Almost a Decade Later, U.S. Money Markets Are Yet to Recover
Regulators’ effort to stamp out risk in the $2.6 trillion U.S. money-fund industry is creating unintended ripple effects across financial markets, with far-reaching consequences for companies and investors. Far less cash than anticipated has returned to the higher-yielding slice of the money-fund world, after the overhaul that took effect in October led to a $1 trillion exodus from what are known as prime funds. They’ve been the principal buyers of the commercial paper that companies and both foreign and domestic banks have sold for decades to obtain short-term U.S. dollar-denominated financing. By squelching demand from prime funds, commercial-paper rates relative to other money-market securities have risen, and are now at the highest levels since the financial crisis, causing borrowers to seek new sources of funding like the short-term securities lending market.
Euro-Area Unemployment Declines to Lowest Level in Eight Years
Euro-area unemployment fell to the lowest level in almost eight years in February, in a sign that the region’s economy is strengthening. Joblessness decreased to 9.5 percent, the European Union’s statistics office in Luxembourg said on Monday. That’s the lowest since May 2009 and matches the median estimate of economists in a Bloomberg survey. Unemployment has been decreasing steadily from a peak of more than 12 percent in 2013 as the European Central Bank deployed unprecedented stimulus to rekindle growth and fuel inflation. Euro-area factory growth accelerated in March, climbing to the highest since 2011, as an improving global economy boosted export demand in the region’s biggest economies. ECB President Mario Draghi, who has repeatedly urged governments to implement reforms to reduce structural unemployment and boost growth potential, has said the recent decline shows the success of the central bank’s 2.28 trillion-euro ($2.4 trillion) stimulus plan.
China Plan to Create New Shenzhen Spurs Speculative Rampage
It didn’t take long for news that China would set up an economic zone near Beijing to touch off an investor frenzy. Within 24 hours of Saturday’s announcement that the government would create the Xiongan area in Hebei province — in the same spirit that Shenzhen and Shanghai’s Pudong was built — hordes of prospective buyers had thronged to the region. Highways were clogged as they came to purchase real estate, with some camping outside property agent offices overnight, according to local media reports. On Sunday the government banned all property sales in the zone to stem speculation, according to the National Business Daily. On Monday, shares of Chinese cement, building and port-related stocks surged in Hong Kong amid optimism the decision will spark a flurry of construction activity. The move by President Xi Jinping, which evokes memories of the rise of Shenzhen since it was declared a special economic zone more than three decades ago, is seen as a historic milestone to power China’s growth for a “millennium to come,” the official Xinhua News Agency reported.