Thursday August 1 Housing and Economic stories

TOP STORIES:

Spanish prime minister rejects calls to step down over scandal - (www.reuters.com) Spanish Prime Minister Mariano Rajoy on Monday rejected calls to resign over a ruling party financing scandal and said he would not allow the matter to hold back his reform plans. The political pressure mounted on Rajoy as the former treasurer of his center-right People's Party gave new testimony before a judge looking into the affair, saying he had made 90,000 euros in cash payments to Rajoy and party secretary-general Maria Dolores Cospedal in 2009 and 2010. Rajoy had so far managed to limit the impact of the scandal, which involves alleged illegal donations by construction magnates that were supposedly distributed as cash payments to party leaders in return for juicy contracts.

Citigroup Sustains $2.4 Billion First-Half Currency Hit - (www.bloomberg.com) Citigroup Inc. (C), the U.S. lender that operates in more than 160 countries, posted a $2.41 billion first-half equity deduction from currency swings, approaching analyst Charles Peabody’s forecast for a year of foreign-exchange pain. Profit growth, including a 42 percent increase in second-quarter net income, still enabled the New York-based company to boost common equity during the period. Accounting rules require banks to subtract unrealized losses on some assets from shareholder equity instead of from profit. Peabody, who leads research at Portales Partners LLC, predicted last month that a drop in the value of emerging-market currencies would cost Citigroup $5 billion to $7 billion in regulatory capital this year. The bank said at the time that it hedges against foreign-exchange losses. The capital deduction increased to $1.7 billion in the second quarter from $711 million in the first, according to figures from the company today.

Economy skids dangerously close to contraction - (www.marketwatch.com)  U.S. economic growth has again slowed sharply, skidding dangerously close in the second quarter to an outright contraction in gross domestic product. Following the releases Monday of tepid reports on retail sales and inventory accumulation, forecasters marked down their GDP expectations from 1.4% to 1.1%. It’s probable that U.S. GDP rose less than 2% for the third quarter in a row, and it’s possible that growth was less than 1% for the second quarter in the last three. It’s not news that the global growth is sluggish, and that sluggishness is weighing on U.S. manufacturers’ export growth. And we know that the federal government is cutting back its spending.

Fed Puzzle: The Massive Collapse in Money Velocity - (www.businessinsider.com) But why is the Fed still so dovish? What are they worried about? Here's an interesting twist: Few people are talking about the complete collapse in money velocity, which is now at a five-decade low. Money velocity is one of those key metrics on the Fed dashboard. If the trillions in Fed stimulus were really working its way into the economy or "Main St." as was designed, you would see an increase in rate that money moves through the economic system with lending, monetary transactions, and economic activity -- the measure known as Money Velocity. When economic activity is high and at risk of overheating, such is in the late 1990s, the velocity of money is high, reflecting the fact that money is changing hands in transactions and banking activity. In fact, the opposite is now happening. As witnessed by chart above, money velocity, as measured by the M1 and M2 measures, has collapsed. This may reflect the economicc malaise that things are not as good as the financial markets appear to be telling us.

Egypt's Woes Are Economic - (www.atimes.com) It doesn't matter who sits in the Presidential Palace if the country runs out of bread. Tiny Qatar had already expended a third of its foreign exchange reserves during the past year in loans to Egypt, which may explain why the eccentric emir was replaced in late June by his son. Only Saudi Arabia with its $630 billion of cash reserves has the wherewithal to bridge Egypt's $20 billion a year cash gap. With the country's energy supplies nearly exhausted and just two months' supply of imported wheat on hand, the victor in Cairo will be the Saudi party.

OTHER STORIES:

China Ships Pass Via Strait North of Japan as Tensions Run High - (www.bloomberg.com)

India Inflation Reaches Three-Month High as Rupee Fans Costs - (www.bloomberg.com)
China June Home Sales Rise 24% as Buyers Defy Property Curbs - (www.bloomberg.com)

China Growth Slows to 7.5% as 2013 Target Under Threat: Economy - (www.bloomberg.com)

China economic slowdown seen deepening as Beijing pushes reform - (www.reuters.com)

Four Glaxo China Executives Held in Criminal Investigation - (www.bloomberg.com)

JPMorgan and Wells Fargo Feel First Chill of Rising Interest Rates - (www.nytimes.com)

Analysis: Banks face profit lull as mortgage boom fizzles - (www.reuters.com)