BBC News - British Chambers of Commerce warns against 'hasty' rate rise

The Bank of England should not make any "hasty decisions" on raising interest rates, warns the British Chambers of Commerce (BCC)

In its quarterly survey it says an early rate rise "may mean more limited growth ambitions" among companies.

The survey of 7,000 businesses showed that the growth rate had slowed in some industries between April and June.

The BCC said this was "unsurprising" given that the economy had "jolted forward" in the first quarter of 2014.

According to the survey, the rate of growth slowed in exports and investments in the second quarter, although they are still both above their pre-recession levels.

The index measuring the service sector, the biggest part of the UK economy, slipped from the all-time high reached in the first quarter.

Driving recovery

The BCC, a business lobby group, said the recovery was "moving forward" but warned that "repairing our broken business finance system" was "a top priority".

"These results reinforce the case against the Bank of England making hasty decisions on raising interest rates in the very short term," said John Longworth, director general of the BCC.

"By driving up the cost of credit for fast-growing firms, many of whom do not sit on the same healthy cash piles as their more established counterparts, early rate rises may mean more limited growth ambitions among the very firms we are counting on to drive the recovery," he added.

The Bank of England governor Mark Carney has been accused of giving mixed messages about when rates would rise.

Last month he hinted that interest rates could rise as soon as this year. He said in a speech that an increase "could happen sooner than markets currently expect", which at the time was the beginning of 2015.

However the following week he appeared to row back from that.

Reuters News - Swiss consumer prices flat, supports need for SNB currency cap

(Reuters) - Swiss consumer prices were unchanged in June from a year ago, data showed on Tuesday, underscoring the need for the central bank to maintain its cap on the Swiss franc.

The Swiss National Bank imposed a lid on the franc at 1.20 per euro in September 2011. Strong demand was driving up the safe-haven currency, hurting the country's exporters and threatening to snuff out price growth.

Almost three years later, deflation fears remain. Tuesday's data from the Federal Statistics Office showed prices were flat on the year in June, less than the 0.2 percent rise economists had predicted in a Reuters poll. Prices fell 0.1 percent month-on-month in June. ECONCH

The primary reason for the monthly drop in prices was the beginning of sales in clothing, the statistics office said.

The price of imported goods fell by 1.0 percent compared with last year, but domestic prices rose 0.4 percent. That suggests weak price growth is not a sign of malaise in the Swiss economy, said J. Safra Sarasin economist Alessandro Bee.

"As long as inflation is positive, the inflationary fears of the SNB are contained," Bee said.

The global economy looks to be improving, Bee said. Unrest in Iraq and Ukraine could lead to spikes in oil prices, pushing up inflation in the coming months, he said.

At its quarterly policy meeting last month, the Swiss central bank stuck to its policy of capping the franc and said it was ready to take further steps if necessary after the European Central Bank eased its own policies.

The SNB raised its inflation forecast for 2014 to 0.1 percent from a previous 0.0 percent, but trimmed its inflation forecasts for 2015 and 2016 to 0.3 percent and 0.9 percent, respectively.

Separate data on Tuesday showed Swiss retail sales fell 0.6 percent in real terms in May from May a year earlier.

BY JOSHUA FRANKLIN

Bloomberg News - China Faces Yuan on Yuan as U.S. Decries Weak Currency

Photographer: Andrew Harrer/Bloomberg

Sharon Yuan, senior coordinator for the U.S.-China Strategic and Economic Dialogue and deputy assistant secretary for trade and investment policy at the U.S. Treasury, typically communicates with Chinese officials two or three times a week

Among the half-dozen U.S. Treasury officials traveling to Beijing for talks with their Chinese counterparts this week, Sharon Yuan will, as usual, carry the heaviest suitcase.

Yuan’s stuffed gray Travelpro befits the scope of her two jobs. As head of the department’s trade and investment policy and its chief China coordinator, she often arrives before her colleagues and makes multi-city stops. After the July 9-10 U.S.- China Strategic and Economic Dialogue, she’s off to Brussels for trade talks.

The immediate task before the Taiwan-born Yuan is persuading a slow-moving Chinese government to allow greatermarket access for U.S. businesses. She’s Treasury Secretary Jacob J. Lew’s everyday liaison with the world’s second-largest economy as they press China to quicken its economic opening and increase the value of a currency that happens to be called the yuan.

“How China implements its reforms will matter greatly to the United States and our ability to compete on a level playing field,” Yuan, 37, said in an interview. A good outcome in Beijing this week would be “to make as much incremental progress as we can” and put “some flesh on the bones” of China’s pledge to move toward a more market-oriented economy, she said.

Her importance is elevated because the department has vacancies in the top two international affairs positions. Nathan Sheets, nominated by President Barack Obama to be undersecretary, and Ramin Toloui, selected as an assistant secretary, have yet to be confirmed by the Senate. Sheets has been working as a counselor to Lew since February.

Closed Markets

“The most important issue for the U.S. is that China still has a lot of markets that are closed to exports, and probably more important, to foreign investment -- in sectors like financial services, media and telecom,” said David Dollar, a senior fellow at the Brookings Institution inWashington who was based in Beijing for the Treasury from 2009 to 2013.

Yuan brings a lawyer’s precision to the talks, as well as some understanding of Mandarin, which she learned growing up from her Chinese father and Taiwanese mother. She spent her first 18 months in Taiwan before moving to Southern California.

Yuan went to the Treasury in 2009 as deputy assistant secretary for trade and investment policy after six years at Sidley Austin LLP, where she was a trade attorney and worked on investment disputes.

Trade Talks

In addition to her China duties, Yuan is a key figure in negotiating the parts of trade pacts that involve banking and securities. The U.S. is trying to finish the 12-nation Trans-Pacific Partnership agreement and is in talks with Europe on the Transatlantic Trade and Investment Partnership -- the subject of her trip to Brussels for talks July 14.

Yuan is “very exact” and “wants to get the language just right,” said David Loevinger, her predecessor as senior coordinator for China affairs and the annual Strategic and Economic Dialogue. “She also knows the political direction her bosses want to go.”

This time she will have to overcome China’s anger over Justice Department charges in May that members of the Chinese military stole trade secrets from companies including United States Steel Corp. by hacking into corporate computers.

“There’s always something going on in the relationship,” Yuan said. “We have worked to establish a relationship that allows us to address even the most complicated and sensitive issues.”

Criticizing Obama

Both China’s interventions to hold down the value of the yuan and the Treasury’s response have drawn criticism from some lawmakers and businesses that say the U.S. has been too soft. The Obama administration’s approach has been “completely inadequate,” the Alliance for American Manufacturing said after a twice-annual Treasury report declined to name China a currency manipulator.

Yuan is a protégé of Lael Brainard, the former Treasury undersecretary who is now a Federal Reserve Board governor. They met in late 1997, when Brainard was in President Bill Clinton’s National Economic Council, due to a series of events that Yuan describes as “a lot of lucky coincidences.”

Yuan was on winter break from her senior year at the University of California at Berkeley and staying with her parents, who had moved to the Washington area. She phoned the White House to ask if there were any internships or short-term work available.

Cold Calling

To her surprise, she reached “a live person on the other end” who told her to come in the next day for an interview. While filling out the paperwork, she met an intern from Berkeley who introduced her to Brainard.

Yuan watched from the sidelines as Brainard and other U.S. officials responded to the Asian financial crisis. After Yuan graduated from Berkeley, where she was student president her senior year, Brainard called asking her to return to the NEC the day before Yuan was going to accept another job.

She worked for two years under Brainard, then the NEC’s deputy for international affairs, taking part in meetings including a Group of Eight summit in Japan in 2000, before leaving to attend the University of Virginia’s law school.

“Because she was at an interagency coordinating position at such an early age at the White House, she understands very acutely the whole set of equities we have with China,” Brainard said in an interview. The Strategic and Economic Dialogue, or S&ED, includes officials from agencies such as the State, Commerce and Energy departments.

Common Language

Yuan’s ethnicity adds another dimension to her talks with Chinese officials.

While Yuan conducts meetings in English, Mandarin was her first language at home and her understanding of it is useful. “There are some things as far as tone, demeanor, and sometimes things don’t really translate well,” she said.

Officials in China might initially expect someone of Chinese ethnicity to be more sympathetic to them, though Yuan is a “fierce defender of U.S. national interests,” said Loevinger, who spent three years in China as a Treasury attaché before returning to Washington to be China coordinator. He’s now a managing director at Los Angeles investment manager TCW Group Inc.

In Beijing this week, Yuan’s role will require some tough talk as she presses Chinese officials to move more quickly on a bilateral investment treaty the two countries agreed to at last year’s meeting in Washington.

Lew’s Frustration

Lew, speaking before his fourth trip to Beijing in less than 17 months as secretary, said July 1 he was frustrated with China’s attempt to exclude “almost everything of any value” from part of the agreement.

Brainard, who was at the Treasury when the agreement was reached, said the treaty is in part the result of Yuan’s persistence and ability to build relationships with Chinese officials.

Bilateral ties have been further strained by territorial disputes in the region. The Chinese government is increasingly concerned about what it views as the Obama administration’s support for the Philippines, Japan and Vietnam in their maritime disputes with Beijing.

Secretary of State John Kerry will also attend the meetings in Beijing.

The two countries will discuss “priority issues” of overlapping interest such as a nuclear weapons-free North Korea, negotiations on Iran’s nuclear arms program and working together to combatclimate change, Daniel Russel, assistant secretary of state of East Asian and Pacific Affairs, said in June 25 testimony before a Senate committee.

Regular Contact

Yuan typically communicates with Chinese officials two or three times a week, and several Treasury officials working on S&ED issues often do so daily. Because of the 12-hour time difference with Beijing, the calls are early in the morning or late in the evening Washington time.

The most challenging part of the relationship is “the intensity of it and the need to always be engaging,” Yuan said.

The pressure on the Obama administration for change comes partly from Congress, just as it did during President George W. Bush’s two terms. The Treasury hasn’t named China a currency manipulator in the foreign-exchange report since 1994.

U.S. lawmakers including Senator Charles Schumer, a New York Democrat, and Jeff Sessions, an Alabama Republican, have said the administration should label China a manipulator. By keeping the value of the currency artificially low, China puts U.S. businesses at a disadvantage in the global marketplace, they say.

China’s opening-up to foreign investment has become “quite broad after 30 years of progress and the speed has been increasing,” said Meng Meng, a researcher at the government-run Chinese Academy of Social Sciences in Beijing. “China is already quite open to the U.S., and the speed of further opening up is not low, but the expectation from U.S. is for something relatively high.”

By U.S. standards, Chinese leaders are slow to make changes, so success is measured by small steps in the right direction, according to Yuan. The goal is to get China to “play by the global rules,” she said. “China’s economy is too large and too important for it to bypass the global norms.”

To contact the reporter on this story: Ian Katz in Washington at ikatz2@bloomberg.net

Reuters News - Global economy ends first half on a high: PMI

(Reuters) - The global economy ended the first half on a high as business activity picked up in June, with new orders pouring in at their fastest rate in over three years, a survey showed on Thursday.

JP Morgan's Global All-Industry Output Index, produced with Markit, rose to 55.4 from May's 54.2, holding above the 50 mark that divides growth from contraction for the 21st month running and the highest reading since February 2011.

"Gains in the levels of the new orders and employment indices suggest that the underlying trend in global economic conditions remains solid moving forward, pointing to above trend growth of global GDP in the second half of the year," said David Hensley, a director at JP Morgan.

The new orders subindex rose to 56.0 from 54.3, also the highest since February 2011.

Britain and the United States were again the leading drivers of the growth, while the recovery in the euro zone slowed. There were also signs Asia was emerging from its soft patch, JP Morgan said.

Robotic arms spot welds on the chassis of a Ford Transit Van under assembly at the Ford Claycomo Assembly Plant in Claycomo, Missouri April 30, 2014

(Reporting by Jonathan Cable; Editing by Hugh Lawson)

BBC News - Bombay Stock Exchange resumes trading

India's main stock market, Bombay Stock Exchange (BSE), has resumed trading after being disrupted due to a network outage.

Shares listed on the exchange, as well as its indices, stopped updating for nearly three hours on Thursday morning.

The main stock index, the Sensex, had risen in early trade before the outage.

The Sensex had risen to a fresh record high on Wednesday as investors hoped that the new government will announce economic reforms in its first budget.

The government is scheduled to present the budget on 10 July.

Dipen Mehta, a member of the stock exchange, was quoted as saying by Indian news website Firstbiz that the decision to halt trading on Thursday morning was the right one.

"Otherwise it would create problems at the broker end," Mr Mehta said.

The stock exchange suffered another technical glitch in June, which left real-time data feeds blank for nearly an hour and forced deals to be struck using prices from a rival exchange, traders said.

Reuters News - Monetary policy not best financial stability tool: Yellen

U.S. Federal Reserve Chair Janet Yellen holds a news conference following two-day Federal Open Market Committee meeting at the Federal Reserve in Washington June 18, 2014

(Reuters) - Monetary policy faces "significant limitations" as a tool to address financial stability risks, and would have caused major economic damage if it had been used to head off the U.S. housing bubble, Federal Reserve Chair Janet Yellen said on Wednesday. Weighing in a global central banking debate, Yellen reiterated her view that regulatory policy needs to play the lead role in combating excessive financial risk-taking.

She said, however, that an increased focus on financial stability in monetary policy deliberations was appropriate, but that central banks should only shift interest rates to combat risks to stability in rare circumstances.

"The potential cost ... is likely to be too great to give financial stability risks a central role in monetary policy discussions," Yellen said at an event sponsored by the International Monetary Fund.

The U.S. stock and bond markets have soared on the back of the Fed's extremely accommodative monetary policy, prompting warnings from some analysts and economists that new bubbles may be forming.

Yellen played down those concerns.

"I do not presently see a need for monetary policy to deviate from a primary focus on attaining price stability and maximum employment," she said.

Last month, the IMF cut its growth forecast for the United States and said the economy would not reach full employment until the end of 2017, allowing interest rates to be held near zero for longer than financial markets expect. It also warned, however, of financial stability risks as the prolonged period of ultra-low interest rates has prompted weak lending standards and risky behavior by investors. "It is ... important that we monitor the degree to which the macroprudential steps we have taken have built sufficient resilience," Yellen said.

Yellen said she saw pockets of increased risk-taking across the financial system that could warrant a more "robust macroprudential approach" if those concerns grew. She cited low volatility and corporate bond spreads, as well as weak lending standards in parts of the leveraged-loan market.

She added that she does not see a systemic threat from leveraged lending, and that data does not suggest that non-financial borrowers are taking on excessive debt.

(Reporting by Michael Flaherty and Howard Schneider; Editing by Paul Simao)

BBC News - South Africa hit by engineering strike

Engineering and metal workers in South Africa have gone on strike after talks on Monday failed to reach an agreement over pay.

The country's largest union, the National Union of Metalworkers of South Africa (NUMSA), claims that more than 200,000 members are striking.

The union is demanding a 12% wage increase, almost double the rate of inflation.

So far employers have offered an 8% pay rise.

Marches are taking place in six major cities across the country, including Johannesburg, Cape Town and Durban.

NUMSA also wants to receive a housing allowance of 1000 rand ($94;) a month.

The union's secretary-general Irvin Jim has said it will not settle for less than a double-digit increase.

"We have a long list of demands that has been reduced because we have to be objective," he told the BBC.

"Originally we had a mandate for demanding 15% [pay increase]... but we have reduced that to 12%".

The union has about 340,000 members in total, but only around two-thirds were planning to go on strike.

There was a festive mood on the demonstration in Johannesburg

AnalysisLerato Mbele, BBC News, Johannesburg

As the winter morning warms up, about 5,000 members of the National Union of Metalworkers of South Africa gathered at the Mary Fitzgerald Square.

It's the music & theatre district of Johannesburg, appropriate because as the workers arrive in waves, they sing, chant and perform war dances.

The songs are about their struggle as the working class. Many are holding up placards stating their negotiating position.

Here at the rally point workers demand a wage increase of 15%, despite the union leaders formally demanding 12% in the wage talks.

It is a sea of red and gold Numsa t-shirts, and there is obviously no sign of employer representatives.

Other than the singing and sloganeering the protest has begun on peaceful note and the mood is somewhat festive.

Essential service

The union is also demanding a pay increase at energy utility, Eskom, and says it will picket outside the firm's headquarters on Wednesday morning.

The power company supplies the vast majority of South Africa's electricity and is deemed an essential service, therefore any strike would not be legal.

There are concerns that if the picket turns into a strike, then South Africa's already fragile power sector could be vulnerable to disruption.

However, Mr Jim believes it should be allowed to strike and blamed Eskom's management for giving "bonuses to themselves" without seeing the "need to give workers a living wage".

"With Eskom we have said to them for years now, let's sit down and deal with the issue of demarcation, because as a union we firmly believe it is not true that the whole of Eskom is an essential service.

"We could have departments that will not affect electricity... and they could be able to carry the plight of other workers by embarking on a legally protected strike," he said.

This latest industrial action comes only a week after the end of a five-month long strike at South Africa's platinum mines, which crippled the sector.

In the first three months of this year, South Africa's GDP shrank by 0.6%, the first contraction since 2009.

Should NUMSA's strike be prolonged, there are worries it could have a damaging effect on the South African economy.