Tuesday, August 05, 2014

Today's Headlines

  • Putin Orders Retaliation as Russia Seeks Aid for Ukraine. President Vladimir Putin ordered the government to prepare a response to U.S. and European sanctions as Russia said eastern Ukraine neared a “humanitarian catastrophe” and required immediate international assistance. “Political instruments of pressure on the economy are unacceptable, they contradict all norms and rules,” Putin said today during a meeting with Alexey Gordeev, governor of the Voronezh region near Ukraine. Any retaliation “must be done extremely carefully to support producers and avoid harming consumers.” Putin is showing no sign of backing down over Ukraine since the U.S. and the European Union tightened sanctions last week, with Russia massing forces on its neighbor’s border in the biggest military buildup since troops were withdrawn from the area in May.
  • Militants Target Second Iraqi Dam as Infrastructure Attacked. Islamic militants in Iraq are battling to seize two of the country’s largest dams as a breakaway al-Qaeda group seeks to consolidate control over the territory it took this year. Fighting between militants from the so-called Islamic State and Kurdish security forces raged for a third day near the Mosul dam, Iraq’s largest, Hisham al-Brefkani, member of the Nineveh provincial council, said in a phone interview. About 350 kilometers (200 miles) to the south, Iraqi forces engaged militants in the farmland and villages near the Haditha dam, Khalid al-Hadithi, a city council chairman, said in an interview.
  • Bond Liquidity Falls 70% in Europe as Sales Soar: Credit Markets. Credit market liquidity has dropped by about 70 percent since the 2008 crisis and continues to decline even as soaring issuance boosts the total size of the market, according to Royal Bank of Scotland Group Plc. A European corporate bond issue now trades once a day on average, compared with almost five times a day a decade ago, according to RBS. It’s tougher to trade even though sales of corporate bonds have surged more than 25 percent to about 565 billion euros ($758 billion) this year from 447 billion euros in the same period of 2013, according to data compiled by Bloomberg. Historically low yields fueled by unprecedented central-bank stimulus are prompting concern that a bubble is being created in the bond market, drawing warnings from regulators and analysts of future instability. The European Central Bank and the Bank of England both cited lack of liquidity in bond markets as cause for concern in their latest financial stability reports this year. The risk is that when sentiment changes and bondholders want to sell, they’ll all try to do it at the same time. Managers should be hedging to offset the risk of taking losses on illiquid positions, said Kirk at Twentyfour Asset Management. “It’s going to be a challenge to exit, that’s the worry of every portfolio manager, and if it’s not, it should be,” he said
  • Goldman(GS) Sees End to Narrowing Spreads in Europe Periphery. “We do not expect any further compression of spreads,” Goldman Sachs strategists Silvia Ardagna and Francesco Garzarelli wrote in an e-mailed note today in London. “We are more concerned about Italy where, over the past few months, economic activity data has continued to surprise on the downside and institutional and structural reforms have not yet been delivered.”
  • Bank of New York-Managed Fund Loses 51% on Argentina Writedowns. Bank of New York Mellon Corp. said a Brazil-based investment fund lost 51 percent of its net asset value because of writedowns on investments linked to Argentine government debt. The Brasil Sovereign II Fundo de Investimento de Divida Externa FIDEX took a loss on Aug. 1 of 197.9 million reais ($87.2 million), according to a regulatory filing yesterday by BNY Mellon DTVM, the bank’s Brazilian fund manager. 
  • Emerging Stocks Fall on China Growth Concern as Aeroflot Slides. Emerging-market stocks fell as Taiwan Semiconductor Manufacturing Co. led technology shares lower and China’s non-manufacturing industry declined. Russian equities dropped as OAO Aeroflot tumbled to the lowest level since March. Taiwan Semiconductor sank to a two-month low in Taipei. Aeroflot, Russia’s biggest air carrier, lost 6 percent after Vedomosti reported the government is considering European flight restrictions. The ruble fell as the nation pulled its third local bond sale in a row. Currencies in Malaysia, South Korea and Indonesia gained at least 0.4 percent. The rupee stayed stronger after India’s central bank held interest rates. The MSCI Emerging Markets Index decreased 0.5 percent to 1,063.57 at 11:46 a.m. in New York.
  • European Stocks Climb as Credit Agricole Beats Forecasts. European stocks rose, rebounding from four days of losses, as companies including Credit Agricole SA and Deutsche Post AG reported better-than-expected earnings. Credit Agricole climbed 2.2 percent after also saying a key solvency measure improved in the second quarter. Deutsche Post gained 2.2 percent after reporting a 5.7 percent increase in quarterly profit. Telefonica SA fell 1.7 percent after saying it offered 6.7 billion euros ($9 billion) for a Vivendi SA unit. The Stoxx Europe 600 Index climbed 0.3 percent to 332.1 at the close of trading, paring earlier gains of as much as 0.8 percent.
  • Copper Caps Biggest Loss in 8 Weeks as Dollar Gains. Copper futures for delivery in September fell 1.2 percent to settle at $3.2045 a pound at 1:14 p.m. on the Comex in New York, the biggest decline since June 6
  • WTI Oil Falls on Forecasts That U.S. Refineries Cut Rates. WTI for September delivery dropped $1.06, or 1.1 percent, to $97.23 a barrel at 1:05 p.m. on the New York Mercantile Exchange. Futures touched $97.09 on Aug. 1, the lowest intraday level since Feb.
  • Einhorn Says Hard to Find Investments Amid Market’s Climb. Hedge-fund manager David Einhorn is struggling to find value amid a five-year stock market rally. “We had a difficult time finding new investments this quarter,” he said today on a conference call discussing results at Greenlight Capital Re Ltd. (GLRE), the Cayman Islands-based reinsurer where he is chairman. “As the market continues to rise in the face of conflicting economic data, global unrest, and looming overdue Fed exit from quantitative easing we remain cautiously positioned.”
  • Over 70b Yuan Risk Assets Reported in China Trust Sector. More than 50b yuan assets are classified as "high-risk" assets, citing people with knowledge of the matter. Citic Trust, Huarong Trust and New China Trust have "serious" risks because their risky assets exceed their net assets at certain points, according to the meeting. 11 other trust cos. have "large" risks. Heads of the trust cos. will be forced to step down if risks emerged from other projects out of the list.

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