News That Matters

The Trader

Let’s look beyond Spain’s ability of asking for a bail out of the banks. Guest post by Craven Brothers. Simply must see presentation.

Our latest outlook series details structural (i.e., long term) problems in the world’s largest economies that were “unmasked” by the credit crisis and Great Recession. This year’s multi-part discussion seeks to look beyond debt and deleveraging (see last year’s “The Age of Deleveraging”: Our Observations and Outlook), to assess the myriad influencers of growth, and thus market prospects going forward.…
Mariano Rajoy, Spain’s embattled prime minister, on Sunday attempted to portray his country’s decision to seek as much as €100bn in European Union rescue funds for troubled domestic banks as a victory, saying his government’s budget prudence prevented a full-scale bailout that would have forced him to surrender sovereignty to Brussels. Spain has now became the fourth and largest eurozone economy to seek an international bailout. But Mr Rajoy, who had resisted any outside EU assistance since his centre-right government was voted into office in December, insisted the agreed loan from EU funds was solely to recapitalise banks. However, because Spain was able to take advantage of new provisions in the eurozone’s €440bn rescue system, it will avoid the kind of intrusive inspection of government books that came along with Irish, Greek and Portuguese bailouts.

Alexis Tsipras, leader of Greece’s leftwing Syriza coalition, seized on news of the Spanish bailout to bolster his position ahead of next week’s crucial general election, which may determine whether the country stays in the euro.  “The developments in Spain confirm the position we adopted from the start that the crisis is a pan-European problem, and the way it has been handled so far has been socially catastrophic and completely ineffectual,” Mr Tsipras, who opposes the bailouts, told a newspaper.

François Hollande was in sight of an all-important parliamentary majority following the first round of National Assembly elections on Sunday, vital to entrenching the authority of France’s new Socialist president a month after he was elected. If confirmed in the decisive second round next Sunday, Mr Hollande will be able to start implementing his growth plans, rejecting at least part of the austerity drive installed by his predecessor.


India’s economy and exports may be waning compared with a year ago, but there is one sector still experiencing big growth exports of beef in the form of water buffalo meat. Indian beef exports are set to rise to 1.525m tonnes this year, up from 609m tonnes in 2009, outstripping Australia, which is expected to ship 1.425m tonnes in 2012 and Brazil, with 1.35m, according to US Department of Agriculture figures. The huge rise in volume of water buffalo beef exports has led to concerns in India that some cow meat is also being exported. Cows are considered holy by India’s Hindu majority and their slaughter is punishable by jail in some states. “India is forecast to become the world’s leading beef exporter in 2012 due to an expanding dairy herd, efficiency improvements, increased slaughter and price-competitiveness in the international market particularly vis a vis Brazil,” the USDA said in a report.

Myanmar’s president, Thein Sein, warned on Sunday that surging sectarian violence in the country’s west could endanger the country’s democratic reforms, and announced a state of emergency in troubled Rakhine state as government media warned of “anarchy” and potential cycles of retaliation. In an address on state television, striking because of its candour on the sensitive issue of ethnic and religious tensions, the president, a former general, said: “If we put racial and religious issues at the forefront, if we put the never-ending hatred, desire for revenge and anarchic actions at the forefront, and if we continue to retaliate and terrorise and kill each other, there’s a danger that [the troubles] could multiply and move beyond Rakhine.

Manufacturing is set this year to reach its highest level for more than a decade as a percentage of total world output, indicating that in a difficult global economy the industrial sector is returning to its historic role as a growth driver. The change is outlined in data made available to the FT from IHS Global Insight, a US consultancy. It supports the idea that a new industrial revolution after four similar growth spurts over the past 250 years is now under way. Jeff Immelt, chief executive of General Electric, the US industrial conglomerate, said the world was experiencing “a new zeitgeist” in the shape of a “global manufacturing renaissance”. As a result, GE is likely to have “a lot” more plants globally in a decade’s time than now. “Twenty years ago I would not have said that, I would have said just the opposite,” he said.
Asian markets rallied early Monday and the euro jumped higher on Spain’s bank bailout, while sentiment was also boosted with Chinese economic data that was less bad than some had feared. Stocks rallied early in the day. Japan’s Nikkei climbed 2% and Hong Kong’s Hang Seng Index gained 2.1% while South Korea’s Kospi was 1.6% higher. Singapore’s Strait Times Index rose 1.4% and the China Shanghai Composite was up 0.3%.

Aircraft manufacturer Airbus is maintaining an earlier target to sell around 600-650 planes in 2012 even as the marketplace has weakened in recent months due to continued global economic uncertainties, John Leahy, the company’s chief operating officer for customers, said Monday. “There’s no doubt about it that 2012 is a softer year than 2011 in terms of orders and in terms of the health of some of the airlines,” Mr. Leahy told Dow Jones Newswires in an interview on the sidelines of the annual meeting of the International Air Transport Association, the industry’s global trade group, in Beijing.

Growth in China’s production of industrial metals including bellwether crude steel mildly slowed in May from the previous month as broader macroeconomic demand weakened, National Bureau of Statistics data showed Monday. Output of key industrial commodities in the world’s second-largest economy is a good gauge of producer confidence, and last month’s declines were largely in line with market expectations. Crude steel output, most of which feeds China’s all-important construction sector, rose 2.5% on year and 1.1% on month in May to

Apple Inc.’s big conference for technology developers will swing into gear Monday morning with a keynote presentation that will end months of speculation about some key hardware and software initiatives. The announcements are expected to include the next version of Apple’s operating system for iPhones and iPads and updates to the company’s MacBook portable computers. (Apple, known for its ability to craft buzz, late last week erected an “iOS 6? banner at the San Francisco convention center hosting the event.)
China’s economy appears to be stabilizing at a slower level of growth, according to analysts, though government stimulus could be supportive in the second half of the year. Citigroup analysts said on Monday the May data indicated that economic growth in the second quarter is set to cool to 7%-7.5% on an annualized basis unless there is a pick up in the June data. While the May data release over the weekend included export growth that was much stronger than expected, some other sets disappointed, including a 13.8% rise in retail sales, compared to a 14.1% gain in April, and weaker than analyst expectations for a 14.2% rise.

Chinese economic data for May released over the weekend suggested weaker domestic conditions, but surprising strength in exports and imports. Exports rose 15.3% compared to a year earlier, government data showed, beating 4.9% growth in April and higher than the 6.9% rise forecast by a Dow Jones Newswires poll of economists. Imports in May were up 12.7%, well ahead of predictions of a 3% increase and April’s 0.3% rise. Domestic data released Saturday, however, showed a broadening deterioration in conditions. China’s industrial production grew 9.6% in May from a year earlier, versus 9.3% growth in April, the Statistics Bureau said. The result missed a 9.9% rise expected in separate surveys by Dow Jones Newswires and Reuters.

-China’s primary gauge of inflation–is likely to rise 2.6% in the June-October period from a year earlier, and the full-year CPI growth for 2012 is expected at 3%, the state-run China Securities Journal reported Monday, citing a former adviser to the country’s central bank. The comments by Li Daokui came after the National Bureau of Statistics said Saturday that China’s CPI rose 3.0% in May from the same month a year earlier, the slowest pace in 23 months. The easing inflationary pressure in May would give Beijing more leeway to fine-tune its monetary policy, the newspaper quoted Mr. Li as saying.
The 100 billion-euro ($126 billion) rescue for Spain’s banks moves Italy to the frontline of Europe’s debt crisis, putting pressure on Mario Monti’s unelected government to avoid succumbing to a market rout. “The scrutiny of Italy is high and certainly will not dissipate after the deal with Spain,” Nicola Marinelli, who oversees $153 million at Glendevon King Asset Management in London, said in an interview. “This bailout does not mean that Italy will be under attack, but it means that investors will pay attention to every bit of information before deciding to buy or to sell Italian bonds.”

Singapore’s export growth quickened in May as shipments of electronics and pharmaceuticals increased. Non-oil domestic exports climbed 3.2 percent from a year earlier, after a revised 1.7 percent gain in April, the trade promotion agency said in a statement today. The median of seven estimates in a Bloomberg News survey was for a 3 percent gain. Growth in overseas shipments may be tempered in coming months as purchasing managers’ indexes in export-dependent Asian economies including China and South Korea signal manufacturing is still slowing, forcing officials to evaluate whether to add stimulus to spur growth. Policy makers across the globe are girding for a deeper impact from Europe’s debt woes, with China and Australia lowering interest rates last week.

China’s exports rose in May at more than double the pace analysts estimated while industrial output and retail sales trailed forecasts, signaling that last week’s interest-rate cut was aimed at countering a domestic slowdown. Overseas shipments climbed 15.3 percent from a year earlier, the customs bureau said yesterday, exceeding all 29 estimates in a Bloomberg News survey. Industrial output gained by less than 10 percent for a second month and retail sales increased the least in almost six years excluding holiday-month distortions, statistics bureau reports showed June 9.

Nathan Tinkler, the Australian entrepreneur who last year helped orchestrate the sale of his mining assets for about A$2.6 billion ($2.6 billion) in stock, has moved his primary residence to Singapore. The move will help relationships between 36-year-old Tinkler, the largest shareholder in Whitehaven Coal Ltd., and customers and investors in Asia, Tim Allerton, an external spokesman at City Public Relations in Sydney, said by phone.
As interest rates have been dropping to new lows seemingly by the week, American companies have been taking advantage of the cheap borrowing costs, but consumers have been largely left on the sidelines. New data this week from the Federal Reserve shows that in the first quarter of this year, American businesses were taking on new debt at the fastest rate since the financial crisis in 2008. American households, though, were heading in the opposite direction, increasingly shedding debt.
Wholesale businesses restocked faster in April, responding to a strong gain in sales. The increase could be a good sign for economic growth in the April-June quarter. The Commerce Department says stockpiles grew 0.6% at the wholesale level in April, double the March gain. Sales by wholesale businesses jumped 1.1% in April, nearly three times the March sales gain. Stockpiles at the wholesale level stood at $483.5 billion in April. That’s 25.6% above the post-recession low of $384.9 billion in September 2009. It would take roughly five weeks to exhaust all wholesale stockpiles at the April sales pace. That’s considered a healthy time frame and suggests businesses will keep restocking to meet demand.
Central banks in Southeast Asia’s two largest economies meet to set interest rates this week, with officials forecast to hold off on stimulus days before a Greek election at risk of triggering a deeper European turmoil. Indonesia and Thailand, along with the Philippines, the region’s No. 5 economy, will keep interest rates unchanged, according to surveys of economists by Bloomberg News. Bank Indonesia meets tomorrow, the Bank of Thailand June 13 and Bangko Sentral ng Pilipinas the day after. Policy makers across the globe are confronting the dangers posed by Europe and slowing growth, with China, Brazil and Australia opting for rate cuts the past two weeks. Many Asian nations are better prepared now than when the credit crunch hit in 2008, according to HSBC Holdings Plc and Moody’s Analytics, giving scope to hold rate-cut fire for now. “Even though there is a temptation to cut rates now, doing so too aggressively could mean that monetary policy is too loose” at a time when inflation pressures remain, said Frederic Neumann, Hong Kong-based co-head of Asian economics at HSBC and a former consultant to the World Bank. “It would be more advisable to spur fiscal policy.”
Passengers on the London Underground will soon be able to make mobile phone calls and access email for the first time. The French telecoms firm Alcatel-Lucent is in talks to install mobile and broadband connectivity across the entire Tube network. The deal would include London Underground trains, as well as the Tube stations, which are already scheduled to receive wi-fi access later this year. Ben Verwaayen, chief executive of Alcatel-Lucent, disclosed that the company would start by introducing broadband and mobile phone reception.

Fraud involving current accounts soared to a new peak in the first quarter, it is disclosed in a survey today. The data shows 44 in every 10,000 applications for current accounts were found to be fraudulent, an increase of 23pc on the fourth quarter last year. Experian, the information services company which compiled the data, believes financial pressures forced many people to resort to fraud to avoid falling into debt. Many are providing false or misleading information to justify an overdraft or open current accounts. The economic downturn and squeeze saw fraud in the financial services sector overall leap 16pc in the first quarter compared with the final three months last year.
Ireland wants to renegotiate its rescue plan to benefit from the same treatment as Spain, which looks set to win a bailout for its banks without any broader economic reforms in return, European sources said on Saturday. ‘Ireland raised two issues: one is the need to ensure parity of the deal with Spain retroactively on its bailout from EFSF,’ one European government source told AFP, referring to the temporary rescue fund, the European Financial Stability Facility. Another European government source confirmed the information.  Ireland secured an 85-billion-euro (S$140 billion) rescue deal from the European Union and the International Monetary Fund in November 2010, but only after agreeing to draconian austerity measures.
China’s fiscal revenue in the first five months of the year rose 12.7 percent from the same period a year ago to nearly 5.3 trillion yuan (841.3 billion U.S. dollars), the Ministry of Finance said Monday. In May alone, the country’s fiscal revenue reached 1.2 trillion yuan, up 13.1 percent year on year, the ministry said.

The Ministry of Agriculture said Sunday that 55 percent of the country’s winter wheat has been harvested with the help of an abundant supply of agricultural machinery. Chinese farmers have gathered about 200 million mu (13.3 hectares) of winter wheat, with more than one million people harvesting crops in China’s central and northern provinces, according to the ministry. The ministry expected that 510,000 combine harvesters will be in use for this year’s summer harvest, exceeding last year’s machinery supply.

South Korea’s producer prices fell for two straight months in May due to a decline in prices for crude oil and vegetables, the central bank said Monday. The producer price index (PI), a barometer of future consumer price inflation, retreated 0.6 percent in May from a month earlier, according to the Bank of Korea (BOK). The May figure was down from a 0.1 percent fall tallied in April. From a year before, the producer prices rose 1.9 percent last month, down from a 2.4 percent gain registered for the previous month. The on-month fall was mainly attributed to falling global oil prices and a drop in vegetable prices. Dubai crude oil, South Korea’s benchmark, averaged 107.32 U.S. dollars a barrel in May, down 8.5 percent from the previous month.

The Philippines obtained 2.5 billion U.S. dollars worth of investment during President Benigno Aquino III’s 7-day visits to Britain and the United States. The news was announced by Aquino in his arrival message at the Ninoy Aquino International Airport after he returned to Manila Sunday morning from visits to the United Kingdom and United States. From UK, he said, the assured investments to be put in the Philippines could at least be 1.5 billion U.S. dollars and this could even increase to 2.5 billion dollars. The expected investments from the United States could reach to at least 1 billion dollars. Aside from the investments, Aquino said his trips to London and Washington also resulted in Manila’s deeper bilateral relations with the two countries.
With ambitious targets in place for the current year, the Government now intends to speed up the payment process for private parties executing infrastructure projects. A meeting involving various Government departments and private companies is expected to take place within the next few days to finalise a faster payment mechanism.  It is estimated that outstanding dues of private companies involved in infrastructure projects ranges from a low of Rs 12,000 crore to as high as Rs 20,000 crore. These are the undisputed amounts, which have been arrived at after discussions with key private infrastructure players.  A highly placed Government official told Business Line, “The amount mentioned does affect the big companies, but it is ultimately the medium, small and micro enterprises who suffer the most. Ultimately, these sub-contractors are the ones who do maximum work.”
China still faces a grim trade outlook, and “if lucky” it will be able to achieve its annual target of 10 per cent growth in exports and imports combined this year, Commerce Minister Chen Deming said in remarks published on Monday. Despite slowing growth at home and abroad, Chinese export and import growth both surprised on the upside in May, with exports rising 15.3 per cent and imports up 12.7 per cent last month from a year earlier.

Infrastructure sector is set for a massive fiscal stimulus of upto 1 lakh crore, albeit of a different type that will not tax the government finances. The government is working on a mechanism for expeditious release of pending dues of companies, mostly to those operating in infrastructure space, as part of its efforts to spur investments. “There is sometimes unnecessary delay in clearing payments and that leads to cash flow issues and holds up investments…the idea is to not just expedite implementation of projects but also address basic issues that impact the sector,” a senior government official told ET .
South Korea’s economy has pulled off modest gains in recent months but eurozone woes and other overseas developments are fueling uncertainties that can hurt future growth, a state-run think tank said Monday. In its monthly economic assessment report, the Korea Development Institute (KDI) said that industrial and service sector outputs, private consumption, business investment and labor market conditions all improved in April compared to the previous month. The trade surplus of Asia’s fourth-largest economy grew in May from April, while consumer prices remained unchanged at 2.5 percent last month, it added.
Car imports surged 16 percent in the first four months of this year, according to customs service figures, reflecting continued recovery in the auto market. Total sales of new cars were up 11 percent in May and 15 percent year on year for January to May, the Association of European Businesses reported Friday. “The pace of growth is becoming less pronounced, reflecting the robust volume base the market reached last year with the help of the now absent government stimuli to the retail sector,” said Jörg Schreiber, chairman of the AEB Automobile Manufacturers Committee, in comments released by the association Friday. He was referring to the “cash for clunkers” scheme that provided rebates to buyers of domestically made cars in 2010 and 2011.  Russians bought 2.6 million cars and light vehicles in 2011. AEB has forecast sales of 2.85 million in 2012, just below the pre-crisis levels of 2.9 million.
Elsewhere in Africa home loans are scarcer than hen’s teeth, offering lending institutions huge potential. Although African countries have huge populations, access to home loans is limited and home-loan debt is negligible as a percentage of gross domestic product (GDP). In some countries lending institutions do indeed enter the home-loan market, but are reluctant to participate on a large scale. Interest rates on home loans are also sky-high. As a result most housing transactions on the continent are done for cash. Players in South Africa’s property industry reckon these unexploited home-loan markets offer lending institutions considerable potential to broaden their horizons, specifically against the background of a massive appetite for accommodation.
Iran plans to raise gas exports to 230 million cubic meters per day by 2025, aiming to boost its share in global gas exports to 16 percent from just one percent at present, the ISNA News Agency reported. The country is currently exporting around 34 million cubic meters of gas per day, the report added. Deputy Director of the National Iranian Gas Company Mostafa Kashkouli said in February that Iran plans to build diverging pipelines for exporting gas to Syria, Iraq and European countries.

Iraqi news agency Aswat al-Iraq has reported that a new Iranian electricity supply line has started operations, carrying 100 MW of imported electricity from Iran. The new line is aimed at meeting the 550 MW of power demanded by Wasit province, in the centre of Iraq. The province currently only receives less than 150 MW from Iraq’s national grid, and consequently suffers from regular electricity blackouts. Iran has been involved in a number of recent electricity export deals, with the country reported last month to have agreed to export 50 MW of power to Lebanon to help the country meet summer power demands. The country’s ministry of electricity and energy, in late 2011, said that Iran’s energy exports would exceed U.S. $1 billion by March of this year. An Iranian Energy Ministry official had said recently that Iran’s electricity exports to four neighboring countries have increased by 40 percent since the beginning of the current Iranian calendar year (started March 20, 2012).

Pakistan President Asif Ali Zardari and Petroleum Minister Dr Asim Hussain remained successful in convincing the Chinese leadership during their recent visit to China to take part in the bidding for the construction of the Iran-Pakistan (IP) gas pipeline project. An official source said after getting China’s backing, the government had extended the deadline for the prequalification of the engineering, procurement, construction (EPC) and commissioning of the 785km-long pipeline from June 8 to June 22.  He said a leading Chinese firm was likely to participate in the construction of the IP pipeline. He said it was a big achievement, as China’s participation in the project would ensure its safety, adding that Iran had already assured Pakistan of providing all the financial and technical assistance, including equipment and compressors, for the commissioning of the pipeline.  The estimated cost of the project on the Pakistani side is estimated at $1.2 billion.
Even as the global economic community hailed an agreement to rescue Spain’s stricken banks, there was concern in Rome on Sunday that investors could now begin treating Italy as the next weak link in the eurozone. Those fears have been fuelled by a report from Moody’s ratings agency warning that Spain’s banking troubles could be “a major source of contagion” for Italy where lenders are also highly reliant on European Central Bank funding. “Italy is now the only country in difficulty that has not had to ask for a bailout,” said Federico Fubini, a columnist for the top-selling Corriere della Sera daily, after aid packages for Greece, Ireland, Portugal and now Spain. Without a stabilisation in borrowing costs on the debt markets for Italy and Spain and a Europe-wide agreement on the banking system, Fubini said that “the uncertainty will be very high and scrutiny of Italy will grow ever higher.”



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