Headlines

A selloff in Hungarian financial markets is forcing investors to weigh the possibility of a default in the European Union state and the risk of contagion to other regional economies, Reuters reported. The rising cost of insuring government and bank debt in neighbouring euro zone member Austria because of exposure to Hungary is a case in point.

The International Monetary Fund is conducting "stress tests" on Japanese banks to gauge how vulnerable they are to a potential drop in the value of their huge holdings of Japanese government bonds, people familiar with the matter said. The move could sharpen investors' focus on the risk to Japan's economy from its ballooning debt, The Wall Street Journal reported.

Japan Airlines plans to raise more than 500 billion yen ($6.5 billion) ahead of re-listing its shares as early as September, a source with knowledge of the matter said, marking a sharp turnaround for the carrier following its bankruptcy in 2010, Reuters reported. A government-backed fund overseeing the airline's restructuring has said it would aim to recoup its 350 billion yen investment through a public offering by January 2013, three years after it went under with 2.3 trillion yen in debts.

Homburg Invest Inc. has filed a formal objection to a decision by the Dutch securities regulator to revoke its investment licence in the country, CanadianBusiness.com reported. The Halifax-headquartered company, which is under creditor protection, said Thursday that it plans to consider all legal steps to challenge the decision made in late November which prevents it from issuing new equity in the Netherlands.

The Algerian subsidiary of ArcelorMittal, the iron and steel multinational, faces bankruptcy at its plant in El-Hadjar in the east of the country, a union official said Thursday, Agence France-Presse reported. "The declaration of bankruptcy is imminent. The complex is crushed under a debt of $120 million," the secretary-general of the Smain Kouadria union told AFP, Dow Jones Daily Bankruptcy Review reported.

Spain says it expects its banks to set aside up to €50bn in further provisions on their bad property assets as part of a new round of reforms for the country’s financial sector, the Financial Times reported. Luis de Guindos, economy minister in the centre-right government that took office two weeks ago after defeating the Socialists, said on Wednesday it was essential that the banks clean up their balance sheets without imposing a burden on the treasury. The €50bn figure, equivalent to about 4 per cent of Spain’s GDP, is higher than private expectations by bankers.

In a new sign of a Spain's deepening financial crisis, the regional government of Valencia on Wednesday said it was a week late in repaying a €123 million ($160 million) debt to Deutsche Bank AG, The Wall Street Journal reported. A spokeswoman for the Valencia government said the region had assistance from Spain's central government in Madrid in finding a solution to its liquidity crunch, but said Madrid didn't provide extra funds or a guarantee. The spokeswoman said the central government was "sensitive" to Valencia's difficulties, but declined to elaborate.

Bankrupt primary aluminium producer ZALCO is in talks with eight potential buyers for a takeover of part or all of its plant in Zeeland, the Netherlands, the company's receiver said on Wednesday. ZALCO, which has a production capacity of 275,000 tonnes per year of aluminium, filed for bankruptcy in mid-December. The plant, which had employed 500 people, was shut down a few days later due to lack of funding to pay energy suppliers.

China's property prices fell for the fourth straight month in December, adding further pressure on Chinese consumers at a time when both the domestic and global economy increasingly depend on their spending, The Wall Street Journal reported. The property slump has triggered a slowdown in sales growth of goods ranging from furniture to refrigerators. Investment in residential real estate accounts for about 12% of China's economy, but as much as 25% is tied up in a broader category that also includes industries such as construction materials and appliances, according to economists.

Commercial banks' overnight deposits at the European Central Bank hit a new record high of €453 billion, data showed Wednesday, underscoring the ongoing fear banks have about lending to each other in the current debt crisis, the Irish Times reported. The ECB also bought up bonds of peripheral euro nationas, including Ireland and Portugal, two people with knowledge of the transactions said. The ECB pays 0.25 per cent interest for overnight deposits, well below the 0.396 per cent banks could lend their spare cash out for on interbank markets.