BETWEEN THE HEDGES: Today's Headlines

Thursday, July 17, 2014

Today's Headlines

Posted by Gary .....at 2:45 PM

Bloomberg:

Ukraine Says Malaysian Airliner Shot Down Near Russian Border. A Malaysian Airlines jet was shot down over eastern Ukraine killing all 295 people on board, with the government in Kiev blaming pro-Russian rebels. The separatists deny the accusation. The Boeing 777 flight from Amsterdam to Kuala Lumpur was hit by a missile and went down near the eastern town of Torez, about 30 kilometers (18 miles) from the Russian border, Ukraine’s Interior Ministry said on its Facebook page. The plane crashed in the main battleground of Ukraine’s civil war and is one of a number to have been downed in the region in the past month. Russian President Vladimir Putin, who’s returning from Moscow from a visit to South America, has repeatedly denied his country has any involvement in the insurgency. The U.S. said this week that Russia is supplying the rebels with weapons and tightened sanctions against it yesterday.

Ruble Slides Most Since Crimea on Sanctions, Stocks Drop. The ruble weakened the most since the country intervened in Crimea and Russian stocks fell as the U.S. imposed new sanctions on companies to punish President Vladimir Putin for failing to end support for rebels in Ukraine. The currency lost 2.3 percent to 35.1610 per dollar at 8:26 p.m. in Moscow, the most since March 3. The Micex Index (INDEXCF) slid 2.3 percent to 1,440.63, the lowest since May 30. OAO Rosneft (ROSN) posted the biggest retreat since May 2013 and its bonds fell the most on record after the oil producer appeared on a list released by the Obama administration, which acted in concert with the European Union yesterday to escalate sanctions. OAO Novatek, also on the list, had its steepest drop in four months.

Rosneft Sanctions to Boost Reliance on China Loans. OAO Rosneft (ROSN), the world’s biggest publicly traded oil producer by volume, will rely on deals with China to withstand the latest U.S. sanctions against Russia.

China Faces Second Corporate Bond Default Amid World’s Biggest Debt. China faces what would be the second default in the nation’s onshore bond market after a builder said it may fail to make a payment next week, the latest sign of stress in the world’s biggest corporate debtload. Huatong Road & Bridge Group Co., based in the northern province of Shanxi, said it may miss a 400 million yuan ($64.5 million) note payment due July 23, according to a statement to the Shanghai Clearing House yesterday. Chairman Wang Guorui is assisting authorities with an official investigation, it said, without elaborating. Wang was removed from the Chinese People’s Political Consultative Conference Shanxi Committee on July 9 for suspected violations of the law, according to an official statement and media report last week.

China Rate Swap Jumps as Bond Sales Pulled Amid Default Risk. China’s interest-rate swaps jumped the most in a year and at least four companies scrapped debt sales amid concern the nation faces what would be the second default in its $4.4 trillion onshore bond market. The cost of one-year swaps that exchange fixed payments for the floating seven-day repurchase rate rose 17 basis points, or 0.17 percentage point, to 4.10 percent in Shanghai, according to data compiled by Bloomberg. That’s the biggest increase since July 22, 2013, and adds to a 20 basis-point gain in the last three days. Junk bond yields jumped the most in three months.

Australia Scrapping Pollution Levy Marks First U-Turn on Climate. Australia’s decision to repeal its levy limiting fossil-fuel pollution makes it the first nation to turn back from a market approach to fighting global warming. Prime Minister Tony Abbott’s government won final approval from Parliament yesterday to scrap a levy about 300 companies paid for their carbon dioxide emissions. The move leaves Australia, the largest polluter per capita among industrial nations, without a system for reducing greenhouse gases as it prepares to host a meeting of the Group of 20 nations.

European Stocks Retreat as Ukraine Tension Escalates. Stocks in Europe fell the most in a week, extending losses in the last 30 minutes of trading after a report that a Malaysian passenger jet crashed in Ukraine, as the European Union and the U.S. imposed further sanctions on Russia. Novartis AG lost 1.7 percent after posting quarterly profit that missed projections. Sandvik (SAND) AB retreated 4.1 percent after earnings fell short of estimates. ITV Plc rallied 6.2 percent after Liberty Global Plc bought a minority stake in the U.K. commercial broadcaster. SAP SE rose 2.4 percent after the largest maker of business-management software posted revenue that beat estimates. The Stoxx Europe 600 Index dropped 0.9 percent to 339.74 at the close of trading in London. The benchmark gauge has fallen 0.6 percent this month as investors weighed the capital strength of Portuguese banks and considered valuations near their highest levels since 2009.

Gold Futures Extend Gains as Ukraine Says 777 Shot Down. Gold futures for August delivery rose 1.3 percent to $1,316.20 an ounce at 12:39 p.m. on the Comex in New York, heading for the biggest gain since June 19.

Forget Yellen Froth Alarm: Junk Loans Are Hot, Per Funds. The Federal Reserve can send all the warnings it wants about froth in the junk-loan market, but some of the biggest buyers aren’t listening. Instead of backing away from the $750 billion U.S. market, they’re targeting the lowest-ranked portions of collateralized loan obligations, which pool the debt and slice it into pieces of various risk and return. Firms from Apollo Global Management LLC (APO) to GSO Capital Partners LP, the credit unit of Blackstone Group LP (BX), are offsetting that and arranging the CLOs at the fastest pace ever, according to data compiled by Bloomberg. JPMorgan Chase & Co. (JPM) predicted sales may reach a record $100 billion in 2014. The frenzy is fueling gains in the debt, with loans to the most-indebted companies returning 2.5 percent this year and 19 percent since the end of 2011, according to Standard & Poor’s/Loan Syndications and Trading Association index data. They’re up 0.1 percent in July even as junk bonds lose 0.3 percent. This hot market is raising eyebrows at the Fed, where policy makers are trying to temper investors’ appetite for risk while also holding their benchmark interest rate near zero for a sixth year.

Young Adults Stay at Home as U.S. Multigenerational Living Rises. The share of young adults living with parents or other family members in the U.S. continues to grow in the aftermath of the most severe recession in the post-World War II era. A record 57 million Americans, or 18.1 percent of the population, lived in a multigenerational household in 2012, a report released today by the Pew Research Center in Washington showed. Almost one in four 25- to 34-year-olds had such living arrangements, and young men in particular were more likely to reside with their families.

Wall Street Journal:

Malaysia Airlines Crash in Ukraine: Streaming Coverage.

Fed’s Bullard: Fed May Need Rate Rises ‘Sooner Rather Than Later’. Federal Reserve Bank of St. Louis President James Bullard said Thursday said if the economy continues to grow around its current pace, the central bank may have to raise short-term interest rates “sooner rather than later.” The Fed “is closer to its macroeconomic targets today than it has been most of the time since 1960,” Mr. Bullard said. “Stronger-than-expected data, rising inflation and rapidly improving labor markets may change” the Fed’s rate outlook “in the months and quarters ahead,” he said. Getting what is now an ultraeasy money policy stance off its current emergency setting and back to something more normal “will take a long time,” Mr. Bullard said. “Current policy settings are far from normal, suggesting an earlier start” to raising short-term rates may be appropriate, he said.

MarketWatch.com:

Yen reaches five-month high against euro.

We’re in the third biggest stock bubble in U.S. history.

CNBC:

Malaysian air crash amplifies move to Treasurys. Benchmark 10-year U.S. "One thing we know is … this was a major strike, a deliberate strike to get giant aircraft at that altitude…," Gen. Barry McCaffrey told CNBC Thursday. Treasury notes rose 14/32 of a point, with the yield at 2.48 percent. The 30-year Treasury bond climbed 28/32 of a point in price to push the yield down to 3.29 percent, its lowest since May 30.