Precious Metals Prices 2.55 p.m. Eastern Time

Gold Price Futures      3 months  US$   1,396.18

Silver Prices Futures   3 months  US$      23.97

US New single-family houses sales fell -13.4% in July

NEW RESIDENTIAL SALES IN JULY 2013
Sales of new single-family houses in July 2013 were at a seasonally adjusted annual rate of 394,000, according to
estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.
This is 13.4 percent (±14.5%)* below the revised June rate of 455,000, but is 6.8 percent (±18.6%)* above the July 2012
estimate of 369,000.
The median sales price of new houses sold in July 2013 was $257,200; the average sales price was $322,700. The
seasonally adjusted estimate of new houses for sale at the end of July was 171,000. This represents a supply of 5.2 months at the current sales rate.

Source: US Census Bureau

FDI increased in China last month

Investment inflows into China quickened in July, the government said on Friday, suggesting foreign firms' confidence in the world's No.2 economy is holding up despite slowing growth.

China drew $71.4 billion in foreign direct investment (FDI)in the first seven months of 2013, up 7.1 percent from the same period of 2012, the Commerce Ministry said.

In July alone, China attracted $9.4 billion in FDI, up 24.1 percent from a year ago, quickening from the 20.1 percent pace in June, the fastest in more than two years, although the amount was lower than June's $14.4 billion.

The ministry said FDI inflows into the manufacturing sector in the first seven months fell 2.4 pct from a year earlier, while investment in the service sector rose 15.8 pct.

China aims to lure more FDI in advanced manufacturing to help move its industry make more sophisticated, high-value products.

Source:  Reuters

Japan aiming to help increase bluefin tuna

Japan aims to take the lead in working out an international plan to help bluefin tuna stocks in the Pacific Ocean recover and implement it in 2015, a senior Fisheries Agency official said Thursday.

Masanori Miyahara, deputy director-general of the agency, announced the policy at a meeting of some 340 representatives of the fisheries industry, calling on them to help regulate bluefin tuna stocks in the Pacific.

The plan is aimed at increasing spawning bluefin tuna stocks, which fell to a record low in 2010. It is expected to set a target year and call for regulating annual catch quotas.

TPP countries goal to conclude talks by year end

Twelve countries negotiating Trans-Pacific Partnership free trade rules, including Japan, reconfirmed at a ministerial meeting Thursday the goal of concluding their talks by the end of this year.

Japan will participate in discussions in a proactive and constructive manner to conclude the TPP talks by the year-end, Akira Amari, Japanese minister in charge of TPP negotiations, said in the first round of the two-day meeting.

Still, Japan, which joined the negotiations in July, is aiming to maintain its tariffs on five key items including rice and sugar, with Amari pointing out during the day's session that every country has a certain set of important items.

Precious Metals Prices 10.50 p.m. Eastern Time

Gold Price Futures    3 Months   US$  1,376.41

Silver Price Futures  3 Months   US$        23.12

Pilot free trade zone in Shanghai approved by China's State Council

China's State Council has approved the establishment of a pilot free trade zone in Shanghai, according to a Ministry of Commerce statement on Thursday.

Covering 28.78 square kilometers, the new zone will be built on the basis of existing bonded zones -- Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone.

Experiences gained from the pilot zone are expected to be copied in other parts of the country, according to the statement.

The zone will help foster China's global competitiveness and serve as a new platform for the nation's cooperation with other countries, and contribute to efforts in building "an upgraded version of China's economy," said the statement.

China will adopt a "negative list" approach in the foreign investment management in the zone, and innovate the country's opening-up mode, said the statement.

Ratings Agencies could downgrade U.S. Banks

According to the Wall Street Journal:
Moody’s Investors Service put ratings of big U.S. bank holding companies on watch for possible downgrade, citing a possible removal of extraordinary government support now that the industry is moving closer to formalizing plans for liquidating banks in crisis.

These biggest U.S. banks’ ratings have gotten a slight boost since the financial crisis erupted five years ago because of the extraordinary support the government extended to aid the financial system. More recently, regulators and lawmakers have worked with banks to come up with plans for their orderly liquidation in the event of another crisis.

Now that those plans are getting more firm, the government may withdraw its support and the holding company ratings could drop as a result, the ratings agencies said in separate announcements this week.

Moody’s said Thursday that a possible offset to the removal of government support is the reduction in the severity of losses for holding company creditors in the event of an orderly liquidation versus a bankruptcy.

The agency joins Standard & Poor’s Corp., which said earlier this week it was also reviewing the holding company ratings of Goldman Sachs, J.P. Morgan, Morgan Stanley and Wells Fargo,JP Morgan Chase,Bank of New York Mellon,State Street and Bank of America.

Euro zone indicators show broad base expansion in August

In an article published today in the Wall Street Journal says "Markit's euro-zone purchasing managers indexes show broad-based expansion in August, including in the so-called periphery countries, such as Spain and Italy. European stocks and corporate bonds should continue to win favor despite headwinds from U.S. monetary policy and emerging-market turbulence"
.The flash estimate of the August euro-zone composite PMI rose to 51.7 from 50.5 in July, Markit said, moving further above the 50 mark that separates contraction from expansion and rising for the fifth consecutive month. Growth was once again led by Germany, where new export orders jumped, pushing the composite PMI to 53.4.

France disappointed. Its PMI dipped to 47.9, but forward-looking indicators appear encouraging: Manufacturing new orders rose and expectations in services remained positive. In any case, the French PMI has consistently understated the

strenghth of the economy.

   The really encouraging news was that the rest of the euro zone saw output rise for the first time since May 2011, across both manufacturing and services. Both domestic and export sales improved, Markit said, indicating both that economies have become more competitive and are benefiting from reduced fiscal strains.

Slower Growth of China and its impact on property markets in top and small cities.

"A flurry of housing investment over the past several years, fuelled in part by herd-like speculative buying, resulted in some developers building more housing than could be sold once the market began to slow.

Now, the concern is that the market could be cooling too quickly, and risk stalling one of the few engines in the economy that are still firing.

While new home prices in Beijing rose 14.1 percent in July from a year earlier and Shanghai prices were up 13.7 percent, smaller cities are lagging the major centers. The National Bureau of Statistics data showed average new home prices in China's top 70 cities up 7.5 percent on the year.

Housing, moreover, props up at least 40 other sectors, from cement to steel to furniture and home appliances. Local governments also depend heavily on revenues from land sales to developers to help service a debt pile worth trillions of yuan.

Still, some developers are scaling back.

Last month, Yu Liang, chief executive of China Vanke , the biggest listed developer by sales, said the company was pulling back from Yixing city in prosperous Zhejiang province.

And Yi Xiaodi, the president of Sunshine 100, a mid-sized residential developer based in Beijing, has put off plans to expand in Zhuzhou, a city with 3.9 million residents in Hunan.

"We changed our mind because of oversupply risk," Yi said. "We will avoid investing in cities where industrial competitiveness is fading and the market is plagued with over-supply. That will be very dangerous." 

China's leadership, acutely aware of housing's importance to the economy, appears to have set aside concerns that a property boom was pricing millions of families out of the market.

That is how industry executives and analysts took a July 30 pledge to maintain "steady and healthy development of the property sector" by the Politburo, the top decision-making body.

But leaving the market alone may not be enough. With stock markets volatile and caps on bank deposits, property remains the only game in town for millions of Chinese savers.

Total property investment accounted for 14.8 percent of gross domestic product in the first half of 2013, up from 13.5 percent a year earlier. Residential property accounts for 70 percent of that total.

Most economists believe incomes will keep growing enough to sustain relatively healthy demand for at least a year, and the government does plan to encourage urbanization.

"We expect a stable property sector policy in the coming year and see a modest property recovery to continue," said UBS chief China economist Tao Wang.

Industry executives say there is now a tide of new investment coming to top cities and provincial capitals, because demand remains strong. Over time, economists say, that could ease housing price inflation in China's biggest cities.

 Source: Reuters

China´s international reserves and Chimerica

The twenty-first-century economy has thus far been shaped by capital flows from China to the United States – a pattern that has suppressed global interest rates, helped to reflate the developed world’s leverage bubble, and, through its impact on the currency market, fueled China’s meteoric rise. But these were no ordinary capital flows.
They came primarily from the People’s Bank of China (PBOC), as it amassed US$3.5 trillion in foreign reserves largely US Treasury securities. 
  Much has been said about the fact that a single institution wields so much influence over global macroeconomic trends has caused considerable anxiety, with doomsayers predicting that doubts about US debt sustainability will force China to sell off its holdings of US debt. This would drive up interest rates in the US and, ultimately, could trigger the dollar’s collapse.
But selling off US Treasury securities, it was argued, was not in China’s interest, given that it would drive up the renminbi’s exchange rate against the dollar, diminishing the domestic value of China’s reserves and undermining the export sector’s competitiveness.
To describe the symbiotic relationship between China’s export-led GDP growth and America’s excessive consumption, the economic historians Niall Ferguson and Moritz Schularick coined the term chimerica
In 2009, these distortions led Ferguson and Schularick to forecastChmericas  collapse  a prediction that seems to be coming true. With the reserves’ long-term effects on China’s internal economic dynamics finally taking hold, selling off foreign-exchange reserves is now in China’s interest.

Jim Rogers Thoughts on Central Banks monetary policies

"I am worried about the global economy because this is all artificial money. Things are looking better because the world is printing money. All the major central banks including the US, Japan, UK are printing money. This is all artificial, and this is going to end badly, when it does. Nobody so far had success by printing money."

Precious Metals Prices 8.10 a.m. Eastern Time

Gold Price Futures         3 months      US$  1,376.42

Silver Price Futures       3 months      US$       23.20

July power sales post 1st rise in 7 months

Electricity sales by the nation's 10 major power suppliers rose 2.5 percent from a year before to 70.12 billion kilowatt-hours in July, the first increase in seven months, the Federation of Electric Power Companies of Japan said Monday.

The increase reflected greater household use of air conditioners amid a heat wave, as well as the first rise in electricity sales to large-lot industrial users since May 2012.Sales to large-lot users rose 0.7 percent to 23.93 billion kilowatt-hours due to brisk demand from main sectors such as machinery, steel, and paper and pulp on the back of the yen's weakness.

Source: NewsOnJapan

HSBC Flash China Manufacturing Purchasing Managers' Index rose in August to 50.1

The HSBC Flash China Manufacturing Purchasing Managers' Index rose in August to 50.1, its highest in four months, as new orders rebounded. That was an encouraging turnaround from July's 47.7 reading, the weakest in 11 months. Any number over 50 means activity is expanding; below 50 represents a contraction.

Economists cheered the survey result as evidence that government efforts to arrest a rapid slowdown were starting to work, while cautioning that a strong rebound still appeared unlikely.

Beijing has launched a series of targeted measures recently to support the economy, including scrapping taxes for small firms, offering more help for ailing exporters and accelerating investment in urban infrastructure and railways.
A sub-index measuring new orders rose to a four-month high of 50.5 in August from 46.6 in July. The employment sub-index of the flash PMI also picked up, but still hovered below the 50 watershed line. But a sub-index on new export orders edged lower -- a reminder that global demand for Asia's exports remains sluggish.

Source: Reuters

End of easy money makes high growth rates of Asian Economies increasingly vulnerable Part I

Asia's economic miracle looks increasingly vulnerable to the end of a decidedly earthly phenomenon - five years of ultra-cheap financing sparked by the U.S. monetary policy dubbed "quantitative easing".
But the sell-off gripping emerging foreign exchange and equity markets this week has exposed an Asia that, despite amassing huge currency reserves and devising policies to insulate it from the kind of fund flight that triggered the Asian financial crisis in 1997 and 1998, has once again become susceptible to the rapid reversal of capital inflows.

Economists, bankers and investors say they caught a glimpse of Asia's possible future in June, when regional markets convulsed at a suggestion by Federal Reserve chairman Ben Bernanke that the central bank of the world's largest economy might start scaling back quantitative easing, or QE.

Those concerns have returned with a vengeance this week to batter markets in India and Indonesia.

Having failed to dismantle politically and socially knotty obstacles to growth, Asia has instead relied on low interest rates and massive borrowing to keep its economies expanding, particularly since the 2008/09 global financial crisis that prompted the Fed to start aggressively buying bonds.

But whether it's immigration and labour laws in Japan, the dominance of state enterprises in China or hurdles to foreign investment in India, each nation faces its own third rail of reform - one that stands to revive productivity and boost potential growth if resolved.

Source:  Reuters

Global Property Markets II

With these criterion Canada’s market is especially vulnerable. A large bubble now looks set to burst. Home sales in March were 15% down on a year earlier. Buyers are in short supply. A recent poll showed that only 15% of Canadians are likely to buy a home in the next two years, down from 27% last year—the steepest decline in the 20-year history of the survey. After a big boom, the housing bust will be a wrenching affair.
By contrast, the recovery in the United States, where house prices are up by 9.3%, is based on solid foundations. Previous falls in prices have made homes cheap by historical standards. The recovery has been driven by investors rather than owner-occupiers, but interest on the part of homeowners is increasing. Housing starts are rising sharply.
In the crisis-stricken euro area the Spanish freefall will continue, judging by still- elevated valuations. Housing markets are depressed throughout southern Europe, notably in Italy. But the agony is no longer confined to the periphery of the euro zone. 
Home prices are falling fast in the Netherlands and they are also sagging in France. High valuations in both countries point to more misery ahead.
The big exception in the euro zone remains Germany, which avoided the great housing boom before the financial crisis. Property prices continue to rise but modestly.

Source: The Economist

China's "Taobao Villages" a transitional stage in agricultural and rural modernization.

Wantou, a village 350 km from Beijing, has become known as one of China's "Taobao Villages," home to over 500 online stores on Taobao, China's largest online shopping site under the e-commerce giant Alibaba.

With a stable but "boring" job in a nearby town, An in 2009 pioneered online sales of handwoven crafts in Wantou, where a tradition of wicker handicrafts has been handed down for at least 600 years.

An has since opened a physical store and a small factory with the cooperation of six neighboring family workshops in order to fill the orders flooding in from customers across the country.

"The online store has gained popularity and trust among netizens, who also bring business to my physical store," said An.

Chinese internet Alibaba defines a "Taobao Village" as a village in which over 10 percent of households run online stores and village e-commerce revenues exceed 10 million yuan per year.

By the end of 2012, more than 1.63 million Taobao stores were registered in rural areas. Total transactions from the 14 "Taobao villages" hit 5 billion yuan last year, according to a report released by Alireserach.

The growth of "Taobao Villages" has brought vitality to traditional agricultural areas of China, said Chen Liang, senior expert with Aliresearch.

Chen said that the villages are exploring a new path for China, with potential to realize sustainable economic growth and narrow the urban-rural income gap, much like the miracle created in Xiaogang Village over 30 years ago.

Earlier this month, the government of Shandong Province, a region known as China's farm produce powerhouse, put forward preferential policies for developing e-commerce, including helping graduates and migrant workers start online farm produce trade in remote areas.

China's Internet users reached 591 million in the first half of 2013, and e-commerce revenues hit 4.98 trillion yuan in the same period.

"We should pay closer attention to 'Taobao villages' in the long term. They are a transitional stage in agricultural and rural modernization," said Qiu Zeqi, director of the Center for Sociological Research and Development Studies of Peking University.

Source: Xinhua

U.S. With mortgage interest rising,the outlook becomes less certain

Record-low interest rates fueled a recovery in the housing market that spread to the broader economy. With mortgage interest rates rising in recent months, the outlook has become less certain.
The Fed signals that it may begin to  tap the asset purchases has led to an increase in the 30-year fixed-rate mortgage to more than 4 percent in recent weeks, having hovered in the 3 percent range for months.
At the National Association of Realtors, which releases the figures on sales of previously owned homes, spokesman Walter Molony says, "It looks like most of the growth in sales has already taken place this year. Higher mortgage interest rates are now causing home sales to level out."
Molony says the trade group expects sales to rise between 2 percent to 3 percent in 2014, with an increase in home prices of up to 6 percent. That's compared to what he characterizes as an 11 percent gain for this year.

Economist Robert Brusca notes that there's been a significant recovery from the depths of the housing market collapse. "Both new and existing home sales have been rising strongly in this recovery after a slow start," Brusca says. "Existing sales are up some 47 percent from their low point, while new home sales are up some 84 percent from their low. From those reference points, median existing home prices have risen 17 percent, with new home prices up 13 percent."

At the same time, he's sees some signs that are worrisome. "For low-priced houses ($100,000 and lower), existing home prices are still lower year-over-year by nearly double digits. New homebuilding is cherry-picking the hottest regions and is not representative of the (U.S.) housing market." Homebuilder stocks have recently been declining amid lower expectations.

As for helping to spread the wealth, so to speak, to the broader economy, Brusca says, "It is not surprising that sales of items that relate to homebuying -- like appliances, furniture and building materials -- are lagging."

Source: Bankrate

Research & Development in the Euro Zone

One of the five headline targets of Europe 2020 Strategy is to
achieve an R&D intensity (R&D expenditure as a percentage of
GDP) of 3% in the EU. In 2011, R&D intensity in the EU-27 stood
at 2.03%. Despite an increase on the 2010 figure (2.01%), it was
below the figures recorded in Japan (2009: 3.36%), South Korea
(2010: 4%) and the United States (2009: 2.87%), but higher than
in China (2009: 1.7%).
Among the EU Member States, only Finland (3.78%), Sweden
(3.37%) and Denmark (3.09%) exceeded the EU goal of devoting
3% of GDP to R&D, also outperforming the United States.
Another seven Member States, namely Germany (2.84%), Austria
(2.75%), Slovenia (2.47%), Estonia (2.38%), France (2.25%), the
Netherlands and Belgium (both 2.04%) were above the EU-27
average although below the target figure of 3%.
Between 2005 and 2011, R&D expenditure in the EU-27 increased
by an average of 3% per year, reaching EUR 257 billion in 2011.
Germany, France and the United Kingdom together accounted
for more than half of all R&D expenditure in the EU-27.
The business enterprise sector (BES) was the largest of the
four main institutional sectors of R&D performance in 2011,
accounting for 62.3% of EU-27 R&D expenditure. The higher
education sector (HES) and government sector (GOV) followed
with shares of 24.0% and 12.7% respectively.
In many of the countries under review, the ‘manufacturing’
sector accounted for the greatest share of business enterprise
R&D expenditure. This was notably the case in Germany,
Slovenia, Finland and Sweden, where 75% or more of R&D
expenditure by the BES was devoted to manufacturing. However,
eight other Member States (Bulgaria, Estonia, Ireland, Cyprus,
Latvia, Lithuania, Portugal and the United Kingdom) saw more
than half of their expenditure go on the services of the business
economy.

Source:  Eurostat

Enhance competitiveness of Chinese Agriculture

In recent years, investment in excess of three billion yuan has been devoted to furthering agricultural industrialization, an important part of the national program for enhancing the international competitiveness of Chinese agriculture. In 2004 alone the government set up 35 agricultural programs, supported by 30 million yuan from the Central Government, over 50 million yuan from local governments, some 100 million yuan of bank loans and more than 600 million yuan raised by enterprises and farmer.
Now a pattern has been formed, with 582 key national enterprises and over 2,000 key provincial enterprises as spearhead, and agencies of various forms connecting farmers with the production base. Leading enterprises in certain sectors, e.g., corn processing, dairy industry and chicken production, have taken major market share and play an increasingly important role in the development and pricing of their respective industries.

Since 2003, the state has set up six types of demonstration projects for the industrialization of modern agro-technology, so as to promote the use of advanced technology for agricultural production, and enhance foreign earnings from exports of farm products.

These projects include industrialization of breeding and cultivation of excellent new varieties and fine strains; high-efficiency, eco-friendly planting and aquatic breeding technology; water-saving and precision technologies; downstream processing of agricultural and ancillary products; pollution-free inputs (e.g., fertilizer and fodder) and the establishment of an agricultural information platform. The "downstream processing of main agricultural products project" was listed as an important sci-tech project during the 2000-2005 Five-Year Plan period. It aims at developing key technologies and equipment for downstream processing of staple agricultural products, research into integrated quality control systems and the quick testing of agro-product technology and equipment. Once completed, some of China's technological aspects will meet the advanced international standard. Meanwhile, the "dairy industry development" and "water-saving agriculture" projects have been listed among important sci-tech application programs initiated by the Ministry of Science and Technology.

Source: Xinhua

China: Innovation in railway funding and speed up railway construction

The central government on Monday published detailed plans to innovate railway funding and speed up railway construction as the new leadership is devoted to deepening reforms.

The State Council said in a statement that railway investment this year is likely to exceed the planned amount. Also, for this year and the following two years, the central government will provide transitional subsidies for China Railway Corp, established in March after a separation of the now-defunct ministry of railways' government and enterprise functions.

These measures are expected to strengthen growth in the world's second-largest economy, which slowed to 7.5 percent in the second quarter of this year.

Railway construction should be accelerated in an attempt to exceed the 2013 investment plan, while the building of railways and related infrastructure should be prioritized in the western and less-developed areas, the statement said.

The reform will see railway fundraising methods diversified and encourage private investment in railway construction as the ownership and management rights of intercity, suburban and branch railways, as well as railways for resource development, will be open to local government and social capital.

In addition, a railway development fund to support national railway projects will be set up with founding capital from the central financial fund coupled with social investment. Private investors will gain reasonable rewards, although they will not directly participate in the construction and management, according to the statement.

"Before the railway freight price determined by the market and the accounting system for nonprofit transportation is established, central finance will support the CRC with transitional subsidies this year and the following two years in view of the latter's insufficient capital, heavy interest rate and the nonprofit function of railway transportation," the statement said.

Source  China Daily

Sixteen Asian and Oceanian countries Monday agreed to adopt common tariff rates

Sixteen Asian and Oceanian countries Monday agreed to adopt common tariff rates in principle under a proposed regional free trade pact.

The countries agreed to work out a broad plan for tariff reductions and elimination under the Regional Comprehensive Economic Partnership pact before a ministerial meeting is held in Myanmar in summer 2014, said sources with access to the conference.In addition, the nations confirmed that they will speed up discussions so that they can end the RCEP talks by the end of 2015.

China's central bank governor Zhou Xiaochuan ready to liberaze deposit interest rates

China's central bank governor Zhou Xiaochuan said Monday the economy will not post persistent slowdowns, indicating the bank is ready to free the long-awaited deposit interest rates to fully liberalize the financial market.

During an interview, Zhou told reporters that the People's Bank of China (PBOC) will continue to implement the prudent monetary policy and conduct some structural finetunings if needed.

The current growth rate is at normal level. China still has powerful endogenic potential of growth and will not slow further, he said.

In response to when the central bank will liberalize the deposit interest rates, Zhou said PBOC is ready and the reform is underway as planned. He is personally optimistic.

Precious Metals Prices 7.10 Eastern Time

Gold Price Futures          3 months      US$   1,366.02

Silver Price Futures        3 months      US$       22.96