Bloomberg:
- Obama-Putin Rift Over Syria Strike Widens on Eve of G-20 Summit. The diplomatic dialogue between Barack Obama and Vladimir Putin has featured the U.S. president comparing Putin to a bored schoolboy and the Russian leader forcing an irritated Obama to wait a half-hour for a meeting. And that was before warships from the two nations drew near in the Eastern Mediterranean amid a widening rift over Obama’s threat of a military strike against Syria after what he says is the regime’s use of chemical weapons in an area near Damascus. With Obama in St. Petersburg today for a summit of global leaders, Putin yesterday denounced a potential U.S. attack on Syria as a violation of international law, while Obama told reporters the two countries’ relations have “hit a wall.” “This is basically as bad as it gets,” said James Goldgeier, dean of the School of International Service at American University and the Russia director for the National Security Council under former President Bill Clinton. “You typically don’t have leaders who so openly criticize each other, who openly disdain each other.”
- IMF Sees Acute Market Pressure for Some Emerging Economies. Developed economies are turning into global growth engines as some of their emerging-market counterparts decelerate amid “acute” market pressures, the International Monetary Fund said. “Global growth remains subdued but its underlying dynamics are changing,” the IMF said today in a report for leaders of the Group of 20 nations meeting this week in St. Petersburg, Russia. “Momentum is projected to come mainly from advanced economies, where output is expected to accelerate.” Emerging markets, which helped pull the world out of a recession after the global financial crisis, now face an exodus of cash and sliding currencies in anticipation of the Federal Reserve’s eventual tapering of its $85 billion in monthly bond purchases. Expansion in those countries is 2.5 percentage points below 2010 levels, with Brazil, China and India accounting for the slowdown, according to the IMF.
- China Must Give Market Bigger Role as Growth Slows, Chamber Says. China’s government must reduce its role in the economy and allow market-driven change to ensure sustainable growth, according to a report by the European Union Chamber of Commerce in China. “China could previously make a choice between economic restructuring and maintaining growth,” Davide Cucino, president of the chamber, said at a briefing on its annual position paper in Beijing yesterday. Now “the only way to get sustainable growth is to carry out structural reform.”
- China Sells Residential Land at Record Price Amid Property Curbs. China sold a residential land parcel in Beijing at a record price amid rising competition among developers for land in major cities even as the government maintains its property curbs. The 28,100 square-meter (302,356 square-foot) National Agriculture Exhibition Center plot, northeast of the city center, was sold for 2.1 billion yuan ($343 million) to Sunac China Holdings Ltd. (1918) yesterday. Sunac’s bid included a commitment to build a 278,000 square-meter hospital at another site, taking the total bid cost to 4.3 billion yuan, according to a statement on the local land reserve center’s website. The price paid implies a cost per square meter of buildable space of 73,000 yuan, the most expensive in China, according to Centaline Property Agency Ltd., China’s biggest real-estate brokerage. “The high price happened even as property curbs were in place,” said Qu Anxin, a Shanghai-based researcher at Centaline, who estimated that homes built on the site will sell for as much as 200,000 yuan per square meter.
- BOJ Leaves Policy Unchanged as Economy Makes Moderate Recovery. The Bank of Japan maintained its unprecedented monetary easing, as signs of strength in the economy and price gains point to progress in its effort to end 15 years of deflation. The central bank will expand the monetary base at an annual pace of 60 trillion yen ($602 billion) to 70 trillion yen, it said in a statement in Tokyo today. All 32 economists in a Bloomberg News survey forecast the outcome. The BOJ raised its assessment of the economy, saying a moderate recovery is underway.
- Samsung $299 Galaxy Gear Tests Demand for Smart Watches. Samsung Electronics Co. (005930) set the price of its Galaxy Gear at $299 as the biggest maker of smartphones beats Apple Inc. (AAPL) in unveiling a wristwatch device that can make phone calls, surf the Web and take photos.
- China Stocks Fall Most in 2 Weeks, Halts Longest Rally in Month. China’s stocks fell the most in two weeks, led by material producers and port operators. Shanghai International Port (Group) Co. dropped 2.6 percent after gaining 95 percent since the State Council approved the city’s free-trade zone plan on Aug. 22. Aluminum Corp. of China Ltd. slumped the most in a month. China Merchants Bank Co. advanced 2.3 percent after raising 27.5 billion yuan ($4.5 billion) in a rights offer. The Shanghai Composite Index (SHCOMP) fell 0.5 percent to 2,117.21 at 10:04 a.m. local time, poised for the biggest loss since Aug. 20.
- Won to Kospi Jump as Metals Gain; Aussie Index, Kiwi Fall. Asian stocks rose for a sixth day and emerging-market currencies strengthened as central banks from Japan to Europe review monetary policy. Aluminum gained. The MSCI Asia Pacific Index of shares added 0.2 percent to 133.39 as of 11:55 a.m. in Tokyo, heading for its longest rally since December.
- Rubber Extends Loss as Selling in Shanghai Spurs Demand Concern. Rubber futures declined for a second day as a drop in the Chinese market increased concern demand may weaken in the world’s largest consumer. The February contract fell as much as 0.8 percent to 279.3 yen a kilogram ($2,800 a metric ton) on the Tokyo Commodity Exchange and traded at 280.9 yen at 11:53 a.m. local time.
- Rebar Futures Drop to Lowest in a Month as Premium Lures Sellers. Steel reinforcement-bar futures in Shanghai fell for the third day to the lowest level in almost a month as the premium to spot market prices attracted selling. Rebar for January delivery on the Shanghai Futures Exchange lost as much as 0.4 percent to 3,723 yuan ($608) a metric ton, the lowest since Aug. 9, before trading at 3,730 yuan at 10:31 a.m. local time.
- Draghi Seen Fighting Enthusiasm as Market Rates Increase. Draghi’s dilemma is that the strength of the rebound has helped boost interest-rate expectations to levels he described last month as “unwarranted.” That’s a signal some investors are questioning his commitment made in July to keep rates low for an extended period. Higher borrowing costs risk undermining what has so far proved to be a jobless recovery. “At a time when this recovery is in its early stages, it is important for the ECB president to limit any abrupt upward reaction in yields,” said Alan Clarke, an economist at Scotiabank in London.
- Shiller Warns of Housing Bubble After 225% Surge: Brazil Credit. Robert Shiller, who predicted the collapse of the U.S. housing market, is warning that a bubble is emerging in Brazil at a time when a sluggish economy and persistent inflation are eroding investor confidence. Since January 2008, home prices in Sao Paulo have soared 181% and jumped 225% in Rio de Janeiro, according to the FIPE Zap index. That's as much as twice the increase in rent prices, signaling that the housing market has become overheated, according to Shiller.
- About 35,000 Global Bank Employees May Face EU’s Bonus Curbs. About 35,000 employees at banks around the world may be caught by European Union bonus caps, more than 20 times the current number of people affected by the pay rules, the British Bankers’ Association said. The workers facing the EU rules, which would cap bonuses at twice annual pay, include 23,450 bankers in the U.K., 2,835 in other EU countries and 8,777 around the world, the industry group said in a report posted on the European Banking Authority’s website. The BBA asked the regulator to delay the introduction of tougher bonus rules for one year.
- Senate Panel Backs Use of Force Against Syria. Measure Says Goal Should Be to 'Change the Momentum on the Battlefield'; Pentagon Plans More Firepower. A key Senate panel on Wednesday backed President Barack Obama's request to strike Syria, while the Pentagon prepared to employ greater firepower to reach a shifting array of military targets. The revised options under development, which reflect Pentagon concerns that Syrian President Bashar al-Assad has dispersed his military equipment, include the use of Air Force bombers to supplement the four Navy destroyers armed with missiles that are deployed in the eastern Mediterranean. Initially, Pentagon planners said they didn't intend to use aircraft in the proposed strikes.
- BlackBerry(BBRY) Seeks a Sale by November. The Board Aims to Wrap Up Auction by November.
- Capital Unease Again Bites Deutsche Bank(DB). German Lender Maintains It Is Adequately Capitalized. A mere four months after co-Chief Executive Anshu Jain declared the end of Deutsche Bank AG's DB +0.77% "hunger march" following a €3 billion ($3.95 billion) capital increase, the bank is again on the defensive, trying to persuade investors and regulators that it is sufficiently capitalized. To its critics, the bank's claims—to be "one of the best capitalized banks in the world"—appear to have fallen on deaf ears as its earnings outlook has clouded. Deutsche Bank's shares have dropped 7.3% since late July, closing Wednesday in Frankfurt at €33.50.
- U.S. Can Catch Emerging Nations' Malaise. Developing Markets Not Only Are Much Bigger Today but Also Are Potentially a Leading Indicator, Not a Lagging One.
- This Is America's Curse. (graph)
- Obama seeks an accomplice for Syria action by George Will. Obama’s sanctimony about his moral superiority to a Congress he considers insignificant has matched his hypocrisy regarding his diametrically opposed senatorial and presidential understandings of the proper modalities regarding uses of military force. Now he asks from the Congress he disdains an authorization he considers superfluous. By asking, however reluctantly, he begins the urgent task of lancing the boil of executive presumption. Surely he understands the perils of being denied an authorization he has sought, and then treating the denial as irrelevant.
- Falling Economic Tide in India Is Exposing Its Chronic Troubles. Its economy now stands in disarray, with the prospect of worse to come in the next few months. Vinod Vanigota, a Mumbai wholesaler of imported computer hard drives, said sales dropped by a quarter in the last two weeks. The rupee, India’s currency, has been so volatile in recent days that he began revising his price lists every half-hour. Business activity at Chip Com Traders, where he is the managing director and co-owner, has slowed so sharply that trucking companies plead for business. “One of the companies called today and said, ‘Don’t you have a parcel of any sort for us to deliver today?’ ” Mr. Vanigota said.
- EADS sees flat to lower defense revenue. EADS is opting out of bidding on some U.S. weapons programs as it adjusts to cuts in U.S. defense spending, and it expects flat to lower revenue in defense business in coming years as the cuts deepen, a senior executive said on Wednesday. "There's no doubt that the government sector is flat to declining and we're forecasting the same," Sean O'Keefe, chief executive of EADS North America, told the Reuters Aerospace and Defense Summit.
- Tunisia's opposition threatens protests after talks fail. Tunisia's secular opposition threatened on Wednesday to launch more mass protests to force the Islamist-led government to step down, saying negotiations to end a political stand-off had failed.
Financial Times:
Telegraph:- Lloyd’s chairman warns on ‘systemic risk’ of capital rush. The chairman of Lloyd’s of London has warned of the danger that a rush of capital into the insurance industry will cause “systemic problems” akin to those of the banking sector during the financial crisis. John Nelson, head of the historic insurance market, spoke out about the risks of adverse consequences from non-traditional funding of insurance, which he said was occurring “on a scale not seen before”.
- Triple shocks threaten Europe's sickly and deformed recovery. Europe has not recovered. It has begun to stabilise, but only just, amid mass unemployment, with debt trajectories still spiralling out of control in Italy, Portugal, Spain and once again in Greece.
- China Economy 'Held Hostage' by Property Investment. China's economy has been "largely taken hostage" by property investment, which accounts for a high proportion of GDP, former People's Bank of China adviser Yu Yongding writes in a commentary. Developing countries like China should not make real estate a "pillar" industry for economic development, Yu wrote. A "serious" property tax policy will "squeeze" out many homes, according to Yu. Non-performing loan ratio may rise substantially in futures periods, he said. Local government debt is the biggest risk to China's financial system, Yu said.
Wedbush:
- Rated (SBUX) Outperform, target $80.
- Rated (DE) Underweight, target $72.
- Asian equity indices are -.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 155.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 128.75 +.5 basis point.
- FTSE-100 futures +.23%.
- S&P 500 futures +.03%.
- NASDAQ 100 futures +.06%.
Earnings of Note
Company/Estimate
- (JOSB)/.52
- (CONN)/.60
- (COO)/1.72
- (PAY)/.20
- (ZQK)/.04
- (FNSR)/.31
- (SWHC)/.36
- (TITN)/.19
- (KFY)/.30
8:15 am EST
- The ADP Employment Change for August is estimated at 182K versus 200K in July.
- Initial Jobless Claims are estimated to fall to 330K versus 331K the prior week.
- Continuing Claims are estimated to fall to 2985K versus 2989K prior.
- Final 2Q Non-Farm Productivity is estimated to rise +1.6% versus a prior estimate of a +.9% gain.
- Final Unit Labor Costs are estimated to rise +.8% versus a prior estimate of a +1.4% gain.
- Factory Orders for July are estimated to fall -3.4% versus a +1.5% gain in June.
- ISM Non-Manufacturing for August is estimated to fall to 55.0 versus 56.0 in July.
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,000,000 barrels versus a +2,986,000 barrel increase the prior week. Gasoline supplies are estimated to fall by -700,000 barrels versus a -587,000 barrel decline the prior week. Distillate inventories are expected to rise by +600,000 barrels versus a -316,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.5% versus a +.2% gain the prior week.
- (DVA) 2-for-1
- The Fed's Kocherlakota speaking, BoE rate decision, ECB rate decision, Draghi press conference, Spanish/French bond auctions, G-20 meetings, Challenger Job Cuts report for August, RBC Consumer Outlook Index for September, weekly EIA natural gas inventory report and the (SYK) analyst meeting could also impact trading today.
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