China inflation ticks lower, policy on pause
A downtrend in inflation would be welcomed by policymakers as confirmation that a flurry of increases in interest rates and bank reserve requirements is working, just when China’s economy is showing increasing strains from the global downturn.Since inflation is still close to the three-year peak of 6.5 percent hit in July, few analysts believe China will follow the likes of Brazil, Indonesia and Singapore and ease policy in the near-term, barring a marked deterioration in Europe’s debt woes.”The slowdown in the CPI last month is not drastic enough to reduce inflationary expectations, and it is still too early to confirm an easing trend in price pressures,” said Qiao Yongyuan, an analyst with CEBM in Shanghai.”The central bank is more likely to keep its current monetary stance unchanged and will wait for data in coming months to judge the direction of policy,” Qiao said.The slowdown in inflation in September was right in line with a poll of economists’ forecasts and lower than August’s reading of 6.3 percent.Food price pressures remained strong, rising 13.4 percent from a year earlier, unchanged from the pace in August’s data. Non-food inflation eased to 2.9 percent from 3.0 percent in August, the data showed.China’s producer price index in September came in below market expectations with a 6.5 percent rise from a year ago, compared with August’s 7.3 percent.”The data will come as a relief to the Chinese government, which now faces a deadlock in policymaking. It will fine-tune policies in December,” said Shen Jianguang, an economist with Mizuho Securities Asia in Hong Kong.China’s ruling Communist Party usually holds an annual agenda-setting economic policy conference in December.”Right now, they are not sure that inflation is slowing just (based on) one month’s number. The policy will be on hold for one or two more months,” said Shen.Such doubts were underscored by the monthly price changes. The consumer price index rose 0.5 percent in September from the previous month, faster than August’s 0.3 percent rise. Food prices rose 1.1 percent in the month, while non-food prices were up 0.2 percent.The government pays particular attention to prices for pork, the staple meat for many ordinary citizens griping about inflation. Pork prices rose 43.5 percent in September from a year ago, barely down from a 45.5 percent rise in August.Residential costs, which measure rents, mortgages and power bills, cooled to 5.1 percent, the slowest rise since October 2010.POLICY ON HOLDAfter lifting interest rates five times and banks’ reserve requirements nine times since October 2010, Beijing has put policy tightening on hold as a slowdown in Europe and the United States threaten global growth.Friday, Singapore eased its monetary policy, saying the “outlook for the global economy has deteriorated sharply.” That followed rate cuts in Brazil and Indonesia in recent weeks.China’s economic growth has been slowing down this year alongside growing concerns that the developed world may be heading into a recession.Data Thursday showed China’s import and export growth eased in September, with export growth hitting seven-month lows, as domestic and overseas demand cooled.The annual pace of exports to the troubled European Union in September more than halved from August.Some analysts say China may relax monetary policy if push comes to shove, although milder moves such as relaxing credit restrictions and lowering banks’ reserve requirements are likely to come before a more drastic rate cut.”The central bank may even see fit to ease policy before the end of the year, perhaps starting with cuts to very high reserve requirements, though it will be keen to keep a grip on lending growth,” said George Worthington, the chief Asia Pacific economist for IFR Markets.”Rate cuts are unlikely to be on the agenda barring a renewed global slump given the relatively modest tightening on that front since the last crisis in 2008/09.”
Asia shares edge lower on caution over global growth
Lingering concerns about Europe’s debt woes and the latest credit rating downgrade of Spain underpinned the safety of government bonds, slightly boosting the price of U.S. Treasuries in Asia on Friday while easing Asian credit markets.China’s consumer price index rose 6.1 percent in September from a year earlier, coming within expectations and lending support to views the central bank will keep interest rates on hold.MSCI’s broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS eased 0.8 percent, but was set for a weekly gain of about 4.7 percent, which would be the largest weekly increase since late March, when the index ended the week up 4.8 percent.Materials sector led the index lower as concerns grew about weakening demand from the world’s No. 2 economy, China, and the broader global economy, but oil and copper recovered earlier with losses partly on technical rebound.”Concerns about China’s demand and doubts over Europe’s ability to contain the crisis are somewhat overblown,” said Tetsu Emori, a fund manager at Astmax Co Ltd in Tokyo.China’s growth may slow but it will still be high with domestic demand staying solid over the medium-term even if the pace of growth slowed, while Europe has no choice but stand by Greece, he said.”Investors have undergoing adjustments since the spring, reducing excessive positions, and I feel the markets currently stand at a juncture where players want to confirm the floor and survive the month,” he said.Most analysts still expect China to grow at least 9 percent this year.The Nikkei average .N225 opened down 0.7 percent after hitting a four-week high on Thursday.Oil prices recovered after falling on worries about slower demand in the world’s second-largest oil consumer China. Brent crude edged up 0.1 percent to $111.23 a barrel and U.S. November crude ticked up 0.01 percent to $84.24.The most active December copper contract on the Shanghai Futures Exchange edged up 0.2 percent.EUROPE EYEDEurope is showing signs of accelerating efforts to shore up the euro zone banking sector and limit the damage from the region’s spreading sovereign debt crisis, but the cost it would have to pay could pose risks to the single currency and growth.The region’s financial turmoil took a toll on bank earnings, as reduced demand for securities underwriting and acquisition advice eroded earnings of JPMorgan Chase & Co. (JPM.N), the second largest U.S. lender the first major bank to post third quarter results.Downgrades of sovereign ratings continued, with Standard and Poor’s cutting the long-term credit rating of Spain by one notch on Friday.The euro eased 0.2 percent after S&P downgraded Spain, but it still remained on track for the biggest weekly rally since January.The European Central Bank said on Thursday that forcing private bondholders to accept losses on euro zone sovereign debt could damage the reputation of the euro, hurt the bloc’s banks and encourage volatility on foreign exchange markets.The ECB’s warnings made no specific reference to the debate on increasing previously agreed plans for a 21 percent writedown for banks holding Greek debt.In its October monthly bulletin, the ECB said downside risks relate especially to financial market turmoil.Sovereign debt woes have put European government bond yields under pressure, with the ECB having to step into the secondary market to buy after an Italian debt auction on Thursday to cap rising yields.In Asian credit markets, which have reflected the strain of waning confidence in the financial system, spreads on the iTraxx Asia ex-Japan investment grade index widened again by about 8 points early on Friday, after narrowing sharply the day before by about 17 points.As investors sought relative safety, prices of U.S. Treasury debt added slight gains in Tokyo Friday, with the benchmark 10-year note up 2/32 to yield 2.1745 percent, compared to 2.1798 percent late in New York on Thursday.
Agreement between Saab, Pangda no longer valid -Pangda chairman
Pang added that the Chinese side has not yet submitted a
proposal to the Chinese government regarding the Saab deal.
UPDATE 1-US FTC weakens proposals for food ads to children
* Ads to general audiences exempted* Ads to children 2 to 11 broadly limitedWASHINGTON, Oct 11 (Reuters) - A government regulator that
is part of a working group concerned about junk food ads aimed
at children will announce on Wednesday it is backing off some
proposals for voluntary food marketing guidelines.The interagency working group (IWG), made up of the Federal
Trade Commission, Centers for Disease Control and Prevention,
Food and Drug Administration, and the U.S. Department of
Agriculture, said in April companies should voluntarily end all
food advertising to children unless they were promoting healthy
fare, such as whole grains, fresh fruits or vegetables.Under that proposal, salty, fatty or very sweet foods or
foods with trans fats would no longer be advertised to children
aged 17 or under.But David Vladeck, head of the FTC’s Bureau of Consumer
Protection, is expected to testify to a congressional committee
on Wednesday that the IWG made major changes in its proposals.The agency’s apparent change of heart comes amid fierce
opposition to any attempts at advertising curbs by the
deep-pocketed food, beverage and restaurant industries, which
are under increasing scrutiny for their contribution to
fast-rising U.S. childhood obesity rates.Among the most dramatic changes is FTC’s decision to exempt
older children from the guidelines.”FTC staff has determined that, with the exception of
certain in-school marketing activities, it is not necessary to
encompass adolescents ages 12 to 17 within the scope of the
covered marketing,” according to Vladeck’s written testimony,
which was available on the House Energy and Commerce
Committee’s website prior to the hearing.In the testimony, the FTC excluded advertising aimed at a
general audience and advertising that was part of charitable or
community events.It also said it would not recommend banning clowns and
cartoon characters — think Ronald McDonald and SpongeBob
SquarePants — used to advertise unhealthy foods.Advertisers, who also are lobbying against the proposals,
welcomed the changes, but said industry should be left to
regulate itself.”I think the best thing that they can do is to withdraw the
proposal and endorse the (industry-supported) Children’s Food
and Beverage Advertising Initiative,” said Dan Jaffe, vice
president of the Association of National Advertisers.Jaffe was referring to an effort that sets voluntary
standards such as barring added sugars in juices and limiting
flavored milk to 24 grams of sugar. Its participants include
McDonald’s Inc , General Mills Inc and PepsiCo
Inc .”We don’t see why the government really needs to step into
this area,” Jaffe said.DAVID VS GOLIATHMedia companies, restaurants, packaged food makers and
beverage sellers formed the Sensible Food Policy Coalition to
fight the IWG recommendations. Those companies wield far more
political influence in Washington than the anti-obesity groups
that are supporting curbs on advertising.Margo Wootan, director of nutrition policy at the Center
for Science in the Public Interest, said she was concerned that
Congress, which oversees the agencies in the IWG, would press
for the advertising principles to be scrapped.”The thing that worries me the most is that the Congress is
not asking for little tweaks to the standards … they’re
asking the agencies to kill the whole thing,” she said. “The
overwhelming majority of advertising to kids is for unhealthy
food, about 80 percent.”Wootan’s concerns are not unfounded.A background memo prepared for the U.S. House of
Representatives Energy and Commerce Committee indicated some
hostility to the IWG’s proposed marketing guidelines. Lawmakers
sent a letter to the agencies in September asking questions
such as what evidence there is that junk food advertisements
are linked to obesity and what the proposal would cost, in
terms of ad revenue and jobs.Representatives from the Grocery Manufacturers Association,
which represents packaged food makers, and the National
Restaurant Association each said the IWG should first study the
costs and benefits of any marketing restrictions before issuing
recommendations.The Obama administration, with its goal of containing
healthcare costs, has emphasized children’s health. First Lady
Michelle Obama’s “Let’s Move” campaign has pushed children to
eat healthier food and exercise more.Concern about obesity rates prompted the campaign. About 17
percent of U.S. children aged 2-19 are obese, according to data
on the CDC website. Nearly one in three U.S. children are
overweight and rates are rising quickly.
