Month: June 2013

By thegoldandoilguy.com

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London Gold Market Report
from Adrian Ash
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Tues 25 June, 08:25 EST

PRECIOUS METALS rallied in London on Tuesday morning as European stock markets also bounced with commodity prices.

Gold and silver recovered half of yesterday’s 1.7% and 3.1% drops respectively.

 The US Dollar eased back on the currency market, as did major government bond yields.

 “The gold price [is] trad[ing] erratically without any clear direction,” say London bullion dealers Standard Bank in their daily note, “due to residual concerns over the Fed’s likely reduction in monetary stimulus, coupled with growing concerns over Chinese banking liquidity.”

 The People’s Bank of China said today it has lent short-term money to some institutions to keep money-market interest rates at a “reasonable level” – its first statement of action since short-term rates in Shanghai spiked above 10% earlier this month.

 “There’s room for further [gold] price declines before a meaningful consolidation,” writes bullion market-maker Scotia Mocatta’s strategist Russell Browne.

 “Our target for the move is $1155-1156, and there are no big levels of support between here and there.”

 After major bank analysts last week cut their silver price forecasts, London bullion bank HSBC yesterday cut both its 2013 and 2014 gold price forecasts by 10%, down to $1396 and $1435 per ounce respectively.

 “Clearly, recent market events show we did not cut [forecasts] enough” in previous revisions, HSBC added.

 Fellow market-maker Deutsche Bank meantime cut its 2013 gold price forecast by 7% to $1431 per ounce, while Morgan Stanley cut its forecast by 5% to $1409.

 “This year has seen a significant change in fortunes for the gold market,” says Deutsche, “driven by a turn in the US interest rate cycle, an increasingly bullish outlook for the US Dollar and a reallocation among global investors from fixed income into equities.”

 With foreign money being pulled from investments in India – the world’s No.1 market for physical gold – the possible end of US quantitative easing “[is a] big negative for the Rupee as flows dwindle further,” says Religare Capital Markets in a note from Mumbai.

 Russian government debt today rallied from a sell-off which drove interest rates up to an 18-month high.

 Russia added to its gold reserves for the 8th month running in May, new data from the International Monetary Fund showed Tuesday, taking it 996 tonnes – the 7th largest national hoard, ahead of Japan and behind Switzerland.

 Gold buying by emerging-market central banks “is one of the underpinnings for gold in the long term,” reckons ANZ analyst Victor Thianpiriya.

 Amongst Asian households and investors, however, “There is only a slight improvement in demand right now due to the price drop,” Reuters today quotes Dick Poon at German refining group Heraeus’ Hong Kong office.

 “It’s definitely not up to April levels. Part of the reason is weak seasonal [gold] demand. But economic factors and China growth are also hurting.”

 Longer-term says new analysis from Barclays bank, “The US cyclical position continues to look relatively healthy versus other developed market countries, where central banks are either in easing mode or are not expected to tighten policy any time soon.”

 “We expect the Dollar rally to broaden as the second half of 2013 progresses,” writes the New York head of FX research at Barclays, Jose Wynne.

 “Anybody who holds gold in Dollar terms,” said trader and newsletter advisor Dennis Gartman to CNBC Monday, “finds himself in a very uncomfortable position.”

 “Gold needs fuel, [it] needs monetary aggressiveness to push it up.”

 US Fed chairman Ben Bernanke said last week that the central bank may start ‘tapering’ its quantitative easing, and perhaps end the program by mid-2014.

 Provided that inflation stays low and the US Dollar is strong, says Swiss bank UBS in a note, “Investors are likely to regard QE-insurance [meaning gold] as obsolete.”

 “You don’t walk up to a lion and flinch,” said Dallas Fed president Richard Fisher in a speech in London on Monday, commenting on the sell-off in all asset classes following Fed chairman Bernanke’s comments.

 “Big money does organise itself somewhat like feral hogs,” said Fisher. “If they detect a weakness or a bad scent, they’ll go after it.”

 Fisher added, however, that the word “exit” is “not appropriate.”

 Speaking at a separate event Monday, non-voting Fed member Narayana Kocherlakota of the Minneapolis Fed said the US central bank “[has to] hammer it every time we talk about policy” that interest rates will stay “highly accommodative…for a considerable time after the asset purchase program ends and the economic recovery strengthens” – a key phrase from recent Federal Reserve statements.

 Although interest rates and central-bank asset purchases “must return to more normal conditions at some point,” said outgoing Bank of England governor Mervyn King to the UK parliament today, “that point is not today.”

Adrian Ash

BullionVault

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.

Support at 1.3065 Range Holds the EURUSD Decrease

Nothing important happened at the beginning of a new trading week. The EURUSD hesitantly tested the support at 1.3065. After that, the pair recovered its position to 1.3143 and then it dropped to 1.3109. The pullback from the support level after such pair`s decrease was quite expectable because of pair`s oversold. But the EURUSD did not manage to recover and consolidate its position above 1.3180,  that explained the downward trend movement. That is why, the upward movement`s attempts should be considered  as an opportunity to open short positions at the best price.

The GBPUSD Remains Positive

The GBPUSD recovered its positions yesterday. The pair`s currency rate increased to 1.5434 after it had tested the support at 1.5343, and then it increased up to 1.5465. The decrease in a cross- rate also supported the GBPUSD. Today, the pair is being traded with a positive sentiment, and it may test the resistance near the 55th figure. It is early to speak about a pullback because in this case the British pound should recover and consolidate its position above 1.5530. This will mean the bottom formation and the upward trend development. Otherwise, the pair will test the current positions.

The USDCHF Returns to Support near the 93 figure

The U.S. dollar has not managed to continue its upward movement against the Swiss franc. Instead, it returned to the support level approaching the 93rd figure yesterday. The pair consolidation is obvious after such high increase in the pair and the decrease of the EURCHF. The further U.S.currency`s prospects may be failed due to losing in the support. Then the bears may count on the support testing near 0.9260 and, in case of its overcoming, they may test 0.9220. The decrease below this level will mean the development of the downward trend for the bulls.

The USDJPY Remaining above 97.22

The recovery in the USDJPY pair stopped at 98.70 where the currency rate decreased to 97.22 and the 100 day MA was crossing. This support meets the bulls expectations. The loss of support will lead to the downward movement to  96.00 for  the U.S. dollar. The increase above 99.00 will confirm the uptrend movement. In this case the bulls may count on  the 100th figure testing.

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By The Sizemore Letter

Watch me discuss the Sprint ($S)–Clearwire ($CLWR)–Softbank ($SFTBY) merger and the Microsoft ($MSFT)–Oracle ($ORCL) partnership with CNBA Asia’s Bernie Lo and Oriel Morrison:

Source: JT Long of The Gold Report (6/24/13)

http://www.theaureport.com/pub/na/15398

Don’t fall for propaganda from the Federal Reserve about tapering quantitative easing, says ShadowStats editor John Williams in this interview with The Gold Report. His corrected economic indicators show the U.S. is nowhere near a recovery and the Fed will have to increase rather than decrease bond buying to prop up the banks and push off inevitable dollar debasement. That could be very bad for savers, but good for gold.

The Gold Report: On Wednesday, the Federal Reserve hinted that it might begin tapering quantitative easing by the end of the year based on signs of an improving economy. Gold immediately dropped from $1,347 an ounce ($1,347/oz) to $1,277/oz, a 7% decline and the lowest price in more than two years. The Dow Jones Industrial Average and NASDAQ were also off more than 2%. You called this “jawboning” and said that due to stresses in the banking system the Fed would be obliged to continue bond buying. Why would the central bank threaten to cut off the flow if it didn’t plan to do it?

John Williams: All the hype over the Fed’s so-called tapering is absolute nonsense. Fed chairman Ben Bernanke said the Fed’s pulling back of quantitative easing was contingent on the economy recovering in line with the Fed’s relatively rosy projections. He also indicated, however, that if the economy worsened, he would expand quantitative easing. When you consider that the official Fed projections are grossly optimistic, the conclusion is that we will have more, not less, bond buying from the government.

The jawboning was a multifaceted attempt to placate the Fed’s critics, while soothing the stock and bond market jitters at the same time. The comments, however, hammered equities and bonds, as well as gold. The negative impact on gold likely would have been viewed as a positive result by the Fed.

The banking system nearly collapsed in 2008. The federal government and Federal Reserve took extraordinary measures to keep the financial system from imploding. Those actions prevented an immediate systemic collapse, but they did very little to resolve the underlying problems. I contend that we’re still in recession, with the economy deepening into a renewed downturn. At the same time, the banking system solvency problems continue. Little has changed in the last five years.

The purported nature of the quantitative easing is a fraud on the public. While Bernanke describes the extraordinary accommodation in terms of trying to stimulate the economy, lowering the unemployment rate and attaining sustainable economic growth in the context of mild inflation, those factors are secondary concerns for the Fed. The U.S. central bank’s primary function always has been to assure banking system solvency and liquidity. All the easing efforts have been aimed at the banking system. The flood of liquidity spiked the monetary base, but it has not flowed through to the money supply and ordinary people.

Simply put, the Fed is propping up the banking system. Bernanke is using the cover of a weak economy to do that because the concept is not politically popular, but it’s what the Fed has to do because the underlying system is just as broken today as it was in 2008.

TGR: Let’s go back to your statement that the economy is doing worse rather than better. Didn’t positive housing start statistics and consumer confidence numbers just come out? How do you know if the economy is getting better or worse?

JW: Housing starts are still down 60% from their peak. Based on the first two months of the second quarter, housing starts are on track for a quarter-to-quarter contraction, a rather substantial one. Industrial production also is on track for a quarterly contraction. These indicators easily could foreshadow a contraction in the current quarter’s gross domestic product (GDP). The underlying economic issues remain, as in 2008, with structural constraints on consumer liquidity and banking system stability. With those ongoing, fundamental weaknesses, there has been no basis whatsoever for the purported economic activity since 2009, or for a recovery pending in the near term.

The consumer directly drives more than 70% of GDP activity. Indirectly, the consumer impacts the balance of the economy. To have sustainable growth in consumption, there needs to be sustainable growth in liquidity, reflected in income and, ideally, supported by credit. Instead, household income is shrinking and traditional consumer credit is heavily constrained.

Headed by two former senior Census Bureau officials, SentierResearch.com publishes monthly estimates of median household income adjusted for the government’s headline CPI inflation number. Those numbers show that household income plunged toward the end of the official economic downturn. Officially, the recession went from the end of 2007 to the middle of 2009, but the reality is that household income kept plunging after the middle of 2009. It hasn’t recovered. Right now, it’s flat and bottom-bouncing at the low level of activity for the cycle.

If you look at those numbers on an annual basis, again adjusted for headline CPI inflation, median household income in 2011 (latest available) is lower than it was in the late 1960s and early 1970s. The consumer here is in severe trouble. You can’t have inflation-adjusted or real growth in consumption without real growth in income. Income drives consumption. That’s basic.

You can buy a little extra consumption through debt expansion. The consumer in the precrisis era tended to maintain his or her standard of living by borrowing from the future. Recognizing a developing liquidity squeeze, then-Fed Chairman Alan Greenspan encouraged the consumer to take on as much debt as possible. In the decade prior to the 2008 panic, the bulk of economic growth was fueled by debt growth, not income growth. For the consumer, the credit crisis dried up everything except federally issued student loans, and those don’t buy washing machines and houses.

If you don’t have income growth or credit availability, that takes a toll on consumer confidence. Usually consumer sentiment follows the tone of the popular press on the economy, and monthly movement in the different consumer measures can be quite volatile. Despite the happy hype of recent headline monthly gains in consumer confidence, the news doesn’t have much relevance to our being out of economic trouble. Consumer confidence plunged starting in 2006 and we’ve been bottom-bouncing ever since. Current levels are consistent with numbers seen during the depths of the worst recessions in the post-World War II era. We’re still at recession levels in consumer confidence; those measures have not shown the full recovery that has been reported in the GDP.

Official GDP reporting shows that the economy turned down right after the end of 2007, plunged through 2008 into the middle of 2009, and then started turning higher and has continued higher ever since. If you believe the GDP numbers, the economy fully recovered as of the fourth quarter of 2011, regaining its prerecession highs, and has continued to expand ever since. No other economic series confirms that pattern.

The big issue in the reporting of the GDP is with the inflation-adjustment process. The government in the last several decades has changed its inflation estimation methodologies to lower the reported rate of inflation. In the case of the CPI adjustments, it’s has been trying to cut budget deficits by using a lower inflation rate to calculate cost of living adjustments for Social Security. A number of the changes to CPI reporting also affected estimates of the GDP’s implicit price deflator, the inflation measure used to remove the effects of inflation from the GDP calculations.

If you correct for the understatement of GDP inflation, the accompanying overstatement of economic growth reverses, showing that the GDP started to turn down in 2006, plunged into 2009 and has been bottom-bouncing along with other indicators, including housing starts, median household income and consumer confidence measures, and along with reporting of other series corrected for inflation overstatement, particularly industrial production and real retail sales. Other real world business indicators, including corporate sales of consumer products, are showing the same pattern of plunge and bottom-bouncing, as opposed to plunge and recovery. The reality is that the economy is weak and it’s going to get weaker.

We haven’t seen a recovery and that is why the Fed won’t end quantitative easing. Any talk of tapering is pure propaganda to placate global markets on the U.S. dollar, trying to hit gold and maybe get a sense of how the markets would respond to an actual withdrawing of quantitative easing.

TGR: We saw the response loud and clear on Thursday.

JW: Yes, the stock market is like a drug addict and Bernanke’s been the drug dealer, pushing direct liquidity injections.

TGR: The market came back a little bit on Friday. Do you think the plunge was just a temporary knee-jerk reaction and things will be back to their upward trajectory in no time?

JW: The stock market is irrational. It’s heavily rigged with big players manipulating it, and with the President’s Working Group on Financial Markets taking actions to prevent “disorderly” conditions in the equity market, as well as other markets. I would tend to avoid the stock market. Gold took a big hit, too, but the underlying fundamentals remain extraordinarily strong for gold. This is not a situation where everything’s right again with the world and the Fed is going to pull back from debasing the dollar. If anything, the Fed is going to have to move further into dollar debasement. That is what Bernanke was saying. If the economy doesn’t recover we’ve got to expand the easing. He is propping up the banking system under the cover of propping up the economy. Nothing that he is doing is helping the economy.

TGR: You called the dollar “a proximal hyperinflation trigger” and said that “gold is the primary and long-range hedge against the upcoming debasement of the dollar irrespective of any near-term price gyrations.” Yet the dollar seems to be stronger than ever. What would trigger the dollar-selling panic that you have predicted by the end of the year?

JW: A visibly weaker economy could have a devastating impact on the dollar. It would force Bernanke to expand rather than contract quantitative easing. That would result in heavy selling pressure against the dollar and a spike gold prices.

At present, there are four major factors out of whack between market perceptions and the fundamental, underlying reality. These misperceptions will tend to shift toward reality, and a confluence of these factors would be devastating to the U.S. currency.

At the top of the list, at the moment, is Fed policy, which we’ve been discussing. My contention is that the Fed is locked into quantitative easing. It can’t escape it.

A close second are U.S. fiscal conditions and long-range sovereign insolvency risks. Fiscal issues should come to a head after Labor Day, when the government runs out of room with all its current bookkeeping finagling so as not to exceed the debt ceiling. Prospects for a meaningful resolution of the fiscal problems remain nil. In the summer of 2011, the market reaction to the government’s fiscal inaction was clear: Heavy dollar selling and gold buying came out of that.

The third factor, again, is the economy being a great deal weaker than consensus expectations, based on the indicators I outlined. As weakening business conditions become more evident in the popular economic releases, that should be a large negative for the dollar. Aside from increasing speculation as to increased Fed easing, it also would have a negative impact on the federal budget forecasts going forward. Economic growth of 4% projected for 2014 is not going to happen. The deficit will explode, and, again, that is very bad for the dollar.

Finally, developing scandals in Washington have the potential to hit the dollar hard. The press has started raising questions about a number of cover-ups. I was involved in the currency markets during the Watergate era. I can tell you that on a day-to-day basis, as the scandal began to unfold, whenever the news was bad for President Nixon, the dollar took a hit. Anything that questions the stability of the government is a big negative for the dollar.

All of these factors work in conjunction with each other. That is why I am predicting a massive decline in the dollar at some point this year, which will spike inflation, certainly spike gold prices and will lead us into the very high inflation environment that will provide the basis for actual hyperinflation in 2014. It’s not just current government actions. It’s series of circumstances that have evolved over decades into a developing crescendo of dollar debasement or inflation.

TGR: You recently wrote that we’re approaching the endgame based on volatility in equities, currencies and monetary precious metals of gold and silver. What will that endgame look like? And how will we know if we are in it?

JW: Primarily I would look at the U.S. dollar as an indicator, when very heavy, consistent, massive selling of the U.S. dollar and dollar-denominated assets begins. As the selling becomes heavier, pressure to remove the dollar from its current world currency reserve status should become unstoppable. I would take that as a sign that we are moving into the position that will set the stage for the hyperinflation.

TGR: Whatever happens in the economy, it sounds as if Bernanke’s days will be numbered. What could that mean for economic policy and Federal Reserve actions? And what advice do you have for whoever takes his place?

JW: I wouldn’t want to be the person who takes his place. Bernanke is a very smart and generally well-intentioned individual who’s in a situation that was not of his creation, but one that he has been trying, with great difficulty, to extricate the Fed from. The Fed doesn’t have any real options here. The best it can do is continue to buy time.

There’s nothing the Fed can do that will stimulate economic activity, except possibly to raise interest rates. Low interest rates are actually negative for economic activity at this point. They constrain loan growth. With higher interest rates, banks have the ability to make more of a profit margin on their lending. The greater the profit margin, the greater the ability to lend to perhaps less qualified borrowers, to take a little more credit risk, but with that also comes loan growth. That helps fuel economic activity. It might even cause the money supply to pick up. The biggest constraint on bank lending, though, remains the still-troubled nature of the banking industry.

Separately, low interest rates devastate the finances of those trying to live on a fixed income. It used to be you could go invest your money in a CD and make a positive return, after inflation, and your money was safe, at least within the insured limits of the banking system. That’s not the case anymore. Domestically, there is no safe investment where you can beat the rate of inflation. Government policies are driving savers into riskier investments, such as the highly unstable stock market.

TGR: So you think by default we will have a continuation of the current policies?

JW: Yes, effectively. The Federal Reserve board has run along with the program, moving in accord with the government to save the financial system. Back in 2008, it could have let the banking system fail. Understandably, though, the Fed and the federal government decided to save the system at all costs. That meant spending, creating, lending and guaranteeing whatever money was needed. Whatever had to be done they did. They prevented the system from collapsing, pushing the problems down the road. Now all those problems again are coming to a head. With many of the same risks in the system today, as in 2008, there is potential for another panic. The Fed has to keep easing here to maintain liquidity in the banking system. The U.S. central bank does not have a choice in the matter.

TGR: It sounds as if there isn’t a lot that Bernanke’s replacement could do. Would your only advice be don’t hold a lot of press conferences?

JW: That would be a big plus. If there’s bad news, basically the central banker has to lie. If he or she says, “The banks are going to collapse,” or “The economy is going to hell,” that will move the process along in a self-fulfilling negative cycle. Accordingly, central bankers often attempt to put false a positive spin on things. Having a Fed chairman hold press conferences is actually something relatively new. “Jawboning” was one tool Bernanke thought he could use to influence the economy and market behavior. That’s deliberate policy, but it has problems, as we saw on Wednesday. The tradition for Fed chairmen has been to keep remarks to the minimum, whenever possible.

TGR: Sounds like some very good advice. Thank you for your time.

JW: Thank you.

Walter J. “John” Williams has been a private consulting economist and a specialist in government economic reporting for more than 30 years. His economic consultancy is called Shadow Government Statistics (shadowstats.com). His early work in economic reporting led to front-page stories in The New York Times and Investor’s Business Daily. He received a bachelor’s degree in economics, cum laude, from Dartmouth College in 1971, and was awarded a master’s degree in business administration from Dartmouth’s Amos Tuck School of Business Administration in 1972, where he was named an Edward Tuck Scholar.

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By www.CentralBankNews.info
    Hungary’s central bank cut its base rate for the 11th time in a row, as expected, and expects to continue to reduce rates due to moderate inflationary pressure but the bank signaled it may have to slow down the pace of easing as volatile financial markets may force it to be become more cautious.
    The National Bank of Hungary cut its rate by another 25 basis points to 4.25 percent, increasing the total reduction in rates since August to 275 basis points, with rates cut by 150 basis points in 2013 alone.
    The central bank’s monetary council said there was still “a significant degree of spare capacity in the economy, inflationary pressures are likely to remain moderate in the medium term, and therefore the 3 percent target can be me with looser monetary conditions.”
    “However, the global financial environment has been volatile recently,” the bank said, adding “a sustained and market shift in perception of the risks associated with the economy may influence room for manoeuvre in monetary policy. The council judges that as long as the outlook for inflation and the real economy justifies it, interest rates can be reduced further; however, increased caution in warranted in the volatile and rapidly changing global environment.”

     So far, sentiment in global markets have remained supportive of Hungary, the bank said, but uncertainty has increased recently.
    The central bank said it expected inflation to ease further in the short term, mainly due to falls in administered prices and commodity prices, and the disinflationary impact of weak domestic demand.
    In May, Hungary’s inflation rate rose to 1.8 percent from 1.7 percent in April.
    “Overall, inflationary pressures are likely to remain moderate over the medium term,” it said.
    Recent economic data suggest that domestic demand and slack in labour markets are affecting expectations and the tax-adjusted inflation rate is expected to remain below 3 percent.
    The output from Hungary’s economy is likely to return to its previous level only gradually, it added.
    In the first quarter, Hungary’s Gross Domestic Product grew by 0.7 percent from the previous quarter but on an annual basis the economy contracted by 0.9 percent, the fifth quarterly contraction in a row.

    www.CentralBankNews.info

By HY Markets Forex Blog

The European market remained green as stocks traded at a positive territory in midday, after the People’s Bank of China (PBOC) stated it would monitor money-market rates and lead them to reasonable levels.

The European Euro Stoxx 50 climbed 1.34% to 2.545.50 at 11:50am GMT, while Vinci gained 3.70% .Germany’s DAX rose 1.50% to 7,807.70 at the same time, as Daimler fell to a low 0.58%.

In France the French CAC 40 rose 1.48% to 3,648.30 at 11:50am GMT, while Alstom fell 3.37 higher and carmaker Renault surged 5.36% while rivals Peugeot soared 5.46%.

In italy, UniCredit fell 0.64%, while the energy group E.ON lowered to 0.57%.

The UK’s FTSE 100 gained 1.04% to 6,091.80 at the same time, as Experian climbed 4.15%. ARM Holdings rose 4.03%.

In Italy, the retail sales fell 0.1% on a monthly basis since April, as retail sales slid 2.9% after the previous revised fall of 3.2%, according to the National Institute of Statistics.

The roman government held an auction of new zero-coupon bonds maturing in 2015 at a high yield of 2.403%.Italy raised 3.5 billion euros, in line with the maximum target.

In Asia , the Deputy Director of the central bank’s Shanghai branch Ling Tao, announced that the People’s Bank of China (PBOC) will be observe and keep the money market at a reasonable level.

However, Ling did not hint what the central bank consider a reasonable level but he did state that the central bank would be flexible with managing the interbank liquidity.

The Shanghai’s repurchase agreement rate opened at 5.73% on Tuesday, which rose to a high 7.63% in the morning. The Shanghai benchmark index closed at 5.3% on Monday , lowest in four years while investors fears over banking crises in the country. The index closed at a low 0.18% on Tuesday.

The post Europe shares remains high as PBOC calms investors appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By HY Markets Forex Blog

The Chinese stocks dropped as the People’s Bank of China (PBOC) said its credit tightening policy would continue.

Concerns have been raised regarding the People’s Bank of China (PBOC) decision to proceed with its credit tightening policy.

Shanghai Composite SSE index declined 5.3% to 1,963.24, while the Hang Seng index closed at 2.22%. Japanese Nikkei closed at 1.26%, and the financial stocks overall, dropped to more than 7%.

Most of the state-owned Chinese banks have been charging some of the highest lending rates recently, from over 25% in most cases.

This is because the People’s Bank of China have temporarily have stopped the supply of low-priced money in order to inflict more control and reduce the reliance on credit from its banks.

Concerns were raised regarding the possible cut in the money market after PBOC’s decision, which could place the small lenders out of business. However, while PBOC sends out a warning to commercial banks to improve their cash reserves management, inter-banks left its lending rates eased on Monday.

The Chinese economy introduced a big monetary stimulus in order to enhance and increase and boost China’s economic growth, after its financial crises in 2008 – 2009.

According to reports released, the manufacturing activity in China dropped to a nine-month low.

The World Bank reduced its 2013 growth forecast for China to 7.7%, from previous forecast of 8.4%.

The post Chinese stocks fall on credit tightening doubts appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By WallStreetDaily.com

According to Barron’s Kopin Tan, “The whiff of [interest] rate volatility” is all it took to send stocks reeling last week – erasing some $775 billion in value in two days.

In case you’re wondering, that figure is equal to about nine months’ worth of Fed bond buying.

So my labeling the recent selloff as an “overreaction” seems apropos. Especially considering that traditional safe havens – U.S. Treasuries and gold – got sacked, too. If the economy and market were truly in trouble, those assets would be rallying right now.

So chill, would ya?

All right. I know that simply telling you to “keep calm and carry on” over and over again won’t cut it. As investors, we crave a specific plan of attack for every conceivable market scenario.

As I shared yesterday, though, retreating into cash can’t be our default setting. It doesn’t protect wealth; it destroys it.

So here are five alternative courses of action to consider in the current market. (Yes, it’s possible to put the market volatility to work for us.)

I’ll start with the easiest to implement and progress to a couple of more involved (but opportunistic) strategies.

~Volatility Buster #1: Trim it Up

Emotional responses always undermine our profitability. We either sell too early, missing out on more profits. Or we sell too late, making it that much harder to recover from our losses.

That means in all market conditions, we need to be robotic. Or, more plainly, we need to take emotions out of the equation.

The best way to do that, which maximizes profits and simultaneously minimizes losses, is to use trailing stops.

As a general rule of thumb, I use a 25% trailing stop on larger-cap, more liquid investments. For smaller-cap, more speculative investments, I go with a 35% trailing stop.

And when fears over a market selloff materialize, all we have to do is trim up our stops. Doing so keeps us in the market just in case our fears are misplaced, yet preserves our profits at the same time. It’s a win-win.

Now, the most common argument against using trailing stops is that market makers can see our orders – and, in turn, they’ll intentionally manipulate prices to stop us out. I’ll admit that it does happen. But not frequently enough to swear off using this type of free insurance.

~Volatility Buster #2: “Put” Your Way to Profits

Buying put options, which gives you the option to sell a stock at a predetermined price, is the closest alternative to using trailing stops. They essentially let you lock in your sale price in advance. And there’s nothing a market maker can do to interfere with the strategy.

Keep in mind, though, there’s a real cost associated with hedging risk using put options.

You have to pay for the option. So if the stock never drops below the strike price (i.e. – the stock resumes its rally), you’ll be out-of-pocket the cost of the option.

As I’m sure you’ll agree, sometimes it’s worth paying a little for a lot of peace of mind.

~Volatility Buster #3: Get Inverted

Dozens of inverse mutual funds and exchange-traded funds (ETFs) now exist that rise when stocks drop. You can purchase these funds in retirement accounts, too.

ProShares, Rydex and Direxion offer the most popular and liquid funds. By taking a small position in any of these funds, you can help smooth out any market volatility.

However, if you plan to hold the funds as a form of long-term insurance, just stay away from the double- and triple-leveraged funds.

~Volatility Buster #4: Bet on the House

We can actually profit from the uncertainty over future interest rates – and stock market volatility – by scooping up shares of CME Group (CME) and CBOE Holdings (CBOE).

The former exclusively handles trading of interest-rate derivatives. So as more and more traders speculate about the next move for interest rates, the company promises to book more profits.

As for the latter, it’s the trading venue for options and futures on the VIX Volatility Index (VIX). Again, as traders get more skittish about the next gyrations in the market, they’re bound to ramp up their bets on the next move for the VIX.

Since the house always wins, it’s best for us to avoid making predictions about interest rates and volatility, and just invest in the companies that promise to benefit from everyone else’s wagers.

~Volatility Buster #5: Buy Value, Not Momentum

During bull markets, many investors get lazy and buy what’s working. And they’re all too quick to “pay up” for momentum stocks. But guess what? When volatility spikes, high-flying momentum stocks are the first to give back gains.

Since I don’t believe the bull market is over, we should respond to the market volatility by putting new money to work in undervalued stocks with hidden growth potential. By that I mean, companies with separate operating units that are growing at different rates.

Why?

Well, as I told WSD Insiders earlier this month, sometimes analysts get lazy and only look at consolidated figures. So a company with a division that’s growing at a rapid clip – but happens to own another unit that’s flat-lining – tends to be overlooked (and mispriced).

And since earnings continue to climb under the radar, such companies promise to march higher – even if the multiple expansion for the S&P 500 grinds to a halt.

Sure, finding such opportunities requires more work. But it pays.

Case in point: When I mentioned this to WSD Insiders on June 11, I recommended an undervalued growth opportunity. And it’s up almost 15% already, compared to a 2% decline for the S&P 500 Index over the same period.

Yet, by my calculations, the stock could easily rally another 50% before the year is out. So it’s not too late to enter a position. (To find out the ticker right away, sign up for a risk-free trial.)

Ahead of the tape,

Louis Basenese

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Original Article: The Five Smartest Responses to the Stock Market Selloff

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