http://www.ctsfutures.com/CTS Futuresen-usTue, 21 May 2013 02:36:48 GMTTue, 21 May 2013 02:36:48 GMThttp://www.ctsfutures.com/rssstory.aspx?id=20130520214617254_1583_47dc-Growth Below Trend For A While, Credit Subdued SYDNEY (MNI) - The Reserve Bank of Australia used some of the scope afforded by a benign inflation outlook to lower the cash rate further after taking into account subdued credit growth and to provide a boost to economic growth. "Taking all the factors into consideration, the board decided that some of the scope to ease policy should be used at this meeting," the RBA said in the minutes of the May 7 board meeting released Tuesday. "It judged that a further reduction in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target." At the board meeting, the RBA cut the cash by 25 basis points to 2.75%, a record low. With this easing, the RBA has lowered the cash rate by a total 200 basis points since November 2011. The RBA judged the household sector was showing signs of responding to low rates, but conditions in the business sector remain below average. One of the reasons for this was the high Australian dollar, the RBA said in the minutes. "Conditions in the business sector, as assessed in surveys, generally had remained below average, possibly in part because the exchange rate had remained high despite lower export prices and interest rates." Three days after the board meeting, the RBA published its quarterly Statement of Monetary Policy where it downgraded inflation forecast while keeping growth forecast little changed, but these forecasts were taken into account at the board meeting. In the May 10 policy statement, RBA spelt out a key risk would be from faster than expected increases in housing prices and increasing household leverage, as this would raise concerns from a financial stability perspective. In the minutes, the RBA noted initial market commentary around the Bank of Japan's announcement which suggested the policy action would prompt Japanese investors to allocate more of their funds to offshore securities. "Members discussed the likely incentives of the various holders of Japanese government bonds to invest offshore," the minutes said, but added, there had been little evidence those investors were increasing their offshore holdings. The Australian dollar remained high by historical standards despite depreciating a little against most currencies, the RBA said in the minutes. Since the rate cut, however, the Australian dollar has been one of the worst performers among major currencies, dropping to a 11-month low versus the U.S. dollar. On a trade-weighted basis it fell to 75.0 on Monday from a peak of 80.2 in mid-April. Still, the currency remains near highs despite around 15% fall in terms of trade since the peak in the September quarter of 2011. --MNI Sydney Bureau; tel: +61 2-9716-5467; email: srodrigues@mni-news.com Tue, 21 May 2013 01:46:17 GMThttp://www.ctsfutures.com/rssstory.aspx?id=20130520210959984_E9CD_b9a-Suspends Investment in Two Small Govt Retirement Funds But Not G Fund By Denny Gulino WASHINGTON (MNI) - In what seems sure to be a slow-motion, almost ritualized progression of steps toward a September showdown over Treasury's borrowing authority, Treasury Secretary Jack Lew Monday night announced a second small step to conserve borrowing headroom, suspending investment in two small government retirement funds. Having already suspended the creation of special securities for muni issuers as part of Friday's announcement of the imminent so-called extraordinary measures, Treasury repeated that the period it anticipates suspending new debt issuance will last until after the Labor Day holiday Sept. 2. With some private analysts estimating Treasury's exceptionally high cash balance, along with unprecedented GSE payments and stronger-than-usual tax receipts will keep the debt limit at bay even longer, Treasury's latest communication with Congress said, "it is not possible to predict more precisely" how long the debt limit will take to arrive. Lew, in a letter sent to every member of Congress, said, "I am writing to notify you, as required under 5 U.S.C. 8348(1)(2), of my determination that, by reason of the statutory debt limit, I will be unable to fully invest the portion of the Civil Service Retirement and Disability Fund (CSRDF) not immediately required to pay beneficiaries and that a 'debt issuance suspension period' will begin on Monday, May 20,2013, and last until August 2, 2013, the last day that Congress is expected to be in session before Labor Day." Though August 2 is the designated end to the period of extraordinary measures, it is a long way from the "drop dead" date beyond which Treasury cannot finance government operations. However, as the last scheduled day Congress is in town before its scheduled month's vacation, it becomes the time for decisions on the debt limit according to Treasury. In past debt limit impasses, Congress has thrown out its schedule and stayed in session so it could keep government running, most recently at the beginning of the year when it ignored the New Year's holiday to debate a postponement of the sequestration of government funds and to work out a way to suspend the debt limit through May 18. Suspending investment in the CSRDF, along with the Postal Service Retiree Health Benefits Fund, provides less than a quarter of the approximately $200 billion borrowing headroom that Treasury preserves by invoking a debt issuance suspension period. Within House Republican ranks it has been reported that there persists fundamental disagreements on how to handle the next debt-limit crisis, with a sizable number still favoring using it as leverage to squeeze more spending cuts from the Democratic Senate, while some GOP leadership figures reportedly would rather bargain for comprehensive tax reform. Earlier in the day Senate Majority Leader Harry Reid, as reported by MNI's John Shaw, echoed the White House in warning against such down-to-the-wire bargaining, the kind of political stalemate that Standard & Poor's cited as a reason for its unprecedented downgrade of U.S. sovereign debt and which it continues to cite as a barrier to debt-to-GDP progress. Reid said there has not only been "no progress" in coming together on a FY 2014 budget, but that he sees Congress moving "closer and closer" to the kind of battle that set the stage for the downgrade. Also earlier in the day, as reported by MNI's Yali N'Diaye, Moody's said in its weekly Credit Outlook that the outcome of this year's budget battles "remains uncertain" although it saw basic budget arithmetic improving because of the restoration of the full payroll tax and the imposition of sequestration spending cuts. "The new figures in the baseline scenario, based on current law and assuming no additional policy measures, show an improvement of government debt-to-GDP trends over the ones presented in the agency's February report, a credit positive for the U.S.," Moody's said, referring to last week's projections by the Congressional Budget Office. The Congressional Budget Office estimates appeared to confirm the sharp improvement in the debt outlook, seeing the fiscal year 2013 budget deficit to be $642 billion, well under the $845 billion it estimated in February as well as far below the $1.1 trillion deficit in FY'12. Yet the CBO pointed out that the numbers do not improve indefinitely under the current budget math and that entitlement reform is as necessary as ever, the sooner the better. The degree of entitlement cutbacks pushed by Republicans and the amount of any revenue raising measures demanded by Democrats add up to a gulf of disagreement that has stymied even the small efforts toward compromise so far. House Republicans have been engaged in strategy sessions on deficit, spending and tax policy and the efforts of Reid and other Democrats to highlight the differences are seen as efforts to influence the Republican deliberations. The eventual suspension of investment in the G Fund, the government employee money market fund made up of a huge portfolio of government securities, will provide about three-fourths of the total $200 billion in borrowing headroom afforded by the set of extraordinary measures. Treasury officials, asked earlier in the day about the schedule of special measures, could not estimate when that major move might be triggered. --MNI Washington Bureau; tel: +1 202-371-2121; email: dgulino@mni-news.com Tue, 21 May 2013 01:10:00 GMThttp://www.ctsfutures.com/rssstory.aspx?id=20130520195436076_FF4E_ef04WASHINGTON (MNI) - The following letter to Congress from Treasury Secretary Jack Lew was made public Monday night: WASHINGTON, D.C. I am writing to notify you, as required under 5 U.S.C. ? 8348(1)(2), of my determination that, by reason of the statutory debt limit, I will be unable to fully invest the portion of the Civil Service Retirement and Disability Fund (CSRDF) not immediately required to pay beneficiaries and that a "debt issuance suspension period" will begin on Monday, May 20,2013, and last until August 2,2013, the last day that Congress is expected to be in session before Labor Day. With these determinations, the Treasury Department will suspend additional investments of amounts credited to, and redeem a portion of the investments held by, the CSRDF, as authorized by law. In addition, because the Postal Accountability and Enhancement Act of 2006 provides that investments in the Postal Service Retiree Health Benefits Fund (pSRHBF) shall be made in the same manner as investments for the CSRDF, the Treasury Department will suspend additional investments of amounts credited to the PSRHBF. My predecessors have declared "debt issuance suspension periods" during previous debt limit impasses. By law, the CSRDF and PSRHBF will be made whole once the debt limit is increased. Federal retirees and employees will be unaffected by these actions. I respectfully urge Congress to protect America's good credit and avoid the potentially catastrophic consequences of failing to act by increasing the debt limit in a timely fashion. Sincerely, Jacob J. Lew Identical letter sent to: The Honorable Nancy Pelosi, House Democratic Leader The Honorable Harry Reid, Senate Majority Leader The Honorable Mitch McConnell, Senate Republican Leader cc: The Honorable Dave Camp, Chairman, House Committee on Ways and Means The Honorable Max Baucus, Chairman, Senate Committee on Finance The Honorable Orrin Hatch, Ranking Member, Senate Committee on Finance All other Members of the 113th Congress --MNI Washington Bureau; tel: +1 202-371-2121; email: dgulino@mni-news.com Mon, 20 May 2013 23:54:36 GMThttp://www.ctsfutures.com/rssstory.aspx?id=20130520171200053_1245_44cc* Chicago Federal Reserve Bank President Charles Evans Monday said he was optimistic about improvements in the U.S. labor market, saying the economy is performing well despite headwinds, but that he would need to see more evidence before agreeing the Fed should curtail its bond-buying. Evans told reporters after a meeting of the CFA Society of Chicago that although the job market has improved, with good reductions in unemployment and nonfarm payroll recently around the Fed's threshold of around 200,000 jobs, "I can't say I know when tapering will begin." He added that he would like to see a few more months of data, but is open-minded about tapering options, which include an abrupt end of Fed purchases. Evans told reporters he has argued at Fed meetings that "it would be OK to keep going" with asset purchases, although he stated earlier that the Fed would like to get its balance sheets back to more normal, pre-QE levels. * In a busy week before Congress's Memorial Day recess, Capitol Hill will be a beehive of activity, including testimony by both Federal Reserve Board Chairman Ben Bernanke and Treasury Secretary Jack Lew. Bernanke will testify Wednesday at 10 a.m. ET on the U.S. economic outlook before the Joint Economic Committee. Lawmakers are likely to question the Fed chief on the state of the economy, the competing demands of fiscal discipline and economic growth, and the Fed's aggressive monetary policy. Lew will testify twice on the Financial Stability Oversight Council's annual report. The Treasury secretary will testify Tuesday at 10 a.m. ET on the report before the Senate Banking Committee and Wednesday at 10 a.m. before the House Financial Services Committee. During both hearings, Lew may be asked questions that are not related to the announced topic such as the IRS scandal, the state of the economy, and fiscal policy such as the debt ceiling. * The Cleveland Federal Reserve Bank's measure of the median Consumer Price Index has tended to come in higher when compared to the government's inflation numbers, and is consistent with the Fed's preferred measure of inflation being closer to 2%, the bank's most senior economist told MNI. Mark Schweitzer, senior vice president and director of Research at the Cleveland Fed also stressed the need to be on guard against small shocks given the modest pace of the economic recovery, so the bank is also "concerned and paying attention" to evidence of instability in the financial markets. * In their search for tangible proof that the U.S. government will be able to rectify its long-term debt trajectory, Moody's and Standard & Poor's do not see through the same lenses, with Moody's considering the faster-than-expected improvement in the budget deficit as a "credit positive" for the country while Standard & Poor's continues to stress the torturous political process. * The Chicago manufacturing economy is advancing, but only haltingly, according to local industrialists. Area manufacturers say business this year has been lukewarm. Some existing customers have been cutting back their orders or holding steady in a still-cautious climate. Other customer segments, particularly telecommunications, utilities and energy, are lively. Construction appears to be climbing out of its recession lull with a mix of commercial, healthcare and public projects. Recovery across the region has been hard-won and remains bumpy, manufacturers say. * MNI's U.S. retail trade indicator is down 1.6 points in the May 18 period to 51.8 which is only just above 50 to indicate no better than light growth in year-on-year business activity, according to the results of MNI's weekly survey released Monday. Total sales in MNI's sample are tracking at a year-on-year +3.3% which is the lowest reading since October 2010. * MNI's U.S. capital goods indicator is down 2.0 points in the May 17 period to 39.3, the lowest reading since November last year and far below 50 to indicate significant contraction in year-on-year business activity, according to the results of the weekly survey released Monday. Sales are tracking at a year-on-year -1.2% which is the first negative reading since November and the lowest since April 2010. And for the first time since April 2010, the 4-week average, at -0.2%, is in negative ground. [09:30 ET] * Currency traders marked time Monday waiting for the main event of the week, which is seen as Wednesday, when the Bank of Japan will announce any monetary policy changes and Federal Reserve Chairman Ben Bernanke will offer his take of the U.S. economy and Fed monetary policy. The BOJ is not expected to adjust its asset purchase program, especially given the recent volatility in Japanese government bond yields. Nevertheless, the market will be glued to BOJ Governor Haruhiko Kuroda's press conference and any currency and or JGB related comments. Dollar-yen closed the U.S. session around Y102.28 Monday, after trading in a Y101.97 to Y103.15 range. Both dollar-yen and yen crosses (dollar-yen at Y102.49 and euro-yen at Y131.66 currently) found bottomfishers after hitting lows near Y101.97 and Y130.99 earlier. * In U.S. stocks, the Dow industrials closed down 19 at 15,335.28 and the Nasdaq Composite Monday closed down 3 at 3,496.43. The S&P 500 closed down 1 at 1,666.29. Earlier Monday, the DJIA posted a new intraday life-time high of 15,391.84 and the Nasdaq Composite a new 12-1/2-year-plus high of 3509.41. * Prices of Treasury securities ended unchanged to modestly lower Monday. * Brazil Central Bank President Alexandre Tombini is scheduled to speak Wednesday to a joint congressional committee on planning, budgets, and regulation, and if last week is an example, even the slightest change in language could lead to sharp reactions in fixed-income markets. Tombini usually addresses inflation, growth and monetary policy when he speaks to Congress, either in his prepared remarks or in response to legislators' questions, and in a speech in which he no longer cited "caution in administering monetary policy," but instead said the central bank "will do what is necessary to bring inflation down." The market interpreted these words as hawkish, even though Tombini also said inflation was "under control" and set as his goal not the 4.5% inflation target, but merely "to bring inflation down in the second half and to ensure this tendency persists into next year." * Mexico President Enrique Pena Nieto's reform agenda faces a further test this week as after a group of Senators split with party lines over a proposed political reform package. Senators from the PAN and the left-wing Democratic Revolutionary Party (PRD) recently unveiled their own legislative package only hours after the PAN presented the political reform initiative backed Pena Nieto's multi-party reform blueprint known as the Pact for Mexico. Ernesto Cordero, former Finance secretary under Felipe Calderon and current Senate president, claimed to have the votes of 60 Senators in the PAN and PRD, just five short of a majority, backing the rival initiative. He said the government's reform efforts have been "negotiated in the shadows." * Argentina's government this week likely will pursue efforts to rekindle consumer spending ahead of October midterm congressional elections, a cornerstone of the ruling party's popularity since 2003. Labor Minister Carlos Tomada last week authorized 24% salary increases for bankers, civil servants and metallurgy workers, higher than previously expected. The administration of President Cristina Fernandez de Kirchner started the year with plans to cap wages at 20-22%, well below the 25-30% increases since inflation firmly entered double digits in 2007. The strategy was riling workers, with labor kingpin Hugo Moyano demanding 30% salary increases to keep pace with inflation. --MNI Washington Bureau; tel: +1 202-371-2121; email: dgulino@mni-news.com Mon, 20 May 2013 21:12:00 GMThttp://www.ctsfutures.com/rssstory.aspx?id=20130520093001026_B0C5_13dfNEW YORK (MNI) - MNI's U.S. capital goods indicator is down 2.0 points in the May 17 period to 39.3, the lowest reading since November last year and far below 50 to indicate significant contraction in year-on-year business activity, according to the results of the weekly survey released Monday. Sales are tracking at a year-on-year -1.2% which is the first negative reading since November and the lowest since April 2010. And for the first time since April 2010, the 4-week average, at -0.2%, is in negative ground. Sales in MNI's sample exclude acquisition effects but do include foreign-exchange translation which is shaving one percentage point from export sales. The deterioration in sales is less pronounced then income which has been falling for nearly three months. Income is currently tracking at a year-on-year -13% which is the lowest rate since April last year. Despite all the negative year-on-year readings, guidance from MNI's sample points to an unadjusted 5.0% sequential gain for second-quarter nondefense capital goods sales. The second quarter typically gets a sizable seasonable lift relative to the first quarter when activity slows, and MNI's sample is calling for the usual Spring lift. But MNI's sample has been consistently over estimating strength with the latest score showing 40% missing guidance vs. only 20% beating guidance. Commercial aircraft is a central strength of the sample, excluding which the diffusion index sinks to 37.8. Note that guidance from the ex-aircraft sample also points to an unadjusted 5.0% second-quarter sequential sales gain. In contrast to aircraft, heavy trucks are an especially weak group with many showing steep double-digit year-on-year sales declines. Also weak is equipment for highway construction where government investment is flat. Warnings continue out of the medical equipment group that uncertainty over healthcare reform is holding back business investment in the sector. General reports on capacity expansion and hiring are mixed with some adding and others cutting. Regional commentary shows optimism on China for a second straight week. Sample size in the period is 473 companies, 261 of which are on the books with guidance. MNI's sample is heavily weighted toward small companies with 73 or 12% of the sample universe (599 companies) having annual sales below $50 million. Editor's Note: MNI compiles its capital goods indicator based on a weekly sample of company news and data. --MNI New York Bureau; tel: +1 212-669-6400; email: mpender@mni-news.com Mon, 20 May 2013 13:30:01 GMThttp://www.ctsfutures.com/rssstory.aspx?id=20130520000110021_40FD_5f4WASHINGTON (MNI) - While economists surveyed in May by the National Association for Business Economics still believe the U.S. economy will grow by 2.4% in 2013 and 3.0% in 2014, unchanged from their February's estimates, they now believe there will be less inflation and stronger consumer spending than they did three months ago. The median forecast for the change in CPI in 2013 fell from +2.0% in February to +1.8% in May, and the Core PCE forecast fell from 1.7% to 1.5%, consistent with the downward revisions to 2013 oil price forecasts to $93 per barrel from $95 previously. The median 2013 forecast for industrial production rose from +2.5% to +3.1% and auto sales are expected to be at 15.4 million instead of 15.2 million. The economists also said that they believe the momentum in the U.S. housing market will continue, with housing starts now forecast at 1.0 million in 2013 instead of 980,000 and home prices expected to rise 4.4% before cooling some to 4.0%. In the February survey, economists saw home prices rising 3.5% in 2013 but they still projected 2014 home prices to rise 4.0%. While the increase in consumer spending is expected to help boost economic growth, the economists now believe real government spending will be a larger drag than they did in February - declining by 2.3% versus the 1% that was forecast in February. The NABE report said the grim forecast for government consumption is because when the February survey was conducted it was unclear whether sequestration would occur. Despite the government drag, economists forecast the S&P 500 to be around 1625 on December 31, 2013 and 1697 in 2014. Both of those forecasts are about 100 points higher than the February forecast. NABE also asked the economists about Greece, and what they think will happen in the coming year. The economists said they think Greece will fail to meet its budget and policy targets but the European Central Bank, European Commission and the International Monetary Fund will relax their targets and continue to provide financial assistance to Greece so they can continue to make their debt payments. Forty-nine economists were surveyed and it was conducted between April 16 - April 30. --MNI Washington Bureau; tel: +1 202-371-2121; email: imckendry@mni-news.com Mon, 20 May 2013 04:01:10 GMThttp://www.ctsfutures.com/rssstory.aspx?id=20130519190100015_D5ED_498cBEIJING (MNI) - Chinese house price inflation showed signs of easing in April due to fresh curbs imposed by local governments, but economists still warned of persisting upward pressure. Prices for new Chinese homes rose for the 11th straight month in April, gaining 1.30% m/m, according to a floor-space weighted average of prices in the 35 largest cities calculated by MNI. The month-on-month growth was slightly slower compared with +1.45% in March and +1.42% in February. Prices rose 1.0% in January and 0.47% in December. But the year-on-year price rises accelerated for a fifth month in a row, jumping to 6.56% y/y in April from +4.88% in March, February's +3.02%, January's +1.46% and the 0.29% rise in December. Prices fell in just two of the 70 cities surveyed by the National Bureau of Statistics in April, the same as March and compared with eight in February on a y/y basis. They fell in two cities month-on-month in April, versus one city in March. The NBS, which released the data on Saturday, abandoned its own national price indicator in 2011 as part of an overhaul of its methodology for collating house price data. April data may indicate the market is struggling to come to terms with the government's latest round of efforts to bring order to house prices with a series of measures imposed from April, known in Chinese as the "guo wu tiao." The measures include caps on price increases on new development projects and a 20% capital gains tax from second-hand house transactions. Developers and buyers have taken to the sidelines after frenzied transactions in March, while economists are still warning about the potential for continued upward pressure on prices. Liu Jianwei, an economist with the NBS, said in an accompanying statement today that expectations of home price rises have not been effectively countered and that property controls are still in crucial, early stages. In Guangzhou, capital of Guangdong, the province bordering Hong Kong, prices rose 13.5% y/y in April versus +11.1% in March, again marking the city as the largest gainer among the 70 surveyed by the NBS. Prices in Guangzhou rose 2.1% m/m, vs +2.5% m/m in March. In Beijing, house prices rose 10.3% y/y vs +8.6% y/y in March, +5.9% in February. Prices in the capital rose 1.4% m/m, a deceleration from +2.1% m/m in March, +2.4% in February. In the financial hub of Shanghai, prices rose 8.5% y/y in April, up from +6.4% y/y in March, +3.4% in February. On a month-on-month basis, they rose 1.7% m/m, slower than 2.7% m/m in March and February's +1.9% m/m. Wenzhou was again the clear laggard, with prices falling 5.7% y/y in April, smaller than March's -9.2% y/y. Prices remained unchanged on a monthly basis, improving from a 0.1% fall in the previous month. The city, a hub of private enterprise, is struggling to recover from a devastating liquidity crunch, despite the central government's promise of support. "We're entering a period of observation after the guo wu tiao and it may last for around three months," said He Tian, a Beijing-based analyst with China Index Academy, a real estate research agency. "Land supply in first tier cities is tight and inventory will only meet demand in the coming three years but there is oversupply in third and fourth tier cities and it's going to take at least 10 years to absorb the land inventories in those cities," said He. --MNI Singapore Bureau; tel: +65 6632-3412; email: iahmad@mni-news.com Sun, 19 May 2013 23:01:00 GMThttp://www.ctsfutures.com/rssstory.aspx?id=20130518110000021_338D_e566WASHINGTON (MNI) - Federal Reserve Chairman Ben Bernanke took a break from current economic woes and uncertainties Saturday, looked into the future and found reason for optimism. Bernanke, in remarks prepared for delivery to graduates of Bard College at Simon's Rock Great Barrington, Massachusetts, took issue with economists and pundits who downplay the economy's long-run potential and foresaw great prospects for innovation and improved standards of living. His only comment about the current situation was to say that the recovery faces "very real challenges," but that he has "every confidence we will overcome" them. After a historical review of the first and second waves of the industrial revolution, he examined the more recent era of technological innovation, particularly information technology. Some have argued that today's technological revolution, which has given people new ways of communicating, won't be nearly as transformative of people's lives as those first waves, which gave the world steam engines, air travel and so forth. But Bernanke told students "there are some good arguments on the other side of this debate." "First, innovation, almost by definition, involves ideas that no one has yet had, which means that forecasts of future technological change can be, and often are, wildly wrong," he said. "A safe prediction, I think, is that human innovation and creativity will continue." "Second, not only are scientific and technical innovation themselves inherently hard to predict, so are the long-run practical consequences of innovation for our economy and our daily lives," he said. "Indeed, some would say that we are still in the early days of the IT revolution." "Moreover, even as the basic technologies improve, the commercial applications of these technologies have arguably thus far only scratched the surface," he said, citing as an example "the potential for IT and biotechnology to improve health care." "Finally, pessimists may be paying too little attention to the strength of the underlying economic and social forces that generate innovation in the modern world," Bernanke went on. "We live on a planet that is becoming richer and more populous, and in which not only the most advanced economies but also large emerging market nations like China and India increasingly see their economic futures as tied to technological innovation." "And, importantly, as trade and globalization increase the size of the potential market for new products, the possible economic rewards for being first with an innovative product or process are growing rapidly," he said. "In short, both humanity's capacity to innovate and the incentives to innovate are greater today than at any other time in history," the Fed chief asserted. --MNI Washington Bureau; tel: +1 202-371-2121; email: sbeckner@mni-news.com Sat, 18 May 2013 15:00:00 GMThttp://www.ctsfutures.com/rssstory.aspx?id=20130517233611824_D5AF_6bdcBEIJING (MNI) - Chinese house price inflation showed signs of easing in April due to fresh curbs imposed by local governments, but economists still warned of persisting upward pressure. Prices for new Chinese homes rose for the 11th straight month in April, gaining 1.30% m/m, according to a floor-space weighted average of prices in the 35 largest cities calculated by MNI. The month-on-month growth was slightly slower compared with +1.45% in March and +1.42% in February. Prices rose 1.0% in January and 0.47% in December. But the year-on-year price rises accelerated for a fifth month in a row, jumping to 6.56% y/y in April from +4.88% in March, February's +3.02%, January's +1.46% and the 0.29% rise in December. Prices fell in just two of the 70 cities surveyed by the National Bureau of Statistics in April, the same as March and compared with eight in February on a y/y basis. They fell in two cities month-on-month in April, versus one city in March. The NBS, which released the data on Saturday, abandoned its own national price indicator in 2011 as part of an overhaul of its methodology for collating house price data. April data may indicate the market is struggling to come to terms with the government's latest round of efforts to bring order to house prices with a series of measures imposed from April, known in Chinese as the "guo wu tiao." The measures include caps on price increases on new development projects and a 20% capital gains tax from second-hand house transactions. Developers and buyers have taken to the sidelines after frenzied transactions in March, while economists are still warning about the potential for continued upward pressure on prices. Liu Jianwei, an economist with the NBS, said in an accompanying statement today that expectations of home price rises have not been effectively countered and that property controls are still in crucial, early stages. In Guangzhou, capital of Guangdong, the province bordering Hong Kong, prices rose 13.5% y/y in April versus +11.1% in March, again marking the city as the largest gainer among the 70 surveyed by the NBS. Prices in Guangzhou rose 2.1% m/m, vs +2.5% m/m in March. In Beijing, house prices rose 10.3% y/y vs +8.6% y/y in March, +5.9% in February. Prices in the capital rose 1.4% m/m, a deceleration from +2.1% m/m in March, +2.4% in February. In the financial hub of Shanghai, prices rose 8.5% y/y in April, up from +6.4% y/y in March, +3.4% in February. On a month-on-month basis, they rose 1.7% m/m, slower than 2.7% m/m in March and February's +1.9% m/m. Wenzhou was again the clear laggard, with prices falling 5.7% y/y in April, smaller than March's -9.2% y/y. Prices remained unchanged on a monthly basis, improving from a 0.1% fall in the previous month. The city, a hub of private enterprise, is struggling to recover from a devastating liquidity crunch, despite the central government's promise of support. "We're entering a period of observation after the guo wu tiao and it may last for around three months," said He Tian, a Beijing-based analyst with China Index Academy, a real estate research agency. "Land supply in first tier cities is tight and inventory will only meet demand in the coming three years but there is oversupply in third and fourth tier cities and it's going to take at least 10 years to absorb the land inventories in those cities," said He. --MNI Beijing Bureau; tel: +86 (10) 8532-5998; email: beijing@mni-news.com Sat, 18 May 2013 03:36:11 GMThttp://www.ctsfutures.com/rssstory.aspx?id=20130517181200028_2127_3806* Prices of U.S. Treasury securities moved sharply lower Friday, raising yields 1.7 to 8.5 basis points. The 2-year note ended at 0.246% (99-24+) from 0.229% (99-25+) Thursday. The 10-year note was 1.951% (98-06) from 1.865% (98-30+). * U.S. stocks closed up reversing Thursday's losses. The Dow Jones Industrial Average closed up 121.18 points or 0.80% at 15,354.40 and the Nasdaq Composite up 33.722 points or 0.97 at 3498.96. And the S&P 500 closed up 15.65 or 0.95% at 1666.12. At the close, the DJIA was up 17.0, the Nasdaq Composite up 15.8% and the S&P 500 up 16.65% ytd. * NYMEX June light sweet crude oil futures settled up $0.86 at $96.02, after trading in a $94.79 to $96.45 range, with WTI closing again above its 200-day moving average, currently at $92.22. * The U.S. Treasury Department confirmed Friday that they will begin enacting "the standard set of extraordinary measures" to avoid the debt ceiling, and that the Treasury expects the measures should "not be exhausted until after Labor Day." In a letter from Treasury Secretary Jacob Lew, to House Speaker John Boehner, Lew said, "Treasury is not able to provide a specific estimate of how long the extraordinary measures will last." However, the measures should "free up approximately $260 billion in headroom under the limit." * Minneapolis Federal Reserve Bank President Narayana Kocherlakota Friday maintained his support for the Fed's aggressive measures to spur faster economic growth, warning that the costs of tightening monetary policy now would significantly outweigh any benefits for financial stability. In remarks prepared for delivery ahead of a panel discussion at a management conference in Chicago, Kocherlakota also argued that given the soaring demand for safe assets - but shrinking supply - the Fed has not lowered the real interest rate sufficiently. * U.S. consumer sentiment jumped in the first half of May to its highest level in almost six years, as consumers raised their view of current conditions as well as their expectations regarding the future, according to the University of Michigan Consumer Sentiment survey released Friday. The preliminary reading of the May consumer sentiment index came in above expectations, rising to 83.7 compared to 76.4 in April, the highest since July 2007. * The Conference Board Leading Economic Index for the U.S. increased 0.6% in April to 95.0, following a 0.2% decline in March, and a 0.4% increase in February. "After a slight decline in March, the U.S. LEI rebounded in April, led by housing permits and the interest rate spread. Labor market conditions also contributed, although consumers' outlook on the economy remains weak. In general, the LEI points to a continuing economic expansion with some upside potential," it said. * Without the fiscal drag of sequestration, the U.S. economy could be expected to grow by more than 3.0% in 2014, so long as replacement legislation is passed by the Congress, according to Treasury Secretary Jack Lew. In an interview with Bloomberg TV, Lew said that he couldn't say when Congress would pass replacement legislation, but that something would have to "change dramatically" in the economy in order to force new legislation. * The Congressional Budget Office said Friday that President Barack Obama's new budget, if enacted into law, would cut budget deficits by $1.1 trillion over a decade compared to the CBO's baseline. In its report, the CBO said the deficit under Obama's proposal would be $669 billion in the 2013 fiscal year and $745 billion in FY'14. The CBO also sees deficits of $437 billion in FY'15, $413 billion in FY'16, $399 billion in FY'17, $427 billion in FY'18, $529 billion in FY'19, $583 billion in FY'20, $584 billion in FY'21, $606 billion in FY'22, and $542 billion in FY'23. * Tucked away within the April consumer price index was a very surprising, potentially very important statistic - hospital services costs had dropped 0.7% over the month, the largest recorded since the series began in 1993. Dan Ginsberg, economist at the Bureau of Labor Statistics, told MNI that based on the details of the survey it's likely to be just a fluke, albeit an unusually large one. * U.S. state and local governments are first in line to be impacted by extraordinary measures taken by the U.S. Treasury to avoid hitting the debt ceiling, but the suspension of State and Local Government Series effective from noon ET Friday is not expected to have any meaningful impact on the municipal bond market altogether. While refunding costs might hamper state and local governments' ability to save, the extent of the impact on market supply is seen limited. * The House Ways and Means Committee plunged angrily Friday into allegations that the Internal Revenue Service handled the applications for tax-exempt status by some conservative groups with greater scrutiny than it does with other groups, with lawmakers from both parties hammering the IRS. * Canadian inflation dropped markedly in April to 0.4% at an annual rate following a 1.0% increase in March, continuing almost a year of steady decline broken only by a rise in February, Statistics Canada reported Friday. The 0.4% inflation rate in April was the lowest annual rate since October of 2009, dropping behind the previous low of +0.5% in January. * Mexico's government Friday lowered its 2013 GDP growth forecast from 3.5% to 3.1% on weak Q1 growth figures and announced plans to reexamine the federal budget and possibly turn to the oil stabilization fund to accommodate the weaker growth environment and the likely impact on revenue. State statistics agency INEGI announced Friday morning the economy grew at an annual rate of 0.8%, compared to 3.2% in the previous quarter, falling below the consensus estimate of 1.1% as well as the Finance Secretariat's own estimate of 1% given May 2. --MNI Washington Bureau; tel: +1 202-371-2121; email: besene@mni-news.com Fri, 17 May 2013 22:12:00 GMT