China Growth Enough to Avert Prolonged Banking Crisis, S&P Says

Steady growth in China should help avert a drawn-out crisis in its banking sector by aiding industrial consolidation and economic rebalancing, according to Standard & Poor’s.

“A prolonged crisis is unlikely,” analysts Naoko Nemoto and Liao Qiang wrote in a report due to be released today. “Growth should support the government and help the industrial sectors to resolve the problems relating to excess capacity over time. And that in turn should limit the systemic risk for Chinese banks.”

Economic expansion will hold at about 7 percent until at least 2016, the ratings company wrote. That would be more than any other Asian country during the next two years, according to forecasts compiled by Bloomberg. Decelerating corporate indebtedness, high profitability and core capital at the banks, and signs the government will step in both to curb excess credit growth and with capital injections if needed will also help the nation’s financial institutions absorb any losses, S&P said in the report.

S&P doesn’t rule out financial distress and severe losses during the next two to three years, according to the report, which cited high exposure to loss-making companies and any correction in the property market as risks.

“Certain parts of the shadow banking sector, notably trust companies, will continue to be the weak link in China’s financial system,” Tokyo-based Nemoto and Beijing-based Liao wrote. “Even if banks choose not to bail out distressed products, they aren’t insulated from contagion risk or collateral damage stemming from credit failures in the shadow banking system.”

Source: Bloomberg

WSJ: Buy-the-Dip Crowd Tested Again

       The WSJ reports: "Here we go again now? U.S. stocks are gripped by a wave of selling pressure again, driving the blue-chip indexes down and testing technical support levels, and taking more than a pound of flesh out of the small-caps, especially the hot, momentum stocks and the biotech darling that were such a noisy part of the 2013 rally.

The question is whether this is just another garden variety dip, and one that should be bought, or something deeper and more disturbing. The reasons for thinking the latter are piling up: Earnings season is arriving, and it’s going to be weak; the Fed is tapering; and markets are starting to notice. Of course, reasons for selling have piled up before, only to get pushed aside as traders scrambled to buy every dip.

For all the noise and attention this selloff is getting, keep in mind: Stocks are coming off record highs, and long-term technical support levels remain intact. Could that change? Yeah, sure. But it hasn’t yet, so nobody’s panicking, for the simple reason that not panicking these past few years has been the more profitable move".

Pro-Moscow protesters seize arms, declare republic; Kiev fears invasion

"Pro-Moscow protesters in eastern Ukraine seized arms in one city and declared a separatist republic in another, in moves Kiev described on Monday as part of a Russian-orchestrated plan to justify an invasion to dismember the country.

Kiev said the overnight seizure of public buildings in three cities in eastern Ukraine's mainly Russian-speaking industrial heartland were a replay of events in Crimea, the Black Sea peninsula Moscow seized and annexed last month.

"An anti-Ukrainian plan is being put into operation ... under which foreign troops will cross the border and seize the territory of the country," Prime Minister Arseny Yatseniuk said in public remarks to his cabinet. "We will not allow this."

Pro-Russian protesters seized official buildings in the eastern cities of Kharkiv, Luhansk and Donetsk on Sunday night, demanding that referendums be held on whether to join Russialike the one that preceded Moscow's takeover of Crimea.

Acting President Oleksander Turchinov, in a televised address to the nation, said Moscow was attempting to repeat "the Crimea scenario". He added that "anti-terrorist measures" would be deployed against those who had taken up arms.

U.S. Secretary of State John Kerry told Russian Foreign Minister Sergei Lavrov in a phone call that Washington was watching events in eastern Ukraine with great concern and any further moves by Moscow to destabilize Ukraine would "incur further costs for Russia."

Kerry "called on Russia to publicly disavow the activities of separatists, saboteurs and provocateurs" in Ukraine, the State Department said. The two discussed convening direct talks in the next 10 days between Ukraine, Russia, the United States and the European Union to defuse tensions.

Western European governments have hesitated to alienate Russia further, fearing for supplies of Russian natural gas, much of which reaches EU buyers via pipelines across Ukraine. Ukraine's own dependence on Russian gas gives Moscow strong leverage, especially over Ukraine's eastern industrial areas.

Russia's gas monopoly Gazprom said it had received no payments from Ukraine for money owed for gas. It has given Kiev until midnight to reduce a $2.2 billion gas debt, although it has not said what it will do if Kiev misses the deadline. In previous years, gas disputes between Moscow and Kiev have hurt supplies to Europe.

In Vienna, Russia did not attend a meeting on Ukraine of the Organisation for Security and Cooperation in Europe. The U.S. envoy to the OSCE, Daniel Baer, said Moscow needed to explain why tens of thousands of its troops were massed on the border.

NATO has halted cooperation with Russia. The Western military alliance announced on Monday it would now restrict access to its headquarters by Russian diplomats apart from Moscow's ambassador, his deputy and two support staff.

Yanukovich, in exile in Russia, has called for referendums across Ukrainian regions on their status within the country.

Yatseniuk said that though much of the unrest had died down in eastern Ukraine in the past month there remained about 1,500 "radicals" in each region who spoke with "clear Russian accents" and whose activity was being coordinated abroad. But he said Ukrainian authorities had drawn up a plan to handle the crisis.

Avakov accused Putin on Sunday of orchestrating the "separatist disorder" and promised that disturbances would be brought under control without violence.

Russia has been pushing internationally a plan proposing the "federalization" of Ukraine in which regions of the country of 46 million would have broad powers of autonomy.

Ukraine, drawing up its own plan for "de-centralization" in which municipalities would retain a portion of state taxes, says the Russian proposal is aimed at carving it up".

  Source:  Reuters

WSJ: Argentina Expands Price Control Program as Inflation Rages

     The WSJ reports: "Argentina has added more than 100 consumer products to a controversial price control program as the government grapples with one of the highest rates of inflation in the world.

Inflation is widely thought to be more than 30% following the devaluation of the Argentine peso in January and the government's habit of financing deficits through money printing. Instead of making unpopular spending cuts to tame inflation, President Cristina Kirchner has capped prices on almost 200 basic consumer goods and almost doubled benchmark interest rates.

The three-month-old price control program now covers 302 basic consumer products such as milk and bread sold by large supermarket chains, Commerce Secretary Augusto Costa said Monday. Prices on the 108 new items will fall about 10% on average, while price caps on the 194 products in the program since the beginning of the year rose just over 3% during the first quarter, he said.

"Adding products to the program generates substantial reductions in prices," Mr. Costa said at a news conference. "What we are agreeing with the companies is that they provide these products at a set price because at that price they are going to have a reasonable profit."

The government also said Monday that the number of price-capped products sold by provincial supermarket chains will more than double to 176 items. Wholesalers that sell to small shops will also observe price caps on 58 products, Mr. Costa said.

"In some cases, the prices are very tight. That shrinks profit margins a lot. You might even be running a loss on some products, but it's not going to put any companies at risk," said Fernando Aguirre, a spokesman for supermarket trade groups CAS and FASA, whose members have about 3,000 stores".

WSJ: Japan Records Current Account Surplus in February

            The Wall Street Journal reports: "Japan recorded its first current account surplus in five months February, on the back of a smaller trade deficit and strong investment income from overseas.

The surplus in the current account, the broadest measure of Japan's trade with the rest of the world, fell 5.7% on year to ¥612.7 billion ($6 billion) before seasonal adjustment, the Ministry of Finance said Tuesday. That was slightly narrower than the ¥618.1 billion surplus forecast by economists surveyed by The Wall Street Journal and the Nikkei.

Strong exports and large investments abroad fueled nearly three decades of almost unbroken surpluses in Japan. Yet widening trade deficits have eaten away at the black, amid more need for energy imports to make up the sidelining of the nation's nuclear reactors. An economic pickup has also fueled more consumer demand for products made abroad, such as electronics, further worsening the nation's trade position.

Though most economists don't foresee a sustained current-account deficit, the recent string of deficits has raised concern.

Sustained account deficits might mean Japan eventually has to rely on overseas investors to finance its debts. That could push up bond yields as non-Japanese investors demand a higher return, putting stress on the nation's already strained finances, some economists say.

February's surplus marks a rebound from a record deficit in January as demand for energy and foreign-made goods ahead of a sales tax increase pushed up the nation's imports. Historically, the nation's current account balance has improved in February from the previous month, as exports pick up again after slowing during Asian new year holidays".

WSJ: To Protect National Interests, German Government Prioritizes De-Escalating Tensions With Moscow

        The Wall Street Journal reports,"while continuing to warn Russian President Vladimir Putin against threatening Ukraine, Ms. Merkel—who earlier said Russia could face massive political and economic damage for its annexation of Crimea—is now emphasizing the need for more dialogue with the Kremlin.

In recent days, the German leader and other senior government officials have repeatedly stressed that de-escalating tensions with Russia, rather than provoking it with a more forceful response, is their top priority. Berlin has also pushed back on pressure from Poland and other Eastern European countries to station more North Atlantic Treaty Organization troops along the security alliance's eastern flank. And German Foreign Minister Frank-Walter Steinmeier said he saw no way for Ukraine to join NATO.

"I work every day to ensure that we continue to speak with Russia," Ms. Merkel told a meeting of her conservative party over the weekend.

On Monday, Ms. Merkel's spokesman, Steffen Seibert, said it was disappointing that Mr. Putin hadn't withdrawn Russian troops from the Ukrainian border as he had pledged to do during a phone call with the chancellor last week. In response to the latest tensions in eastern Ukraine, Mr. Seibert said all parties needed to avoid a further escalation.

"There's been a lack of sensitivity in dealing with our Russian neighbor, especially President Putin," ex-Chancellor Helmut Kohl told the daily Bild in an interview last month.

Polls suggest most Germans want their country to maintain equal distance between Russia and the West and act as a mediator. Yet most believe Ms. Merkel has firmly aligned Germany with the West, according to a poll released last week by infratest dimap. More than 60% of Germans surveyed oppose sending the country's air force to strengthen NATO's eastern borders, the poll found.

The German public's aversion to confronting Russia is one reason for Ms. Merkel's change of course. The other is business.

Many of the country's blue-chip companies, from Siemens AG  toVolkswagen AG  have major investment in Russia. Though Germany's overall trade with Russia is fairly modest—Russia accounts for just 3% of overall exports—the companies active there count among Germany's most influential.The chief executives of Adidas AG, Thyssen-Krupp AG  and DHL parentDeutsche Post AG  have all recently criticized the West's handling of the Ukraine crisis, arguing that Mr. Putin was forced into a corner. All three companies have substantial operations in Russia.

Within days of Crimea's annexation, Siemens Chief Executive Joe Kaeser visited Mr. Putin at his official residence outside of Moscow and stressed the importance of Germany's economic ties with Russia. The public visit, which Mr. Kaeser said Ms. Merkel's office was informed about, was seen as an attempt to signal to Russia that commercial ties needn't suffer amid what the Siemens chief characterized as "temporary turbulence."

The head of Deutsche Bahn AG, Germany's state-owned railway, Rüdiger Grube, is also planning a trip to Russia. Deutsche Bahn, which has large freight and logistics arms, does a lot of business with Russia's state railway.

"For us, the top priority is de-escalation," Mr. Grube said at a recent news conference.

Ms. Merkel's supporters argue that she has succeeded in striking a balance between protecting German interests and meeting its international obligations within the European Union and NATO.

Wolfgang Ischinger, the head of the Munich Security Conference and a lobbyist for insurance giant Allianz SE,  rejects the criticism leveled at Germany by Arizona Sen. John McCain and others who have chided Berlin for being too soft on Russia. "We are by far the country that would suffer the most" from a worsening of the crisis, said Mr. Ischinger, a former German ambassador to the U.S. "Not a single dollar will be lost in Arizona.""

The Guardian: Hydroelectric dams are doing more harm than good to emerging economies

     "New research undertaken at Oxford University, investigating 245 large dams built since 1934, reveals the dismal track record of such megaprojects. With an average cost overrun of over 90%, large dams have one of the highest cost overruns among all infrastructure asset classes. This result is before accounting for negative impacts on human society and environment, and without including the effects of inflation and debt servicing.

What's worse, planners do not seem to learn. Forecasts are likely to be as wrong as they were between 1934-2007. Dam budgets today are as wrong as at any time during the 70 years for which data exist.

Nearly half the dams we studied suffered a cost overrun so large as to be considered stranded. That is, the capital sunk upfront could not be recovered. For example, Brazil's Itaipu dam, built in the 1970s, suffered a 240% cost overrun that impaired the nation's public finances for three decades. Despite producing much-needed electricity, it is likely Itaipu will never pay back the costs incurred to build it. Yet Brazil is currently building the controversial Belo Monte hydroelectric project, which studiessuggest may be non-viable even before opening. China, Indonesia, Pakistan and other nations show similar amnesiac behaviour regarding the building of dams.

The costs of large dams and similar failed mega projects have caused an explosive growth of debt in developing countries. For example, the actual cost of Tarbela dam, most of which was borrowed from external sources, amounted to 23% of the increase in Pakistan's external public debt stock between 1968-1984.

Similarly, for the Chivor hydroelectric project in Colombia, the planners predicted that there would be no changes in the exchange rate between the Colombian peso and the US dollar during the construction period (1970-77). In fact, the Colombian currency depreciated nearly 90% against the dollar. Since over half the project's costs covered imported inputs, this depreciation caused a 32% cost overrun.

Countries with a higher per capita income and better macroeconomic climate typically build dams more quickly with lower cost overruns. This suggests that developing countries, in particular, despite seemingly being most in need of complex facilities such as large dams, ought to stay away from bites bigger than they can chew.

Costs aside, mega dams also take an inordinately long time to build – 8.6 years on average and often more than 10 years. Our research shows that these long time horizons leave dam projects particularly ineffective in resolving urgent energy crises and especially vulnerable to currency volatility, hyperinflation, political tensions and swings in water availability.

Some combination of these factors constitutes the typical dam disaster. For example, owing to incorrect estimates of water availability, Kainji Dam in Nigeria has fallen short of its hydroelectricity production targets by as much as 70%. Volatile swings in water flow have threatened the dam's safety in times of flood and impaired its hydropower and irrigation benefits during drought.

Despite forgoing large dams, developing countries can still take advantage of their water resources. Our research shows that smaller, more flexible hydroelectric projects that can be built quicker, and are more easily adapted to social and environmental concerns, are preferable to high-risk mega dams.

Norway is an excellent model of how a flexible approach can yield substantial payoffs. With 99% of its electricity produced from water, hydropower is highly successful in the country. Pressure groups and political parties began to question large dams on environmental grounds at the turn of the century. The government responded with a plan to encourage small hydro development, defined as plants with an installed capacity of 10 megawatts or less.

This experience has yet to inform such emerging economies as Brazil, China, Indonesia and Pakistan. China needs the biggest rethink, with its plans to almost double its current hydropower capacity of 250,000 megawatts through a huge dam-building effort. Rather than drowning their economies in debt from megadams, developing countries should think of more agile alternatives".

WSJ: Stocks Retreat as High-Growth Tech Shares Slide

    The Wall Street Journal reports,"Monday's 1.2% drop in the tech-oriented index highlights a broad reassessment of risk amid uneven economic signals and subdued expectations for the coming first-quarter earnings season. The Nasdaq Composite shed 47.97 points, to 4079.75, down 4.6% over the past three trading sessions.

The Dow Jones Industrial Average tumbled 166.84 points, or 1%, to 16245.87. The S&P 500 fell 20.05 points, or 1.1%, to 1845.04. All three indexes are now in negative territory for the year.

The Nasdaq, widely viewed as a gauge of the tech sector, is off 6.4% from a 52-week high hit on March 5. Since then, components Netflix is off 25%, Facebook is down 20% and Amazon.com has slid 15%.

At the same time, investors continued flocking to larger, more-mature companies that pay dividends as a hedge against market and economic uncertainty. Intel  and Cisco Systems  were among the Nasdaq gainers Monday, up 1.2% and 0.6%, respectively.

The action underlines concerns about the pace of economic growth following sharp share-price gains in 2013 and questions about the valuations on many young, fast-expanding companies. A host of economic indicators have disappointed the most-bullish investors in recent weeks.

Mr. Santini portfolio manager at CLS Investments in Omaha, Neb.,  has been selling shares of First Trust Dow Jones Internet Index Fund ETF, which holds stocks such as Facebook and Amazon, since the start of the year. Instead, he has been buying the First Trust Nasdaq Technology Dividend Index Fund ETF, which holds Intel and Oracle.

The declines in shares of faster-expanding companies highlight the premium investors have begun placing over the past month on firms that have strong records of profitability and tend to perform well even when the economy slows. Microsoft and Cisco each are up 4% since March 5.

On Monday, financial and consumer-discretionary stocks also declined, pointing to investor fears that corporate profits could fail to meet Wall Street estimates. Alcoa is due to post results Tuesday and banks J.P. Morgan Chase & Co. and Wells Fargo & Co. on Friday.

Money that had flooded into biotech ETFs is bolting out now. On Friday alone, $372 million poured out of the market's largest biotech ETF, the iShares Nasdaq Biotechnology IBB +0.67% ETF, the biggest one-day outflow ever for the fund, according to BlackRock. The recent reversal comes after months of inflows. Some $8.4 billion piled into health-care and biotech ETFs from the start of 2013 through March, according to fund tracker Lipper, compared with about $8.9 billion absorbed by traditional mutual funds.

The Nasdaq Biotechnology Index has dropped 18% since hitting an all-time high on Feb. 25, while the Nasdaq Internet Index is down 17% since its record reached on March 7".

WSJ: German Finance Minister Trips Over Taboo With Hitler-Putin Comparison

Wolfgang Schäuble's Remarks Likening Crimea Annexation to Nazis' Seizure of Sudetenland Unleashes Firestorm

• Permalink

Germany's finance minister broke an unwritten rule in German politics in drawing parallels between Russia's annexation of Crimea to the Nazis' seizure of the Sudetenland: Stay away from Hitler comparisons.

Exxon Mobil dismisses a low carbon future and puts faith in oil markets

        The Guardian reports, "When an international group of 77 institutional investors with more than $3tn in assets asked the world's 45 largest fossil fuel companies to assess the risks that climate change poses to their business, they were aware they were asking a tough, complex question.

Knowing this, investors launched the Carbon Asset Risk Initiative to spur fossil fuel companies to assess the risks climate change poses to their business based on two scenarios: a business-as-usual scenario under which the world's fossil fuel use continues to grow, warming the earth to levels society may not be able to adapt to; and a low-carbon scenario where governments achieve their stated goal of limiting the average temperature rise to below 2C.

Many of the 45 companies that received this request are responding – among those, Exxon Mobil, the world's largest publicly traded energy company, which agreed to publish a report after investors agreed to withdraw a pair of related shareholder resolutions.

Exxon Mobil does expect increasing government action to curb emissions, but not to the level required to limit global warming to below 2C, which the company claims would be unaffordable. In fact, the report says the emissions projections in the company's Outlook for Energy are comparable to the Intergovernmental Panel on Climate Change scenario that projects a temperature rise well above the international two degree goal. The company focuses on the costs of action and largely ignores the costs of inaction, suggesting that policymakers should balance mitigation, adaptation, and other social priorities.

This key issue – that inaction on climate change will carry significant economic costs – was underscored by a report the Intergovernmental Panel on Climate Change (IPCC) released the same day as Exxon Mobil's report. According to the IPCC, "Throughout the 21st century, climate-change impacts are projected to slow down economic growth, make poverty reduction more difficult, further erode food security, and prolong existing and create new poverty traps."

To make the case that a low carbon scenario would be unaffordable, Exxon Mobil cites a 2008 International Energy Agency (IEA) report that concluded: "To halve today's emission levels would require additional investments of the order of USD 45 trillion." What the company does not point out is the second half of IEA's conclusion, which said: "Although this is a large number in absolute terms, it is small relative to the expected growth in global economic activity over the next forty years - and small relative to the cost of inaction." More recently, the IEA said in 2012 that achieving a low carbon scenario would be affordable, requiring an investment of $36tn that would generate fuel savings of more than $100tn.

Considering that Exxon Mobil not long ago denied the science of climate change outright, this report shows the company has come a long way and this is an important step forward.

No one can predict the future. The oil and gas industry is accustomed to boom and bust cycles and also has a history of overestimating demand. Exxon Mobil itself paid tens of billions for its shale gas specialist subsidiary XTO just before the natural gas price dropped precipitously. Profits from the investment have yet to materialize, demonstrating that even Exxon Mobil can be wrong about the future".

The Guardian,Ukraine Crisis: Interim prime minister Arseniy Yatsenyuk told the cabinet over the weekend that the new price for gas was unfair and Ukraine would not pay it.

"The prospect of a new gas war between Russia and Ukraine drew closer at the weekend as the government in Kiev said it would refuse to pay for gas at a new, inflated price set by Gazprom last week. The dispute comes as tensions in eastern Ukraine remain high, with pro-Russian protesters in two cities storming government buildings on Sunday.

In Kiev, interim prime minister Arseniy Yatsenyuk told the cabinet over the weekend that the new price for gas was unfair and Ukraine would not pay it.

"Russia has not managed to grab Ukraine through military aggression, so now they are pursuing a plan to pressure and grab Ukraine through gas and economic aggression," said Yatsenyuk. He said that Ukraine would continue buying gas at the "acceptable market price" of $268 (£162) per 1,000 cubic metres.

Last week, Russia announced two successive price hikes in gas for Ukraine, taking it up to $485.50. It is unclear what Russia will do if Ukraine refuses to pay the new price, but in the past it has shut off the supply. Last week, Gazprom's CEO, Alexei Miller, gave televised comments explaining why Russia was raising the gas price, noting that part of the discount had come when Russia extended credit to Ukraine last December as part of a package that was given to the former president, Viktor Yanukovych, for turning his back on an association agreement with the European Union.

"The discount was given on the condition that Ukraine would pay all its gas debts and pay 100% for the current deliveries, and it was clearly indicated that if this did not happen, the discount would be annulled in the second quarter of 2014," said Miller. He said that Gazprom had "not received a single dollar" in payment for March deliveries, and thus the discount had automatically been annulled.

Miller also said that Ukraine had received huge savings on gas based on its agreement to prolong the so-called Kharkov agreements, by which Russia retained the right to base its Black Sea fleet in Crimea".

Source: The Guardian

theguardian: Serguei Lavrov: It's not Russia that is destabilising Ukraine

The profound and pervasive crisis in Ukraine is a matter of grave concern for Russia. We understand perfectly well the position of a country which became independent just over 20 years ago and still faces complex tasks in constructing a sovereign state. Among them is the search for a balance of interests among its various regions, the peoples of which have different historical and cultural roots, speak different languages and have different perspectives on their past and present, and their country's future place in the world.

Given these circumstances, the role of external forces should have been to help Ukrainians protect the foundations of civil peace and sustainable development, which are still fragile. Russia has done more than any other country to support the independent Ukrainian state, including for many years subsidising its economy through low energy prices. Last November, at the outset of the current crisis, we supported Kiev's wish for urgent consultations between Ukraine, Russia and the EU to discuss harmonising the integration process. Brussels flatly rejected it. This stand reflected the unproductive and dangerous line the EU and US have been taking for a long time. They have been trying to compel Ukraine to make a painful choice between east and west, further aggravating internal differences.

Ukraine's realities notwithstanding, massive support was provided to political movements promoting western influence, and it was done in direct breach of the Ukrainian constitution. This is what happened in 2004, when President Viktor Yushchenko won an unconstitutional third round of elections introduced under EU pressure. This time round, power in Kiev was seized undemocratically, through violent street protests conducted with the direct participation of ministers and other officials from the US and EU countries.

Assertions that Russia has undermined efforts to strengthen partnerships on the European continent do not correspond to the facts. On the contrary, our country has steadily promoted a system of equal and indivisible security in the Euro-Atlantic area. We proposed signing a treaty to that effect, and advocated the creation of a common economic and human space from the Atlantic to the Pacific which would also be open to post-Soviet countries.

IMF: Real interest rates are expected to increase modestly with the normalization of global economic conditions

Real interest rates are expected to increase modestly with the normalization of global economic conditions, reversing the decline into negative numbers after the financial crisis, predicts a new study by the IMF’s Research Department.

Continued low real interest rates—the rate paid by borrowers minus the expected rate of inflation—will ease the burden of debt for borrowers but can also tie the hands of policymakers. A low real interest rate environment also enhances the chances that in the future the nominal policy rate may hit the lower bound (that is, zero), thereby losing a key monetary policy tool: lowering interest rates to stimulate growth. Because there is a risk that advanced economies will encounter continued very low growth, this limitation may materialize.

Any increase in current real interest rates is expected to be modest because the main factors contributing to the decline in real rates are unlikely to be reversed:

• Saving: emerging market economies’ saving rate increased significantly between 2000 and 2007, driving down interest rates. This increase is expected to be only partly reversed.

• Portfolios: since the financial crisis, demand for safe assets has increased—bonds over the increasingly risky stocks and other equity. This was also driven by reserve accumulation in emerging market economies. Unless there is a major unexpected change in policy, this trend is likely to continue.

• Investment: the decline in investment rates in advanced economies as a result of the global financial crisis is likely to persist.

Since the early 1980s, interest rates, or yields, on assets of all maturities have declined worldwide, well beyond the decline in inflation expectations. This means that real interest rates—the rates paid by borrowers corrected for expected inflation—have declined. Ten-year real interest rates across countries fell from an average of 5½ percent in the 1980s to 3½ percent in the 1990s, 2 percent over 2001–08, and 0.33 percent between 2008 and 2012 

WSJ: Retreat en European Stock Markets Selloff In Tech Stocks and Ukraine and Russia Mounting Tensions

     The Wall Street Journal reports,"European shares retreated from six-year highs Monday, ending down asUkraine and Russia tensions flared up and a selloff in technology stocks on Wall Street spilled over into global markets.

The Stoxx Europe 600 index snapped a nine-day winning streak to end down 1.24%, with the technology subindex falling 2%. The decline come as highflying tech stocks around the world register widespread losses as investors question fast-rising valuations".

“These stocks lost touch with what we would call reasonable valuations some time ago,” said Erwin Sanft, head of Chinese equity strategy for Standard Chartered in Hong Kong.

After ending 2.6% lower Friday, the tech-heavy Nasdaq index remained under pressure Monday and was most recently down 1.2%.

In other news, Russian assets came under renewed pressure after antigovernment protesters calling for closer ties with Moscow seized regional government headquarters in two cities in Ukraine’s east Sunday

WSJ: Tech valuations in Question?

MARKETS

Tech-Stock Slump Extends to Europe

Investors Raise Questions Over Fast-Rising Tech Valuations

• Permalink

European shares retreated from six-year highs, following Asian markets lower, dented by a selloff in technology stocks on Wall Street late last week that spilled over into global stock markets.

Crude Drops as Libyan Rebels Hand Over Control of Ports

Brent and West Texas Intermediate crudes fell for the first time in three days after Libyan rebels surrendered control of two oil ports to the government, enabling the OPEC country to increase exports.

Brent dropped as much as 1.4 percent. The self-declared Executive Office for Barqa handed over the oil terminals of Hariga and Zueitina overnight and will relinquish the other two ports they control in two to four weeks, said Ali Al-Hasy, a spokesman for the group. Libya’s output fell to 250,000 barrels a day in March from 1.4 million a year earlier, according to data compiled by Bloomberg.

Brent for May settlement slid $1.12, or 1 percent, to $105.60 a barrel at 12:13 p.m. New York time on the London-based ICE Futures Europe exchange. The volume of all futures traded was 31 percent higher than the 100-day average.

WTI for May delivery decreased 77 cents, or 0.8 percent, to $100.37 a barrel on the New York Mercantile Exchange. Volume was 11 percent above the 100-day average. The U.S. benchmark grade’s discount to Brent shrank to $5.23 from $5.58 on April 4.

Source: Bloomberg

Micron Technology is a very big chipmaker that's closer to Apple than it ever has been.

Micron Technology doesn't get a lot of attention, but it should. Especially because it's one of Apple's largest silicon suppliers.

The Boise, Idaho-based company flies under the radar much of the time in the non-investor community. But it's the second largest DRAM memory chip company in the world -- outranked only by behemoth Samsung -- and third largest chipmaker overall in in terms of wafer capacity, even beating Intel.

And it's now a lot closer to Apple after it completed the $2 billion acquisition of Japanese memory maker Elpida last year. Why? Because Apple uses lots of Elpida memory in its iPhone and iPad products. Most recently, that means the iPhone 5S and iPad Air.

Apple is expected to use Micron's newest DDR4 memory chips in upcoming products. DDR4 will befaster and more power efficient than the current DDR3 technology used widely in PCs, tablets, and smartphones.

Memory capacities will increase too. Future iPads and iPhones -- and whatever new mobile products Apple dreams up -- will likely use more system memory, as designs demand more horsepower 

Source: CNET

WSJ: EU Calls Talks Ukraine Gas Supplies

China’s tourism ecommerce site Tuniu plans to raise $120 million in US IPO

China’s IPO season looks to be in full swing as the latest company from China files with the SEC, packaged travel tour website Tuniu. The Nanjing-based company plans to raise US$120 million when it lists under the symbol “TOUR” (hat-tip to 36kr for spotting). The company sells domestic and international travel booking services, specializing in holiday tour packages. According to the prospectus filed with the SEC, 70 percent of all bookings came from foreign leisure travel products and services. Tuniu is partnered with over 3,000 travel suppliers across 70 countries, including more than 1,000 tourist attractions. The site has also become a source for prospective travelers to find ratings and reviews on those attractions. The site has 85 million registered users with 20,000 comments on travel destinations. Tuniu was founded in 2006 and booked US$322 million in sales last year, up 75 percent on the previous year. Gross profits nearly hit US$20 million last year. Tuniu’s executives and board members currently hold 86.4 percent of the company. The number of shares and their price has not yet been announced. Competitors include Tours4Fun - acquired by Ctrip for US$100 million in January – along with recently-funded Yikuaiqu, Lvmama, and 17u. The latter just raised a US$82 million funding round and is also rumored to be preparing for an IPO. Tuniu is the latest in a string of US IPO filings in recent weeks. Ecommerce retailer JD looks to raise US$2 billion; Twitter-like Sina Weibo is aiming at US$437 million; Kingsoft subsidiary Cheetah Mobile wants US$300 million; daily deals site Jumei is rumored to have filed confidentially with the SEC; and ecommerce titan Alibaba says it will file in New York.

Source:  TECHINASIA

WSJ: You May Want to Avert Your Eyes This Earnings Season

   The Wall Street Journal reports:

"Earnings season is here. You may want to avert your eyes.

Alcoa reports first-quarter earnings on Tuesday, and while no longer a member of the Dow Jones Industrial Average, the company’s earnings still mark the unofficial start of earnings season.

The expectations for Alcoa are low: Street consensus is just 5 cents a share, according to Thomson Reuters, down from 11 cents a year ago. The expectations for the S&P 500 companies are low, too. Profits are expected to contract in the first quarter by 1.2%, according to FactSet Research, the first contraction since the third quarter of 2012 (Thomson Reuters is slightly more optimistic, projecting growth of 1.1%). Revenue is seen rising only 2.3%.

Everybody knows the brutal U.S. winter had some effect here, of course, but the other headwind companies are already mentioning is the strong U.S. dollar, FactSet’s John Butters noted. Of the 21 companies that have already reported, 11 have mentioned the dollar as a weight on their bottom line. “It will certainly bear watching how frequently these themes are cited,” he wrote.

Usually, canny traders can at least rely on companies beating expectations (and if those expectations are low, well, then it’s even easier). So far this quarter, though, the pace of earnings “beats” has slowed, Thomson noted. “While it is still too early to draw any firm conclusions, history suggests that we may not see the high percentages of companies beating estimates that we have seen over the past several quarters.” The winter weather, and retailers running heavy sales may tamp down the earnings surprises, the firm said.

It will certainly be interesting to see how the market digests all this. So far this year, U.S. equities have been essentially stalled – at high levels, mind you, but stalled all the same. The stock market hasn’t had a big catalyst to drive that next leg up. Traders will likely write off weak first-quarter numbers to the weather, and indeed the forecast for the rest of the year is brighter: Second-quarter profit growth is seen at 7.6%, according to FactSet, and the whole year is seen at 8.5%.

Of course, one quarter ago the Street saw first-quarter earnings rising 4.3%''.

Bloomberg: Copper Extends Weekly Drop on Concern Demand Will Fall

The contract for delivery in three months on the London Metal Exchange retreated as much as 0.6 percent to $6,577.50 a metric ton, the lowest intraday level since March 28, and was at $6,586.75 at 9:41 a.m. in Tokyo. The metal slid 0.8 percent last week, the first such drop in three weeks. Markets in China are closed today for a public holiday.

Payrolls in the U.S. missed estimates in March, rising 192,000 compared with the median forecast in a Bloomberg survey that had projected a 200,000 gain. Two Chinese manufacturing gauges released last week pointed to weakness in the economy, the world’s biggest user of metals.

“The U.S. payroll data fueled concern that demand will slow after disappointing Chinese economic data earlier last week,” said Tetsu Emori, a senior fund manager at Astmax Asset Management Inc. in Tokyo. “The weaker outlook for demand would damp market sentiment at a time when supplies are seen rising.”

World production of refined copper is expected to exceed demand by about 400,000 tons as consumption will lag behind the output growth, the International Copper Study Group said in a report last week.

WSJ: German Industrial Output Rises Faster Than Expected

     The Wall Street Journal reports,"German industrial output increased faster than expected in February, its fourth increase in a row, suggesting Europe's largest economy expanded at a robust pace during the first quarter with an annualized rate approaching 3%".

Industrial output expanded 0.4% on the month in adjusted terms in February, Germany's statistics office said Monday, beating economists' expectations of a 0.2% monthly rise. The increased output follows unexpectedly strong manufacturing orders in February.

The influx of data points to a strong first quarter for Germany's economy, which has benefited from a very mild winter that has lifted construction output. For that reason, Germany's central bank said last month the country should see a "substantial boost" to economic growth.

Barclays  on Monday raised its estimate for Germany's first-quarter gross domestic product growth to 0.7% on a quarterly basis from 0.5%, in view of stronger than expected industrial production, as well as healthy retail sales figures during the first two months of the year. That implies an annualized growth rate of around 2.8%, nearly double the fourth quarter's pace of 1.5% growth.

In addition, consumer confidence remains at a seven-year high, as optimism about the economy and a stable job market have helped boost economic expectations for Germans. February retail sales shot up 1.3% from the previous month, after increasing 1.7% in January, data last month showed.

"All in all, today's numbers confirm once again that a strong growth performance, at least in the first quarter, is in the making. The German economy is powering ahead," said Carsten Brzeski, an economist with ING Bank. Mr. Brzeski noted that despite a 0.1% decline on the month in February, the construction sector is "booming," as evidenced by the sector's 1.6% average growth over the past four months.

Germany's performance is critical for the euro zone as a whole. Its economy accounts for nearly one-third of GDP in the 18-member euro bloc.

WSJ: Ukrainian Leaders Slam Russia for Attempt to 'Tear Country Apart'

     The Wall Street Journal reports, "Ukrainian leaders on Monday ripped into Russia for what they said was an effort to tear their country apart with a new burst of unrest, as pro-Russian protesters occupying a government building in the country's east called for a regional referendum on independence.
Acting President Oleksandr Turchynov said he believed the recent events in the east represented "the second wave of Russia's special operation against Ukraine, aimed at destabilization, toppling the current government, thwarting elections and tearing the country apart".

Russia has warned repeatedly that it is prepared to intervene to protect Russian speakers in Ukraine's east and south from alleged threats by Ukrainian nationalists. The country has since massed tens of thousands of troops on its western border with Ukraine, according to U.S. and Ukrainian officials.

Ukraine's Prime Minister Arseniy Yatsenyuk earlier accused Russia of playing a role in unrest that kicked off Sunday.

"It's absolutely clear to everyone that an anti-Ukrainian, anti-Donetsk, and anti-Kharkiv plan is being implemented. A plan to destabilize the situation, a plan for foreign troops to cross the border and take over the territory of the country, which we will not allow," local news agencies quoted him as saying.

The pro-Russian protests that flared in Ukraine's eastern cities after President Viktor Yanukovych's ouster in late February had appeared to be fading. While the crowds of several hundred demonstrators who occupied a government building in Donetsk were no larger than at other protests in recent weeks, Sunday marked the first time in nearly a month that government buildings had been seized in the eastern region of the country.

On Monday, the occupying protesters proclaimed the creation of the "Donetsk People's Republic," ruled by the self-declared "Supreme Soviet," the Interfax news agency reported. The protesters later voted to call a referendum in the next month on declaring independence, Interfax said. It wasn't clear whether they had enough support to impose their demands, however.

Russian stocks fell sharply following the unrest and then again after the broadcast, with the Micex tumbling 3.3% and the dollar-denominated RTS Index sliding 4.5% The Russian ruble also declined more than 1.0% against the dollar.

Protesters also seized the regional government building in the eastern city of Kharkiv on Sunday. Police said they left the building in Kharkiv overnight after negotiations, but witnesses said some continued to occupy parts of the ground floor on Monday and police had the building surrounded.

Violence also flared in Luhansk, a nearby regional capital where demonstrators seized the local security service building and reportedly secured the release of a half-dozen fellow protesters detained during earlier protests. Ukrainian police later said some of the demonstrators had made off with a cache of weapons from a security service office.

Russia's invasion of Crimea came after a group of armed men seized the local parliament building there and appealed for Russian help. As in Crimea, a majority of people in the east speak Russian, but surveys show less than half want their region to join Russia.