OECD urges China to run budget deficits, free yuan

China needs to run a continued fiscal deficit and let its real exchange rate rise to rebalance its economy towards domestic demand and thus sustain the impressive growth of recent years, the OECD said on Tuesday. In only its second full-length study of non-member China, the Organisation for Economic Cooperation and Development maintained its November forecast of an acceleration in gross domestic product growth to 10.2 percent in 2010 from 8.7 percent last year. The report highlights major challenges facing China, including the ageing of the population; income inequalities; fragmented social safety nets; the inability of small firms to access financing; and a lack of incentives for innovation due to weak protection of intellectual property rights. [Read the full article]

* U.S. stock index futures pointed to a lower opening on Wall Street on Tuesday, with futures for the S&P 500 SPc1 down 0.27 percent, Dow Jones DJc1 futures down 0.23 percent and Nasdaq 100 NDc1 futures down 0.23 percent. * White House adviser Paul Volcker will urge Congress to curb the risks taken by large banks to help prevent them from being treated as “too big to fail,” according to testimony obtained by Reuters on Monday. [ID:nN01217116] * On the macro front, investors awaited data on pending home sales, ahead of all-important monthly U.S. payroll data due on Friday, while on the earnings side, Pepsi Bottling (PBG.N), Dow Chemical Co (DOW.N), United Parcel Service (UPS), Whirlpool Corp (WHR.N) and News Corp (NWSA.O) feature among the companies due to report results on Tuesday. [Read the full article]

Worries over tougher banking regulations and Greece’s deficit situation prompted equity investors to trade cautiously as they waited for the European Commission recommendations on the country’s fiscal reform plans on Wednesday.

At 0927 GMT (4:27 a.m. EST), the MSCI world equity index (^MIWD00000PUS – News) was up 0.4 percent at 289.54 points after touching its weakest level since early November on Monday. The FTSEurofirst 300 (^FTEU3 – News) index of top European shares was almost flat, but energy stocks fell after oil major BP’s (LSE:BP.L – News) results disappointed investors.

“Despite the triple digit rally in the U.S. [Read the full article]

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Italian Foreign Minister Franco Frattini said on Tuesday that Rome had taken a firm stance on blocking new oil and gas investments in Iran, where Italy’s Eni is involved in the Darkhovin oilfield. Frattini told Italian television from Israel, where he was on an official visit with the prime minister, that his country had gone as far as to suspend export credit guarantees for firms investing in Iran. “We are absolutely firm about blocking new investments in the oil and gas sector. We have already blocked insurance by the SACE (Italian Export Credit Agency) for anyone investing in Iran. This is a completely correct measure that our Israeli friends will appreciate,” the Italian minister said. Western powers have called for a fresh round of United Nations measures against Iran for refusing to halt uranium enrichment activities. [Read the full article]

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