Bloomberg:
- Egypt Islamists Ready New Protest as Violence Condemned. Egypt’s Muslim Brotherhood readied for new protests in support of ousted President Mohamed Mursi, raising the prospect of more of the violence that has left the military-backed government facing pressure from key allies. Clashes that have left more than 800 dead since police raided two Islamist protest camps on Aug. 14 have sparked an international outcry, with the European Union saying today it would “urgently review” relations with the Arab world’s most populous nation. Foreign Minister Nabil Fahmy condemned talk of cutting aid to Egypt, and said the government would not abandon its efforts to restore order to a nation gripped by chaos. Markets fell on the turmoil. “We keep hearing if Egypt doesn’t do this or doesn’t do that, then aid will be stopped here or will be stopped there,” Fahmy said. “If one side is revising aid they are giving, we are revising aid we receive as well.”
- China July Home Prices Rise as Big Cities Post Record Gains. China’s new home prices rose in almost all cities in July, led by gains in the biggest metropolitan centers, amid expectations that the government won’t further tighten property market restrictions. Prices climbed in 69 of the 70 cities the government tracked last month from a year earlier, the National Bureau of Statistics said in a statement today, matching the data in June and May. The southern business center of Guangzhou posted the biggest gain, rising 17 percent from a year earlier. Prices in Beijing and Shanghai increased 14 percent each. All three cities had their biggest gains since the government changed its methodology for the data in January 2011. Existing home prices rose 15 percent in Beijing last month from a year earlier and increased 11 percent in Shanghai and Guangzhou each, according to the data. Private data also showed rising housing values. Home prices jumped 7.9 percent from a year earlier last month, according to SouFun Holdings Ltd., the nation’s biggest real estate website owner. The value of home sales fell 17 percent in July from June, the statistics bureau reported Aug. 9.
- China Trading Error Reduces Investor Confidence in Stocks. The biggest swing in China’s benchmark equity index since 2009 threatens to further erode confidence in the nation’s stock market after it lost more money for investors than any in the world during the past four years. China’s shares were roiled Aug. 16 by a trading error at Everbright Securities Co. (601788) that spurred a 53 percent surge in volumes and a swing of more than 6 percent in the Shanghai Composite Index. The gauge jumped from a loss of as much as 1 percent to a gain of 5.6 percent in two minutes during the morning session, then ended the day with a 0.6 percent drop. Erroneous buy orders from Everbright’s proprietary trading group sparked the early rally, the securities regulator said.
- Everbright Trading Error Adds to China Broker’s Woes. Everbright Securities Co. (601788), the Chinese state-controlled brokerage besieged by falling profits and a regulatory probe, faces a further blow to its reputation after a trading error sparked the wildest swings in the nation’s stocks in four years.
- Bo Xilai Set to Face Trial This Week as Historic Case Nears End. Bo Xilai, the former Politburo member charged with bribery and abuse of power, will go on trial on Aug. 22, bringing the Communist Party’s gravest scandal in more than 20 years a step closer to its conclusion.
- India Markets Plunge Pressures Singh as Economy Teeters. India’s biggest stock market slide in almost two years, surging bond yields and an unprecedented plunge in the rupee are pressuring officials for fresh steps to stem capital outflows and revive a struggling economy. The S&P BSE Sensex (SENSEX) Index sank 4 percent on Aug. 16 as the rupee touched an all-time low of 62.005 per dollar and the yield on the government bond due May 2023 rose 39 basis points to 8.88 percent, the highest on a 10-year note since 2011. Foreigners pulled $3 billion from stocks and bonds in July on concern the U.S. Federal Reserve could curb stimulus and thereby undermine Indian steps in the past year to revive investment and woo funding for a record current-account deficit. The rupee’s drop risks faster inflation and triggered central bank interest-rate increases even with growth at a decade low.
- Rupee Plunges With Asian Currencies. Indonesia’s currency slumped to the weakest level since 2009 and the rupee dropped to a record amid concern about widening current-account deficits. India has seen its foreign-exchange reserves sink as much as 7 percent this year to $277 billion, while Indonesia’s holdings shrank 18 percent to $92.7 billion. “Central banks are being tested, especially those in Indonesia and India,” said Andy Ji, a foreign-exchange strategist at Commonwealth Bank of Australia (CBA) in Singapore. “People just don’t have the confidence that they have enough reserves to shore up their currencies.” The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, lost 0.5 percent during the week to 115.35 in Singapore. The rupee fell 1.3 percent to 61.66 per dollar and reached an unprecedented 62.005 yesterday. The rupiah dropped 0.96 percent to 10,385 and touched 10,435, the lowest since June 2009.
- Japan Weak Exports, Higher Imports Show Growth Constraints. Japan’s exports grew at a slower-than-forecast pace while imports swelled in July, highlighting limits on the economy’s growth that could fuel opposition to a planned sales-tax increase. Exports rose 12.2 percent from a year earlier, the Ministry of Finance said in Tokyo today, compared with the 12.8 percent median estimate of 23 economists surveyed by Bloomberg News. Imports climbed 19.6 percent, leaving a trade deficit of 1.024 trillion yen ($10.5 billion). The seasonally adjusted deficit expanded from June to 944.0 billion yen. Prime Minister Shinzo Abe is set to decide in the next month whether to raise the sales tax to 8 percent in April from 5 percent now and will listen to opinions of a panel of experts to consider the impact on the economy. Increasing the tax would risk choking off a recovery helped by stronger exports, just as Japan shows signs of emerging from 15 years of deflation.
- Asian Stocks Swing Between Gains, Losses; Bluescope Falls. Asian stocks swung between gains and losses amid low trading volumes in Japan as energy companies advanced, offsetting a decline at utilities firms. BlueScope Steel Ltd. (BSL) fell 16 percent as sales missed analyst estimates and Australia’s No. 1 steel producer forecast a weaker first half of the financial year. Hyundai Merchant Marine Co. rose 2.4 percent in Seoul, extending gains since North Korea and South Korea agreed to reopen a jointly operated industrial complex. JX Holdings Inc. gained 3.4 percent after Mitsubishi UFJ Morgan Stanley Securities Co. advised buying the Japanese refiner’s shares. The MSCI Asia Pacific Index fell less than 0.1 percent to 134.28 as of 10:43 a.m. in Hong Kong, having gained as much as 0.1 percent.
- Merkel Rebuffs Opposition Saying No One Wants Grand Coalition. German Chancellor Angela Merkel dismissed the prospect of a post-election alliance with the main opposition Social Democratic Party as the latest poll showed her in a position to reprise her current coalition after the vote. “Nobody wants that,” Merkel said in an interview with broadcaster ZDF yesterday when asked about the probability of a reprisal of her first-term “grand coalition” with the SPD. “I hear that from all sides.”
- Russian Recession Risk Worsened as Banks Skimp on Loans: Economy. Elena Dibova was ready to pledge her 15 million-ruble ($456,000) apartment to get financing for her metal-safe business. As her bank dragged its feet, she hit the roadblock companies across Russia face as the economy sinks. Corporate-lending growth has plunged as the weaker economy prompts banks to demand more collateral and as borrowers shun interest rates that can top 20 percent. As VTB24, the retail arm of Russia’s second-largest lender, expanded its list of demands, Dibova borrowed 2.5 million rubles from her business partners so she could join a tender to supply the Moscow police.
- U.S. Stocks Beat BRICs by Most Ever Amid Emerging Market Flight. Investors are favoring U.S. stocks over emerging markets by the most ever as fund flows and volatility measures show institutions are increasingly seeking the relative safety of American equities. Almost $95 billion was poured into exchange-traded funds of American shares this year, while developing-nation ETFs saw withdrawals of $8.4 billion, according to data compiled by Bloomberg.
- China Video Tools for U.S. With American Help Spurs Spy Anxiety. A manufacturer accused of being tied to the Chinese government has found a way to sell to U.S. agencies in an arrangement that’s raising concerns from security officials and at least one lawmaker about spying. ZTE Corp. (000063), China’s No. 2 phone-equipment maker, linked up with a company in Baltimore to make its videoconferencing system available to federal offices.
- Rebar Advances on China Home Price Gains, Property Investments. Steel reinforcement-bar futures rose, extending a rally in the past three weeks, as China’s new home prices climbed and investors expected increased infrastructure investments, boosting demand for the construction material. Rebar for January delivery gained as much as 0.8 percent to 3,843 yuan ($629) a metric ton on the Shanghai Futures Exchange and was at 3,821 yuan at 10:59 a.m. local time. The most-active contract rose 1.5 percent last week for a third straight gain.
- Gold Seen Climbing From Two-Month High on Asian Physical Demand. Gold may extend a rally from a two-month high as an increase in demand from jewelry buyers in China and India helps counter a drop in assets under exchange-traded funds backed by bullion. Prices may rally to as much as $1,550 an ounce by the end of the year, said Jeffrey Rhodes, managing director of the financial institutions division of the Kaloti Jewellery Group, a Dubai-based gold trader and refiner. There are no signs of demand abating from India and China, which account for about 60 percent of global gold consumption, he said at the India Gold Convention in Jaipur yesterday.
- Hospitals May Absorb Risk of Insurers’ Debtor Patients. Less than two months before health exchanges open to the public, hospitals are asking to change a part of the Affordable Care Act that leaves them at financial risk for patients who fall behind on their insurance premiums. The hospitals said in an Aug. 15 letter that the U.S. Centers for Medicare and Medicaid Services should reconsider the way health-insurance exchanges divide the financial responsibility for delinquent customers. The letter was signed by the American Hospital Association, the Federation of American Hospitals, and the Association of American Medical Colleges. “We are very concerned about our risk for giving uncompensated care,” Joanne Alig, senior vice president for policy and research at the Wisconsin Hospital Association, said in a telephone interview.
- Luminant Sued by EPA Over Texas Clean Air Violation Claims. Luminant Generation Co., the largest power generator in Texas, was sued by the U.S. Environmental Protection Agency for failing to meet air-pollution standards at two power plants, the Sierra Club said in a statement. The enforcement action, which was filed under seal in federal court in Dallas, follows two earlier EPA notices of violations of the U.S. Clean Air Act by the Big Brown plant in Freestone County and the Martin Lake plant, located in Rusk and Panola counties.
- Egypt, U.S. on Collision Course. Military-Led Government Says It is 'Reviewing' Relationship With U.S. Amid Criticism. Egypt's military-led government said it was "reviewing" its strategic relationships with the U.S. and other Western governments critical of its crackdown on Islamists, deepening the divide between the Obama administration and Cairo. Amid expectations of more violence in coming days, the death toll rose on Sunday as dozens of Muslim Brotherhood supporters were killed in Cairo in what the government described as a prison-break attempt. The Islamist movement's leaders called for continued defiance against Egypt's generals, despite signs that their supporters were becoming limited in their ability to take to the streets.
- Test for Federal Reserve's Next Chief: Quelling Dissent by Jon Hilsenrath. Departure of Ben Bernanke Could Produce a Feistier Central Bank. During nearly eight years running the Federal Reserve, Chairman Ben Bernanke's signature style has been managing by consensus. He has given colleagues wide latitude to speak their minds at closed-door Fed meetings and in public. He also has worked behind the scenes to find common ground among the 18 other strong-willed Fed governors and regional bank presidents when he has had to make big policy decisions. With Mr. Bernanke expected to give up the helm when his term ends in January, his leadership style, and the style of his potential successors, warrant extra scrutiny. An already divided Fed could become more fractious when Mr. Bernanke departs, with important implications for the central bank, markets and the economy.
- Regulatory Headaches Worsen for J.P. Morgan. Regulatory headaches keep piling up for J.P. Morgan Chase JPM 0.00% & Co. A growing number of lawsuits and investigations could force the nation's largest bank to absorb $6.8 billion in future legal losses above its existing reserves, according to a filing earlier this month. That amount is greater than any other U.S. bank, according to an analysis from Barclays Research, a unit of Barclays PLC.
- Mexico's Pemex Looks to Tap U.S. Shale. Rookie CEO Lozoya Seeks to Reverse Production Slump at State-Run Firm.
- T.J. Rodgers: Targeting the Wealthy Kills Jobs. My investment in my company helps maintain 3,470 permanent positions. What's not 'fair' about that?
Fox News:
- Washington split on Egypt aid, raising more questions on who the US backs. Washington appeared no closer Sunday to agreeing on whether to cut U.S. aid to Egypt, raising further questions about which side the United States is taking amid the escalating and deadly political protests in the Middle East country. The disagreement divides political parties as well as the White House, the Senate and the House, roughly five weeks after the Egyptian military overthrew President Mohammed Morsi, an Islamist and member of the Muslim Brotherhood political party.
- Hiring in China by JPMorgan(JPM) under scrutiny. Federal authorities have opened a bribery investigation into whether JPMorgan Chase hired the children of powerful Chinese officials to help the bank win lucrative business in the booming nation, according to a confidential United States government document.
- Can ETFs really cause the next stock market crash? Those exchange-traded funds that use leverage to double and triple returns on stock market moves could cause the next big market crash, according to the Federal Reserve.
Zero Hedge:
Business Insider:
New York Times:
- A Summer of Troubles Saps India’s Sense of Confidence. A summer of difficulties has dented India’s confidence, and a growing chorus of critics is starting to ask whether India’s rise may take years, and perhaps decades, longer than many had hoped.
- Public Funds Take Control of Assets, Dodging Wall Street. Investors responsible for more than $2 trillion recently gathered at a resort in the Canadian Rockies, far from the news media and, more important, far from Wall Street. Those in attendance, including leaders of Abu Dhabi’s sovereign wealth fund and France’s pension system, were there to consider ways to put their money to work together without paying fees to private equity firms and hedge funds. Over that weekend, three of the attendees completed the details of a $300 million investment in a clean-energy company. The group holding the gathering, the Institutional Investors Roundtable, has kept a low public profile since it began in 2011, but it attracted 27 funds managing public money to its latest meeting and is spinning off concrete investments. The group is part of a much broader push by the world’s biggest pension and sovereign wealth funds to reduce their reliance on the Wall Street firms that used to manage almost all their money.
Reuters:
Financial Times:- Spirit of boom-time mortgages lives on in Europe. Remember the days when you could take a mortgage big enough to buy the house and furnish it, a car to park outside and a holiday to celebrate - all on a repayment schedule that only Methuselah could honour? Those days have never gone away in pockets of Europe.
- Steeled for change: China's bloated industry to face market forces. Momentum is growing in China to allow market forces to end a titanic capacity glut in heavy industry that a decade of state interventions has failed to resolve, according to speeches made by high-ranking officials this month at a closed-door event. The speeches indicate that China's reform-minded cabinet is considering a dose of deeper structural reform to remedy bloated, inefficient and debt-laden sectors such as steel.
- CME(CME) under fire over cash for trades in Brent. The biggest US futures exchange’s campaign to break into North Sea oil has been marked by unusual trading patterns as computerised firms engineer ways to exploit a cash-for-volume scheme, according to market participants. CME Group has promised a pot of as much as $1m a month to the biggest traders in its upstart Nymex Brent crude futures contract, a June filing shows, as it attempts to wrest market share from ICE Futures Europe, the exchange that launched Brent in 1988.
- HSBC and StanChart hit by Asia focus as economies lose momentum. Ever since the financial crisis, HSBC and Standard Chartered have trumpeted their exposure to faster-growing economies as a welcome differential among the UK banks. But the recent slowdown in parts of their Asian heartlands – both reported weaker growth in markets including China, Indonesia, Malaysia and Taiwan in the first half of this year – means their reliance on the region is fast becoming a concern rather than a comfort for investors.
- US energy boom helps fuel Barack Obama’s export goal. The value of US fuel exports has grown faster than other goods and commodities during Barack Obama’s presidency, according to a Financial Times analysis, emerging as a driving force behind his goal to double exports by 2015. The data offer further evidence of how the US domestic energy boom – led by expanding oil and natural gas production and higher prices – is reshaping its economy.
- Commodities: Egyptian bloodbath threatens crucial routes for oil and gas supplies. Egypt is a key bottleneck in the global oil industry. Should the current turmoil in the North African country get any worse, a potential oil spike could damage any nascent economic recovery.
- Germany Can't Save Euro Area, Schaeuble Adviser Says. Germany can't save euro area as country is "small" and has become poorer compared with other states in currency union, citing Kai Konrad, adviser to German Finance Minister Wolfgang Schaeuble, as saying. If politicians decide to break up currency union, they should ask Germany and "stronger" states to leave to devalue euro and improve economies of southern countries, Konrad said.
Jakarta Post:
Press Trust of India:- Rupiah at risk of slipping further in the coming week. The current account deficit swelled far beyond initial forecasts with both Bank Indonesia (BI) and local economists voicing concern that the imbalance would drag the already weak rupiah further down. In the second quarter (Q2), the current account deficit topped its historic-high level of US$9.8 billion, or 4.4 percent of gross domestic product (GDP), as languid exports could not compensate for the high level of imports needed to support the robust economic expansion, BI announced last week. “It’s a structural problem,” BI Governor Agus Martowardojo said recently, citing the underdevelopment of local industries as the reason the nation depended heavily on imports to support its robust economic boom.
- India Won't Face Repeat of '91 Economic Crisis, Singh Says. The country has reserves to fund over seven months of imports compared with 15 days in 1991, Prime Minister Manmohan Singh said. The government can only control the volatility in the rupee and not the value of the currency.
- China's Biggest Economic Challenge Is Govt Debt. China's biggest economic challenge now is local government debt, 63% of economists surveyed say, citing a survey among 43 economists.
- China May Face Risks From New City Constructions. China's local government financing vehicles may face investment risk if new city developments don't go as planned, citing Li Tie, a researcher at National Development and Reform Commission's center for cities and small towns development. Many local governments aim to boost economic growth with construction of new cities, the report cites Li as saying
- Hangzhou May Impose Property Tax of .5%-1%. Hangzhou city in eastern China may start a property tax with rate of .5%-1%, higher than original plan of .4%-.8%, the report said. Other cities' attempts to loosen controls following moves by the eastern city of Wenzhou may be rejected, the report said.
- Beijing May Set New Policies on Self-Use Homes. Beijing may supply more land for homes for self-use in the near term to help curb prices, citing people familiar with the matter.
Weekend Recommendations
Barron's:- Bullish commentary on (ALK), (WTW), (BK), (TAP) and (ISCA).
- Bearish commentary on (LYV) and (FXCM).
- Asian indices are -.75% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 141.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 113.75 +2.5 basis points.
- FTSE-100 futures +.11%.
- S&P 500 futures +.02%.
- NASDAQ 100 futures +.03%.
Earnings of Note
Company/Estimate
- (IRF)/-.10
- (URBN)/.48
- (BOBE)/.57
- None of note
- None of note
- The Spanish 10Y auction and the RBA Meeting Minutes could also impact trading today.
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