MCX - WEEKLY NEWS LETTERS
INTERNATIONAL NEWS
✍ China
China’s factory activity showed some signs of stabilizing in June but still contracted for the fourth straight month, according to a preliminary private survey, suggesting more stimulus measures may be needed to support the world’s second-largest economy.
The HSBC Flash China Manufacturing Purchasing Managerial Index (PMI) edged up to 49.6, a three-month high, from 49.2, but remained below the 50 mark which separates contraction from expansion.
New orders returned to positive territory at 50.3 and new export orders fell at a much slower pace, but companies stepped up layoffs, shedding jobs at the fastest pace in over six years, a trend which is sure to alarm Beijing. Factories were also forced to cut prices for their products more deeply, pressuring profit margins.

Despite a flurry of stimulus and easing measures over the past year, economic growth slowed to a six-year low of 7 percent in the first quarter and analysts believe further momentum was lost in April-June. Sluggish demand at home and abroad has left many factories, particularly in heavy industries, laden with overcapacity.

The PMI reading follows small signs of recovering demand, reflected in other private surveys and in public statements by officials, but China is still struggling to get monetary easing to translate into investment in growth. Part of the problem is that central bank moves to add liquidity into the system are being absorbed by a stock market rally that began in November, and now by the bond market, which is being force-fed a massive plate of municipal bonds being issued as part of a debt swap programmed.

“Real interest rates are double digits, 11 or 12 percent. This is the real issue for the economy. You can cut nominal rates to zero and you are still seeing real rates around 5 percent. The profit margin is only around 3-4 percent,” said Zhou Hao, economist at ANZ Bank in Shanghai. “We are still seeking new engines for the economy. Basically we need to deleverage first,” he said, adding that the recent stock market rally was being used by many executives to retire outstanding debt.





✍ ECB Meeting
European Central Bank chiefs will discuss whether to extend Greece's funding lifeline again after the meeting of euro zone leaders on Monday, officials said. With nervous Greek savers and firms withdrawing billions of euros in cash from accounts, the country's banks are almost entirely dependant on central bank funding to avoid collapse and potentially dragging down the country with them.
After hiking emergency credit for Greek lenders to about 86 billion euros last week, the ECB agreed to a further 2 billion euros of such Emergency Liquidity Assistance (ELA) on Monday, people with knowledge of the matter told Reuters.
This won breathing space for Athens, allowing teetering banks to stay open as Greece's Prime Minister Alexis Tsipras sought to clinch a deal with euro zone backers at a meeting in Brussels.Austria's central bank chief Ewald Nowotny later said the Governing Council, which is made up of central bank chiefs from around the euro zone and the ECB's executive, would talk again to discuss the outcome of the leaders' summit. This was confirmed by other people familiar with the matter.

✍ US GDP
The US economy contracted slightly in the first quarter as it struggled with bad weather, a strong dollar, spending cuts in the energy sector and disruptions at West Coast ports.There are signs, however, that growth is accelerating in the second quarter as the temporary drag from unusually heavy snowfalls and the ports dispute fade. Retailers reported strong sales in May and employers stepped up hiring. Housing is also firming.
The Commerce Department said on Wednesday gross domestic product fell at a 0.2 percent annual rate in the January-March quarter instead of the 0.7 percent pace of contraction it reported last month. A fairly stronger pace of consumer spending than previously estimated accounted for much of the upward revision. Consumer spending, which accounts for more than two thirds of US economic activity, was revised up to 2.1 percent growth pace from the 1.8 percent rate reported last month. With personal savings increasing at a robust USD 720.2 billion pace, consumer spending could accelerate in the second quarter. While export growth was revised higher, that was offset by an upward revision to imports, leaving a still-large deficit that subtracted almost 2 percentage points from GDP. The GDP revision was in line with economists' expectations.

The economy expanded at a 2.2 percent rate in the fourth quarter. But the first-quarter slump in output likely is not a true reflection of the economy's health. Economists, including those at the San Francisco Federal Reserve Bank, say a problem with the model the government uses to smooth the data for seasonal fluctuations also contributed to depressing the GDP number. The value of inventory accumulated in the first quarter was revised up to an increase of USD 99.5

billion from the USD 95 billion rise reported last month. That meant inventories contributed 0.45 percentage point to GDP instead of the previously reported 0.33 percentage point.
Inventories could be a drag on second-quarter GDP. After-tax corporate profits were a bit weaker in the first quarter than previously thought. Profits after tax with inventory valuation and capital consumption adjustments were revised to show a 8.8 percent decline instead of the 8.7 percent drop reported last month.


✍ BULLION
✍ Gold
Gold prices gained in Asia on Friday as events surrounding Greece's debt talks look increasingly close to collapse, though meetings are seen through the weekend.
Talks between Greece and its creditors remained inconclusive, as discussions continued over the latest proposed reforms from Greece’s creditors and Greece’s counter-proposal.Greece's Prime Minister, Alexis Tsipras, told European Union Leaders Thursday in Brussels that any deal with creditors "must be viable and have adequate funding" a Greek official told journalists.Tsipras spoke during the Leaders' dinner where the Greek issue was discussed and according to the official some leaders were "more favorable and some more harsh." Nonetheless, Tsipras expressed his optimism that a deal could be reached by the end of the week.The Greek premier said that his government presented adequate and credible proposals in line with creditors' demands and that "Greece does not need more austerity but a growth agenda, investments and structural reforms."

On the Comex division of the New York Mercantile Exchange, gold for August delivery rose 0.18% to $1,173.90 a troy ounce. Gold is viewed as a safe-haven for investors in periods of severe economic instability.Elsewhere, initial jobless claims remained near historic lows even as the level increased by 3,000 last week to 271,000. More critically, the four-week average fell by 3,250 to 273,750 moving lower from monthly averages throughout the spring.
While Gold futures retreated in the domestic market on Thursday in the midst of strong US consumption data and a lack of progress in Greek Debt negotiations. the US Department of Commerce said consumer spending surged in May by 0.9 per cent, the highest monthly gain in nearly six years and above expectations for a 0.7 per cent rise.
Bolstered by a 0.5 per cent spike in personal income, the surge reflects an increase in consumer spending in auto purchases and retail goods. Meanwhile, the two sides in longstanding Greek Debt negotiations concluded talks without reaching a deal. During the emergency two-day meeting, both sides presented revised proposals that could unlock critical stimulus aid to Greece thought to be necessary in order to avoid bankruptcy. Gold may bounce back friday as worries over Greece spur safe haven demand for the precious metal. At the MCX, Gold futures for August 2015 contract closed at Rs 26,485 per 10 gram, down by 0.18 per cent after opening

at Rs 26,570, against the previous closing price of Rs 26,533. It touched the intra-day low of Rs 26,460 till the closing

✍ ENERGY
✍ Natural gas
Natural gas trimmed gains on Thursday, despite data showing that U.S. natural gas supplies rose less than expected last week.Natural gas for delivery in August rose 2.4 cents, or 0.88%, on the New York Mercantile Exchange to trade at $2.806 per million British thermal units during U.S. morning hours. Prices were at around $2.846 prior to the release of the supply data.A day earlier, natural gas prices fell to $2.733, the lowest level since June 9, before turning higher to end at $2.782, up 3.6 cents, or 1.31%. Futures were likely to find support at $2.733, the low from June 25, and resistance at $2.905, the high from June 18.

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