By www.CentralBankNews.info The Central Bank of Trinidad and Tobago held its benchmark repo rate steady at 2.75 percent, saying its accommodative policy stance was appropriate in light of contained price pressures and economic growth that remains weaker than expected.
The central bank, which cut rates by 25 basis points in 2012, said private sector credit growth remained subdued but the financial system was highly liquid and it “stands ready to employ additional measures in the coming months to contain excessive build-ups in financial system liquidity.”
In response to the large build-up of liquidity – commercial banks’ daily excess reserves at the central bank averaged $6.5 billion during May 1-21, up from $5.3 billion in April – the central bank facilitated the issue of a $1 billion liquidity absorption bond. With the proceeds sterilized, excess reserves fell to $5.8 billion on May 21 from over $7 billion earlier in the month.
In addition, the central bank sold foreign currency, removing $637 million from the system and rolled over a $1 billion fixed deposit held by commercial banks at the central bank.
“Nevertheless, with liquidity still at elevated levels, there was no activity on the inter-bank market and banks did not access the central bank’s repo facility,” the bank said.
Given the high levels of liquidity, treasury rates have remained depressed and banks lowered their lending rates early this year to encourage credit demand.
Headline inflation rose by 1.5 percent in April from March, but on an annual basis, the inflation rate fell to 5.5 percent from 6.9 percent.
For the first time since October 2011, food price inflation slowed to single digits, reaching 9.4 percent in April, down from 26.2 percent in April 2012 and 15.0 percent in April 2011.
“The recent slowdown in headline inflation and the continued stability in core inflation suggest that general price pressures are contained, although food price pressures may increase in coming months with the advent of the rainy season,” the central bank said, adding that “economic growth is still not as strong as expected, underlined by the further contraction in business credit.
On an annual basis private sector credit granted by the financial system grew by 2.0 percent in March, down marginally from 2.1 percent in February while business lending contracted for the fourth consecutive month, down by 2.4 percent year-on-year in March.
Trinidad & Tobago’s Gross Domestic Product contracted by an annual 0.39 percent in the fourth quarter of 2012 and earlier this month the central bank said in its monetary policy report that it was still forecasting 2.5 percent growth this year, up from 0.2 percent in 2012, based on a rebound in natural gas production.
Chinese and German Manufacturing Now Both Contracting
A recession for the global economy is becoming an increasingly likely scenario.
The Chinese economy, the second-biggest in the world, witnessed a contraction in manufacturing in May. The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) registered 49.6 for May, declining from 50.4 in April. (Source: Markit, May 23, 2013.) Any number below 50 represents contraction in the manufacturing sector.
The Chinese economy exports a significant amount of what it produces to the global economy. Contraction in Chinese manufacturing shows exports are falling—the global demand for goods is falling.
Similarly, Germany’s Flash Manufacturing PMI showed continuous contraction in the manufacturing sector. The index stood at 49.0 in May. (Source: Markit, May 23, 2013.) The German economy is important to observe, because it’s the largest economy in the eurozone and an economic slowdown in the nation can send the common currency region into another downward spiral, again affecting the global economy.
Looking at other key indicators, they are pointing to an economic slowdown ahead in the global economy. Consider the copper market. Demand for copper is suggesting activity in the global economy is sluggish, even deteriorating.
Copper prices are down more than 10% since the beginning of 2013, and stockpiles of the brown metal, tracked by the London Metals Exchange (LME), are up a staggering 95% this year! (Source: Bloomberg, May 23, 2013.)
Other industrial metal prices, such as aluminum, lead, nickel, and zinc, are in decline as well.
How can the U.S. economy possibly improve when the global economy is in trouble?
The U.S. is highly affected by any shift in demand in the global economy.
After the financial crisis of 2008, U.S.-based companies were able to show growth because of robust demand in the global economy. Some say the growth in the global economy pulled the U.S. out of recession in 2008.
Now, the economic indicators clearly point to diminishing global demand. Will U.S.-based multinational companies be able to show profit growth under the scenario of global manufacturing contraction? Of course not! (Someone tell stock market investors!)
During the first-quarter earnings reporting season, some of the biggest big-cap companies in the key American stock indices displayed concerns regarding the crisis in the eurozone. I expect more companies to start blaming the economic slowdown in the global economy as they report lower second-quarter corporate earnings.
As I have been writing in these pages, economic growth in the U.S. economy won’t happen by printing more paper money—it’s a short-term fix that creates more long-term problems.
According to data compiled by Bloomberg, 2,267 non-financial constituents of the Russell 3000 index saw their cash holdings increase by 13% to $1.73 trillion in the first quarter of 2013 compared to the same period a year earlier. (Source: Bloomberg, May 23, 2013.)
As the cash hoard continues, business spending declined 21% in the first quarter compared to the last quarter of 2012. This was the biggest decline since the financial crisis of 2008.
To top this off, business executives in the U.S. economy are worried about troubles in the global economy, and they don’t have a very optimistic view on conditions here at home. A CEO Confidence Survey conducted by the Conference Board suggests only 29% of executives believe conditions in their industries have improved in the first quarter; going forward, only 32% expect the U.S. economy to improve in the next six months. (Source: Conference Board, April 25, 2013.)
Looking at all of this, how can you not question the effectiveness of quantitative easing in the U.S. economy? The problem at hand is businesses shying away from spending in the U.S. economy and hoarding cash. To my standards, quantitative easing is failing at making businesses more confident about spending as it was promised.
Dear reader, for economic growth to take place in the U.S. economy, businesses must be willing to spend and make investments; we are seeing the opposite of that. This isn’t rocket science; once businesses start to spend and make investments, we will see recovery in the jobs market and economic growth will eventually follow.
The U.S. economy is at a vulnerable stage. I am paying extra attention to business spending because troubles from outside the U.S. economy are brewing quickly, and as a result, multinational businesses may make further cutbacks on their spending.
Where the Market Stands; Where It’s Headed:
We are putting the finishing touches on “A Dire Warning for Stock Market Investors,” a forecast we will present in video format. Please see your e-mail inbox tomorrow for this presentation. It’s important you watch it to see where the stock market is really headed next.
What He Said:
“As for the stock market, it continues along its merry way oblivious to what is happening to homebuyers’ wealth. (Since 2005 I have been writing about how the real estate bust would be bigger than the boom.) In 1927, the real estate market crashed and the stock market, even back then, carried along its merry way for two more years until it eventually crashed. History has a way of repeating itself.” Michael Lombardi in Profit Confidential, November 21, 2007. This was a dire prediction that came true.
Article by profitconfidential.com
If the Economy is Improving, Why Are Business Executives So Scared to Spend?
As I have been writing in these pages, economic growth in the U.S. economy won’t happen by printing more paper money—it’s a short-term fix that creates more long-term problems.
According to data compiled by Bloomberg, 2,267 non-financial constituents of the Russell 3000 index saw their cash holdings increase by 13% to $1.73 trillion in the first quarter of 2013 compared to the same period a year earlier. (Source: Bloomberg, May 23, 2013.)
As the cash hoard continues, business spending declined 21% in the first quarter compared to the last quarter of 2012. This was the biggest decline since the financial crisis of 2008.
To top this off, business executives in the U.S. economy are worried about troubles in the global economy, and they don’t have a very optimistic view on conditions here at home. A CEO Confidence Survey conducted by the Conference Board suggests only 29% of executives believe conditions in their industries have improved in the first quarter; going forward, only 32% expect the U.S. economy to improve in the next six months. (Source: Conference Board, April 25, 2013.)
Looking at all of this, how can you not question the effectiveness of quantitative easing in the U.S. economy? The problem at hand is businesses shying away from spending in the U.S. economy and hoarding cash. To my standards, quantitative easing is failing at making businesses more confident about spending as it was promised.
Dear reader, for economic growth to take place in the U.S. economy, businesses must be willing to spend and make investments; we are seeing the opposite of that. This isn’t rocket science; once businesses start to spend and make investments, we will see recovery in the jobs market and economic growth will eventually follow.
The U.S. economy is at a vulnerable stage. I am paying extra attention to business spending because troubles from outside the U.S. economy are brewing quickly, and as a result, multinational businesses may make further cutbacks on their spending.
Where the Market Stands; Where It’s Headed:
We are putting the finishing touches on “A Dire Warning for Stock Market Investors,” a forecast we will present in video format. Please see your e-mail inbox tomorrow for this presentation. It’s important you watch it to see where the stock market is really headed next.
What He Said:
“As for the stock market, it continues along its merry way oblivious to what is happening to homebuyers’ wealth. (Since 2005 I have been writing about how the real estate bust would be bigger than the boom.) In 1927, the real estate market crashed and the stock market, even back then, carried along its merry way for two more years until it eventually crashed. History has a way of repeating itself.” Michael Lombardi in Profit Confidential, November 21, 2007. This was a dire prediction that came true.
Article by profitconfidential.com
Is the Short Yen / Long Japanese Equities Trade Over?
In volatility we haven’t seen since the Fukushima disaster, Japanese shares dropped by 7% on Thursday before bouncing off of those lows later in the day. Ouch!
The ostensible cause? Fed Chairman Ben Bernanke indicated that QE Infinity might—just might—come to end if U.S. economic data improve, and China’s PMI came in lower than expected. A more likely explanation is the recent surge in Japanese government bond yields; the 10-year yield briefly jumped above 1% before falling back into the 80-basis-range.
Japanese stocks were definitely due for a breather; the Nikkei had was up by more than 50% year to date. But does Thursday’s action point to something bigger? Could it be that the short yen / long Japanese equities trade is over?
We’ll see. I expect that the yen still has much further to fall, and this may or may not mean a short-term rally in Japanese equities.
The real trading opportunity here, however, is in Japanese bonds. This is a trade where the risk and potential reward are asymmetric; your downside is modest while your upside is enormous.
Japanese 10-year yields cannot go much lower than current levels. At time of writing, the yield was 0.86%. The all-time low was hit last month at just under 0.50%.
Could yields retest those old lows? Of course, anything is possible. But given the scale of the money printing involved, I wouldn’t bet on it.
A far more likely outcome is something akin to the Eurozone crisis whereby the bond vigilantes mercilessly punished the countries with high budget deficits and debt loads. Japan’s total debt is roughly 100 percentage points of GDP higher than that of Italy and its yearly budget deficit is substantially bigger, yet it pays a yield that is more than 75% lower. Given that Japan is no longer a high-savings-rate country, they cannot depend on their citizens to bail them out this time. And if the Bank of Japan steps in too aggressively, they run the risk of undermining confidence in the yen and turning its orderly decline into a rout…which would almost certainly cause yields on Japan’s debt to soar.
To take advantage of this, I recommend investors short Japanese debt. The easiest way to do this is via the Powershares DB 3x Inverse Jap Gov Bond ETN ($JGBD). Be careful here because this is a leveraged ETN that also happens to be somewhat thinly traded.
Give this trade a little room to run. I would use a stop loss near the old lows $17.50. Your risk here is manageable. If I’m wrong, you have lost roughly 8%. But if I’m right, and the bond vigilantes finally turn on Japan, we might be able to double our money in a matter of weeks or months.
Disclosures: Sizemore Capital is long JGBD. This article first appeared on TraderPlanet.
SUBSCRIBE to Sizemore Insights via e-mail today.
Gold “Trying to Build Base” as Retail Demand Counters More ETF Selling
London Gold Market Report
from Adrian Ash
BullionVault
Fri 24 May, 08:45 EST
The GOLD PRICE fell $10 per ounce after reaching almost $1400 for the 5th time this week in London trade Friday morning.
Silver held tight around $22.50 per ounce, managing only one-third of gold’s 2.0% gain for the week.
After yesterday’s 7% plunge Japan’s stock market bounced, but other Asian equities fell, as did European stocks.
US and UK markets are closed Monday for national holidays.
“There is a floor emerging around $1360,” says a New York dealer’s note, adding that bearish speculators wanting to profit from a fall in the gold price “may be inclined to wait” for a rally to this week’s high of $1414 before adding to their record holdings of short futures contracts.
Unless the gold price gets above Wednesday’s high, reckons technical analysis from Swiss bank and London bullion market-maker UBS, “the risk is for rejection and to resume the broader bear trend.”
But “while the trend is still bearish,” counters Russell Browne at Scotia Mocatta, “the metal is trying to develop a base.”
Given the 20% drop from 2011’s highs, the gold price “could take multiple weeks to consolidate and determine a direction,” Scotia says, pegging resistance at last week’s high of $1450 per ounce.
“That the gold price hasn’t completely collapsed,” says a note from Macquarie bank quoted by Reuters, “is testament to strong retail demand for jewellery, coins and bars” in the face of continued selling of exchange-traded gold trust funds by institutional investors.
Thursday saw another 1.5 tonnes of gold exit the world’s largest gold ETF. The SPDR Gold Trust has now shrunk by 25% from its all-time peak of six months ago.
The UK’s largest pawnbroker H&T today warned investors that every 10% drop in British Pound gold prices will knock £2 million ($3m) off its pre-tax profits.
Major government bonds meanwhile ticked higher as stock markets slipped, nudging interest rates lower on UK, US and German bonds.
To reduce “significantly the risk of a sharp rise in [Japan’s] long-term rates,” says Nomura analyst Richard Koo, the Bank of Japan should clearly state it won’t let inflation rise above 2% per year.
Japan’s central bank vowed at the start of April to double its balancesheet to nearly $3 trillion by end-2015. The Japanese stock market has gained 29%, but government bonds have fallen sharply, doubling the interest rate on new 10-year borrowing from below 0.4% to more than 0.9% today.
“Pundits in the media, and especially on television, have devoted a great deal of attention to the subject of inflation,” says Koo. “The more people hear about it the more they are inclined to believe it, even if it is not true.”
“[But] recent history teaches us that inflation has fallen too low,” writes John Hopkins professor and IMF scholar Laurence Ball.
Commenting specifically on the United States, “Raising inflation targets to 4% would have little cost,” says Ball, “and it would make it easier for central banks to end future recessions.”
“Gold’s sensitivity to inflation is better than most other asset classes,” says Kleinwort Benson’s chief investment officer, Mouhammed Choukeir.
The private bank and wealth manager is now selling gold from client portfolios, however. Because with gold price “momentum now clearly negative and key technical support broken at $1500, it looks to be an increasingly expensive form of insurance.”
Kleinwort is increasing its allocation to the US Dollar – “a safe haven currency” – because the recent surge in world stock markets have been accompanied by “signs of investor complacency.”
Gold price chart, no delay | Buy gold online
Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.
(c) BullionVault 2013
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.
Central Bank News Link List – May 24, 2013: Abe fears spike in long-term interest rates could hurt economy
By www.CentralBankNews.info Here’s today’s Central Bank News’ link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.
- Abe fears spike in long-term interest rates could hurt economy (Kyodo)
- Fed’s Bullard: Need faster inflation before tapering (CNBC)
- The federal funds rate target may be sent to the showers (MarketWatch)
- New Indonesian central bank chief to focus on inflation amid political pressure (Dow Jones)
- Fed officials stress no rush to exit, not on ‘autopilot’ (Reuters)
- Bank of England’s Fisher says does not want U.S.-style QE pledge (Reuters)
- Bank of Canada rate hike view pushed to last quarter of 2014 (Reuters)
- Primary dealers saw Fed’s confusing strategy reducing QE impact (Bloomberg)
- Fed history shows punch bowl goes as jobs rise: Cutting research (Bloomberg)
- Denmark shows negative rates can work, central bank deputy says (Bloomberg)
- www.CentralBankNews.info
Gold restores safe-haven status
The Gold prices were traded slightly higher on Friday following Thursday’s rally.
The Gold market weakened a bit but got better as the gold prices traded slightly higher on Friday according to US economic reports released on Thursday morning. Compared to a raw commodity, the reports indicate the metal would act as a safe-haven asset.
The prices at which the yellow metal were being traded on Friday following Thursday sell-off, pushed them back to the $1,400 level ,restoring the safe-haven status for the investors ,while the weak US dollar helped rising the metal again.
Gold was traded flat, with up to 0.18% to $1,394.40 per troy ounce, while silver traded higher, profiting 0.16% to $22.545 per troy ounce.
Investors traded over 400 metric tons valued an estimate $21bn from the exchange-traded products this year.
The Chief Executive of Barrick Gold Corp. (ABX) Jamie Sokalsky said the mine company is considering shrinking in size to focus on returns over production volumes.
The U.S Mint sold about 209.500 ounces last month, compared to March sales of 62,000 ounces. Sales this month summed up to approximately 52,000 ounces. The expansion of Central banks reserves may also boost the demand for bullion.
The S&P GSCI estimate of raw materials dropped by 2.6% .The CFTC reports indicates the Hedge fund wagers on higher prices across 18 commodities are close to 33% lower than the five-year average .
The post Gold restores safe-haven status appeared first on | HY Markets Official blog.
Article provided by HY Markets Forex Blog
WTI Crude Drops for a fourth day
Extending its biggest weekly drop in more than a month, the West Texas Intermediate Oil dropped for a fourth day. The fall indicates another sign of rising the fuel supplies in the U.S and the weakness in the global economy.
WTI fell by 0.5 percent in New York, while manufacturers in China shrank unexpectedly. According to the data released by the government, the gasoline stockpiles in the U.S increased by 3 million barrels.
After the U.S, Crude stockpiles in China are the biggest oil-consuming country.
“The tone of the market remains soft,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “Growth in oil demand has been very moderate. This week’s figures in the U.S. were a bit disappointing with a big build-up in gasoline inventories as we start to move into the early part of summer, showing a well-supplied market.”
According to Bloomberg survey and calculations, WTI are expected to decline next week, while the speculations that the U.S fuel supplies will be sufficient to meet summer demands as global economic growth weaken.
According to HSBC Holdings PLC and Markit Economics, the Chinese Purchasing Managers index slid to 49.6 for May.
Gasoline for June fell 2.64 cents, to end the session at $2.8194 a gallon on the Nymex. It was the lowest since May 2. Trading volume was 25 percent above the 100-day average.
The post WTI Crude Drops for a fourth day appeared first on | HY Markets Official blog.
Article provided by HY Markets Forex Blog
EURUSD remains in downtrend from 1.3242
EURUSD remains in downtrend from 1.3242, the price action from 1.2796 is treated as consolidation of the downtrend. Range trading between 1.2796 and 1.2998 would likely be seen in a couple of days. Key resistance is at 1.2998, as long as this level holds, the downtrend could be expected to resume, and one more fall to test 1.2747 support is still possible after consolidation. On the upside, a break above 1.2998 will indicate that the downtrend from 1.3242 had completed at 1.2796 already, then the following upward movement could bring price to 1.3500 zone.
The Day Japan and China Shook the Aussie Market
There’s no doubting that yesterday was a tough day for Aussie stocks.
The benchmark S&P/ASX 200 index fell 103 points. That’s a drop of 2%.
Some stocks fell even more. Myer Holdings [ASX: MYR] fell 6.3% and Westpac Banking Corporation [ASX: WBC] dropped 4.1%.
So, why the gloomy price action?
As Murray Dawes accurately pointed out yesterday, it’s all about Japan…
In fairness, it wasn’t just yesterday that Murray warned you about Japan. He’s banged on about Japanese bond yields and the yen for weeks.
And yesterday, the chickens finally came home to roost for the Japanese market. As bond yields hit 1%, the Nikkei225 dropped 1,143 points. That’s 7.3% in one day, in case you’re wondering.
That’s a big drop. In fact, you could say it’s a nuclear sized drop. The last time the Japanese market fell this much was in March 2011, following the earthquake and tsunami that led to the Fukushima nuclear reactor meltdown.
Although we will make one point before the gold bugs say, ‘Ha, we told you shares were risky.’ While the Nikkei225 fell 7.3% in one day, the gold price in Japanese yen is down 9.8% since early April. And over the past year, yen gold is only up 15.9% while the Nikkei is up 74.6%.
So in terms of the better asset to combat inflation, for the Japanese at any rate it has been stocks, not gold.
(You know how much we like gold. We’re not bagging it; we’re just telling it how it is…which is what you’d expect from us.)
But it wasn’t just the news out of Japan that roiled the Aussie market…
Whose Numbers do You Distrust the Least?
Yesterday, HSBC released its monthly Flash Purchasing Managers Index (PMI) number. It wasn’t good. It reveals that perhaps the Chinese economy is contracting.
Or does it? We asked our old pal, Diggers & Drillers editor, Dr Alex Cowie for his take on the number. (The Doc is our go-to man when it comes to commodities and China).
Here’s what he told us:
‘The Flash HSBC number out Thursday was 49.6. Anything below 50 is supposed to suggest industry is contracting. The Flash HSBC number is a warm up for the HSBC final number at the end of the month, which is normally pretty close to the flash.
‘What’s far more important is the official number. Just because the flash number is under 50, doesn’t mean the official number will be too. So I never read too much into the flash number. I take the official number with a grain of salt too, as it’s a government statistic.‘
The Doc also put together a nice chart showing how the HSBC number differs wildly from the official Chinese government figure:
As the Doc says, you can’t really trust Chinese government numbers…any more than you can trust Aussie government numbers if we’re honest.
On top of this you’ve got US Federal Reserve chairman, Dr Ben S Bernanke, blowing his horn about the conditions under which the Federal Reserve may (or may not) cut back on its money printing and bond buying program.
But we know that big and small businesses are still doing business regardless of what’s happening in China or Japan. The two ‘Cash Box’ stocks we tipped this month in Australian Small-Cap Investigator opened their doors yesterday and served customers just as they did the day before. And we dare say they’ll open their doors and serve customers today too.
The same goes for the four ‘Money’ stocks we’ve tipped, the property stock and others among the 23 stocks on our buy list.
Cheers,
Kris
Join me on Google+
From the Archives…
The Foundations for the Great Lie We Have Built Our Lives Upon
17-05-2013 – Vern Gowdie
How the Aussie Dollar is Running Out of Friends, Fast
16-05-2013 – Murray Dawes
STOP PRESS…Resource Stocks Pay Dividends Too
15-05-2013 – Dr Alex Cowie
‘Best Week in Four Years’: Resource Stocks are Starting to Move…
14-05-2013 – Dr Alex Cowie
Why You Won’t See Me on ABC or CNBC Discussing Financial Markets…
13-05-2013 – Kris Sayce
Australian Small-Cap Investigator:
How to Make Money From Small-Cap Stocks
