GLOBAL MARKETS-Asian shares sluggish, dollar holds firm before Fed

Asian shares were subdued while the dollar held steady near an eight-month high against the euro on Wednesday, as investors awaited key U.S. data as well as a U.S. Federal Reserve meeting that some believe might result in a more hawkish policy outlook.

The Fed's two-day policy meeting will conclude later in the session with central bank officials issuing the policy statement at 2 p.m. (18:00 GMT). The Fed will not be updating its economic forecasts and Chair Janet Yellen will not hold a press conference, keeping investors' focus squarely on the statement. 
The U.S. central bank is expected to cut its monthly bond-buying program by another $10 billion. With U.S. unemployment dropping over the last few months and inflation firming, some believe the Fed could adjust its wording to suggest its willingness to hike interest rates sooner rather than later as the bank approaches its "full employment" mandate.

"If they decide to tweak their assessment of the labour market, it would accelerate the gains for the dollar," Kathy Lien, managing director of FX strategy for BK Asset Management, wrote in a note to clients.

Also later in the session, the Commerce Department is expected to report that the economy grew at a 3.2 percent annual pace in the second quarter, after it shrank 2.9 percent in the previous quarter.

On Friday, the Labor Department's nonfarm payrolls are expected to rise by 231,000 in July after an increase of 288,000 in June. The jobless rate is expected to hold steady at 6.1 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan  was slightly lower in early trade, while Japan's Nikkei stock average  edged down about 0.1 percent.

Data released early on Wednesday showed Japan's industrial output fell 3.3 percent in June as companies curbed production due to a pile-up in inventories, but manufacturers expect output to rise in the coming months. 

On Wall Street overnight, a weak outlook from courier company United Parcel Service triggered a broad selloff, pushing the S&P 500 <.SPX> below its 14-day moving average for a second straight day.

Still, almost 70 percent of the S&P 500 companies that have reported already have topped earnings expectations, according to Thomson Reuters data, which is well above the long-term average of 63 percent. More than half of companies have reported results, and over 63 percent of them have topped revenue forecasts, above the long-term average of 61 percent.

The yield on the benchmark 10-year U.S. Treasury note stood at 2.460 percent in Asia, not far from its U.S. close of 2.462 percent on Tuesday, when it got support from German, Italian and Spanish government debt yields all hitting record lows.

Ten-year German government bond yields, the benchmark for euro zone borrowing costs, sunk as low as 1.12 percent .

That helped the dollar hit an eight-month high against the euro, which dropped as low as $1.3404 and was treading water at $1.3410 in early Asian trade.

Against the yen, the dollar was steady on the day at 102.09 after it broke above the 102 level on Tuesday for the first time since early July.

The dollar index, which tracks the U.S. unit against a basket of six major rivals, was last at 80.206 <.DXY>, after touching a six-month high of 81.245 on Tuesday as the euro cratered.

U.S. crude was steady on the day at $100.98 a barrel after touching an intraday low of $100.37 on Tuesday, its lowest since mid-July.
Source: Reuters

Fitch Ratings has affirmed OAO Gazprom Long-Term debt at 'BBB'

Chinese Stocks Take Off

       The WSJ reports,"China's stocks are soaring as people scoop up investments in one of the world's cheapest markets, encouraged by signs Asia's biggest economy has turned the corner and is starting to motor again.

The Shanghai Composite Index jumped for a sixth day to the highest in nine months on Tuesday, bringing the gain to 6.6% so far in July and leaving the market in position to record its best month since December 2012. The index is catching up with a rally in Hong Kong that sent the city's main stock index to a three-year high last week.

An index of mainland companies traded in Hong Kong entered a bull market Monday, rising more than 20% from a low in March.

"People have given up on expecting China to collapse," said Arnout van Rijn, Asia-Pacific chief investment officer at Robeco Group in Hong Kong, which manages assets worth $290 billion. Mr. van Rijn increased his exposure to Chinese stocks this year.

Because of a slowing growth on the Chinese economy in the first quarter and H1,"for most of the year, Chinese stocks put in lackluster performances, missing out on a rally that swept through the U.S., Europe and most of Asia, as markets encountered a variety of bumps. In March, the country experienced its first default on a corporate bond, adding to fear that widespread credit problems could emerge as companies dealt with slowing economic growth.

Now, sentiment has turned around. Government measures unveiled in the past month are spurring optimism the economy will rebound, aided by overhauls aimed at debt-laden state-run enterprises. Banks are raising cash to help with bad loans.

Property prices are showing signs of stabilizing, and large developers are among the leaders of the stock rally.

Investors have moved in to take advantage of valuations driven lower by the downturn, leaving China's market among the cheapest in the world.

The Hang Seng China Enterprises Index, which tracks Chinese companies listed in Hong Kong, is currently trading at 7.2 times forward earnings, a common valuation measure, compared to an average 11.9 over the past 10 years and the current 16.6 for the S&P 500.

The recent rally has been led by widely-traded behemoths like PetroChina Co., China's largest listed oil company by capacity, which is up 23% year to date in Hong Kong."

The buying in China has been widespread. According to HSBC Holdings PLC, mutual funds now hold record amounts of Chinese equities. EPFR, a data provider, says Chinese equity funds recorded net inflows of cash in both June and July, reversing four months of outflows.

Local investors have bought as well as alternatives such as the property market have stagnated. Yields on wealth-management products, once popular as a source of high returns, have fallen sharply in recent months.

The optimism has spread to other markets as well. China's currency hit a three-month high this week, rebounding from a first-half tumble. The bond market, too, has rallied: Yields on top-rated corporate bonds were at 5.39% on Monday, down from 6.31% at the start of the year.

Not all investors are convinced. Paul Chan, Invesco's chief investment officer for Asia, excluding Japan, cut his allocation to Chinese equities to "underweight" from "overweight" for the first time in more than four years this month. Invesco has $802.4 billion in assets under management.

Mr. Chan says economic growth and increases in earnings per share in mainland China are likely to lag behind those in the rest of the Asian-Pacific region.

Other investors say a rapid accumulation of debt by China in recent years is still an overhang for the economy. Standard Chartered  PLC estimates that total debt amounted to 251% of gross domestic product hit at the end of June. An additional concern is that China's recent efforts to stimulate the economy aren't sustainable, and that effects will only be temporary.

For now, though, investors are welcoming Chinese efforts to overhaul state-run companies. The government has allowed six to introduce pilot programs aimed at introducing more private investors and improving management".

Argentina: Country's Stocks and Bonds Sell Off Ahead of Wednesday's Default Deadline

       The WSJ reports,"Investor confidence that Argentina would reach a deal with holdout creditors is falling as a default deadline draws closer, sparking a selloff in the country's stocks and bonds.

Argentina and its holdout creditors have until Wednesday to agree to a deal to avert what would be a second default in 13 years. Analysts and investors in the past few weeks have been relatively upbeat on the prospects for an agreement, expecting Argentina to agree to pay the holdouts at the last minute.

But those prospects seemed to dim following the news that Monday would come and go without further talks. On Monday, the court-appointed mediator said Argentina had arranged for a meeting on Tuesday, but wouldn't meet face to face with the holdouts.

"The market has been optimistic, expecting that Argentina will do what they think Argentina should do" and come to an agreement, said Siobhan Morden, head of Latin America strategy at Jefferies LLC. "The market is starting to crack. I think we're still heading lower."

Argentina's dollar bonds due 2033 fell as low as 81.375 cents on the dollar, a five-week low and down from as high as 90 cents on the dollar as recently as Thursday. They later rebounded to about 84 cents in very thin, choppy trading, traders said. The bonds closed at about 85.5 cents late Friday.

Ms. Morden said 57% of investors polled by Jefferies now expect an Argentine default. Should that happen, those investors expect Argentina's benchmark bonds to fall to an average of 68 cents, she said.

The price on Argentine credit-default swaps, contracts designed to pay out when a country defaults on its debt, on Monday implied an 80% chance of default in the next five years, according to research firm Capital Economics.

Argentina's benchmark Merval stock index hit a one-month low before trimming its losses to end the day down 1%. The index is down 11.3% in the last 10 trading sessions.

U.S. District Judge Thomas Griesa blocked interest payments for $539 million due on Argentina's 2033 bonds in June after the country deposited the money. Judge Griesa has ruled that Argentina must pay hedge funds led by Elliott Management Corp. affiliate NML Capital Ltd. and Aurelius Capital Management LP when it pays investors who own bonds the country issued after its 2001 default.

Argentina has until Wednesday to get that money to bondholders or run the risk of being declared in default.

Argentine officials met twice last week with their court-appointed mediator, Daniel Pollack, but declined to hold face-to-face talks with representatives for the hedge funds, which are suing to collect on debt Argentina stopped paying 13 years ago.

Argentina's finance secretary and a set of other officials are set to travel to New York on Monday and meet with Mr. Pollack at 11 a.m. on Tuesday.

"I again urged direct, face-to-face conversations with the bondholders," Mr. Pollack said about the call with Argentina's representatives on Monday. "But that will not happen tomorrow."

Jim Craige, a portfolio manager with Stone Harbor Investment Partners LP in New York, said it was looking less likely that Argentina would reach a deal, particularly after the country's negotiators flew back to Buenos Aires on Friday, to return to New York late Monday.

"They could have gotten on an airplane earlier," Mr. Craige said. "They should have never left [Friday], and probably should be here for an early Monday meeting if they were really interested in getting this done. In order to negotiate, you have to actually sit down at the table and hammer out a deal."

Mr. Craige said his firm owned some Argentine bonds governed by local law, and not subject to the U.S. court ruling, but that he'd consider selling those if conditions in the country worsen after a potential default.

The Argentine government has argued that it can't default because it deposited the money, which is now the property of bondholders. The government has asked the judge to suspend his ruling to give it more time to negotiate".

Argentina's long-running legal battle with hedge funds stems from its default on some $100 billion in public debt in 2001 amid a deep economic crisis. The country offered holders of the defaulted bonds new securities valued at about 33 cents on the dollar in 2005 and 2010. Between the two swaps, investors agreed to exchange almost 93% of defaulted bonds eligible for restructuring.

However, the hedge funds decided not to tender their bonds and instead sued for full repayment. Those so-called holdout creditors have won about $1.6 billion after years of litigation in U.S. courts.

Argentina has largely run out of legal options after the U.S. Supreme Court on June 16declined to hear its appeal in the case, leaving in place Judge Griesa's decision that Argentina must treat its different groups of creditors equally".

EU agrees economic sanctions on Russia

The European Union reached agreement on Tuesday on the bloc's first broad economic sanctions on Russia over its role in Ukraine, diplomats said, marking a new phase in the biggest confrontation between Moscow and the West since the Cold War.

The measures will shut major state-owned Russian banks out of European capital markets and target the defence sector and sensitive technologies, including oil, but exclude the vital gas sector, on which Europe is heavily dependent.

In contrast to the United States, the 28-nation EU, with bigger economic interests at stake, hesitated for months to take decisive action against Moscow.

But the mood changed radically after the downing of a civilian flight in an area of Ukraine controlled by pro-Russian separatists earlier this month, killing all 298 people on board, including 194 Dutch citizens.

Washington believes flight MH17 was shot down in error by the separatists with a missile supplied by Russia. Moscow has denied any involvement and sought to deflect the blame to Kiev.

The president of the European Commission, Jose Manuel Barroso, and European Council President Herman Van Rompuy said the sanctions were means as a "strong warning" that Russia's actions in Crimea were not unacceptable and would bring "heavy costs" to its economy.

"The European Union will fulfil its obligations to protect and ensure the security of its citizens. And the European Union will stand by its neighbours and partners," the EU's top two officials said in statement.

Several European diplomats, speaking on condition of anonymity, said sanctions could be ratcheted up further if necessary.

EU ambassadors clinched their agreement as intense fighting between Ukrainian troops and pro-Russian rebels in eastern Ukraine killed dozens of civilians, soldiers and rebels.

It is expected to be finalised on Wednesday and the measures published in the bloc's Official Journal. [ID:nL6N0Q42JK]

Dutch Foreign Minister Frans Timmermans, whose call for justice swayed EU peers last week, said the capital market restrictions "will have a far-reaching and immediate effect".

The sanctions will initially last a year but will be reviewed after three months on Oct. 31 to determine their impact on Moscow's behaviour, diplomats said.

"We have to keep a consistent review of the political aspect and provide legal certainty," one senior EU diplomat said.

The deal, which does not require endorsement at a special EU summit, followed an agreement to widen sanctions on Moscow between U.S. President Barack Obama and the leaders of Britain, France, Germany and Italy in a telephone conference on Monday.

Previously, Washington and Brussels have imposed sanctions on specific individuals over Moscow's actions towards Ukraine, but the EU in particular had shied away from measures designed to hurt vital sectors of the Russian economy, not least because of the threat to EU economies.

The EU does more than 10 times as much trade with Russia as the United States does, relying in particular on Russian natural gas to fuel its industry and power its cities.


BALANCE

Some member states are nervous about the risk to their own economies, and EU leaders struggled to strike a balance between inflicting pain on Russia and preventing fragile EU nations from sliding back into recession.

In a letter to EU leaders last week, European Council President Herman Van Rompuy said the proposed sanctions package

"should have a strong impact on Russia's economy while keeping a moderate effect on EU economies".

There was a consensus on only targeting future contracts, he said, which would leave France free to go ahead with the delivery of helicopter carrier warships is it building for Russia.

Another principle was that EU measures targeting energy technology could hit Russia's oil sector but not its natural gas. Russia is the world's biggest exporter of gas and second biggest exporter of oil; Europe depends on it far more for gas, which arrives mainly by pipeline and is harder to source from elsewhere than oil that arrives mostly by ship.

Probably the most high-impact measure will ban Europeans from buying new bonds or shares issued by banks owned 50 percent or more by the Russian state, which analysts say will affect their ability to finance the economy.

Syndicated loans were not included "at this stage", one senior EU diplomat said, adding that European banks will not be able to purchase targeted debt anywhere in the world.

"It applies to primary markets and to secondary markets, bonds and shares of targeted, well-defined, state-owned Russian banks," he said.

Apart from agreeing on the economic measures, ambassadors also signed off on a new list of Putin's associates and companies that will face asset freezes and visa bans under previous measures, the criteria for which were toughened the day before the plane crash.

The list is expected to be made public on Wednesday, adding to the 87 people and 20 organisations already hit with asset freezes for playing a role in threatening Ukraine. 
Source: Reuters

U.S. natgas futures end up 1.6 pct on contract expiration

U.S. natural gas futures ended up 1.6 percent on Tuesday as some short traders closed out their positions ahead of the expiration of the August contract.

After falling for seven of the last eight trading days, the front-month August futures on the CME NYMEX closed up 6.1 cents, or 1.6 percent, at $3.808 per mmBtu.

August traded between $3.72, which was a fresh eight-month low, and $3.83 on Tuesday, moving out of oversold territory for the first time in 17 days. That was the longest the front month had remained in oversold territory in more than four years.

The Relative Strength Index, climbed to 33.1 from 22.1 on Monday. An RSI under 30 is considered oversold.

The September contract, which becomes the front month on Wednesday, ended up six cents at $3.82.

The front month has lost more than 20 percent since hitting a four-month high of $4.71 in mid June owing to record production and stock builds, and to a lack of hot summer weather and lower-than-normal air conditioning demand.

After falling for six straight weeks last week, the longest stretch of weekly declines in more than four years, the front month was up 1 percent so far this week, down 15 percent for the month and off 10 percent for the year.

In early estimates, analysts forecast utilities added about 93 billion cubic feet of gas to storage last week. [EIA/GAS]

MDA Weather Services forecast cool weather will linger over the eastern two-thirds of the United States over the next 15 days.

That is in line with U.S. weather models predicting cooler-than-normal temperatures over the next two weeks, with 184 cooling degree days, versus a normal of 199 for this time of year, according to Thomson Reuters Analytics.

On the NYMEX, the premium of front-month gas over spot Appalachian coal edged up to $1.29 from $1.23 on Monday. A gas premium over $2 makes it economic for utilities to burn coal.

On the IntercontinentalExchange, next-day gas at the Henry Hub , the benchmark supply point in Louisiana, lost seven cents to average $3.75, a fresh eight-month low.

Next-day New York gas lost about 23 cents to $2.31, while Chicago citygates lost eight cents to a new eight-month low of $3.79, and the Southern California Border lost three cents to $4.12.

In power markets, next-day Mid Columbia in the Pacific Northwest held steady at $46 per megawatt hour, while PJM West in the Mid-Atlantic lost about $4 to a nine-month low of $34.
Source: Reuters

Chinese Huawei’s Smartphone Shipment Soars 62%YOY to 34M in 2014 H1

Huawei has shipped 34.27 million smartphones globally in the first half of this year, surging 62% as compared with the same period of last year, according to stats released by Huawei  Consumer Business Group. Of which, more than 20.56 million smartphones were sold out in the second quarter of this year globally, up 85% YOY.

The telecom gear and smartphone maker said its total shipment for handsets, mobile broadband and other gadgets has reached 64.21 million during the reporting period.

Huawei attributes this growth to the popularity of its flagship products like Ascend P7 and Mate 2 (4G), as well as the robust sales surge in emerging overseas markets. In Q2 2014, Huawei recorded rapid growth in Middle East and Africa, Latin America, Asia-Pacific regions, with smartphone shipment in these areas rocketed 550%, 275% and 180% in YOY growth respectively, according to the firm.

The company’s annual smartphone shipment for 2013 stood at 50 million. The group generated a revenue of more than 135.8 billion yuan (around US$22 billion) in the first half of this year, rising 19% YOY, citing its latest fiscal report.

As more Chinese handset makers like Xiaomi, Meizu are making efforts to develop feature-rich smartphones at lower prices, Huawei is trying to tap the premium handset market, where Apple and Samsung have continued to dominate.

Source: TechNode

Chinese Android Phone Maker Meizu Raises more than US$300 million

Source: TechNode

Meizu, the Chinese smartphone maker, disclosed today that the company had raised more than RMB2 billion (more than US$300 million) at a valuation of more than RMB20 billion (more than US$3 billion).

The very first round of funding had been closed by the end of the June, according to the company, which began in early this year, although for years the founder of the company, Huang Zhang (aka J.W.) rejected the idea.

The company disclosed it today must have something to do with that Xiaomi, whom Meizu founder publicly hates, launched its latest flagship phone today. Meizu Mr. Huang accused Xiaomi stealing its business secrets. Though it’s unknown to what extent Mr. Huang’s story was accurate or objective, Xiaomi’s way of doing the Android phone business, from hardware design to custom operating system development, was similar to Meizu’s.

Meizu and Xiaomi would launch their third-gen Android phones in September 2013. While Xiaomi has launched its flagship phone and a fitness band, Meizu said today that the company would launch four 4G phones, both high-end and low-end, in the second half of this year.

Source: 

Copper weighed by rising output, economic data awaited

 Copper prices slipped on Tuesday, as prospects of growing supplies overshadowed encouraging signs of health in the global economy, while zinc hovered at three-year highs on expectations of a tightening market.

Three-month copper 
Data earlier this month showed manufacturing in the world's top metals user, China, expanded at its fastest clip in 18 months in July, while the U.S. economy has gathered pace, with the outlook for its labour market brightening.

The copper market is expected to register another year of surplus this year, in a move that is seen weighing on prices. Late last week, the world's top copper producer Freeport-McMoRan Incclinched a deal with the Indonesian government to allow the miner to resume copper concentrate exports.

The base metals complex could struggle to eke out significant gains for the remainder of the week ahead of key economic indicators due later in the week and international political risk, analysts said.

This week, second-quarter economic growth in the United States, a U.S. jobs report and an official reading on China's factory health are expected to show fresh signs that a global economic revival has taken hold.

"Investors surely want to wait for the big events.. such as the outcome of the FOMC (Federal Open Market Committee) and the U.S non-farm payroll data this week. No one wants to bet big," said Naeem Aslam, chief market analyst at Ava Trade.

"On top of that Russian sanctions are very much back on the forefront, and the new sanctions by the European Union, which could be announced as soon as tomorrow, are also weighing on the sentiment."

EU diplomats will try to agree on Tuesday on broader economic sanctions against Russia for its actions in Ukraine. Measures being considered include targeting capital markets, defence and sensitive technology. [ID:nL6N0Q34UN]
Benchmark zinc traded at a session peak of $2,416 a tonne, hitting its highest since August 2011 for a second consecutive day, boosted by uncertainty about supplies as the market is expected to move into a deficit. It later traded at $2,381 a tonne in official rings, down 1.2 percent.

Several top zinc mines are drying up, including Century in Australia, while a recovery in the construction industry would revive demand from galvanisers.

"The direction is right. It's probably gone a lot quicker than I expected, which opens it up for some profit-taking ... I wouldn't expect to see a significant sell-off," said ANZ strategist Daniel Hynes in Sydney.

In other metals, LME lead rose to $2,307, the highest since late February 2013. Prices moved into positive territory for the year in July and are now up almost 4 percent in 2014. It traded at $2,278 a tonne in official rings, down 1 percent.

Tin untraded in official rings, was bid at $22,725 a tonne, up 0.3 percent. Aluminium , also untraded, was bid at $1,985 a tonne, down 1.4 percent. Nickel traded at $18,595 a tonne, down 1.1 percent.

In industry news, Goldman Sachs Group Inc's metals warehousing unit is exploring its first foray into China and privately held C Steinweg has expanded capacity there, sources said, as a financing scandal in a major Chinese port fuels a scramble for market share. 

Source: Reuters

Brent Crude Oil nears $107 as supply offsets global tensions

 Brent crude oil fell towards $107 a barrel on Tuesday as ample supply outweighed concerns over political tensions in the Middle East, Africa and Europe.

Despite conflicts in Ukraine, Iraq and Libya, global oil production has exceeded demand, leaving pockets of excess supply in Africa and Europe.

"The likelihood of a supply disruption remains extremely low as the ability of other regions to respond, particularly the U.S. energy sector, remains high," analysts at Goldman Sachs led by Jeffrey Currie said in a note to clients.

Brent crude was down 30 cents at $107.27 a barrel by 1400 GMT, after dropping nearly 0.8 percent in the previous session. U.S. crude dropped $1.20 to $100.47 a barrel, its lowest since mid-July.

Crude exports from second-largest OPEC producer Iraq stayed near record levels as oil output in the south remained untouched by the conflict with Islamist militants.

Olivier Jakob, an analyst at Petromatrix in Zug, Switzerland, said West African physical crude markets were over-supplied.

"There are still a lot of cargoes from West Africa looking for a home," Jakob said. "But from the support side there is a lot of geopolitical input."

In Libya, oil production fell to around 450,000 barrels per day (bpd) last week as escalating violence threatened a hard-won deal to restore oil exports.

Libya's capital Tripoli has slipped into chaos, but analysts said the OPEC producer's low output, at way below 1 million barrels per day for close to two years, has already been factored into oil prices.
U.S. and European leaders agreed on Monday to impose wider sanctions on Russia's financial, defence and energy sectors, although these were not expected to impact Russian oil exports.
The European Union will try to reach a final deal on Tuesday on stronger sanctions, which would include restrictions on energy technology.

But further sanctions against Russia could damage the euro zone's economic recovery.
A firm dollar also kept a lid on oil by making the commodity expensive for holders of other currencies.

The dollar held close to a six-month high against a basket of major currencies <.DXY> on Tuesday, ahead of a policy review this week by the U.S. Federal Reserve.

In the United States, traders watched for weekly data on gasoline stocks, which have been weighing on U.S. crude prices.

A Reuters survey said U.S. gasoline stocks could have risen by 1 million barrels last week, adding to bloated supplies. U.S. commercial crude oil inventories probably dropped in the week to July 25, the survey showed.
Source: Reuters