Month: September 2012

By MoneyMorning.com.au

China bulls used to deny that any sort of economic slowdown was possible for the country.

Once it became clear that the Chinese economy was indeed slowing down, the bulls said it would be a “soft”, well-managed landing.

But now that the landing is looking a lot harder than they’d expected, the bullish argument is that there will be a rebound in the second half of 2012.

However, the latest data suggests there’s little hope of that either.

So just how hard will China fall? And what does it mean for your money?

A Harder Landing in China than Most People Expected

China’s manufacturing sector shrunk in August, according to official figures. That was the worst showing in nine months, and worse than analysts had expected.

The unofficial figures were even worse. The HSBC Purchasing Manufacturing Index reported its worst figures since March 2009. HSBC’s index has now been falling for ten months in a row.

Optimists had been hoping that China’s economy would start to rally this quarter. Now that seems unlikely.

Never mind, say the China bulls. China has plenty of room to “loosen monetary policy”. Indeed, shares in Asia were boosted by the bad data, because of hopes that China will go on a spending spree now.

However, looser monetary policy was what the bulls pinned their hopes on when it became clear the Chinese economy was slowing at the start of the year. Yet it hasn’t had a big impact so far.

For example, the deterioration in the official manufacturing figures was ‘driven by a worsening of conditions for large firms’, notes Qinwei Wang of Capital Economics.

What’s significant about that? Well, China has been loosening monetary policy recently, which had encouraged the bulls. However, ‘large firms tend to be the first beneficiaries of policy loosening. The fact that they are still struggling does not bode well for hopes of a rapid rebound.’

There are other factors beyond monetary policy affecting the Chinese economy. There’s the political handover this year, for one thing. Bulls have been arguing that China would try to ensure the Chinese economy was looking healthy for when the new leaders take over this year.

Yet Paul Glasson of Satori Investments tells The Australian newspaper that the handover process is part of the problem. The change in government is holding up the development of new projects.

The trouble is that ‘many projects are developed at provincial level’. With changes sweeping through the ranks at all levels, it is ‘impossible to progress with meaningful investment’.

Of course, the worse the data gets, the more chance there is that the Chinese will embark on a big push. But that would be bad news too. Given the political confusion, capital will be misallocated even more badly than in the past.

Caixin Online: ‘overcapacity is still severe in most industries’. To get rid of the overcapacity, companies need to cut production. But that won’t happen if they’re being pushed to maintain production to sustain GDP figures.

In turn, this ‘will prolong the vicious cycle’, with over-production leading to falling commodity prices and making the eventual reckoning all the harder.

Don’t Bet on the Fed to Bail Out the Rest of the World

China’s woes are one of the main reasons why we would keep avoiding the industrial mining sector, as I noted last week. But wouldn’t more quantitative easing (QE) in the US also boost risky, cyclical sectors like the miners?

It probably would – in the short term at least. But I wouldn’t be betting on more QE from Ben Bernanke either.

At his Jackson Hole speech on Friday, the Fed chief reiterated that the Fed would act ‘as needed’. But that doesn’t mean much. That’s just part of the Fed’s basic job description. Looking at the figures, there’s no clear reason for the US to print money yet.

The US economy is looking fragile, no doubt about it. But as Jim Paulsen of Wells Capital Management points out in the FT, the best thing that could happen is for the US to get over this particular “soft patch” without any more money-printing from the Fed.

This ‘would boost confidence by creating a sense of a much more sustainable, less monetarily addicted economy’.

Even if Bernanke doesn’t agree with this view, it would be hard for him to justify any heroic action from the Fed, not of the sort that would send stock markets soaring. As we’ve noted already, the first and second batches of QE took place against a backdrop of panic. That’s not present right now.

QE3 may well materialise – eventually. And the Chinese might panic and print a ton more money, although that would be the worst thing to do for the Chinese economy in the long run.

But investors will have to endure a lot more pain before either event happens. That’s why we’d favour European over US stock markets right now – Europe is priced for hard times, whereas the US is priced rather more optimistically.

John Stepek
Contributing Editor, Money Morning

Publisher’s Note: This is an edited version of an article that originally appeared in MoneyWeek

From the Archives…

Why There’s No Such Thing as a Floor Price Just the Market Price
31-08-2012 – Kris Sayce

Take Advantage of the High Australian Dollar While You Can
30-08-2012 – Greg Canavan

Smartphone, Dumb Patents
29-08-2012 – Jeffrey Tucker

Find Out if You’re a Speculator, Value Investor or Stock Trader
28-08-2012 – Nick Hubble

Why Green Energy Will Struggle Against a 790,000 Year Habit
27-08-2012 – Kris Sayce

Brace Your Portfolio for a Hard Landing in China

EURUSD stays above a upward trend line on 4-hour chart, and remains in uptrend from 1.2241. Initial support is at the trend line, as long as the trend line support holds, uptrend could be expected to continue, and further rise to 1.2700 is possible. Key support is at 1.2465, only break below this level will indicate that lengthier consolidation of the longer term uptrend from 1.2042 is underway, then deeper decline to 1.2400 area to complete the consolidation could be seen.

Forex Signals

By Central Bank News

By OilPrice.com

The biggest geostrategic change of the past decade overlooked by Washington policy wonks in their fixation on their self-proclaimed “war on terror” is that Latin America has been throwing off the shackles of the Monroe Doctrine.

These ignored developments may well soon refocus Washington’s attention on the Southern Hemisphere, as Venezuela’s President Hugo Chavez reorients his country’s to China.

It is not an inconsiderable element of concern for the Obama administration. According to the U.S. Energy Administration, the United States total crude oil imports now average 9.033 million barrels per day, with the top five exporting countries being Canada (2.666 mbpd), Mexico (1.319 mbpd), Saudi Arabia (1.107 mbpd), with Venezuela in fourth place at 930 thousand barrels per day. Note that two of America’s top four energy importers are south of the Rio Grande.

Furthermore, Venezuela’s reserves according to OPEC now top those of Saudi Arabia, with Venezuela now estimated to have the largest conventional oil reserves and the second-largest natural gas reserves in the Western Hemisphere. Two years ago OPEC reported that of the organization’s 81.33 percent of the globe’s known oil reserves Venezuela had 24.8 percent, exceeding Saudi Arabia with 22.2

So, why is Chavez in Washington’s bad books? Well, among other reasons, for the company he keeps, as the Russian Federation, Iran and Cuba are all allies. Note that the first two are also major oil exporters.

Worse however are the social programs that Chavez has implemented to benefit his people, which not only smack of socialism but offer an alternative to Washington’s proscriptions. Case in point – Venezuela’s health care system. A joint Cuban-Venezuelan medical program, “Barrio Adentro,” has made health care free and accessible to all Venezuelans. Founded in 2003,  Barrio Adentro expanded Venezuela’s national health care system by employing more than 30,000 Cuban medical professionals as the government equipped clinics and hospitals with advanced high technology diagnostic and surgical equipment.

Something that Americans might consider as the presidential race heats up, with Medicare on the table. Such alternatives hardly please the powers that be in Washington, but are increasingly considered in Latin America.

But, back to energy. Despite the primacy of Venezuelan oil sales to the U.S. Caracas is shifting gears, and China will soon to become Venezuela’s main trade partner, with oil sales surging 60 percent in 2012.

During a recent interview Oil Minister Rafael Ramirez said, “We are selling 640.000 barrels of petrol per day to China.” This is now equivalent to 2/3 of Venezuela’s oil exports to the U.S., up from 400,000 barrels per day in February. For those with a sense of history, before President Chavez took office in 1999, Venezuela did not ship oil to China, but Chavez has stated that by 2015 he intends to ramp up Venezuelan oil exports to China to one million barrels of crude per day. According to Ramirez, the rise in exports will come from increased production in the natural resource-rich Orinoco Oil Belt in the east of the country.

It is hard to see this emphasis shift as anything but a short-sighted diplomatic disaster for the U.S. Compounding the degradation of Washington, which insists that China in Africa in particular exploits poor nations by buying resources at rock bottom prices, Ramirez said simply, “We are selling oil to China at a better price than what is sold in the U.S. market.” And, given Washington’s foreign aid stinginess, last week President Chavez announced that China Development Bank will bankroll $4 billion dollars in development projects, to include housing, energy and industrial growth.

Again, those with a sense of history might note that the year Chavez took office, Venezuela exported to the U.S. market 1.5 million bpd.

So, where does Washington go from here? If it wants to preserve its increasingly tenuous foothold in a nation with the world’s largest oil reserves, it might begin by engaging in some honest diplomacy.

And match Chinese rates of pay.

Source: http://oilprice.com/Energy/Crude-Oil/Venezuela-Ramps-up-China-Oil-Exports-Unsettling-Washington.html

By. John C.K. Daly of Oilprice.com

By Elliott Wave International

On the day when the Fed Chairman Ben Bernanke delivers his much-anticipated speech in Jackson Hole, we want to tell you about an emerging forex opportunity which…

…has nothing to do with Bernanke.

And that’s exactly what makes this opportunity so promising: Few traders know about it.

See, while most of the forex world is focusing on Bernanke, traders who are in-the-know are looking at what few people see: Elliott wave patterns.

The man who found this new opportunity for you is Elliott Wave International’s Jim Martens.

Who is Jim Martens?

Jim is Elliott Wave International’s long-time Senior Currency Strategist — and one of the very few top forex Elliott wave instructors in the world. A sought-after speaker, Jim has been successfully applying Elliott since the mid-1980s, including 2 years at the George Soros-affiliated hedge fund, Nexus Capital, Ltd.

Here’s why this forex opportunity is both so urgent and promising:

1. This forex market’s daily chart shows complete waves 1 and 2. This is a textbook Elliott wave trade setup:

What should come next is wave 3 — the strongest, longest and most explosive wave in an Elliott wave sequence.

1. Wave 2 has already retraced .618% of wave 1 — a common Fibonacci reversal point.
2. You risk is limited and well-defined: Under the rules of Elliott, wave 2 cannot retrace more than 100% of wave 1.

So your risk-reward ratio is at least 3-to-1!

Third waves are what every Elliott wave trader lives for. Catching 2-3 such moves can literally make your year.

See this Compelling FX Opportunity For Yourself — FREE — at elliottwave.com For a limited time, you can see Jim Martens’ NEW 7-minute video featuring this high-confidence opportunity. Jim walks you through the Elliott wave evidence that every FX trader needs to see. Hurry! Free access to this video ends Tuesday, Sept. 4. Get your FREE FX video forecast now >>

By Central Bank News
    The Bank of Zambia held its policy rate steady at 9.00 percent as inflation remains in line with the central bank’s target of 7 percent.
    The central bank of Zambia said in a statement from Aug. 31 that its Monetary Policy Committee had taken note of upside price pressures from a proposed change in electricity tariffs and higher mealie meal and meat prices. However, these inflationary pressures are likely to be moderated by the stable exchange rate and stable prices for fuel, fish and vegetables.
    “The Committee has weighed the inflation risks going forward and it has noted that during the policy relevant period, inflation will be broadly in line with the end-year target of 7.0%. Therefore, the Committee decided to maintain the policy rate at 9%,” the bank said.
    Zambia’s inflation rate rose to 6.4 percent in August from 6.2 percent in July due to higher food prices. The International Monetary Fund expects the country’s economy to expand by 7.7 percent this year, up from an estimated 6.5 percent in 2011 due to high copper production.
    www.CentralBankNews.info
 

By Central Bank News

Is ECB’s Mario Draghi going to reaveal further details Thursday on ECB’s long awaited bond buying program? Probably not, says Senior Strategist Ib Fredslund Madsen.

Thursdays centralbank meeting in the ECB is this weeks most important event – followed by Fridays US jobrapport.

Legal information

Video courtesy of en.jyskebank.tv

London Gold Market Report
from Ben Traynor
BullionVault
Monday 3 September 2012, 06:30 EDT

SPOT MARKET gold prices hovered close to $1690 an ounce during Monday morning’s London trading, close to five month highs hit after Friday’s speech by US Federal Reserve chairman Ben Bernanke, in which he noted the US economic situation is “far from satisfactory”.

“Central banks are still hurtling towards more cash-printing,” one Hong Kong dealer told newswire Reuters Monday.

“They are under pressure to be doing something actively, which is good for gold.”

“Gold has broken through the topside of a large triangle pattern which had resistance at $1655,” adds the latest technical analysis from bullion bank Scotia Mocatta.

“The next resistance is the $1790 high from March.”

On the gold futures and options market, the so-called speculative net long – defined as the difference between bullish and bearish contracts held by non-bullion industry traders – rose to its highest level since early March last Tuesday, according to weekly figures published each Friday by the Commodity Futures Trading Commission.

Monday morning’s AM gold fix in London – which acts as a reference and clearing price for the professional bullion market – put the Euro price of gold at €1341.72 per ounce, the highest Euro fix price since 12 September 2011.

Euro gold prices breached €1340 per ounce on four trading days in September last year, which also saw record-high prices for US Dollar and UK Sterling investors.

Silver meantime hit $31.94 per ounce this morning – its highest level since April – while stock markets edged higher, with the exception of Spain’s Ibex.

European Central Bank chief Mario Draghi is due to appear before the European Parliament’s Committee on Economic and Monetary Affairs Monday to discuss the creation of a so-called banking union among Eurozone members.

The European Commission last week said it will recommend giving the ECB supervisory powers over all Eurozone banks, of which there are approximately 6000. German finance minister Wolfgang Schaeuble has argued that only the largest banks should be subject to a supranational regulator.

“If the German position prevails,” writes Wolfgang Munchau in the Financial Times, “the project of a banking union will have irrevocably failed…the Eurozone will remain a monetary union with nationally supervised and crisis-prone banks for the foreseeable future.”

The ECB should give a “credible signal” to markets that it will do what is necessary to contain sovereign borrowing costs when it makes its latest policy announcement this Thursday, the head of the Organisation for Economic Cooperation and Development Angel Gurria said Sunday.

“The ECB is the bazooka, the firepower, the muscle, the one that has the capacity to impress upon the markets and say: yes we will,” said Gurria.

The ECB has faced opposition to the idea of bond market intervention from some German policymakers, while it was reported last week that Bundesbank chief Jens Weidmann has considered resigning.

Draghi responded last week by insisting that “exceptional measures” may be required to fulfill the ECB’s mandate.

“Draghi’s announcement of intervention shows the robust will of the ECB to solve the problem,” said Spanish prime minister Mariano Rajoy in a press interview published over the weekend.

Benchmark yields on Spanish 10-Year bonds fell as low as 6.2% last month, having hit a Euro-era high of 7.7% in July, although they have crept higher since, hitting 6.9% this morning.

“The market is expecting a lot from the ECB,” says Bank of America Merrill Lynch economist Gustavo Reis.

“However, we [expect] little clarification on the bond-buying program. The likely market disappointment should intensify the pressure on Spain.”

Spain’s manufacturing sector, continued to contract last month, though at a slower rate than in July, according to purchasing managers index data published Monday.

PMI data for German manufacturing also suggest the sector shrank at a slower rate last month. The opposite was true for the Eurozone as a whole however, with manufacturing activity falling at a faster rate in August than a month earlier, according to PMI data.

Over in China, one of the world’s top two gold buying nations, official August PMI data published Saturday indicate reduced manufacturing activity for the first time since last November. HSBC’s alternative PMI measure, which focuses on smaller firms, also suggested manufacturing contracted last month.

Sales of gold coins by the US Mint meantime recorded their worst August since 2007, US Mint data show.

In South Africa, around 12,000 miners have been on strike since Wednesday at the KDC Gold Mine, operated by South African-listed Gold Fields.

“It appears that the strike is the result of an internal dispute between the local branch leadership of the National Union of Mineworkers and certain employee groupings within the NUM membership, who are demanding the resignation and replacement of local NUM branch office bearers,” says a statement from Gold Fields.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault’s weekly gold market summary on YouTube and can be found on Google+

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Source: ForexYard

The euro shot up to an eight-week high against the US dollar on Friday, following a speech from Fed Chairman Bernanke in which he hinted that new steps will soon be taken to boost the US economic recovery. This week, market volatility is almost guaranteed, as a batch of significant news is set to be released out of the US and euro-zone. Particular attention should be given to Thursday’s ECB Press Conference, followed by the US Non-Farm Payrolls on Friday. In addition, a speech from ECB President Draghi today and the US ISM Manufacturing PMI on Tuesday both have the potential to generate activity in the marketplace.

Economic News

USD – Bernanke Speech Results in Dollar Tumbling

The US dollar fell against most of its main currency rivals on Friday, following a speech from Fed Chairman Bernanke in which he restated that the Fed may soon take steps to boost the US economic recovery. The news resulted in risk taking among investors, which led to the safe-haven dollar turning bearish. Against the CAD, the greenback fell more than 70 pips for the day to reach as low as 0.9850 before staging a slight upward correction to finish the week at 0.9861. The USD/JPY hit a two-week low at 78.18 before bouncing back to 78.36 when markets closed for the weekend.

Turning to this week, the main piece of news is likely to be the US Non-Farm Payrolls figure, set to be released on Friday. The employment statistic is long considered the most important event on the forex calendar, and consistently leads to market volatility. This week, the indicator may take on added significance due to questions about whether the Fed will initiate a new round of quantitative easing this month. If Friday’s news comes in above the expected level, it may make the Fed less likely to take steps to boost the US economic recovery, which could lead to dollar gains.

EUR – ECB Press Conference Set to Generate Euro Volatility

Risk taking in the marketplace following a speech from US Fed Chairman Bernanke on Friday, resulted in major gains for the euro. Against the US dollar, the common-currency shot up more than 130 pips to reach an eight-week high at 1.2636. A slight downward correction brought the euro to 1.2573 when markets closed for the weekend. The EUR/JPY was up close to 100 pips in the first half of the day, reaching as high as 99.01, before correcting itself during afternoon trading. The pair closed the week out at 98.52.

This week, investors will be paying close attention to the euro-zone Minimum Bid Rate and ECB Press Conference, set to take place on Thursday. Speculations that the ECB will unveil new steps to lower Spanish and Italian borrowing costs on Thursday have boosted the euro in recent weeks. If a plan to combat the euro-zone debt crisis is finally revealed this week, the euro could see significant gains as a result. That being said, if investors are disappointed with the ECB’s plan, the common-currency could see bearish movement.

Gold – Gold Hits 5-Month High

Gold shot up to its highest level since April on Friday, as risk taking returned to the marketplace amid hopes that the Fed is getting ready to initiate a new round of quantitative easing. The precious metal advanced more than $34 an ounce following a speech from Fed Chairman Bernanke, to reach $1691.42 before markets closed for the weekend.

This week, whether or not gold continues its upward trend is likely to be dependent on Thursday’s ECB Press Conference. If a plan to combat the euro-zone debt crisis is finally announced, risk taking in the marketplace could send the precious metal higher.

Crude Oil – Crude Oil Rallies Following Bernanke Speech

The price of crude oil shot up close to $2 a barrel on Friday, as hopes that Fed will soon take steps to boost the US economic recovery were boosted following a speech from Fed Chairman Bernanke. Typically, any talk of plans to strengthen the US economy turns the price of oil bullish. The commodity closed out the week at $96.50, up from $94.48 at the beginning of the day.

This week, oil traders will want to continue monitoring announcements out of the US for clues as to what any steps the Fed may take will contain. In addition, the US Non-Farm Payrolls on Friday is guaranteed to generate volatility for oil Any better than expected news could signal to investors that demand in the US will go up, which may lead to additional gains for crude.

Technical News

EUR/USD

The Bollinger Bands on the weekly chart are beginning to narrow, signaling a possible price shift in the coming days. Furthermore, the Williams Percent Range on the same chart is approaching the overbought zone, indicating that the price shift could be downward. Opening short positions may be the wise choice for this pair.

GBP/USD

Most technical indicators on the daily and weekly charts show this pair range trading, making it difficult to make a long-term prediction. Traders may want to take a wait and see approach, as a clearer trend is likely to present itself in the near future.

USD/JPY

The daily chart’s Slow Stochastic appears close to forming a bearish cross, indicating that an upward correction could occur in the near future. Furthermore, the Williams Percent Range on the weekly chart has dropped into oversold territory. Opening long positions may be the right move for this pair.

USD/CHF

Long-term technical indicators are providing mixed signals for this pair. On the one hand, the MACD/OsMA on the weekly chart has formed a bearish cross, meaning that downward movement could occur. On the other hand, the same chart’s Williams Percent Range has fallen into oversold territory. Taking a wait and see approach may be the best choice for this pair.

The Wild Card

AUD/CHF

The daily chart’s Relative Strength Index has fallen into oversold territory, indicating that an upward correction could occur in the near future. Additionally, a bullish cross on the same chart’s Slow Stochastic is providing another signal that upward movement could occur. Forex traders may want to open long positions for this pair.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.