Tuesday, July 08, 2014

Today's Headlines

Posted by Gary .....at 2:08 PM
Bloomberg:
  • EU Mulls More Russia Sanctions as Ukraine Rebels Fight on. Ukrainian rebels seized a town in the Luhansk region today after a retreat from eastern strongholds as European Union states considered expanding a list of Russians facing sanctions as soon as tomorrow. Several hundred rebels seized Popasnaya, a city of 20,000 people, news service Interfax reported, citing the separatists. After the militants shifted thousands of fighters to the provincial capital of Donetsk last week, Ukrainian forces continued to press their campaign, according to Ukrainian Deputy Foreign Minister Danylo Lubkivsky, who said the separatists wouldn’t agree to peace talks.
  • Russia Threatens Response If Sectoral Sanctions Imposed. Russia will respond against the U.S. and its European allies if measures targeting entire industries are levied over the crisis in Ukraine, according to Deputy Finance Minister Sergey Storchak. “If the situation continues to develop and sectoral sanctions are imposed, it will be necessary to prepare more serious countermeasures,” Storchak said on the ministry’s Facebook page today. “In particular, there may be difficulties with money transfers if sanctions are applied to big banks and the financial sector.”
  • Israel Strikes Gaza by Air, Sea to Halt Rocket Attacks. Israel struck 150 targets in the Hamas-controlled Gaza Strip and authorized the call-up of 40,000 reservists as it weighed a possible ground operation to quell weeks of Palestinian rocket fire into its territory. Gaza emergency services chief Ashraf al-Qedra said 14 people, including three children, were killed today as Israel’s offensive expanded. Targets included senior Hamas operatives as well as militant facilities, the military said. 
  • Brazil Inflation Really at 8% Without Rouseff Fiddling. Brazilian President Dilma Rousseff has been fighting inflation by holding down government-regulated prices. The bill will come due next year. The winner of this October’s presidential election will suffer the consequences of policies that have repressed electricity prices by 30 percent, urban bus fares by 20 percent and gasoline prices by 15 percent since 2011, according to data from Rio de Janeiro-based firm Modal Asset Management. Lifting controls will unleash pressures that will keep inflation above the mid-point of the target for a sixth straight year. Consumer prices as measured by the benchmark IPCA index rose 0.4 percent in June, pushing annual inflation to 6.52 percent, the national statistics agency said today. Prices would be rising by almost 8 percent if it weren’t for controls, according to estimates by Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc., who spoke by phone from New York.
  • Commerzbank Said Next to Face Penalties in U.S. Probe. Commerzbank AG (CBK), Germany’s second-largest lender, will probably be the next bank to resolve alleged U.S. sanctions violations, a person with knowledge of the matter said. The Frankfurt-based firm may incur penalties of at least $500 million as part of a deferred-prosecution agreement with authorities as soon as summer in the U.S., the person said, asking not to be identified because the talks are confidential. Such agreements spare companies a felony conviction.
  • European Stocks Decline as Air France Warns on Earnings. European stocks fell the most in almost three months, led by travel and leisure companies, after Air France-KLM (AF) Group cut its full-year profit forecast. Air France-KLM slumped the most since October 2011 after saying earnings will be hurt amid overcapacity on North American and Asian routes, poor demand for freight and the fallout from a dispute with Venezuela. Commerzbank AG fell to its lowest price since December after a person with knowledge of the matter said it will probably be the next bank to resolve alleged U.S. sanctions violations. The Stoxx 600 slipped 1.4 percent to 339.99 at the close of trading, for its third day of declines.
  • Complacency Breeds $2 Trillion of Junk as Sewage Funded. “It definitely feels like investors are getting overexuberant, and you can stay in overexuberant conditions for a while,” said Fred H. Senft Jr., director of fixed income and equity research for Key Private Bank in Cleveland. “But when it turns it will turn quickly and it will turn very ugly.” Halfway through a sixth year of near-zero interest rates by the Federal Reserve and unprecedented central-bank stimulus from Brussels to Tokyo, almost any borrower is able to raise debt with few questions asked even as the World Bank cuts its outlook for global economic growth. These are boom times for complacency. To gauge just how comfortable the world of debt has gotten, consider:
  • Office REITs in U.S. Plan the Most Construction in Decade. Office REITs, led by Boston Properties Inc. (BXP), Vornado Realty Trust (VNO) and Kilroy Realty Corp. (KRC), are planning to plow almost $11 billion into new projects, triple the amount just two years ago and the most in data going back to 2004, according to research firm Green Street Advisors Inc. Much of that is focused on the coasts, including San Francisco and New York, the areas with the most demand from both tenants and investors.
  • Jefferies CEO Warns of ‘Bad Behaviors’ Returning. Bankers and investors need to ensure they don’t repeat “bad behaviors” that contributed to the credit crisis as the financial-services industry embraces greater risk, said Richard Handler, chief executive officer of Jefferies Group LLC. “People who take short cuts, are political, prioritize themselves above others, take excessive risks for personal gain, don’t value capital, or are unethical are outright cancers,” Handler, 53, also CEO of Jefferies’s parent company, Leucadia National Corp. (LUK), said in his quarterly letter to clients. “These types of people will not only flourish in the next crisis, but most probably they will cause it.”
  • Central Banks Seeking to Spur Supply Side Miracle Come Up Short. Central bankers’ experiment with zero interest rates is falling short on the supply side of their economies. Productivity and labor-force growth are failing to accelerate despite policies Bank of England GovernorMark Carney said should deliver the economic growth needed to generate “supply-side improvement.” “Weaker supply-side performance may dampen the enthusiasm of developed-market central banks to experiment with their growth/inflation trade-off to elicit strong supply,” JPMorgan Chase & Co. economists led by Bruce Kasman said in a July 4 report.
  • Option Skew at 2 1/2-Year Low Signals Treasuries Rise, BofA Says. Long-term Treasuries are poised to rally as the skew in option volatility reached the lowest since 2011, signaling wagers for higher yields have become overdone, according to Bank of America Corp.
Wall Street Journal:
MarketWatch.com:
CNBC: 
ZeroHedge: 
Business Insider:
Reuters:
  • China c.bank reinforces interbank lending limits -sources. China's central bank has reinforced the country's controls on interbank lending by instructing the headquarters of banks to keep close tabs on this area, according to two sources with knowledge of the matter. Interbank loans, which are a part of China's fast-growing and sometimes wayward shadow banking market, have come under increased scrutiny on fears that some may sour as the maturing Chinese economy cools.
  • Sensex falls over 500 points, marks biggest single-day fall since Sept. The BSE Sensex and Nifty slumped more than 2 percent on Tuesday, marking their biggest single-day fall in over 10 months and retreating from record highs hit earlier in the session, after the railway budget raised worries the government would slash spending.
Financial Times:
  • Short selling drops to lowest level since Lehman. Hedge funds have sharply scaled back their bearish bets that the value of stocks is about to fall, with the proportion of shares earmarked for short selling at its lowest level since before the financial crisis despite warnings of renewed market exuberance.

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