Good afternoon. Another earthquake in New Zealand — fortunately, the epicentre was far from the mainland, therefore, despite the high magnitude (7.8) there were no exceptional consequences. A hacker violated twitter of FoxNews channel, posting a message that Obama is assassinated, and that «there is light at the end of the tunnel». Case of Strauss-Kahn has become a case of Diallo — the Guinean maid who shocked the prosecutors with continuous lies. She received the shelter in the USA, telling of a bloody struggle against the regime at home, for which she had been raped by the military (lie); in the Sofitel she was a prostitute and extorted money from the blacks, and in the case of the ex-head of the IMF she at first cleaned up another room and only afterwards «understood» that she has been raped; «understanding» was provided by her drug dealer boyfriend, who gave a poor refugee $100 thousand in a couple of years — surely, out of pure altruism. Sodomites are on offense — now they attacked the mayor of Toronto: the scoundrel decided to spend the weekend with his family — even though all people of goodwill are clear that he should lead the city gay pride parade. But the professional mourners of the oppressed minorities, it seems, nevertheless began to get the audience — for example, 4 years ago the Constitutional Court of Spain overturned the criminal responsibility for denial of the Holocaust, and now the Supreme Court went even further by supporting direct justification for the Nazis — freedom of speech! If homosexuals won’t calm down, it would be them who will by the next objects of «acts of reactionaries».
Monetary markets. People's Bank of China increased by 0.25% interest rates on loans (up to 6.56% per annum) and deposits (to 3.50%); the ECB and the central bank of Denmark also increased their rates by 0.25%. At the same time, the Bank of England and the Reserve Bank of Australia left interest rates on the spot — the first has not changed the size of the quantitative easing program, while the second made ??it clear that the rates may go even lower in the future. Moody's has examined the report of Chinese regulators on the finances of local governments — and suddenly found unaccounted credits for 3.5 trillion yuan ($540 billion): agency demanded the country’s authorities to develop a program for solving the problem — threatening otherwise to worsen the forecast for the country's banking system. Bickering about raising the ceiling for the US national debt continues — Republicans, in the run-up of deadline, proposed to increase this figure slightly as a temporary measure, but Obama suddenly dismissed the idea in a harsh manner, demanding a global agreement: sharp manoeuvre confused the opposition — and the Republican leaders seem ready to consider abolition of tax relief, of which they did not want to hear previously. After its defeat in court from Bloomberg, Fed began to reveal the secrets of its handouts to various banks — it was already revealed that Lehman Brothers received $18 billion from the Fed in the summer-autumn of 2008, and then successfully went busted: and now all wonder what happened to the money lent by Bernanke. Many leading hedge funds suffered losses in the first half of the year — and this is despite the fact that nothing particularly wrong happened in the market until now.
Europe has a new hero: the place of Greece was unexpectedly taken by Portugal, and the same irrepressible Moody's cut the country’s both sovereign and bank ratings by 4 points at once down to «junk» level, conserving the negative forecast — the justification was «well, Lisbon asked for help, hence the conditions are bad, so he must be punished». Such arrogance made the Euro-officials mad, and they poured angry tirades at the agency’s address — and made ??it clear that it is certainly the time to create a European credit rating agency as opposed to «biased» US-UK ones. The effect was instant: Moody's immediately announced that the rating forecast for Portugal can be raised back to stable — and, in general, they say, things in the country are not as bad as in Greece. «Frightened» noted the ECB with satisfaction — and abolished the rule that the bonds with «junk» ratings should not be taken: Portuguese bonds will continue to be recognized — regardless of agencies’ acts. As for Greece, there is a new problem: as soon as the authorities persuaded the leading banks to exchange the bonds, it turned out that the banks have already sold out a large part of their packages (that is why they were so accommodating) — officials were offended and said «you promised not to do so», but it's too late. The Spanish budget cuts, coupled with the emptiness of the regional budgets, have forced the authorities to increase spending on healthcare by €8 billion in 2012 — or the industry itself could go bust. In general, debt upheavals are bad for the whole continent — and the yield of Italian 10-year bonds has risen above 5% per annum for the first time since autumn of 2008.
Currency markets. Nothing interesting happened with the main rates — the only exception is euro, which got tired of troubles around the problem of the periphery, and it fell a bit; but nothing terrible happened — and generally there is a lazy summer market.
Stock markets. The same applies to stocks, which sluggishly grew, and then fell — however, there still was more willing to go north; so the major indexes have returned to spring peaks — though they have no real reason to grow.
Commodity markets. Gazprom continues to lose markets — after Croatia, Bulgaria wants to flee it too; however, these are not very sensitive bites yet — but only so far. USA and the EU have won the case in WTO against China, which introduced export duties and quotas on raw materials during the crisis and blew up the prices on the stock exchanges — the practice is now considered unfair, and the China's argument about the ecological nature of the duties was declared insolvent. Excess liquidity in the markets continues to put pressure on prices, as soon as the panic about some current issues stops — such as Greece. Brent crude oil soared to $119 per barrel; industrial metals surged — especially copper, which returned to the top. Precious metals were not far from the current tendency — gold came to $1545 per ounce: among other things, it was pleased by the plan of the Swiss Parliament to consider the possibility of introducing a «golden franc». Cereals and legumes, forage and cooking oil have stabilized since the last fall; fruits, coffee and cocoa are becoming more expensive again; meat, milk and particularly sugar set new peaks. According to the UN, in June food prices rose by 1%, bringing the annual increase in prices up to 39% — and the end of this outrage is not visible.
A powerful dignity
Asia and Oceania. In Japan, recovery after the earthquake continues. The book of orders for engineering firms got fatter by 3.0% in May after weight loss of 3.3% in April. Index of leading indicators rose by 3.6 points after falling by 3.4 a month earlier, report of economic observers improved dramatically. Annual dynamics of wages returned to the plus (adjusted for inflation) — by 0.7% compared with −1.9% in April. However, bank lending is still in negative territory, as well as the balance of trade — but there was an improvement against the previous months. In Australia the situation is complicated: the June activity in the service sector has gone deeper into the zone of recession, and in the construction sector it got into the area of depression (only 35.8% of positive responses); building permits in May have fallen by 7.9% m/m after falling by 0.3% in April; retail sales lost 0.6% in the same month — though in April it was +1.2%, so it's not that scary. The trade surplus in May rose due to increased exports, and employment has expanded significantly in June — albeit against the background of deterioration in May. Activity in the services sector of China slightly reduced in June — but remains confidently in the zone of expansion. Hole in the treasury of the New Zealand reached 20.4% of GDP in May: it is clear that there is a recovery from the earthquake, which requires some deficit spending — but not of that degree!
Europe. Eurozone GDP for January-March wasn’t revised: +0.8% q/q and +2.5% y/y. NIESR institute promises the British economy a boost of only 0.1% in the second quarter against the first — blame the royal wedding. Industrial production in May pleased after April's bitterness: in Germany increase by 1.2% recouped the drop of 0.8%; Britain’s case is worse (+0.9% after −1.7%); Spanish annual dynamics went to plus (by 0.8%) after minus in April (by 1.6%) — and only in Italy there was a fall of 0.6% m/m. Orders in the manufacturing industry of Germany rose by 1.8%: external demand fell by 5.8%, but domestic orders (+11.3%), particularly for capital goods (+20.0%), more than compensated for the collapse. Eurozone business activity is at the lowest levels since October 2009, it also declined in the UK — however, the figures are yet in the area of expansion; business climate in France is actively deteriorating. French trade deficit in May was a record one because of the weakness of export; German surplus was generally consistent with the forecasts. Producer prices of eurozone fell in May by 0.2% m/m, reducing the annual increase to 6.2% from 6.7% in April; consumer prices in Switzerland shrank by 0.2% m/m, but rose by 0.6% y/y; increase in selling (+5.7% y/y) and retail (by 2.9%) prices in Britain in June was the highest since the autumn of 2008 — food is growing especially aggressively. Unemployment in Spain is falling, but rising in Switzerland; the UK review of KPMG/REC showed deterioration on all fronts (full employment index reached a minimum for 2 years). In Switzerland, retail sales in May collapsed by 4.2% m/m and 4.1% y/y; in the eurozone they shrank by 1.1% and 1.9% respectively, already returning to the crisis lows.
America. Industrial orders in the USA rose in May by 0.8% m/m — but it does not take into account inflation, which, even according to official figures, reached 0.9%; and if prices are calculated normally, the case is very sad — real orders per capita almost hadn’t recovered at all since the bottom of the crisis, staying on the territory of record lows. Business activity in Canada has weakened in June — but still generally states an expansion; in the US in services the similar figure has been slowly declining (especially new orders) — but still stays above 50 points level. Building permits in Canada hit the somersault: +20.9% in May after −21.5% in April — to blame for fluctuating commercial projects. In early July, the mood of American consumers, according to Bloomberg, has clearly deteriorated recouping the positive of several previous weeks. In general, the labour market is not bad: Challenger states the growth of both employment and layouts; primary applications for unemployment benefits have dropped — but remained at a high level; industry index of Monster grew. The dynamics of private sector employment from ADP has exceeded the market expectations more than double-fold — but the official report was terrible: the number of jobs created is much smaller than the growth of labour force, unemployment has risen, the average time of unsuccessful job search reached a record high, the numbers of May were decreased. Car sales in June were the worst since June 2010, and per capita — since last February: against May there is fall by 3.0%, and versus June 2010 — an increase of 0.9%.
Source: U.S. Census Bureau, independent evaluations
Russia. Consumer sentiment index from Rosstat showed a slight improvement in the second quarter against January-March — though the basic components are still in the red. As we expected, end of the programme for the exchange of old cars for new ones has influenced badly the industry’s indicators: if in the first half of the year as a whole the annual increase of sales of AvtoVAZ was 31.5%, then separately for June — only 7.0%: we suppose, the general industrial production (and especially the manufacturing sector) won’t be overjoyed too. Consumer prices have swollen in June by 0.2% m/m and 9.4% y/y — as always public utilities are in the forefront (+13.2% against the same month last year). And the authorities don’t plan any stopping here: MED wants to raise tariffs of natural monopolies by 11-15% in 2012, the strongest rise will be for the gas. FSB found a mountain of dirt on prosecutors who protected underground casinos; and a high rank in Prosecutor's Office, who was positioned to catch villains in special services, could not resist the constant pressure of mafia in his own office and tried to kill himself — a clear illustration of the chaos and despair reigning among the people who managed to keep a clear conscience in the corridors of power. Gloomy atmosphere continues to tighten — Medvedev ordered Serdyukov to deal with the disruption of military order, recalling that at the time of war the alarmists were shot, but graciously allowing the minister to limit himself to layoffs; no one could better illustrate the success of the notorious de-Stalinization, as our beloved president who started it. The owner of Gunvor, Putin's friend, Finnish citizen and resident of Switzerland Timchenko sued Nemtsov in defence of his honour and dignity, and the latter published a rebuttal — but the businessman was not content with the font size that wasn’t worthy of his powerful dignity: now the bailiffs are going to forbid Nemtsov to cross the country border — idiots!
Illustration: Artyom Popov, ITinvest
Have a nice week!