Today's Headlines

Bloomberg:  

• China’s Richest Traders Are Fleeing Stocks as the Masses Pile In. The wealthiest investors in China’s equity market are heading for the exits. The number of traders with more than 10 million yuan ($1.6 million) of shares in their accounts shrank by 28 percent in July, even as those with less than 100,000 yuan rose by 8 percent, according to the nation’s clearing agency. While some of the drop is explained by falling market values, CLSA Ltd. says China’s rich have taken advantage of state buying to cash out after the nation’s record-long bull market peaked in June. Investors with the most at stake are finding fewer reasons to own Chinese shares amid weak corporate earnings and some of the world’s highest valuations. With this month’s devaluation of the yuan adding to outflow pressures, bulls have started to question whether there’s enough buying power to prop up prices once the government pares back its unprecedented rescue effort - - a concern that contributed to the Shanghai Composite Index’s 6 percent plunge on Tuesday. “The high net worth clients are the ones who moved the market,” Francis Cheung, the head of China and Hong Kong strategy at CLSA, wrote in an e-mail. “They tend to be more savvy.” The median stock on mainland bourses traded at 72 times reported earnings on Monday, more expensive than any of the world’s 10 largest markets. The ratio was 68 at the peak of China’s equity bubble in 2007, according to data compiled by Bloomberg. 

• China Stimulus Confronts Drag From Headwinds of Debt, Land Sales. China’s efforts to put a floor under growth with stimulus and a yuan devaluation are struggling. Headwinds range from slumping land sales to interest payments on local-government debt and lackluster growth in fiscal revenue. Local governments alone face a debt-service burden of about 1 trillion yuan this year ($156 billion), according to JPMorgan Chase & Co., while revenue from land sales in the first seven months plunged 954 billion yuan from a year earlier, according to the government. Growth in fiscal revenue was 5.4 percent in the first seven months compared with 8.5 percent a year earlier using the same methodology, highlighting pressure on receipts. Premier Li Keqiang’s ability to counter those drags may determine the fate of his growth target of about 7 percent for the year. The severity of the funding squeeze is especially acute in the northeastern province of Liaoning, where first-half revenue slumped 23 percent and this month it failed to sell bonds even with coupons 15 percent higher than similar maturity sovereign debt.

• China’s Stocks Sink Most in Three Weeks on State Support Concern. Chinese stocks tumbled the most in three weeks as traders reduced stimulus bets and speculated the government will pare back efforts to prop up equities. The Shanghai Composite Index sank 6.2 percent to 3,748.16 at the close, the biggest loss since an 8.5 percent rout on July 27. About 35 stocks fell for each that rose, while more than 600 companies plunged by the daily 10 percent limit. The Hang Seng China Enterprises Index slid 1.75 percent to its lowest level in nine months in Hong Kong. Chinese investors lowered expectations for further monetary stimulus after data Tuesday showed home-price gains are spreading. Odds of an imminent cut to lenders’ reserve requirements dropped after the central bank injected cash into the financial system through its weekly open-market operations. The securities regulator said Friday that China Securities Finance Corp., the state agency tasked with supporting share prices, will reduce buying as volatility falls. “Investors ran for the exit when the government failed to step in to support the market,” said Steve Wang, the chief China economist at Reorient Financial Markets Ltd. in Hong Kong. “The CSF has become a main player in this market so everyone is watching it. People panic when it stops buying.” 

• Russia May Halt Monetary Easing If Oil at $40, Kremlin Aide Says. Russia’s central bank may pause its monetary easing cycle if oil prices fall to $40 a barrel, Kremlin economic aide Andrey Belousov said in an interview. “If the situation on the foreign-exchange market changes as a result of a significant drop in oil prices -- to $40 a barrel, with fluctuations between $40 and $45 -- then the central bank will probably halt the process of cutting the rate,” Belousov said by phone on Tuesday. 

• Commerzbank Cutting Russia Debt Worsens Bond Rout as Ruble Falls. Russian bonds fell for a third day and the ruble retreated as Commerzbank AG recommended selling the nation’s local debt as sliding oil prices make it less likely that the central bank can press on with interest-rate cuts. The decline in five-year OFZ bonds lifted the yield three basis points to 11.26 percent, set for the highest level in a month. The currency weakened 0.5 percent to 65.8560 per dollar by 6:08 p.m. in Moscow, a six-month low as President Vladimir Putin said he discussed the currency on Tuesday with Prime Minister Dmitry Medvedev.

• Russia Fails to Soothe Oil Concerns as Citi Joins Ruble Bears. Russia’s efforts to assure investors it can weather oil’s plunge are winning few believers in the bond and currency markets. Citigroup Inc., the second-most accurate ruble forecaster in the first quarter, predicted the currency will tumble to near its lowest on record by the end of next month, diminishing any prospect of further interest-rate cuts to rescue the economy from a recession. Eurobond prices dropped to a five-month low on Monday and the cost of protecting government debt against default climbed.

• Saudi Stocks Sink Into Death Cross as IMF Sees Growth Slowing. Investors sold Saudi Arabian stocks after an International Monetary Fund warning of slowing growth in the Middle East’s biggest economy tipped the equity index into a so-called death cross. Dubai’s shares also slumped. The Tadawul All Share Index slid for a sixth day, closing 2.9 percent lower at 8,197.02, the weakest level in more than seven months. That dragged its 50-day moving average below the 200-day moving average, a signal to some investors that further declines are in store. Al Rajhi Bank’s 2.9 percent decrease was the biggest contributer to the loss. Dubai’s DFM General Index slipped 2.5 percent to the lowest close since April 13. 

• China, Commodities, Currencies Challenge Emerging Markets. (video)

• Brazil Real Falls as Commodities Trigger Emerging-Market Selloff. Brazil’s real fell for the first time in three days as a global decline in commodities and pessimism surrounding China, the Latin American nation’s biggest trading partner, triggered an emerging-market selloff. Moody’s Investors Service, which cut Brazil’s rating last week to the lowest level of investment grade after it failed to meet budget targets, predicted a contraction of about 2 percent this year. Copper and silver led a renewed slump in commodities amid speculation China’s economy will face further headwinds. 

• Emerging Stocks Decline as Thai Bomb Adds to China, Fed Concerns. (video) Emerging-market stocks traded for a second day at a 2011 low as a deadly bombing in Bangkok and speculation China will reduce stimulus measures worsened investor sentiment already undermined by expectations for higher U.S. interest rates.

• European Stocks Rise for Second Day After China-Fueled Selloff. European stocks extended a rebound after the worst weekly drop in more than a month, amid signs the U.S. economy is strengthening. The Stoxx Europe 600 Index added 0.2 percent to 388.13 at the close of trading, rising higher after data that showed U.S. new-home construction climbed to an almost eight-year high in July.

• We Just Got a Look at How Much Higher Wages Are Costing Wal-Mart(WMT). (video) 

• Demise of Phone Subsidies Masks U.S. Wireless Sales Slowdown. (video) The heavy discounting used by U.S. wireless companies to get consumers hooked on pricey smartphones is going away -- boosting near-term results, while masking weakness in the industry’s main business of selling monthly mobile services. T-Mobile US Inc. kicked off the shift away from handset subsidies in 2013, prompting other carriers to phase out the incentives that for years were used to encourage subscribers to sign two-year contracts. With the move, carriers book almost the full price of smartphones on the day of the sale, making revenue and some profit metrics appear rosier.

Fox News:

• Grassley questions whether Clinton attorney had clearance for thumb drives. (video) A top Republican senator is questioning whether Hillary Clinton's personal attorney had the security clearance to keep thumb drives containing thousands of her emails, after it was revealed some of her messages contained highly sensitive -- even "top secret" -- information. "The transmission of classified material to an individual unauthorized to possess it is a serious national security risk," Senate Judiciary Committee Chairman Chuck Grassley, R-Iowa, wrote in a letter to Clinton lawyer David Kendall.

• Iran threatened ‘harm’ to top nuke inspector to prevent disclosure of secret deal. Iranian leaders prevented a top International Atomic Energy Agency (IAEA) official from disclosing to U.S. officials the nature of secret side deals with the Islamic Republic by threatening harm to him, according to regional reports.

CNBC: 

• St. Louis Fed official: No evidence QE boosted economy. (video)

Zero Hedge:

• China Stocks Crash, More Than Half Of Market Halted Limit Down; PBOC Loss Of Control Spooks Global Assets. (graph)

• Cyanide Thunderstorms Feared As Mystery Deepens Around $1.5 Billion Tianjin Explosion.

• China & The Decline In Quality (And Soon In Profits).

• No Jon Hilsenrath, It Is Not "Anti-Semitic" To Criticize Goldman Sachs.

• 23 Nations Around The World Where Stock Market Crashes Are Already Happening.

• Hilsenrath Warns Fed Is Out Of Ammo, "Policy Makers Resorting To Backup, Backup Plans".

• Atlanta Fed Q3 GDP Forecast Doubles Thanks To Subprime Auto Loans. (graph)

• What Investors Think Is The Biggest "Tail Risk" Right Now. (graph)

• More Trouble In Turkey As Lira Plunges To New Lows, Bond Yields Soar. (graph)

• Base Metals Battered As "Unholy Combination Of Factors" Crushes Copper. (graph)

• Building Permits Plunge After NYC Property Tax Break Expires, Housing Starts Stable. (graph)

• Indonesia Impaled: Currency Crashes To 1998 Asian Crisis Low As Exports Crater. (graph)

• Walmart(WMT) Stock Slides After EPS Miss, Profits Tumble, Full Year Guidance Slashed. (graph)

Business Insider:

• The world's top China analyst has a doomsday scenario. The note said: "Reform is relatively effortless when GDP growth is in the teens; it is much more complex and painful in a climate in which GDP growth is rapidly slowing. "For this reason, we see a risk that Chinese policymakers won't be able to stomach the pain of some reforms and will simply back away — the same way they recently walked away from their pledge last fall to cut off new local government borrowing." That would mean the Chinese authorities putting off the hard decisions in the hope that they can maintain stability and ultimately grow their way out of the difficulties they currently face. Every time they do that they increase the likelihood that the blowup will be more devastating if and when it comes.

• This is the scariest chart in the history of cable TV. (graph)

• One alarming reason Walmart's(WMT) profit is down. Walmart's theft problem is getting worse.

• The probe of Hillary Clinton's server could find more than just emails.

• If China's GDP is so amazing then why have Chinese metal prices collapsed? (graph)

• China just tested a new intercontinental missile that can fire multiple nuclear warheads at once.

• Here are the various ways the US depends on China. (graph)

• Warren Buffett's favorite valuation measure says stocks are overvalued. (graph)

• The 'Keqiang Index' shows China is growing at this ridiculously low rate. (graph)

• Donald Trump's immigration plan would wreak havoc on US society.

• We may see a nasty surprise if the world ignores North Korea’s nuclear progression.

• Iran is one step closer to advanced air defense capability.

• Now it looks like Merkel may not be able to put the Greek bailout together.

Mashable:

• Apple's(AAPL) biggest new business risk is a cheaper Chinese currency.

The Hill:

• Planned Parenthood launches ads against vulnerable GOP senators. Planned Parenthood announced Tuesday that it is launching ads targeting vulnerable Republican senators over talk of defunding the organization. The ads will run in the home states of Sens. Kelly Ayotte (R-N.H.), Rob Portman (R-Ohio), Ron Johnson (R-Wis.) and Pat Toomey (R-Pa.), all of whom face tough reelection races next year.

Financial Times:

• China shadow banks appeal for government bailout. The collapse of a state-owned credit guarantee company in China’s rust belt has shone a new spotlight on risk from bad debt and moral hazard in the country’s shadow banking system. As China’s economy slows, concerns are mounting over rising defaults, especially on loans from non-bank lenders, which provide credit to risky borrowers at high interest rates.