial Times, Gillian Tett says discussions about the European Central Bank's collateral policy and central banks' "exit strategies" are adding to market instability. On Barrons.com, Randall Forsyth says persistent near-zero U.S. interest rates and the unwinding of the carry trade--borrowing cheap dollars to invest in riskier currencies and other assets abroad--added to Thursday's market instability. In the New York Times, Floyd Norris says how Europe chooses to deals with the problems of Greece, Spain, Portugal, and Ireland may determine the future politics of Europe and the future of the euro. Background: In this CFR interview, Economist.com editor Ryan Avent discusses U.S. efforts to rein in growing government debt. MIDDLE EAST: Iraq Bombings Continue At least twenty-seven people were killed (al-Jazeera) and more than seventy-five others wounded after two explosions rocked Karbala during a Shia religious observance, the third major strike this week. Iraq's electoral commission said it will delay (BBC) the start of campaigning for next month's parliamentary elections. PACIFIC RIM: Japan's Toyota Problem Global humiliation over Toyota's troubles could seriously damage (WSJ) Japan's confidence, adding to the collapse of its long-ruling political party, the bankruptcy of its national airline, and a renewed bout of deflation. China: China will impose (FT) anti-dumping tariffs of up to 105.4 percent on U.S. poultry imports, adding to the two countries' economic and political frictions. SOUTH AND CENTRAL ASIA: McChrystal on Afghanistan During a NATO conference in Istanbul, U.S. General Stanley McChrystal said conditions in Afghanistan are no longer deteriorating (WashPost) and he expects more improvement this year. Pakistan: A motorcycle rigged with explosives rammed into a bus carrying Shias in Karachi Friday, killing twelve people (Dawn) and wounding close to fifty. A second explosion inside a hospital killed ten more and injured another twenty. The United States remains uncertain (WSJ) about whether Hakimullah Mehsud, the top Taliban leader in Pakistan, is dead, revealing U.S. and Pakistani officials' persistent intelligence deficit. AFRICA: Sudan Humanitarian Crisis Infighting in a Darfur rebel group, the Sudan Liberation Army, has driven at least ten thousand people from their homes in Sudan's west, deepening the humanitarian crisis there (Reuters). Somalia: Somali pirates hijacked (NYT) a Libyan-owned merchant from North Korea in the Gulf of Aden. AMERICAS: U.S. Debt Woes U.S. joblessness, weakening exports to Europe, and a large budget deficit could lead investors (WSJ) to shun U.S. debt, sending interest rates higher and stunting the economic recovery. Haiti: Haitian Prime Minister Jean-Max Bellerive says the case of ten U.S. missionaries charged with child abduction is distracting needed attention (BBC) from earthquake recovery. EUROPE: Northern Ireland Deal Northern Ireland's Sinn Féin and the Democratic Unionist party reached a power-sharing deal (Guardian) centered on devolved justice and policing powers.

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