WSJ: Social-Networking Apps Report Service Outages in China

"A number of popular social-networking applications reported Thursday their services were impaired in mainland China, two days after a massive pro-democracy demonstration in neighboring Hong Kong.

Users of mobile messaging applications Line and KakaoTalk in mainland China have been unable to access many of the features on the popular services since Tuesday, in the first major service disruption in the country for the companies.

Yahoo Inc. 's Flickr was also inaccessible on Thursday.

Line Corp. and Kakao Corp. said they didn't know what caused several services available on their platforms to be unavailable to users in China. In an emailed statement, a Yahoo spokeswoman said: "We are aware of reports that Flickr is blocked for users in China and our team is investigating this now."

The timing of the outage, which began on the evening of July 1 during the pro-democracy march in Hong Kong, could indicate that the Chinese government took steps to limit usage. China's government often blocks foreign websites and smartphone services during sensitive times, like the recent 25th anniversary of the Tiananmen Square crackdown.

Sonia Im, a spokeswoman for Kakao Corp., based in Pangyo, South Korea, said that while some features of the messaging platform still worked in China, users there couldn't add new friends, use certain emoticons or check notices. Ms. Im said the company began receiving user complaints Tuesday evening, but that the stoppage affected the bulk of its Chinese users on Wednesday.

She said the company hoped to restore full functionality to its users as soon as possible, adding that she didn't know what caused the disruption in service. Kakao has about 140 million registered users, but doesn't break out its user base by country.

In China, users of Line could see that they had received a message, but couldn't access the message itself. Mobile-phone users also could download the KakaoTalk app, but couldn't register.

On local social media, censorship of references to the Hong Kong protests has been severe, even eclipsing blockages carried out during the anniversary of the Tiananmen Square crackdown, according to WeiboScope, a service provided by the University of Hong Kong that tracks censorship.

Since rising to power in 2012, Chinese President Xi Jinping has taken steps to tighten government control over the Internet. Under his leadership, the government has created a new high-profile committee to increase cybersecurity, has warned Internet celebrities with large numbers of followers about spreading rumors online, and has instituted a particularly strong antipornography campaign.

Messaging services such as WhatsApp,WeChat,and Viber were working as usual".

Gold slips after upbeat U.S. nonfarm payrolls lift dollar

 Gold slipped on Thursday as the dollar extended earlier gains after U.S. nonfarm payrolls rose more than expected in June, increasing bets that U.S. interest rates could rise earlier than expected.

Nonfarm payrolls increased by 288,000 jobs, while employment growth jumped in June and the unemployment rate declined to near a six-year low of 6.1 percent, the Labor Department said on Thursday. 

Economists polled by Reuters had forecast a gain of 212,000 jobs in June, marking a fifth month above 200,000.

"Looking at the U.S. unemployment situation ...it is interesting that we are well into the territory now that one would expect a normalisation of monetary policy (accompanied to) an interest rates rise," Mitsubishi Corp analyst Jonathan Butler said.

"The more hawkish members of the FOMC are probably going to use this as evidence that the U.S. can sustain higher interest rates," he added. "There is still downside risk there on gold but it is going to probably take the next FOMC meeting before that becomes clear."

A low interest rates environment has been crucial in sending gold prices higher in the years after the 2008 credit crisis, as investors looked to put their money in non-interest-bearing assets.

Spot gold dropped as much as 1.3 percent to a one-week low of $1,309.64 an ounce and was down 0.5 percent at $1,320.16 by 1413 GMT. The metal was 1.5 percent lower than a 3-month high of $1,332.10 hit earlier this week on geopolitical tensions in Iraq and Ukraine and was on course for its biggest daily loss since May 25.

U.S. gold futures for August delivery were down 0.7 percent at $1,321.30 an ounce.

The dollar hit a session high against the yen and the euro as the monthly European Central Bank news conference got under way.

ECB President Mario Draghi said the risks facing the euro zone economy meant interest rates will stay low for an extended period and detailed plans for a new, conditional tranche of ultra-cheap loans to banks that it hopes will lift the economy.

A stronger U.S. currency makes dollar-denominated assets like gold more expensive for foreign investors.

"Prices should come under pressure below $1,300 in the longer term, as the U.S. economy gets gradually better and investors find fewer reasons to put their money into safe assets like gold," Natixis analyst Bernard Dahdah said.

The technical picture also looked weak with Reuters technical analyst Wang Tao saying gold may retrace to $1,316 as it has failed to break a resistance at $1,334 twice.

Meanwhile, physical demand for gold has been lacklustre due to the recent rally in prices. In top buyer China, domestic prices were at a discount of $1-$2 an ounce to global prices, underscoring sluggish demand.

Palladium extended earlier gains to hit its highest level since February 2001 at $864.45 an ounce, as good U.S. data lifted prospects for stronger auto demand in the country. Palladium is mostly employed in gasoline autocatalysts, predominantly used in the United States and China.

Platinum was up 0.2 percent at $1,504.20 an ounce, still close to a 10-month high of $1,517.50 hit on Wednesday, while silver stood up 0.1 percent to $21.12 an ounce.

Source: Reuters

Nickel jumps to six-week peak, copper at 4-month high,Zinc at USS2239

 Nickel surged to a six-week peak on Thursday and copper prices touched their highest levels in more than four months on fund buying after strong U.S. jobs data boosted hopes that economic recovery would spur demand for industrial metals.

Aluminium climbed to the strongest level in more than 10 months and zinc hit its highest level in nearly three years before retreating.

Three month nickel was the strongest performer on the London Metal Exchange (LME), climbing 1.3 percent to close at $19,870 a tonne after touching a session peak of $19,990, the strongest since May 20.

Nickel has been the star performer on the LME this year, with gains of more than 40 percent after top producer Indonesia imposed a ban on exports of unprocessed ore.

Nickel raced to a high of $21,625 in May, but has since struggled to regain those levels as investors realised that no shortages had yet emerged due to high levels of stocks.

"Although the medium-term outlook for nickel is certainly very favourable, we are still waiting for tangible signs of scarcity, or at the very least diminishing stocks," analyst Grant Sporre at Deutsche Bank said in a note.

"We think the market is going to be prone to bouts of profit-taking with periods of short-term exuberance with prices moving well ahead of the fundamentals."

The price was also being supported ahead of next week's presidential election in Indonesia, where a new government is expected to reaffirm the ore export ban.


U.S. JOBS DATA LIFTS METALS

Most of the LME metals complex, including copper, saw fund buying in the wake of healthy economic data from the United States.

Employment growth jumped in June while the jobless rate closed in on a six-year low, showing the U.S. economy was rebounding after a slump at the start of the year.

That added to optimism spurred by data this week showing an upbeat outlook for global manufacturing, especially in China.

After the U.S. jobs data LME copper surged to a session high of $7,187.50 a tonne, the highest since Feb. 19, before paring gains to close at $7,175, up 0.7 percent.

"The growth story is well intact...and this is going to increase the demand in the longer term for copper and aluminium as more construction projects will get the green light," said Naeem Aslam, chief market analyst at Ava Trade.

Investors should be cautious, however, warned analyst Dominic Schnider of UBS Wealth Management in Singapore.

"People were saying, 'What is cheap in the world?' They figured out the metals were cheap and if things accelerated a little bit, why not take a position?" he said.

"We have been telling our clients to look for 5-10 percent gains and then pull the plug. You can't get greedy with more than double digits. It is not a trending market."

Benchmark zinc hit an intraday high of $2,270.25 a tonne, its highest level since Sept. 2011, before giving up gains and going in the red, ending down 0.4 percent at $2,239.

Zinc, used for galvanising steel, has risen about 9 percent so far this year, lifted by expectations that mine closures and declining ore grades would lead to shortages in the market.

Aluminium hit a high of $1,938.50 a tonne, the strongest since Aug. 19, 2013, before trimming gains to finish at $1,936, a rise of 0.67 percent.

Tin shed 0.5 percent to close at $22,900 a tonne and

lead also fell 0.5 percent to end at $2,196.

Source: Reuters

China gold imports may drop 400T hit by financing curbs

Chinese gold imports could fall by up to 400 tonnes this year as the government tightens controls on gold financing deals and domestic demand softens, a leading precious metals consultant said on Thursday.

Philip Klapwijk, director of the Hong Kong-based Precious Metals Insights, said the Chinese authorities are once again moving to rein in abuse of gold lending, after a crackdown on commodity financing last year.

He said weaker import volumes in recent months -- China's gold imports from Hong Kong dropped in May to the lowest level since January last year -- suggested the gold lending business was already being partly wound down. 

In the full year, imports could fall 300-400 tonnes, or as much as 22 percent, he said.

"(Gold imports) will probably decline for the full year given the impact of firstly, weaker real demand in China compared to its outstanding level in 2013 and secondly, measures to restrict the abuse of gold lending and other financial plays using the yellow metal," he said in an interview with the Reuters Global Gold Forum on Thursday.

"Total imports into China may have reached nearly 1,800 tonnes in 2013, taking into account unofficial and direct shipments," he said. "That figure will surely be several hundred tonnes lower in 2014.... It is another headwind for any rally in gold this year, and it also means the price floor may be a bit shakier."

Gold prices are up nearly 10 percent this year after falling in 2013 for the first time in more than a decade, but remain more than 30 percent below 2011's record highs.

A report from the World Gold Council earlier this year, based on research by Klapwijk, said gold imported into China was being used via gold loans and letters of credit to raise low-cost funds for business investment and speculation.

It estimated that up to 1,000 tonnes of gold, worth about $42 billion at current prices, could be tied up in these transactions.

"In short you have in China a very large 'surplus' of gold

-- cumulatively over 2,000 tonnes in the last 4 years -- that can mostly only be explained by either private sector financial use of gold or official purchases," Klapwijk told the Forum.

"It is impossible to be sure of the split between these two main semi-hidden sources of demand, but both would be large, in my view."

China's chief auditor said last week Chinese gold processing firms have since 2012 used falsified gold transactions to borrow 94.4 billion yuan ($15.2 billion) from banks.

While affirming that a drop in Chinese gold imports could prove a drag on price, Klapwijk played down the impact of a large-scale unwinding of Chinese gold financing deals on international prices.

He said however that it could reverse the flow of physical gold, which has moved from west to east in recent years as gold stored to back exchange-traded funds in London and New York was shipped east to meet Chinese demand after investors sold ETFs.

"Given that nearly all of these gold trades are hedged in the futures market, there should be no net effect on the price if they are unwound," he said.

"However, there could be an impact on the contango (discount for immediate delivery) and also on the physical premium or discount loco (located in) China or Hong Kong versus the rest of the world.

He said the premium could potentially fall significantly, adding: "If the discount grows sufficiently then there will be pressure to export material from China to Hong Kong and then back to Europe, reversing in fact some of the financially-driven flows seen between 2011-13."

Source: Reuters

India services growth hits 17-month high in June

Activity in India's services sector grew at its fastest pace in well over a year in June as new business poured in, adding to signs of a pick-up in the economy even as inflation remains high, a survey showed on Thursday.

The HSBC Services Purchasing Managers' Index , compiled by Markit, jumped to a 17-month high of 54.4 in June from 50.2 in May.

That was the biggest one-month rise in the index in four years. Before May, the services PMI had been stuck below 50, which divides growth from contraction, for almost a year.

The data supports growing optimism among Indian firms that the new government led by Prime Minister Narendra Modi will push through reforms after years of policy paralysis.

India's benchmark BSE Sensex equity index has been hitting record highs on hopes that those reforms will be psuhed through by the majority government, India's first in three decades.
"After months of subdued activity, the Modi wave has struck the service sector and lifted growth to a 17-month high," said Frederic Neumann, co-head of Asian Economic Research at HSBC.

"New business flows and stronger business sentiment supported the rise. As we move along, faster reforms due to political stability should fuel the momentum."

The new orders sub-index jumped to 54.3 in June, the highest since February last year.

The PMI data also showed input prices rose at the fastest pace in five months, but firms passed only a small portion of those costs to consumers.

"Be sure to expect bumps along the way, as tensions in the Middle East and the absence of monsoon clouds play spoil sport," Neumann added.

A similar business survey on Tuesday showed Indian manufacturing activity grew at its fastest pace in four months in June, while the output prices index rose to an eight-month high, suggesting inflation could accelerate further and compound the challenges facing the Reserve Bank of India.

The RBI has hiked rates three times since Raghuram Rajan took over as governor last September to tackle high inflation, even as economic growth slowed to decade-lows. 

Source: Reuters

China services sector booms in June, suggest economy steadying

Activity in China's services sector expanded at its fastest pace in 15 months in June, a private survey showed on Thursday, reinforcing signs that the broader economy is stabilising.

The services purchasing managers' index (PMI) compiled by HSBC/Markit rebounded to 53.1 in June from 50.7 in May, well above the 50-point level that demarcates expansion in activity from contraction.

"The expansion in the service sector reinforces the recovery seen in the manufacturing sector, and signalled a broad-based improvement over the month," said Qu Hongbin, chief economist for China at HSBC.

"We think the economy is slowly turning around, and expect the recovery to remain supported by accommodative policies on both the fiscal and monetary fronts over the coming months," he added.

In a sign that the domestic economy is regaining some internal strength, a sub-index measuring new business jumped to 53.8 in June, the strongest expansion since January 2013.

Government data on the services sector released earlier in the day also pointed to continued strong expansion, though the pace of growth dipped slightly to 55 for June from 55.5 in May.

The findings follow upbeat readings from similar factory activity surveys earlier in the week which offered signs that the world's second-largest economy is steadying as a flurry of government stimulus measures start to kick in.

Beijing has stepped up policy support in recent months to give a lift to economic growth, which dipped to a 18-month low in the first quarter.

Such measures include targeted reserve requirement cuts for some banks, quicker fiscal disbursements and hastening construction of railways and public housing projects.

"We should especially note the evident rebound in services businesses related to manufacturing activities," Cai Jin, a vice president at the China Federation of Logistics and Purchasing -- which compiles the official PMI -- said in a statement on the agency's official microblog Weibo account.

"New orders from commodity retailers showed a big rebound, indicating that the stabilising growth momentum in the factory sector is filtering into the services industry."

Thursday's HSBC/Markit survey showed firms in the services sector were generally optimistic about the 12-month business outlook. A sub-index gauging their sentiment picked up slightly in June from May's 11-month low, though the reading remained weak in the context of historical data.

Stronger orders and the improving business outlook prompted services firms to hire more workers last month, as indicated by the employment sub-index, which rose to a three-month high.

Official data also showed companies remained confident, despite a slowdown in new order growth.


The services sector, which accounted for 45 percent of China's gross domestic product in 2012 and roughly half of all jobs in the country, is expected to post steady growth in coming years as the economy matures.

However, some economists warn the economic recovery still appears patchy, with a cooling property market, sluggish exports and high local government debt levels remaining as key risks.

Source: Reuters

Dow Tops 17000 in Intraday Trading After Strong Jobs Report

The  WSJ reports "the Dow Jones Industrial Average rose above 17000 for the first time in intraday trading after a stronger-than-expected report on U.S. job creation in June helped reassure investors that economic growth can support stock benchmarks at all-time highs.

The Dow was up 51 points or 0.3% to 17029 shortly after the opening bell. The S&P 500 added six points, or 0.3%, to 1980 on Thursday, while the Nasdaq Composite Index climbed 16 points, or 0.4%, to 4474.

With the move above 17000, the Dow is up 2.4% for the year, and stands 13% higher than it did a year ago. The Dow's move above 17000 comes just 153 trading sessions since it first closed above 16000 on Nov. 21, 2013".

Thursday's rally was spurred by a report from the Bureau of Labor Statistics that showed U.S. employers added 288,000 jobs in June, well above the 215,000 expected by economists. The unemployment rate unexpectedly fell to 6.1% in June, from 6.3% a month earlier.

"It's a huge boost," said Jack Ablin, chief investment officer at BMO Private, which oversees $66 billion.

"Going into this number, I was still concerned: I knew the economy was growing but couldn't tell if we were making up lost ground from winter," he said. "This confirms that the economy is accelerating and I will say it vindicates the equity investors' view."

Evidence of a strengthening labor-market recovery hit bonds, rekindling worries about the Federal Reserve raising short-term interest rates earlier than many investors have been anticipating.

Yields on the benchmark 10-year Treasury note rose to 2.675% from near 2.630% before the jobs report.

The dollar gained against rival currencies following the jobs report, as investors saw a greater chance that the Fed may raise rates sooner than the widely expected timeframe of mid- to late 2015. Gold was 1% lower at $1,317.90 a troy ounce, and crude-oil futures were down 0.4% at $104.06 a barrel.

Still, some economists expect the Fed to wait for more evidence of a strong recovery before any acceleration of rate increases. "The Federal Reserve has to be happy to see the labor market continues to improve. But the lack of wage pressure means they are going to continue the current path of monetary policy," said Gary Pollack, who helps oversee $12 billion assets as head of fixed-income trading in New York at Deutsche Bank AG's private wealth management unit. "The turning point will come when wage inflation accelerates. Until then I don't think they will be in a hurry to raise rates."

Copper is unexpected victim of Indonesian export ban

 When Indonesia banned the export of unprocessed minerals in January of this year, the consensus view was that the most significant impact would be on the nickel and aluminium raw material markets in that order.

Copper barely warranted a mention.

Analysts at Macquarie Bank, for example, issued a research note on January 14, two days after the ban came into effect, examining the implications in a question-and-answer format. The only reference to copper came in the 19th bullet point under the telling heading: "Have copper producers been let entirely off the hook?"

Six months on, though, and one of the country's two giant copper mines is on care and maintenance and the other has cut production by half. There have been no concentrate exports since January.

Not only is this the single biggest hit to copper mine supply this year but it is acting to accelerate a fracturing of the copper concentrates pricing model.


CONTRACT CONFUSION

Both Freeport McMoRan , which owns and operates the Grasberg mine, and Newmont Mining , major stakeholder in and operator of the Batu Hijau mine, appear to have been blind-sided by the January rule changes.

After all, not only are both major employers and tax-payers in Indonesia, but both also thought themselves protected by what they believed to be legally-binding contracts of work (COW) covering their operations in the country.

In theory, such COWs set in stone the level of taxes and royalties payable over the contracts' life-time.

And anyway, copper concentrates are not unprocessed minerals. As Newmont has repeatedly pointed out, around 95 percent of the value chain is captured in this form of copper. Why would anyone build a new smelter in Indonesia just to get the last five percent?

Indonesian policy-makers, though, beg to differ. There will be a steep and escalating tax on exports of copper concentrates until 2017, when they will also be banned completely.

Those legally-binding COWs, it seems, will simply have to be changed to accommodate the new regulations.

After weeks of negotiations, Newmont this week announced it would seek international arbitration.

Freeport is still talking. But then it has an even bigger problem. Its COW expires in 2021, unlike Newmont's, which runs to 2030.

That places a major question-mark over the future of the Grasberg mine, not least because Freeport has to spend heavily on switching to underground mining when the open pit is exhausted in 2017.


SUPPLY HIT

In the interim, neither has been exporting since the start of the year, depriving the global market of a major source of raw materials.

Freeport has reduced the milling rate at Grasberg by around half to align mine output with the intake capacity of the country's sole existing copper smelter, which Freeport partly owns.

Newmont also has an off-take agreement with the Gresik smelter but not big enough to support continued operations at Batu Hijau. Rather, it will deliver 81,000 tonnes of concentrates from stocks over the remainder of this year. The mine itself was shuttered and placed on care and maintenance in June.

Batu Hijau was scheduled to produce 110,000-125,000 tonnes of contained copper this year, meaning it will lose around 10,000 tonnes for each month of closure.

Grasberg was originally expected to produce 1.1 billion lb

(just under 500,000 tonnes) of contained copper in 2014, guidance that was trimmed to 900 million pounds (just under 410,000 tonnes) at the time of Freeport's Q1 report.

Even that, though, assumed a resumption of exports in May, the company warning that any delay beyond then would mean "a deferral" of 50 million lb (22,700 tonnes) per month.

Right now, therefore, the absence of a deal on the resumption of exports is costing around 34,000 tonnes per month of lost, or "deferred" as Freeport would call it, copper production.

In times gone by this would have been a major bull driver in the copper market. But those were the days of chronic mine shortfall. Today, the supply picture looks very different as a wave of expansions and new mines comes on line to the point that just about every analyst out there thinks 2014 will be a year of substantial market surplus.

Albeit a little less substantial, given the combined hit from both Indonesian producers.


FRACTURED MARKET

But the real significance of the loss of export flows from Indonesia goes beyond just the affected tonnage.

Both Batu Hijau and Grasberg produce "clean" copper concentrates containing a lot of gold and very little bad stuff like arsenic.

This is an increasingly important differentiator in the copper raw materials markets because a lot of the new mines coming on stream produce "dirty" concentrates.

The prime example is the Toromocho mine in Peru, owned and operated by China's Chinalco <3668.HK>, which warned in June that not only was it downgrading its production guidance this year due to commissioning issues but that the arsenic content of some of the concentrates being produced exceeded five percent.

That's a critical threshold, since Chinese smelters can't treat such material on environmental grounds. In fact, they can't even legally import it.

This means it must be blended with cleaner concentrates, such as those from Grasberg and Batu Hijau.

The copper concentrates pricing model was already starting to fragment along these lines even before the Indonesian export halt.

The treatment charge on Toromocho material, for example, is quoted at close to $200 per tonne, compared with the $95.50 negotiated by BHP Billiton with Chinese smelters for second-half 2014 deliveries. And that's not factoring in the excess penalties smelters can charge for all the bad stuff in the concentrates.

That evolution of concentrates pricing into a two-tier model, one for "clean" and another for "dirty" concentrates, is only going to accelerate with the loss of a sizeable amount of

"clean" Indonesian material.


LOSSES TODAY, LOSSES TOMORROW

Some sort of deal between Freeport and the Indonesian government, allowing for the resumption of exports from Grasberg, does look on the cards. Newmont may find it tougher, judging by some pretty pointed comments from Indonesia's new chief economics minister about its decision to go for arbitration. [ID:nL4N0PD1NQ]

But the longer-term impact is unchanged, since Indonesian policy-makers show no signs of bending on the key provision that from January 2017 what is mined must also be refined in the country.

The inference is that Asian copper smelters are going to lose permanently two major sources of concentrates supply, and

"clean" supply at that, in a couple of years time.

By then, the current mine supply growth dynamic will have waned. Indeed, analysts are already pencilling in a return to copper deficit, a lagging effect of the current shareholder-led austerity in the natural resources sector.

The copper market appears to have been just as blind-sided by events in Indonesia as the two producers operating in the country.

But this is still a preview. The real impact will come in January 2017, when the total ban on copper concentrate exports kicks in.

Source: Reuters

Islamic State seizes Syrian oil field from rivals

Militants from the Islamic State group seized control of Syria's largest oil field al-Omar from rival rebel fighters on Thursday, strengthening its advance across the eastern Deir al-Zor province, a monitoring group said.

"They took leadership about two hours ago," said Rami Abdelrahman, head of the Syrian Observatory for Human Rights. Nusra Front, Syria's al Qaeda wing, had previously been in control of the field.

Syria is not a significant oil producer and has not exported any oil since late 2011, when international sanctions took effect to raise pressure on President Bashar al-Assad. Before sanctions, Syria exported 370,000 barrels per day, mainly to Europe.
Source: Reuters

Brent falls below $111, Libya says oil crisis is over

 Brent crude futures fell below $111 a barrel on Thursday as supply fears began to ease after Libya declared an end to an oil crisis that has slashed exports from the OPEC member.

Libya's government said it had reached a deal with a rebel leader controlling oil ports involving the handover of the last two terminals, potentially making an extra 500,000 barrels per day (bpd) of crude available for export. 

"The market has been waiting for this. The question now is how long it will take for flows to come out," said Ole Hansen, senior commodity strategist at Saxo Bank.

"The market has been disappointed before so after the initial sell-off yesterday it is a case of wait and see."

Brent fell to a three-week low as traders took profits, dropping 51 cents to $110.73 a barrel by 1242 GMT. The selling pushed the front of the Brent futures curve into a contango of 2 cents. 

U.S. oil fell by 44 cents to $104.04 a barrel, also hitting a three-week trough.

The crisis in Iraq is still providing a floor for prices, however, with industry officials and analysts saying the world's spare production capacity would struggle to cover for another big oil outage.

Iraqi Prime Minister Nuri al-Maliki is hoping parliament will form a new government in its next session after the first collapsed in discord. Baghdad can ill afford a long delay as large swathes of the north and west have fallen under the control of an al Qaeda splinter group. 

Saudi Arabia has deployed 30,000 soldiers to its border after Iraqi soldiers abandoned the area, Saudi-owned al-Arabiya television said, but Baghdad denied this and said the frontier remained under its full control. 

Source: Reuters

U.S. Department of Labor. Bureau of Labor Statistics Press Release

THE EMPLOYMENT SITUATION -- JUNE 2014


Total nonfarm payroll employment increased by 288,000 in June, and the unemployment 
rate declined to 6.1 percent, the U.S. Bureau of Labor Statistics reported today. 
Job gains were widespread, led by employment growth in professional and business
services, retail trade, food services and drinking places, and health care.

Household Survey Data

In June, the unemployment rate declined by 0.2 percentage point to 6.1 percent.  The 
number of unemployed persons decreased by 325,000 to 9.5 million. Over the year, the 
unemployment rate and the number of unemployed persons have declined by 1.4 percentage 
points and 2.3 million, respectively. (See table A-1.)

Among the major worker groups, the unemployment rates for adult women (5.3 percent) 
and blacks (10.7 percent) declined in June, and the rate increased for teenagers 
(21.0 percent). The rates for adult men (5.7 percent), whites (5.3 percent), and 
Hispanics (7.8 percent) showed little change. The jobless rate for Asians was 5.1 
percent (not seasonally adjusted), little changed from a year earlier. (See tables 
A-1, A-2, and A-3.)

The number of long-term unemployed (those jobless for 27 weeks or more) declined by 
293,000 in June to 3.1 million; these individuals accounted for 32.8 percent of the 
unemployed. Over the past 12 months, the number of long-term unemployed has decreased 
by 1.2 million. (See table A-12.)

In June, the civilian labor force participation rate was 62.8 percent for the third 
consecutive month. The employment-population ratio, at 59.0 percent, showed little 
change over the month but is up by 0.3 percentage point over the year. 

Part-Time workers

The number of persons employed part time for economic reasons (sometimes referred 
to as involuntary part-time workers) increased by 275,000 in June to 7.5 million. 
The number of involuntary part-time workers is down over the year but has showno 
clear trend in recent months. These individuals were working part time because their 
hours had been cut back or because they were unable to find a full-time job. 

In June, 2.0 million persons were marginally attached to the labor force, down by 
554,000 from a year earlier. (The data are not seasonally adjusted.) These individuals 
were not in the labor force, wanted and were available for work, and had looked for 
a job sometime in the prior 12 months. They were not counted as unemployed because 
they had not searched for work in the 4 weeks preceding the survey. 

Among the marginally attached, there were 676,000 discouraged workers in June, a 
decrease of 351,000 from a year earlier. (The data are not seasonally adjusted.) 
Discouraged workers are persons not currently looking for work because they believe 
no jobs are available for them. The remaining 1.4 million persons marginally attached 
to the labor force in June had not searched for work for reasons such as school 
attendance or family responsibilities. 

U.S. Nonfarm payrolls increased 288,000 jobs in June.

U.S. employment growth jumped in June and the unemployment rate declined to near a six-year low of 6.1 percent, effectively dispelling fears about the economy's health and underscoring its momentum heading into the second half of 2014.

Nonfarm payrolls increased by 288,000 jobs, the Labor Department said on Thursday. Data for April and May were revised to show a total of 29,000 more jobs created than previously reported.

Economists polled by Reuters had forecast a gain of 212,000 jobs in June. It was the first time since the technology boom in the late 1990s that employment has grown above a 200,000-jobs pace for five straight months.

The closely watched employment report added to robust auto sales in June and data showing a steady manufacturing expansion in suggesting a plunge in economic output in the first quarter was a weather-driven anomaly.

Gross domestic product contracted at a 2.9 percent annual rate in the January-March period, causing a sharp downgrading of growth estimates for this year. Growth in the second half of the year is forecast around a 3.5 percent pace.

The sturdy pace of job gains was flagged by reports on Wednesday showing companies hired the most workers in 1-1/2 years in June, with small business hiring increasing for a ninth straight month.

With new applications for jobless aid holding at lower levels and the share of businesses that cannot fill open positions rising, there is little doubt the labor market is tightening.

The 0.2 percentage point drop in the unemployment rate in June to its lowest level since September 2008 came even as the labor force swelled. The unemployment rate has declined from a peak of 10 percent in October 2009, driven by job gains and a shrinking labor force.

The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, was steady at 62.8 percent.

The improving tone of the labor market will be welcomed by the Federal Reserve and could spur debate on the timing of the first interest rate increase by the U.S. central bank.

Fed Chair Janet Yellen has argued that there is still considerable slack in the labor force, citing the low labor force participation, which she says partly reflects the departure of discouraged job seekers who could be enticed back into the workforce if conditions were to tighten

Most economists do not expect the U.S. central bank to raise rates until the middle of next year at the earliest, but with the labor market tightening that could change.

The Fed has kept benchmark overnight lending rates near zero since December 2008.

Job gains in June were across all sectors.

Manufacturing payrolls increased by 16,000, rising for the 11th straight month. Construction jobs advanced for the sixth consecutive month of gains.

Services industries employment jumped by 236,000, the biggest increase since October 2012, while government employment increased 26,000. The length of the workweek was steady at 34.5 hours. Average hourly earnings rose by six cents.

Source: Reuters

Zinc rallies, but is it another false dawn?: Home

 Zinc’s on a roll again.

On the London Metal Exchange (LME) three-month zinc has this week hit a 16-month high of $2,222 per tonne, eclipsing a first-quarter rally which stalled just shy of the $2,150 mark.

The galvanising metal has moved for the first time in two years to a premium to sister metal lead , although this may be as much to do with the heavy metal’s lethargy as anything else. Lead has done little more than shuffle sideways this year amid falling open interest and stagnant volumes.

Zinc, of course, has a compelling fundamental narrative of dwindling mine supply as some of the world’s largest operations come to the end of their natural life.

It is a story-line apparently echoed by the steady attrition of LME-registered stocks and monthly deficit headlines generated by the statistical updates from the International Lead and Zinc Study Group (ILZSG).

Yet both remain highly problematic market indicators, which is maybe why so few players are buying into the latest move.


HALF-HEARTED

One of the curiosities of the latest zinc price surge is the fact that it has happened without any discernible change in market open interest .

It was a very different story back at the end of last year and beginning of this, when zinc went on its previous upside excursion.

Open interest surged from under 400,000 lots in August 2013 to 486,000 lots in early January, coinciding with a price break up through the $2,100 level as speculative money flowed into the LME market to ride the bull story of mine supply shortfall.

By March both price and open interest had deflated in tandem as investors took profits and moved on to the next hot metals story offered by nickel after the Indonesian government’s ban on the export of nickel ore.


Right now open interest is still just over 400,000 lots and although there have been some minor flurries of activity, the market positioning landscape looks relatively featureless.

“The rally appears to be a bit half-hearted in nature,” concludes Leon Westgate, analyst at Standard Bank London, writing in the bank’s quarterly commodities review on June 27.

Drawing attention also to “pretty disappointing” volumes, Westgate suggests that “what does appear to have changed is that zinc is being traded on its own, or alongside lead, rather than against it as a relative value pair”.


LME STOCKS DOWN…OR ARE THEY?

Maybe the fact that zinc has been able to rally without any obvious speculative push is a positive sign that this market’s underlying deficit fundamentals are starting to assert themselves?

The only problem is that there is still scant evidence that there is any shortage of metal around.

LME stocks at 667,950 tonnes are still historically high and although they have fallen by over 260,000 tonnes this year, this may have very little to do with underlying market dynamics.

The biggest draws from the LME system this year have taken place at New Orleans, Detroit, Vlissingen and Antwerp, four warehouse locations characterised by load-out queues.

This means there is something of the rear-view window about current stock movements.

Take, for example, Detroit, where zinc has been leaving daily since late April, but where the last sizeable cancellations occurred all the way back in November. It’s taken that long for the zinc to get to the front of the aluminium load-out queue.

The picture is even hazier when it comes to New Orleans, where most of the LME zinc tonnage is concentrated and where most of what is there is being stored by Pacorini, the warehousing arm of Glencore.

A whopping 265,000 tonnes have been loaded out at New Orleans since the start of January but has the zinc actually gone anywhere other than across a white line into off-market storage? It’s a suspicion that is only reinforced by the occasional mass movement of metal in the opposite direction, such as the 147,000 tonnes that “turned up” at the port in March.

LME stocks can be a problematic indicator of market balance at the best of times. In the recent history of zinc, they have been near useless, given the prominence of New Orleans, an LME location far removed from any zinc consumption hub.


CHINESE STOCKS UP?

But what of those monthly updates from the ILZSG? Surely, they are a “true” indicator that this market is shifting from years of structural oversupply to shortfall?

The latest Group bulletin, covering the first four months of this year, assesses the global market as being in supply deficit to the tune of 107,000 tonnes.

But here the problem is also one of stocks.

Delving behind the ILZSG headlines reveals two very different dynamics at work. It is China that accounts for the global deficit calculation, while the rest of the world was in comfortable 145,000-tonne surplus over the January-April period.

And in China, as any copper trader can tell you, things get a bit statistically tricky. ILZSG, for example, uses an apparent consumption calculation, comprising production plus net imports plus/minus changes in visible stocks. On that basis “apparent” demand rose 12.4 percent in the first part of this year.

But, as sister organisation the International Copper Study Group has found out, builds in unreported stocks can seriously distort the mathematics. And particularly problematic are builds in bonded warehouse stocks, metal that has been counted as an

“import” by China’s customs department but which has made it only as far as the port bonded zone.

China has been a net importer of commodity-grade zinc for a long time, not necessarily to fill domestic market shortfall but to meet financial demand for collateral to be used in the country’s shadow lending market, a trade that has recently come under the spotlight in the wake of the Qingdao scandal.

Most metal collateral financing is in the form of copper, but zinc has garnered its fair share of the business.

Analysts at Macquarie Bank, for example, estimate that bonded warehouse stocks of zinc have grown from around 50,000 tonnes at the end of last year to over 240,000 tonnes at the end of May (“Zinc: strong rally ahead of the curve”, June 30).

That would account for a major part of the 311,000 tonnes of imports so far this year, serving to reduce ILZSG’s apparent demand indicator and its Chinese market deficit calculation.


A SLOW GRIND

All of which suggests there is a lot of surplus zinc still sloshing around the system, both in China and everywhere else.

That’s not to gainsay zinc’s background story of tightening mine supply but it’s to warn that this is going to be a long process, a slow grind rather than an explosion.

Even bullish analysts such as Stephen Briggs at BNP Paribas, argue that structural deficit won’t happen overnight. The first evidence might come as early as this year but the real impact will be felt next year and in 2016 (“Supply favours zinc over copper”, June 25, 2014).

Zinc’s bull story is a slow burner. Funds lost patience with it in the first quarter and there’s no sign they’ve changed their collective mind.

The recent price strength looks like another false dawn. There will be plenty more before this market enjoys its day in the sun.

Source: Reuters

Brent slips below $111 as Libyan PM declares oil crisis over

Brent futures dipped below $111 a barrel on Thursday as supply fears eased after Libya declared an end to an oil crisis that has cut exports from the OPEC member to a trickle, although declines will be capped by concerns over Iraq.

Libya's acting Prime Minister Prime Minister Abdullah al-Thinni said the government had reached a deal with a rebel leader controlling oil ports to hand over the last two terminals and end a blockade, making around 500,000 more barrels a day of crude available for export.

Brent crude extended the previous session's losses to fall to a three-week low, dropping 32 cents to $110.92 a barrel by 0230 GMT. U.S. oil declined 44 cents to $104.04, also sliding to a three-week low.

"Even if Libyan production comes back, it will still be only 40-50 percent of the country's full pre-crisis exports. That's a small number," said Tetsu Emori, commodity fund manager at Japan's Astmax Investment. "People are still looking at Iraq."

Oil investors are on edge over how the crisis in Iraq can be brought under control, Emori said. With limited global spare production to fill up any major disruption in shipments from OPEC's second-largest producer, prices will head higher later this month, he said.
Iraqi Prime Minister Nuri al-Maliki, who is fighting for his political life as a Sunni insurgency fractures the country, said he hoped parliament could form a new government in its next session after the first collapsed in discord. Baghdad can ill afford a long delay as large swathes of the north and west fall under the control of an al Qaeda splinter group. 

Prices are also being supported by an improving demand outlook in the United States and China, the world's top two oil consumers.

U.S. crude stocks fell more than expected last week as refineries hiked output ahead of the holiday July Fourth weekend, data from the Energy Information Administration showed on Wednesday.

Crude stocks fell 3.2 million barrels compared with expectations for a decrease of 2.2 million barrels. Gasoline stocks fell 1.2 million barrels versus forecast of a 400,000-barrel gain, it said.

Broader financial markets also gained on hopes of an improved economic outlook. Asian stocks hovered at a three-year high and the dollar rose early as a series of strong economic numbers point to momentum building in the economy.

WSJ: Argentine Consensus Emerges: Pay Off Debt

       The WSJ reports, "as Argentina struggles with a poor economy and the risk of default, a consensus has emerged among Argentines, business groups and ruling-party lawmakers that the government should settle a $1.5 billion debt with holdout bondholders—and do so soon.

President Cristina Kirchner's administration, which begins negotiating with a small group of hedge funds on Monday in New York, has until the end of July to reach a deal or default on its debt for the second time in 13 years.

That prospect, harrowing for a country with an economy in recession with one of the world's highest inflation rates, is prompting both Mrs. Kirchner's allies and foes to urge her to abide by a U.S. court order. The U.S. Supreme Court last month declined to review an earlier district court ruling. The ruling said Argentina must pay the hedge funds that sued to collect on defaulted bonds at the same time it pays investors who own bonds issued after the country's 2001 default".

"The solution is to reach an agreement, and an agreement obviously means paying," Daniel Scioli, governor of Buenos Aires province and a leading figure in Mrs. Kirchner's Peronist movement, said in a recent televised interview.

For years, Mrs. Kirchner vowed never to pay the investors she calls "vulture funds"—investment funds led by Elliott Management Corp. and Aurelius Capital Management LP, which snapped up defaulted bonds on the cheap in hopes of getting paid full face value.

Argentina's legal setback in the U.S. coincides with growing economic and political troubles here, most recently after Mrs. Kirchner's vice president, Amado Boudou, was indicted on bribery and influence-peddling charges. Her approval rating has sunk to 26%, the Management & Fit polling firm reported recently, and two-thirds of Argentines expect the economy to worsen over the next six months.

Settling the case would give Mrs. Kirchner's cash-strapped country, which has seen reserves fall to $29 billion from $53 billion in January 2011, access to financial markets for the first time since 2001.

Mrs. Kirchner has said recently that her government wants to pay off its debts, but her aides have said that settling with the hedge funds could trigger claims that would cost billions more.

"For me it would be very easy to promise anyone the moon," the president said in a recent speech. "But don't count on me to just do anything, but rather to do what I should do in meeting with my commitments—never to raffle off the fatherland."

"If the government doesn't reach a deal with holdouts, its legacy falls apart," said Nicolas Solari, a political analyst. "The government took over during a profound debt and default crisis a decade ago and always bragged about solving those problems. Now it would risk leaving power in the middle of another default and economic crisis."

Those who favor a settlement say Argentina has no other option.

"One way or another, we have to normalize this situation," said Eduardo Buzzi, head of the Argentine Agrarian Federation, a leading farm group representing small-scale farms nationwide. "It puts the economy at risk. If the country defaults, it will raise financing costs and raise uncertainty about the exchange rate."

And it isn't just companies that believe it's time for the government to swallow its pride. The polling firm, Poliarquia, recently released a poll showing that 80% of respondents are worried about a possible default and 65% say Argentina should simply pay up.

Many here believe that there are ample signs that Argentina is prepared to enter into negotiations, despite contradictory and nationalist rhetoric from high government officials.

On Monday, Argentina is sending a delegation to New York to meet with Daniel Pollack, an attorney appointed by Judge Thomas Griesa, who made the initial ruling, to oversee negotiations between the two sides. The talks begin a week after Argentina missed a deadline to pay both the holdouts and the other bondholders, setting the clock ticking on a 30-day grace period that Argentina has to settle. A settlement would be in line with Argentina's recent efforts to end other long-standing creditor disputes. In November, Argentina agreed to pay about $5 billion in bonds to Spain's Repsol for seizing its controlling stake in the oil company YPF.  Mrs. Kirchner's administration then agreed in May to settle a long-running dispute with the Paris Club group of creditor nations by paying $9.7 billion.

Lawyers representing the country in its dispute with hedge funds described those settlements as "breakthroughs" that reflect Argentina's desire to normalize ties with creditors.

"Argentina wants to emerge from the litigation that has burdened both it and the courts," the lawyers said in a recent letter.

A clear winner if Argentina settles is state-controlled oil firm YPF, which is seeking to develop huge oil and gas reserves in a desolate swath of the country's south. A default would raise YPF's financial costs just as its president, Miguel Galuccio, has been aggressively trying to court foreign investors.

But a deal in New York would cut borrowing costs by several percentage points, company officials say. A month ago, YPF sold 10-year bonds at an interest rate of 8.5%.

GLOBAL MARKETS-Asian stocks hover at 3-yr high, U.S. jobs data enthrall

 Asian stocks hovered at a three-year high and the dollar rose early on Thursday after robust jobs data fuelled hopes that the U.S. nonfarm payrolls report would point to momentum building in the economy.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> stood little changed at 499.88, within a short distance of a three-year peak of 500.26 reached the previous day.

Tokyo's Nikkei <.N225> gained 0.4 percent, buoyed by the weaker yen.

Asian equities received an early lift after the Dow <.DJI> and the S&P 500 <.SPX> closed overnight at record highs for a second straight day following data from payrolls processor ADP showing U.S. private-sector hiring hit a 1-1/2-year high in June. 
The upbeat ADP report heightened expectations that the all-important June U.S. nonfarm payrolls due at 1230 GMT would show the American economy gathering momentum after a dismal start to the year.

"The market is expecting to see another print north of 200,000 and no doubt sentiment will be riding high following this ADP reading," Stan Shamu, market strategist at IG in Melbourne, wrote in a note to clients.

A Reuters poll forecast non-farm payroll gains of 212,000.

The data will be released on Thursday because U.S. markets close for Independence Day on Friday, the day the report is usually released.

Investors are keeping an eye on the European Central Bank meeting later on Thursday. Market participants do not expect the ECB to do much after it launched a number of monetary easing measures last month.

The focus was on whether the ECB mentions quantitative easing or verbally warns against the strength of the euro, which has crawled higher against the dollar despite last month's easing.

The dollar inched up to 101.77 yen after gaining more than 0.2 percent overnight, helped after the benchmark U.S. Treasury yield rose to a 1-1/2 week high on the strong ADP report.

The euro stood little-changed at $1.3656 after shedding 0.15 percent overnight.

The Australian dollar fell 0.1 percent to $0.9435 , still on shaky ground after being knocked down from an eight-month peak the previous day on disappointing trade data.

Crude oil extended losses after falling the previous day on encouraging signs of supply from Libya and Iraq.

U.S. light crude fell 0.4 percent to $104.09 per barrel.

Source: Reuters

Yellen speech at the IMF: Fed should continue focus on jobs and inflation. Leave stability concerns to regulation

Federal Reserve monetary policy should continue to focus on jobs and inflation and leave stability concerns to regulation, Federal Reserve Chairwoman Janet Yellen said on Wednesday.

“I do not presently see a need for monetary policy to deviate from a primary focus on attaining price stability and maximum employment, in order to address financial stability concerns,” Yellen said in a speech at the International Monetary Fund.

Stocks barely reacted to Yellen’s remarks. Read live blog of stock market.

Yellen’s speech was a “pretty clear vote” for keeping monetary policy and financial regulation separate, said James Glassman, economist at J.P. Morgan Chase.

“It is a hornet’s nest to get into trying to understand what is a threat and what isn’t,” he added.

Many economists think the Fed should already have started to hike interest rates and failing to do so is fostering potential asset bubbles.

For example, former Fed governor Kevin Warsh, currently a fellow at Stanford University’s Hoover Institution, and billionaire investor Stanley Druckenmiller wrote an op-ed in the Wall Street Journal saying that ultra-loose Fed policy is spurring wasteful financial engineering instead of needed capital expenditures.

Another former Fed governor, Jeremy Stein, who left the Fed at the end of May, was a leader in urging the central bank to focus more attention on the “cost” of its bond-buying in terms of financial instability.

The central bank began cutting back its bond-buying program last December, and has reduced total purchases by more than half to a $35 billion-per-month pace.

Laura Rosner, an economist at BNP Paribas, said Yellen’s remarks are dovish because they lowered “the odds of the Fed tightening policy on the basis of financial stability concerns rather than their traditional dual mandate goals.”

“This was not our baseline expectation but has been a lingering risk ever since the Fed first began focusing on the ‘costs’ of accommodative policy, in addition to the benefits,” Rosner added in a note to clients.

Read recap of live blog of Yellen’s speech.

In her remarks, Yellen expanded on her existing stance that effective bank supervision must play the “primary role” in preventing future asset bubbles and crises.

“Monetary policy faces significant limitations as a tool to promote financial stability,” Yellen said.

She said the work on “building resilience” in the U.S. financial system was far from done.

Jaret Seiberg, a banking policy analyst at Guggenheim Partners, said Yellen took a “hard lined stance on capital, liquidity and leverage.” He noted that the Fed chairwoman repeated her call for reform on money market mutual funds.

Yellen pushed back on critics who argue that the financial crisis could have been avoided if the Fed had tightened rates at a faster pace in the mid-2000s.

“A tighter monetary policy would not have increased the transparency of exotic financial instruments or ameliorated deficiencies in risk measurement and risk management within the private sector,” Yellen said.

But she said she was also mindful of the potential for low rates to take on risk and reach for yield, as well as the limits of regulation.

So there “may be times” when interest rates should be raised to ameliorate emerging risks, she said.

Asked by IMF Managing Director Christine Lagarde about possible spillovers on emerging markets when the Fed exits its easy policy stance, Yellen replied: “I wouldn’t assume that this is going to go badly, and I can just say that we will do everything on our side to make sure that it goes smoothly.”

She pledged to communicate in a manner that will avoid surprising financial markets.