New York Times: European Finance Ministers Approve New Loans for Greece April 1, 2014

By NIKI KITSANTONISAPRIL 1, 2014

ATHENS — Euro zone finance ministers, meeting in Athens under tight security on Tuesday, approved the release of 8.3 billion euros in rescue loans to Greece, pointing to signs that the country is emerging from its economic crisis.

“It has been an arduous process, but now we have a positive outcome,” Jeroen Dijsselbloem, the Dutch finance minister and head of the Eurogroup of finance ministers, said at a news conference in Athens announcing loans worth $11.5 billion.

In light of recent street demonstrations by Greeks protesting the belt-tightening measures that have been necessary to keep the bailout money flowing, security in Athens was stepped up for the event. The police banned demonstrations in much of the city center, and helicopters circled the site where foreign dignitaries were gathered.

The talks focused on the progress of Greece’s economic overhaul and the enduring problem of unemployment that plagues much of the euro zone. The agenda also included the continued efforts to form a more unified banking system in Europe, a possible package of financial assistance to Ukraine and the political context in France after the ruling Socialists’ big losses in local elections over the weekend.

As for Greece, Mr. Dijsselbloem said a seven-month review by the country’s international lenders — the troika consisting of the European Commission, the European Central Bank and the International Monetary Fund — “can now be closed” after the Greek Parliament’s approval of economic overhauls on Monday.

The provisions included contentious measures lifting barriers to competition and a new framework for the recapitalization of Greek banks. The troika’s review was the longest — and Greek officials said it was the toughest — since Athens signed its first loan agreement with the lenders in the spring of 2010.

Greek officials and representatives of the lenders said efforts to overhaul the economy had yielded the first indications of a return to growth in Greece after six of years of grinding recession that has hammered living standards and pushed unemployment to a record level of nearly 28 percent. Officials in Athens are eager to begin talks on lightening the huge debt burden, considering that Greece is on track to post a budget surplus this year before debt repayments. It forecasts that this primary surplus will come in at €2.4 billion for 2013.

Asia Markets live blog: More trade-deficit disorder for China?

Hong Kong markets seem to have lost their steam after China published disappointing trade data for March, sending the Hang Seng Index off its early gains. The index — which had gained 0.4% in the opening minutes — is now down 0.3%.

Mainland Chinese banks and other financial stocks retreated, with Agricultural Bank of China leading the sector’s retreat with a 2.9% drop. Similarly, China Merchants Bank has declined 2.6%, China Minsheng Banking Corp. is down 2.2%, Bank of Communications has pulled back 1.7%, and both ICBC and China Construction Bank are moving 1.6% lower.

Among the brokers and other financial-service providers, Guotai junan International is down 2.5%, China Galaxy Securities is off 1.6%, and China Everbright is weaker by 1.3%.

Likewise, several leading property developers are also suffering heavy losses, as China Resources Land slides 4.3%, Country Garden Holdings falls 4%, China Overseas Land & Investment skids 2.6%, and Poly Property Group gives up 2.3%.

But tech stocks appear to be keeping up their recent momentum, with Tencent Holdings advancing 1.9%, and online firm China Binary Sale Technology is rising 1.1%.

Over on the mainland exchanges, the Shanghai Composite Index is edging lower by 0.2%, dragged by property stocks.

Source: MarketWatch

New China Central Bank Chief Economist Pushes Liberalization Plan

        The Wall Street Journal reports, "the Chinese central bank's new chief economist is pushing a plan to liberalize the country's financial system within three years, according to economists briefed on the plan, as the country looks for reforms to sustain growth".

Ma Jun, until recently Deutsche Bank AG  's top China economist, presented a proposal for remaking China's monetary policy at a closed-door economic-policy session held by the People's Bank of China and the International Monetary Fund on March 27 in Beijing. Mr. Ma was still at Deutsche Bank then, but his talk was followed closely because he was expected shortly to join the PBOC as its first chief economist.

Mr. Ma said China should liberalize in steps, according to participants at the IMF-PBOC meeting. First it needs to establish a central bank-blessed interest rate that would set a benchmark for lenders. China's interbank rate—the rate that banks lend to one another—could serve that purpose.

During a first stage of reform, Mr. Ma said, according to participants, the PBOC should keep its intentions about the interbank market quiet and target a broader measure of money supply, known as M3. If the interbank lending system stabilized, China could shift fully to a monetary policy based on interest rates within three years, he said, according to those present.

In the end, the PBOC would set the interbank market rate, and banks would be free to charge what they like for deposits and loans.

The IMF has urged the PBOC to act carefully as it liberalizes interest rates and to put in place a bank deposit insurance system and improved regulation, among other measures. In other countries where banks have been freed from government fiat to set bank deposit rates according to competition, some have gone on lending sprees that have ended badly.

Chinese Exports Fall 6.6% in March

   The WSJ reports,"China's exports fell 6.6% in March from a year earlier, data from the General Administration of Customs showed Thursday.

This was an improvement from February's 18.1% decline but still well below the median forecast for 4.2% growth from 16 economists surveyed by Dow Jones.

Imports also fell 11.3% from a year earlier, compared with a 10.1% increase in February, missing the economists' median forecast of a 2.8% increase.

China posted a trade surplus of $7.71 billion in March after reporting a $22.99 billion deficit in February. The economists' median forecast was for a $1.75 billion surplus".

Fed dropped jobless target in secret meeting

Federal Reserve officials had a secret video conference call in early March to discuss overhauling its communication to the market and reached a general consensus that the 6.5% unemployment rate threshold for the first rate hike was outdated, the central bank said Wednesday. A summary of the video conference was included in the minutes of the Fed's March 18-19 meeting released by the Fed. On the conference call, the central bankers were clearly worried that changing the forward guidance would impact markets. They noted that, going into the video conference, the Fed and the markets were on the same page about the outlook for short-term interest rates. The minutes of the March 18-19 meeting also reveal that there was concern that the markets would read too much into the "dot plot" which showed an upward shift in the Fed's expectations for short-term rates. Officials also spelled out headwinds that would keep rates low even after the first rate hike. These headwinds included higher precautionary savings by consumers.

Source: Marketwatch

Chile: State copper producer expects funding to top last year's

State copper producer Codelco should receive more government funds this year than Chile allocated for the world's No. 1 red metal miner in 2013, the country's mining minister told Reuters on Tuesday.

The previous, conservative government handed Codelco $1 billion in 2013. That was followed by a second distribution of $1 billion, but Codelco said that tranche was essentially an accounting change that did not amount to comprehensive funding for the ambitious and costly overhaul of its tired mines.

Williams added that the new center-left government was serious about reaching solutions soon for financing the cash-strapped miner.

Copper was nationalized in 1971 under socialist Chilean president Salvador Allende. Codelco has since become a crucial motor of economic development in Chile, the world's No. 1 copper producer.

The company hands all its profit over to the state, which then decides on an annual basis how much to return to the miner. This erratic financing mechanism exposes Codelco to the whims of the government at a time when Chileans are clamoring for improved social spending. This year will be a crucial test of whether the government of Michelle Bachelet has the political capital and will to reform the system.

Codelco, which produces around 10 percent of the world's copper supply, plans to invest roughly $30 billion to counter dwindling ore grades in its massive Chilean deposits.

Source: Reuters

WSJ : Copper Titans Gather as Glut Overshadows Quakes in Chile

       The Wall Street Journal reports,"the world’s strongest earthquake in a year and hundreds of aftershocks rattled the copper-rich Atacama Desert last week, forcing almost a million people to seek refuge from tsunamis. The copper market barely reacted".

The metal is down 0.7 percent in Londonsince Anglo American Plc to Antofagasta Plc temporarily halted some operations after an 8.2-magnitude temblor struck on the evening of April 1. Investors’ indifference is explained by surging global output at a time of waning Chinese demand growth.

As tremors continue to shake northern mines, it will be the prospect of the biggest global glut since the so-called super-cycle began -- and how miners are reacting by shelving expansions and shoring up balance sheets -- that dominate discussion at the industry’s annual get-together in Santiago this week. Chile, the top producer, is opening three mines in a year, more than it has started in the past decade.

“Demand is not going to grow by the same margin, which is going to generate a significant surplus,” Alvaro Merino, head of research at Chilean mining society Sonami, said in an April 4 interview. “You are really going to see this increase in the second half of this year.”

New mines will help increase global production by 4.7 percent in 2014 and 7.3 percent next year, according to the Lisbon-based International Copper Study Group. That compares with an estimated 3.2 percent demand growth and 3.6 percent in 2015. 

CRU estimates a surplus this year of 140,000 tons, Vanessa Davidson, copper group manager at the London-based metals researcher, said in a March 24 interview. That’s almost four times bigger than previously estimated. The excess will widen to about 250,000 tons in 2015 before exceeding 400,000 tons a year later, Davidson said at the time.

Copper for delivery in three months declined 10 percent this year to $6,612.50 a ton on the London Metal Exchange. Prices reached the lowest level since 2010 last month amid concern about slumping demand in China and a release of metal held as finance collateral.

Copper’s price slump has led to companies shelving projects that might bring the shortages of the past decade back as early as 2017, according to Sonami.

About 40 percent of the $110 billion of projects under consideration in Chile are being revised or have been postponed, Sonami’s Merino said. Also, much of the investment needed is to replace declining output from aging mines. Mining companies spent $54 billion between 2004 and 2012 without raising output, according to Sonami.

Greece to Issue First Long-Term Bond Since Bailout

     The WSJ reports: ''Greek bonds are rallying fast while bankers seek investors for the country's first long-term debt since its international bailout four years ago.

The country will finalize a deal Thursday to sell at least €500 million ($689.9 million) of five-year bonds, according to one of the banks running the deal. People familiar with the matter said the sale could run to a total of €2.5 billion, and that yields will be around 5.25% to 5.5%. Greece has no outstanding five-year debt to use as a yardstick, but the country's outstanding 10-year bond yields sank by a quarter of a percentage point Wednesday to 5.85%''. 

THE GUARDIAN: Russia to meet EU and US for talks over Ukraine crisis

The Ukrainian authorities have said they will end the occupation of administrative buildings by pro-Russian separatists in the east of the country, either by negotiations or force, within 48 hours, as four-way talks between Russia, Ukraine, the US and EU were announced for next week in an attempt to defuse the tense situation.

"A resolution to this crisis will be found within the next 48 hours," said the interior minister, Arsen Avakov, in Kiev, referring to the eastern cities of Luhansk and Donetsk where protesters remained in control of government buildings.

"For those who want dialogue, we propose talks and a political solution. For the minority who want conflict they will get a forceful answer from the Ukrainian authorities," he said.

In Luhansk, the protesters did not appear in the mood to compromise, and on Wednesday were reinforcing the barricades around the security services building they have seized, and preparing petrol bombs.

In Donetsk, protesters remain in control of the local administration building, from where on Monday they proclaimed Donetsk an independent republic and said they would hold a referendum within a month on the region's status and whether it should appeal to join Russia.

In Kharkiv, protesters also seized the local administration building, but were removed by security forces, who arrested 70 people.

Kiev has claimed the protesters are directed by Russian security services, and on Tuesday, the US secretary of state, John Kerry, accused Moscow of stirring up unrest, possibly as a pretext for Crimea-style military intervention.

Many locals in eastern Ukraine have concerns about the new government in Kiev, but support for actually joining Russia, unlike in Crimea, is not widespead.

In Moscow, President Vladimir Putin is due to meet with his cabinet on Wednesday and discuss possible economic responses to Ukraine. The Russian gas monopoly, Gazprom, says Russia has not received any money for March gas deliveries and still has a $2.2bn (£1.3bn) debt outstanding from Ukraine. Kiev has said it will pay the debt but has protested at an 80% rise in gas prices announced last week.

Diplomats will hope that four-way talks next week could help to defuse the situation.