Week of August 19, 2012 thru August 25, 2012

China House Prices Improve More, Highlighting Policy Quandry

BEIJING (MNI) - July house price data highlighted an apparent quandry faced by Chinese policy-makers as more signs of improvement last month suggested that the housing market is one of the few parts of the economy that is responding to monetary easing.

Chinese house prices rose last month on a sequential basis for a second straight month, government data released Saturday showed, providing fresh evidence of a recovery in the market following interest rate cuts in June and July.

Nationwide, prices rose 0.15% in July, according to a floor-space weighted average of prices in the 35 largest cities calculated by MNI, following June's 0.13% increase, which had been the first rise since June 2011.

UK TSC Report Downplays BOE Tucker's Role in Libor Scandal

-UK TSC: Barclays didn't need nod, wink from BOE to rig Libor -UK Tsy Says Libor Manipulation Points To Culture Irresponsibility -UK Tsy: Govt Aims To Mend Banking Culture As Quickly As Poss

LONDON (MNI) - The Treasury Select Committee's preliminary report into Barclays' Libor rigging has downplayed the importance of Bank of England Deputy Governor Paul Tucker's role in the scandal.

The report's only sharp criticism of Tucker relates to his failure to ensure there was a note of his now infamous telephone conversation about Libor with ex-Barclays Chief Executive Officer Bob Diamond. The TSC even suggests that the importance of the Tucker/Diamond call may have been hyped to distract from the real scandal of Libor rigging.

US News Events Calendar

--Meetings & Events of Interest to Subscribers



21-Aug 1245/0845 Atlanta Federal Reserve Bank Pres. Dennis Lockhart speaks to the Latin American Chamber of Commerce and World Affairs Council, in Atlanta, and after will answer questions from the audience and the media. http://laccgeorgia.org/content/index.php

22-Aug 0330/2330 Chicago Federal Reserve President Charles Evans speaks at a press briefing in Beijing.

27-Aug 1615/1215 Cleveland Federal Reserve Bank Pres.

TheFXSpot: The Risk Pendulum Swings Toward Neutral, For Now

NEW YORK, Aug 17 (MNI) - The final weeks of summer have brought a wave of repositioning as previously panicked global investors began to pare back the safe-haven trades put on in the past few months.

UPDATE:US Tsy Freezes Fannie/Fred; To Collect All Earnings

--Updating 11:39 ET Story With Additional Quotes, Details

WASHINGTON (MNI) - The Treasury Department Friday announced it is freezing the size of Fannie Mae and Freddie Mac and from now on will collect every dollar of their profits while accelerating the shrinkage of their retained portfolios.

Fannie and Freddie "will not be allowed to retain profits, rebuild capital and return to their prior form," Treasury said.

Although described by the Department as expediting the wind-down of the government sponsored enterprises, the net effect of the latest changes may be to increase the chance of their survival in their current state, but with much smaller investment portfolios, as reform fervor wanes, some analysts said.

Talk From The Trenches: Tsys, MBS Finally Find Some Footing

NEW YORK, Aug 17 (MNI) - After a very rough week, the Treasury market was remarkably stable, and even the agency mortgage-backed securities market found some calm.

After trading lower all week in fits and starts, the 10-year Treasury note found its footing. It hovered around 1.80% most

FXWRAP: Dollar Notches Slight Gains To Round Out Week

NEW YORK, Aug 17 (MNI) - Dollar was able to notch small gains vs. the euro and the yen Friday, the greenback enjoying a lift on the back of slightly better-than-expected U.S. economic data.

Euro-dollar was changing hands at $1.2325 in quiet dealings ahead of the weekend, the single currency a tad below its early $1.2356 level of the day but about the middle of the day's $1.2288/1.2361 U.S. hours range.

Dollar-yen meantime was trading at Y79.54 in afternoon dealings, within a whisker of its Y79.58 session high after beginning the day at Y79.38, its low of the day.

Analysis: Someday a Better Congress? Or Something Different?

WASHINGTON (MNI) - This week's Gallup Poll update which showed the approval rating of Congress slipping down to 10% -- matching the record low -- has underlined a question increasingly being raised about whether there are alternatives to some important but faltering mechanisms of the national legislature.

Gallup's series of surveys on the performance of Congress is the gold standard on public opinions about Congress, having consistently asked the same questions since early 1974 on 230 different occasions. Congressional approval ratings have at times soared, such as after the 9/11 attack. Yet only since 2007 have the ratings been consistently at the bottom of the range.

Next Wk/US: FOMC Minutes, Durables, New/Existing Home Sales

--Correcting Preview Published 13:49 ET, Fixing Day for FOMC Minutes

WASHINGTON (MNI) - The week ahead features housing sales data, along with minutes of the last meeting of the Federal Open Market Committee.

July existing home sales and new home sales, to be released Wednesday at 10:00 a.m. ET and Thursday at 10:00 a.m. ET, respectively, are both expected to show modest increases over the month of July.

Home sales have been somewhat inconsistent over the past few months, even as both the National Association of Home Builders' confidence survey and permit applications for housing construction have continued to improve.

Update: UK Highlights of Market News' Forecast Surveys

London, Aug 17 (MNI) - The following are highlights of forecasts for upcoming U.K. economic indicators and events.


Tuesday, Aug 21

July Public Sector Finances

Prior Median

0830/0430 UK Jul PSNB (stg bln) 12.1 0830/0430 UK Jul PSNB-X (stg bln) 14.4 -2.0 0830/0430 UK Jul CGNCR (stg bln) 21.6

In the first three months of the fiscal year the UK public finances have deteriorated.