Today's Headlines

Bloomberg: 

• Shanghai Shares Detach From Economic Reality as State Funds Buy. In most stock markets, data showing weak economic growth is bad news for investors. In China on Friday, it was just the opposite -- the Shanghai Composite Index rose as much as 1.5 percent after a private gauge of Chinese manufacturing unexpectedly fell to a 15-month low. It’s the latest sign of how divorced the nation’s $7.5 trillion market has become from economic fundamentals amid unprecedented government intervention to prop up share prices. The gauge erased gains toward the end of trading to close 1.3 percent lower. “There is a clear detachment between fundamentals and the movement of stocks on the mainland,” said Gerry Alfonso, a sales trader at Shenwan Hongyuan Group Co. in Shanghai. “The poor factory data should have had a bigger impact.”  

• China Has Entered the Bust Phase: Whelan. (video)

• Shanghai Margin Debt Rises Most in Seven Weeks Amid Stock Rally. Chinese stock investors increased leveraged positions in Shanghai by the most in almost two months as the benchmark equity index extended a rebound. The outstanding balance of margin debt on the Shanghai Stock Exchange rose 1.3 percent to 941.4 billion yuan ($152 billion) on Thursday, the biggest increase since June 2.

• Exit Emerging Markets Before the Fed Moves, Danske Fund Says. Get out of emerging markets before the U.S. Federal Reserve starts raising interest rates. That’s the position of Danica, the pension fund unit of Danske Bank A/S, Denmark’s biggest bank. The fund, which oversees about $50 billion in assets, says the shift that comes once the Fed starts tightening monetary policy will overshadow every other moving piece in markets. High-returning but illiquid markets will be a bad place to be when that happens, according to Jacob Aarup-Andersen, Danica’s chief financial officer.

• Why the Price of Stocks in China Matters to U.S. Credit Buyers. The effects of China’s economic slowdown are trickling into the U.S. debt markets in some small, but meaningful, ways. Investors have suffered a 13 percent decline this year on $56 billion of junk-rated debt of metals and mining companies such as Arch Coal Inc. and Walter Energy Inc., which filed for bankruptcy protection this month. That world of hurt contrasts with a 1.6 percent gain in the $1.4 trillion U.S. high-yield bond market, according to Bank of America Merrill Lynch index data. You can blame China for some of these hefty losses, since the world’s second-biggest economy consumes more than 40 percent of the world’s coal, copper and steel production, according to Barclays Plc analysts.

• German Manufacturing Growth Slowed in July as Exports Decline. German manufacturing growth unexpectedly cooled in July as exports fell for the first time in six months. Markit Economics said on Friday its factory index slipped to 51.5 from 51.9 in June, missing economists’ forecast for an unchanged reading. An export index fell below the key 50 level for the first time since January, indicating a contraction. A services gauge also fell in July, to 53.7 from 53.8, while a composite index of both sectors slipped to 53.4 from 53.7. Economists had forecast 53.9.

• Emerging Currencies Drop to Record Low as China Saps Commodities. Emerging-market currencies deepened their slump to a record low as a surprise slowdown in Chinese manufacturing threatened to exacerbate a rout in global commodity prices. South Africa’s rand led the decline, falling 1.5 percent against the dollar as gold tumbled. Brazil’s real dropped to the weakest level in 12 years on mounting concern that the country’s credit rating will be cut. The lira slid for a third day as Turkey stepped up its fight against Islamic State militants. The Bloomberg Commodity Index sank to the lowest since 2002. A gauge of 20 developing-nation currencies retreated 0.6 percent.

• World’s Worst Currency Drop Sparks Race to Cut Brazil Forecasts. The Brazilian real’s 4.5 percent tumble this week, the most among major currencies worldwide, has forecasters reviewing their exchange-rate targets after the government said it won’t meet fiscal goals. The real touched a 12-year low Friday, falling faster and further than economists had predicted, after Finance Minister Joaquim Levy asked lawmakers to cut a key budget goal. The move sparked speculation that Brazil’s credit ratings will be cut as Latin America’s largest economy heads for the worst recession in a quarter century. The real weakened 1.5 percent to 3.3390 per dollar at 1:21 p.m. in Sao Paulo, the weakest intraday level since March 2003.

• China Slump Breaks Aussie’s Back as S&P Spurs Slide to 2009 Lows. The Australian dollar slumped to the weakest level in six years as a gauge of Chinese manufacturing unexpectedly worsened and Standard & Poor’s said it might lower Australia’s credit rating if the budget doesn’t improve. The Aussie fell against all its 31 major counterparts as Caixin Media and Markit Economics said their flash manufacturing index for China dropped to the lowest in 15 months. China is Australia’s major trading partner. ABN Amro Bank NV, the most accurate Aussie forecaster in Bloomberg Rankings last quarter, lowered its 2015 and 2016 year-end estimates for the currency. China’s numbers “were very weak,” said Roy Teo, a currency strategist at ABN Amro in Singapore. “Everything looks bearish at the moment.” Australia’s currency tumbled 0.8 percent to 72.93 U.S. cents as of 7:22 a.m. in London after sliding to 72.69, the lowest since May 2009. The New Zealand dollar dropped 0.2 percent to 65.95 cents.

• Chinese Stocks Slump as Weak Factory Data Spurs Growth Concerns. Chinese stocks dropped, with a gauge of shares in Hong Kong falling for a sixth week, after a private gauge of manufacturing in the nation unexpectedly declined to the lowest level in 15 months. The Hang Seng China Enterprises Index slumped 1.3 percent to 11,679.01, taking its retreat this week to 1.4 percent.

• European Stocks Little Changed Amid Mixed Earnings; Miners Slump. European stocks fell with miners and auto-related shares, extending their first weekly drop in three, as data around the world signaled worsening economic conditions. Antofagasta Plc and Glencore Plc slipped at least 4.5 percent as commodity producers extended a rout. Volkswagen AG slid 2.7 percent, pacing losses among carmakers, after Manager Magazin said a drop in its Chinese deliveries could hurt earnings by more than 1 billion euros ($1.1 billion). BASF SE declined 4.6 percent after its earnings trailed projections. The Stoxx Europe 600 Index dropped 0.9 percent to 394.64 at the close of trading, reversing intraday gains of 0.5 percent.

• Commodity Collapse Isn’t Slowing Down Amid Worst Week of 2015.
  The commodity collapse that sent gold to a five-year low and pulled crude oil into a bear market isn’t showing any signs of slowing down. The Bloomberg Commodity Index fell 4.3 percent this week, the most since November, and extended a drop to a 13-year low. Shares of Freeport-McMoRan Inc., the biggest publicly traded copper producer, are poised for the worst week since 2011 as the metal dropped to a six-year low in New York. Brent oil is on its way to the longest run of weekly declines since January.

• Copper Extends Slide to Lowest Since 2009 on Weak China Demand. Copper declined to the lowest since 2009 as manufacturing data added to evidence that demand is slowing in China, the world’s biggest metals consumer. A private gauge of Chinese manufacturing unexpectedly fell to the lowest in 15 months. Investors in the nation who are banned from shorting equities may be selling copper instead, exacerbating the metal’s collapse. The rout could get worse, as Goldman Sachs Group Inc. predicts lower copper prices. Traders and analysts were the most bearish since May in a Bloomberg survey. Shares of Freeport-McMoRan Inc., the biggest publicly traded producer of the metal, are heading for the biggest weekly drop since 2011. 

• Citigroup Says Top Trade in Commodity Rout Is Short Iron Ore. In a beaten-up commodities world with copper, gold and crude oil on the slide, Citigroup Inc. said the best trade at present is to wager on further losses in iron ore. “We’ve been generally bearish for the last two years, really, so still even today we probably see more opportunities for the downside than to the upside,” said Ivan Szpakowski, the bank’s commodity strategist in Hong Kong. “Our most-preferred trade at this point would be short iron ore.”

CNBC:

• The Dow just broke a pretty dubious record. (video)

ZeroHedge:

• Fed "Accidentally" Released Dovish Confidential Market-Moving Forecasts, Blames "Glitch". (graph)

• Can We All Stop Being Surprised By Company Earnings "Surprises"?

• The FBI And DOJ Get Involved: Hillary Clinton Sent Confidential Emails From Her Personal Email Account.

• Crude Slips After Oil Rig Count Surges By Most In 15 Months (graph).

• Is This Why Hillary Clinton Just Went Nuclear On Short-Term Capital Gains Tax? (graph)

• Crude Collapse Continues - WTI Trades $47 Handle, New 4-Month Lows, Credit Crashing. (graph)

• The End Of The Supercycle? Commodity "Capitulation" Arrives. (graph)

• Stocks Are Not Cheap (And 'Growth' Won't Help). (graph)

• Presenting The "Glamour" Bubble In All Its Glory. (graph)

• Earnings And Guidance Suddenly Matter? Say It Ain't So.... (graph)

• There Goes The Housing "Recovery" Again: New Home Sales Plunge Most Since 2014. (graph)

• US Manufacturing PMI Hovers Near 19 Month Lows, Employment Tumbles Amid "Worrying Undercurrents". (graph)

• Add Junk Bonds To The Growing Pile Of Concerns. (graph)

ZDF TV:

• Schaeuble Beats Merkel on Handling of Greece Crisis in ZDF Poll. Share of Germans who think Finance Minister Wolfgang Schaeuble has done a good job handling bailout negotiations with Greece was 74%, citing an FG Wahlen poll. Measure for Chancellor Merkel in poll was 62%.