Copper prices fell after China's decision to cut copper production capacity

Copper prices futures fell -2.5% today and closed at US$ 3.10 per lb, locking their second straight weekly drop.

Investors and analyst say copper's latest leg lower was prompted by China's decision overnight to shut down 654,400 metric tons of outdated copper-production capacity by the end of September. The move is part of a broader government effort to upgrade and consolidate Chinese industry.

China accounts for about 40% of the world's copper demand, and investors have been worried that slower purchases by factories and copper refiners there will lead to lower global prices of the industrial metal.

China spends well over 40% of its healthcare budget on medicines expenditure

While most Western countries spend 10-12 percent of their healthcare budget on medicines, in China it is well over 40 percent, a disparity that goes to the heart of Beijing's crackdown on the industry.

A promise this week by GlaxoSmithKline to make its drugs more affordable in China in the wake of a bribery scandal is an important lever Chinese authorities may now use to start redressing the balance.

Britain's biggest drugmaker has given no details on the size of the price cuts it will consider, but an examination of its discounts in other emerging markets suggests there may be scope for reductions for some medicines of a third or more. Other pharmaceutical firms might have to follow suit.

Chinese police have detained four Chinese GSK executives in connection with allegations the drugmaker funneled up to 3 billion yuan ($489 million) to travel agencies to facilitate bribes to doctors and officials to boost sales and raise the price of its drugs.

The powerful National Development and Reform Commission said it was examining pricing by 60 local and international pharmaceutical companies.

Data from the World Health Organization (WHO) and other groups shows how China's drugs market has   not worked well  with a system that effectively encourages public hospitals to prescribe large amounts of expensive medicine to earn revenue, given cuts in government subsidies over 30 years.

China's government has also faced criticism that some drug prices are higher than in South Koreaand Taiwan, both developed economies.

"You have to question why the Chinese government is buying high-priced originator brands for off-patent medicines. It's clear they could treat many more patients, without any increase in expenditure, if they only procured lower-priced, quality-assured generics," said Margaret Ewen, coordinator for global pricing at Health Act International.

The Chinese healthcare system should be reformed, hospitals get 40 percent of their income from prescribing drugs, giving doctors an incentive to use costly products and creating a fertile seedbed for corruption.

The most recent edition of the WHO's World Medicines Situation report, issued in 2011, said that in China "even in the most basic primary care level institutions, patients are frequently provided with unnecessary and expensive drugs".

As a result, medicines account for nearly half, or 43 percent, of China's total health expenditure, the WHO said.

Source: Reuters

Oil prices fell on concerns over the slowdown of China's economic growth

 Oil prices dropped Friday as worse-than-expected Chinese manufacturing data sparked concerns over the slowdown of China's economy growth.

Light, sweet crude for September delivery went down 0.79 U.S. dollars to settle at 104.7 dollars a barrel on the New York Mercantile Exchange.

Source: Xinhua

Marc Faber: Investors should pay more attention to Chinese economic indicators rather than focus on what Ben Bernanke says.

Which economies within the emerging market pack look more attractive and why?

Marc Faber : I am not yet sure what I will buy. As mentioned earlier, I would prefer to wait and see how economic developments and policies shape up. In fact, investors should pay much more attention to the economic developments in China rather than focus on what Ben Bernanke says.

My sense is if the Chinese economy slows down, the whole of Asia will slow down very meaningfully. Besides, other emerging economies that supply resources to China will also be severely impacted.

So overall, between the EM pack and the developed world, which economies would you bet on from a 6 – 12 month perspective?

Well relatively speaking, I think that the US may outperform the EM pack but it doesn’t imply that the US will go up. It may actually go down less than the EMs. I prefer to hold cash and will invest in EM economies only if there is a good opportunity. - 

Interview of Sprott Management News

World Gold Council China could overtake India as the world's largest gold market.

The latest report from the World Gold Council said that China's gold demand could hit 1000 tons this year, overtaking India as the world's largest gold market. India's average yearly imports of should be 963 tons. According to the Council, "China will probably be the world's biggest gold consumer this year for the first time on an annual basis" as driven by "both jewelry and investment demand. Jewelry will be the biggest overall demand segment, but investment will grow fastest". Meanwhile, it also expected that jewelry demand would "increase globally this year as a proportion of overall gold demand for the first time in 12 years".

Government Bonds

Government Bonds

                                                                                        Price          Yield
                                                                                      Change           %
                                                                                       

U.S. 5 Year			0/32	1.380
U.S. 10 Year			1/32	2.569
U.S. 30 Year			6/32	3.630
Germany 2 Year			-0/32	0.163
Germany 10 Year			2/32	1.670
Italy 2 Year			-0/32	1.978
Italy 10 Year			-5/32	4.410
Japan 2 Year			0/32	0.134
Japan 10 Year			3/32	0.794
Spain 2 Year			-2/32	1.909
Spain 10 Year			5/32	4.613
U.K. 2 Year			1/32	0.294

Source: The Wall Street Journal                                                                                      

Japan needs amphibious units and surveillance drones.Call of the Ministry of Defense.

Japan needs amphibious units and surveillance drones to protect its outlying islands, the defense ministry said Friday.

In a paper that had been widely reported on Thursday, the ministry said it was necessary to boost the strength and range of forces that could be used to protect Japan’s far-flung territories.

“To deploy units quickly in response to a situation, it is important… to have an amphibious function that is similar to U.S. Marines,” capable of conducting landing operations on remote islands, it said.

The interim report, which was approved by a high-level defense meeting on Friday, also advocates the introduction he phraseology reflects an on-going debate among politicians about the need to re-interpret aspects of the pacifist country’s military stance, defense officials told reporters, and steered clear of any mention of “first strike”.

“We are not talking about pre-emptive attack. That’s not good,” a defense official said.

“We have this awareness that given changes in the security environment surrounding Japan, we have to discuss whether it is enough for us to depend on US forces in terms of capability to attack enemy territory,” he told reporters.

Japan and the U.S. have a security treaty that binds Washington to coming to Tokyo’s defense if it is attacked. a drone reconnaissance fleet that could be used to monitor distant islands.

WSJ EU Zone Closer to Stabilization

''The  Center for Economic Policy Research(CEPR) and the Bank of Italy said Friday the Eurocoin indicator rose to minus 0.09% in July from minus 0.18% in June to reach its highest level since the first half of 2012.

The rise in the index, one of the earliest measures of economic activity in the currency area, is consistent with other recent surveys and indicators in recording an improvement in the EU economy, although it is at odds with manufacturing and services purchasing managers' surveys in that they pointed to an expansion this month for the first time since early 2012.

Those favorable signs continued to arrive Friday, as the results of a monthly survey conducted by France's national statistics agency showed consumers became more optimistic about their prospects in July. Insee's headline measure of consumer confidence rose to 82 from 79 in June. That follows improvements in measures of business confidence in Germany, the Nederlands and Belgium and consumer confidence in Italy''.

Precious Metals Quotes

Gold Price Futures       3 months     US$ 1,326.25

Silver Pices Futures     3 months     US$     19.97

Japan: CPI in June +0.3% highest rate since 2008

Consumer prices in June rose the most since 2008, 0.4 percent from a year earlier, an early sign that Japan's economy may be starting to shake off deflation, the Internal Affairs and Communications Ministry said Friday.

The median estimate of 29 economists was for a 0.3 percent gain, excluding fresh food, a Bloomberg News survey showed. Excluding energy as well, prices dropped 0.2 percent, continuing more than four years of declines.

As Prime Minister Shinzo Abe's policies weaken the yen and energy costs rise, the increase in prices points to a gradual shift away from the deflation that has dragged on the economy for 15 years. With the Bank of Japan rolling out unprecedented monetary easing from April, the next challenge for Abe is to loosen constraints on the labor market and companies to achieve sustained growth and the BOJ's 2 percent inflation goal.

Government Bonds Quotes

Government Bonds
                                                                                         Price           Yield
                                                                                        Change           %

U.S. 5 Year			-1/32	1.386
U.S. 10 Year			-2/32	2.583
U.S. 30 Year			-1/32	3.643
Germany 2 Year			0/32	0.155
Germany 10 Year			0/32	1.676
Italy 2 Year			0/32	1.978
Italy 10 Year			0/32	4.390
Japan 2 Year			0/32	0.134
Japan 10 Year			3/32	0.792
Spain 2 Year			0/32	1.868
Spain 10 Year			0/32	4.632
U.K. 2 Year			0/32	0.326
U.K. 10 Year			0/32	2.381

  Source: WSJ

Japanese Investors buying Foreign Bonds

Japanese investors snapped up foreign bonds for a third straight week last week and analysts say that the long-awaited trend may be finally under way, signaling the next leg lower for the yen.

Data released on Thursday showed Japanese investors bought a net 549.3 billion yen ($5.48 billion) of foreign bonds in the week to July 20. That followed net buying worth about 1.106 trillion yen in the previous week, the largest amount since September 2012.July looks set to be the first month of net foreign bond buying in six months, Reuters reported.

Some Board members of BOJ doubt success of Abenomics

Some Bank of Japan policymakers are becoming more vocal in expressing concerns about the economic outlook, threatening to pick away at what has been a unified public position of optimism key to the central bank's reflationary message.

The three policymakers on the nine-member board see more risks than their colleagues from Japan's planned increase in a domestic sales tax in April, a contentious issue Prime Minister Shinzo Abe must deal with after his resounding election victory on Sunday.They are also more concerned than the others about a slowdown in China's economic growth, which has become more apparent in recent months.
With the economy responding well to the Abenomics phenomenon of aggressive monetary policy, fiscal spending and the promise of economic reform, the pessimists see no imminent need for additional growth stimulus.
But their doubts may gain more traction next year once Japan feels the pinch of the sales tax hike and China's slowdown, and so undermine the BOJ's relatively upbeat message. The BOJ's economic forecasts project a stronger recovery than private analysts by some margin as the central bank targets turning years of deflation into 2 percent inflation in two years.
"Still, the pessimists have a point. Even the optimists aren't convinced that everything is on track. There's still a long way ahead to achieving 2 percent inflation."

The pessimists' concerns may also win over the board into taking stronger money market measures if government bond yields spike again, unlike in recent months when the central bank refused to be drawn into taking stronger measures as 10-year returns jumped to 1 percent from just 0.3 percent

Source: NewsonJapan

China's Central Bank liberalize interest rates for loans

China's central bank announced interest rate reforms on Friday that are a milestone in China's financial marketization. It removed the floor on lending rates, allowing banks to cut rates as much as they like to attract customers, scrapped the controls on bill discount rates and lifted the ceiling on lending for rural banks. However, it did not remove the ceiling on deposit rates.
The long-term benefits of lifting controls on lending rates cannot be underestimated as it is the start of China's market-oriented reform of its financial market. Before the latest reforms the interest rates for both loans and deposits had controls relating to the benchmark rate and were strictly regulated by government.

Meanwhile, the central bank's relaxation on bill discount rates means that banks can set their own prices. This change is good for guiding the market to use the Shanghai Interbank Offered Rate in the interest rate pricing process, which is a market-oriented practice, rather than using the benchmark interest rate as before.

Moreover, such a change will help promote interest rate liberalization. The central bank, instead of relying on the open market, can widely use the short-term interbank offered rate to regulate market liquidity as developed countries do.

The reforms mean banks will now give risk pricing to different borrowers based on their credit situation. However, this means banks will need to improve their risk pricing ability, which requires the establishment of an effective credit appraisal system as well. This will allow banks to compete on price.

Interest rate liberalization in China is being carried out gradually, and to some extent, that is why many problems in financial market exist.

The key is freeing deposit rates. A liberation of deposit rates would force banks to carry out effective risk pricing considering the floating costs and make them more cautious and rational in their commercial activities. Therefore, after removing the control on the interest rates for lending, China should seek to liberate the deposit rates in a timely manner.

Source: Xinhua

Precious Metals Prices

Gold Price Futures     3 months          US$  1,338.69

Silver Price Futures   3 months           US$     20.26

EIA report Present and Future of Energy demand Part I

The IEA in its latest report International Energy 2013 Outlook projects that "total world energy
use rises from 524 quadrillion British thermal units(Btu) in 2010 to 630 quadrillion Btu in 2020
and to quadrillion Btu in 2040".
   Much of the growth in energy consumption occurs in the BRIC economies Brazil,Russia,India and China.
   "Energy use in non-OECD countries increases by 90 percent; in OECD countries, the increase is 17 percent".
   Renewable energy and nuclear power are the world's fastest-growing energy source.However, fossil fuels continue to supply almost 80 percent of world energy use through 2040. Natural gas is the fastest-growing fossil fuel in the outlook. Global natural gas consumption increases by 1.7 percent per year. Increasing supplies of tight gas, shale gas, and coalbed methane support growth in projected worldwide natural gas use. Coal use grows faster than petroleum and other liquid fuel use until after 2030, mostly because of increases in China's consumption of coal and tepid growth in liquids demand attributed to slow growth in the OECD regions and high sustained oil prices.
  The industrial sector continues to account for the largest share of delivered energy consumption; the world industrial sector still consumes over half of global delivered energy in 2040. Given current policies and regulations limiting fossil fuel use, worldwide energy-related carbon dioxide emissions rise from about 31 billion metric tons in 2010 to 36 billion metric tons in 2020 and then to 45 billion metric tons in 2040, a 46% increase.
 Because of the uncertainty of the present world economic conditions it is difficult to project growth rates of the developed 
countries,and economic unions and those of the emerging markets.
The report assumes world's real GDP rises by an average of 3.6 % per year from 2010 to 2040. The fastest rates of growth are projected for the emerging economies, where combined GDP increases by 4.7% per year. In the OECD  GDP grows at a much slower rate of 2.1% per yeart. The strong growth in non- OECD GDP drives the fast-paced growth in future energy consumption projected for these nations.
In the long term, the IEO2013Reference case projects increased world consumption of marketed energy from all fuel sources through 2040 . Although liquid fuels—mostly petroleum-based—remain the largest source of energy, the liquids share of world marketed energy consumption falls from 34 percent in 2010 to 28 percent in 2040, as projected high world oil prices lead many energy users to switch away from liquid fuels when feasible. The fastest growing sources of world energy in the Reference case are renewables and nuclear power. In the Reference case, the renewables share of total energy use rises from 11 percent in 2010 to 15 percent in 2040, and the nuclear share grows from 5 percent to 7 percent.

U.S. Energy Secretary small but continued growth of electric vehicle sales.

U.S. Energy Secretary Ernest Moniz today "highlighted the continued growth of electric vehicle sales – doubling in the first 6 months of 2013 compared to the same period in 2012" – as the Energy Department released its most recent pricing data showing the low cost of fueling on electricity.  The eGallon, a quick and simple way for consumers to compare the costs of fueling electric vehicles vs. driving on gasoline, rose slightly to $1.18 from $1.14 in the latest monthly numbers, but remains far below the $3.49 cost of a gallon of gasoline. 

Plug-in electric vehicle (PEV) sales tripled from about 17,000 in 2011 to about 52,000 in 2012.  During the first six months of 2013, Americans bought over 40,000 plug-in electric vehicles (PEV), more than twice as many sold during the same period in 2012. 

The latest numbers also show how the early years of the PEV market have seen much faster growth than the early years of the hybrid vehicle market.  Thirty months after the first hybrid was introduced, monthly sales figures were under 3,000.

Fed would refine forward guidance monetary policy

According to the Wall Street Journal "The Federal Reserve is on track to keep its $85 billion-a-month bond-buying program in place at its policy meeting next week, but officials likely will debate changes to the way the central bank describes its plans for the program and for short-term interest rates"
.At their July 30-31 meeting, Fed officials are likely to discuss whether to refine or revise "forward guidance," the words they use to describe their intentions for the next few years.
US Central Bank Chairman has said that it intends to keep short-term interest rates near zero at least until the jobless rate drops to 6.5% or unless inflation rises to a 2.5% annualized rate. 
Some Fed officials argue it would be too soon to raise short-terrm rates even after joblessness drops below 6.5%. In part, they see inflation as unthreatening, which means rates can stay low longer. They fear the jobless rate, now 7.6%, doesn't reflect other weaknesses in the labor market, such as people leaving the workforce or working part time when they want full-time work.
Futures markets suggest investors are back to believing a series of rate increases aren't likely until 2015. As a result, officials might decide to avoid any change in their message and leave well enough alone for now.

Source: WSJ

Precious Metals Prices

Gold Price Futures    3months      US$ 1,331.97

Silver Price Futures   3months      US$     20.23

China´s job market grows. But employment pressure remains

Ministry of Human Resources and Social Security spokesman Yin Chengji said at a press conference that China created more jobs in the first half compared with the same period last year.

igures from the ministry showed that China added 7.25 million jobs in the first six months of the year, an increase of 310,000 year on year. The registered urban unemployment rate stood at 4.1 percent at the end of the second quarter.

The government has set a goal of creating no less than 9 million jobs this year, with the full-year unemployment rate set to reach less than 4.6 percent.

Yin said the service sector, particularly Internet-related businesses, has helped absorb new labor.

He said the employment situation in east China has improved in the last two months, with a rebound in monthly figures. The number of newly-added jobs increased rapidly in underdeveloped west China, while that of central China remained stable in the first six months.

Source Xinhua

China´s textile industry facing challenges.

China's cotton textile industry is facing difficult challenges, as sales have been poor amid the weak recovery of the international market, as well as domestic factors.

The Fujian Hongyuan Group, located in southeast China's Fujian Province, is the largest cotton textile enterprise in the province, with an annual output value of 1 billion yuan (163 million U.S. dollars).

Statistics released by the National Bureau of Statistics showed that the added value of the textile industry from January to June was greater than that of the same period last year. However, exports to Europe, Japan and other major overseas markets have plunged.

Statistics released by the National Bureau of Statistics showed that the added value of the textile industry from January to June was greater than that of the same period last year. However, exports to Europe, Japan and other major overseas markets have plunged.

"Although a rebound in textile product exports has been seen in the past six months, things do not look optimistic for the second half. It may be worse than the first half and could plunge even further in the future," said Chen Cangsong, vice president of Hongyuan. 

The Chinese government started purchasing cotton for temporary state reserve in 2011 in order to protect cotton farmers' interests. As a result, domestic cotton prices became higher than those of the global market.

Domestic cotton prices stood at about 19,000 yuan per tonne this year, 3,500 to 4,000 yuan higher than the price of imported cotton.

However, imported cotton has been hit with high tariffs and enterprises who want imported cotton must abide by a strict quota system.

Since southeast Asian nations like Vietnam, Bangladesh, India and Cambodia can freely purchase cotton at a price of about 13,000 yuan per tonne and have lower labor costs, those countries are seeing an increasing number of orders from European markets that used to order from China.

Source Xinhua

Initial jobless claims rose 7,000.

Initial jobless claims rose 7,000 in the July 20 week to 343,000 with the 4-week average down slightly to 345,250. The trend for the data are flat, pointing to no discernible improvement underway in the jobs market.

Once in a while continuing claims, which are reported with a 1-week delay, get some attention and that may be the case to a degree for today's report as the reporting period, the week ending July 13, is also the sample week for the monthly employment report. And the data for the week show big improvement with a 119,000 decline to 2.997 million. But the decline only partially reverses big increases of 93,000 and 70,000 in the prior two weeks and leaves the 4-week average at 3.022 million which is still more than 40,000 higher than the month-ago comparison. The unemployment rate for insured workers dipped back 1 tenth to 2.3 percent but is unchanged compared to a month ago.

July is the time that automakers shut down their factories for retooling and put their workers on leave, which brings into play major adjustment issues and substantially clouds the data. Don't expect today's report to have much influence at all on the jobs outlook or the markets. 

Durable Good Orders surged 4.2% in June.Nondefense aircraft gained 31.4%.Excluding Transportation,Durable oders were unchanged in June

Durables orders sharply beat expectations at the headline level but it was almost entirely due to aircraft orders at Boeing. Elsewhere, durables orders were mixed, ending net at flat for June. New factory orders for durables in June surged 4.2 percent, following an upward revised 5.2 percent (originally 3.7 percent) for May. Market expectations were for a 1.5 percent boost for June. The transportation component spiked 12.8 percent after a 14.8 percent jump in May. Excluding transportation, durables orders were unchanged in June, following a 1.0 percent rise in May. The consensus expected a 0.6 percent decrease in orders excluding transportation.

Unfilled orders, however suggest some overall continuing momentum for manufacturing. Overall unfilled orders jumped 2.1 percent in June, following a 1.1 percent increase in May. This was mostly aircraft but non-transportation was still respectable. Unfilled durables excluding transportation increased 0.9 percent in June, matching the May pace.

Turning back to new orders data, within transportation, motor vehicles gained 1.3 percent, nondefense aircraft jumped 31.4 percent, and defense aircraft increased 18.7 percent. Outside of transportation, components were mixed but net zero. Gains were seen in fabricated metals, machinery, and "other." Declines were seen in primary metals, computers & electronics, and electrical equipment.

Precious Metals Quotes

Gold Price        3months Futures        US$ 1,322.48

Silver Price       3months Futures        US$     20.13

Foreign Tourists to Japan increased 22.8% in H1

The number of foreign visitors to Japan in January-June rose 22.8 pct from a year before to an estimated 4,954,600, hitting a record high for the first-half period, the Japan National Tourism Organization said Wednesday.

The increase came as the yen's recent weakening made travel to Japan cheaper, according to the government-affiliated agency. Also behind the growth were service launches by new low-cost carriers.The number of visitors increased for the second straight year on a first-half basis, according to the JNTO.