Bloomberg:
- On Second Thought, China Slowdown Will Hit Global-Growth Outlook. China’s deepening struggles are starting to make a bigger dent in the global economic outlook. Moody’s Investors Service on Friday cut its 2016 growth forecast in Group of 20 economies to 2.8 percent, down 0.3 percentage point from the company’s call less than two weeks ago. China is projected to grow 6.3 percent in 2016, down from 6.5 percent previously, the credit-rating company said in a report. Citigroup Inc. last week pared its projection for world growth in 2016 to 3.1 percent from 3.3 percent, the third straight time the bank has cut the forecast. Recent Chinese data including numbers on credit expansion and fixed-asset investment suggest a sharper slowdown this quarter than Moody’s previously judged, while Citigroup said the worsening outlook was driven by “significant” downgrades for China, the euro area, Japan and several other major countries. Economists in a Bloomberg survey earlier this month gave a median estimate of 3.5 percent global growth in 2016, compared with 3.6 percent in the July survey. “We’re seeing evidence that the slowdown is broader than expected” in China, said Marie Diron, a London-based senior vice president at Moody’s and one of the report’s authors. “It’s long been clear that there’s a slowdown in the manufacturing and construction sector, but the service sector was more resilient. That’s still the case, but we’re seeing some signs of weakness in the labor market.”
- Uh-oh, Canada. China Pales as a Risk to U.S. Growth. The U.S. neighbor to the North could cool off momentum. Canada probably experienced a technical recession in the first half of 2015, and the fact that the No. 1 U.S. export market is in a slump could spell bad news for growth in the world's biggest economy. Canada's gross domestic product contracted for a second quarter in the three months through June, a Sept. 1 report will show, according to almost all economists in a Bloomberg survey. The economy probably shrank by 1 percent, even worse than the 0.6 percent first-quarter drop. "When Canada hurts, U.S. exporters do, too," Bricklin Dwyer, an economist at BNP Paribas in New York, wrote in an Aug. 27 note to clients titled "Canada (not China) matters more."
- India's Rajan Says Prices Aren't Right in Global Asset Markets. Reserve Bank of India Governor Raghuram Rajan has a message for investors around the world: Get ready for potential declines in asset prices. That’s because unprecedented easing by global central banks has helped drive up prices, Rajan said in a Bloomberg Television interview Friday at the Kansas City Federal Reserve’s annual symposium in Jackson Hole, Wyoming. “Those might be the sources of fragility -- that we’ve tried doing too much,” Rajan said. “And as a result, in certain asset markets, prices aren’t correct. And they may correct. Now whether that happens smoothly or that happens in more volatile fashion, I think is anybody’s guess.” The comments come a decade after Rajan, who at the time was the International Monetary Fund’s chief economist, presented a paper at Jackson Hole that proved prescient in warning that a global financial crisis could be triggered by little-understood financial products. Two years later, that crisis scorched the world economy. More recently, Rajan’s criticism has shifted to the years of unprecedented monetary stimulus by central banks in the world’s richest countries. He’s spoken of the dangers of competitive monetary easing and called for greater coordination among policy makers.
- All of That Dollar Borrowing in Emerging Markets Looks Like It's Been One Giant Carry Trade. Since the 2008 financial crisis, companies across emerging markets have been borrowing dollars and converting them into local currencies as part of a massive carry trade. This practice has helped U.S. dollar shadow banking go global as the effects of near-zero U.S. interest rates seep into all corners of the world economy. That's the main finding of a new report released Thursday by the Bank for International Settlements, an institution in Basel, Switzerland, known as the central bank for central banks.
- European Bonds May Extend Losses as Sovereign-Debt Supply Rises. After a volatile week in global markets, traders may be reluctant to increase their holdings of euro-area government bonds as debt supply surges and before the European Central Bank responds to the turmoil kindled in China. Investors last week turned pessimistic on German bonds, sending the 10-year bund yield rising the most in almost three months. Spanish and Italian securities also declined. BNP Paribas SA said it’s too soon to re-enter positions that bet on prices in sovereign-debt markets rising. Austria, Belgium, Germany, Spain and France all will auction securities next week, which tends to suppress prices.
- Fischer Sees Good Reason to Believe U.S. Inflation Will Rise. Federal Reserve Vice Chairman Stanley Fischer said the U.S. central bank should not wait until it reaches its inflation goal before raising interest rates and voiced confidence price pressures would accelerate. “Given the apparent stability of inflation expectations, there is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further,” Fischer said Saturday at the Kansas City Fed’s annual retreat in Jackson Hole, Wyoming. “With inflation low, we can probably remove accommodation at a gradual pace,” he said without specifying when the Fed should start. “Yet, because monetary policy influences real activity with a substantial lag, we should not wait until inflation is back to 2 percent to begin tightening.” The Fed is monitoring the fallout for the U.S. from stock market turmoil spurred by concerns about a slowdown in China. Investors bet that could persuade the U.S. central bank to delay raising rates. Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said it suggested that Fischer wants to get going on rate hikes. “It sounds like Fed Vice Chairman Fischer is getting an itchy trigger finger when it comes to lifting rates,” he said in a note to clients. ’’Today’s news represents an important change possibly in the leadership of the Fed’s position, which clears the way for action on Sept. 17.’’
- Jackson Hole Paper Backs View of Fed Liftoff 'Sooner,' Not Later. U.S. is "nearing" point at which diminishing slack will lead to upward inflation pressure, according to a paper presented at Fed's Jackson Hold symposium that seems to support rate liftoff "sooner rather than later." "We can be confident based on our slack measures that inflation will soon be rising," economists Jon Faust of John Hopkins University and Eric Leeper from Indiana University wrote in paper. Fed policy "could easily devolve into regular goalpost moving" without clearer framework for applying a new approach into deliberations, they wrote.
- Fischer Keeps Fed Liftoff Options Open as October Comes in Focus. Federal Reserve Vice Chairman Stanley Fischer left open the option of an interest-rate increase next month while two other Fed officials raised the prospect of an October liftoff. Fischer was the most senior Fed official to speak on Friday as policy makers debated what market turmoil means for the U.S. during a barrage of live television interviews at the Kansas City Fed’s annual retreat in Jackson Hole, Wyoming. European central bankers will address the conference on Saturday, providing an international perspective of market convulsions and slower Chinese growth during a panel on global inflation, in which Fischer will also take part.
- Fed, ECB, BOE Officials All Say They See Inflation Rising. Stronger growth will pull inflation higher in the U.S. and Europe, according to three top central bankers who voiced confidence that their regions will escape from headwinds that are keeping inflation too low. Federal Reserve Vice Chairman Stanley Fischer joined European Central Bank Vice President Vitor Constancio and Bank of England Governor Mark Carney Saturday on a panel at the Kansas City Fed’s annual retreat in Jackson Hole, Wyoming, dedicated to discussing inflation dynamics. Their optimism has not been shared up until now by investors, trading in inflation-protected bonds shows.
- Foes Try New Ways To Attack Obama’s Iran Nuclear Deal. Republicans plan votes on new Tehran sanctions as Obama moves to lock up support to implement accord. Capitol Hill opponents of the landmark Iranian nuclear accord are devising a Plan B to ratchet up pressure on Iran as President Barack Obama moves closer to locking up the support needed to implement the deal.
- For China, a Plunge and a Reckoning. In today’s interwoven world, the stock-market crisis should spur Beijing to prefer compromise to bullying.
Fox News:
- Suspect arrested, charged in killing of Texas county sheriff's deputy. (video) Authorities have charged a 30-year-old man with capital murder, after they say he ambushed a Texas county sheriff’s deputy at a suburban Houston gas station in an attack motivated by "absolute madness."
CNBC:
- A 'perfect storm' for Chinese President Xi Jinping. (video) The yuan, China's market, and global confidence in Beijing are all dropping. It's not an easy time to be the leader of the world's second-biggest economy.
Zero Hedge:
NY Times:
- Zombie Factories Stalk the Sputtering Chinese Economy. Changzhi and its environs are littered with half-dead cement factories and silent, mothballed plants, an eerie backdrop to the struggling Chinese economy. Like many industrial cities across China, Changzhi, which expanded aggressively during the country’s long investment boom, has too many factories and too little demand. That excess capacity, many economists indicate, will have to be eliminated for the Chinese economy to return to healthy growth.
Reuters:
- China crisis covers tracks of Japan. As China's stock markets have lurched wildly, seeding dramatic falls across the world, some have drawn parallels with the global financial crisis of 2008 or the Asian version a decade earlier. They are weak comparisons. The abrupt end of Japan's boom in the 1990s, complete with stock crash and property bust, offers the most striking similarities, and the most valuable lessons.
- Half of UK manufacturers worried by China, some review plans - EEF. Just under half of British manufacturers are worried by the possibility of a sharp slowdown in China's economy and one in ten are reviewing their business plans, a survey from an industry group showed on Sunday.
Telegraph:
- If we have a Lehman moment, the West must share blame with China. Black Monday happened because of drastic and ultimately unsustainable measures taken by both Chinese and Western policymakers.
Xinhua:
- China Regional Debt Surges 34% in 18 Months. China's local governments had 24 trillion yuan ($3.8 trillion) of outstanding debt at the end of last year, up 34% from June 2013. The regional authorities had 15.4 trillion yuan of debt that they have to repay and another 8.6 trillion yuan of contingent liabilities, Xinhua said in a report citing a bill the National People's Congress approved. That compares with 17.9 trillion yuan of debt they had at the end of June 2013, according to an official audit. The top legislature approved the 16 trillion yuan regional debt quota for this year. The approval signals China has initiated quota-management for local debt, and has put a "ceiling" for authorities' fund raising, the official news agency said. China's local debt risk "is overall under control, though some regions faces relatively high debt risks," Xinhua said.
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