Greece Under Pressure

 

IMF approves EUR3.2B aid to Greece

The International Monetary Fund (IMF) Friday approved a EUR3.2B aid package to Greece to help the debt-hit Country from an impending default.

The Executive Board of the IMF completed the fourth review of Greece’s economic performance under a program supported by a 3 yr Stand-By Arrangement (SBA) for Greece.

The new disbursement has brought total support from the Fund to about EUR17.4B to Greece. The SBA, which was approved on May 9, 2010, is part of a joint financing package amounting to EUR110B over 3 yrs.

IMF Managing Director Christine Lagarde noted that Greece has made progress in its fiscal consolidation plan.

“The program is delivering important results: the fiscal deficit is being reduced, the economy is rebalancing, and competitiveness is gradually improving,” Lagarde said in a statement.

“However, with many important structural reforms still to be implemented, significant policy challenges remain. A durable fiscal adjustment is needed, lest the deficit get entrenched at an unsustainably high level, and productivity-enhancing reforms should be accelerated, lest growth fail to recover,” said Lagarde who took office on July 5.

She called for continued liquidity support from the European Central Bank and other stakeholders.

“Greece’s debt sustainability hinges critically on timely and vigorous implementation of the adjustment program, with no margin for slippage, and continued support from European partners and private sector involvement,” Lagarde added.

Inflation Spike in China

 

China’s CPI growth hits 3 yr high of 6.4% in June

Of the 6.4% CPI growth in June, 3.7 percentage points were contributed by the carryover effect of price increases last year, the NBS said in a statement on its website.

Food prices, which account for nearly 33% of the basket of goods in the nation’s CPI calculation, rose 14.4% in June from the same month last year, a pace faster than May’s 11.7%.

Growth in non-food prices also accelerated to 3 percent in June, up from 2.9% in May from a year earlier.

In terms of regions, the CPI rose 6.2% Y-Y in China’s urban areas and the growth in the rural areas was 7.0%, according to the NBS.

On a M-M basis, food prices added 0.9% from May, with the pork prices jumping 11.4% from May. M-M price declines were reported in vegetables and fruits. Non-food prices were flat in June as compared with May.

“We do not have to panic about the June CPI figure,” said Zhang Liqun, a macroeconomic analyst with the State Council Development Research Center, China’s top government think-tank.

“A CPI growth above 6% does not mean the inflation situation is worsening in China, because 3.7 percentage points of the increase were contributed by the carryover effect,” Zhang said.

He said the carryover effect peaked in June and new factors that push up prices have been under the government’s control.

Except for pork, the supplies of other food are improving and will help ease inflation pressure, Zhang added.

Thailand Election Result Questioned

 

Only one week after the election, complaints have been flooding in to the EC. Some complaints have been filed by candidates who lost in their constituencies. They have cried foul over poll fraud and asked that the poll results be annulled.

Prime minister-in-waiting Yingluck Shinawatra said on Saturday that her brother, former prime minister Thaksin, and members of the No.111 House group had not involved in her party.

She was responding the move by head of legal team of the Democrat Wirat Kalayasiri who had on Friday filed a petition with the Election Commission asking the agency to dissolve the Pheu Thai Party for allowing Thaksin and the persons banned from politics to get involved in policy drafting.

Ms Yingluck denied the charge, saying Pheu Thai have working teams to map out policies to settle pressing problems of the country.

Other candidates called into question the qualifications of rival candidates who are key members of the red shirt movement.

The complainants said any red shirts who had been charged with terrorism offences related to last year’s unrest should have been stripped of their right to run in the election.

Some complainants have asked the EC to dissolve certain parties, charging that politicians who were banned from politics were still actively involved in helping the parties to woo voters.

The EC is also dealing with complaints from citizens who said they lost their chance to vote because of technical problems.

Singapore Dollar Moves Higher Again

 

Developing economies in Asia will expand 8.4 percent in 2011, outpacing growth of 2.5 percent in the U.S. and 2.0 percent in the euro region, according to International Monetary Fund estimates released last month.

Shayne Heffernan upgraded the Singapore Dollar from a strong buy to a Must Own currency in June, 2011.

Singapore’s GDP will increase 5% to 7% in 2011, from an earlier forecast for 4% to 6% growth, the trade ministry said in a statement today.

The Singapore economy expanded 22.5% in the three months through March from the previous quarter, compared with a preliminary estimate of 23.5% in April.

The Singapore dollar hit new highs several times this year and is well on the way to reach parity by 2015, as more and more investors seek a safe haven from the ever falling USD many have turned to Asian investments giving most regional currencies a strong currencies a lift.

The Singapore Dollar will Reach Parity in 2015 according to Shayne Heffernan.

The Singapore dollar exchange rate with respect to the US dollar has mostly fluctuated between SGD$ 1.5 and SGD$ 1.8 per 1 US$ since 2003.

The Growth:

1.7422 (2003)

1.6902 (2004)

1.6644 (2005)

1.5889 (2006)

1.507 (2007)

1.4377 (2008)

1.279 (2010)

1.234 (May, 2011)

1.23 (June, 2011)

1.226 (July, 2011)

Singapore dollar began weakening in early 2009 due to a decline in regional prices and reduced demand for market assets, and its value floated around the SGD1.5/USD mark for the initial months of 2009.

However the path is clear, as Singapore develops the Singapore Dollar will see parity.

IMF Fear USA Default

 

IMF boss Lagarde told ABC’s “This Week” that she did not expect Washington to end up in default, despite tense negotiations between the White House and Republican leaders on measures to increase the US debt ceiling.

“I can’t imagine for a second that the United States would default,” she said.

“But, clearly, this issue of the debt ceiling has to be resolved, as, otherwise, there would a hike in interest rates. There would be you know a much heavier burden to be borne by, you know, all the US taxpayers at the end of the day.”

A default “would certainly jeopardize the stability, but not just the stability of the US economy, it would jeopardize the stability at large,” the first woman to head the International Monetary Fund told ABC News.

“And that’s clearly against the purpose and the mission of the International Monetary Fund. So we are — we are concerned.”

Without an agreement, she said she could see “interest hikes, stock markets taking a huge hit and real nasty consequences, not just for the United States, but for the entire global economy, because the US is such a big player and matters so much for other countries.”

She added that a default “would be a real shock, and it would be bad news for the US economy. So I would hope that there is enough bipartisan intelligence and understanding of the challenge that is ahead of the United States, but also of the rest of the world.”

Gold Shines as Uncertainty Rules

 

Gold marks the largest weekly gain in 19 months

The Gold price last Friday marked its largest weekly rise since November 2009, made after a weak US labor market report renewed fears about the health of the World’s biggest economy, fueling safe-haven buying.

US payrolls growth slowed to a trickle in June, as employers hired the fewest workers in 9 months, frustrating hopes that economic growth would pick up pace in 2-H of the year.

Instead, some analysts and investors, we here at LTN among them, began speculating in earnest about how soon the next US government stimulus plan might be put up in the United States, triggering more safe-haven purchases.

Players looked hard at the jobs data as encouraging the next level of stimulus and that it sent Gold futures North toward their next resistance level at 1,550.

Spot Gold rose to a 2 week high of 1,545.30, and held around 1,543 for the rest of the session Friday, up from 1,531.85 late in New York Thursday.

Spot Gold price remained near the highs into the close, gaining 3.8%, the most since early November 2009.

US Gold futures for August delivery extended their gains to a fresh 2 wk high at 1,546, and finished + 11.0 to 1,541.60, and added to those gains in after-hours trade.

The weak June US employment report dampened hopes that economic growth was picking up. Nonfarm payrolls rose by just 18,000, below economists’ expectations for a 90,000 rise. The unemployment rate rose to 9.2%, its highest in 6 months.

Adding to the weak tone of the report, the department said the economy created 44,000 fewer jobs in April and May than previously thought.

The USD fell against several currencies as the US jobs data strengthened expectations the US Federal Reserve would leave interest rates low into next year, prompting investors to embrace alternate safe-haven assets like Gold.

A weaker “Greenback” also often boosts USD-denominated assets, such as Gold, because of the advantage it provides buyers outside the United States.

Some analysts, including LTN’s Shayne Heffernan, said they thought the USD would likely trend lower in the week ahead in the aftermath of an abysmal US jobs report and without clear signs of progress on the approaching US debt ceiling deadline.

Both factors are likely to fuel further Gold buying. But, several other factors on this week’s calendar could keep a lid on gains or, depending on their results, push the precious Yellow metal through the upper end of its 2.5-month trading range, on its way to fresh all-time highs.

On the Inflation Front: China releases its producer and consumer price indexes Saturday, and the United States reports the same next Thursday and Friday, respectively.

Gold received a couple of boosts last week when the Bank of China and European Central Bank each raised Key interest rates to curtail any potential inflation.

On Wednesday, US Fed Chairman Ben Bernanke will testify before Congress in his semi-annual report. Investors will be listening carefully for any hints of a further stimulus plan, though he is unlikely to reveal anything specific at that time, I look for the announcement to come in August.

That said, spot Gold will likely remain in the range that has defined its path since early May, when it tapped a record high at 1,575.79 oz.

Among the other precious metals, Silver hit a 4-wk peak at 36.82 oz and remained around 36.71 Friday vs. 36.41 last Thursday.

Spot Platinum eased to 1,734 oz from 1,739.85 Thursday, and spot Palladium edged down to 775.50 oz vs 781.55 prior.

The Platinum-Palladium ratio: the number of ounces of Palladium needed to buy an ounce of Platinum, held at its lowest in more than 4 months at 2.23. Stay tuned…

Earnings Add to Confusion on Wall St

Laurence " Larry" Fink, chairman and chief executive officer of BlackRock Inc.

As Wall Street heads into earnings season again this week playing a typical game: Worrying about results a lot, and then rallying on pleasant surprises, thus following the old adage of climbing a Wall of Worry.

Some analysts I read have lowered earnings estimates recently, and nervousness about the US economic picture is everywhere, especially after last Friday’s poor June jobs report.

However, profit growth could still be strong in Q-2, and that could perhaps should boost stocks. The Standard & Poor’s 500 markets/index .SPX fell 0.4% in Q-2, but rallied over the last several days on hopes of economic improvement in the US..

Over the last month, analysts have revised downward their earnings estimates for S& P 500 companies, with the average change in earnings estimates a negative 6.4%, according to Thomson Reuters StarMine data.

And I think there is a lot of worry going into it, and companies are going to continue what they have done for the last few Q’s, and is report better-than-expected numbers, and guidance should be OK too.

S& P 500 components’ earnings are expected to have increased an average of 7.3% in Q-2 from last year, down from Q-1 growth of 18.9%, the Thomson Reuters data showed.

But the number could rise if most companies beat analysts’ forecasts. Remember that early estimates for Q-1 profit growth were at about 13%.

The general economic data is suggesting some softness in the overall economy both Globally and in the USA accounting for a more realistic expectations for companies.

What I see is that companies have kept costs in check and that should support stronger results, and giving a boost to stock prices.

The Noise about things underneath the Macro, Global, Political stuff continues to bubble, but we are going to see quality companies showing the surprises this Q vs last Q.

I believe that the industrials and utilities will surprise to the Northside, especially for companies involved in machinery, and roads and rails (aka infrastructure), and for electric utilities.

On the otherside, I see a high probability for earnings disappointments in health care, consumer staples and materials sectors.

This week, players will get a steady flow of economic indicators along with the earnings reports. Stay tuned…

AP Top Extended Financial Headlines At 7:36 p.m. EDT

Obama to keep pushing for $4 trillion debt deal even as leading Republicans say it's dead

As more are unable to pay homeowners' fees, associations pit neighbor against neighbor

IMF chief says failure to raise US borrowing limit would cause 'real nasty' economic fallout

Insurance groups say FEMA is confusing landowners along Missouri River about flood coverage

Difficult talks on banks' role in second Greek rescue may spoil eurozone summer

Minn. public employees idled by government shutdown hold on for now would rather be working

As News of the World dies, Murdoch flies to UK to deal with hacking scandal it left behind

Australia to hit nation's 500 worst polluters with tax companies to pay $25 per ton of carbon

Down on the US? Consider stocks that rise when things fall. Pawn shops, payday lenders are up

Double mortgage nightmare: Spanish defaulters lose home and stuck with debt as well

Click on the headline news

Obama presses leaders for debt deal in 10 days

By LAURIE KELLMAN
Associated Press

(AP:WASHINGTON) President Barack Obama said Sunday that " we need to" work out a debt deal within the next 10 days as he convened a meeting with congressional leaders, aiming to fashion a deficit reduction package for the next 10 years.

Obama and the eight top House and Senate leaders assembled in the White House Cabinet Room for about 90 minutes during a rare Sunday session, less than 24 hours after House Speaker John Boehner abandoned plans to negotiate a massive $4 trillion deal for reducing the debt.

As the meeting opened, Obama and the leaders sat around the table in Sunday casual dress. Asked whether the White House and Congress could " work it out in 10 days," Obama replied, " We need to."

Despite Boehner's preference for a smaller, $2 trillion plan for deficit reduction, White House aides said Sunday that Obama would press the lawmakers to accept the larger deal. Republicans object to its substantial tax increases and Democrats dislike its cuts to programs for seniors and the poor. The aides, however, left room for negotiations on a more modest approach.

" He's not someone to walk away from a tough fight," White House chief of staff William Daley said. " Everyone agrees that a number around $4 trillion is the number that will ... make a serious dent in our deficit." But embedded among the tough words was rhetoric that acknowledged the " big deal's" prospects had become uncertain at best.

" We're going to try to get the biggest deal possible," said Treasury Secretary Timothy Geithner.

It was an abrupt change from 24 hours earlier. Republicans late Saturday rejected the $4 trillion proposal, the largest of three under consideration, because its tax increases would doom it in the GOP-led House, Speaker John Boehner said.

The Ohio Republican informed Obama that a package of about $2 trillion, which bipartisan negotiators had identified but not agreed to, was more realistic.

Senate GOP leader Mitch McConnell of Kentucky left little doubt that the $4 trillion deal was dead.

" I think it is," McConnell said. Raising taxes amid 9.2 percent unemployment, he added, " is a terrible idea. It's a job killer."

The statements threw into question the extent to which the Sunday meeting, called for 6 p.m. EDT, would move the talks toward a resolution as an Aug. 2 deadline loomed. That's when the nation would begin to default on its debts, administration officials say, if no deal is reached to raise the borrowing limit from $14.3 trillion.

The International Monetary Fund's new chief, Christine Lagarde, said that if the U.S. fails to act, she foresees " interest hikes, stock markets taking a huge hit and real nasty consequences" for the American and global economies.

" I would hope that there is enough bipartisan intelligence and understanding of the challenge that is ahead of the United States, but also the rest of the world," she said.

Republicans have demanded that any plan to raise the debt limit be coupled with massive spending cuts to lighten the burden of government on the struggling economy. Higher taxes, Republicans have said from the start, are deal-killers if not offset elsewhere.

But Obama has a long way to go to satisfy lawmakers in his own party, too. Many Democrats are unnerved by the president's $4 trillion proposal because of its changes to Medicare and Medicaid.

Political pain is part of the deal and should be worth bearing, Daley said. Obama, he added, was calling on lawmakers to " step up and be leaders."

He cast Obama as uninterested, for now, in a more modest proposal which, like the $4 trillion deal, would extend the debt limit through 2012.

Geithner cautioned that a package about half the size of the one Obama prefers would be equally tough to negotiate because it, too, could require hundreds of billions in new tax revenue _ anathema to Republicans. Lawmakers said that previous bipartisan talks, led by Vice President Joe Biden, identified a fraction of cuts that would be needed even for the more modest packages.

Even so, Boehner insisted the smaller proposals had more realistic chances of passing. One would call for about $2 trillion in deficit reductions, most accomplished through spending cuts that have been identified but not signed off on by the Biden group.

" I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase," Boehner said.

The package of $2 trillion to $2.4 trillion in deficit reduction identified by the Biden-led negotiators would still require Republicans to accept some increase in tax revenue. Republicans walked out of those negotiations after they were unable to accept about $400 billion in new tax money that the White House proposed by closing loopholes, ending some corporate subsidies, and limiting the value of deductions for wealthy taxpayers.

One option now under consideration by Obama administration officials would call for capping some deductions for wealthy taxpayers at the 28 percent tax rate and using the revenue to help pay for a yearlong extension of a current payroll tax cut. The extension would expire at the end of 2012, but the cap on deductions would continue, generating new revenue in the long term. Capping all itemized deductions at the 28 percent rate would generate about $293 billion over 10 years.

Daley was on ABC's " This Week," as was Lagarde. McConnell appeared on " Fox News Sunday" and Geithner was interviewed on NBC's " Meet the Press" and CBS' " Face the Nation."

Win Streak Likely Over For Singapore Stocks

(RTTNews) - The Singapore stock market has finished higher now in back-to-back sessions, climbing more than 35 points or 1.1 percent along the way. The Straits Times Index finished just above the 3,150-point plateau, but now traders are bracing for renewed selling pressure at the opening of trade on Monday.

The global forecast for the Asian markets is broadly negative following much weaker than expected employment data from the United States. Losses figure to be broadly based at the open, although brokerages and technology stocks may be hit particularly hard. The European and U.S. markets finished firmly in the red, and the Asian bourses are expected to follow suit.

The STI finished modestly higher on Friday following gains from the plantations and property stocks.

For the day, the index added 25.41 points or 0.81 percent at 3,151.28 after trading between 3,136.06 and 3,154.31. Volume was 1.67 billion shares worth 1.45 billion Singapore dollars. There were 366 gainers and 141 decliners.

Among the gainers, Golden Agri-Resources added 3.7 percent, while Wilmar International climbed 1.3 percent, CapitaLand jumped 4.1 percent, CapitaMalls Asia collected 1.7 percent and City Developments rose 1.0 percent.

The lead from Wall Street suggests consolidation as stocks closed lower on Friday on the heels of much weaker than expected employment data, although the major averages ended the session well off their worst levels of the day. Optimism about the upcoming earnings season helped to lift stocks off their lows in afternoon trading.

Stocks plunged following the release of a Labor Department report showing much weaker than expected job growth in June. The report showed that U.S. employment edged up by just 18,000 jobs in June following a downwardly revised increase of 25,000 jobs in May. Economists had been expecting employment to increase by more than 100,000 jobs. Additionally, the unemployment rate unexpectedly ticked up to 9.2 percent in June from 9.1 percent in May, which was also up slightly from April.

In other economic news, the Commerce Department released a report showing that wholesale inventories rose by 1.8 percent in May, double the expectations of economists. On the other hand, wholesale sales edged down by 0.2 percent.

Among individual stocks, shares of Google (GOOG) came under pressure after Morgan Stanley lowered its rating on the internet search giant to equal weight from overweight. Google fell by 2.7 percent after ending the previous session at a nearly three-month closing high.

Meanwhile, WD-40 (WDFC) surged up by 6.6 percent after the consumer products maker reported weaker than expected third quarter results but provided full year guidance in line with analyst estimates. With the gain, shares of WD-40 set a record closing high.

The major averages continued to regain ground going into the close but still ended the day in the red. The Dow closed down by 62.29 points or 0.5 percent at 12,657.20, the NASDAQ fell 12.85 points or 0.5 percent to 2,859.81 and the S& P 500 dropped 9.42 points or 0.7 percent to 1,343.80. Despite the losses on the day, the major averages all moved higher for the holiday-shortened week. The tech-heavy NASDAQ surged up by 1.6 percent for the week, while the Dow and the S& P 500 rose by 0.6 percent and 0.3 percent, respectively.

Friday, July 8, 2011

Commodity to watch: Crude oil