BRICS Announce $100 Billion Reserve To Bypass Fed, Developed World Central Banks

As we suggested last night, the anti-dollar alliance among the BRICS has successfully created a so-called "mini-IMF" since the BRICS are clearly furious with the IMF as it stands currently: this is what the world's developing nations just said on this topic "We remain disappointed and seriously concerned with the current non-implementation of the 2010 International Monetary Fund (IMF) reforms, which negatively impacts on the IMF’s legitimacy, credibility and effectiveness."

As Putin explains, this is part of "a system of measures that would help prevent the harassment of countries that do not agree with some foreign policy decisions made by the United States and their allies." Initial capital for the BRICS Bank will be $50 Billion - paid in equal share among the 5 members (with a contingent reserve up to $100 Billion) and will see India as the first President. The BRICS Bank will be based in Shanghai and chaired by Russia. Simply put, as Sovereign Man's Simon Black warns, "when you see this happen, you’ll know it’s game over for the dollar.... I give it 2-3 years."

• BRICS MINISTERS SIGN DEVELOPMENT BANK AGREEMENT
• INITIAL SUBSCRIBED CAPITAL OF BRICS BANK IS $50 BLN: STATEMENT

A quick take on existing monetary policy.

• MONETARY POLICY MUST BE CAREFULLY CALIBRATED: BRICS STATEMENT

The punchline, however, is that using bilateral swaps, the BRICS are effectively disintermediating themselves from a Fed and other "developed world" central-bank dominated world and will provide their own funding.

We are pleased to announce the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion.This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements.... The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures. 

Incidentally, the role of the dollar in such a world is, well, nil.

For those who have forgotten who the BRICS are, aside from a droll acronym by a former Goldman banker, here is a reminder of the countries that make up 3 billion in population.

Key excerpts from the Full statement:

We remain disappointed and seriously concerned with the current non-implementation of the 2010 International Monetary Fund (IMF) reforms, which negatively impacts on the IMF’s legitimacy, credibility and effectiveness. The IMF reform process is based on high-level commitments, which already strengthened the Fund's resources and must also lead to the modernization of its governance structure so as to better reflect the increasing weight of EMDCs in the world economy. The Fund must remain a quota-based institution. We call on the membership of the IMF to find ways to implement the 14th General Review of Quotas without further delay. We reiterate our call on the IMF to develop options to move ahead with its reform process, with a view to ensuring increased voice and representation of EMDCs, in case the 2010 reforms are not entered into force by the end of the year. We also call on the membership of the IMF to reach a final agreement on a new quota formula together with the 15th General Review of Quotas so as not to further jeopardize the postponed deadline of January 2015.

BRICS, as well as other EMDCs, continue to face significant financing constraints to address infrastructure gaps and sustainable development needs. With this in mind, we are pleased to announce the signing of the Agreement establishing the New Development Bank (NDB), with the purpose of mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies. We appreciate the work undertaken by our Finance Ministers. Based on sound banking principles, the NDB will strengthen the cooperation among our countries and will supplement the efforts of multilateral and regional financial institutions for global development, thus contributing to our collective commitments for achieving the goal of strong, sustainable and balanced growth.

The Bank shall have an initial authorized capital of US$ 100 billion. The initial subscribed capital shall be of US$ 50 billion, equally shared among founding members. The first chair of the Board of Governors shall be from Russia. The first chair of the Board of Directors shall be from Brazil. The first President of the Bank shall be from India. The headquarters of the Bank shall be located in Shanghai. The New Development Bank Africa Regional Center shall be established in South Africa concurrently with the headquarters. We direct our Finance Ministers to work out the modalities for its operationalization.

We are pleased to announce the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion.This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements. We appreciate the work undertaken by our Finance Ministers and Central Bank Governors. The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures.

Goodbye visions of an SDR-world currency. As for the USD...

Turnover of commodity exchanges down 65% in Q1: FMC

The turnover of commodity exchanges fell sharply by 65 per cent to Rs 14.55 lakh crore in the first quarter of this fiscal due to poor volumes in most commodities, the Forward Markets Commission (FMC) said.

The turnover at these commodity bourses stood at Rs 41.45 lakh crore in the same period last year.

Much of the fall was seen in bullion followed by energy, metals and agricultural commodities, FMC data showed.

According to the FMC, the turnover from bullion fell by 73 per cent to Rs 5,23,030 crore in April-June this year, against Rs 19,38,548 crore in the same period a year ago.

Similarly, the business from futures trading in energy commodities such as crude oil declined by 70 per cent to Rs 3,18,662 crore from Rs 10,45,990 crore, while the turnover from metals dropped by 61 per cent to Rs 3,12,859 crore from Rs 7,93,213 crore in the review period.

The turnover from agriculture commodities also fell by 18.23 per cent to Rs 3,00,690 crore in April-June of this year, as against Rs 3,67,711 crore in the corresponding months of 2013-14.

Analysts attributed the falling volumes to higher transaction cost after the imposition of commodity transaction tax (CTT) and the dent in investors’ confidence in the wake of the Rs 5,600 crore-payment crisis at the commodity spot exchange NSEL.

There are five national and nine regional level bourses operating in the country.

Anti-Dollar Alliance Prepares Launch Of BRICS Bank (Brazil, Russia, India, China and South Africa)

Three months ago we discussed in detail the growing anti-dollar hegemony alliances that were building across the BRICS countries (Brazil, Russia, India, China and South Africa). Their efforts at the time, to create a structure that would serve as an alternative to the IMF and the World Bank (which are dominated by the U.S. and the EU), appear to be nearing completion. As AP reports, Brazil's President Dilma Rousseff and Russia's Vladimir Putin have discussed the creation of a development bank to promote growth across the BRICS and hope to produce an agreement on the proposed institution at this week's BRICS Summit.

As AP reports,

Brazil's President Dilma Rousseff and Russia's Vladimir Putin have discussed the creation of a development bank to promote growth in Brazil, India, China, Russia and South Africa.

Rousseff received Putin in the presidential palace in Brasilia on Monday, a day before leaders of the five emerging BRICS nations meet in the northeastern city of Fortaleza.

Rousseff told reporters the bank would top the summit's agenda, adding she hoped the event would produce an agreement on the proposed institution.

She said the five countries "are among the largest in the world and cannot content themselves in the middle of the 21st century with any kind of dependency."

Brazil and Russia also signed bilateral accords on air defense, gas and education

The leaders who will be present (not so many big fans of the US there)...

They seem serious:

• *BRICS DEVELOPMENT BANK KEY TO FOSTER GROWTH IN GROUP: BORGES
• *BRICS BANK AT 1ST TO FINANCE EXCLUSIVELY INFRASTRUCTURE:BORGES
• *RUSSIA'S PUTIN SAYS COOPERATION WITH CHINA IS GROWING
• *PUTIN SAYS RUSSIA TO PROMOTE CURRENCY SWAP WITH CHINA: XINHUA

As we concluded previously, as RBTH reports, it seems the BRICS are not slowing down efforts to create their own IMF-alternative...

The BRICS countries (Brazil, Russia, India, China and South Africa) have made significant progress in setting up structures that would serve as an alternative to the International Monetary Fund and the World Bank, which are dominated by the U.S. and the EU. A currency reserve pool, as a replacement for the IMF, and a BRICS development bank, as a replacement for the World Bank, will begin operating as soon as in 2015, Russian Ambassador at Large Vadim Lukov has said.

Brazil has already drafted a charter for the BRICS Development Bank, while Russia is drawing up intergovernmental agreements on setting the bank up, he added.

In addition, the BRICS countries have already agreed on the amount of authorized capital for the new institutions: $100 billion each. "Talks are under way on the distribution of the initial capital of $50 billion between the partners and on the location for the headquarters of the bank. Each of the BRICS countries has expressed a considerable interest in having the headquarters on its territory," Lukov said.

It is expected that contributions to the currency reserve pool will be as follows: China, $41 billion; Brazil, India, and Russia, $18 billion each; and South Africa, $5 billion. The amount of the contributions reflects the size of the countries' economies.

...

The creation of the BRICS Development Bank has a political significance too, since it allows its member states to promote their interests abroad. "It is a political move that can highlight the strengthening positions of countries whose opinion is frequently ignored by their developed American and European colleagues. The stronger this union and its positions on the world arena are, the easier it will be for its members to protect their own interests," points out Natalya Samoilova, head of research at the investment company Golden Hills-Kapital AM.

Perhaps the following sums it all up perfectly...

Economists warn the IMF's legitimacy is at stake, and they say U.S. standing abroad is being eroded.

"Eroded" indeed...

*  *  *

Read more here on the BRICS morphing into an anti-dollar alliance...

If the current trend continues, soon the dollar will be abandoned by most of the significant global economies and it will be kicked out of the global trade finance. Washington's bullying will make even former American allies choose the anti-dollar alliance instead of the existing dollar-based monetary system. The point of no return for the dollar may be much closer than it is generally thought. In fact, the greenback may have already past its point of no return on its way to irrelevance.

Just in Modi to press for equal shareholding in proposed BRICS bank TOI
India will press for equal shareholding for its five member countries in the proposed $50 billion BRICS Development Bank so that no shareholder dominates.

London zinc hits near 3-year top on supply worries

* Shanghai zinc hits highest in 17 months
* Zinc, aluminium rallies unlikely to be sustained - Citi
* Aluminium cash prices reach highest vs benchmark since 2012

London zinc prices jumped to their highest level in almost three years on Monday amid prospects of falling mine supply, while copper prices steadied after four weeks of gains.

Given a generally brightening outlook for global demand, investors have been allocating funds to commodities that are expected to be in tight supply.

Zinc prices in both London and Shanghai have jumped more than 4 percent this month, while London copper and aluminium futures have climbed by more than 2 percent over the period.

"There is a structural story that people seem to buy into on zinc because we are losing supply in closures of huge mines such as (Australia's) Century. Then you have the technical signals which are also bullish," said analyst Dominic Schnider of UBS Wealth Management in Singapore.

Century mine is the world's second largest zinc mine, and is scheduled to run dry in three years. It yielded 105,279 tonnes of zinc in the first quarter, down 31 percent from the previous quarter and 21 percent on a year ago. [ID:nL3N0DH0G6]

Zinc futures on the London Metal Exchange (LME) rose to $2,325 a tonne, the loftiest since August 2011. Prices could target $2,450 in the short to medium term, Schnider said.

Shanghai zinc ended up 0.9 percent at 16,410 yuan

($2,600) a tonne, having earlier reached 16,550 yuan a tonne - the highest since February 2013.

But uncertain demand from China, the world's top consumer of most commodities, is expected to cap gains in metal prices

"Sluggish growth in galvanised steel sheet production in China year to date ... and subdued Chinese construction do not support a bullish demand picture," Citi said in a research note.

"We expect a short-term correction and as such we forecast zinc to trade at around $2,000-2,200/t on a 3-6 month view."

Markets will be watching for China's money supply figures this week which may flag an improvement in factory activity in the coming months.

China's fiscal expenditure surged 26.1 percent in June from a year earlier to 1.65 trillion yuan ($265.84 billion), reflecting government efforts to speed up spending to shore up the economy.

China's GDP and industrial output figures on Wednesday this week will also give fresh direction.

LME copper was barely changed at $7,150 a tonne by 0723 GMT, after ending marginally higher last week. The most-traded September copper contract on the Shanghai Futures Exchange slipped by 0.2 percent to 50,670 yuan a tonne.

Reflecting improved investor appetite for copper, hedge funds and money managers raised their bullish bets on copper futures and options in the week to July 8, according to data from the Commodity Futures Trading Commission. In aluminium, prices have been driven by scant spot market supplies, which propelled cash prices to the highest against the benchmark since December 2012 on Friday .

LME aluminium was up slightly at about $1,946 per tonne, after rising for the past two weeks.

Higher cash prices will curb marginal profits for some financing deals that have locked metal away from the market, suggesting more stocks may be delivered to LME inventories.

"Producer selling appears to have capped the recent rally," Citi said. "We now see little prospect of prices now sustaining upside moves outside a $1,850-$1,950/t price range in H2."

CME Group Cutting Margins For Gold, Silver, Copper Futures

 CME Group is lowering margins for gold, silver and copper futures on the Comex division of the New York Mercantile Exchange.

The new rates will be effective as of the close of business on Monday, according to a notice from CME Group. The exchange operator said the changes were the result of “the normal review of market volatility to ensure adequate collateral coverage.”

Margins act as collateral on futures trades. CME Group also changed margins for electricity, equity-index, ethanol, natural gas futures and a number of other products.

In the case of the main 100-ounce gold-futures contract, CME Group trimmed the “initial” margin for new  speculative trades to $5,940 from $6,600. The “maintenance” margin for existing speculative trades, plus all hedge positions, was cut to $5,400 from $6,000.

For the 5,000-ounce silver contract, CME Group lowered the initial speculative margin to $8,250 from $9,075. The  margin requirement for maintenance speculative positions, plus all hedge trades, was lowered to $7,500 from $8,250.

For the Comex copper contract, the initial speculative margin was cut to $2,970 from $3,300. The margin for maintenance speculative and all hedge positions was reduced to $2,700 from $3,000.

CME Group also lowered the margins for the smaller-sized gold, silver and copper products, as well as aluminum and iron ore.

Peru set to become world’s second largest copper producer in 2016

Peru is on track to double its current copper production by 2016 and so recover the second position among the world’s largest production of the industrial metal, the Minister of Energy and Mines said.

The country’s total production will hit 2.8 million tonnes in 2016, up from 1.4 million tonnes in 2013, thanks to five major projects slated to begin operations that year

During a visit to Freeport-McMoRan Copper & Gold’s (NYSE:FCX) Cerro Verde copper complex, about 30 km southwest of Arequipa, minister Eleodoro Mayorga Alba said the country’s total production will hit 2.8 million tonnes in 2016, up from 1.4 million tonnes in 2013, thanks to five major projects slated to begin operations that year, OutletMinero (in Spanish) reported.

Freeport-McMoRan’s Cerro Verde’s $4.6 billion expansion, scheduled for completion during the first quarter of 2016, is one of those key projects, Mayorga Alba noted.

Work at Cerro Verde is 22% complete and the extended mine will start initial production in the second half of 2015, the minister added.

Another card up Peru’s sleeve is Southern Copper’s (NYSE:SCCO) controversial $1 billion Tía María mine, which is expected to begin production in March 2016.

Currently China is the second largest producer of the red metal, with an annual output of about 1.6 million tonnes per year, well below the nearly 5.8 million annual tonnes produced by Chile, the world’s leader, based on data provided by CRU Consulting.

Global copper producers —being Chile's Codelco the largest, followed by Freeport-McMoRan, Glencore (LON:GLEN) and BHP Billiton (ASX:BHP)— plan expansions of mine capacity that would add between 1.1m tonnes and 1.3m tonnes of copper per year to the market until 2016.

Such increases would be roughly equivalent to the annual output of Chile's Escondida, the world’s largest mine, which provides about 5% of the world supply.

Peru’s steady growth in recent years has been largely driven by mineral production. Last year the country injected $9.7 billion to the local economy coming from mining, jumping 14% when compared to 2012.

Authorities have said they expect to reach similar levels by the end of this year, as there is still there is plenty for everyone to get a descent piece of the resources pie. Peru holds13% of the world's copper reserves, 4% of gold, 22% of silver, 7.6% of zinc, 9% of lead and 6% of tin reserves, official figures (in Spanish) show.

A Significant Decline is Coming to The Stock Market

Last week we wrote that a trend turn is coming to stocks. Stocks immediately declined sharply. However, we believe there is a much larger decline coming and that it could start soon. Didn't it already start this past week? Maybe, maybe not. This past week's decline has several "corrective" characteristics that suggest it is not the big decline we expect to start. There could be more upside before that large sell-off begins. What we can ascertain this weekend is that a significant decline is not far away. If it started last week, a much deeper decline is on its way. If it did not start last week, it could start very soon. Here is some of the evidence why we believe a significant decline should be underway within a few weeks:

Above we see that there is a Bearish Divergence between the S&P 500 and Demand Power. The Divergence is maturing, suggesting a top is close at hand and a significant decline should begin soon.

Above we see that there is a Bearish Divergence between the NASDAQ 100 and its Demand Power Measure. The Divergence s maturing, suggesting a top is close at hand and a significant decline should begin soon.

Above we see that there is a Bearish Divergence between the S&P 500 and the NYSE 10 Day Average Advance/Decline Line Indicator. The Divergence is maturing, suggesting a top is close at hand and a significant decline should begin soon.

Above, we see similar Bearish Divergences with their 10 Day Average Advance/Decline Line Indicators and prices for the small cap Russell 2000 and also the NASDAQ 100. These divergences are maturing, suggesting a top in stocks should arrive over the next two weeks, with the start of a strong decline.

Robert McHugh