Black Gold Breaks Last Weeks Losing Streak

“BANGKOK (AP) — The price of oil rose above $94 per barrel Tuesday as traders awaited U.S. economic indicators following a long holiday weekend.

Benchmark oil for July delivery was up 43 cents to $94.56 per barrel at late afternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contract fell 10 cents to close at $94.15 per barrel on Friday. Monday was a public holiday in the U.S. and Britain.

Traders think global energy demand could weaken after a survey by HSBC Corp. released last week showed a decline in China’s manufacturing for May. An official report on factory production in the world’s second-largest economy will be released later in the week…..”

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“The U.S. mortgage bonds that were exported around the globe and triggered the worst financial crisis since the Great Depression are now helping Europe’s banks and governments repair balance sheets after jumping in value.

Lloyds Banking Group Plc (LLOY), Britain’s biggest mortgage lender, is auctioning $8.7 billion of mortgage debt to plug a capital shortfall, a month after Lone Star Funds and Credit Suisse Group AG paid 6.7 billion euros ($8.7 billion) for assets taken over from the failed Belgian bank Fortis. The Netherlands can sell debt from the bailout of ING Groep NV (INGA) at a “decent profit,” Chief Executive Officer Jan Hommen said this month.

While European banks and governments need to sell assets to raise capital or repay taxpayer-funded rescues, investors are seeking riskier, potentially higher-paying securities as central banks globally push down yields on safer debt. With U.S. home prices rising at the fastest pace in seven years, that has turbocharged demand for non-agency bonds, with subprime-backed debt returning 12.7 percent this year after rallying more than 41 percent in 2012, according to Barclays Plc data.

“Fundamentals of housing continue to improve, and the asset class itself continues to shrink in size as borrowers repay debt or default,” said Harrison Choi, a bond manager for TCW Group Inc., which oversees about $131 billion in assets.

HBOS Rescue…”

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“European Union governments gave the go-ahead for weapons sales to the Syrian opposition, seeking to increase pressure on Bashar al-Assad’s regime after two years of civil war.

The U.K., the prime mover behind the EU decision, said it wouldn’t immediately start to supply the rebels with arms and that other economic sanctions will be prolonged by 12 months.

“It was a difficult decision for some countries, but it was necessary and right to reinforce international efforts to reach a diplomatic solution to the conflict in Syria,” U.K. Foreign Secretary William Hague said in a statement late yesterday after 13 hours of wrangling among foreign ministers in Brussels. “It was important for Europe to send a clear signal to the Assad regime that it has to negotiate seriously, and that all options remain on the table if it refuses to do so.”

Also backed by France, the arms-sales authorization was intended to narrow the options of Assad, who has clung to power throughout the civil war that has claimed at least 80,000 lives and flooded neighboring countries with refugees.

Austria led the resistance to a change in European policy, saying that sending military hardware would undermine efforts to promote a negotiated solution and betray the principles that earned the EU the Nobel Peace Prize last year.

“We just won the peace prize,” Austrian Foreign Minister Michael Spindelegger said. “The people in Syria being killed in this conflict wouldn’t benefit if we ship weapons. It would result in an arms race.”

Escalation Fears….”

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“Volkswagen AG (VOW), Europe’s largest carmaker, agreed to raise wages for German workers by 5.7 percent over 20 months as the country’s biggest manufacturing union helped employees tap into the company’s growing profit.

VW will increase base pay by 3.4 percent as of Sept. 1 and another 2.2 percent as of July 1, 2014, the Wolfsburg, Germany-based company said in a statement today.

Contract terms are in line with an industrywide pay increase that the IG Metall union won in mid-May for about 770,000 manufacturing workers in the state of Bavaria. That accord is being used as a model for labor agreements elsewhere in the country. The VW pact, negotiated separately from IG Metall’s regional accords, covers 102,000 employees at six plants in western Germanyand the financial services unit.

Germany’s economy grew just 0.1 percent in the first quarter….”

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“French consumer confidence unexpectedly dropped, matching the record low it set in 2008, as President Francois Hollande’s tax increases hurt pruchasing power and the economy returned to recession.

Household sentiment fell to 79 in May from a revised 83 in April….”

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“Australia’s dollar traded 0.6 percent from the lowest level since 2011 before U.S. data forecast to show improvements in consumer confidence and manufacturing amid speculation theFederal Reserve may slow stimulus.

The Aussie’s one-month volatility versus the greenback was near the highest since June. The currency rebounded against the yen, snapping a four-day slide, as technical indicators signaled recent losses were excessive. Chairman Ben S. Bernanke said last week the Fed may slow quantitative easing if there are signs of sustained economic growth. Demand for the Australia and New Zealand currencies was limited on prospects slowing Chinese output will curb the South Pacific nations’ exports.

“It would be interesting to see whether the expectations will continue for the Fed to wind down QE,” said Janu Chan, a Sydney-based economist at St. George Bank Ltd. “There’s a bit of uncertainty about China. Chinese data this week could increase the chance of the RBA cutting sooner rather than later. I wouldn’t rule out Aussie falling further,” Chan said, referring to the Reserve Bank of Australia.

The Australian dollar was little changed at 96.40 U.S. cents as of 3:10 p.m. in Sydney from 96.34 yesterday. It reached 95.82 on June 1, the lowest since October 2011. The currency’s one-month implied volatility was at 11.160 percent from 11.255 percent yesterday, when it reached 11.375, the highest since June 26…..”

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“Global technology companies such as Samsung Electronics Co. (005930), Apple Inc. (AAPL)and Sony Corp. (6758) are poised to see surging sales in India as the country’s anemic tech manufacturing sector can’t fulfill booming demand for TVs and smartphones.

The world’s fastest-growing market for consumer electronics has few homegrown makers of flat-panel TVs and no producers of mobile phones or the semiconductors and displays used in the devices. Last year, the nation of 1.2 billion people spent $14.2 billion importing screens and smartphones, accounting for 90 percent of demand, government data show.

India’s technology manufacturers haven’t kept pace with itssoftware industry, which last year contributed 4.7 percent of the country’s $1.8 trillion gross domestic product. While the government is trying to support local output with subsidies, only foreign companies have the technology needed to benefit from incentives, according to India’s Department of Electronics andInformation Technology.

“India got carried away with the success of software,” said Suresh Khanna, secretary general of India’s Consumer Electronics and Appliances Manufacturers Association. “We never developed newer, smarter technologies and largely ignored hardware.”

Assuming India’s economy grows at a 6.5 percent annual rate, the foreigners may be fighting for share of a market totaling 27 million flat-screen TVs by 2017, up from about 7.2 million this year, Khanna said in an interview.

Just a quarter of the TVs sold in India are assembled locally, by companies including Samsung and LG (066570) Electronics Inc., and none of the core components are manufactured in the country, Khanna said. No smartphones are made in India, he said.

Chinese Smartphones….”

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“Taiwan will let insurers invest in infrastructure projects and create a NT$1 billion ($33 million) fund to channel money to companies as President Ma Ying-jeou bids to boost growth and revive his flagging popularity.

The island also plans to revise capital-gains tax rules, give cash incentives to trade in old cars for new ones, simplify visa procedures for Chinese visitors and set aside NT$400 million to subsidize energy-saving home appliances including gas stoves and heaters, Premier Jiang Yi-huah said in Taipei today.

Ma, whose disapproval rating of 70 percent this month is at its highest since he took office in May 2008, joins policy makers from Australia to South Korea in moving to aid their economies as the global recovery falters. The island’s statistics bureau last week cut its forecast for gross domestic product growth this year to 2.4 percent from 3.59 percent.

“President Ma is under pressure to deliver some solutions after economic growth slowed in the first quarter,” said Yang Tai-Shuenn, a political scientist at Chinese Culture University in Taipei. “But I don’t think this would help lift his approval rating or bring real benefits to the economy.”

The Taiwan dollar rose 0.2 percent to NT$29.914 as of 3 p.m. local time. The benchmark Taiexstock index fell 0.2 percent at the close today.

Proposed revisions to capital-gains tax rules include removing the condition that investors will be taxed when the stock index closes at 8,500 points or higher, and reducing the tax rate on investors with NT$1 billion or more in trading volume to 0.1 percent from 2.25 percent. The measures are awaiting legislative approval, and may be passed in the current session without further delays, Jiang said.

Economic Agenda…”

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“Chinese Premier Li Keqiang told German business leaders his country is confronted by “huge challenges” as it seeks 7 percent annual growth this decade, down from more than 10 percent in the previous 10 years.

China needs growth of about 7 percent to double per capita gross domestic product by 2020 from the level in 2010, Li said yesterday in Berlin after meeting with Chancellor Angela Merkelduring his first trip abroad as premier. Expansion is cooling from the pace that propelled the nation to become the world’s second-biggest economy.

Li, who succeeded Wen Jiabao as premier in March, is signaling the limits of leaders’ tolerance for slower growth asEurope’s debt crisis curbs shipments abroad, manufacturing weakens and a government anti-extravagance campaign restrains restaurant and retail sales. The comments came days after President Xi Jinping said China won’t sacrifice the environment to ensure short-term expansion and policy makers outlined plans for a bigger role for the private sector.

“I don’t think it’s a change of policy stance, but I do feel that in the past several months we’ve started to hear more and more signals from the central government that they want to tolerate lower growth,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong.

Yesterday’s comments at a Germany-China business forum compare with Li’s remarks at a March 17 press conference that China must average 7.5 percent growth through 2020. State-media transcripts that day said Li gave a 7 percent figure.

Some Confusion….”

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“The dollar rose against most of its major peers before U.S. data today that economists say will show consumer confidence improved and home prices gained.

The Dollar Index climbed amid prospects improving U.S. fundamentals will prompt the Federal Reserve to taper its monthly bond purchases of $85 billion. The yen snapped a three-day advance versus the euro as Asian stocks rose and after the Bank of Japan estimated a key component of funds in the nation’s economy reached a record amid unprecedented stimulus.

“This is an unsustainable pace of Fed purchases, and we have to accept that’s not good monetary policy, so I think tapering does start in the fourth quarter this year,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. (WBC) in Sydney, referring to a reduction in U.S. monetary stimulus. “On a medium-term basis, the dollar is a buy.”

The greenback jumped 1 percent to 101.97 yen as of 6:37 a.m. in London from yesterday and added 0.1 percent to $1.2923 per euro. The yen slid 0.9 percent to 131.78 per euro.

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against currencies of six major U.S. trading partners, added 0.1 percent to 83.799. Markets in the U.S. and U.K. were closed yesterday for public holidays….”

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World Markets

Currencies

Commodities

USD Libor

Euribor

Yields for Italy, Spain, France,  and Germany …

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