What the terrible job report means for US; Decline of ‘big soda’; India village where a man was killed for eating beef

1 What the terrible job report means for US (Neil Irwin in Sydney Morning Herald) The September jobs numbers are easily the worst of 2015 so far. The weak numbers offer some vindication for those Federal Reserve officials who preferred to hold off on interest rate increases last month to ensure the economy was on sound footing before tightening the money supply.

The question now is whether it means anything – whether the US economic expansion, which seemed set to roar into 2015, is slowing in some meaningful way. We don’t know that yet, and it would be a mistake to leap to that conclusion. But that possibility became quite a bit more plausible after the September numbers.

The new numbers are poor on pretty much every level. US employers added a mere 142,000 jobs last month, far below the analyst forecast of 201,000 or the average over the last year of 229,000. Revisions pushed July and August numbers down substantially. The unemployment rate was unchanged at 5.1 per cent.

This is usually the point in one of these stories where we would list the silver linings — the countervailing details that suggest it isn’t as bad as all that. This report doesn’t really offer any. Average weekly hours fell. Average hourly pay was unchanged. The number of people in the labor force fell by 350,000, and the number of people who reported having a job fell by 236,000.

The most positive angle I could come up with, with credit to an anonymous Twitter user, is the possibility that with the unemployment rate scraping relatively low numbers, we should expect the rate of job creation to slow simply because the pool of potential workers is dwindling.

The best silver lining is that this is a data series with a lot of statistical variance that can send false signals, even for a few months in a row, that don’t ultimately mean anything. So we might turn out to be in one of those periods when the data falter for no particular reason. If so, it would be an unfortunate coincidence that it’s coming when so much else about the world economy is looking perilous.


2 Decline of ‘big soda’ (Margot Sanger-Katz in The New York Times) Five years ago, Mayor Michael A. Nutter proposed a tax on soda in Philadelphia, and the industry rose up to beat it back. The lesson from Philadelphia is that the soda industry is winning the policy battles over the future of its product. But the bigger picture is that soda companies are losing the war.

Even as anti-obesity campaigners like Mr. Nutter have failed to pass taxes, they have accomplished something larger. In the course of the fight, they have reminded people that soda is not a very healthy product. They have echoed similar messages coming from public health researchers and others — and fundamentally changed the way Americans think about soda.

Over the last 20 years, sales of full-calorie soda in the US have plummeted by more than 25 percent. Soda consumption, which rocketed from the 1960s through 1990s, is now experiencing a serious and sustained decline. Sales are stagnating as a growing number of Americans say they are actively trying to avoid the drinks that have been a mainstay of American culture.

Sales of bottled water have shot up, and bottled water is now on track to overtake soda as the largest beverage category in two years, according to at least one industry projection. The drop in soda consumption represents the single largest change in the American diet in the last decade and is responsible for a substantial reduction in the number of daily calories consumed by the average American child.

From 2004 to 2012, children consumed 79 fewer sugar-sweetened beverage calories a day, according to a large government survey, representing a 4 percent cut in calories over all. As total calorie intake has declined, obesity rates among school-age children appear to have leveled off. The soda tax didn’t pass. But the debate about it, along with a series of related city policies, helped discourage people from drinking soda.

For many public health advocates, soda has become the new tobacco — a toxic product to be banned, taxed and stigmatized. It’s clear that soda’s calories contribute to weight gain and obesity, but whether its impact is greater than that of other unhealthy foods has not been conclusively demonstrated. Nevertheless, the change is already underway.

Water has been the runaway success story of the industry. Gary A. Hemphill, an industry consultant, projects that in 2017, water will surpass soda in sales and become the largest beverage category in the US.


3 India village where a man was killed for eating beef (Jason Burke in The Guardian) The minister has arrived. The motorcade fills the unpaved street. Mahesh Sharma, India’s minister of culture, is preceded by a small aide in a purple shirt and followed by a large grey-suited bodyguard. He has come to “condole” the family of Mohammed Akhlaq, a 50-year-old labourer beaten to death by a mob in his small two-storey home in the centre of Bishara village, about an hour’s drive beyond the outskirts of Delhi, India’s capital, last Monday night.

The mob that killed him believed that Akhlaq and his family, who are Muslim, had eaten meat from a cow, an animal considered sacred by the 80% of the Indian population who follow the Hindu faith. Akhlaq and his son were dragged from their beds and beaten with bricks. The father died; the son is fighting for his life in hospital.

Sharma’s Bharatiya Janata Party, Hindu nationalists, stormed to power in a landslide victory in May 2014, unceremoniously dispatching Congress, which had ruled India for most of its 68 years as an independent country, to the political margins. The BJP is led by Narendra Modi, whose appeal is based on his promise to bring economic development and opportunity without sacrificing India’s cultural identity.

Critics of the prime minister say that since Modi took power rightwing groups have felt empowered. “The silence at the top … is absolutely stunning,” Abhishek Singhvi, a Congress MP, told reporters following the murder in Bishara. In an interview last month, Sharma said India should be “cleansed” of “polluting” western influences so as to restore “Indian culture”.

A suggestion by India’s foreign minister last year that the Bhagavad Gita, a Hindu epic, be made the “national book” provoked an outcry from Muslims and Christians, 14% and 2.3% of the population of 1.35 billion respectively.

The route from central Delhi to Bishara passes first over the heavily polluted Yamuna river, past a vast new temple and a metro station and on to a recently built expressway slicing through the city’s sprawl. Bishara, a huddle of hundred or so breeze-block cement and brick homes with intermittent electricity and patchy sanitation, lies among fields that stretch to the horizon.

Sitting on a narrow, worn rope bed in a corner of the Akhlaqs’ home was Hanif, a brother of the dead man. Like Mohammed, he too was a labourer and described a life of working 14-hour days in often blinding heat for less than 200 rupees (£2) a day. “Mohammed was a quiet man. Like most of us, he just worked and kept quiet. There are 60 Thakur villages round here, so they can pretty much do what they want and get away with it. Today it was my brother. Tomorrow it could be anyone,” Hanif said.


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GCC credit cycle at tipping point; Fraud, fools and financial crises; Why India is concerned about Nepal’s constitution

1 GCC credit cycle at tipping point (Issac John in Khaleej Times) Corporate and infrastructure companies in the Gulf Cooperation Council face a weaker operating environment as governments reduce spending on the back of lower oil prices, which have more than halved since June 2014, Standard and Poor’s ratings services has said.

“Reflecting this weak economic climate, debt issuance by corporate and infrastructure companies has fallen by 58 per cent in the past 12 months to about $7 billion. This also reflects our view that the credit cycle has reached a potential tipping point, with higher pricing anticipated going forward,” the ratings agency said in its latest analysis.

S&P said there are various factors that could tempt existing and new issuers to tap the capital markets over the coming year. These include the gradually declining availability of liquidity at the local banks, the opening up of markets to foreign investment – such as the Tadawul in Saudi Arabia, along with the Iranian market if the nuclear deal with the P5+1 progresses as expected – and the refinancing by government-related entities in 2016.

It noted that energy subsidy cuts by Bahrain, Oman, and the UAE governments could increase financial pressures on downstream corporates in the region. World oil prices have dropped by more than 50 per cent since June 2014. S&P expects Brent crude oil prices to remain at about $50 per barrel for the time being, which would prompt governments to postpone or delay some projects.

The International Monetary Fund forecasts that the oil price dip would result in a $300 billion drop in revenues this year for the six GCC states. Globally, energy industry players had already cancelled $200 billion in investments over the past few months in the wake of the oil price plunge.

A Barclays survey found that oil companies worldwide shed about 20 per cent of their capital budgets to $521 billion this year and will cut another three per cent to eight per cent from their investments next year, marking the first time since the mid-1980s that oil companies will reduce spending two years in a row.


2 Fraud, fools and financial crises (Robert Shiller in The Guardian) Adam Smith famously wrote of the “invisible hand,” by which individuals’ pursuit of self-interest in free, competitive markets advances the interest of society as a whole. And Smith was right: free markets have generated unprecedented prosperity for individuals and societies alike. But, because we can be manipulated or deceived or even just passively tempted, free markets also persuade us to buy things that are good neither for us nor for society.

This observation represents an important codicil to Smith’s vision. And it is one that George Akerlof and I explore in our new book, Phishing for Phools: The Economics of Manipulation and Deception. Most of us have suffered “phishing”: unwanted emails and phone calls designed to defraud us.

A “phool” is anyone who does not fully comprehend the ubiquity of phishing. A phool sees isolated examples of phishing, but does not appreciate the extent of professionalism devoted to it, nor how deeply this professionalism affects lives. Sadly, a lot of us have been phools – including Akerlof and me, which is why we wrote this book.

Routine phishing can affect any market, but our most important observations concern financial markets – timely enough, given the massive boom in the equity and real estate markets since 2009, and the turmoil in global asset markets since last month.

We found out many years ago, to the world’s great regret, what happens when a financial epidemic is allowed to run its course. Our analysis indicates that not only are there endemic and natural forces that make the financial system highly volatile; but also that swift, effective intervention is needed in the face of financial collapse. We need to give free rein to fiscal and monetary authorities to take aggressive steps when financial turmoil turns into financial crisis. One Dark Age is one too many.


3 Why India is concerned about Nepal’s constitution (Sanjoy Majumder on BBC) Nepal’s adoption of a new federal constitution is being watched warily across the border by its giant neighbour India. The document defines the majority Hindu nation as a secular republic divided into seven federal provinces.

Although Delhi was one of the major backers of the process over the past decade, it believes the new constitution is not broad-based and is concerned that it could spur violence which could spill over into its own territory. Reports in Indian media say that its ambassador in Kathmandu spoke to Prime Minister Sushil Koirala hours before Sunday’s constitution ceremony to express Delhi’s disappointment at the process going through.

India’s concern has been with the violent reaction to the constitution in the low-lying southern plains, adjoining India, the Terai. Communities living in the Terai, especially the Madeshis and the Tharu ethnic minorities, have expressed concern that the proposed boundaries of the new provinces could lead to their political marginalisation.

The two groups make up nearly 40% of Nepal’s population and the Madeshis share close ethnic ties with people in India. Prof SD Muni, a strategic analyst who closely follows events in Nepal, says “India’s concern is genuine because whatever happens in the Terai will spill over into India. So the violence is really worrying.”

India shares a 1,751km-(1,088 miles)-long open border with Nepal through which people pass freely but which has often concerned the country’s security agencies because of its use by smugglers, human traffickers and terror suspects.

And then there is China, India’s regional bugbear. In recent years, China has been ramping up its involvement in Nepal mainly through economic engagement much to India’s discomfort in what it considers its backyard. It is also wary of China’s links with Nepal’s Communists, never mind that most of its leadership has either been schooled in India or has spent many years in exile in this country.


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Syriza back in power in Greece; Italy upgrades growth forecasts; Honey, they shrunk the world

1 Syriza back in power in Greece (Helena Smith & Graeme Wearden in The Guardian) Greece’s leftwing leader Alexis Tsipras has emerged triumphant from a snap general election after securing a dramatic victory over his conservative rival, despite a turbulent first term in office.

There had been predictions that the race was too close to call after he accepted a crushing eurozone-led austerity programme during his first term in office, but the charismatic leader looked set to be returned to power with a near repeat of the stunning win that catapulted his Syriza party into office in January.

Speaking in Athens, Tsipras declared: “This victory belongs to the people and those who dream of a better tomorrow and we’ll achieve it with hard work.” Tsipras told supporters that he would tackle endemic corruption in the country. “The mandate that the Greek people have given is is a crystal clear mandate to get rid of the regime of corruption and vested issues,” he said.

The small anti-austerity right-wing Independent Greeks party, the leftists former coalition party, was prepared to enter a power-sharing arrangement with Syriza, said its leader, Panos Kammenos, joining Tsipras on stage as both men celebrated.

Tsipras fought an uphill battle following his spectacular U-turn on previous promises to tear up the excoriating bailout agreements successive Greek governments had signed with international creditors.

The 41-year-old leader went to the polls in January promising to roll back austerity measures imposed by the so-called troika of international lenders – the European commission, International Monetary Fund and European Central Bank – but was instead forced to accept even harsher terms in July after Greece teetered on the brink of bankruptcy and a eurozone exit.


2 Italy upgrades growth forecasts (James Politi in Gulf News/Financial Times) Italy has upgraded its economic forecasts for 2015 and 2016, in a sign of growing confidence within the government of Matteo Renzi, the reformist prime minister, that a recovery is taking hold after three years of recession and stagnation.

Ahead of next month’s budget law, Italy said output would rise by 0.9 per cent this year and 1.6 per cent next year, compared with earlier forecasts of 0.7 per cent growth in 2015 and 1.4 per cent in 2016. “In 2015 we turned the corner, and in 2016 we have to accelerate,” Renzi said at a press conference in Rome

The improved economic outlook — boosted by external factors such as a lower euro and lower oil but also a bump in domestic demand — will also affect Italy’s budgetary picture, which has long been a source of concern because of the country’s high levels of indebtedness.

Pier Carlo Padoan, Italy’s finance minister, said he expected Italy’s debt to gross domestic product ratio, which is forecast at 132.8 per cent in 2015, to begin declining from 2016, for the first time since 2007. Italy’s budget deficit this year is forecast at 2.6 per cent, which is well below the European Commission’s threshold of 3 per cent and is due to decline further to 2.2 per cent in 2016.


3 Honey, they shrunk the world (Darrel Bristow-Bovey in Johannesburg Times) This week a small aircraft – a specially modified twin-prop Beechcraft King Air 200, to be specific, flying from Johannesburg and refuelling in Angola – landed for the first time on a tiny island in the south Atlantic, and the world became vastly smaller and less interesting.

When Napoleon Bonaparte was defeated at Waterloo he was like a super-villain in the setup for a Marvel movie: the Allied powers needed to send him somewhere so remote and godforsaken, so fortress-like and impenetrable that he could never again escape, so they banished him to St Helena, a tiny volcanic speck in the endless ocean. Napoleon never made it off St Helena alive, because the English had chosen well.

Even today, or at least until this week, the fastest way on or off the island was five or six days on the last working British mail ship, the RMS St Helena. She was strong but not especially stable – she could make a barnacle seasick or a whelk unsteady on its feet. I’ve visited St Helena several times, so I’ve spent about a month of days cursing Poseidon and praying for death, but I still loved that voyage and now that the airport is built and the ship almost decommissioned, I mourn her passing.

The island was like a Devonshire village in the 1800s: people were polite, wary of strangers, slightly incurious. I met a woman in her seventies who had never left the island but also never visited Blue Hill or the Gates of Chaos in the southern part of the island. Why would she want to go all the way over there? Those weren’t her people over there. (The island is 16km long and 8km wide.)

Ten years ago there was a referendum on the island about building an airport. I was opposed. It would tear apart the unique fabric of a unique community, I declared, but really what I feared was it would change the world I lived in from one that had space for a time-travelling ship to one that didn’t. Those who voted for the airport – they narrowly won – voted to be a part of the world, to join a modern global community.

If the Saints are happy about the airport, I’m glad, because they deserve to be happy, and I hope they don’t mind that when those wheels touched down on Tuesday afternoon, a small part of my heart silently broke.


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Moody’s lowers France rating; Goldman sees 15 years of weak crude; Japan scripts major upset in rugby history

1 Moody’s lowers France rating (San Francisco Chronicle) Moody’s Investors Service is downgrading the credit rating of France, saying the French economy will grow slowly for the rest of this decade while the country’s debt remains high.

The firm lowered its rating to “Aa2” from “Aa1.” That means France has Moody’s third-highest possible rating. Moody’s said the outlook for economic growth in France is weak, and it does not expect that to change soon. It says the high national debt burden probably will not be reduced in the next few years because of low growth and institutional and political constraints.

Overall Moody’s says France’s creditworthiness is “extremely high” because of its large, wealthy, well-diversified economy, high per-capita income, good demographic trends, strong investor base and low financing costs. The outlook was raised to “stable” from “negative.”


2 Goldman sees 15 years of weak crude (Gulf News) A glut of crude may keep oil prices low for the next 15 years, according to Goldman Sachs Group Inc. There’s less than a 50 per cent chance that prices will drop to $20 a barrel, most likely when refineries shut in October or March for maintenance, Jeffrey Currie, head of commodities research at the bank, said. Goldman’s long-term forecast for crude is at $50 a barrel, he said.

Goldman cut its crude forecasts earlier this month, saying the global surplus of oil is bigger than it previously thought and that failure to reduce production fast enough may require prices to fall near $20 a barrel to clear the glut. Prices may touch that level when stockpiles are filled to capacity, forcing producers in some areas to cut output, Currie said.

Lower iron ore, copper and steel prices as well as weaker currencies in commodity-producing countries have reduced costs for oil companies, according to Currie. The world is shifting from an “investment phase” of a 30-year commodity cycle to an “exploitation phase,” with shale fields as an important source of output, he said.


3 Japan scripts major upset in rugby history (BBC) Japan stunned two-time champions South Africa to cause arguably the biggest upset in rugby union history. Karne Hesketh crossed in the final minute to win an incredible World Cup Pool B encounter in Brighton.

South Africa led 12-10 after Francois Louw and Bismark du Plessis tries. Lood de Jager and Adriaan Strauss also scored for the Springboks, but Ayumu Goromaru contributed 24 points, including a try, before Hesketh’s dramatic clincher. Japan had not won a World Cup game since 1991, while South Africa were world champions in both 1995 and 2007.

Japan started the game brightly, played with quick ball and took the game to South Africa, never looking overawed by their powerful opponents. Captain Michael Leitch went over for Japan’s first try as they went 10-7 up after 29 minutes and, although Du Plessis quickly responded, the Brave Blossoms stayed in touch throughout the second half.

Japan were always looking to attack, with scrum-half Fumiaki Tanaka dictating the tempo of their game and full-back Goromaru putting in a near-flawless kicking display. The 29-year-old added to his points tally when he finished off a well-worked move and, after he converted his own try, the score was 29-29 with just over 10 minutes remaining.

Replacement Handre Pollard kicked South Africa back in front eight minutes from the end after Japan strayed offside but the underdogs were not to be denied. They laid siege to the Springboks’ line as time ticked beyond 80 minutes, twice opting not to kick penalties that would have earned them a draw. Their adventure was rewarded as they span the ball across the field for Hesketh’s winning try on the left flank.

Several kickable penalties were given away after the break to allow Goromaru to keep Japan in touch, while Coenraad Oosthuizen’s late yellow card proved costly as Japan were able to stretch the play for Hesketh to touch down in the corner.


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UK seen to need interest rate cut; Market bubble fears grow; ‘Cool clock’ boy brings out best and worst of America

1 UK seen to need interest rate cut (Katie Allen in The Guardian) Interest rates in the UK may have to be cut further from their record low level, the Bank of England’s chief economist has warned, as he highlighted signs that the global financial crisis is entering a third phase of turmoil.

Andy Haldane cited evidence of a slowdown on the domestic front and risks to the global economy from China, where an economic downturn has coincided with a stock market rout that has sent shockwaves through the world’s markets.

His view that the Bank may need to resort to even more unconventional moves to protect the UK recovery puts Haldane at odds with the Bank’s governor, Mark Carney, who has indicated that rates may rise from 0.5% early next year. The warning from a top Bank official over the UK’s fragility is also unwelcome news for George Osborne as he seeks to emphasise his stewardship of the economy following Jeremy Corbyn’s election as Labour leader.

Haldane, one of nine policymakers who set interest rates, was speaking a day after the US central bank decided to delay an interest rate hike for the world’s biggest economy. The US rate-setters blamed a more fragile global outlook in remarks that further rattled jittery financial markets. The FTSE 100 fell more than 1% in the wake of the US decision.

Haldane warned the UK was not ready for higher borrowing costs. “In my view, the balance of risks to UK growth, and to UK inflation at the two-year horizon, is skewed squarely and significantly to the downside,” he said. “Against that backdrop, the case for raising UK rates in the current environment is, for me, some way from being made.” Given the range of risks facing the economy, there is every chance the next rate move could be a cut instead of an increase.

Added to that, Haldane highlighted challenges in Britain. “While the UK’s recovery remains on track, there are straws in the wind to suggest slowing growth into the second half of the year,” he said. “Employment is softening, with a fall in employment in the second quarter and surveys suggesting slowing growth rates.


2 Market bubble fears grow (Jamie Robertson on BBC) No increase in interest rates – crack open the champagne – another month (or two or three) of cheap money. There may well be a few investors breathing a sigh of relief that the Federal Reserve has kept US interest rates on hold. But most realise that the days of cheap money are coming to an end.

Only now are we beginning to look at the stock market, blown up by cheap money over the last six years, and starting to question the resilience of this quivering balloon. With rates close to zero the stock market has been the first choice for anyone hungry for a decent return since March 2009. And in their enthusiasm those investors may well have inflated a bubble of alarming proportions.

One valuation, known as Cape, and which gained popularity after the collapse of the dot.com boom in 2000, is flashing red and sending shivers through the market. Cape stands for “cyclically adjusted price to earnings” ratio. The price to earnings ratio (or PE) is the relationship between the price of a share in the market, and the earnings of the company to which it relates.

Prof Robert Shiller, the Nobel laureate economist who popularised Cape, decided to use average earnings, adjusted for inflation, over the last ten years. The historic average Cape for the S&P 500, the broad US market index, is 16.6. Its rock bottom was just below 5 in the early 1920s. Last year Prof Shiller said that over 25, Cape was at “a level that has been surpassed since 1881 in only three previous periods: the years clustered around 1929, 1999 and 2007. Major market drops followed those peaks”.

Now, I know what you’re thinking. Where are we now? 25.33. Uh-oh… But before you grab the phone to your broker, it should be pointed out that no-one, Prof Shiller included, sees Cape as a predictor of a crash. In fact had you used Cape to time your investment for most of this century you would have gone spectacularly wrong. For all that time Cape has been, with one brief exception in mid-2009, above its long term average of 16.6, i.e. telling you your returns were going to be below average.

The last quarter saw total earnings for companies in the S&P 500 index down 2.1% on the same period last year. The third quarter is likely to be worse, maybe 5.5% lower than last year. Now a lot of that is to do with the energy sector getting knocked sideways by the low oil price, but other sectors are hardly shining. The bottom line is that earnings are at their weakest level in six years. That in itself (let alone confidence levels and the Cape ratio) should make investors cautious. And interest rates haven’t even gone up yet.


3 ‘Cool clock’ boy shows best and worst of America (Khaleej Times) Ahmed Mohammad is now a celebrity in the US. The little boy who was handcuffed and suspended for bringing his homemade clock, which was mistaken for a bomb by the school authorities, is now all smiles and has a tale to tell. President Barack Obama has invited him to the White House to share with him his invention, and similar invites are pouring in from Facebook CEO Mark Zuckerberg, Google, the Massachusetts Institute of Technology and Nasa to visit their facilities.

This episode is in need of being studied in an objective manner. The psychological terror and abuse that Mohammad, 14-year-old son of a Muslim immigrant from Sudan, suffered at the hands of his school authorities is condemnable. The fact that he was handcuffed and Texas cops were called in to arrest him is disgusting. All that he was carrying with him is his clock invention that resembled a bomb!

This speaks high of not only the fear factor but also the sense of otherness that has set in American society in the aftermath of the 9/11 attacks. Call it Islamophobia or paranoia, minorities still face the uphill task of proving their loyalty and patriotism when it comes to the business of the state.

Obama, nonetheless, made the necessary socio-political correction by tweeting in support of the student. The gesture to invite the ninth-grader to take his clock to the White House is laudable, and will go a long way in wooing minorities and other dispossessed sections of the American society. This is like appreciating the nation’s enterprise and their zest to contribute to the development and prosperity of the state.

“We should inspire more kids like you to like science…it’s what makes America great,” Obama tweeted. Similarly, the Facebook chief was candid, as he said: “Having the skill and ambition to build something cool should lead to applause, not arrest. The future belongs to people like Ahmed. I’d love to meet you. Keep building.”

While Mohammad will be a sought-after guest on the Astronomy Night (September 19) – an event bringing together scientists, engineers, astronauts, teachers and students on the lawns of the White House – Obama has an opportunity to send across the message that none should be discriminated on the basis of unreasoned prejudice.



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US Fed declines to raise rates; Alibaba’s wipeout and after; Over 2m Indians vie for 368 jobs

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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OECD cuts world growth outlook, warns on emerging markets; Ortega, second richest man, closes in on Gates; Social media and mental health of teenagers

1 OECD cuts world growth outlook, warns on emerging markets (Gulf News) The OECD has cut its world economic growth forecasts for 2015 and 2016, warning of a dramatic slowdown in Brazil and a global outlook clouded by uncertainty over China. The policy analysis club of 34 advanced economies had already slashed its forecasts just three months ago because of weak US activity.

The Organisation for Economic Cooperation and Development cut its world growth forecast for this year to 3.0 per cent, trimming 0.1 percentage points off its previous estimate made in June. “The outlook has worsened further for many emerging market economies”, the OECD said.

The group issued its new economic outlook on the eve of a US Federal Reserve decision on whether to lift interest rates for the first time in nine years. Analysts say such a tightening could chill global activity. For China, whose slowing economy has prompted deep uncertainty in global financial markets, the OECD cut its 2015 growth forecast by 0.1 percentage points to 6.7 per cent.

But Brazil’s forecasts took the biggest hit, by far, in the latest OECD report. Suffering like other emerging economies from a commodity price crash, engulfed in recession and with its debt downgraded by Standard & Poor’s this month to junk bond status, Brazil had its economic outlook for this year downgraded to a 2.8-per cent contraction instead of a 0.8-per cent contraction.

Coincidentally, within an hour of the report’s release, Standard & Poor’s cut Japan’s investment-grade credit rating by one notch, saying the government’s strategy to revive growth and end deflation was unlikely to reverse the deterioration in the next two to three years. Meanwhile, the euro area’s recovery lacked some vigour and activity in China was “difficult to assess”, the OECD said.


2 Ortega, second richest man, closes in on Gates (Robert Lafranco in Sydney Morning Herald) Spain’s fast-fashion king Amancio Ortega has added $3.7 billion to his personal fortune after Inditex, the world’s largest clothing retailer and owner of the Zara chain, announced brisk sales, boosting its shares.

Now Ortega, who passed US billionaire investor Warren Buffett as the world’s second-richest person in June, is $9.5 billion away from leapfrogging Microsoft founder Bill Gates as the world’s richest person, as of mid-day trading in New York on Wednesday.

The 79-year old businessman began building the Spanish fashion empire with his siblings and soon-to-be wife in 1963, making women’s bathrobes and other clothing in their home in northern Spain. He opened the first Zara store in 1975 and created Inditex a decade later. Its initial public offering was in 2001 and since then, Ortega has reaped in more than €4 billion ($6.3 billion) in dividends, investing much of it in commercial properties in major US and European cities.

Those real estate holdings amount to about $8 billion of his net worth, with Inditex making up more than $63 billion. Ortega has risen from the world’s seventh-richest person since March 2012, when his fortune was at $38 billion.

Gates had $62.5 billion in March 2012 and passed Mexico’s Carlos Slim to reclaim the world’s richest person spot in May 2013 when Microsoft hit a five-year high. Microsoft’s shares closed at $44.30 overnight in New York, giving Gates a fortune of around $80.6 billion. Ortega has $71.1 billion.


3 Social media and mental health of teenagers (June Eric Udorie in The Guardian) The digital landscape has put increased pressure on teenagers today, and we feel it. A new study has found that teenagers who engage with social media during the night could be damaging their sleep and increasing their risk of anxiety and depression.

Teenagers spoke about the pressure they felt to make themselves available 24/7, and the resulting anxiety if they did not respond immediately to texts or posts. Teens are so emotionally invested in social media that a fifth of secondary school pupils will wake up at night and log on, just to make sure they don’t miss out.

Perhaps the worst thing about this is that teenagers need more sleep than adults do, so night-time social media use could be detrimental to their health. Research has shown that teenagers need 9.5 hours of sleep each night but on average only get 7.5 hours. A lack of sleep can make teenagers tired, irritable, depressed and more likely to catch colds, flu and gastroenteritis.

During the summer holidays, I lost my phone. And for the week that I was phoneless, it felt like a disaster. I love my phone. It gives me quick access to information and allows me to be constantly looped in with my friends, to know exactly what is going on in their lives. So when I didn’t have my phone for a week, I felt a slight sense of Fomo, or if you’re not up to speed with the lingo, fear of missing out.

A separate study by the National Citizen Service found that, rather than talking to their parents, girls seek comfort on social media when they are worried. The survey also suggests that girls are likely to experience stress more often than boys – an average of twice a week.


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