4 February 2014 - Dad Can’t Buy Daughter Shoes as Argentine Currency Falls

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• 4 February 2014 - Dad Can’t Buy Daughter Shoes as Argentine Currency Falls
• 3 February 2014 - U.S. Mint Gold-Coin Sales Jump 63% in January; Silver Triples
• 3 February 2014 - Emerging Market Rout May Signal ‘Sudden Stop’: Cutting Research
• 3 February 2014 - Turkey Rate Increase Stems Lira Decline as Basci Defies Erdogan
• 3 February 2014 - BNM keeps key policy rate at 3%
• 3 February 2014 - Government creates 75 new posts for aviation security

4 February 2014 - Dad Can’t Buy Daughter Shoes as Argentine Currency Falls Posted: 04 Feb 2014 02:36 AM PST From:http://www.bloomberg.com/news/2014-02-04/dad-can-t-buy-daughter-shoes-as-argentine-currency-falls.html Jorge Contrera checked a pair of soiled shoes from top to bottom, tried to buff them with his shirt sleeve, then paid 40 pesos ($5) for his 8-year-old daughter's present. Before Argentina's devaluation last month, he planned to surprise her with a new pair. "Do you know how I feel buying my daughter used shoes?" said 29-year-old Contrera, a welder who's currently working as a delivery man. "The new shoes just went up and I don't have the cash." Like Contrera, many Argentines see their standard of living falling as the fastest pace of inflation in a decade erodes their purchasing power and confidence in President Cristina Fernandez de Kirchner's economic policies. Last month's 19 percent devaluation of the peso, which drove up prices on products from cars to refrigerators, highlights Fernandez's dilemma. If she adopts unpopular belt-tightening measures, she could face social unrest, said Mariel Fornoni, director of polling firm Management & Fit. "It's a critical moment for the government and there's no reason to believe things will get better," Fornoni said in an interview. "There's a real risk of growing protests in coming months." Since Jan. 27 the government eased some currency restrictions and raised interest rates by more than six percentage points in an effort to reduce dollar demand that has drained central bank reserves by 34 percent to $28 billion over the past year. Capital Flight Real interest rates remain negative and unless the government cuts spending, including energy subsidies, Argentina's vicious cycle of inflation, capital flight and devaluation will continue, Mark Mobius, chairman of San Mateo, California-based Templeton Emerging Markets Group, wrote in a note to clients on Jan. 30. While Argentina's Merval stock index nominally has risen 112 percent since Fernandez's Oct. 2011 re-election through yesterday, those gains evaporate if returns are converted to dollars at the rate investors use to avoid currency controls. Economy Ministry press official Jesica Rey didn't respond to an e-mail message from Bloomberg seeking comment on government measures to curb surging inflation. In a series of Twitter posts from a summit in Havana last month, Fernandez said banks, importers and exporters were behind "speculative" movements in the markets, without giving more details. The peso's plunge this year is the largest among 169 currencies tracked by Bloomberg, and investors have dumped government dollar bonds that have lost about 15 percent, according to data compiled by Bloomberg and JPMorgan Chase & Co.'s EMBIG index. The cost to protect the nation's debt against non-payment over five years with credit-default swaps has jumped 11.7 percentage points to 28.2 percent, implying an 87 percent probability of default, the highest in the world. Salary Gains For the first time since at least 2008, salary gains last year fell short of consumer price increases, according to Buenos Aires-based consulting firm Elypsis, which estimates its own inflation index. In January inflation accelerated to 6 percent from 3.5 percent a month ago and will come in around 4 percent in February, said Luciano Cohan, chief economist at Elypsis. Prices rose an estimated 28 percent in 2013. "These higher levels of inflation are provoking discontent, and government measures to control it are increasingly ineffective," Cohan said by phone from Buenos Aires. Ricardo Villalba, a 37-year-old kitchen hand, came to buy meat and grapes at a market in the Constitucion neighborhood of Buenos Aires. After balking at the 30 pesos-per-kilo price of grapes and a jump in beef to 55 pesos, he changed his mind. "Of course I'm unhappy, I'll eat a fried egg tonight," Villalba said. IMF Censure The government, which says annual inflation was 10.9 percent in 2013, was censured by the International Monetary Fund last year for underreporting consumer price increases. The IMF has given the country until March to release a new index. Cabinet Chief Jorge Capitanich yesterday accused Royal Dutch Shell Plc's Argentine unit of conspiring against the country's interests after it raised fuel prices following the devaluation. The company rejected the charges, saying it was due to the relative increase in crude oil costs as a result of the weaker currency. Argentina's annual wage bargaining period will be key for Fernandez to keep part of her base content. Police strikes over wages in December triggered violent looting in at least half of the country's 23 provinces. Labor unions are preparing for wage negotiations in March in which the CGT, the nation's largest trade federation, has already asked for a 3,000 peso upfront payment and a 30 percent salary increase. Disapproval Rating Disapproval of Fernandez increased to 58.4 percent in December from 29.4 percent when she was re-elected in October 2011, according to the latest M&F national poll of 1,600 people, which had a margin of error of 2.45 percentage points. Attempts to contain inflation through price caps and subsidies, which have ensured some cost stability for basic foods, energy and transport, are becoming more expensive and less effective. South America's second-largest economy posted a record $6.1 billion energy deficit in 2013 after running a surplus for 20 years through 2010. As domestic gas output falls, the government has turned to imports of liquefied natural gas from as far away as Singapore and Qatar, selling the fuel to homes and factories at a sixth of the price paid to suppliers. Government attempts at regulating prices on basic goods have a limited impact, with supermarkets agreeing to cap 194 of an estimated 40,000 products, said Cohan of Elypsis. Empty Shelves The specially-marked items from milk to sugar and beer are not always available, and many smaller grocery stores don't participate. At a Carrefour SA supermarket in the southern zone of the capital, only one bottle of "fixed price" vegetable oil was available at 7.54 pesos. Around the corner, a fully stocked grocery store sold the same oil at a 33 percent markup. After electronics and household appliance stores hoisted prices by as much as 30 percent in the days following the devaluation, the government threatened to fine or close businesses that didn't cap the increases at 7.5 percent. In December, half of Argentines said they expected their personal economic situation to worsen in the coming months, the highest percentage since August 2012, according to the latest survey by M&F. The economy will grow 2.3 percent this year, down from an estimated 3.2 percent in 2013, according to the median forecast of 21 economists surveyed by Bloomberg. Luxury Vehicles Price increases and a luxury tax on high-end models may particularly hit the auto industry, which last year sold a record 963,917 units as many consumers turned to vehicles as a way to park their savings in durable goods. Sales of imported luxury cars rose faster than other models, as Argentines sold dollars on the black market and then bought the cars at the official exchange rate, saving about 40 percent. Fiat SpA said it sees "double digit" declines in Argentina's car market in 2014, according to a presentation on its fourth-quarter results posted on its website Jan. 29. "After how prices increased for some of the cars, you'd have to be crazy to buy now," said Ramon Herrera, who runs a car dealership named after his family. He expects sales to drop about 50 percent this year. Source:http://www.bloomberg.com/news/2014-02-04/dad-can-t-buy-daughter-shoes-as-argentine-currency-falls.html

3 February 2014 - U.S. Mint Gold-Coin Sales Jump 63% in January; Silver Triples Posted: 03 Feb 2014 04:46 PM PST From:http://www.bloomberg.com/news/2014-02-01/u-s-mint-gold-coin-sales-jump-63-in-january-silver-triples.html Sales of gold coins by the U.S. Mint rose 63 percent in January to the highest since April as futures rebounded. The volume climbed to 91,500 ounces from 56,000 ounces in December, while sales of silver coins almost tripled to 4.78 million ounces, the highest in a year, mint data showed yesterday. In January, gold futures rose 3.1 percent, snapping a four-month slump, as a rout in emerging-market currencies increased demand for the metal as a haven. Mints from the U.S., the world's biggest, to Australia boosted sales with Austria's Muenze Oesterreich AG operation running 24 hours a day to meet a surge in demand. "Any kind of uncertainty attracts people to gold," Scott Carter, the chief executive officer of Los Angeles-based Lear Capital, said in a telephone interview. "The long-term buyers accumulate gold every time there is a drop." Gold futures for April delivery fell 0.2 percent to $1,239.80 an ounce yesterday on the Comex in New York. On Dec. 31, the price touched a six-month low of $1,181.40, spurring demand for coins, bars and jewelry. In 2013, the metal tumbled 28 percent, the first annual loss since 2000. A U.S. equity rally to a record and muted inflation eroded the metal's appeal as an alternative investment. Sales of gold coins fell 39 percent from a year earlier, and silver dropped 36 percent. Source:http://www.bloomberg.com/news/2014-02-01/u-s-mint-gold-coin-sales-jump-63-in-january-silver-triples.html

3 February 2014 - Emerging Market Rout May Signal ‘Sudden Stop’: Cutting Research Posted: 03 Feb 2014 04:44 PM PST From:http://www.bloomberg.com/news/2014-01-31/emerging-market-rout-may-signal-sudden-stop-cutting-research.html Brazil, South Africa, Turkey and Ukraine are the emerging markets most at risk of a "sudden stop," in the view of Morgan Stanley. That's defined as a halt or even a reversal in capital flows into a country, slashing access to international financial markets for an extended period and weakening the economy. The term is often linked to 1995 work by Rudi Dornbusch, the late international economics professor at the Massachusetts Institute of Technology in Cambridge. Mexico, Indonesia, India and Thailand are also in some jeopardy of such a phenomenon as investors turn sour on emerging markets, London-based economists Manoj Pradhan and Patryk Drozdzik said in two reports to clients over the past week. They wrote as central banks in India, Turkey and South Africa raised interest rates to shore up confidence in their currencies. The Morgan Stanley authors evaluated the risk by looking at factors such as the reliance on capital inflows and credit, the size of the current account deficit, the legroom for policy and exposure to China. In the case of Brazil, for example, capital inflows account for almost half the money entering the country, total external debt is more than the size of foreign exchange reserves, the current account shortfall is almost 4 percent of gross domestic product, inflation is around 6 percent and government debt is about 70 percent of GDP. The countries most in danger now face questions over how they will fund their budget and trade gaps and whether they can pivot to new sources of expansion, the economists said. Investors should monitor the processes of reducing debt and political splits. Ukraine, Turkey and Thailand have all witnessed social unrest. "While the risk of a sudden stop is higher in some economies and lower in others, EM economies remain exposed to the risk," Pradhan and Drozdzik said in a Jan. 27 report. "If policy makers don't enforce the change and reforms that are needed to generate a new model of growth, asset prices will adjust by as much as is necessary to generate that change." In a Jan. 29 report after the rate increases in Turkey and South Africa, Pradhan and Drozdzik wrote: "this new policy awareness is by itself a positive and a step in the right direction." The euro area is the major economy most at risk from the recent outbreak of emerging-market anxiety. The region last year exported the equivalent of 3.1 percent of gross domestic product to Brazil, India, Indonesia, Russia, South Africa and Turkey, the countries most attacked by investors lately, according to Julian Callow, chief international economist at Barclays Plc in London. That compares with 2.4 percent for Japan and 1.3 percent for the U.S. By contrast, the euro area's exposure to the so-far non-stressed emerging markets was 4.7 percent. The U.S.'s was 3.3 percent and Japan's 6.6 percent. "It suggests that if there were to be a more serious decline in imports by China then this would carry much more significant implications for GDP in the advanced economies," Callow said. In a separate report, Dominic Wilson, chief market economist at Goldman Sachs Group Inc., concluded that a greater risk to rich nations may lie through financial channels. It nevertheless remains manageable, he said. Citing data from the Bank for International Settlements, New York-based Wilson said on Jan. 29 that the developed-market banking system has $5 trillion tied to emerging markets, 20 percent of its total external position. The exposure to the economies in tumult is just $1.14 trillion, he said. * * * Inflation is increasingly driven by global rather than local factors, meaning central banks in industrial economies may be running overly easy monetary policy. So say Stephen L. Jen and Fatih Yilmaz of London-based hedge fund SLJ Macro Partners LLP. In a Jan. 22 report they outlined how forces of globalization -- such as international labor arbitrage, free trade and rise of multinational corporations -- have driven up correlations between the inflation rates of different countries, especially since the 1990s. The link is less strong for output. The results mean that central banks targeting for inflation alone could be destabilizing because it fails to account for whether price pressures are located at home or abroad. The Fed, for example, may have eased monetary policy too much in the mid-2000s because it under-appreciated the disinflationary effects of globalization, said Jen and Yilmaz. It may be running over-loose policies now, they said. Immigration can have a positive effect on the average wages of lower-skilled workers, according to a new study that challenges the conventional wisdom of governments. The paper, to be published in the Economic Journal, found that during the 1990s, immigration usually boosted the average pay of workers lacking skills in countries from the 34-member Organization for Economic Cooperation and Development. That's because the immigrants are typically more educated than the non-migrant natives and so create jobs, fanning hiring of those further down the job ladder, according to authors Frederic Docquier, Caglar Ozden and Giovanni Peri. They work at the National Fund for Economic Research in Brussels, the World Bank in Washington and the University of California Davis respectively. Less educated workers enjoyed particularly large gains in countries where immigration favors educated foreigners, such as Australia and Canada, their study said. In Ireland, the U.K. and Switzerland, the wage increase was still as much as 5 percent. Traders hit the sell button on stocks as their national teams are eliminated from the World Cup, according to researchers at the Bank of Canada -- a nation that has only been to the men's tournament once and never scored a goal. Ahead of this year's World Cup in Brazil, the researchers tracked minute-by-minute trading of STMicroelectronics NV (STM) on the Milan and Paris stock exchanges during the 2010 tournament matches where Italy and France were being knocked out. Share prices that should have been equal in each city were as much as 7 basis points lower in the country whose team was being defeated, the central-bank economists said. "A major shift in investors' emotions, caused by a national team's imminent elimination from a major sporting event, can almost instantaneously affect stock prices," Ottawa-based Michael Ehrmann and David-Jan Jansen wrote in a Jan. 28 paper. The finding "contributes to the continuing debate on the efficiency of financial markets and the rationality of market participants." STMicroelectronics of Geneva is Europe's largest semiconductor maker, and its shares trade at a median rate of 5,500 per minute in Milan and 4,300 in Paris. The average price difference in a trading sample taken outside a match day was 0.02 percentage points. Source:http://www.bloomberg.com/news/2014-01-31/emerging-market-rout-may-signal-sudden-stop-cutting-research.html

3 February 2014 - Turkey Rate Increase Stems Lira Decline as Basci Defies Erdogan Posted: 03 Feb 2014 04:42 PM PST From:http://www.bloomberg.com/news/2014-01-28/turkey-more-than-doubles-main-interest-rate-to-halt-lira-slump.html The lira swung between gains and losses as traders assessed whether a doubling of interest rates would be enough to stem capital outflows in the face of further reductions in U.S. monetary stimulus. Stocks fell. The Turkish currency strengthened more than 4 percent following the central bank's midnight rates decision before depreciating as much as 2.4 percent. It climbed 0.5 percent to 2.2407 per dollar at 7:23 p.m. in Istanbul. Yields on two-year benchmark notes decreased 18 basis points to 10.88 percent and the Borsa Istanbul 100 Index (XU100) of shares slumped 2.3 percent. Governor Erdem Basci is fighting to restore credibility eroded by a currency run that gained speed amid domestic upheaval and a global rout of emerging markets. Prime Minister Recep Tayyip Erdogan, who said yesterday he's always opposed higher rates, is embroiled in a graft scandal that has ensnared several ministers and the chief executive officer of a state-owned bank. It spooked investors just as the reduction of U.S. monetary stimulus began sucking money out of riskier assets. "The immediate knee-jerk reaction last night was that the Central Bank of Turkey had in some sense passed an important test," David Simmonds, the head of currency and emerging-markets strategy at Royal Bank of Scotland Group Plc in London, said in an e-mail. "The broader perspective that having to raise rates to defend your currency is ultimately a very tough place fundamentally to be, so broader macro pressures persist." Fed Decision The Lira Reacts to Turkey's Continental Divide Turkey's central bank raised all its main interest rates at an emergency late-night meeting in an effort to shore up the lira, resisting government pressure and reversing years of policy aimed at stoking growth. Interest rates had been on hold since August. The Ankara-based bank increased the one-week repurchase rate to 10 percent from 4.5 percent, while lifting the overnight lending rate to 12 percent from 7.75 percent and the overnight borrowing rate to 8 percent from 3.5 percent. Emerging-market assets are losing their luster as the Fed scales back its $75 billion of monthly bond purchases and amid concern that Chinese growth is slowing. Fed policy makers will probably decide to reduce monetary stimulus by $10 billion at a meeting that ends today, according to a Bloomberg News survey of economists on Jan. 10. South Africa's rand appreciated as much as 1.3 percent today before tumbling to a five-year low against the dollar after the nation's central bank unexpectedly raised its policy rate by 50 basis points to 5.5 percent, the first increase since 2008. The rand dropped as much as 3.1 percent to 11.3803 per dollar, the lowest level since October 2008, before trimming the retreat to 11.2246. Higher Rates The Turkish central bank said the one-week repo rate should be treated as the benchmark policy tool. Since it had previously been encouraging investors to use the overnight lending rate as the main guideline, the move amounts to an effective tightening of between 200 and 400 basis points, Neil Shearing, the chief emerging-markets economist at Capital Economics Ltd. in London. Turkey's financial markets have plunged since news of the corruption scandal broke last month, leading to the departure of three cabinet members whose sons were detained in the probe. That coincided with a flow of money out of emerging economies that weakened currencies from Brazil to South Africa. Basci Constrained "Let's not forget that the trigger for the selloff was political and that very much remains in place," Abbas Ameli-Renani, a London-based strategist at Royal Bank of Scotland Group Plc, wrote in an e-mailed report. "Political noise" is expected to rise significantly as Turkey approaches March 30 local elections, he said. Erdogan's response to the graft investigation has been to accuse a "gang" within the police and judiciary loyal to U.S.- based Islamic cleric Fethullah Gulen of attempted treason. Basci has been constrained by political opposition to raising borrowing costs as growth slows. While economists and investors advocated higher rates to bolster the lira, Erdogan has repeatedly railed against an "interest-rate lobby," blaming it for last year's wave of protests and the graft probe implicating members of his government. At the last regular policy meeting on Jan. 21, Basci left the three main interest rates unchanged, even after the lira had declined almost 7 percent in the previous month. He opted instead to introduce a fourth rate of 9 percent, to be used only days when the bank decides extra tightening is needed. Currency Intervention As the currency's slide picked up pace last week, Basci intervened unannounced in markets for the first time in more than two years, selling about $3 billion. That only accelerated the slump, leading the bank to reassemble last night. It was a currency crisis that laid the foundations for Erdogan's 11-year rule. The collapse of an International Monetary Fund program in 2001 led to a devaluation of more than 50 percent. In elections a year later, the parties that presided over the slump were swept away, clearing a route for Erdogan's Islamist-rooted movement to win a majority. Erdogan says growth of 5 percent a year under his government has left Turkey's economy less vulnerable to such shocks. The premier reiterated yesterday that he's always been opposed to rate increases. Speaking in Ankara before leaving for Iran, he said he hoped the bank would make the right decision and usher in a "new era" for the Turkish currency. Before today, Basci accommodated the political pressures by developing a system of multiple benchmarks that allowed him to tighten policy without raising headline rates and vary monetary conditions day-to-day within an interest-rate corridor. Simpler Policy The bank said today it would seek "to simplify the operational framework" in an effort to achieve price stability. It took another step to that end today, announcing an immediate end to "extra tightening days," on which it did not lend at the one-week repo rate. As well as Turkey and South Africa, India unexpectedly increased rates yesterday, and Brazil has pushed its benchmark higher for six straight meetings. "Real rates aren't high enough to guarantee de-dollarization," Manik Narain, a currency strategist at UBS AG in London, said in an e-mail. "Local demand for dollars won't reverse at this level." Source:http://www.bloomberg.com/news/2014-01-28/turkey-more-than-doubles-main-interest-rate-to-halt-lira-slump.html

3 February 2014 - BNM keeps key policy rate at 3% Posted: 03 Feb 2014 04:39 PM PST From:http://m.yahoo.com/w/yfinance/article?id=highlight-bnm-keeps-key-policy-rate-3-100745590--sector&offset=4&backlink=%2F&.ts=1390992580&.tsrc=apple&.intl=MY&.lang=en-my KUALA LUMPUR (Jan 29): Bank Negara Malaysia (BNM) decided to maintain the Overnight Policy Rate (OPR) at 3.00% at its regular monetary policy committee (MPC) meeting today. But the central bank warned that inflation is expected to rise higher due to rising costs this year. In a statement, it noted that inflation, which rose to 3.2% in December 2013 and average at 2.1% for 2013, has been gradually rising "due to disruptions in supply following adverse weather conditions and higher domestic costs." "Going forward, inflation is expected to average higher largely due to domestic cost factors. But the subdued external price pressures and moderate domestic demand conditions will help contain the impact of these cost factors on underlying inflation," it said. For the Malaysian economy, BNM said the economy registered sustained performance in the fourth quarter of 2013. "Improvements in exports have supported economic growth during the quarter while domestic demand remained firm. "The country's growth momentum is expected to continue in 2014, amid better performance in the external sector and robust investment activity. "Domestic demand, however, is expected to moderate, reflecting the ongoing public sector consolidation and a slower growth in private consumption." Looking at the global economy, the central bank opined broader signs of improvement have emerged in the major advanced economies. But in the Asian economies, growth in domestic demand in some economies is showing signs of moderation, it added. "Looking ahead, global growth will be supported by the emerging economies and the recovery in the advanced economies. Nevertheless, global economic and financial conditions remain vulnerable to shifts in sentiments and heightened volatility in the international financial markets," said BNM. Source:http://m.yahoo.com/w/yfinance/article?id=highlight-bnm-keeps-key-policy-rate-3-100745590--sector&offset=4&backlink=%2F&.ts=1390992580&.tsrc=apple&.intl=MY&.lang=en-my

3 February 2014 - Government creates 75 new posts for aviation security Posted: 03 Feb 2014 04:37 PM PST From:http://m.yahoo.com/w/yfinance/article?id=government-creates-75-posts-aviation-security-102219937--finance&offset=4&backlink=%2F&.ts=1390993150&.tsrc=apple&.intl=MY&.lang=en-my New Delhi, Jan 29 (IANS) The government Wednesday approved creation of 75 posts for technical staff at the aviation regulator to look after safety, training and certification responsibilities. The civil aviation ministry said the 75 posts were created in the flight standards directorate (FSD), an arm of the Directorate General of Civil Aviation (DGCA) which will comprise of chief flight operations inspector (CFOI), deputy chief flight operations inspectors (Dy. CFOIs), senior flight operations inspectors (senior FOIs) and flight operations inspectors (FOIs). "These 75 posts have been created on the basis of the International Civil Aviation Organisation (ICAO) standards and are meant for both, aircraft and helicopter operations," the ministry said in a statement. "It has also been decided, in principle, to pay the incumbents to be recruited against these posts as per the industry standard." According to the ministry, the FSD arm of the DGCA conducts inspection of air-crew, safety oversight, training programmes, standardisation of trainee captains, certification of airline operators, examination of operational documents and other examinations. The move is significant as up till now, the DGCA does not have any regular FOIs and deputed pilots from airlines to carry out safety oversight functions. Earlier the US-based Federal Aviation Authority (FAA) had pointed out the issue in its audit of the DGCA. "Creation of these posts followed by recruitment will not only address the finding of FAA but also strengthen the FSD removing any possibility of conflict of interest," the ministry said. "The recruitment rules for the newly-created posts are in the final stage and the process of recruitment is likely to start in February this year." In the meantime, DGCA has appointed 18 FOIs on contract basis who will be directly paid by the government. The government is also in the final stages of creating a Civil Aviation Authority (CAA) which will take the place of the DGCA and provide it with greater financial autonomy. "The (Civil Aviation Authority) bill is already pending in parliament. The ministry is making all efforts to ensure that the bill is passed in the coming session of Parliament," the statement added. Source:http://m.yahoo.com/w/yfinance/article?id=government-creates-75-posts-aviation-security-102219937--finance&offset=4&backlink=%2F&.ts=1390993150&.tsrc=apple&.intl=MY&.lang=en-my

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