Chinese Premier Wen Jiabao is putting renewed emphasis on investment to sustain the country's growth amid worrying signs for the second quarter and in the jobs market. But a good deal of the effort apparently will be directed toward big state-owned companies. "Public investment will likely go up in coming months," said Zhang Zhiwei, chief China economist at Nomura Holdings, noting that this is probably "the only effective way to push up growth in the short term."

Rise in wholesale inventories reflects cooling U.S. economy

Even though oil inventories fell sharply, overall U.S. wholesale inventories were up a bit in May, echoing other indications of a cooling economy. As if to confirm that diagnosis, shipments for the U.S. box-making industry fell 0.6% in May on an average-week basis, the second consecutive month of decline. 

U.S. trade deficit shrinks as exports to China, Europe grow

Stronger exports to China and Europe and lower oil prices helped narrow the U.S. trade gap by 3.8% in May. Exports for the month were up 0.2% but, given the unresolved crisis in the eurozone, this is unlikely to be sustained. "Exports are holding up, but as we go forward we are going to see pretty weak numbers given the slowdown abroad," said Jay Bryson of Wells Fargo Securities. 

Fitch retains negative outlook for AAA-rated U.S.

The U.S. maintains its AAA rating by Fitch Ratings, but the outlook remains negative as well, with the agency citing Washington's deadlock over deficit reduction. "The uncertainty over tax and spending policies associated with the so-called 'fiscal cliff' weighs on the near-term economic outlook," Fitch said. 

Spain announces 65 billion-euro austerity package

Facing pressure from its eurozone partners and an increasingly restive public, Spain unveiled 65 billion euros' worth of tax increases and budget cuts. As striking miners marched in Madrid, Prime Minister Mariano Rajoy announced the austerity package, telling parliament that "these measures are not pleasant, but they are necessary." 

Diamond offers to return for more testimony on Libor, Barclays

Former Barclays CEO Bob Diamond would like to testify again before Parliament in the U.K. to deny claims that he was misleading in previous testimony over Libor manipulation. More hearings on the matter are set for next week, with Bank of England Governor Mervyn King and Deputy Governor Paul Tucker among those on the schedule. 

Market Activities
INTERNATIONAL MARKETS OVERVIEW

The focus in the U.S. stock market Wednesday was the minutes from the Federal Reserve Board's June meeting, in which it was indicated that more stimulus might be warranted, but only if the economy turns for the worse. The news left the key S&P 500 unchanged, but the Dow Jones industrials and Nasdaq both declined. Stocks in Europe were mixed for the day. Here is a continuously updated listed of global stock indexes. 

Economic Trends & Outlook
China's purchases bolster gold reserves

In a sign that mainland China is beefing up its gold reserves, the government has bought 315 tons of gold from Hong Kong this year through May. According to a Bloomberg report, China's gold imports from Hong Kong rose more than sixfold in the first quarter alone as gold again found popular demand as an investment tool. 

Australian rate cuts begin to buoy consumer outlook

Australian consumer sentiment remains narrowly in negative territory, according to a July reading, though recent interest rate cuts have helped. "Finally, we have some evidence that the Reserve Bank's policy of cutting the official cash rate by 125 basis points between November last year and June this year is starting to gain more positive traction with households," said Westpac chief economist Bill Evans. "However, this result is far from convincing and should not be interpreted that we can expect confidence to steadily return to more normal levels over the months ahead."

China's share of Taiwan exports declines, easing reliance fears

Fears that Taiwan may be growing too reliant on mainland China and Hong Kong for exports were eased somewhat by first-half figures that show 38.1% of Taiwan exports going across the strait, the lowest share in several years. Officials traced the lower figure to the impact of the European debt crisis on China's economy. 

Tax boost is targeted as Japan's Ozawa launches new party

Vowing to thwart plans to double Japan's consumption tax, Ichiro Ozawa introduced his new party, the latest threat to Yoshihiko Noda as prime minister. "Our first goal is to overturn the tax hike bill," Ozawa said as he unveiled the People's Livelihoods First party, which launches as the third-largest in parliament's lower house. 

Analysts tone down government projections for Philippine economy

Countering Philippine government projections of steadily rising growth rates over the next three years, possibly hitting 8% by 2015, analysts say the prospects are good but not that bright. A more realistic outlook is 6% annual growth or slightly higher for the next five years, said DBS Bank economist Eugene Leow. Others noted that growth rates would depend on reducing domestic corruption and improving investment rules as well as the international economic climate, which remains uncertain.

Capital Markets & Financial Products
Foreign hedge funds get clearance to find clients in China

Foreign hedge funds have been cleared by Beijing to do business with wealthy Chinese for investments abroad, people in the industry say. 

Foreign direct investment in China eases

Foreign direct investment in China was down 1.9% in the first five months of the year from the year-earlier period, according to a report by the U.N. Conference on Trade and Development. The report noted difficulties in finding loose investment funds in a global economic climate constrained by economic uncertainty. 

Traders seek safety in rapidly growing South Korean bond market

Daily volume in South Korea's bond market has nearly doubled since the beginning of the year as sovereign bonds win the attention of traders amid a flight to safety in uncertain times. The gains come at the expense of stocks, with capitalization of the Kospi market declining by 100 trillion won over the past two months. 

Standard Chartered advises less Taiwan equity exposure

Investors should reduce their exposure to Taiwanese equities while the world works through its current economic difficulties, advises Standard Chartered Bank. "We see a muddle-through scenario as likely to continue in the coming months and possibly years. ... Data around the world has been weaker than expected," Steve Brice, chief investment strategist at Standard Chartered, said in Taipei.

Mumbai exchange rises

Mumbai's MCX Stock Exchange has been cleared by regulators to trade equity and stock derivatives, making it India's third full stock exchange. The Mumbai exchange, also known as MCX-SX, currently trades only in currency futures. 

People & Personalities
AlpInvest to focus on Asia from Hong Kong base

AlpInvest Partners of the Netherlands plans to allocate 10% to 20% of its 1 billion euros in annual second private-equity investments to Asia and other emerging markets through its new secondary-investments office in Hong Kong. Neal Costello from AlpInvest's New York office will run the Hong Kong operation, which is soon to be joined by Nicole Ying Su from the secondaries team in Amsterdam. 

Banking-job cuts appear likely across Asia

Persistent global economic woes probably mean further reductions in the ranks of bankers across Asia, joining recent job cuts by Credit Suisse, Morgan Stanley, Deutsche Bank and Goldman Sachs.