Mark Mobius is piling into commodity stocks in China, saying that a rebound in raw-material markets is only getting started after prices sank too far and that gains may be extreme.

Templeton Emerging Markets Group will add more raw-material stocks from Asia’s top economy, according to Mobius, executive chairman of the group, who’s been investing in emerging markets for more than four decades. Many of them will be good holdings for the long term, he said in an e-mail interview, without identifying particular companies.

China’s commodity producers, which were the worst mainland equity investments over almost a decade, have led this year’s rebound as China boosted stimulus and local investors swarmed into the nation’s futures markets, with bets on everything from steel bars to cotton. The Bloomberg Commodity Index rallied for a second month in April, and assessments are stacking up that the worst of the rout is now over, including from industry veteran Tom Albanese, a former head of Rio Tinto Group.

“We have already seen how both commodity prices and the commodity stock prices went down too far, beyond realistic assessments,” Mobius said. “We can now expect movement on the upside to be extreme in percentage terms. If there is a move down, there is a good chance that we would increase.”

http://www.mineweb.com/news/mining-finance-and-investment/mobius-says-buy-commodity-stocks-as-rebounds-just-beginning/?platform=hootsuite

In November 2013 bosses from nine of China's largest copper smelters sat down over a weekend to discuss the state of the local market.

They did so because they had lost faith in the official copper production figures released by the National Bureau of Statistics (NBS).

The NBS had just reported record output in the month of October, equivalent to an annualised run rate of 6.8 million tonnes.

The smelters weren't convinced, suspecting the statistical agency was double-counting production at parent and subsidiary companies and incorrectly labeling some intermediate products such as copper blister as refined metal.

Actually, it was more than mere suspicion. The smelters were themselves supplying the raw data to the agency in the first place, so had a good idea of what the resulting production figures should look like.

Nor was this a case of statistical nit-picking.

The smelters were poised to engage with international miners on terms for the supply of copper concentrates the following year and knew that the "official" production figures would be a core discussion point in the negotiations.

The moral of the story is that it's not just Western analysts who struggle with the reliability of Chinese statistics.

And it's a timely reminder that inconsistent data can have very real-world effects because right now there is no data at all.

The NBS has suspended the publication of detailed metals production figures since October last year.

Which means that everyone is now largely in the dark as to what is happening in the world's largest metallic economy.

It's not just the monthly base metals production figures that have gone missing.

Data on oil products such as liquefied petroleum gas, naphtha and fuel oil have been withdrawn. So too have regional figures for coal, steel and electricity output.

This has little or nothing to do with the sort of inconsistencies in the NBS data picked up by the country's copper smelters.

Rather, it results from an anti-corruption investigation into the agency by the Central Commission of Discipline Inspection (CCDI).

http://www.reuters.com/article/china-statistics-ahome-idUSL5N18137W

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Oh this sounds too good to be true. Just print the money! Well to be honest, a politician – and a central banker – should admit that increasing joblessness must be paid for somehow.

1.     Raising taxes (not lowering them, Donald) is one way.

2.     Issuing more and more debt via the private market is another (not a good idea either in this highly levered economy).

3.     A third way is to sell debt to central banks and have them finance it perpetually at low interest rates that are then remitted back to their treasuries.

Money for free! Well not exactly. The Piper that has to be paid will likely be paid for in the form of higher inflation, but that of course is what the central banks claim they want. What they don’t want is to be messed with and to become a government agency by proxy, but that may just be the price they will pay for a civilized society that is quickly becoming less civilized due to robotization. There is a rude end to flying helicopters, but the alternative is an immediate visit to austerity rehab and an extended recession. I suspect politicians and central bankers will choose to fly, instead of die.

Private banks can fail but a central bank that can print money acceptable to global commerce cannot. I have long argued that this is a Ponzi scheme and it is, yet we are approaching a point of no return with negative interest rates and QE purchases of corporate bonds and stock. Still, I believe that for now central banks will print more helicopter money via QE (perhaps even the U.S. in a year or so) and reluctantly accept their increasingly dependent role in fiscal policy. That would allow governments to focus on infrastructure, health care, and introduce Universal Basic Income for displaced workers amongst other increasing needs. It will also lead to a less independent central bank, and a more permanent mingling of fiscal and monetary policy that stealthily has been in effect for over 6 years now. Chair Yellen and others will be disheartened by this change in culture. Too bad. If there is an answer, the answer is that it’s just that way.

Investment implications: Prepare for renewed QE from the Fed. Interest rates will stay low for longer, asset prices will continue to be artificially high. At some point, monetary policy will create inflation and markets will be at risk. Not yet, but be careful in the interim. Be content with low single digit returns

~Bill Gross.

 

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The European Commission has given details of how it will define high-frequency trading (HFT) as part of its new approach financial markets regulation, the revised Markets in Financial Instruments Directive (MiFID II).27 Apr 2016

• Financial services regulation 
• Banking & Restructuring 
• Banking reform 
• UK
• Europe 
• Germany 
• France

A high-frequency trader will be defined as one sending at least two messages per second for a single instrument on any trading venue, or at least four messages per second in respect to all instruments being traded on a venue, the Commission said in proposed regulations published this week.

Markus Ferber, the rapporteur for the MiFID II legislation in the European Parliament, welcomed the decision, saying that the EU now had a clear and coherent set of rules.

"The 2010 flash crash in New York has shown what can happen if high frequency trading gets out of control. Such an incident must never happen in Europe. This delegated act is an important step to reign in HFT, but … if the calibration goes wrong, the regime will be undermined. Therefore, we need to get it right the first time," Ferber said, in documents emailed to Out-Law.com.

HFT would now be subject to more control and transparency rules, and "the European Parliament will look very closely to check that the rules cannot be circumvented," Ferber said. 

The European Parliament and Council have three months to study the proposals. 

The crusading federal judge behind Brazil’s explosive corruption investigation, facing the limits of his mandate and signs of political pushback, sees his role in the case winding down by the end of the year, a turning point in a probe that has helped push the president to the brink of impeachment.

For more than two years, Judge Sergio Moro and his team of prosecutors and police in the southern town of Curitiba have tracked the $1.8-billion graft scandal across four continents. They uncovered a crime ring so epic that it shattered Brazil’s political and economic leadership and helped tip the nation into its worst recession in a century.

Now, legal challenges are chipping away at Moro’s jurisdiction over executives amid criticism that he’s over-reaching. Brazilian law also bars him from going after sitting politicians accused of graft. So he expects significantly fewer new operations under his watch starting next year, according to three top officials who asked not to be named relaying details from private conversations. The press-shy judge declined to comment.

That doesn’t mean corruption investigations will end but it probably means a substantial drop in their intensity and speed. The Supreme Court has sole jurisdiction over lawmakers. Its exhaustive caseload, political ties and past aversion to prosecuting legislators are the foundation for a long-held belief that crooked leaders are all but untouchable in Brazil. While that’s beginning tochange, there’s no doubt that the top court -- responsible for ruling on everything from impeachment challenges to state debt relief -- won’t be as steadfast in its pursuit of corruption as the dogged 43-year-old judge with jet black hair.

“Moro is a judge with a single focus -- extremely capable, very disciplined and efficient,” said Floriano Azevedo Marques, a professor of law at Sao Paulo University. “That’s why he’s been so fast.”

Publicly, the Federal Police and prosecutors say the investigation known as Carwash will go on come hell, high water, or impeachment. Inside legal circles, however, there’s a sense that when Moro wraps up his investigation into the state-run oil giant Petrobras -- the key case under his purview and the epicenter of Carwash -- it will mark a major slowdown.

In Brazil’s justice system, a judge is responsible for overseeing Federal Police probes, approving accusations by prosecutors, reviewing the evidence and deciding if a defendant is guilty or innocent. Other elements of the scandal thrown off by Carwash are already being sent to other federal judges.

Curitiba, about an hour’s flight from the financial hub of Sao Paulo, is called Brazil’s green capital, but these days it’s better known as ground zero for the sprawling corruption scandal. It’s here that police investigators, working in a modern glass-and-concrete building, first connected an infamous money laundererto a Petrobras executive. From there, they pieced together an elaborate bribery scheme involving the nation’s biggest builders, lucrative public works projects and top politicians, tracing alleged million-dollar kickbacks to campaign coffers and Swiss bank accounts.

While President Dilma Rousseff has not been accused in the scandal, it has undermined her political support and she’s now facing impeachment on allegations that she used accounting to mask the size of a budget deficit.

Along the way, Moro became a folk hero. Masks of the judge were a favorite in Carnival celebrations; he was named one of Time Magazine’s 100 most influential people. And protesters in March waved balloons of Moro dressed as Superman that stood in stark contrast to the inflatable likeness of Rousseff and her mentor, former President Luiz Inacio Lula da Silva, in striped prison garb.

But he has picked up detractors, too, especially after releasing transcripts from a taped phone conversation between Lula and Rousseff which suggested that she wanted to name Lula a minister to shield him from investigation.

Following the transcript’s release, thousands of Brazilians poured into the streets from Sao Paulo to Brasilia to protest. The backlash by some of Brazil’s political and legal elite was just as fierce. Supreme Court Justice Marco Aurelio Mello, in an interview with Folha de S.Paulo newspaper, said Moro’s “show of force” overstepped his limits, and the Rio de Janeiro branch of Brazil’s bar association branded it illegal.

In Brasilia, meanwhile, the political stand-down that has crippled Rousseff’s government is reaching its culmination, too. A special congressional committee is analyzing the request to oust her. If a simple majority of senators vote as early as next week that she should stand trial, Rousseff would be forced to step aside, at least temporarily. Her successor, Vice President Michel Temer, is already assembling an administration that investors hope will quickly address Brazil’s economic woes.

Moro’s investigation entering a new phase is “pretty good news for Temer,” said Christopher Garman, who analyzes Brazil for Eurasia Group in Washington. “For a Temer government, the real window of risk is over the next four to five months. There are still shoes to drop in Moro’s investigation. If you get past this phase, then the risk for Temer’s government starts to diminish. The bar to undermine his administration is higher than it was under Rousseff.”

http://www.bloomberg.com/news/articles/2016-05-04/crusading-judge-who-rocked-brazil-says-his-days-are-numbered-too

Mining giant Rio Tinto’s incoming CEO Jean-Sébastien Jacques on Thursday told shareholders at the company’s annual general meeting, in Brisbane, that his focus would remain firmly on productivity improvements. 

Jacques, who was previously employed as Rio’s copper and coal CEO, would succeed Sam Walsh when he retires in July this year. “There is no doubt these are challenging times for the sector, and for your company. The macro-economic environment is tough, and is likely to remain so for the foreseeable future, from whichever way you look at it. 

I am under no illusions of the task and challenges ahead,” Jacques said. He added that while it would not be an ‘easy ride’ for Rio into the future, the company had significant assets on which to build its foundations. “But these attributes alone will not deliver sector leading performance. We cannot be complacent just because we have Tier 1 assets. We must always challenge ourselves to be more productive, more performance driven and more proactive in our engagement with stakeholders and society,” he said. 

Walsh on Thursday reiterated that Rio’s cost savings initiatives had delivered more than $6-billion in cost cuts since 2013, with the company releasing some $1.5-billion in working capital in 2015. “We reduced capital expenditure for 2015 to $4.7-billion and we are reducing capital expenditure to $4-billion in 2016 and $5-billion in 2017. We have not done this at the expense of future growth, but by re-assessing projects, lowering costs, and only investing in the highest returning projects,” Walsh said. 

Over the next two years, Rio was targeting to cut operating costs by a further $2-billion, and would also remove $3-bilion in capital expenditure, compared with its previous guidance, while implementing a new dividend policy. “These actions are designed to ensure we maintain our balance sheet strength and deliver shareholder returns commensurate with the economic environment and supported by the quality of our world-class assets,” Walsh said.

http://www.miningweekly.com/article/rios-new-boss-focused-on-cost-savings-2016-05-05