Bloomberg:
- Yuan Bear in Wilderness in 2014 Now Warns of China Credit Crisis. In a March 2014 report, Daiwa Securities Co. senior economist Kevin Lai forecast a 10 percent drop in the yuan by the end of 2015 and warned China needed “very delicate” policy to avert a crisis. He’s still worried, and no longer so alone. The currency has devalued 3.7 percent since Tuesday morning, when the People’s Bank of China cut its daily reference rate by a record and said it would let the market play a greater role in the fixing. Lai, whose uber-bearish prediction is now halfway to fulfillment, estimates China has some $3 trillion of dollar-denominated debt outstanding which has suddenly become more expensive. “The PBOC is telling people that if they want to take their money out, please do,” Lai said in an interview Wednesday. “As the selling pressure increases, this could spin into a currency and a credit crisis. They’re exporting the crisis.” Chinese corporations have sold bonds and gotten bank loans offshore at a record pace in the past three years and now are the biggest component of major fixed-income indexes in the region. These issuers will buy dollars as they seek to protect themselves from the currency move, Lai said, increasing the pressure on the yuan and making it even more difficult to pay back their foreign dues. Already there are signs of cash draining from the country. The one-year sovereign yield jumped 20 basis points in two days and the similar interest-rate swap rose nine basis points.
- China’s Ailing Growth Fuels Surge in Emerging-Market ETF Hedges. (video) Emerging-market equities’ descent into a bear market amid a slowdown in China’s economy has ignited hedging in a popular exchange-traded fund. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, which tracks hedging costs on the iShares MSCI Emerging Markets fund, jumped to the highest level in 18 months versus a similar gauge for the Standard & Poor’s 500 Index. Investors in the ETF are bracing for more swings as they watch China’s deteriorating economy drag down developing markets amid the Federal Reserve’s intentions to tighten monetary policy for the first time in more than nine years.
- Ukraine Says Attacks on Troops Intensify as Unrest Worsens. Ukraine said pro-Russian militants intensified attacks on government troops overnight in a bid to win ground, a sign the recent surge in fighting is worsening. Tensions in the 16-month conflict rose this week as the army reported renewed assaults on a village in the Donetsk region, an accusation the separatists deny. That prompted Ukraine to redeploy heavy artillery there that was removed under a February peace accord. The rebels, who control large swathes of the former Soviet republic’s easternmost regions, are trying to advance again toward the village, located near the port of Mariupol, military spokesman Andriy Lysenko said.
- Germany Says It Can’t Back Greek Bailout Plan Yet. Germany’s government withheld approval of the draft bailout plan for Greece, saying a bridge loan remains an option if a full aid program isn’t agreed in time for a payment to the European Central Bank due next week. Euro-area governments need time to assess the preliminary accord between Greece, its international creditors and the European Stability Mechanism before possible approval of a proposed 85 billion euros ($95 billion) in aid, Finance Ministry spokesman Juerg Weissgerber said Wednesday. The ministry expects to have a position on the draft memorandum of understanding by the end of the week, he said.
- Market's Partying Like It's 1998, VAR Models Need a Xanax. Take a quick gander at the analysis below and see if you don't agree it's a pretty good summary of the recent state of play in financial markets as China launched the latest salvo in the global currency wars by devaluing the yuan.
- China Sends Ominous Message to Junk Bond Buyers Already on Edge. China just darkened the future for riskier corporate credit around the world. The world’s second-biggest economy shocked markets this week by depreciating its currency by the most in two decades, with the goal of aligning the yuan more closely to the market rate. In response, the average price of dollar-denominated junk bonds plunged to its lowest level since 2011. Debt of some energy companies, including Energy XXI Gulf Coast Inc. and Sandridge Energy Inc., fell more than 5 percent on Tuesday alone, Bank of America Merrill Lynch index data show. And China’s move deepened losses on obligations issued by U.S. metals and mining companies, which are already suffering their highest default rate since 2003. Why is a cut in the yuan’s value such a huge deal for U.S. corporate credit? Because it indicates that China’s growth is slowing down, perhaps more than analysts expected, which directly affects industrial companies that rely on continual demand from the $10.4 trillion economy. The problem is particularly acute for commodity producers that have already been struggling to meet their bills in the face of lower natural-resources values.
- Bearish Wagers on Brazil Stocks Rise to Record as Ibovespa Falls. Bets on further declines in Brazilian shares climbed to a record amid forecasts Latin America’s largest economy is heading toward the worst contraction in 25 years. The Ibovespa led losses in the Americas. Short interest in the iShares MSCI Brazil Capped exchange-traded fund was at 34.3 percent of shares outstanding as of Tuesday, according to data compiled by London-based Markit and Bloomberg. That’s the highest since at least 2006. The benchmark stock gauge slumped to a six-month low.
- Brazil’s Plummeting Currency Forces Wall Street to Play Catch-Up. The selloff in Brazil’s currency is getting so bad that strategists can’t keep up. Even after cutting their forecasts by 20 percent this year, the most for any major currency, the estimates still trail the real’s current trading level. Banco Bilbao Vizcaya Argentaria analysts are revising their forecasts for the third time in less than six weeks after the real’s descent to a 12-year low Thursday. Nine banks including Credit Suisse Group AG and Societe Generale SA already cut projections this month after the swoon rendered earlier calls obsolete.
- First Blood to Ruble in New Currency War as Decline Exceeds Yuan. If China’s devaluation is going to set off a currency war, Russia will be pretty hard to beat. The yuan’s 1.8 percent plunge on Tuesday was topped by the 2.3 percent slide in the ruble, the largest of any major currency. Even before China’s announcement on Tuesday, most international futures traders were betting on further declines for the ruble, this quarter’s worst-performing major currency with a drop of 15 percent.
- Europe Industrial-Output Slump Puts Damper on Short-Term Outlook. Industrial production in the euro area fell more than economists forecast in June, raising some questions about the state of the region’s recovery. After Eurostat reported a 0.4 percent slump on the month, leaving production down 0.3 percent over the quarter, Credit Suisse Group AG said the number “implies downside risks” to its forecast for gross domestic product. For economists at ING Groep NV, the report “sheds a concerning light on the manufacturing recovery in 2015.”
- Honeymoon Over for Renzi as Italian Reality Confounds Ambitions. The political honeymoon is long over for Italian Prime Minister Matteo Renzi, and it will be tough to square his latest vote-catching plan with the debt-plagued economy. The timid exit from a record-long recession has left many Italians frustrated, with youth unemployment at 44.2 percent in June. His popularity at a record low in public opinion polls, 40-year-old Renzi has pledged three years of tax cuts worth 35 billion euros ($39 billion) from 2016 to 2018 to regain momentum.
- Emerging Bear-Market Slump Deepens as Yuan Pummels Currencies. Emerging-market stocks sank to the lowest level since 2011, extending declines in a bear market, and currencies slid as China’s falling yuan spurred bets developing nations will weaken their currencies to stay competitive. Investors exiting riskier assets drove stocks from Indonesia to South Africa and Turkey down at least 1.4 percent. Malaysia’s ringgit sank beyond 4 per dollar for the first time since 1998 as currencies in South Korea and Indonesia lost at least 1 percent. Eastern European currencies, regarded as haven investments amid central bank stimulus in the euro area, outperformed peers. Brazil’s real weakened for a second day and the Ibovespa dropped to the lowest level since March.
- China Spurs Rout in Europe Stocks Eclipsing Worst of Greece Saga. “Euro stocks have two strong winds pushing against them: the Chinese consumer is going to be hiding behind the weaker yuan, and stocks are selling in sympathy to the expected lack of exports,” said Daniel Weston, chief investment officer of Aimed Capital in Munich, Germany. “The demand expectation from China is having a big rethink.” Today’s selloff, led by automakers and consumer companies, was worse than the biggest one-day slides that accompanied Greek’s impasse with creditors in June and July. Losses in companies BMW AG and Daimler AG pushed the Stoxx 600 Auto & Parts gauge down 7.9 percent in two days, the most since 2011.
- Oil at $30 Is No Problem for Some Cost-Cutting Bakken Drillers. The lowest crude prices since 2009 might still not be enough to end the U.S. energy renaissance. Some parts of North Dakota’s Bakken shale play are profitable at less than $30 a barrel as companies tap bigger wells and benefit from lower drilling costs, according to a Bloomberg Intelligence analysis. That’s less than half the level of some estimates when the oil rout began last year. The lower bar for profitability is one reason why U.S. oil production has remained near a 40-year high even as crude prices fell more than 50 percent over the past year to the lowest level since March 2009.
- IEA Sees Oil Glut Through 2016 After Reaching 17-Year High. The global oil glut will last through 2016 as the strongest demand growth in five years and faltering supply fail to clear the surplus, according to the International Energy Agency. Record inventories will expand further even as consumption growth doubles in 2015 and supplies outside OPEC contract next year for the first time since 2008, the IEA predicted. Stockpiles won’t be diminished until the fourth quarter of next year, or even later if sanctions on Iranian crude are lifted, the agency said.
- Corn Futures Plunge as U.S. Unexpectedly Raises Forecast. Corn and soybeans slumped in Chicago by the maximum daily limit after the U.S. unexpectedly raised its crop forecasts from last month’s predictions, citing better yields than previously anticipated. The corn harvest will total 13.686 billion bushels, compared with 13.53 billion projected in July, the U.S. Department of Agriculture said Wednesday in its first survey-based estimate for the 2015-16 crop. That’s also higher than the 13.332 billion-bushel average of 31 analysts surveyed by Bloomberg News. Last year’s crop was a record 14.216 billion bushels.
- Dudley Says He’s Hopeful for Fed Rate Liftoff in ‘Near Future’. The Federal Reserve is approaching the moment when it can start raising interest rates and the exact timing will be dictated by incoming economic data, said New York Fed President William C. Dudley. “Hopefully, we’re going to make progress in terms of our goals” for maximum sustainable employment and inflation of around 2 percent, Dudley told an audience on Wednesday after delivering a speech in Rochester, New York. “And so hopefully, in the near future, we’ll be able to actually begin to raise interest rates. When that is precisely, depends on the data.”
- Biotech on the Brink of Joining Half the S&P 500 Down 10% From High. The bull run in biotechnology is having its worst month in more than a year. Down in four of the last five days, companies tracked by the Nasdaq Biotechnology Index have fallen about 8 percent since July 20. They’re in danger of joining more than half the stocks in the Standard & Poor’s 500 Index nursing losses that meet the definition of a correction. Like cable television and movie stocks that plunged last week, biotech shares have been almost completely immune to weakness for more than six years, rising more than sixfold since March 2009. Weakness in the groups has been a troubling sign in an equity market where the Dow Jones Industrial Average has dropped in nine of the last 10 days.
- John Paulson Is Starting to Cash In on His Big Land Grab. Hedge-fund manager John Paulson, who made billions wagering against subprime mortgages, has started to profit from a U.S. housing bet that took longer to ripen: owning land. After acquiring about 35,000 lots since 2009, Paulson & Co. shifted toward selling last year and is accelerating its disposition pace, according to Michael Barr, who manages the firm’s real estate. Paulson’s funds had invested $770 million, mostly in lots bought out of bankruptcies or other distressed sales, and acquired two dozen communities in Arizona, California, Colorado, Florida and Nevada.
- Goldman Sachs(GS) to Give Out ‘Secret Sauce’ on Trading. New open source platform is an attempt by Goldman to bolster its technology bona fides.
CNBC:
Business Insider:
Reuters:
- China central bank under pressure to weaken yuan further. China's move to devalue its currency reflects a growing clamor within government circles for a weaker yuan to help struggling exporters, ensuring the central bank remains under pressure to drag it down further in the months ahead, sources said. The yuan has fallen almost 4 percent in two days since the central bank announced the devaluation on Tuesday, but sources involved in the policy-making process said powerful voices inside the government were pushing for it to go still lower.
- Chinese Steel Exporters Cut Prices on Weaker Yuan. Chinese steelmakers cut prices $5-$10/t on rebar, billet, citing people familiar with the matter.
No comments:
Post a Comment