NEW$ & VIEW$ (25 FEBRUARY 2014)

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Note: Today, BEARNOBULL.COM also published FACTS & TRENDS: U.S. HOUSING TO STAY COLD
 
CHAIN STORE SALES REMAIN FROZEN

There was no mention of a weather effect in today’s release showing that sales dropped 0.6% last week after the 2.5% jump the previous week. The 4-week m.a. troughed the week of Feb. 8 but it is still up only 1.5% YoY when core inflation is 1.6%.

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Nearly 1 in 3 Americans Aren’t Saving Any Money Only 68% of all Americans are spending less than they earn and saving the difference. That’s down from 73% in 2010, the first full calendar year after the recession ended.

A new survey released Monday found that only 68% of all Americans are spending less than they earn and saving the difference. That’s down from 73% in 2010, the first full calendar year after the recession ended.

Some 64% of households have emergency funds, down from 71% in 2010. The survey found 76% are reducing their consumer debt, down from 79% in 2010.

A divide remains along incomes. More than 80% of households earning over $50,000 spend less than they earn. Only about 69% of households making less than $50,000 are able to save.

The pattern holds for reducing consumer debt and maintaining an emergency fund. Nearly 90% of households in the top half are reducing their debt or are debt free, and more than 80% have a “sufficient” emergency fund.

Only 78% of those making less than $50,000 are reducing their debt or debt free, while 63% are content with their emergency fund.

Median household income in the United States in 2012 was $51,017, according to Census Department data.(…)

Natural Gas Falls Most in Six Years

Natural-gas prices dropped 11%, in the biggest plunge in more than six years, as traders locked in profits from the commodity’s weather-driven rally.

Natural gas for March delivery ended down 69 cents at $5.445 a million British thermal units.

Monday’s drop, the largest one-day percentage fall since August 2007, presages a change in focus from near-term weather concerns to demand in the spring. The severe winter across much of the U.S. has eaten away at stockpiles and pushed futures up 29% for the year so far. This spring, traders will focus their wagers on whether the demand will fall enough to allow inventories to be replenished by next winter. (…)

CHINA
China’s Property Market Shows Strongest Signs Yet of Cool-Down China’s red-hot property market is showing its strongest signs yet of a cool-down, as price growth eases, credit for many developers dries up and some start to cut prices at new housing projects.

(…) Average new-home prices in 70 Chinese cities rose about 9% in January from a year earlier, according to Wall Street Journal calculations based on data released on Monday by the National Bureau of Statistics. While that figure shows China’s housing market remains frothy, it also marks a drop from December’s 9.2% rise as well as November’s 9.1% rise. (…)

Industrial Bank, a midsize lender, said on Monday in a filing to the Shanghai Stock Exchange that it had halted some types of property loans until the end of March, when it will unveil new policies. The bank said the move is aimed at “adjusting its asset structure and to better serve the real economy.”

Banks have periodically tightened lending to developers; the last time was in 2010-2012 when the government worried that easy credit was helping drive up prices. Worries about a slowing economy led to a loosening in early 2013.

Now banks are growing cautious about lending to developers, especially those active in smaller cities that face an oversupply of housing, and Beijing is concerned about a buildup of debt and unoccupied housing.

In Changzhou, the developers of a 21-tower project announced discounts last week. Prices were reduced to an average of 7,000 yuan per square meter, with some units selling for 5,380 yuan per square meter, down from an 11,000-yuan price tag in December, according to data from property broker SouFun Holdings. SFUN -6.23% One of the developers, Agile Property Holdings, 3383.HK -1.23% didn’t respond to requests for comment.

New Yuan Bet: Down A sharp and sudden slide in China’s yuan is forcing investors to rethink one of the most reliable trades in financial markets over the past four years: betting on gains in the Chinese currency.

(…) China’s central bank determines a daily reference point for the yuan, also known as renminbi, then lets it trade 1% higher or lower. Since 2005, it has gradually moved the rate up, allowing the yuan to strengthen 33%. A linked currency, called the “offshore” yuan, trades freely in Hong Kong. (…)

China has halted the yuan’s rise before. It kept the exchange rate steady for two years after the financial crisis. And in 2012, the yuan was allowed to sink about 1.5% over a roughly three-month period. Since then, it has risen more or less steadily. (…)

Yuan Shifts Roil Copper Market Turbulence in the Chinese yuan is percolating in the copper market.

(…) Copper prices have been under pressure since the start of 2014, falling as much as 6.3% in early February amid signs that China’s economy was sputtering. China accounts for about 40% of global copper consumption.

“There’s a lot of fear about a slowdown in China,” said Frank Lesh, a broker and futures analyst with FuturePath Trading.

Rapid shifts in China’s currency, the yuan, have added to these concerns. Copper is traded in dollars and becomes more expensive for Chinese buyers in their home-currency terms when the yuan weakens. (…)

Yuan’s Slide Helps Fix Misaligned Currencies With other emerging-market currencies still under great pressure – see Turkey’s lira today, as well as the Ukrainian hryvnia – China’s hitherto appreciating currency had been creating an imbalance, adding an unwanted burden to its all-important export sector as its economy slowed.

(…) But now that the yuan is trading at six-month lows versus the dollar, the overvaluation is being corrected. Chinese exporters are no doubt relieved, but the question now is: What does that do to investment flows that had been for a long time bet on the conventional wisdom that the yuan would continue to rise? That inflow of funds, particularly from Hong Kong residents earning near-zero rates on their dollar-pegged savings, was an important source of liquidity, both for productive investments and for speculative purposes.

While some of the yuan’s weakness can be attributed to investors’ concerns about China’s slowing economy and latent risks in its financial system, there is also a growing perception that the Chinese central bank has been proactively undermining expectations for the yuan to relentlessly appreciate. With the yuan recently trading closer to the PBOC’s dollar-yuan reference rate, conditions are ripening for a widening of the yuan’s trading band, that by which the PBOC allows the yuan to move 1% above or below the reference exchange rate. The band was last widened in April 2012, when the permitted deviation from the reference rate was 0.5%. Analysts expect Beijing to widen the trading band further, and allow a 1.5% or 2% deviation in the next few months.

From the FT:

(…) The renminbi suffered a sustained period of depreciation in the months following the previous widening of the band. In the middle of 2012, the renminbi dropped as much as 1.4 per cent from its April level, before recovering in September.

However, “it’s still too early to say that the whole market has shifted expectations”, Ms Wang added.

She noted that the economic fundamentals this time are different. In early 2012, China was in a cycle of cutting interest rates and experiencing large capital outflows. Recent data show that China is still experiencing large inflows through its external trade, and few expect an imminent change to interest rates.

“We could run into a 2012 scenario again – that seems to be what [the authorities] want. But unless we see a big narrowing in the trade surplus, then exporters still need to sell dollars [and buy renminbi] in the onshore market,” she said.

But there is a lot more to the story. See The curious incident of the PBOC in the USDCNY market, but be warned that you will get more confused.

 

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