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With the Greek ” (no) fix” investors will start focusing on the true elephants of Europe, with Spain in pole position for the moment. Market reflections by Peter Tchir. The “Nothing is Fixed” rally continues to annoy most people. Just like last week, the refrains that nothing is fixed and nothing can be done are ringing out loud and clear, and once again markets have faded from overnight highs. While the “Nothing is Fixed” rally is only possible because of government intervention and the fact that the “Everything is Broken” sell-off took the markets too low.
The election victory for pro-austerity parties in Greece failed to assuage fears over the eurozone’s future, as investors ratcheted up the pressure on policymakers by sending Spain’s benchmark borrowing costs to a new euro-era high. Markets initially rallied on news that New Democracy and Pasok, two mainstream parties that support the austerity conditions of the eurozone’s bailout, gained enough seats to form a parliamentary majority in Athens. But the optimism was swiftly deflated by dismal bad bank loan figures in Spain that underlined the country’s woes.

Russia is setting aside up to $40bn for this year and next to shore up the economy in case the crisis in the eurozone escalates and spreads, and is dusting off a plan that would allow the government to recapitalise the country’s banking system. In his first interview with a foreign newspaper since his appointment as finance minister last year, Anton Siluanov said the government had agreed to create a reserve mechanism worth Rbs500bn ($15.4bn) for next year “for the direct financing of anti-crisis measures”.

The Brics nations announced late on Monday that they would begin a process to build a financial safety net, creating a joint pool of reserves to be used if any country faces sudden capital flight. Based on the Chiang Mai initiative between Asian countries, the proposal between Brazil, Russia, India, China and South Africa, would go far beyond existing agreements between the five emerging economies. High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. Work on the initiative has already begun with the aim of an agreement at the 2013 Brics summit and demonstrates the concern among strong emerging economies that they will feel the cold winds of contagion from a deepening eurozone crisis. The size of the proposed safety net is expected to be announced on Tuesday. Guido Mantega, Brazil’s finance minister, said the Brics nations were strengthening their financial integration to underscore the faith investors should have in their economies and the move should also improve global confidence. “By creating financial solidarity among us, we will be even safer and stronger than we already are,” Mr Mantega said.


Microsoft has made a belated entrance into tablet computing and a market dominated by Apple’s iPad with the unveiling of the Surface, a device it said would merge the best of PCs and mobile computing. The new device, which will run the group’s Windows 8 operating system, has an optional built-in touch keyboard, two cameras and a stand. “With Windows 8, we didn’t want to leave any seam uncovered,” said Steve Ballmer, Microsoft’s chief executive, at a launch event in Hollywood.

Canada is worried about an unconditional declaration that access to safe drinking water is a human right. The Holy See is against using family planning to advance gender equality. And dozens of countries are wary about getting rid of fossil fuel subsidies. These are just some of the objections negotiators have raised ahead of this week’s Rio+20 sustainable development conference, which the UN says is the biggest event it has ever organised.  They underline the growing doubts many have about what the 100-plus leaders expected to fly in for the meeting will have achieved by the time it ends on Friday. “It’s like a rally race of back seat drivers,” said Lasse Gustavsson, head of the World Wildlife Fund International delegation. “Everyone is sitting in the back seat and no one is taking responsibility.”
Asian stocks edged downwards on Tuesday morning, as investors shifted their attention back to Spain’s financial woes, overriding Monday’s post-election cheer from Greek election results. Japan’s Nikkei Average was down 0.3%, South Korea’s Kospi was flat, while Australia’s S&P ASX 200 fell 0.5%. Singapore’s Straits Times Index gained 0.4%. In China, Hong Kong’s Hang Seng Index dropped 0.4% and the China Shanghai Composite fell 0.2%.

Greece appears headed for a new clash with Germany over its rigid bailout program as the winners of Sunday’s Greek election prepare to ask Europe for more time to cut public spending.Greece’s conservative New Democracy party and its likely Socialist coalition partner, known as Pasok, are working on a proposal to ask other euro-zone countries for an extra two years to meet Greece’s fiscal targets, officials involved in the preparations said. The request would mean that on top of the €173 billion ($218.7 billion) bailout plan agreed early this year, Greece would need an additional €16 billion in financing from Europe, these officials said.

The U.S. recovery is hobbled by an economic divide that separates Americans not by income or wealth but by their access to credit. The housing bust left behind millions of people with credit records damaged by plunging home prices, lost jobs, past overspending or bad luck. Many are now walled off from the low interest rates engineered by the Federal Reserve to spur the economy and remedy the aftereffects of the borrowing boom. Millions with good credit, meanwhile, are taking advantage of the easy money, a windfall in many cases for people who don’t especially need it.

China is expected to kick-start a trial program that would allow banks to turn loans into securities and free up funds for lending at a time when Beijing is seeking ways to bolster growth. The securitization program could remove as much as 50 billion yuan ($7.9 billion) of loans from balance sheets, according to senior Chinese banking executives. Endorsed by China’s banking regulators and the Ministry of Finance, it represents another step in China’s efforts to revamp its financial system into one that relies more on market forces. It also comes as Chinese authorities are stepping up efforts to fight
The Australian central bank’s decision to cut the cash rate in June was “finely balanced,” according to the minutes from the latest interest-rate meeting, released Tuesday. The Reserve Bank of Australia minutes showed members weighed up relatively strong domestic data with “clear evidence suggesting a softening in global conditions.” Uncertainty about the future in Europe had increased significantly, the RBA said.

China said at the Group of 20 summit that it would contribute $43 billion to the recapitalization of the International Monetary Fund, the state-run Xinhua News Agency reported Tuesday. Sources at the meeting in Los Cabos, Mexico, had told Dow Jones Newswires earlier that a stepped-up contribution of about $43 billion was expected.

The yield on Spain’s 10-year government bond shot to a euro-era high above 7% on Monday, knocking the wind out of stocks in the country, as markets brushed aside Greek election results to refocus on problems for the Iberian nation. The yield surged 30 basis points in the afternoon to 7.14%, after having breached the 7% level for the first time earlier in the day. The yield on Italy’s 10-year government bond jumped 14 basis points to 6.07%.  Spanish stocks stumbled 2.3% to 6,561.60, with banking heavyweights Santander SA and BBVA SA tumbling more than 3% apiece. Earlier in the day, official data revealed that bad loans for Spanish banks increased again in April, and Friday the International Monetary Fund said the government would miss its 5.3% deficit-to-GDP target for 2012.

It is almost conventional wisdom on Wall Street that the Federal Reserve is dreading the looming four-month presidential campaign and wants to quickly get out of the spotlight until after the Nov. 6th election. But a close examination of the Fed’s past actions over the last several elections shows that this argument is more urban myth than reality. “Any thorough analysis would show the Federal Reserve, dating back at least to the 1970s, has been unimpeded in its decisions making with respect to political factors,” said Tony Crescenzi, a long-time Fed watcher and strategist for PIMCO. Mark Gertler, an monetary policy expert and economics professor at New York University, and a long-time friend of Fed Chairman Ben Bernanke, said central bankers care about their reputations, but they are tied to how the economy performs.
Brent crude, which is down around 25 percent since hitting a peak above $128 in early March, was up 8 cents at $96.13 per barrel by 0404 GMT. It hit a session low of $95.80, not far from Monday’s low of $95.38 – its weakest since January 2011. U.S. July crude, which expires on Wednesday, slipped 7 cents to $83.20 per barrel. Uncertainty in the market, with Spain’s borrowing costs taking centrestage now, will likely keep volatility high.

Gold hit an intraday high of $1,630.59 an ounce and was steady at $1,627.95 an ounce by 0300 GMT. Gold rallied to a record of around $1,920 in 2011, when investors turned to the metal as a safe haven during the debt crisis in Europe. U.S. gold for August delivery added $2.00 an ounce to $1,629.00 an ounce.
A Chinese film-finance group plans to invest $300 million in 10 English-language films, starting with “Ming: The Annihilator,” based on a character from Spider-Man creator Stan Lee. National Film Capital, a government-backed entertainment company, is developing projects that will appeal to international audiences, the Beijing-based company said yesterday in an e-mailed statement. The company will also invest in the Chinese theater business, to become a major player in both the U.S. and in China.

Foreign ownership of Japanese government debt rose to a record in 2011, signaling increasing dependence on investors abroad to finance the world’s largest public debt. Overseas investors owned 8.3 percent of JGBs as of the end of the fiscal year in March, the Bank of Japan (8301) said in a report released in Tokyo today. This was the highest since 1979, the first year for which comparable data is available. On a quarterly basis, the ratio rose to 8.6 percent in the third quarter of 2008 and it has fluctuated between 8.3 percent and 8.5 percent in the last three quarters.

China’s commerce minister said his nation’s economy is heading for a rebound this month following government measures to support growth, adding to signals of confidence among officials that the slowdown is ebbing. “I personally think that the June situation is turning for the better,” Chen Deming told reporters yesterday in Los Cabos, Mexico, without specifying the signs of improvement. With a “pretty obvious” downward trend the past two months, policy makers took steps to shore up consumption, he said.

Greek election winner Antonis Samaras begins a second day of talks to form a coalition after holding “constructive” meetings with two party leaders, racing to forge a government that keeps bailout aid flowing. Samaras secured initial agreement yesterday from Socialist Pasok leader Evangelos Venizelos, the former finance minister who negotiated the second rescue, and said he’d hold further talks today with Fotis Kouvelis, the leader of the Democratic Left party. If those three team up, they will hold a majority of 179 seats in the 300-member Greek parliament.
World leaders pressured Europe on Monday to take ambitious steps to resolve its debt crisis after a victory for pro-bailout parties in a Greek election failed to calm markets or ease worries that wider turmoil could derail the global economy. The world’s major industrialized and developing economies were set to urge Europe to take “all necessary policy measures” to resolve a crisis that has now raged for over two years, according to a draft communique seen by Reuters that was prepared for a Group of 20 summit in this Mexican resort town. U.S. President Barack Obama, concerned that Europe’s woes could upend his re-election hopes, requested a meeting with its leaders on Monday evening.
WASHINGTON European leaders said Monday that they were ready to help a new Greek government, as long as it respects the agreements that were part of a joint bailout program reached in February. Heads of European countries have expressed a “willingness to do more to support Greece in terms of growth-enhancing measures, provided, of course, that Greece respects the commitments that have been already taken,” European Union President Jos Manuel Barroso told reporters in Los Cabos, Mexico ahead of the meeting of Group of 20 leaders. Barroso said Greece already has made impressive measures to reduce its budget, but that the country has lagged in needed structural reforms. Representatives of the so-called “troika” — the European Union, the International Monetary Fund and the European Central Bank — will go to Athens as soon as a new government is formed to assess how Europe can help Greece meet the bailout targets, according to Barroso.
Ratings agency Fitch has cut its outlook for the Indian economy to negative, saying the country’s growth faces “heightened risks”.  Fitch warned India’s growth potential “will gradually deteriorate if further structural reforms are not hastened”.It also added that the government had made little progress on reducing its deficit.  The downgrade comes just days after Standard & Poor’s warned that India could lose its investment grade status. “India also faces structural challenges surrounding its investment climate in the form of corruption and inadequate economic reforms,” Fitch said in a statement late on Monday.

India’s central bank, the Reserve Bank of India (RBI), has left its key interest rate unchanged at 8% in a surprise move. Most analysts and observers had forecast the bank would drop the cost of borrowing amid slowing growth. India’s economy grew at an annual rate of 5.3% between January and March, its slowest pace in nine years. However the RBI said that a cut in interest rates would have put pressure on consumer prices.  “Our assessment of the current growth-inflation dynamic is that there are several factors responsible for the slowdown in activity, particularly in investment, with the role of interest rates being relatively small,” the central bank said in a statement.
There is a large cardboard box on the floor of a rudimentary clinic in southern Athens that carries its own shocking story about the crisis in Greece.  Its contents are unremarkable – it is full of basic first aid supplies – bandages, swabs and wipes. What is surprising is how it came to be there. Once intended for the world’s poorest in Africa, the box has been diverted to aid desperate Greeks.  Fair Planet, a small local aid agency, normally sends medical supplies to Burkina Faso and the Gaza Strip. But it decided to help the MKIE clinic when it heard through its Facebook page that it was short of vital medicines such as insulin, as well as antibiotics and powdered baby milk. “The situation in Greece was changing dramatically,” said Nafsika Theotoka, head of administration at Fair Planet. “We had to radically rethink how we distribute aid.”

Spain pleads for ECB rescue as bond markets slam shut. Europe’s leaders have vowed to mobilise all possible means to counter the region’s escalating crisis after Spain’s borrowing costs threatened to spiral out of control. Yields on 10-year Spanish bonds surged to a record high of almost 7.3pc as investors ignored the victory of pro-bailout parties in Greece’s elections. The closely-watched two-year yield rocketed by 65 basis points in a matter of hours, signalling a near-total collapse of confidence in Spain’s €100bn (£80.3bn) rescue from the EU last week to shore up its banking system. Cristobal Montoro, the economy minister, warned that Spain is now in a “critical” condition and pleaded with the European Central Bank to act with “full force” to defeat markets hostile to the euro project. Bank of America said Spain may need a second rescue to tide it through the next three years, pushing the total loan package towards €450bn – a sum that would test the EU bail-out machinery and cause serious knock-on effects for Italy. A draft communique from the summit of G20 leaders in Mexico said Europe will take “all necessary measures” to hold the eurozone together and break the “feedback loop” between sovereign states and banks.
The Federal Reserve could step in with a new round of Operation Twist this week to bolster the fragile American recovery as Europe’s woes continue to rattle the US economy, experts believe. Fed chairmanBen Bernanke and the Federal Open Markets Committee (FOMC) meet Tuesday and Wednesday this week, amid fresh developments in the eurozone crisis and signs that the US economy is picking up. Analysts predict that while the FOMC will stop short of a major intervention in the form of a third round of quantitative easing, they are more likely to take the smaller scale option of Operation Twist. This involves the Fed selling medium-term bonds, and using the proceeds to buy longer-term bonds such as 10-year treasuries. In theory, such a move drives down the interest rate on 10-year bonds, taking down interest rates across the board. Mortgages are tied to 10-year Tteasury rate and the move should bring down home loan rates.
China will strengthen monitoring of its agricultural products market during the summer flood season to stabilize prices and prevent an inflation rebound, the country’s top economic planning agency announced on Monday.  Local authorities should step up monitoring of supplies and price changes of agricultural products, especially those of staple vegetables, according to a statement posted on the National Development and Reform Commission’s website. Provinces that have been hit by severe storms and floods should begin monitoring vegetable prices and increase the frequency of price checks in a timely manner, it said.

Top 10 destination cities in Asia Pacific region is estimated to attract 77.6 million visitors via air travel in 2012, up 9.5 percent on year, while their cross- border spending will rise by 15.3 percent to 104.7 billion U.S. dollars, according to MasterCard Global Destinations Cities Index released on Tuesday. Bangkok, ranks third globally, tops the Asia Pacific region’s cities by visitor arrivals with 12.2 million inbound passengers and 19.3 billion U.S. dollars are expected to be spent in 2012. Singapore came in fourth globally in term of visitor arrivals, with 12.7 billion U.S. dollars in cross-border spending, an increase of 12.7 percent compared with last year.

The ratio of bad loans held by Spanish banks in April, standing at 8.72 percent, hit a record since April 1994, said Bank of Spain (BOE) on Monday. The figure means the total amount of non-performing loans in Spain rose to 152.74 billion euros (193 billion U.S. dollars). The ratio, up from 8.37 percent in March, was only slightly below the all-time high in February 1994, when the proportion reached 9.15 percent of the total. It was also in this week that the independent auditors appointed by the government of Mariano Rajoy are due to give the first results of their audit of Spain’s banks.

Ukraine’s industrial production grew 1 percent year-on-year in May following an expansion in the key sectors, a government report showed Monday. On a month-on-month basis, the industrial output was up 1.9 percent, said Ukraine’s state-run statistics committee in a report. In 2011 the country reported a 7.3 percent rise in its industrial production. And the Ukrainian government projects a 8.3 percent rise for 2012.

Bangladeshi cabinet Monday approved a proposal for signing a deal with its Southeastern neighbor Myanmar to resume direct flight service between Dhaka and Yangon. The approval came at the regular cabinet meeting with Prime Minister Sheikh Hasina in the chair. After the meeting, Bangladeshi Cabinet Secretary Mosharraf Hossain Bhuiyan told journalists that seven passenger and four cargo flights will shuttle between Dhaka and Yangon every week once the agreement is signed. He said Bangladesh will now dispatch the proposal to Myanmar for its approval to pave the way for signing the deal in resuming direct flight service which remained suspended for about five years. Earlier in January this year Myanmar and Bangladesh agreed on launching new bilateral air services in line with international air transport developments.

Bangladesh received nearly 1 billion U.S. dollars of foreign aid in the first 10 months of the current 2011-12 fiscal year ending this month, an official said Monday. Quoting the Bangladesh Bank data, the Economic Relations Division (ERD) official said, “net receipts of foreign aid during July-April of 2011-12 fiscal year (July 2011 – June 2012) stands at 980.17 million U.S. dollars, against 841.69 million U.S. dollars during the same period a year earlier.” The aid commitment for the month of April was much higher as it was 145.12 million U.S. dollars compared with 78.76 million U.S. dollars during the same period of last year, said the official who preferred to be unnamed.

More natural gas has been discovered along Tanzanian coast, bringing the findings of the deep sea exploration within the past three years to 20.97 trillion cubic feet, according to report reaching here on Monday. Sospteter Muhongo, the country’s Minister for Energy and Minerals, said over the weekend in Dodoma, the capital city of Tanzania, that the amount of gas stated included a gas well that was discovered on Wednesday code-named Lavani. The  discovery is made by Norwegian firm, Statoil and US’s Exxon Mobil, on block two located east of Lindi region, about 80 km off the coast.
U.S. homebuilder sentiment nudged upwards in June to its highest level in five years, the National Association of Home Builders said on Monday. The NAHB/Wells Fargo Housing Market index rose one point from the month before to 29, in another sign that the housing market may be slowly heading into recovery, and one point ahead of the expec tations of economists polled by Reuters. May’s reading was previously reported as 29. The index, however, was sill below 50, meaning more builders view market conditions as poor than favorable. It has not been above 50 since April 2006.  The single-family home sales component rose to 32 from 30 in May, its highest level since April 2007. The gauge of single-family sales expectations for the next six months held steady at 34 from May, and prospective buyer traffic also remained in place at 23.
India took the G20 to task today when the Prime Minister, Dr Manmohan Singh, told the Plenary that the G20 agenda “is getting over burdened. We need to refocus on a few goals rather than dissipating energies on too many fronts.” He also announced that India would contribute $10 billion to the IMF’s additional firewall of $430 billion meant for the Euro Zone. “The International Monetary Fund has a critical supportive role to play in stabilising the Euro Zone. All members must help the Fund to play this role,” he said.  Dr Singh strongly emphasised the need to provide liquidity to European banks without neglecting issues of solvency.

Expressing dismay over the Reserve Bank of India’s continued focus on containing inflation, India Inc., on Monday, feared the tight monetary policy could lead to stagnation and blow up into a major economic crisis that could threaten the livelihood of millions of people. Industry bodies were surprised at the RBI taking a unilateral stance rather than a co-ordinated action with the Union Government to steer the economy through unsettled global economic scenario.

India’s economic woes have not gone out of hand in the wake of the slip in the GDP growth the lowest in nearly nine years but there could be trouble if the eurozone crisis is not quickly contained and financial stability in Europe restored, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia said on Sunday. Ahead of the G20 Summit of developed and developing countries being attended by Prime Minister Manmohan Singh among other world leaders, Mr. Ahluwalia said India will be “lucky” if it can achieve around 7 per cent growth rate this fiscal. The country’s economic growth rate slipped to 5.3 per cent in the fourth quarter of 2011-12, lowest in nearly 9 years due to poor performance of the manufacturing and farm sectors.
Dismissing the current negative investor sentiment, Shankar Sharma of First Global told ET Now that the Sensex could rise 25 per cent over the next 6-12 months. Expressing disappointment over the RBI’s decision not to cut rates, he said RBI’s faulty monetary policy has impacted India’s growth momentum. Sharma said, “Rate cut is inevitable and RBI has to cut rate in the next meet and that too more aggressively.” On Monday, Reserve Bank of India kept the cash reserve ratio ( CRR) unchanged at 4.75 per cent. No cut in the repo rate was announced, maintaining it at 8 per cent.
South Korea’s economic growth is expected to slip to 3 percent in 2012, down from a 3.7 percent expansion last year, as global uncertainties hurt exports and domestic consumption, a private think tank said Tuesday. In its growth outlook, the LG Economic Research Institute (LGERI) said persistent eurozone woes and slower-than-expected growth in China will limit export growth to 1-2 percent this year. This is a sharp drop from 19.3 percent on-year growth reported for the whole of 2011. Such developments will exert direct impact on the economy since South Korea is heavily dependent on overseas markets to fuel growth.
South Africa’s current account deficit is likely to have swollen to 4.5% of GDP in the first quarter of this year from 3.6% the previous quarter, a Reuters poll showed. The 10 economists surveyed forecast that the deficit, due to be reported on Thursday, will have widened due mainly to reduced exports to Europe – South Africa’s largest trading partner – which is struggling on through a debt crisis. “We are looking for quite a significantly wider trade deficit on the quarter, largely on the back of a deteriorating trade balance,” said Jeffrey Schultz, macro strategist at Absa Capital.  Fourteen economists saw inflation in Africa’s biggest economy, due out on Wednesday, braking to 5.95% in May, just below the top of the Reserve Bank’s 3% – 6% target band, from 6.10% the previous month.
The first exploratory well of phases 22-24 of the South Pars gas field, south of Iran, was drilled by the Pars Oil and Gas Company (POGC), the Pana News Agency reported. Studies show that the drilled oil layer has the capacity to produce 20 million cubic feet of natural gas per day.  Some 12.5 million cubic meters of natural gas will be produced from the South Pars gas field phases 22-24 once the phases become operational by May 2013, the Shana News Agency quoted the phases 22-24 project manger as saying. Farhad Izadjou added that $5.144 billion will be invested to develop the three phases, which are aimed to produce 56.6 million cubic meters of sour gas, 75000 barrels of gas condensates, 400 tons of sulfur and 870 tons of LPG.