Bloomberg:
- China Builds All It Buys for Changsha From Rail to Biggest Tower. In this city of seven million people, where Mao Zedong went to college, China’s model of investment-driven growth funded by bank lending, bond issuance and land sales remains in force, even as Premier Li Keqiang tries to craft a new blueprint for expansion powered by consumption and private enterprise. Underscoring financial risks that prompted Li to order an urgent nationwide government debt audit, a local financing company raising money for Changsha’s tunnel says its ability to generate revenue is low.
- RBA Lowers Growth Outlook as Economy Transitions From Mining. The Reserve Bank of Australia lowered its growth outlook as the economy transitions from mining investment, a process that may be aided by the currency falling further from its still “high level.” “The forecast for Australian GDP continues to embody a transition in the drivers of growth from mining investment to other parts of domestic demand, and to exports,” the RBA said in its quarterly monetary policy statement released in Sydney today. “There remains considerable uncertainty about how this transition will proceed.”
- Asiana Airlines Loss Widens as Korea Travel Demand Slumps. Asiana Airlines Inc. (020560), the South Korean carrier that suffered a fatal jet crash in San Francisco last month, reported a second-quarter loss bigger than analysts estimated as travel demand waned.
- Asia Stocks Set to Snap Longest Winning Streak Since Jan. Asia’s benchmark stock index is on course to snap its longest weekly winning streak since January after Nikon Corp. (7731) cut its profit forecast and investors await Chinese industrial production data. Nikon, a Japanese camera maker, slumped 12 percent, dragging consumer shares lower. BHP Billiton Ltd. (BHP), the world’s largest mining company, climbed 1.8 percent in Sydney, leading raw-materials firms to the largest advance among the 10 industry groups of the Asia-Pacific benchmark gauge. SoftBank Corp. climbed 1.6 percent in Tokyo after a report it will refinance a loan for its Sprint Corp. deal. The MSCI Asia Pacific Index slid 0.1 percent to 133.67 as of 10:46 a.m. in Toyko, with five stocks rising for every four that rose.
- Copper Pares Weekly Gain Ahead of China Industrial Output Data. Copper pared a weekly advance as investors weighed China’s smaller-than-expected inflation rate and ahead of industrial output data due today. Copper for delivery in three months on the London Metal Exchange fell 0.6 percent to $7,141.25 a metric ton at 11:25 a.m. in Shanghai. The metal has climbed 2 percent this week.
- Fed Officials Signal Tapering Is Possible at September Meeting. Four Federal Reserve officials with varied voting records on monetary stimulus indicated greater willingness this week to begin tapering the central bank’s bond-buying program, citing confidence the economy is accelerating. “I would clearly not rule” out a decision to start dialing back the purchases at the Sept. 17-18 gathering of the Federal Open Market Committee, Chicago Fed President Charles Evans said two days ago in Chicago. “We’ve seen good improvement in the labor market, there’s no question in my mind about that,” and “I’m still wanting to see greater evidence that it’s a sustainable improvement.”
- Cleveland Fed’s Pianalto to Retire Early in 2014, Bank Says. Federal Reserve Bank of Cleveland President Sandra Pianalto will retire from the district bank early next year, according to an e-mailed statement. Pianalto, 59, is the longest serving of the Fed’s 12 regional presidents, having become leader of her district bank in 2003. During her 10-year tenure at the Fed, Pianalto was a reliable supporter of Fed Chairman Ben S. Bernanke, never dissenting from a decision of the Federal Open Market Committee.
- JPMorgan Nears Settlement With SEC on London Whale Loss. JPMorgan Chase & Co. (JPM) is negotiating final terms of a deal with U.S. securities regulators to end a yearlong probe of derivatives bets that led to the bank’s largest trading loss ever, two people briefed on the talks said.
- Berlusconi Adds $1.5 Billion to Fortune Amid Court Losses. Silvio Berlusconi’s fortune has increased by $1.5 billion this year even as the former Italian prime minister lost four criminal-court judgments since January.
- China's Gleaming Ghost Cities Draw Neither Jobs Nor People. When this small city in northeastern China launched a plan to build a satellite city six miles down the road, it got off to a promising start. Urban planners spent millions of yuan to clean up surrounding marshland that had become a dumping ground for the city's untreated sewage. A pristine environment, they hoped, would help attract the businesses that would raise incomes and swell the population. Four years later, Tieling New City is virtually a ghost town.
- Anti-U.S. Hostility Ramps Up in Egypt. Media Outlets Blast American Policies, Further Straining Ties. A headline in a major Egyptian state newspaper this week referred to the proposed U.S. envoy to Egypt as the "Ambassador of Death." Posters in Cairo's Tahrir Square, a center of pro-government rallies, depict President Barack Obama with a beard and turban, exclaiming his "support for terrorism." Another large Egyptian newspaper alleged Sen. John McCain, who traveled to Cairo this week in an effort to break a deadlock betweenthe government and its Islamist rivals, has chosen sides by employing Muslim Brotherhood staffers in his office.
- Al Qaeda Yemen Branch Plan Prompted U.S. Terror Alert. The terror plot that has temporarily shut down 19 U.S. diplomatic posts wasn't ordered by al Qaeda's leader Ayman al Zawahiri, but proposed by al Qaeda's Yemeni branch and approved by the global Qaeda chief, a senior U.S. official said Thursday in a more specific description of the plot's origin.
- Stocks Start to Look Overvalued. Stocks in S&P 500 Are at Highest Price/Earnings Ratio in Nearly Four Years. Stocks in the S&P 500 are at their highest price/earnings ratio in nearly four years, and above their average multiple of the past 10 years. That has some investors becoming more cautious.
- Daniel Yergin: China's Big Commodity Chill. With the end of the supercycle, copper prices have dropped 30% from their 2011 peak, and iron ore is down 32%.
- Noonan: How Obama Wooed the Middle Class. It took both painstaking research and a ruthless attitude.
- Fox News Poll: Majority calls implementation of ObamaCare 'a joke'. Majorities of Americans think the new health care law is going to increase their medical costs and their taxes -- and add to the federal deficit as well. Those are some of the reasons why voters say -- by a two-to-one margin -- that Congress should keep working on the law. A Fox News national poll released Thursday also asks voters about how they think Obamacare is being carried out: 31 percent say “it’s going fine,” yet a 57-percent majority feels “it’s a joke.” Republicans are more than three times as likely to say it’s a joke (87 percent vs. 25 percent). Still, a quarter of Democrats agree. Nine times as many Democrats as Republicans say implementation of Obamacare is going fine (63 percent vs. 7 percent). Overall, 63 percent of voters think the 2010 health care law needs to be changed and Congress should keep at it. That’s up from 58 percent who felt that way in July 2012. On the other hand, 31 percent say the law is the law and Congress should “move on” to other issues. The poll finds that 65 percent of independents think Congress should keep working on the law, up from 53 percent last year. It’s noteworthy that 41 percent of Democrats now feel the law needs more work, up from 35 percent. The number of Republicans who thinks the law needs to be changed -- 84 percent -- held steady.
- 5 signs Wall Street’s zombie apocalypse is at hand. 3. According to the U.S. Federal Reserve, U.S. households in the first quarter of 2008, at the peak of the bubble, collectively owed $13.8 trillion in mortgages and consumer credit. In the first quarter of this year, the figure was—drum roll, please—$12.8 trillion. That’s right. After five brutal years of financial crises and bailouts, bankruptcies and foreclosures and economic recession and write-offs, while the federal government has piled on the national debt to keep the wheels rolling while the private sector “repaired” its balance sheet, the great American household has managed to reduce its debt levels by just 7%. (Yippee!) Debts today are still at the same level as they were at the end of 2006. 4. U.S. business debt just surpassed household debt for the first time in living memory. U.S. (nonfinancial) businesses today owe about $12.9 trillion, compared with just $9.9 trillion at the start of 2007. Zombies like to point to the large amount of cash that corporations hold in their bank accounts, although quite a chunk of this is being held offshore to avoid taxes. Zombies rarely point out the other side of the equation—the spiraling debts. In total, U.S. nonfinancial corporations today have debts equal to 50% of their net worth, says the Federal Reserve. As recently as 2006 that figure was 40%. The average since the Second World War: 37%.
- China's factories remain in deflation, producer prices show. China's consumer inflation accelerated in July, largely in line with forecasts, but producer prices dipped in the month, showing that the factories in the country remained entrenched in deflation. China's consumer price index (CPI) rose 2.7 percent in July from a year earlier, official data showed on Friday, unchanged from June and slightly lower than a Reuters forecast of 2.8 percent. But the producer price index (PPI) fell 2.3 percent in the month from the year before, slightly worse than the 2.2 percent drop markets were expecting, but better than the 2.7 percent drop in June.
- Blame the Fed for the floundering dollar. This was supposed to be a summer when the U.S. dollar would stand tall, pumped up by higher interest rates and the prospect of an improving economy.
Business Insider:
- The Rest Of JC Penney Board Blasts Bill Ackman: Firing Our CEO Is 'Disruptive And Counterproductive'.
- After Going All In During Mining Boom, BHP(BHP) Cuts Its Ambitions. BHP Billiton, the world’s largest mining company, was willing to spend big in early 2012. It was building new mines and upgrading old ones, at a cost of $18 billion. It considered a potential expansion of its copper and uranium mine, Olympic Dam, which could have cost as much as $20 billion. It proposed a deepwater extension of Port Hedland, its iron ore port, an estimated $10 billion or more.
- Financial crisis could disrupt Philadelphia school openings. Philadelphia's cash-strapped public schools may not open on time in September unless they get $50 million from the city to rehire some of the 3,800 teachers and staffers laid off because of the district's financial crisis.
- Nvidia(NVDA) forecasts revenue below estimates on sluggish demand. Graphic chipmaker Nvidia Corp forecast current-quarter revenue below analysts' estimates as it continues to struggle with high competition in a slowing PC market. Nvidia, which gets majority of its sales from PCs, has been a late entrant in the market for smartphone chips.
- U.S. Fed balance sheet grew in latest week. The U.S. Federal Reserve's balance sheet grew in the latest week as the Fed's holdings of U.S. Treasuries increased, Fed data released on Thursday showed. The Fed's balance sheet liabilities, which are a broad gauge of its lending to the financial system, stood at $3.542 trillion on Aug. 7, compared with $3.529 trillion on July 31.The Fed's holdings of Treasuries rose to $1.993 trillion as of Wednesday, Aug. 7, up from $1.982 trillion the previous week.
- Brazil won't rule out retaliation if U.S. cotton payments end. Brazil's foreign minister, Antonio Patriota, said on Thursday he could not rule out retaliation if the United States stopped paying Brazil monthly compensation for controversial cotton subsidies. The dispute flared up days before the arrival of U.S. Secretary of State John Kerry, who is to plan an October state visit to Washington by President Dilma Rousseff.
- U.S. slowly opening up commercial drone industry. The Federal Aviation Administration's recent certification of two expensive unmanned aircraft for commercial use further opens up the U.S. market for drones, but cheaper unmanned aerial vehicles (UAVs) will still have to operate in regulatory limbo. The drone industry was heartened by the FAA's decision in late July to greenlight Boeing Co's Insitu ScanEagle and AeroVironment Inc's Puma, in the first such U.S. certification of drones for commercial use.
- Report says Keystone pipeline would not up U.S. greenhouse gas emissions. A new study has backed an earlier finding by the U.S. State Department that the proposed Keystone XL pipeline will have "no material impact" on U.S. greenhouse gas emissions, a crucial factor the White House is expected to weigh when it decides whether to approve the project.
- Priceline(PCLN), Orbitz profits top estimates on travel demand. Online travel agencies Priceline.com and Orbitz Worldwide Inc posted higher-than-expected quarterly profits on Thursday, pointing to solid demand for travel. Rising reservations for rental cars and hotels bolstered Priceline, which has the highest market capitalization among online travel agencies, while Orbitz benefited from an increase in bookings of higher-margin hotel and vacation packages.
Financial Times:
Economic Information Daily:- Growth in crude oil shipped by rail slows. Rail shipments of crude oil in the US – one of the major trends to emerge from the shale drilling boom, are hitting the buffers. As the price differential between inland and coastal oil markets narrows, railways and logistics companies are reporting falling traffic on the lines connecting oilfields to refineries.
- China 1H Solar Photovoltaic Exports Fall 31% to $6.52b. China's exports of solar photovoltaic cells and modules fell 31% to $6.52b, citing China Chamber of Commerce for Import and Export of Machinery and Electronic Products.
- Emperor Director Sees H.K. Home Prices Diving 40%. Prices in the
city almost doubled over the past 3 years, citing co.'s Donald Cheung.
Home prices will drop up to 15% and land prices to fall up to 25% over
next 12 months, he said.
- China May Expand Property Tax Trial to 6 New Cities. China may expand a property tax trial to as many as 6 cities including Hangzhou and Nanjing, citing Yang Hongxu, deputy head of E-House China R&D Institute. Eastern, central and western cities may be included, Yang said. Expansion of a property tax nationwide may take 3-5 years, Yang said. Local Chinese governments are not enthusiastic about property tax trials as it slows economic growth, citing Yang.
- China May Do More to Curb Property Speculation. China may further introduce detailed differentiated home loan policy in 2H in order to curb speculative home purchases, Yi Xianrong, a researcher at Chinese Academy of Social Sciences, writes in a commentary.
- None of note
- Asian equity indices are -.50% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 145.50 unch.
- Asia Pacific Sovereign CDS Index 110.75 -.25 basis point.
- FTSE-100 futures +.28%.
- S&P 500 futures -.05%.
- NASDAQ 100 futures +.01%.
Earnings of Note
Company/Estimate
- (ABFS)/.19
- (FSS)/.14
- (MGA)/1.64
- (ZEUS)/.36
10:00 am EST
- Wholesale Inventories for June are estimated to rise +.4% versus a -.5% decline in May.
- Wholesale Sales for June are estimated to rise +.7% versus a +1.6% gain in May.
- None of note
- The China Retail Sales/Industrial Production data and the (MU) analyst conference could also impact trading today.
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