Trade between China and Brazil is expected to grow 30-40 percent in 2011.  Trade between the two countries has grown exponentially since 2000.  In 2010, bilateral trade was measured at close to $60 billion. Brazil has a trade surplus with China at $5.1 billion and 68 percent of exports are in iron ore and soy. On the other side, most of China’s exports to Brazil are value-added products.

Trade data shows China’s economy is slowing down.  China’s imports increased 19.3 percent in June from the same month a year earlier. However, the annual increase in May was 28.4 percent. Weaker imports point to slowing domestic demand which is a sign of a slowing economy. Industrial activity is also falling as demand and imports for key commodities decreased as well. Some analysts are concerned that Beijing could trigger a hard landing of its economy with its tightening policy.

China’s foreign reserves climb by $152 billion.  There was a large increase in China’s reserves in Q2.  Reserves show how much the central bank is intervening in the currency market. This increases the inflationary pressure on the yuan and highlights the risks of Beijing keeping the yuan undervalued. Additionally, money supply growth increased by 15.9 percent —  which was above forecasts — in June despite the monetary tightening.

U.S. trade deficit increased to its highest level in three years in May.  The deficit increase was driven by an increase in oil imports. The trade deficit grew $50.5 billion in May, a 15.1 percent increase, compared to April’s $43.6 bn increase. The deficit with China increased 16 percent, $25 billion. Overall imports increased 2.6 percent $225.1 billion, being driven by increases for industrial supplies and materials, capital goods and food, feeds and beverages. Exports declined 0.5 percent, $174.9 billion, due to decreased demand for U.S. goods abroad. However, service exports increased in May and were driven by business, professional, technical, insurance, and financial services.

Eight of 90 banks fail European stress test.  Two Greek, five Spanish, and one Austrian bank failed the European Banking Authority's stress tests. Several banks in Germany, Portugal and Spain passed the stress test by only a small margin. However, the test did not ask how the banks would survive a debt default from Greece or any other country. Also, some criticize the tests as being too easy in order to allow a higher passing rate.

Global demand for U.S. assets increases but remains below expectations.  Global demand for U.S. stocks, bonds and other financial assets rose in May from a month earlier. Net buying of long-term equities, notes and bonds fell in May from April, however, short-term securities increased. China increased its holdings of U.S. treasuries by $7.3 billion. The dollar continues to provide safety from the economic crisis in Europe despite the debt ceiling debate. Lastly, foreigners also became net sellers of U.S. securities for the first time in 11 months.

California’s politicians support building a transport hub for flower growers.  State senators and half the congressional delegation back a plan for a $15 million project to build a transport hub to counter Colombian competition.  Estimates say the hub could reduce growers’ costs by 20-40 percent.  This would greatly help California growers with trade logistics and distribution.

EU leaders approve plan for second Greek bail-out.  The new plan would involve private creditors to share part of the burden which would lead to a selective default, the first for any eurozone country. The plan would only limit the private investor rollover to Greece and not any other country. This decision was made to prevent financial contagion to Ireland, Italy, Portugal, and Spain. Greek banks have been using government bonds as collateral for European Central Banks loans to keep them afloat. If government bonds default then the ECB can no longer accept them and the banks are insolvent. In addition, the new deal lowers interest rates on rescue funds for Greece, Ireland, and Portugal to 3.5 percent and extends the loans’ repayments schedule.

Eurozone economic growth slows sharply in July.  According to the most recent survey of the purchasing managers index (PMI) economic growth in the eurozone was negligible in July. The PMI fell to 50.8 from June’s 53.3. A reading below 50 means the economy is contracting, thus, the region is hovering just above negative growth. With the selective default on Greece’s debt, it is unsure if the next few months’ readings will be above 50. The banks of France and Germany, the strongest economies in the eurozone, have the most exposure to Greek debt. Depending on how big the losses are for them, a decrease in these two countries' PMI will have a bigger effect on next month’s measure.