Evening Headlines
Bloomberg:
- Euro Can Bear Fewer Members as Czech Leader Calls Greeks Victims. The exit of one or more member states from the euro won’t destroy the monetary union or the project of European integration, Czech President Vaclav Klaus said. And a Greek departure from the currency would be a “victory” for that country, which has been a victim of the monetary system, Klaus said yesterday in an interview at Bloomberg’s headquarters in New York. The Czech Republic, which pledged to adopt the euro as part of its agreement to join the European Union in 2004, is under no official deadline to do so and the question of joining the common currency is a “non-issue” in the country, said Klaus, whose second term as president expires in March. “I don’t think the euro as a currency disappears,” Klaus, 71, said. “The issue is whether all of the 17 countries and potentially a few others should be or will be in this system or not.”
- Gilmore Says Irish Debt Deal Won’t Unravel. Eamon Gilmore, the Irish deputy prime minister, said an accord that paved the way to cut Ireland’s legacy bank debt won’t unravel, seeking to calm investor concern that German-led opposition could derail the agreement. Irish bonds slumped yesterday after finance chiefs from Germany, the Netherlands and Finland indicated a retreat from the June agreement to allow the euro-area bailout fund to recapitalize banks. Their statement on Sept. 25 excluded “legacy assets” from the region’s rescue facility’s responsibility.
- Hollande Sruggles to Match Sarkozy Budget-Gap Wins: Euro Credit. Plugging a budget hole of more than 30 billion euros next year against a backdrop of an economy that hasn't grown in three quarters and joblessness that's at a 13-year high will be a tall order, investors such as Dagmar Dvorak at Baring Asset Management say. Failure to do so may drive money away from French debt.
- GM(GM)-Peugeot Discussion Said to Slow While Economy Worsens. General Motors Co. (GM) and PSA Peugeot Citroen’s efforts to deepen their alliance have slowed recently amid a worsening European auto market and complicated regulatory review, people familiar with the matter said. The companies have already missed a June 30 deadline on the parts-buying plan. The automakers also aimed to announce as soon as this week at the Paris Motor Show more details on plans to jointly build four model lines using common underpinnings and to combine purchasing efforts, said the people, who asked not to be identified discussing internal negotiations.
- Japan Won’t Compromise With China on Claim to Islands: Noda. Prime Minister Yoshihiko Noda said Japan will never budge on its ownership over islands in the East China Sea also claimed by China, doing little to ease tensions with Asia’s top economic power. While Japan isn’t seeking a military confrontation with China and wants to keep talking “calmly,” the disputed islands “are an inherent part of our territory in light of history and also under international law,” Noda told reporters in New York yesterday. “There can’t be any compromise that would be a step back from this basic position.” Tensions over the islands, known as Diaoyu in Chinese and Senkaku in Japanese, spilled over to an annual gathering of world leaders at the United Nations. The foreign ministers of China and Japan held talks on Sept. 25 in New York that failed to ease a feud damaging a $340 billion trade relationship. The conflict has sparked the worst diplomatic crisis between the two nations since 2005, when thousands of Chinese protested Japanese textbooks that downplayed wartime atrocities. Chinese Foreign Minister Yang Jiechi told Japanese counterpart Koichiro Gemba that China “will not tolerate” Japan’s claims, according to a Chinese Foreign Ministry statement. Gemba described the atmosphere at the meeting as “severe” and emphasized Japan’s “maximum restraint” over the dispute, Kyodo News reported.
- Chinese Industrial Profits Fall 6.2% in Fifth Consecutive Drop. Chinese industrial companies’ profits dropped for a fifth month in August, a government report showed, adding to signs the nation’s economic slowdown is extending into a seventh quarter. Net income fell 6.2 percent from a year earlier to 381.2 billion yuan ($60.4 billion), the National Bureau of Statistics said today in Beijing. That compares with a 5.4 percent decline in July and a 1.7 percent slide in June. “Profits are expected to continue to fall as there is a considerable build-up of excess capacity in the economy, and businesses have very little pricing power and in some cases are looking to unload inventory,” Patrick Bennett, a senior strategist at Canadian Imperial Bank of Commerce in Hong Kong, said before the release. The economic slowdown may persist into next year on a lack of funding for investment projects, Song Guoqing, a central bank adviser, said last week. Earnings are declining amid falling prices, higher costs and slower demand. More small companies are halting all or half of their production due to narrowing profit margins, Miao Wei, minister of industry and information technology, said in remarks posted on the agency’s website on Sept. 24. Industrial companies’ profits in the first eight months of the year declined 3.1 percent to 3.06 trillion yuan, according to today’s statement. That compares with a 2.7 percent drop in the first seven months and a 28.2 percent gain in the same period in 2011. Revenue for the companies in the first eight months increased 10.2 percent from a year earlier to 57.6 trillion yuan, today’s statistics bureau report showed. Sales rose 29.9 percent in the January-August period of 2011.
- Foxconn Workers Labor Under Guard After Riot Shuts Plant. Security teams wearing riot helmets and wielding plastic shields marched around a Foxconn Technology Group factory in northern China in a sign that tensions remain high after a fight between 2,000 workers halted production. Foxconn’s complex, home to 79,000 workers in Taiyuan, Shanxi province, still shows damage caused by a Sept. 23 clash in which a dormitory fight escalated into a riot finally quelled by hundreds of security guards and police. More than 40 people were hospitalized in the melee that left shattered windows and damaged parked cars across the campus.
- China Unlikely to Introduce Infrastructure Stimulus: Baosteel. China is unlikely to introduce any large stimulus plans on infrastructure investment in the near term because economic development is already "unbalanced," Zhang Dianbo, president of Raw Materials Procurement Center and the assistant president of Baoshan Iron & Steel Co., told reporters at an iron ore conference in Dalian today. China's stimulus on roads, rail and ports in September won't give a big boost to steel demand, Zhang said.
- Cosco Sees Extended Slump as Shipper Yields Surge: China Credit. Bonds of China's two biggest shippers are yielding the most in at least nine months as a slump in world trade drags freight rates to levels last seen in the 2008 global financial crisis.
- Spanish Scare Roils Europe Markets. Madrid's Borrowing Costs Rise as Investors Fear It Will Delay Bailout Request; Exchanges Fall as 'Draghi Effect' Wanes. Spain's borrowing costs rose and its stock market fell sharply on the eve of Madrid's announcement of new austerity measures, putting the shaky economy again at the center of Europe's race to preserve its currency union. Spain's benchmark IBEX-35 index fell 3.9% and other European exchanges posted losses as well. The government's 10-year borrowing costs rose nearly one-third of a percentage point, to above 6%, placing renewed pressure on Madrid to find a way out of its debt crisis and appearing to crimp its prospects for avoiding a bailout from its euro-zone partners.
- It's Always the Economy, Stupid. Barack Obama wants to talk about his windmill economy. Next week's debate should discuss the one we've got now.
- Obama's Biggest Opponent Is the Truth. Voters expect Mitt Romney to blow the whistle in the debates.
- Spain’s chicken game won’t end happily. Commentary: Politicians, markets assume other will swerve first.
- Chicago Fed Asks "What Are Asset Bubbles" As Its President Calls For Even More QE.
- Intrade Implies At Least 65% Odds Of Major Fiscal Contraction Post-Election.
- FX Concepts' John Taylor Will Always Be A EUR Bear. (video)
- Europe's Got A New Crisis, And This Time The ECB Can't Solve It.
- Report: Refs Reach Deal With NFL, Will Be On Field Thursday Night.
- There Are A Few Developments In Markets We'd Like You To Take A Look At.
- Why A Bar Owner Yelling At The Cops Is The Defining Image Of Spain's New Crisis.
- And Now China Has Angered Australia.
NY Times:
Reuters: - Spanish Ire, Symbolized by a Carrot. As Spanish domestic politics threaten to spin beyond the control of the central government, they are also making it harder for Prime Minister Mariano Rajoy to meet Spain’s financial obligations to the rest of the euro zone.
- Europe's dimming prospects in spotlight at Paris auto show. As executives bemoan the worsening outlook for the European car market, they hope the no-frills small cars on display at the Paris auto show will lure customers in austerity-hit markets and premium limousines will attract buyers in China. Even the carmakers that had until recently been thriving, poaching market share from ailing competitors, are now feeling the pinch as austerity measures, high unemployment and fears about the future keep customers away from showrooms. South Korean automaker Hyundai Motor Co on Wednesday said it was deferring its sales and market share target by at least a year due to the dismal outlook that is now starting to worry the stronger carmakers as well as the weak.
- H.B. Fuller(FUL) cuts forecast for full-year revenue. H.B. Fuller Co's third-quarter profit met analysts' estimates, but the specialty chemicals maker cut its full-year revenue outlook, citing a slight slow down in the global market for industrial adhesives. The company cut its full-year revenue forecast to between $1.88 billion and $1.90 billion from between $1.93 billion and $1.98 billion.
- Spain is turning into the new Greece, and Mariano Rajoy has himself to blame. Spain has taken another confident stride to becoming the next Greece, a status long predicted for the country in some quarters.
- Not even the great economists of history can get us out of this fix. Our financial crisis is unique, and the route back to health will be painful, costly and long.
- China will continue to stabilize land prices and crack down on hoarding and speculation of land, citing an official from the Ministry of Land and Resources.
- Major shareholders of 32 companies listed on China's ChiNext have offered to extend the lockups on the holdings after they become tradable in Oct, citing statements. The move is ant attempt to help stabilize the stock market, according to the report. ChiNext tumbled -3.1% yesterday to the lowest since Feb. 2, extending a 5-day loss to 9.2%.
- None of note
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 143.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 120.0 +1.75 basis points.
- FTSE-100 futures +.03%.
- S&P 500 futures +.40%.
- NASDAQ 100 futures +.32%.
Earnings of Note
Company/Estimate
- (DFS)/1.03
- (MKC)/.76
- (ATU)/.54
- (NKE)/1.12
- (MU)/-.23
- (GPN)/.87
- (ZZ)/.03
- (AZZ)/.52
8:30 am EST
- Final 2Q GDP is estimated to rise +1.7% versus a prior estimate of a +1.7% gain.
- Final 2Q GDP Price Index is estimated to rise +1.6% versus a prior estimate of a +1.6% gain.
- Final 2Q Personal Consumption is estimated to rise +1.7% versus a prior estimate of a +1.7% gain.
- Final 2Q Core PCE is estimated to rise +1.8% versus a prior estimate of a +1.8% gain.
- Durable Goods Orders for August are estimated to fall -5.0% versus a +4.2% gain in July.
- Durables Ex Transports for August are estimated to rise +.2% versus a -.4% decline in July.
- Cap Goods Orders Non-Defense Ex Air for August are estimated to rise +.7% versus a -3.4% decline in July.
- Initial Jobless Claims are estimated to fall to 375K versus 382K the prior week.
- Continuing Claims are estimated to rise to 3288K versus 3272K prior.
- Pending Home Sales for August are estimated to rise +.3% versus a +2.4% gain in July.
- Kansas City Fed Manufacturing for September is estimated to fall to 5 versus a reading of 8 in August.
- None of note
- The Spanish retail sales report, Germany unemployment rate, Italy 10Y Bond Auction, UK GDP, Spanish 2013 Budget Approval, Spanish bank stress tests, 7Y T-Note auction, Japan Industrial Production report, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.
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