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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (25574)	3/14/2005 1:40:52 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

China´s Premier Wen says macro-economic controls cannot be relaxed yet -UPDATE Monday, March 14, 2005 6:04:52 AM afxpress.com China's Premier Wen says macro-economic controls cannot be relaxed yet -UPDATE (Updating with further Wen quotes, background) BEIJING (AFX) - Chinese Premier Wen Jiabao said that macro-economic controls imposed last year could not yet be relaxed "We cannot stop when we are half way there," Wen told a nationally-televised news conference He said macro-economic controls imposed last year had achieved initial results but the nation's economy still needed careful management. China raised interest rates last year for the first time in nine years. It also clamped down on lending to certain sectors of the economy seen as overheating and slowed the approval of some construction projects and land use transfers "We have been successful in avoiding major 'ups-and-downs' in the economy, preventing excessive price hikes and keeping prices at a stable level, and maintaining stable and fairly rapid economic growth," Wen said. Last year's growth in gross domestic product was reined in at 9.5 pct and inflation kept at 3.9 pct. But the premier said China "musn't slacken our efforts in the slightest way" in its economic management "Soaring prices" for capital goods will make it harder in 2005 to achieve the government's priorities of boosting grain output and farmers' income, he said Coal, electricity, oil and transport are also in short supply, and growth in fixed asset investment could pick up again, Wen said The premier also noted that Beijing still needs to create more jobs while promoting stable and fairly rapid economic growth The government will combine policies to expand and to contract different sectors and will use administrative as well as economic tools to keep a lid on growth, Wen said. It will also embark on its "toughest battle in the reform process" this year to consolidate on its macro-economic successes China will continuing reforming its financial, social security and rural sectors as well as improving corporate governance and share-holding structures at state-owned enterprises "We mustn't stop, we musn't waste our previous effort," Wen said Last week, Ma Kai, minister in charge of the powerful National Development and Reform Commission, also said at a news conference the government remains committed to keeping its current macro-economic policies in place, saying they would not be abandoned this year.

To: RealMuLan who wrote (25574)	3/14/2005 10:40:41 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

China says yuan float range needs to be ´acceptable to all parties [Is China going to float the Yuan at a measured pace? - Mish] Monday, March 14, 2005 8:02:48 AM forexstreet.com China says yuan float range needs to be 'acceptable to all parties' BEIJING (AFX) - China needs to adopt a trading range for its currency that is acceptable to all affected parties, China Business quoted Guo Shuqing, director of the State Administration of Foreign Exchange (SAFE), as saying "We need to adopt a trading band which can be accepted by everyone," Guo said in an interview with the weekly newspaper He did not specify which interests needed to be addressed in any adjustment of the exchange rate The yuan now trades in a narrow band around 8.3 to one dollar but China has come under pressure from its major trading partners to make its foreign currency regime more flexible Guo also said that the government would not recklessly float the yuan "We must consider the ability of financial institutions, other companies and the nation as a whole in absorbing the impact (of a yuan revaluation)," he said When asked why there has not been any obvious progress in reforming the yuan exchange rate mechanism, Guo likened the government's preparatory work to preparing for a military campaign where "supplies, ammunition and troops are needed prior to any attack." He said the preparatory work is going well Guo reiterated the government will consider the country's economic development and foreign exchange market developments as well as the impact on the domestic financial system and on neighboring countries when reforming its yuan exchange rate system The SAFE director also said the government will keep an eye on potential capital outflows due to rising US interest rates, adding it will adjust its monetary policy when necessary He said such capital outflow risks are still small but the government should be prepared for any changes

To: RealMuLan who wrote (25574)	3/14/2005 10:49:38 AM
From: mishedlo	Respond to of 116555

Weekly Commentary from Berson at FNM March 14, 2005 Interesting 2004 mortgage market data in the Flow of Funds report. The Federal Reserve recently released fourth quarter and full year financial data for 2004 in its Flow of Funds report, and it contained a number of interesting observations on the mortgage market. Among the highlights: Single-family mortgage debt outstanding (MDO) grew at a 13.6 percent rate in 2004, the fastest pace since 1985. Multifamily MDO increased by 7.9 percent, the slowest pace since 1997. The amount of home equity debt outstanding (included in the single-family MDO figures above) soared by 28.7 percent, an all-time high. Households clearly were taking advantage of significant equity increases while protecting their low-rate first mortgage loans, as well as increasing their usage of simultaneous second lien mortgages (presumably to avoid paying private mortgage insurance when they purchased homes with less than 20 percent downpayments). Among the strongest buyers of mortgage debt last year were Real Estate Investment Trusts (REITs), Asset-Backed Securities (ABS) issuers, and finance companies -- with gains of 119.8, 56.9, and 25.5 percent, respectively. This mirrored the extraordinary growth in the subprime and “Alt-A” mortgage categories. Depository institutions (banks, thrifts, and credit unions) increased their portfolio holdings of mortgages by 18.9 percent last year, while government-sponsored enterprises (GSEs) increased theirs by only 1.2 percent (and on balance sheet purchases of agency- and GSE-backed mortgage pools rose by 1.5 percent). The dollar value of owner-occupied real estate for the household sector climbed by 13.4 percent. With the 13.6 percent rise in MDO, this suggests that the aggregate debt-to-value ratio for owner-occupied housing was little changed in 2004 -- as massive borrowing was offset by equally substantial home price increases. The net worth of the household sector rose for the second consecutive year (by 8.8 percent) to a record $48.5 trillion, with real estate the biggest contributor. Note that the declines in 2000-2002 were the only drops in the history of the series (reflecting the sharp falloff in equity values in those years). We had projected an increase of 12.3 percent for MDO in 2004 (compared with the actual gain of 13.6 percent), but our miss on this forecast didn't come from an error in our fourth quarter estimate (we had projected an annualized increase of 12.1 percent, close to the actual rise of 11.7 percent), but rather from upward revisions to historical data from the Fed over the first three quarters of the year. With the fourth quarter increase fairly close to our previous estimates, we have not made significant revisions to our outlooks for MDO or mortgage originations growth for 2005 -- only the levels have changed in response to the upward historical revisions. We project originations of $2.23 trillion for this year (a drop of 18.3 percent from 2004), with expected MDO growth of 9.3 percent. This will be a much bigger week for economic releases, although none of the really important ones are scheduled for this week. On Tuesday, retail sales for February are projected to rise by 0.7 percent, despite a slight dip in auto sales. Excluding auto, retail sales should climb by 0.8 percent. Also on Tuesday, the New York Fed's Empire State Manufacturing survey is expected to be little changed at about 19 for March -- the third consecutive month around the same level. Additionally on Tuesday, business inventories for January should increase by 0.7 percent -- helping to boost economic growth in the first quarter. The key datapoint in this release will be the inventory-sales ratio -- if it remains near record lows, then additional strong inventory production should occur in coming months. Finally on Tuesday, the National Association of Home Builder's (NAHB) housing market index for March is expected to edge down to around 67 -- as a result of higher mortgage rates. On Wednesday, the current account deficit is projected to grow in the fourth quarter of 2004 to a record $185.0 billion -- and with climbing oil prices, it will probably worsen in the first quarter of 2005, as well. Also on Wednesday, housing starts are projected to fall by about 4 percent to 2.07 million units in February -- with single-family activity slipping from the prior month's record level. Additionally on Wednesday, industrial production and capacity utilization are expected to rise -- by 0.4 percent and to 79.2 percent, respectively. Manufacturing activity in particular continues to expand. On Thursday, the Conference Board's index of leading economic indicators should show a rise of 0.1 percent for February -- a modest recovery after the prior month's 0.3 percent decline. Still, there is little here that would suggest an economic downturn is in the offing. Also on Thursday, the Philadelphia Fed's business outlook survey is expected to edge down modestly to around 19.0 for March -- about the middle of its range over the past six months. Additionally on Thursday, initial unemployment claims are projected to fall to around 315 thousand for the week ending March 12th -- after a surprising jump to 327 thousand last week. On Friday, import prices should rise by 0.8 percent for February, mostly in response to higher oil prices -- but the weaker dollar will contribute, as well. Finally on Friday, the University of Michigan's preliminary estimate for March consumer sentiment is expected to edge up to around 95.0 in response to higher equity prices -- although higher oil prices are a risk to this view. David W. Berson Fannie Mae Economics Last Revised: March 14, 2005 fanniemae.com