It is too early to talk about new rescue money for Greece

It is “premature” to talk about a new rescue package for Greece despite rumors in the media that the country may be forced to restructure its debts pile, the Top economic official of the European Union (EU) said Tuesday.

EU Economic and Monetary Affairs Commissioner Olli Rehn told reporters in Strasbourg, France that the EU would have to wait for a joint mission of EU and International Monetary Fund (IMF) auditors to wrap up their review of Athens’ finances before deciding on any further steps.

“The jury is still out,” Rehn said. “It is still too early to pass final judgment on these programs.”

EU and IMF auditors arrived Tuesday for a scheduled check of Greek finances to determine if Athens has met the conditions to receive the next bailout funds.

The EU and the IMF agreed on a 110B Euro (US$158B) bailout package for Greece in May last year, but 1 yr later, the country was whispered to need an additional rescue of 60B Euros (US$86B) over the next 2 yrs as Athens appeared incapable of bringing its finances back into balance.

The media is speculating now that Greece may be forced to restructure its debts and even abandon the Euro. Both possibilities were firmly denied by Greek and EU officials.

China’s farm produce prices fell in week ending May 8

The prices of China’s farm produce continued to fall in the week ending May 8, the Ministry of Commerce said Tuesday.

During the week of May 2 to 8, the average wholesale prices of 18 types of vegetables dropped 3.1% from the prior week, the ministry said in a statement on its website. The decline rate was 1.1 percentage points lower than that of the prior week, it said.

The price of onions and peppers slid by 11.6% and 8.8%, respectively, last week from a week earlier, while the price of celery and Chinese cabbage rose 15.8% and 11.4%, respectively, from the prior week, the statement said.

The price of mutton and beef dipped 0.9% and 0.2%, respectively, and the price of pork and chicken rose 0.1% from a week ago.

The retail price of eggs rebounded 0.3% last week from the week before, snapping a continuous fall since mid-February.

Food prices accounted for one third of the calculation of consumer price index, a main gauge of inflation, in China, which rose to a 32 month high of 5.4% in March, exceeding the government’s full-year target of 4%.

The index data is scheduled to be released Wednesday and is estimated to be above 5% but lower than the March number.

SPDR Gold Trust (ETF), NYSE:GLD, iShares Silver Trust (ETF), NYSE:SLV, United States Oil Fund LP (ETF) NYSE:USO

The Overall Fundamentals for the week ending May 6, 2011

Commodities rebounded after a huge sell off in European session Friday. Prices gained in the NY session on US payroll data that beat expectations.

The USD rose against Japanese Yen and particularly commodity currencies (AUD, NZD and CAD) on improved employment data.

It was impressive that Gold and other commodities rose against USD’s strength.

The Precious Metals rose along with the broad-based recovery in the commodity sector. Despite the recent weakness, Gold’s decline was limited Friday.

Unlike other commodities, the precious Yellow metal held above Thursday’s low. With that action I now believe the next objective is to regain 1500, the psych mark.

The central banks are buying Gold. Mexico’s central bank said that it is buying Gold to get ‘the best risk-return balance’ in investments’. Note that the recent performance in Gold indicates that such investments do provide ‘higher return without much risk’.

The reaction of Gold’s price today suggests to me that recent Long liquidation in the metal is losing momentum.

The fact is that I am not worried about the correction these days as reserve managers will probably use this as an opportunity to accumulate Gold.

Silver is a different story. Silver failed at below 49.8, the Key resistance, reversed and fell to close at 35.63. My initial bias is now to the downside this week for a move to the medium term trendline support, now at 31.4, or further to the 61.8% retracement of 14.65 to 49.82 at 28.085.

In the Crude Oil complex, the front-month contract for WTI Crude Oil fell to 94.63, the lowest mark in over than 3 months, before bouncing back above 100 and fading to 97.17, -2.62, the biggest weekly decline since Y 2008.

Brent Crude also fell with the Benchmark contract moving to as low as 105.15 before reversing. The contract settled at 110.80, – 1.67 on the day.

In the US, the number of non-farm payrolls rose 244K in April, following an upwardly revised 221K in the previous month. The market had anticipated a ease to +190K addition.

The data was encouraging, but the jobless rate climbed +0.2% to 9%, the 1st increase in 5 months. Stay tuned…

The Overall Technical Outlook

Comex Gold (GC)

Gold made a record high at 1577.4 last week and reversed after tapping the medium term channel resistance.

The initial bias now is mildly on the Southside for this week for 50% retracement of 1309.1 to 1577.4 at 1443.3.

On the Upside: a clear break above 1505.5, the minor resistance, will turn bias Neutral, and bring on a recovery. Nevertheless, any upside should be capped below 1577.4, and bring on another decline to extend the correction.

The Big Picture: a short term Top was made at 1577.4 after Gold tapped its medium term rising channel resistance. But, there is no indication of long term trend reversal in here. Yes, a deeper pull back could come on for a move back into 1309.1/1432.5, the Key support Zone. I anticipate Strong support from medium term channel low, now at 1390, to contain any downside, and bring on the up trend resumption through 1600, the psych level, after consolidations.

Note: any sustained trading below 1400 will raise the possibility of a trend reversal, and turn focus back to 1309.1,Key support for confirmation.

The Long Term Picture: rise from 681 is treated as resumption of the long term up trend from the Y1999 low of 253. 100% projection of 253 to 1033.9 from 681 at 1462 has been met, but there is no sign of a reversal yet. Sustained trading above 1462.6 may pave the way towards 161.8% projection at 1945.6 in the longer term.

Note: a clear break of 1309.1, Key support, will augur that a medium term Top has formed and a correction from 1577.4 would then likely move to the 55 month EMA now at 1033. Stay tuned…

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Inflation has peaked in Brazil

Inflation in Brazil has peaked and will start to fall in May, Finance Minister Guido Mantega said Friday.

The Country’s annual inflation rate rose to 6.51% in April 2011, higher than the ceiling allowed, according to figures of the Brazilian Institute of Geography and Statistics (IBGE).

Mantega attributed high inflation in April to higher Ethanol fuel prices, which are expected to fall in May due to the beginning of Sugarcane’s harvest season. In addition, commodity prices on the International market are also falling. “The worst inflation moment is behind us,” he said.

The Government’s target for this year’s inflation is below 4.5% with a tolerance of 2 percentage points, which means the inflation rate cannot exceed 6.5% by the end of this year. “The inflation rate will not exceed the limit,” said Mantega. Month-on-Month inflation rate would be between 0.45 and 0.5% in May, he said.

Security and Investment likely to dominate 3rd round of China-US Dialogue

As leading officials from the World’s 2 largest economies meet next week, “strategic security” and “investment” may become Key phrases dominating the 3rd round of the China-U.S. Strategic and Economic Dialogue to be held in Washington D.C.

Analysts say that the 2 topics will move up on the bi-lateral dialogue agenda against the backdrop that China and the United States are committed to working together to build a co-operative partnership based upon mutual respect and mutual benefit.

The 2-day meeting will be co-chaired by Chinese Vice Premier Wang Qishan, State Councilor Dai Bingguo, US Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner, with some 30 Top officials of over 20 government agencies from each side in attendance.

“The Strategic and Economic Dialogue works as a thermometer to measure the partnership,” said Zhu Feng, a professor from Peking University, adding that the more fruitful the talks are, the healthier the bi-lateral relationship is and the brighter prospect there will be for the ties.

According to Chinese Vice Foreign Minister Cui Tiankai, the two countries will launch their first “strategic security dialogue” under the framework of the China-U.S. Strategic and Economic Dialogue slated for Monday and Tuesday. Military officials, for the first time, will take part in the security talks.

The launch of the “strategic security dialogue” and inclusion of military officials into the talks is an innovation for the dialogue mechanism, observers say, indicating that China and the United States acknowledge they share some common ground and are ready to work together to address problems in terms of strategic security.

Ni Feng, a researcher with the Chinese Academy of Social Sciences, said that talks on strategic security help to build mutual trust in each other and minimize mis-readings and misunderstandings, while steering the bi-lateral ties in a stable direction.

“Besides bilateral concerns, the two countries can also hold dialogues on anti-terrorism, non-proliferation and regional stability, among others, to advance the China-U.S. partnership toward a higher phase,” Ni said.

Investment is expected to be another hot topic during the once-a-year Strategic and Economic Dialogue.

At a press briefing prior to next week’s dialogue, Chinese vice finance minister Zhu Guangyao said China would raise the issue of discrimination against Chinese investors in the United States.

“As the US government continues to request accessibility to Chinese markets for its firms, we now raise a similar request on behalf of Chinese firms,” Zhu said, adding that the mutual requests indicate that China and the United States have confidence in each other’s development.

“We have received many complaints from Chinese companies that have met discrimination as they try to invest in the United States, even though the US side has repeatedly stated that Chinese companies are welcome,” Zhu said.

Lin Shunjie, deputy secretary general of the China Chamber of International Commerce, echoed Zhu’s remarks, quoting the failure of Huawei to acquire the assets of 3-Leaf Systems, a small US company. Huawei, China’s largest telecommunications equipment manufacturer, withdrew from an agreement to buy the assets in February under pressure from a US panel over “security concerns.”

“Furthermore, US competitors tend to use legal and technical barriers, which they are adept at, to make trouble for Chinese enterprises that try to enter the US market,” he added.

“In comparison with the US environment for Chinese firms, China provides US enterprises with a much better environment,” he added.

China’s investment in the United States will help to create jobs, which is, of course, beneficial for the largest World economy that struggles with high unemployment rates, Ni said.

The investment will also bind China and the United States together more tightly and ensure more stable bi-lateral ties between the 2 countries, he added.

Commodities gain, snap 5-Day slide + Stocks and Euro rise

Commodities are rallying off the biggest weekly slide since Y 2008, and Asian stocks are gaining as concerns over the strength of the Global recovery eased.

The Euro is up on prospects the region’s debt crisis will not keep the European Central Bank from increasing Key interest rates.

The Standard & Poor’s GSCI Index of 24 raw materials rose 1.1% as of 3:05 p.m. in Tokyo after an 11% slump last week.

Crude Oil and Silver futures snapped a 5-days downer, and Lead added 2.1%.

The Euro rose 0.6% to 1.4395. Australia’s Dollar also appreciated. US Treasuries fell, snapping a 7-day winning streak.

The MSCI Asia Pacific Index increased 0.1%. Futures on the S& P 500 Index advanced 0.5%, and those on the Euro Stoxx 50 Index lost 0.6%.

Last week’s commodities rout knocked off US$99B of market value, driving out speculators and prompting Goldman Sachs Group Inc. to predict a possible recovery.

Data last week showed US payrolls increased by more than economists had forecast, and separate reports this week may show China’s inflation eased last month while industrial production and retail sales grew at about the same pace as the previous month.

Crude Oil for June delivery rose 1.7% to 98.79 bbl in New York, after losing 15% last week, the most since the period ended December 2008.

Crude Oil’s 14-day relative strength index (RSI), a measure of how rapidly prices are rising or falling, dropped to 29 after last week’s slump, the lowest in almost a year.

Readings of 30 and below are a sign that an asset’s price has fallen too fast and is poised to reverse course. Brent Crude Oil climbed 1.2% to 110.41 bbl, recovering from a 13% weekly slump.

Silver futures advanced as much as 2.9% to 36.31 oz before trading at 35.805. The metal fell 27% last week after CME Group Inc., the owner of the Comex exchange, increased the cost of making new speculative positions by 84% in 2 weeks. Prices advanced as much as 61% to 49.845 oz this year.

Lead for three-month delivery rose 2.1% to 2,327 a metric ton on the London Metal Exchange. Copper gained 0.9%, Nickel increased 1% , and Zinc rallied 1.1%.

Wheat for July delivery advanced 2.3% to 7.7675 a bushel, and Corn rose 1% to 6.9325 a bushel.

Australia’s F-B 2011-12 will create more jobs

Australian Treasurer Wayne Swan on Sunday said the 2011-12 Federal Budget, ready for release, will get more Australians into jobs and spread the opportunities in the mining boom.

Swan is due to release the budget Tuesday, and some economists are predicting that it will include a deficit of about US$56B, compared with the US$45.6B predicted last November.

Mr. Swan said the federal budget is too often treated like a “Magic Act”, judged on the number of surprises, clever one-liners and Rabbit-out-of-the-Hat” style tricks.

Instead, he said Tuesday’s budget is not a 1-night show, and it will show a return to surplus in 2012-13, getting more Australians into jobs and spreading the opportunity in the mining boom.

“It will get us back into the “Black” in 2012-13, that’s the responsible course of action, well ahead of just about any other developed economy in the world,” Swan said in his final Sunday economic note before handing down his fourth budget.

Mr. Swan has said the budget would be at least a US$7.1B hit to revenues in the short term caused by the Summer’s natural disasters, both at home and in Japan, as well as the hangover of the Global financial crisis. However, he said longer term there would be economic strength and strong job creation.

Mr. Swan said small business is to the forefront of the government’ s focus, because not everybody is going to be in the “Fast Lane” of the economy. He added that the budget would provide up to a US$5500.00 write-off on the purchase of a new vehicle by small businesses. “This would be a very important measure which will help small business in terms of their cash flow,” Swan said.

Mr. Swan said the budget will also focus on breaking welfare dependency and moving more people into the workforce.

ASEAN to provide financing access and sets standard for SMEs

Trade ministers of the Association of Southeast Asia Nations (ASEAN) agreed to provide access to financing and to set product standards for small and medium enterprises (SMEs), a minister said in Jakarta Sunday.

“Related to SMEs, we have agreed on several things. There are some recommendations that were submitted in symposiums a few days ago that we will focus on access to financing and standard,” Indonesia’s Trade Minister Mari Elka Pangestu told reporters in the side line of the 18th ASEAN Summit. She said that every Country has its own problem and policy for their SMEs.

“So, we have to make difference between national policy and regional policy to help the sector. In regional policy, what must we do? So, we agreed that we will help SMEs that are ready to export their products. We will find them export financing,” she said.

Besides, she said, trade ministers also agreed on how SMEs could take benefit of the ASEAN single market.

“We help them to understanding rules, regulations, standard and others. We will also provide them in building capacity and others, ” she said.