Monday, February 24, 2014

Today's Headlines

  • Ukraine Replaces Central Bank Head. Ukraine replaced its central bank chief as it scrambles to fend off default, while Russia poured scorn on the legitimacy of the new interim leadership. The temporary government in Kiev said it needs $35 billion of financial assistance as the U.S. and the European Union pledged aid for a new administration. Russia’s Foreign Ministry said deposed President Viktor Yanukovych’s opponents broke a Feb. 21 peace agreement and set the country on a course for “dictatorial, terrorist methods.”
  • Ruble Cracks Seen Before Ukraine’s Deadly Descent: Russia Credit. Foreign investor holdings of Russian ruble government bonds slid to the lowest level in 10 months in December as the ruble capped its worst year since 2008 and political tensions in neighboring Ukraine were growing. Non-residents’ share of ruble debt fell one percentage point from the previous month to 23.9 percent as of Jan. 1, central bank data data published Feb. 21 show. That represented outflows of 17 billion rubles ($477 million) to 894 billion rubles. Foreign holdings of OFZ securities peaked at 28.1 percent on May 1, according to the figures. 
  • Industrial Bank Temporarily Tightens Developer Financing. Industrial Bank Co. (601166) temporarily tightened financing for real-estate developers until it prepares a new set of credit policies, according to a stock exchange statement. The bank requested all branches to take stock of existing assets and market conditions after the Lunar New Year, according to the statement to the Shanghai Stock Exchange yesterday. It also suspended granting new credit to some developers and halted mezzanine financing until new rules are released, by the end of March, it said. The weeklong Lunar New Year break ran through Feb. 6, with financial markets reopening on Feb. 7.
  • China Stocks Drop as Property Shares Plunge Most in Eight Months. China’s stocks fell, sending the benchmark index to its biggest loss in seven weeks, amid speculation that reduced lending to the property industry will curb growth in the world’s second-largest economy. China Vanke Co. (000002) and Poly Real Estate Group Co., the nation’s biggest developers, plunged more than 6 percent after the Shanghai Securities News reported Industrial Bank Co. and other banks have tightened lending to the property sector. Industrial Bank led declines for lenders with a 3.7 percent loss. China Petroleum & Chemical Corp. (386), the refiner known as Sinopec, slid as much as 6.4 percent, erasing gains since it announced plans to sell a stake to private investors. The Shanghai Composite Index (SHCOMP) dropped 1.8 percent to 2,076.69 at the close. A gauge of property stocks in the Shanghai index slid 5.4 percent, the most among five industry groups. Vanke, the nation’s biggest listed developer, tumbled 6.6 percent to 6.69 yuan. Poly Real Estate plunged 8.5 percent to 6.77 yuan. Gemdale Corp. (600383) fell 7.7 percent to 5.91 yuan
  • European Stocks Rise to Six-Year High Amid Deal Talk. European stocks advanced to a six-year high as companies from Scania AB to Dixons Retail Plc rallied amid heightened mergers-and-acquisitions activity, outweighing a drop in HSBC (HSBA) Holdings Plc which posted worse-than-estimated profit. Scania soared to its highest price since July 2007 after Volkswagen AG offered to buy the remaining stake in the Swedish truckmaker for 6.7 billion euros ($9.2 billion). Dixons jumped 6.7 percent as it confirmed talks with Carphone Warehouse Group Plc for a possible merger. HSBC declined the most in six months. Vodafone Group Plc (VOD)’s new shares traded after a consolidation and cash distribution. The Stoxx Europe 600 Index rose 0.6 percent to 338.19 at the close of trading, its highest level since Jan. 14, 2008. The benchmark climbed 0.8 percent last week to its highest level since January 2008 as companies from Meda AB to Valeo SA posted better-than-forecast earnings.
  • Copper Declines Most in a Month on China’s Slowing Demand. “We are seeing broad-based weakness in the metals space, as concerns about China are once again dragging values lower,” Edward Meir, an analyst at INTL FCStone in New York, wrote in a note today. Slowing home-price gains in China “may also explain the rumored move by the banks,” he said. Copper futures for delivery in May fell 1.2 percent to $3.222 a pound at 10:28 a.m. on the Comex in New York, heading for the biggest loss for a most-active active contract since Jan. 23. On the London Metal Exchange, copper for delivery in three months fell 1.2 percent to $7,070 a metric ton ($3.21 a pound).
  • Gold Climbs to 16-Week High as U.S. Data Spurs Demand. “There is some safe-haven buying because of continued signs of slowing growth in the U.S.,” Tom Power, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “Concerns about Ukraine remain.” Gold futures for April delivery climbed 1 percent to $1,336.60 an ounce at 10:44 a.m. on the Comex in New York after earlier today trading at $1,338.20, the highest for a most-active contract since Oct. 31.
  • Greed Turning Losers to Leaders in Russell 1000 Index. Two things explain why the biggest gains in the U.S. stock market this year are coming from companies without profits, according to Jeff Mortimer of BNY Mellon Wealth Management: Greed, and fear of missing out. Unprofitable companies such as Zynga Inc. (ZNGA) and FireEye Inc. (FEYE) are leading gains in the Russell 1000 (RIY) Index. The Nasdaq Biotechnology Index is up 25 percent in the past 10 weeks, the most since February 2012, data compiled by Bloomberg show. Less than a third of its 122 companies earned any money in the last 12 months. Marijuana shares, which trade on venues with less stringent reporting requirements, are among the most active.
Wall Street Journal: 
Fox News:
  • Hagel calls for shrinking Army to pre-WWII size. Defense Secretary Chuck Hagel called Monday for shrinking the U.S. Army to its smallest size in decades, along with other cuts, drawing criticism that the drastic changes will hurt U.S. security. Hagel announced his Pentagon budget priorities Monday afternoon. The Army had already been preparing to shrink to 490,000 active-duty members from a wartime peak of 570,000. Hagel is proposing to cut it further to between 440,000 and 450,000. That would make it the smallest since just before the U.S. entered World War II.
  • It's not the weather, stupid, it's the economy! "The mantra of late when it comes to assessing the high frequency economic data has been to blame it on the weather," Tom Porcelli, chief U.S. economist at RBC Capital Markets, said in a report. "But it seems to us that folks are all too eager to dismiss what could potentially be some real underlying weakness."
Business Insider: 
  • Fed's Fisher says backs reducing stimulus in $10 bln steps. Dallas Federal Reserve Bank President Richard Fisher said on Monday that he would like the U.S. central bank to continue to scale back its monthly bond-buying stimulus by $10 billion at each of its upcoming policy meetings. "That's certainly what I am in favor of," Fisher told Fox Business television when asked if he wanted to reduce the asset purchases by $10 billion at each meeting. "I am very happy with doing this in the measured steps of which (Fed Chair) Janet Yellen has spoken about recently, and I'm in full accord on that front," he said.
  • U.S. services growth slows in Feb -Markit. Growth in the U.S. services sector as well as the pace of hiring slowed in February, an industry report showed on Monday, the latest data to suggest an unusually cold winter is dragging on economic activity. Financial data firm Markit said its "flash" or preliminary services sector purchasing managers index slipped to 52.7 in February from 56.7 in January.
Financial Times:
  • Greece in banking sector stand-off with bailout lenders. The Greek government and its bailout lenders are locked in a new stand-off over the health of Greece’s banking sector, with Athens contending its financial system requires less than €6bn of new capital, while international monitors insist it needs at least three times that amount.

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