Money Daily Brief: G20 is world's new economic order

Investors worry that G20 limits on bankers' pay would hurt financial stocks.

Toru Hanai/Reuters
Shares of Nomura Securities plunged 16 percent Friday -- its biggest one-day drop in more than three decades -- after it announced plans to issue up to $5.6 billion in shares.

Updated 3:12 p.m. EDT (19:12 UTC)

G20 is world's new economic order: The G20 will replace the G8 as the world's foremost body for economic coordination. Together, the group  - which includes nations from Argentina to Turkey to India - represents roughly 85 percent of world gross domestic product. Formerly a ministerial-level group, the world financial crises brought on largely by financial practices of G8 nations reinforced the need for wider economic consultation, perhaps including "peer review" of other G20 economies.

Banker pay in cross hairs: G20 leaders meeting in Pittsburgh Friday have narrowed in on a resolution on limiting compensation for banking executives world wide. A lack of a hard cap on pay is a significant bone of contention for the U.S., where banking chiefs averaged rates far beyond their international peers. Fears that the G20 will impose limits on bankers’ compensation rattled stocks on a day when Asian markets were also hit by investor concerns about the pace of economic recovery.

Yen surges, sterling slumps: Japan's currency rose against the euro on speculation that Japanese exporters will repatriate profits, taking advantage of a tax-waiving rule change. The dollar was also up against the euro although sterling was set for another heavy loss following a report that Bank of England Governor Mervyn King said the pound's drop would help the United Kingdom's economy rebalance.

US consumers upbeat: A sentiment index rose to 73.5 in September, its highest level since the beginning of 2008 (.pdf), but most consumers judged their own finances had deteriorated. Separately, new orders decreased 2.4 percent in August, mostly on a big drop in the volatile category of orders for civilian airplanes. More worrying was the 0.4 percent drop in core nondefense capital goods orders, the second monthly decline in a key indicator of business investment.

Still spending: The world’s biggest recession for nearly a century has failed to dent overconsumption of resources, a respected British think tank said. The New Economics Foundation warned about the ecological impact of continued debt-fueled consumption, particularly by western consumers.

In my backyard: As share markets elsewhere struggled, Australian stocks staged a turnaround on the back of strong gains in the financial sector helped by the country’s fourth-largest lender swallowing up the Aussie and Kiwi operations of Dutch-based bank ING. Australia & New Zealand Banking Group Ltd will buy ING’s stake in a joint life insurance and wealth-management venture for $1.8 billion (Australian; US$1.5 billion). As further proof of Australia’s robust growth, one forecaster said its dollar is set to achieve parity with the US greenback next year, the first time in 30 years.

Ben Quinn, a Monitor correspondent based in London, reported from Sydney, Australia. For a look at the Group of 20's evolving role, see G20 as world's top economic body? Doubts abound.

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