Wednesday, July 08, 2015

Today's Headlines

Posted by Gary .....at 3:12 PM
Bloomberg:     
  • China Bans Stock Sales by Major Shareholders for Six Months. China’s securities regulator banned major shareholders, corporate executives and directors from selling stakes in listed companies for six months, its latest effort to stop the nation’s $3.5 trillion stock-market rout. Investors with stakes exceeding 5 percent must maintain their positions, the China Securities Regulatory Commission said in a statement. The rule is intended to guard capital-market stability amid an “unreasonable plunge” in share prices, the CSRC said. While China has already ordered government-owned institutions to maintain or boost their stock holdings, the CSRC’s directive expands the ban on sales to non-state companies and potentially foreign investors who own major stakes in mainland businesses. Regulators have unveiled market-boosting measures almost every night over the past 10 days, steps that have so far failed to revive investor confidence. Foreign traders sold Chinese shares at a record pace this week in part due concerns over the government’s meddling in markets. “It suggests desperation,” Mark Mobius, chairman of Templeton Emerging Markets Group, said by phone Wednesday. “It actually creates more fear because it shows that they’ve lost the control.”   
  • Inside China's Stock Market Collapse. (video)
  • Is China Having a Crisis of Legitimacy Over Markets? (video)
  • This Is Why So Many Chinese Companies Are Suspende. China's corporations have been big fans of stock-based loans, too.  At least 1,331 companies have halted trading on China's mainland exchanges, freezing $2.6 trillion of shares, or about 40 percent of the country’s market value, Bloomberg reported on Wednesday. The Shanghai Composite Index fell 5.9 percent on Wednesday. It's now about 32 percent below the peak of 5,166 it reached on June 12. The unwinding of margin loans is adding fuel to the fire. Individual investors in China, as we all know by now, have used generous margin financing terms to enter the stock market and then build up their portfolios. Less-known is that Chinese companies have been doing the same thing by using their own corporate stock to secure loans from banks. This means that they stand to lose a lot when those share prices start trending dramatically lower.
  • China Ousts Russia as Riskiest BRICS Market for Options Traders. China’s market meltdown is making even Russia look good. Shanghai stocks overtook Moscow-listed equities as the riskiest for investors in the so-called BRICS universe on Wednesday for the first time since the build-up to Russia’s military intervention in Crimea in February 2014. Expectations for price swings in China jumped 23 percent today, extending the 2015 increase to 71 percent, compared with a 39 percent drop in Russian volatility this year, according to options data.
  • Greeks Work on Crafting Now-or-Never Reform Plan to Keep Euro. Greece is working against the clock on a package of proposed reforms to convince European leaders headed by German Chancellor Angela Merkel that it can keep the euro. The country has until midnight Thursday in Brussels to present measures to reform its economy and cut spending in exchange for a new European bailout. Merkel is willing to let Greece go if Prime Minister Alexis Tsipras’s government doesn’t deliver plans Germany views as credible, according to two government officials familiar with her strategy, who asked not to be identified discussing private deliberations. 
  • Greece Faces Euro Exit Unless Demands Accepted by Sunday. (video) European leaders talked openly about a Greek exit from the euro ahead of a weekend summit on the country’s economic future, breaking dramatically with years of denial about the possibility. Europe has “a Grexit scenario prepared in detail,” European Commission President Jean-Claude Juncker said late Tuesday night, hours before Austrian Chancellor Werner Faymann said Greece’s Plan B is “another currency.” The European Union set a Sunday deadline to reach a deal with Greece on a rescue in exchange for austerity measures and economic reforms, while the country formally requested a new three-year bailout and promised to pay back its debts.
  • Bond Traders Worry Central Banks Are Firing Guns Without Bullets. What happens when central bankers do everything they can to spur economic growth and prop up markets -- and still fail? That’s a question that’s come to the fore in the past few days as China unsuccessfully tries to support its plunging stock market and the European Central Bank pledges to use its monetary tools to prevent fallout from a Greek default. Even after trillions of dollars of central-bank stimulus globally, bond traders are showing they’re still worried about stagnant global growth.
  • Russian Stocks Test Bearish Gauge as China Turmoil Pounds Oil. Russian stocks breached a bearish threshold that signals they may extend declines as China’s equity-market rout spread across the world, wiping out oil’s gains this year. The benchmark Micex Index fell as much as 2.5 percent to 1,573.98, bringing it temporarily below the 200-day moving average of 1,585.7 for the first time since December, data compiled by Bloomberg show.
  • Stocks Gain From Italy to Portugal as Two-Day Selloff Is Pared. Equities rallied in European countries that bore the brunt of a two-day selloff following the Greek vote, with stocks in Italy and Portugal leading the way. The FTSE MIB Index and the PSI 20 Index advanced at least 1.4 percent, rebounding from losses of 6 percent or more in the past two days. Spain’s IBEX 35 Index climbed 0.8 percent. The Euro Stoxx 50 Index added 1 percent to 3,327.5 at the close.
  • Iron Ore Slumps to Lowest Since at Least 2009 in China. Iron ore retreated to the lowest level in at least six years as a rout in China’s stock markets threatened to hurt demand in the largest buyer just as the biggest producers plan to raise output. Ore with 62 percent content delivered to Qingdao sank 10 percent to $44.59 a dry metric ton on Wednesday, according to Metal Bulletin Ltd. That’s the lowest price on record dating back to May 2009, the data show. The raw material was until the past several years traded predominantly through annual benchmark prices. Compared with those benchmarks, this would be the lowest since 2005, data compiled by Clarkson Plc show.
  • Goldman(GS) Sees Negative Loop in Commodities From Excess Money. It’s going to take a prolonged slump in commodities to break a cycle of too much money and excess production, according to Goldman Sachs Group Inc. The market is caught in a “negative feedback loop,” where lower raw-material prices are strengthening the dollar and lowering production costs for countries with weaker currencies, Goldman analysts wrote in a report. That boosts the prospects of higher U.S. interest rates and a reduction in emerging-economy debt, according to the bank. Demand for commodities will subsequently decline, capping prices and further reinforcing the greenback, it said. “Commodity markets still have access to far too much capital relative to future demand and a declining cost structure,” analysts including Jeffrey Currie in New York wrote in the note. “Long-term surpluses in most commodity markets require prices to remain lower for longer to balance both the near-term physical supply and demand, but more importantly, the longer-term supply and demand for capital to fund future investments.”
  • Mining’s $143 Billion Stock Rout Signals Escalating China Fears. Fears of faltering Chinese growth ignited a $143 billion meltdown in global mining stocks as investors confront sputtering demand in the world’s biggest consumer of commodities. The Bloomberg World Mining Index of 79 producers dropped 17 percent in the past 10 days as prices for industrial metals such as copper, nickel and aluminum sank to six-year lows. The price of iron ore, a key profit driver for top-ranked BHP Billiton Ltd. and Rio Tinto Group, slumped 10 percent Wednesday to its lowest since at least 2009 as new supply floods the market.
  • NYSE Suspends Trading in All Securities. Investors were forced to steer orders away from the New York Stock Exchange as the biggest U.S. share venue halted trading to fix a computer malfunction. The suspension, announced to securities firms through notices on the NYSE website around 11:32 a.m., dropped the biggest U.S. share platform out of the interconnected network of venues that make up the American equity market. That network continued to operate, however, as other exchanges such as the Nasdaq Stock Market and Bats Global Markets Inc. picked up the runoff.
  • Attack on U.S. Power Grid Could Cost $1 Trillion, Lloyd’s Says. A cyber attack on the U.S. power grid could cost more than $1 trillion because of property damage, higher death rates and crippled infrastructure, according to Lloyd’s of London. “The scenario predicts a rise in mortality rates as health and safety systems fail; a decline in trade as ports shut down; disruption to water supplies as electric pumps fail and chaos to transport networks,” according to a report from the insurance market and Cambridge University.
  • Fed’s Williams Still Sees 2015 Rate Rise as Growth Trumps Risks.
  • Hedge Funds Are a Holdout in Fed’s Plan to Prevent the Next Lehman. Regulators need help from hedge funds to make sure a bank failure in the future doesn’t roil markets the way Lehman Brothers Holdings Inc. did. The problem is hedge funds don’t see what’s in it for them. The Federal Reserve, Federal Deposit Insurance Corp. and Bank of England have met with representatives for firms such as Citadel LLC, D.E. Shaw & Co., BlackRock Inc. and Pacific Investment Management Co., to try to persuade them to wait before canceling contracts with a collapsing lender, said three people with knowledge of the matter. The purpose is to give regulators more time to resurrect a failed bank so derivative trades and lending arrangements that underpin the global financial system don’t have to be terminated. Money managers who account for trillions of dollars of swaps trades are resisting, because they’re concerned that giving up their right to quickly kill contracts with a bankrupt firm could stick them with losses and violate a requirement that they act in their investors’ best interests. 
  • Microsoft(MSFT) to Cut Jobs, Take $7.6 Billion Writedown on Nokia. Microsoft Corp. plans to cut as many as 7,800 jobs and write down about $7.6 billion on its Nokia phone-handset unit, wiping out nearly all of the value of a business it acquired just 14 months ago.
Wall Street Journal:
Barron's:
  • Commodities, China and Greece Hint at Deflation. Like a falling barometer, sliding commodity prices can often signal an approaching storm for investors. The contagion from the crisis in Greece and the crash in China to other major securities markets so far has been relatively muted. The far greater impact appears to be in commodities, which have fallen hard this week. Losses have been across the board, from crude oil to corn. And while there hasn’t been any single, strong linkage from the commodity pits to the tumult in Athens and Asia, the decline shouldn’t be ignored. Like a falling barometer, sliding commodity prices can often signal an approaching storm.
CNBC:
Telegraph: 
ZDF TV:
  • Tsipras Showing No Willingness to Reform His Country. German Social Democratic Party lawmaker Carsten Schneider, an SPD deputy group leader in parliament, says on ZDF TV he doesn't see any kind of willingness on the part of Greek Prime Minister Alexis Tsipras to overhaul his country's economy. "That's why I'm not talking about debt reduction if everything goes on afterward as before". "Only when I have certainty that this Greek government works in a serious fashion on solving the country's problems, only then can the debt load be discussed in a second step, but not before". Schneider says he's "skeptical" that agreement between Greece, creditors can be reached by Sunday.
Le Figaro:
  • Poll Shows 62% of French Against Greek Debt Writedown. Poll also shows 73% of Germans against Greek debt writedown. 44% of the French trust German Chancellor Merkel to solve the crisis between the EU and Greece; 24% trust French President Hollande. 45% of the French and 60% of the Germans want Greece to exit the euro area.

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