1 Fed declines to raise rates (Rupert Neate in The
Guardian) The Federal Reserve declined to raise interest rates from their
record low of near-zero on Thursday, citing concerns that the still fragile
world economy may “restrain economic activity” and further drag down already
low inflation.
While some economists had expected a rate rise – the
first since 2006 – recent stock market turmoil in China and fears that a
slowdown in the world’s second largest economy could dampen the global economy
appear to have put off the decision for now.
Janet Yellen, the Fed chair, said the central bank
had maintained the federal funds rate at 0-0.25% – where it has been since the
2008 financial crisis – because of “heightened concerns” about a sharp slowdown
in China and lower-than-desired inflation.
She said the US recovery from “the great recession”
meant that there was an argument to be made for increasing rates – and the
bank’s poliycmakers had that argument today – but in the end they still needed
more evidence that there was a sustained global recovery. The Fed said that
while the US economy is almost balanced, it could be knocked off course by
global developments and the central bank was closely “monitoring developments
abroad”.
Rates are still expected to be raised this year,
with 13 of the 17-member committee predicting that the Federal Open Markets
Committee (FOMC) will raise rates by at least 0.25 percentage points. However,
four policymakers believe that rates should not be raised until at least 2016,
including one who pushed out until 2017. In June only two members felt the rate
hike should be left unchanged until 2016.
An increase in rates will eventually lead to an
increase in mortgage, car and personal loan and credit card rates in the US,
and spark central banks throughout the rest of the developed world to also
consider raising their interest rates. The Fed forecast that unemployment will
drop to 5% by the end of this year, down from 5.3% in June. The unemployment
rate in August dropped to a seven-year low of 5.1%.
2 Alibaba’s wipeout and after (Lulu Yilun Chen in
Sydney Morning Herald) Alibaba looked like a sure thing a year ago when it
pulled off the largest sharemarket float ever last year. It had a lock on China
e-commerce as the economy was surging and consumer spending was steadily
rising. Shares soared 76 per cent from the IPO price in just two months.
Then it all crumbled. Alibaba came under fire from a
China government agency, it cut deals that baffled investors and it replaced
its chief executive as growth slowed. Most important, China's economy turned
wobbly, jeopardising the rise in consumer spending Alibaba needed. Its stock
slid down, down, down to the IPO price and then below. The sure thing was no
such thing.
What now? Investors who watched $125 billion in
market value disappear through Wednesday shouldn't expect a reprieve any time
soon. Atlantic Equities' James Cordwell, the top-ranked analyst covering the
stock, predicts the slowing Chinese economy will undercut e-commerce
transaction growth until at least 2016. The many deals Alibaba has negotiated
will take time to pay off too.
Jack Ma, Alibaba's chairman and co-founder, isn't
known for coddling investors. In a letter with the IPO filing, he said
explicitly shareholders would be the third priority after customers and
employees. He and his partners didn't want short-term market volatility to
distract from building a successful business for the long term.
Indeed, many of Alibaba's troubles derive from a
domestic economy over which it has no control. While conceding some missteps in
its first year, Alibaba isn't one for introspection. The Hangzhou-based company
is trying to push beyond China and e-commerce, announcing $15 billion of deals.
Many of the investments make clear strategic sense, but others have been harder
to rationalise, like the stakes in a Guangzhou soccer team, a minor player in
Chinese smartphones and an unprofitable entertainment studio.
John Choi, an analyst at Daiwa Capital Markets, says
that despite the bad press and unfavourable economy, the fundamentals of
Alibaba remain positive with e-commerce still growing.. Atlantic's Cordwell,
who has a neutral rating, sees light at the end of the tunnel, with the company
ultimately emerging stronger. "There's going to be another two to three
tough quarters for the company," he said. The current challenge "is
making Alibaba a better company for the next 10 years."
3 Over two million Indians vie for 368 jobs (BBC) Authorities
in India's most populous state, Uttar Pradesh, say they have been overwhelmed
after receiving 2.3 million applications for 368 low-level government jobs. Prerequisites
for the posts include having primary school qualifications and being able to
ride a bicycle.
But, tens of thousands of graduates, post-graduates
and others with doctorate degrees have also applied. An official said it will
take four years to interview all the candidates. Those who have applied for the
posts, advertised in August, include 255 PhD holders and 152,000 graduates.
With the number of applicants, there are more than
6,250 candidates vying for each post. The successful candidates will receive a
monthly salary of 16,000 rupees ($240). Unemployment is a huge challenge in
Uttar Pradesh where tens of millions are out of work. The state, with a
population of 215 million, is expected to have 13.2 million unemployed young
people by 2017, according to one estimate.
Government recruitment drives have attracted massive
responses in other parts of India, too. Earlier this year, several people were
injured in a stampede when thousands turned up to join the Indian army in the
southern city of Visakhapatnam. In 2010, one man was killed and 11 others were
injured in the crush when more than 10,000 candidates gathered to join the
police in Mumbai. And in 1999, the government in West Bengal state was deluged
with responses when they advertised 281 jobs and received nearly one million
applications.
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