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CCTV Script 08/07/16

– This is the script of CNBC's news report for China's CCTV on July 8, Friday.

Welcome to CNBC Business Daily, I'm Qian Chen.

Britain's vote to leave the EU could be significantly negative for the euro zone, dampening a growth outlook that is already facing headwinds, the European Central Bank said in the minutes of its June 2 meeting, held before the British referendum.

The policymakers concluded that growth was being hurt by a weak external environment, particularly in emerging markets, and continued deleveraging by euro zone companies, and that risks remained tilted to the downside, requiring heightened attention.

Still, taking a cautious tone much like the U.S. Federal Reserve a day earlier, the ECB said time would be needed to see the full effect of its already unveiled but not yet implemented policy easing measures, particularly its corporate bond buys and a fresh round of cheap loans.

In the minutes of its own June meeting, the Fed said it would keep interest rates firmly on hold until it got a handle on the consequences of Britain's vote to leave the EU.

The ECB's minutes said that if Britain voted "Leave", "there could be significant, although difficult to anticipate, negative spillovers to the euro area via a number of channels, including trade and the financial markets".

The result of the June 23 referendum sent some markets into tailspin, boosting the euro - a negative for the ECB - but also lowering many sovereign yields, a positive for monetary policy.

ECB President Mario Draghi has said Britain's departure will lower euro zone growth by up to half a percentage point in total over the next three years.

Repeating an ECB pledge to take action if necessary, the policymakers agreed the bank would act with all tools available within its mandate if the inflation outlook required.

For the ECB, one of the most pressing issues may be the investor flight to top-rated government debt seen since the referendum, which reduces the availability of bonds to purchase as part of its 1.74 trillion euro quantitative easing scheme.

Nearly a third of euro zone government bonds are no longer eligible for the asset buying scheme because they yield less than the bank's minus 0.4 percent deposit rate, according to Tradeweb data on Thursday.

The ECB said a remark had been made at the June meeting that markets see a future challenge in sourcing sufficient volumes of debt to buy, possibly leading to increased price volatility.

Although the ECB can substitute assets if it cannot buy enough government debt, investors remain closely tied to specific market segments, so the actual composition of purchases still matters, the ECB added.

Some analysts predict the bank will not have enough German, Irish and Portuguese bonds to buy due to its self-imposed limits, forcing the ECB to tweak some of its rules if it wants to maintain monthly purchases at 80 billion euros per month until March, when the scheme is due to run out.

Any extension of the purchase program, expected by many analysts and investors, would almost certainly require changes either in the self-imposed limits or the types of assets the bank can buy.

CNBC's Qian Chen, reporting from Singapore.


Welcome to CNBC Business Daily, I'm Qian Chen.

Gold just posted its longest weekly winning streak since July 2011, but if investors missed out on the recent rally, fear not. One trader says the commodity has "unlimited upside," and investors have the Federal Reserve to thank for it.

On CNBC's "Futures Now" this week, Tom Colvin said that gold will remain in a bull market that will only come to an end "when central banks take their hands out of the cookie jar." The Federal Reserve is unlikely to hike rates in the foreseeable future, despite a blockbuster June employment report on Friday.

For Phillip Streible, senior market strategist at RJO Futures, the gold volatility reflects a major tug of war underway in the market.

"Under normal circumstance we should have seen gold initially fall $20 and then grind lower throughout the rest of the trading session, but these are different times," Streible wrote to CNBC on Friday. "Regardless of how strong the number is, the Fed will remain handcuffed to not raising rates for the rest of the year."

In other words, even a positive jobs report does not appear to make the Fed substantially more likely to raise rates. Hikes in rates are the great fear of gold bulls, as they tend to strengthen the dollar and reduce the chances of inflation, both of which are bad news for the precious metal.

"The year-to-date rally in gold has been nothing short of spectacular, benefiting from what we have seen as a 'confused Fed' or a Fed lacking action," the senior vice president of global institutional sales at Ambrosino Brothers explained.

Gold prices have rallied 28 percent in 2016, hitting a two year high earlier this week. Even as the yellow metal has pulled back from those highs in the last two sessions, Colvin expects these dips to arise as buying opportunities for investors.

This week, Bank of America-Merrill Lynch forecast that gold was building up a full head of steam that could take it to $1,500 per ounce. Colvin also has bullish expectations for bullion. His near-term target for the precious metal is $1,400, roughly $50 above where it's currently trading. Gold has not been above that level in three years.

Furthermore, Colvin says a "top heavy" equity market-the S&P 500 is within a hair of its all-time high-should continue to invite investors to buy gold as a hedge.

CNBC's Qian Chen, reporting from Singapore.

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