Top of the Agenda: Global Markets Rise on ECB Bond-Buying Plan
Global stock markets rallied, the euro jumped, and Spanish and Italian bond yields fell following yesterday's announcement by the European Central Bank that it will buy unlimited government bonds of struggling eurozone sovereigns (WSJ). The ECB move was meant to reign in borrowing costs for indebted eurozone states, while reassuring markets that the nearly three-year-long sovereign debt crisis is being forcefully addressed. The new bond-buying program--Outright Monetary Transactions--will force participating countries to request formal financial assistance from the EU and abide by strict austerity conditions.
Enforcing conditionality is also crucial politically. The Bundesbank and the German public remain opposed to any bond-buying programs. While Mr. Draghi is right to do what he feels is necessary to save the currency bloc, he has to ensure that Europe's largest economy remains on board. Markets have applauded the ECB's move. But European leaders should not get carried away," says this Financial Times editorial.
"Despite Mr. Draghi's efforts to portray the purchases as purely within the ECB's monetary responsibilities, there is no denying that they wander far from the ECB's original mandate. That's why the vote was not unanimous. Mr. Draghi did not name the lone dissenter, but it was almost certainly Jens Weidmann, president of Germany's Bundesbank," says the Economist.
"The bank is calculating that just the prospect of a large-scale ECB intervention will be enough to lower interest rates and that, in the best case scenario, it won't actually have to buy bonds. The announcement itself could be enough to calm investors. But what if it isn't? Then the ECB will be forced to go down a path that is paved with risks. Europe has never seen a program like this before, and it is almost impossible to predict the consequences," writes Der Spiegel's Stefan Kaiser.
South Korea Holds Military Drill Near Disputed Islands
South Korea today conducted defense drills near the Dokdo Islands in the East Sea amid a diplomatic dispute with Japan (Yonhap), which also lays claim to the South Korean-controlled islands.
CHINA: The European Union launched an unfair-trade investigation (WSJ) into allegations Chinese companies are selling solar panels at artificially low prices in Europe and undermining the continent's solar panel industry, EU authorities announced yesterday.
SOUTH AND CENTRAL ASIA
U.S. to Blacklist Haqqani Militants
The administration of U.S. President Barack Obama is expected to brand as a terrorist organization the Pakistan-based Haqqani militant network (NYT), which has been responsible for deadly attacks on U.S. troops in Afghanistan, U.S. officials confirmed yesterday.
Pakistan has emerged as a terrorist sanctuary for some of the world's most violent groups, including al-Qaeda, the Taliban, and homegrown militants, that threaten the stability of Pakistan as well as the region, explains this CFR Backgrounder.
Israel yesterday agreed to admit three migrants from Eritrea--two women and a teenage boy--out of twenty-one that have been camping out for a week along the Israeli border with the Egyptian Sinai Peninsula, as Prime Minister Benjamin Netanyahu insisted Israel is "no longer a destination for infiltrators" (LAT).
PALESTINIAN TERRITORIES: Israeli soldiers yesterday shot three alleged Palestinian militants (BBC) in Gaza near the border with Israel, hours after an Israeli airstrike in central Gaza killed three other alleged militants in response to recent rocket attacks against Israel.
U.S. Warns of Sudan Border Conflict
Following a UN Security Council meeting yesterday, U.S. Ambassador to the UN Susan Rice expressed concern over a lack of urgency on the part of Sudan and South Sudan in implementing an African Union plan for resolving border and oil disputes, while warning of renewed "outright conflict" (AP).
KENYA: Armed attackers yesterday set fire to houses and killed at least eleven people in the village of Tana Delta in Kenya's Coastal province, in a row over grazing land and water resources (Reuters), the Red Cross confirmed today.
Colombian President Juan Manuel Santos yesterday dismissed a proposal by the leftist FARC rebel group to implement a cease-fire during upcoming peace negotiations, saying a government offensive against the rebels would not subside "until we get the final agreement" (al-Jazeera).
Since 2006, the Mexican government has been in embroiled in a bloody drug war, which has failed to significantly curb trafficking, explains this CFR Backgrounder.
Obama Convention Speech Asks for Time on Economic Recovery
President Barack Obama officially accepted the Democratic Party's nomination for president on the last night of the convention Thursday, delivering a speech that included appeals to voters for more time to shepherd the United States through a slow economic recovery and to continue improving its global standing (WashPost), while warning of the setbacks that would come with a Republican presidency (NYT).
The August 2012 jobs report released today reveals that 96,000 jobs were added last month, and the unemployment rate edged down to 8.1 percent from 8.3 percent in July. The sluggish U.S. employment picture has been a central issue in the presidential campaign.
While Democrats were convening in Charlotte, NC, Thursday, some Obama administration officials were consulting oil market experts (Reuters) on the possibility of tapping into the U.S. Strategic Petroleum Reserve as prices remain high heading into the November 8 election.