Tuesday, June 16, 2015

Today's Headlines

Posted by Gary .....at 2:37 PM
Bloomberg:      
  • Tsipras Brands IMF Criminal as Merkel Focuses on Greek Solution. Prime Minister Alexis Tsipras hurled criticism at Greece’s creditors, accusing the International Monetary Fund of “criminal” responsibility for his country’s predicament. Addressing lawmakers in Athens on Tuesday, Tsipras gave no sign of backing down in the standoff over Greece’s bailout. Instead, he blasted the IMF’s adherence to austerity and accused the European Central Bank of using tactics that were akin to “financial asphyxiation.” “The situation in which we find ourselves today is that IMF positions prevail when it comes to the strictness of austerity measures asked, while at the same time EU positions prevail when it comes to the denial for any discussion about Greek debt sustainability,” Tsipras, 40, said.
  • Euro Risk Signals Flash Red for a Third Day as Greek Talks Stall. Indicators of risk surged for a third day across the euro zone as a Greek standoff with its creditors continued. The Markit iTraxx Crossover index of credit-default swaps on high-yield companies climbed as much as 18 basis points, the biggest daily gain since April, and was up 12 basis points to 335 basis points at 12:35 p.m. in London. An index linked to the subordinated debt of financial companies rose to 176 basis points, the highest in almost eight months.
  • French Bonds Infected as Greek Crisis Swells Euro-Region Spreads. Europe’s bond selloff is spreading to markets traditionally viewed as safer, with only Germany remaining unscathed by Greece’s impasse with creditors. The extra yield, or spread, that investors get for holding French or Belgian 10-year bonds rather than benchmark German debt surged above 50 basis points for the first time this year. Even bonds of the Netherlands and Finland, which have top AAA grades from at least two of the three major ratings companies, are suffering as the fallout from the Greek debacle spreads beyond the euro-zone periphery. “The semi-core is selling off,” said Piet Lammens, head of research at KBC Bank NV in Brussels. “On the other hand, the gains the bunds have made have also been rather disappointing. With the Greek story you could have expected the bund to make more ground.” The 10-year yield spread between French and German debt widened three basis points, or 0.03 percentage point, to 48 basis points as of 10:38 a.m. in London. It climbed as high as 54, the most since March 2014, up from 33 as recently as June 11.
  • Spanish 10-Year Bond Yield Rises Above 2.5% Amid Greece Impasse. Spanish government bonds dropped, pushing the 10-year yield above 2.5 percent for the first time since August, as Greece signaled it won’t make further concessions this week to unlock the bailout funds needed to avoid default. Irish and Portuguese bonds also declined as concern over the turmoil in Greece increased investor perceptions of risk in other peripheral euro-area nations. Greece has no plans to present new proposals at a meeting of European finance ministers in Luxembourg on June 18, Finance Minister Yanis Varoufakis told Bild newspaper. German 10-year bunds rose for a fourth day, boosted by demand for the assets as a haven.
  • I Knew Italy's Economy Was Bad, but the Truth May Be Even Grimmer. (graph)
  • German Investor Confidence Drops as Greece Clouds Outlook. German investor confidence fell for a third month as the risk of a Greek debt default stoked uncertainty in Europe’s largest economy. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, slid to 31.5 in June from 41.9 in May. That’s the lowest level since November. Economists had forecast a decline to 37.3, according to the median of 36 estimates in a Bloomberg survey.
  • China Bubble Debate Turns to When, Not If, Stocks Will Tumble. It’s no longer a question of whether China’s stock-market rally is a bubble, but when the bubble will burst. That’s the refrain from a growing number of analysts as valuations climb to levels that by some measures already exceed the peak of China’s last equity mania in 2007. A market crash may come within six months, Bocom International Holdings Co. said Tuesday, citing an analysis of global bubbles over 800 years that shows the speed of gains in China mirroring past market peaks. Macquarie Investment Management, whose Asian stock fund is outperforming 97 percent of peers in 2015, has already eliminated exposure to mainland shares after turning bearish for the first time in seven years. The government may engineer a correction if valuations rise much further, according to CLSA Ltd. “We are probably going to be in a very volatile trading period before a crash eventually happens,” Hao Hong, the chief China strategist at Bocom International in Hong Kong, said in an interview with Bloomberg Television. “It is plain that China is in a bubble.”
  • Real Cost of Chinese Stocks Dwarfs 2007 Bubble. Chinese stocks are getting a lot more expensive than the benchmark Shanghai Composite Index suggests. Using the most-watched mainland equity gauge as a guide, an investor might conclude that valuations are pricey, though still within reason: the index trades near a five-year high of 19 times estimated earnings -- well below the level of 36 reached during the 2007 bubble -- and in the same ballpark as the Standard & Poor’s 500 Index’s multiple of 17. The problem with the Shanghai Composite is that 94 percent of Chinese stocks trade at higher valuations than the index, a consequence of its heavy weighting toward low-priced banks. Use average or median multiples instead and a different picture emerges: Chinese shares are almost twice as expensive as they were when the Shanghai Composite peaked in October 2007 and more than three times pricier than any of the world’s top 10 markets. “The market rally is more fragile than in 2007,” Francis Cheung, a strategist at CLSA Ltd. in Hong Kong, wrote in a June 12 report. “With the de-rating of banks and other large SOEs that make up the largest part of the index, it is likely more accurate to compare valuation with median PE.” The Shanghai index lost 3.5 percent at the close Tuesday, taking its decline this week to 5.4 percent. 
  • Guotai Junan Targets $4.8 Billion in Biggest China IPO Since ’10. Guotai Junan Securities Co., China’s largest brokerage by revenue, is capitalizing on a world-beating stock rally by seeking $4.8 billion in the nation’s biggest initial share sale in almost five years. Guotai Junan will sell shares at 19.71 yuan each to raise as much as 30.1 billion yuan ($4.8 billion), the brokerage told Shanghai’s stock exchange on Tuesday. It will be the biggest domestic initial offering since China Everbright Bank Co. raised $3.2 billion in August 2010, data compiled by Bloomberg show.
  • Europe Stocks Halt 2-Day Drop as Swiss Shares Rise; Greece Falls. European stocks rebounded from their biggest two-day drop since April, helped by a rally in German shares. Greek shares fell amid a debt impasse. The Stoxx Europe 600 Index added 0.6 percent to 385.49 at the close of trading. It reversed losses of 1.1 percent after the European Commission said it would restart talks with Greece if offered new proposals. Germany’s DAX Index also swung to gains, rising 0.5 percent as a drop in the euro helped exporters. Spanish and Portuguese shares erased declines exceeding 1.5 percent.
  • Copper Falls to 3-Month Low as Metals Sag on Growth Woes. Copper fell to a three-month low on concern that a cooling economy in China and Greece’s debt turmoil will stymie global growth, cutting demand for raw materials. Investors this month pulled $37.6 million from U.S. exchange-traded funds backed by industrial metals, a 10 percent drop that is the biggest of any commodity group, data compiled by Bloomberg show. Money managers have turned net-bearish on copper for the first time since February, U.S. government data show.
  • CBO Warns on Growing U.S. Debt. (video)
Wall Street Journal:
ZeroHedge: 
Telegraph: 

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