Precious Metals Prices

Gold Price Futures          3 months       US$  1,317.25

Silver Prices Futures       3 months       US$      19.97

Sony officials will reject proposal to spin off its entertainment arm

In May, the US asset management company Third Point proposed that Sony should spin off its entertainment arm and sell 15 to 20 percent of its shares on a US stock market. The US hedge fund is a major Sony shareholder.

Third Point thinks the money could be better spent rebuilding the company's electronics division.

Sony officials say they will reject the proposal at a board meeting as early as next week. They believe the entertainment arm can contribute to the company's future growth if it's run in combination with its electronics business that includes TV and video games.

Source: NewsonJapan

China: the risk of local goverment funding is well under control

The risk element of local government funding vehicles is well under control, said Shang Fulin, head of the China Banking Regulatory Commission in an interview with CCTV on Friday.

Shang said in general the risk exposure of lending to local governments is small because most of the loans are long-term and contained by effective regulations and controls.

By the end of June, outstanding loans via local government funding vehicles stood at 9.7 trillion yuan ($1.57 trillion), up 6.2 percent year-on-year.

"Most of the new lending to local government funding vehicles in 2013 went to projects that are in their final phase. As the total amount of lending increases, low efficiency of the use of funds and a lack of solvency may be observed," a note from the commission released on Friday said.

In response to mounting concerns over trusts and wealth management products - which are considered to be "shadow banking" by many people - Shang said the risk element in these products is controllable.

"Growth rates of such products are not significant. The balances of these products are basically the same as that of last year," said Shang.

The balance of wealth management products was 9.08 trillion yuan by the end of June, with non-standard credit assets totaling 2.78 billion yuan, 7 percent short of the level recorded in late March, when the commission released a notice on regulating the wealth management product business of the country's commercial banks.

Lenders need to keep a close eye on their liquidity management, said Shang.

"The liquidity crunch in June was a lesson to lenders that at all times the management of lenders must follow the principle of prudence. Safety and liquidity are always vital in the banking sector and financial system," said a CBRC note on Friday.

Source: Xinhua

China's surge in material consumption has created intense pressure on environment

China has surged ahead of the rest of the world in material consumption, which has created intense pressure on the country's environment, according to a report released by the United Nations Environment Programme (UNEP) on Friday.
According to the report, China has become the world's largest consumer of primary materials, including minerals, metal ore, fossil fuels and biomass, with domestic material consumption levels four times that of the United States.

The report said massive investment in urban infrastructure and manufacturing have caused the domestic per capita consumption of natural resources to increase at almost twice the rate of the rest of the Asia-Pacific region.

Urbanization and infrastructure have driven the consumption of minerals for use in construction and metal ore, while increased fossil fuel consumption has contributed to China's rising carbon dioxide emissions, the report said.

China's emissions of greenhouse gases per unit of economic output are four times the global average and twice that of the rest of the Asia-Pacific region, the report said.

Although the country is facing serious challenges, it also remains among the most successful in the world in improving resource efficiency, the report noted.

 In 2009, the circular economy promotion law was promulgated and put into force in order to improve resource efficiency, protect the environment and achieve sustainable development.

According to another UNEP-backed study released earlier this year, China invested 67 billion U.S. dollars in the renewable energy market in 2012, up 22 percent from last year, which consolidated its position as the world's dominant renewable energy market player.

Source: Xinhua

China's non-manufacturing sector rebounded in July

The purchasing managers index for China’s non-manufacturing sector rebounded after falling for three consecutive months, according to official data released yesterday.

The non-manufacturing PMI was 54.1 percent in July, up from 53.9 percent for June, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.

A PMI reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction.

The CFLP said China’s service sector is becoming increasingly active — boosting the economy.

In the service sector, the sub-indices for business activity and new orders both rose for two consecutive months, up to 53 percent and 50 percent, respectively.

Information-related consumption increased rapidly during the period, the CFLP said. New types of businesses appearing in the service sector will push growth in the second half, it said.

Construction activity also remained at a high level in July, according to the CFLP, with the sub-index for business activity staying above 58 percent.

China’s non-manufacturing PMI is based on a survey of some 1,200 companies in 27 sectors.

Source: Xinhua

China's July HSBC services PMI holds steady at 51.3

Activity in China's services sector expanded modestly in July, a private survey showed, as new business orders recovered from a multi-year low in a rare sign of resilience.
The HSBC/Markit Purchasing Managers' Index (PMI) for the services industry stood at 51.3 in July, unchanged from June and just a whisker above a 20-month low of 51.1 struck in April. 
But the show of strength was tempered by a fall in prices charged by companies, suggesting demand was still too weak for firms to raise prices, which hit a nine-month low in July.

China's economy is at risk of posting its weakest annual growth in over two decades this year as flagging foreign and domestic demand weigh on exports and factory production. A slowdown in investment has further dragged on growth.

"China's service sector has stabilized at a relatively low level of growth," said Qu Hongbin, an economist at HSBC.

"But profit margins continue to be squeezed. Without a sustained improvement in demand, services growth is likely to remain lackluster, putting downside pressures to employment growth."

China's economy is at risk of posting its weakest annual growth in over two decades this year as flagging foreign and domestic demand weigh on exports and factory production. A slowdown in investment has further dragged on growth.

Source: Reuters

Marc Faber: The Fed is scratching their heads

Having printed this much money, and we are essentially in QE4 and QE

unlimited, the results have been very dismal. I think the Fed is

scratching their head at the present time and can’t believe that when

their objective was actually to lower interest rates from July 25 of

last year, the ten year Treasury note yield has gone up from roughly

1.4% to, a few days ago, 2.7%.

We have an almost doubling of the interest rate because of their QE

programs. I think that really makes them scratch their heads and wonder,

“What did we do wrong? What do we need to do? Do we taper, or do we

have to increase asset purchases?”

Pimco’s Total Return Bond Fund Suffers $7.5 Billion Outflow in July

"According to an article published today in the Wall Street Journal Pimco's Total Return Fund suffered a $7.5 billion net outflow last month, according to data from fund tracker Morningstar Inc.

It is the third straight monthly outflow for the fund, on the heels of nearly $10 billion in redemptions in June. Clients have made redemptions of $15.6 billion from Gross’s fund in 2013 through July.

Gross’s fund produced some gains in July after a quarterly loss during the second quarter. But the July outflow signaled continued investor anxiety over rising bond yields and falling prices.

The fund is still a laggard this year, hurt by a record quarterly loss of 3.6% between April and June. The fund was down 3.08% in 2013 through Thursday, compared to a loss of 2.84% on the benchmark index, according to Morningstar.

Fears that the Federal Reserve will soon cut back bond purchases have sent funds out of fixed-income assets over the past few months. The benchmark 10-year Treasury yield has risen about 1% since the start of May"

The benchmark 10-year Treasury yield has risen about 1 percentage point since the start of May.

Toyota profit soars in Q2

"Toyota said Friday net profit soared 93.6% to a record 562.19 billion yen for the three months to June, and said it was on track to produce over 10 million vehicles worldwide this year.

The world’s biggest automaker has ramped up its bid to tap emerging markets while key U.S. demand has also been on the upswing, helping Toyota to book ever-increasing profits over the last year.

The Camry and Corolla maker tripled its net profit in the past fiscal year with a slump in the yen helping Japanese manufacturers’ bottom line.

On Friday, Toyota said it also saw its European market decline in the quarter as Asian sales slipped.

But North America helped make up the shortfall along with strong demand in emerging markets in Central and South America as well as Africa, it added.

Toyota said it earned 562.19 billion yen in the quarter on sales of 6.25 trillion yen, which were up 13.7% from a year earlier.

Profit “increased due to the impact of foreign exchange rates and our global efforts for profit improvement, through cost reduction activities,” Managing Officer Takuo Sasaki said in a statement.

Looking forward, Toyota said it expected to pump out a record 10.12 million vehicles this calendar year, after it overtook General Motors in 2012 to regain the title of world’s biggest automaker"

Source: JapanToday

Nikkei 225 index clsed 2.82% higher

Tokyo stocks surged 3.29% Friday on the back of a firmer dollar, upbeat earnings results and a strong lead from Wall Street.

The benchmark Nikkei 225 index closed up 460.39 points at 14,466.16, while the Topix index of all first-section shares gained 2.82%, or 32.78 points, to 1,196.17.

The dollar bought to 99.60 yen in Asian afternoon trade, compared with 99.52 yen late in New York and 98.63 yen in Tokyo earlier Thursday.

The euro bought $1.3209 and 131.56 yen against $1.3208 and 131.45 yen in US trade.

The Nikkei will likely continue to advance as uncertainties surrounding global economies have waned and expectations for better earnings for Japanese exporters mount on the back of a stronger dollar.

Big-hitters SoftBank and Sharp also helped drive the index higher after impressing with their first-quarter earnings released earlier this week.

SoftBank’s net profit more than doubled for the three months to June, while Sharp managed to reduce its loss in the same period thanks to the weaker yen and cost-cutting.

China relax controls on life insurance interest rates

 China's insurance industry regulator said Friday that it will relax controls on interest rates for standard life insurance products, marking the country's latest effort to deepen market-oriented reforms in its financial system.

The 2.5-percent upper limit on pre-determined interest rates of standard life insurance products will be removed starting Aug. 5, according to a notice posted by China Insurance Regulatory Commission (CIR) on its website.

The measure represents China's freshest effort in interest rate liberalization, following the central bank's key move on July 19 to loosen its grip on bank lending rates.

Under Friday's new regulation, insurance companies can set their own rates in line with prudent principles, but for risk prevention purposes, a new cap of no more than 3.5 percent will be applied for the statutory reserve requirement assessment ratio of standard life insurance products.

Official CIRC data show that the assets of China's insurance industry totaled 7.88 trillion yuan (1.27 trillion U.S. dollars) at the end of June, up 7.2 percent from the level at the beginning of 2013

he rigid 2.5-percent cap, made valid since 1999, has resulted in severe homogeneity in life insurance products, according to Tuo Guozhu, professor of insurance at Capital University of Economics and Business.

The proportion of standard life insurance products in China's total life insurance business declined from 44 percent in 2002 to 9.2 percent in 2012, "a result of consumers' voting with their feet," said Tuo.

Source: Xinhua

A closer look to US unemployment data of July

Total nonfarm payroll employment increased by162,000 in July,and the unemploymen rate edged down to 7.4 percent the U.S. Bureau of Labor Statistics repor         Employment rose in

retail trade, food services and drinking places, financial activities,           and wholesale trade.

Household Survey Data

Both the number of unemployed persons, at 11.5 million, and the unemployment     rate at 7.4 percent,


edged down in July. Over the year, these measures were down by 1.2 million and   0.8 percentage
point, respectively.

In July, the number of long-term unemployed (those jobless for 27 weeks or more) was little
changed at 4.2 million. These individuals accounted for 37.0 percent of the      unemployed. The number of long-term unemployed has declined by 921,000 over the past year.
. 
The number of persons employed part time for economic reasons (sometimes referred to as involuntary
part-time workers) was essentially unchanged at 8.2 million in July. These individuals were working
part time because their hours had been cut back or because they were unable to   find a full-time job.
 
In July, 2.4 million persons were marginally attached to the labor force, little changed from a
year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor
force, wanted and were available for work, and had looked for a job sometime in  the prior 12
months. They were not counted as unemployed because they had not searched for    work   in the 4 weeks
preceding the survey.

Among the marginally attached, there were 988,000 discouraged workers in July, up by 136,000 from
a year earlier. (The data are not seasonally adjusted.) Discouraged workers are  persons not
currently looking for work because they believe no jobs are available for them.  The remaining
1.4 million persons marginally attached to the labor force in July had not searched for work for
reasons such as school attendance or family responsibilities.

Japan's top banks with big profits in Q2

Japan's top three banks have booked big net profit gains in the April to June quarter as stock market rises helped boost their bottom line while the trio ramp up overseas expansion.

Mitsubishi UFJ Financial Group, the country's biggest lender, said Wednesday that its net profit surged 39.6 percent from a year earlier to 255.3 billion yen ($2.6 billion) in the quarter.Mitsubishi's results, mirrored by smaller rivals Mizuho Financial Group and Sumitomo Mitsui Financial Group, come as their stock trading businesses benefited from a surge in the Japanese stock market.
Tokyo's bid to kickstart Japan's lumbering economy with big government spending and massive monetary easing pushed down the yen, helping the country's hard-hit exporters.
That, in turn, saw investors pile into Japan's equity markets, pushing the Nikkei 225 stock index to a five-year high in May although it has slipped from its perch since then.

NewOnJapan

Precious Metals

Gold Price     3 months Futures   US$ 1,319.04

Silver Price   3 months Futures    US$      19.63

China's PMI 50.3 survey done by the National Bureau of Statistics

   The PMI survey released by the National Bureau of Statistics earlier on Thursday showed the index rising to 50.3 in July from 50.1 in June.

Investors trying to gauge what is happening in the world's second-largest economy also look at surveys on China's fledgling services sector, which has been holding up relatively well compared to the manufacturing sector.

China's official PMI suggest services are growing faster than manufacturing. The services measure has hovered between 53.9 and 56.7 in the past 12 months, while manufacturing has fluctuated between 49.2 and 50.9.

The official services PMI for July will be released on August 3, followed by the HSBC services PMI on August 5.

Source:  Reuters

HSBC PMI fell 47.7% in July MoM

The HSBC Purchasing Managers' Index (PMI), compiled by Markit Economics Research, fell to 47.7 in July from June's 48.2. It was the weakest reading since August 2012, and matched a preliminary figure published last week.
While keeping the door shut for big stimulus, the government has unveiled a series of polices to boost spending in social housing, urban infrastructure, high-speed rail and energy-saving industries, while offering tax breaks for small firms.

Source;  Reuters

China's top economic planner confident in a GDP growth rate of 7.5 %

China's top economic planner expressed confidence in achieving the 7.5 percent gross domestic product growth target this year through hard work after the government decided to adopt further measures to stabilize market expectations and release enterprises' vitality.
National Development and Reform Commission Minister Xu Shaosh stressed the need to maintain "moderately abundant" monetary liquidity and efficiently make use of credit and fiscal capital to support the industrial economy.

"Policy fine-tuning will be likely at the right time," he said.

"Diversified adjustments that take into consideration the different situations of regions, industries and enterprises will be taken in the second half" to strengthen enterprises' confidence by maintaining growth within a reasonable range and preventing risks, Xu said.

For the next step of reform, the minister also pledged the nation would launch demonstration projects for private funds to invest in infrastructure construction and public services, as well as eliminate unreasonable fees in banking services.

Source  Xinhua

U.S. Bank's Present Weakness their investments in long-term bonds and treasuries

The Wall Street Journal published an article today "about the new weakness in the balance sheets of

large banks : they hold so many bonds that they can't avoid trouble when interest rates rise"

When Fed Chairman announced that they would begin to taper their bond buys  long term

rates jumped by a full percentage point in May and June,and bank investments in mortgage-backed securities and Treasuries plummeted. Morgan Chase,Bank of America,Citgroup and Wells Fargo saw the holding of these assets fall by more than US$ 13 billion in Q2.

"Banks in recent years invested in bonds in search of returns as a way of making up for weak loan demand and billions in annual income lost to a slew of new U.S. regulations. But now the size of these portfolios is exposing banks to vulnerabilities even though their holdings are largely considered safe". "Bond instruments now comprise nearly 99% of the $1.159 trillion investment portfolios held by the top four banks", according to Charlottesville, Va., data provider SNL Financial.

  Q2  losses didn't affect banks' earnings because of  accounting rules that allows institutions to keep any paper losses on long-term bonds out of the profit-and-loss statement. As a result, the four biggest banks were able to churn out more than $20 billion in net income during the quarter, a 33% increase YoY.

But analysts said "the unrealized accounting losses, which result from a quarterly evaluation by the banks of how much the securities are worth, could hurt banks in the long run. They can reduce the banks' reported book value, or net worth, and have the potential to eat away at the capital they hold to protect against future losses". 

"Bank of America's unrealized losses on its long-term bond holdings more than doubled to $7.71 billion in the second quarter from $3.48 billion in the first quarter. Income tied to the value of investment portfolios held by J.P. Morgan Chase & Co. and Wells Fargo & Co. went down by slightly more than $3 billion apiece, while the value of Citigroup Inc.'s holdings decreased by $2.86 billion. In all cases the movements represented less than 2% of the value of the banks' total portfolios".

 At Bank of America, mortgage bonds issued by  Fannie Mae, Fredy Mac and

Ginnie Mae represent 84% of the bank's $241 billion securities portfolio.

China: Overcapacity in steel industry sends it to a loss

For the first half, the profits of members of the China Iron and Steel Association (CISA) hit 2.27 billion yuan, with an average profit margin of 0.13 percent, the lowest among all industries, said the CISA on Wednesday.

Steel prices have been dropping since February. At the end of June, the price of steel products fell 6.45 percent compared with the beginning of this year, and down 14.7 percent year on year, according to the CISA.

Oversupply in the steel sector will continue amid the country's economic slowdown, the CISA warned, as the country has been pushing forward economic reforms.

China's economic growth slowed to 7.5 percent in the second quarter from 7.7 percent in the first three months, as the government deliberately tamed the pace to avoid bubbles.

China's output of pig iron, crude steel and steel products still expanded to 357.54 million tonnes, 389.87 million tonnes and 516.96 million tonnes in the first half, up 5.7 percent, 7.4 percent and 10.2 percent year on year, respectively, according to the CISA.

Moreover, the amount of steel being stored by CISA member mills increased 225,000 tonnes, up 1.75 percent year on year, which further lifted the business cost, the CISA said.

During the January-June period, CISA members saw their sales revenues reach about 1.8 trillion yuan, up 0.94 percent year on year. But 35 out of 86 CISA members reported losses, the association added.

The MIIT confirmed that the ministry and the National Development and Reform Commission, China's top economic planner, are currently working on a plan to eliminate outdated production capacity in the steel industry.

To ease overcapacity in affected industries, the MIIT on July 25 ordered some 1,400 companies in 19 sectors, including steel, to eliminate outdated production capacity by September and eliminate excess capacity by the end of the year.

Source: Xinhua 

China can break out of the middle-income trap

In his book, Breakout Nations: In Pursuit of the Next Economic Miracles, which has just been published in Chinese as well as in a paperback edition, Ruchir Sharma, head of emerging market equities at Morgan Stanley and leading economic commentator, makes the case that China alone among the BRICS nations (Brazil, Russia, India, China, and South Africa) will make it to the next stage.

He believes it will be able to move on from its 2012 per capita income level of $6,091, according to the World Bank, to around $20,000 within 15 years, providing a comfortably high income.

He makes the point, however, that it will be easier for China to move up the ladder if it sets its growth targets lower at a more sustainable 5 to 6 percent.

Chasing higher rates of growth through excessive investment in infrastructure, he argues, carries the risk of a bust that could see it behaving like a yo-yo in the middle-income trap like many other countries before it.

Source: ChinaDaily

Petronas delays to 2018 US$ billion petrochemicals complex

State oil firm Petronas will start up its $19 billion petrochemicals complex in Malaysia in 2018, the company said, signaling a further delay in the country’s largest-ever infrastructure project.
A source familiar with Petronas’ business strategy told Reuters the project had been complicated by a need to secure water supplies as well as cater for proposed international partners.
Petronas had already put back the project from late 2016 to early 2017 in June and revised the final investment decision  to the first quarter next year, citing state government problems in relocating villages and graves from the 2,000 hectare-site, five times the size of New York’s Central Park.
Petronas had already put back the project from late 2016 to early 2017 in June and revised the final investment decision  to the first quarter next year, citing state government problems in relocating villages and graves from the 2,000 hectare-site, five times the size of New York’s Central Park.
“As a result of the revised final investment decision date, the RAPID refinery is scheduled to be ready for start-up in Q4 2017 and the remaining plants within the complex is scheduled to be commissioned in 2018,” Petronas said in a statement.
This is at least six months later than market expectations after local media had cited Petronas CEO Shamsul Azhar Abbas in June as saying the start date for phase one of the RAPID project had been pushed back to early 2017.
Delays in the project — a cornerstone of Prime Minister Najib Razak’s Economic Transformation Program aimed at doubling Malaysians’ incomes by 2020 — could slow an economy whose oil and gas sector makes up a fifth of GDP.
The complex is the largest single investment in Malaysia, and aims to grab a chunk of the $400 billion global market for speciality chemicals used in products from LCD televisions to diapers.
Its location at the southernmost tip of the peninsula, just 10 km from Singapore’s east coast, is part of a vision for a “Greater Singapore” energy trading hub that would rival competitors such as China.

Source:  Arab News

Precious Metals Prices

Gold Price   3months Futures      US$  1,310.38

Silver Price 3months Futures      US$       19.51

Government Bonds Quotes

Government Bonds Quotes

                                                                                         Price           Yield
                                                                                       Change            %

U.S. 2 Year			-1/32	0.340
U.S. 5 Year			-11/32	1.466
U.S. 10 Year			-18/32	2.684
U.S. 30 Year			-19/32	3.722
Germany 2 Year			0/32	0.163
Germany 10 Year			-1/32	1.676
Italy 2 Year			0/32	2.022
Italy 10 Year			-1/32	4.415
Japan 2 Year			0/32	0.121
Japan 10 Year			0/32	0.797
Spain 2 Year			0/32	1.920
Spain 10 Year			1/32	4.656
U.K. 2 Year			0/32	0.318
U.K. 10 Year			-11/32	2.359

  Source  WSJ

Japan's industrial production drops -3.3% in June MoM

"Japan's industrial production dropped a seasonally adjusted 3.3 percent in June from the previous month in the first decline in five months, due mainly to weaker output of automobiles and electronic parts, government data showed Tuesday.

It was the sharpest fall since March 2011, when it plunged 16.5 percent in the wake of the earthquake and tsunami disaster, the Ministry of Economy, Trade and Industry said.But the ministry maintained its basic assessment in the preliminary report, saying production has shown "signs of picking up at a moderate pace," given that output grew on a quarterly basis in the April-June period, and it will likely mark a sharp rise in July, a ministry official said".

NewsOnJapan

BOJ Governor QE is creating favorable changes in the Economy

The Bank of Japan's accommodative monetary policy introduced in April has been right on track, creating favorable changes in the economy, BOJ Governor Haruhiko Kuroda said Monday.
It has been three months since the introduction of QE , and there have been favorable developments spreading to financial markets and the real economy, and the public's expectations for economic activity and prices are improving"he said.
 "Inflationary expectations are rising, thanks to the aggressive easing'', the BOJ governor said. "He then offered the view that the nation's core consumer price index, excluding fresh food prices, is highly likely to show year-on-year rises of about 2 percent toward the latter half of the BOJ's projection period through fiscal 2015".

Source; NewsOnJapan