InvestMacro Forex News

By www.CentralBankNews.info     The central bank of Mauritius cut its repo rate by 25 basis points to 4.65 percent by a majority vote and revised downwards its 2013 growth forecast due to “lasting downside risks to the economic outlook” and generally softer conditions in the main trading partners.
    The Bank of Mauritius, which last cut its rate in March 2012, said the domestic economy continues to be vulnerable due to the subdued external environment and economic output has been below trend with slow export growth and a significant contraction in construction.
    The 2013 growth forecast was revised down to a range of 3.2-2.7 percent, down from a March forecast of 3.4-3.9 percent. In 2012 the economy grew by an estimated 3.3 percent.
    Inflation has remained broadly unchanged since the bank’s March meeting, and in addition to excess capacity in the economy, a new CPI basket has introduced a downward substitution bias. However, there are upside risks to the inflation outlook from public sector wages and a possible spillover to private sector, the bank said in a statement from June 17.
    Inflation this year is forecast at 5.3-5.8 percent, based on no changes in policy, equivalent to headline inflation of 4.1-4.3 percent, the central bank said.
    In March the inflation rate rose to 3.7 percent from 3.6 percent the previous month and the central bank said its inflation expectations survey in May put the mean headline inflation rate at 4.3 percent in December this year.
    The central bank said its monetary policy committee was divided on the risks to growth and inflation, with some members arguing for proactive action to tackle medium-term inflation and others saying the growth outlook had deteriorated in light of developments in the main trading partners.
    Rundheersing Bheenick told Bloomberg today that he voted for a 25 basis point increase in the policy rate for the second time this year to help contain inflation.

    www.CentralBankNews.info
   
   

By www.CentralBankNews.info    Morocco’s central bank held its key rate steady at 3.0 percent, saying inflation is expected to remain in line with the bank’s price stability objective and the risks are balanced.
    Bank Al-Magrib also said it would implement a new program to encourage banks to lend to very small, small and medium-sized enterprises, particularly industrial companies that are export-oriented due to a continued deceleration in non-agricultural activity and bank credit.
    The program, with a minimum duration of two years, provides banks with liquidity collateralized mostly by private securities issued by such businesses, the Central Bank of Morocco said.
    Bank Al-Magrib trimmed its inflation forecast for 2013 to 2.1 percent from a March forecast of around 2.2 percent and maintained its forecast that inflation would be around 1.6 percent in the third quarter of 2014, averaging 2.0 percent over the forecast horizon.
    Morocco’s inflation rate rose to 2.4 percent in April from 2.2 percent in March for an average rate of 2.4 percent in the first quarter, in line with the bank’s forecast from March. Core inflation rose to 1.6 percent in April from 1.5 percent in March, mostly due to the dissipating effect of a cut in communications prices in 2012. Due to lower commodity prices, industrial producer prices fell by 4 percent in April after a 1 percent fall in March.

    Morocco’s central bank has held its key rate steady since March 2012 when it cut rates by 25 basis points.
    Morocco’s economy is forecast to bounce back this year after growth of 2.7 percent in 2012 due to an 8.9 percent fall in agriculture valued added and a 4.5 percent fall in non-agricultural GDP.
    This year, agricultural activity is benefitting from good weather while the non-agricultural sector will be impacted by the economic downturn in partner countries, mainly the euro area.
    Gross Domestic Product growth this year if forecast to range from 4.5-5.5 percent – up from a March forecast of 4-5 percent – with non-agricultural output rising 2.5-3.5 percent, which means the output gap remains below zero and the absence of inflationary pressures from domestic demand.
   The central bank said the international environment was still characterized by a “continued worsening of economic activity and the persistently high levels of unemployment,” particularly in the euro area.
    “These developments, couples with lower commodity prices, contributed to keeping inflation at moderate levels, particularly in partner countries, which suggests the absence of significant external inflationary pressures on the national economy in the coming quarters,” the bank said.

    www.CentralBankNews.info
   

By The Sizemore Letter

Watch me chat with Covestor’s Mike Tarsala about how to invest at the end of a 30-year bull market in bonds.  I discuss some of the ways I am playing the transition in my Dividend Growth Portfolio.

To read Mike’s write up of the interview, see: Sizemore: How I’m playing the end of a 30-year bull for bonds.
SUBSCRIBE to Sizemore Insights via e-mail today.

By The Sizemore Letter

Rumors flew over the weekend that AT&T ($T) had made an offer to buy Spain’s Telefonica ($TEF) for $93 billion—a roughly 50% premium to today’s market cap.

Telefonica was quick to dispel the rumor, and AT&T had no comment as Monday afternoon.

My gut reaction is that this rumor is exactly that: a rumor.  The sheer size of the deal makes it unlikely that it would ever make it past the assorted national telecom regulators without provoking anti-trust hysteria.  AT&T is the largest telecom firm in North America, and Telefonica is a dominant player in Europe and Latin America.

But while I don’t see a deal happening, the prospect does raise a few questions.   Given that mobile phones are ubiquitous in the United States, smartphones are not far from the saturation point, fixed-line telecom is in terminal decline and broadband internet and paid TV are well past the saturation point, where does a behemoth like AT&T go for growth?

One obvious answer is emerging markets, which is why Telefonica was allegedly on AT&T radar screen.  Telefonica gets roughly half its revenues from Latin America, where fast internet and smartphone subscriptions are both still growth businesses.

The problem is that there aren’t a lot of assets there left to buy.  The Latin American market is essentially a two-horse race between Telefonica and America Movil ($AMX), the company controlled by Mexican billionaire Carlos Slim.

AT&T actually already owns 9% of America Movil, making it the company’s second –largest shareholder.  This would also make it complicated for AT&T to make a serious offer for America Movil’s bitterest rival.

There aren’t a lot of easy targets elsewhere either.  The European telecom giants tend to dominate in their countries’ former colonial holdings, with Telefonica being a prime example.  France Telecom ($FTE) is active in 21 Middle Eastern and African countries, and Britain’s Vodafone ($VOD) has most of the rest of the world covered.   Vodafone operates in 30 countries, many of which are attractive emerging markets, and has partnerships in place with local providers in over 50 more.

So, an American newcomer like AT&T would be competing on price against some entrenched competition for a capital-intensive business that doesn’t have particularly great margins.  Perhaps an aggressive emerging markets growth strategy is not so attractive after all…

I raised a few eyebrows earlier this year when I suggested that my favorite “tobacco stock” was semiconductor giant Intel (INTC).

By “tobacco stock” I was referring to companies in slow-growth industries that had high barriers to entry.  Because their growth prospects are limited, they tend to use their excess cash flows to buy back their own shares and pay out monster dividends.

This is where AT&T, Verizon ($VZ) and Sprint ($S) are today.  Barriers to entry are not as high in mobile telecom as they are in, say, tobacco or semiconductors.  Consider the recent success of discount providers like Metro PCS ($PCS), which recently merged with T Mobile.  But given the limited spectrum available and the cost of building out a network, the current providers have little to worry about in the way of new entrants.

Sprint is a train wreck right now, which is thankfully being bought out by the Japanese telco Softbank ($SFTBY)—a company so desperate for growth in its moribund Japanese home market that even a dog like Sprint looks attractive).

But how do AT&T and Verizon look?

AT&T yields 5% in dividend and is aggressively buying back its shares.  Verizon yields 4% and has not made any recent announcements regarding share repurchases.

5% and 4%, respectively, are not bad yields in this environment.  This puts the two major telecom companies about on par with triple-net REITs and MLPs.

But if I have to choose between telecom stocks and REITs and MLPs, I’m taking the REITs and MLPs.  Both should benefit from an improvement in the economy, as a healthier economy means rising rents and increased energy usage.  Both are also better positioned to weather any uptick in inflation.

AT&T and Verizon might also benefit from an improving economy, as more employment means more business phone and data lines and, to some extent, upselling to more expensive personal plans.  But both operated in an inherently cutthroat and deflationary business.  Quality real estate appreciates in value over time.  Telecommunication equipment does not.

Bottom line: in a diversified income portfolio, there might be room for the likes of AT&T or Verizon.  But I would give a higher allocation to quality REITs and MLPs.

Sizemore Capital is long TEF. This article first appeared on InvestorPlace.

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provided by IAFT

EURUSD – The EURUSD Squeezed in Narrow Range

The EURUSD has failed to move anywhere again, having spend most of the day in a narrow range between 1.3318 and 1.3358. At the end of the day, there was a weird hike to 1.3381, but it wasn’t continued due to its obscurity, thus the pair started returning to its initial positions. Consequently, the EURUSD continues consolidating, but it is difficult to say whether there will be either an upward breakdown or its downward correction. Therefore, we can assume that withdrawal from the range will determine the pair’s further movement in the short term.

GBPUSD – The GBPUSD Likely to Form the Peak

The GBPUSD pair had almost the same situation yesterday. Its fluctuations were limited by 1.5751 and 1.5680. It is possible that the pair has started the peak formation at current highs, but the market activity is so low that this assumption could be easily challenged. Thus, it is wise to wait until there are further developments, and then plan your trading strategy.

USDCHF – The USDCHF Remains Above Support 0.9220

The dollar’s increasing attempts against the Swiss franc yesterday were limited by the resistance of 0.9271. After its testing, the pair returned to the support level at 0.9220. This level continues to carry out its functions, confirming the continuing demand for the U.S. currency. If the bulls manage to defend the support, they will gain strength and confidence, which will allow them to break through the resistance and make the pair’s rate increase to 0.9307. In the USDCHF increases and consolidate higher, the outlook will be improved. The drop below would mean the downtrend resumption.

USDJPY – The USDJPY Still at Risk of Decreasing

The USDJPY has come to standstill in the 100-point range between 94.20 and 95.20 at this stage – the pair spent the whole day there yesterday. The pair remains in demand at the approaches to the 94th figure – this may cause the basis formation, which, in turn, will likely complete the descending correction, but the bulls need to break through and consolidaye above the 96th figure. So far, the pair is still at risk of continuing its decrease.

provided by IAFT

By ForexAbode.com

GBPUSD had fallen very strongly since the beginning of 2013 to March second week. The fall had taken the currency pair from 1.6381 to 1.4831 i.e. 1550 pips. The rise from that low was strong and after some resistance near 38.2% retracement of that fall, the pair had managed to break over it. The upward gains took it to 1.5606. The interesting point here is that 1.5606 was the exact 50% retracement of the move from 1.6381 to 1.4831. A strong resistance was faced at that level for 2 weeks during end of April and 1st week of May 2013. The failure had a strong fall. The second rise from the recent bottom of 1.5008 tried again struggled against this resistance of 50% retracement.

GBPUSD’s Struggle

The Break Over 50% Retracement Resistance

At last the pair broke the above mentioned resistance cans went as high as 1.5751 but is mainly remaining in a sideways mode. We will see later where the resistance is coming from.

Another Resistance Ahead

The above mentioned resistance was not the only one to be careful about. Since the beginning of September 2009 to mid-February 2013 i.e. for almost three and a half years the price action of GBPUSD had been inside a slightly ascending triangle. During February 2013 the pair had broken below the support trend line very strongly. This break after such a long time had fueled the bearish sentiments.

The Trend Lines

The interesting point is that now this previous support trend line seems to have turned into a resistance trend line. The previous upward jump had found resistance just below this line during April last week and May first week of 2013. And now the recent upward move is again finding resistance near the same trend line. Interestingly the 61.8% retracement from the above mentioned move and the resistance of the support turned resistance trend line fall in the same range. If this resistance holds then another bigger  fall cannot be ignored. However a break of this resistance may see GBP/USD to test the previous resistance line by moving towards 1.6300 or higher.

You may also like to check daily and weekly updates at http://www.forexabode.com/

Connect with the author at Google: +Himanshu Jain.

By www.CentralBankNews.info

By www.CentralBankNews.info     Turkey’s central bank held its benchmark interest rates steady but will provide up to 9.0 billion lira in liquidity through weekly auctions, saying a flexible monetary policy stance was appropriate given  “continued uncertainties about the global economy and volatility in capital flows”
     The weekly and monthly funding auctions comes after the Central Bank of the Republic of Turkey (CBRT) last week tightened short-term policy by reducing liquidity and holding unsterilized foreign exchange sales due to “excessive volatility” in the foreign exchange market.
    Following a meeting of its Monetary Policy Committee, the CRBT said the weekly auctions beginning June 19 would provide between 0.2 and 9.0 billion lira and the upper limit for one-month repo auctions had been set at 0.5 billion lira.
    The CBRT said if there was any need to change the upper or lower limits of the funding required, either via the weekly or monthly auctions, it would announce the changes.
    The central bank said domestic demand continued to show a healthy recovery while exports were slowing down due to weak global demand and there was increased uncertainty about monetary policy due to changes in global capital flows.

    Like most emerging markets, Turkey’s lira and its markets have been under pressure in recent weeks from an expected reduction in asset purchases by the U.S. Federal Reserve. In addition, Turkey has also been suffering from domestic political unrest.
    The lira has lost 4.8 percent since early May when it started to weaken and was quoted at 1.88 per U.S. dollar today. Since the beginning of the year, it has lost some 5.3 percent.
    “In this context the effect of exchange rate movements on domestic demand and the increase in loans will be closely monitored,” the central bank said.
    The depreciation of the lira tends to boost inflation through higher import prices. Turkey’s inflation rate rose to 6.51 percent in May from 6.13 percent in April, but down from 7.29 percent in March.
    The recent outflow of capital from Turkey is in stark contrast to years of inflows which has put upward pressure on the lira and stoked local asset prices.
    The central bank has been cutting its benchmark and overnight interest rates in recent months to discourage the inflow of capital and boost domestic economic activity.
    Most recently in May, the CBRT cut its benchmark, one-week repo rate by 50 basis points to 4.5 percent, and its overnight borrowing rate – the ceiling in the central bank’s interest rate corridor – was cut by the same amount to 3.5 percent and the overnight lending rate to 6.5 percent.
    It was the central bank’s second cut in its one-week repo rate this year, bringing this year’s rate cuts to 100 basis points following a 25 basis point cut in 2012.
    Turkey’s economy has been recovering after economic growth slumped to 2.2 percent in 2012 from 8.8 percent in 2011. It is expected to grow by around 4.0 percent this year.
    In the first quarter of this year, Turkey’s Gross Domestic Product expanded by 1.6 percent from the fourth quarter for annual growth of 3.0 percent, up from 1.4 percent.

    www.CentralBankNews.info

London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 18 June 2013, 07:00 EDT

GOLD drifted to a one-week low below $1380 an ounce Tuesday morning, as silver dipped below $21.80 an ounce, with stocks and commodities broadly flat on the day ahead of tomorrow’s US Federal Reserve decision, with analysts speculating on whether the Fed will give details of when and how it might slow down its quantitative easing program.

“The outlook for the gold price remains negative from a technical perspective,” says Karen Jones, head of FICC technical analysis at Commerzbank.

“Following the mid-April plunge, the market has consolidated tightly sideways in a converging range. We are viewing this as a potential symmetrical triangle. A close below $1352 will complete the pattern and trigger another leg lower we suspect.”

“We believe that the dramatic gold sell-off in April,” adds a note from Societe Generale, “combined with the prospect of the Fed starting to taper its QE program before year-end, has resulted in a paradigm shift in many investors’ attitude towards gold. This is likely to result in continued large-scale gold ETF selling this year and next.”

The SPDR Gold Trust (ticker: GLD), the world’s largest gold exchange traded fund (ETF), has seen outflows this year amounting to a quarter of the gold it held to back its shares at the start of January.

In Washington, the Federal Open Market Committee begins its latest two-day monetary policy meeting today, with a decision due tomorrow.

“[There is] much speculation as to whether [the FOMC] will detail an exit strategy [from QE],” says a note from Dutch bank ING.

“While there are views that the Fed will want to see bond yields lower, or certainly highlight that policy rates will not be raised for a significant period, we see merit in the view that transparency is the best policy choice – and it is time to more formally outline the normalization process.”

ING also argues that Fed policy uncertainty “has seen soaring volatility destroy the carry trade”, whereby investors could borrow cheaply in Dollars to invest in emerging market assets.

Fed chairman Ben Bernanke meantime has stayed in his job “longer than he wanted” and has “done an outstanding job”, according to US president Barack Obama, speaking in an interview broadcast Monday.

Over in the UK, consumer price inflation rose to 2.7% last month, up from 2.4% a month earlier, figures published Tuesday show. Mervyn King steps down as Bank of England governor at the end of this month. For the 120 months of his tenure, inflation has been above the Bank’s target in 84 of them.

Over in India, the world’s biggest gold buying nation, the authorities “are not at the end of our wits as far as gold imports are concerned,” economic affairs secretary Arvind Mayaram said Monday.

“If required, there are other measures that can be taken and they will be considered at the appropriate time.”

India has raised import duties on gold twice this year – taking them to 8% – and has also restricted imports of gold on a credit basis to only those who will re-export it. Gold and silver was India’s second biggest import item last year and has been cited as a major contributor to the country’s current account deficit.

Over in China, the world’s largest stock market-listed jewelry chain Chow Tai Fook today reported a 13% drop in profits for the year to March, a filing with Hong Kong’s stock exchange shows. The company cited “declining confidence of domestic consumers” as a factor behind the fall in profits.

Sales of silver bullion American Eagle coins by the US Mint meantime are set to record their best first-half-of-a year since at least 1986 – the year from which US Mint sales data start – with over 24 million ounces sold so far this year.

CME Group’s new 1000 ounce silver futures contract saw 25 lots of the September contract traded in its first day of trading yesterday, with 5 lots of the December contract traded. By comparison, volume for the standard 5000 contract was 11,028.

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 can be found on Google+

(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.

By George Leong

All of you know how I feel about the Japanese stock market and the economy in general.

Yes, I was wrong in the past when I suggested traders and investors stay away from the Japanese stock market. The benchmark Nikkei 225 has been the top performer this year; in fact, at one point on May 23, the stock index was up a hefty—though undeserved—70% or so.

Yet despite all of the hoopla regarding how Japanese Prime Minister Shinzo Abe has become a rock star in Japan’s equivalent of Wall Street due to the country’s massive stimulus regime referred to as “Abenomics,” I still remain unconvinced about the Japanese stock market.

Just like the Federal Reserve here with Ben Bernanke, Abenomics is all about driving the economy by flooding the monetary system with easy and, essentially, free money. (Can you say “Ponzi scheme”?) And when money is free, it is expected that consumers and corporations will spend it. But the problem, just like the one we’re experiencing here in
America, is that the flow of money down the pipeline will create an artificial Japanese economy that will stay stuck in a recession—despite the growth.

As I mentioned previously in these pages, the flowing of easy money is dangerous because spenders become addicted to the near-zero interest rates.

Just recall the use of the term “monetary cocaine” by Richard Fisher, president of the Dallas Federal Reserve Bank, in reference to the Fed’s stimulus. (Source: “Fed’s Fisher: We Cannot Live in Fear of ‘Monetary Cocaine,’” Reuters, June 5, 2013.)

The failure of the Bank of Japan to offer up new stimulus at last week’s monetary meeting and the subsequent selling in the Nikkei stock market were red flags that we need to watch.

It’s no different from here; just like the U.S., Japan is currently being driven by the easy money—and traders want more of it. Hold back the easy money, and you’ll see the stock market fall.

In the Global Economic Prospects report produced by the World Bank, Japan’s gross domestic product (GDP) growth projection was raised to 1.4% from the previous 0.8%. According to the World Bank, “In Japan, a dynamic relaxation of macroeconomic policy has sparked an uptick in activity, at least over the short-term.” (Source: “Japan growth estimate
gets World Bank boost,” The Japan Times News, June 13, 2013.)

The upward revision is encouraging for Japan, but it doesn’t justify the associated rise in the Japanese stock market. Not even close.

Moreover, last year’s launch of Abenomics will add to the already woeful debt levels in Japan, and, just like the massive debt buildup in America, this will not be good.

The Nikkei 225 has retrenched 22% from its high on May 23, and I don’t think a bottom has even been reached yet. I said it before and I will repeat it now: I would stay out of the Japanese stock market.

And just like the United States, Japan will find out very soon that its stock market will be dependent on the flow of easy money to continue its uptick. This is a risky proposition, especially as the global interest rates begin to ratchet higher. And just like America, the Bank of Japan is running a massive Ponzi scheme that could—very simply—collapse.

This article Abenomics: The Biggest Ponzi Scheme in History? was originally published at Investment Contrarians