Bloomberg:
- Moody’s Sees Local Default as $21 Billion Matures: China Credit. Local-government financing vehicles need to repay a record amount of debt this year, prompting Moody’s Investors Service to warn Premier Li Keqiang may set an example by allowing China’s first onshore bond default. Some 127 billion yuan ($21 billion) of so-called LGFV notes expire in the second half, according to Everbright Securities Co., the most in its data going back to 2000 and more than double the 62.7 billion yuan that matured in the first six months. The yield premium over top-rated notes for one-year AA debt, the most common rating for LGFVs, widened to 67 basis points yesterday, the highest level since Jan. 16, Chinabond data show. The comparable gap in India is 47. “With bonds approaching maturity, the weaker ones will have some problems as cash flows that they generate are very weak,” said Christine Kuo, a Moody’s analyst in Hong Kong. “I wouldn’t rule out the possibility of the government showcasing some companies to go under.”
- China to Cut Manufacturing Capacity as Li Reshapes Economy. China ordered more than 1,400 companies in 19 industries to cut excess production capacity this year, part of efforts to shift toward slower, more-sustainable economic growth. Steel, ferroalloys, electrolytic aluminum, copper smelting, cement and paper are among areas affected, the Ministry of Industry and Information Technology said in a statement yesterday. Excess capacity must be idled by September and eliminated by year-end, the ministry said, identifying the production lines to be shut within factories. China’s extra production has helped drive down industrial-goods prices and put companies’ profits at risk, while a survey this week showed manufacturing weakening further in July. Premier Li Keqiang has pledged to curb overcapacity as part of efforts to restructure the economy as growth this year is poised for the weakest pace since 1990. “This detailed list shows the government is serious in its efforts to restructure the economy and is prepared to tolerate the necessary pain,” Zhang Zhiwei, chief China economist at Nomura Holdings Inc. (8604) in Hong Kong, wrote in an e-mailed research note late yesterday.
- Inter-Korean Talks Break Down With ‘Pushing and Shoving’. Talks between the two Koreas aimed at reopening the jointly-operated Gaeseong factory park broke down yesterday, with negotiators from both sides “pushing and shoving” and no agreement for dialogue to resume. The scuffle broke out when North Korea’s chief negotiator Pak Chol Su and about 20 officials entered a room of South Korean journalists to explain their position, according to a pool report distributed yesterday by the South’s Unification Ministry. “There was some pushing and shoving” after about 10 South Korean officials tried to break up the briefing, according to the report.
- Singapore Home Prices Climb to Record as Loan Curbs Imposed. Singapore home prices climbed to a record in the second quarter as gains in suburban housing values accelerated, prompting the government to implement new measures on property loans. The island-state’s private residential property price index rose 1 percent to 215.4 points in the three months ended June 30, extending a 0.6 percent increase in the first quarter, according to revised figures released by the Urban Redevelopment Authority today. The pace of gains in prices in the suburbs more than doubled from the previous three months.
- Rebar Set for First Weekly Loss in Eight as China Output to Gain. Steel reinforcement-bar futures in Shanghai were poised for the first weekly drop in eight on concern that a rally this month may spur more output in China. Rebar for delivery in January on the Shanghai Futures Exchange fell as much as 0.5 percent to 3,665 yuan ($598) a metric ton and was at 3,674 yuan at 11:10 a.m. The contract lost 0.5 percent this week, the first such drop since May.
- China Swaps Set for Biggest Weekly Gain in a Month as Cash Wanes. The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, climbed 12 basis points, or 0.12 percentage point, this week to 4.07 percent as of 10:48 a.m. in Shanghai, according to data compiled by Bloomberg.
- Chinese Stocks Fall, Led by Technology, Consumer Companies. Chinese stocks fell for a third day, led by technology and consumer-staples companies. Cement producers and drugmakers advanced. BOE Technology Group Co. slumped for a second day after the maker of flat-screen television panels said it planned a share sale that may be China’s largest private placement. Kweichow Moutai Co. led losses for consumer-staples producers after the industry group jumped the most in the CSI 300 Index yesterday. Anhui Conch Cement Co. rose 4 percent as BNP Paribas SA said the biggest cement producer will benefit from an order from the government to cut production capacity in 19 industries. The Shanghai Composite slipped 0.4 percent to 2,012.39 at 10:41 a.m. local time.
- Asian Stocks Fall as Topix Slides on Earnings; Gas Climbs. Asian stocks fell, with the regional benchmark index trimming a fifth weekly advance, as Japanese shares dropped amid disappointing earnings. The yen and South Korea’s won climbed, while gasoline rebounded. The MSCI Asia Pacific Index dropped 0.3 percent to 135.77 as of 11:45 a.m. in Tokyo, reducing its climb in the week to 0.6 percent. Japan’s Topix index headed for its biggest drop since mid-June as chip-testing equipment maker Advantest Corp. reported a wider-than-estimated loss.
- Russian Growth Forecasts Trimmed as Recession Risks Rise. Russia’s economy will probably grow less than previously forecast from April to September as risks mount of a recession in the world’s largest energy exporter. Gross domestic product will advance 3 percent from a year earlier in the third quarter compared with 2 percent in the second, the median of 15 estimates in a Bloomberg survey showed. That’s down from 3.1 percent and 2.1 percent in June’s poll. There’s a 30 percent chance of a recession next year, up from 20 percent a month ago, according to a survey of 13 economists.
- Gold Set for Best Weekly Run Since March on Outlook for Stimulus. Gold headed for the longest weekly rally since March as U.S. economic data backed the case for sustained monetary stimulus. Russia and Kazakhstan added bullion to reserves for a ninth month in June. Spot gold gained as much as 0.3 percent to $1,338.50 an ounce, and traded at $1,334.55 at 8:30 a.m. in Singapore. Prices are 3 percent higher this week after advancing to a one-month high of $1,348.65 on July 24.
- Senate Democrats Said to Circulate Letter Backing Yellen For Fed. A group of Senate Democrats is rallying behind Federal Reserve Board Vice Chairman Janet Yellen to succeed Chairman Ben S. Bernanke, circulating a letter to colleagues in support of her potential candidacy, according to a Senate aide. The letter has been signed by several Democrats and was originally drafted by SenatorSherrod Brown, an Ohio Democrat, said the aide, who asked for anonymity to discuss the document, which hasn’t been made public. The exact number of signers remained unknown to Senate staff, the aide said.
- White House Protects U.S. Aid to Egypt By Avoiding Talk of Coup. The Obama administration, in a move that may protect U.S. aid to Egypt, has concluded that it doesn’t have to make a formal determination on whether the ouster of President Mohamed Mursi was a coup, according to an administration official. Making such a determination, which potentially would have required cutting off aid, wouldn’t be in the U.S. national interest, said the official, who asked not to be identified. Egypt is a stabilizing force in the region, and it’s to the U.S.’s advantage to continue providing aid, the official said.
- Google(GOOG) Has Shown Another Living Room Device. Google's home-entertainment experiments extend beyond the gadget the company announced Wednesday, which turns TV sets into an extra screen for watching Web videos and other content.
- Holder Targets Texas in New Voting-Rights Push. Justice Department Wants to Scrutinize State for Potential Discrimination. The Obama administration moved to retain some oversight of the way states conduct elections after the Supreme Court invalidated part of the landmark 1965 Voting Rights Act, setting up a new fight with Republican governors.
- U.S. Eases Bite of Penalties Against Iran. White House, Seeking to Improve Ties With New Leader in Tehran, Lifts Curbs on Medical Supplies, Agricultural Products. The Treasury Department's announcement Thursday was viewed by many Iran-watchers as a gesture of good will from Washington as it seeks to restart talks with Tehran over its nuclear program once Mr. Rouhani enters office next month. However, the White House is clashing with Congress, where a bilateral group of lawmakers is seeking to tighten the sanctions, say U.S. officials and Capitol Hill staffers. Their proposed legislation would significantly toughen financial penalties on Iran by targeting the country's oil exports, ships and banks by October, in an effort to convince Tehran to halt its nuclear program.
- Deckers(DECK) Second-Quarter Loss Widens as UGG, Teva Sales Fall. Deckers Outdoor Corp.'s (DECK) second-quarter loss widened as the footwear maker recorded a decline in UGG and Teva brand sales as well as weaker margins. Shares fell 5.3% to $55.74 after hours as revenue fell short of the company's projections.
- Jindal and Walker: Unworkable ObamaCare. Opaque rules, big delays and rising costs: The chaos is mounting. Remember when President Obama famously promised that if you like your health-care plan, you'll be able to keep your health-care plan? It was a brilliantly crafted political sound bite. Turns out, the statement is untrue.
Fox News:
- EXCLUSIVE: Benghazi hero fought alongside fallen SEALs, still recovering at Walter Reed. One of the most severely wounded survivors of the Benghazi terror attack, Diplomatic Security agent David Ubben, risked his life to help save his fellow Americans, and is still being treated at Walter Reed medical center to this day, Fox News has learned. Fox News is the first news organization to make direct contact with Ubben -- who has had multiple surgeries at Walter Reed to save his right leg, which was badly wounded in the Sept. 11 attack. Fox News has also learned new details about Ubben's heroic actions on the night of the attack, including fighting alongside the former Navy SEALs who were later killed.
- China money-market funds see big outflows: Fitch. Assets under management at Chinese open-ended money-market funds dropped nearly 40% in the quarter ended June on heavy redemptions by both retail and institutional investors, according to calculations made by Fitch Ratings. The outflows were "unprecedented in the market's relatively short history," the credit ratings agency said.
- Goldman(GS) CEO on risk: The worst 'absolutely will happen'. Investors should always prepare for the most extreme risk scenario because it will happen, Goldman Sachs CEO Lloyd Blankfein told the Australian Institute of Company Directors at a breakfast briefing on Friday. Blankfein has headed up Goldman Sachs since 2006, steering it through the fallout of the global financial crisis of 2007-2008. He said the experience had taught him to accept the reality that the worst thing you can imagine will inevitably happen. "Most risk management is really just advanced contingency planning and disciplining yourself to realize that, given enough time, very low probability events not only can happen, but they absolutely will happen," said Blankfein. "The definition of infinity is that you wait long enough, everything happens," he added.
- Prosecutors seek 'any and all' SAC assets in sweeping complaint. If federal prosecutors are successful in their case against SAC Capital, the firm and its multi-billionaire founder Steve Cohen could be left virtually penniless. That is because in addition to the five-count criminal indictment against the firm unsealed today, U.S. Attorney Preet Bharara unveiled a separate civil complaint targeting "any and all assets" of SAC and its funds. The complaint does not specify the amount the government is seeking, but notes that at their peak, the firm and its funds were worth $15 billion. Forbes has listed Cohen's personal net worth at $9.3 billion as of March—virtually all of it tied to the hedge fund business he founded.
- Just How Bad Is The US Economy? (graph)
New York Times:
- Under Code, Apps Would Disclose Collection of Data. Like food packages that display nutrition labels, some mobile apps could soon display information that allows consumers to decide at a glance whether the apps are good for them.
- Mobile growth dip takes shine off Samsung Elec Q2 profit record. Samsung Electronics Co Ltd is under mounting pressure to produce eye-catching new smartphones after its mobile business shrank 3.5 percent in the second quarter, taking the gloss off a record $8.5 billion operating profit. The South Korean IT giant on Friday said April-June operating profit increased 47.5 percent from a year ago to 9.53 trillion won ($8.54 billion), in line with its estimate. Profits at its mobile division, the biggest earnings generator, jumped 52 percent to 6.28 trillion won from a year ago but fell 3.5 percent from the previous quarter. The reporting period included the launch of its flagship Galaxy S4 in April, backed by a massive advertising campaign, in Samsung's biggest assault yet on arch rival Apple Inc's iPhone.
- SolarWinds(SWI) revenue misses estimates on weak license sales. Network management software maker SolarWinds Inc reported lower-than-expected quarterly revenue due to a shortfall in license sales and forecast current-quarter results below Wall Street estimates. SolarWinds shares fell 17.5 percent in extended trading.
- Competition, discount website drag on Expedia(EXPE); shares tank. Online travel agency Expedia Inc reported a quarterly profit far short of market estimates due to higher competition and poor performance in its discount website Hotwire.com, sending its shares crashing 25 percent in extended trade.
- Turmoil hits Tunisia after secular politician slain. Tunisian opposition politician Mohamed Brahmi was shot dead on Thursday in the second such assassination this year, setting off violent protests against the Islamist-led government in the capital and elsewhere. "This criminal gang has killed the free voice of Brahmi," his widow, Mbarka Brahmi, told Reuters, without specifying who she thought was behind the shooting outside their home in Tunis.
- Nikkei falls to 2-week low on stronger yen, weak earnings. Japan's Nikkei share average fell to a two-week low on Friday morning, as selling accelerated on the back of a firmer yen and disappointing quarterly earnings from the likes of Canon Inc and Advantest Corp. The Nikkei fell 1.9 percent to 14,288.92 in mid-morning trade after slipping to a low of 14,236.46 earlier, the lowest level since July 9.
South China Morning Post:
- US dollar loan rise triggers warning for Hong Kong. Sharp growth in greenback funding spurs Monetary Authority to raise risk alert and order banks to tighten credit controls. Hong Kong banks are building up a potentially dangerous exposure to foreign currency loans after an explosion in US dollar loans in May. That lending surge triggered moves by the Hong Kong Monetary Authority to rein in over-aggressive lending, forcing banks to step up credit controls to manage the risks. Bank loans in May increased 40 per cent from April, followed by a 20 per cent growth in June. Of the amount, 60 per cent was in US dollars. The growth over the two-month period is higher than the average of 19 per cent for the first six months. "It is quite a worrying sign as the growth rate is substantial," a HKMA spokesman said. "The HKMA is contacting all banks to understand why there is such a strong growth in US dollar loans, and whether such a trend will continue."
- PBOC's Zhou Reiterates Prudent Monetary Policy. People's Bank of China Governor Zhou Xiaochuan reiterates that the nation will continue a prudent monetary policy and keep a "reasonable" amont of money supply and credit, according to an article written by Zhou. Zhou also said that downward pressure on the economy is "relatively big," according to the article.
- Researcher Says China Won't Have 'Hard Landing'. China's economy won't have a "hard landing" and will stabilize, Zhang Liqun, a researcher with the State Council's Development Research Center, writes in an article.
- China Researcher Says Large Fiscal Stimulus Unnecessary. China doesn't need to roll out large-scale fiscal stimulus on infrastructure, citing Jia Kang, director of the Finance Ministry's fiscal science research center.
- China 1H Vehicle Imports Drop for 1st Time Since 2006. China's imports of vehicles fell -10.7% in 1H to 526,000 units, the 1st half-year drop since 2006 when the Asian nation cut tariffs, citing customs data. Dealers are trying to ease high inventory pressure as imported vehicle sales are still rising, the report cites Wang Cun, a manager at the country's largest vehicle importer, China Automobile Trading Co., as saying.
- China Shouldn't Eagerly Introduce Policies Now. China shouldn't be too eager in introducing economic policies now as they come with costs, Li Hongxia, a researcher at the Ministry of Finance's fiscal science research center, writes in a commentary. China shouldn't judge how the economy is doing based solely on the GDP figure, Li writes.
- None of note
- Asian equity indices are -1.0% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 142.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 109.75 +5.5 basis points.
- FTSE-100 futures +.39%.
- S&P 500 futures +.23%.
- NASDAQ 100 futures +.21%.
Earnings of Note
Company/Estimate
- (AON)/1.10
- (B)/.47
- (LEA)/1.37
- (LYB)/1.63
- (SWK)/1.21
- (TYC)/.48
- (WY)/.30
9:55 am EST
- Final Univ. of Mich. Consumer Confidence for July is estimated to rise to 84.0 versus a prior estimate of 83.9.
- None of note
- The German import price data could also impact trading today.
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