Today's Headlines

Bloomberg:   

• China Becomes Liability for Korean Stocks Dependent on Tourism. South Korean companies reliant on Chinese demand are turning from the stars of the stock market to the also-rans after the yuan’s devaluation. Shares of AmorePacific Corp., a cosmetics company that counts China as its second-biggest market, had more than doubled in the 12 months before the Chinese currency tumbled on Aug. 11. Hotel Shilla Co., which had been benefiting from an influx of mainland tourists, had rallied 20 percent. Both companies had lost 11 percent since the devaluation through Tuesday, more than five times the 1.6 percent loss of the MSCI Korea Index. “Cosmetics, tourism, and hotels are seen hit hard as Chinese inbound flows will be affected,” said Park Jeong Woo, a Seoul-based strategist at Korea investment Securities Co.
• Death Cross Looms in Hong Kong Stocks as Rout Seen Getting Worse. Traders hurting from a slump in Hong Kong shares since April say a pattern looming in stock charts suggests the rout has room to run. The average level of the Hang Seng Index over the past 50 days is close to dropping below its 200-day mean, a phenomenon known as a death cross. That’s happened six times in the past 10 years, with the measure then falling an average of more than 15 percent through the next market low. “Hong Kong has historically been very sensitive to this,” said Hank Terrebrood, Hong Kong-based managing director and strategist at MCM Partners.  
• Glencore CEO: China Is a Lot Weaker Than Anyone Expected. (video) Glencore Plc Chief Executive Officer Ivan Glasenberg said no one can read the Chinese commodity market.
  It’s getting harder to predict metals consumption in China, the world’s biggest user of raw materials, the billionaire CEO said in a phone interview in London. Glencore reported a 56 percent plunge in first-half profit on Wednesday and cut the earnings forecast for its trading division. “At the moment none of us can read China,” said the 58-year-old South African who’s the second-largest shareholder in the company. “None of us know what is going on there and I’m yet to find the guy who can predict China correctly. China in the first half was a lot weaker than anyone expected.”
• Rousseff Revives Policies That Pushed Brazil to Edge of Junk. Brazil’s President Dilma Rousseff is reviving policies that helped push the country’s debt rating to the brink of junk status as a political crisis and a recession erodes support for fiscal discipline. State-controlled banks Banco do Brasil and Caixa Economica Federal announced this week that they will provide car and auto-parts makers as much as 14 billion reais ($4 billion) in loans, a strategy to fuel growth and save jobs that Finance Minister Joaquim Levy repudiated when he took office earlier this year. He told reporters Wednesday the loans don’t threaten the fiscal adjustment and are mostly based on market rates.
• Brazil Set for Longest Bond Drought on Record Amid Credit Woes. Brazil is close to hitting its longest stretch ever without selling new bonds abroad. The Treasury hasn’t sold new notes in international markets since its $1 billion issue of 2025 bonds in September 2014 as a deepening recession and a widening political crisis drove the nation’s credit rating to the cusp of junk. Brazil joins other developing nations such as Russia, which due to sanctions over its involvement in Ukrainian conflict hasn’t been able to access the international debt market since September 2013. If the government doesn’t tap international markets by Sept. 23, it will break its record bond drought of 384 days ended in April 2003, when concern over the election of then-President Luiz Inacio Lula da Silva reduced foreigners’ appetite for new notes. 
• Brazil's Stock Exchange Is Nearing a Bear Market. A plunge in the Ibovespa from this year’s peak put the equity gauge on the brink of a bear market amid forecasts Latin America’s largest economy is headed toward the longest recession since the 1930s. The stock benchmark led world losses, extending its slump since May 5 to 20 percent, as lender Itau Unibanco Holding SA and oil producer Petroleo Brasileiro SA tumbled. Traders have been pulling money from Brazil on concern President Dilma Rousseff will struggle to revive the economy, curb inflation and narrow the budget deficit amid a political crisis and calls for her impeachment. The real posted the biggest decline among 16 global major currencies tracked by Bloomberg. The Ibovespa fell 2.5 percent to 46,262.77 at 1:54 p.m. in Sao Paulo, the lowest level since March 2014. State-run lender Banco do Brasil SA sank to a three-year low on plans to aid the automaker industry at a time when revenue has trailed analysts’ estimates for three straight quarters. The real dropped 1 percent to 3.5025 per dollar. Brazil’s bond risk, as measured by credit-default swaps, approached the highest in six years. 
• Russia Is Having Trouble Selling Its Debt. Russia fell short of its bond auction target for a third week as contagion from China’s yuan devaluation spread through emerging markets. The ruble fell as Brent slid below $48 a barrel for the first time since January. The government sold 60 percent of the 10 billion rubles ($151 million) of floating-rate and fixed-coupon bonds it offered in auctions Wednesday after investors sought a higher price for the debt than the Finance Ministry was prepared to pay. The ruble dropped for a fifth day, retreating 0.5 percent to 66.1980 against the dollar, the lowest since Feb. 12.
• As Canada’s Oil Debt Soars to Record, an Industry Shakeout Looms. Canadian energy companies’ debt loads are the heaviest in at least a decade, boosting concern that some won’t survive the collapse in crude prices. Trican Well Service Ltd., Canada’s largest fracking service provider, said last week it may be unable to continue because it’s in danger of breaching the terms of its debt. It’s the latest firm to see crude’s descent to a six-year low sap the cash flow needed to meet financial obligations. Oil’s plunge has pushed a measure of the average debt burden among Canadian energy firms to the highest since at least 2002, and another measure of their ability to make interest payments to the third-lowest level in a decade, according to data compiled by Bloomberg. Facing some of the highest production costs in the world and carrying more debt than U.S. peers, the Canadian industry has become ripe for acquisitions.
• Emerging-Market Losses Spread as Vietnam to Kazakhstan Devalue. Emerging markets took another knock as Vietnam and Kazakhstan weakened their currencies in response to China’s surprise devaluation and investors weighed the timing of the first U.S. rate increase since 2006. South Korean equities fell to a six-month low on Wednesday while Taiwanese shares lost 1.9 percent and the Saudi index tumbled 2.5 percent. Vietnam devalued the dong for the third time in 2015 and Kazakhstan, whose biggest trading partners are China and Russia, let its tenge slide 4.4 percent. Turkey’s lira fell to a record for a fifth day, extending declines after an explosion in Istanbul. China’s yuan weakened in offshore trading. The anticipation of higher U.S. interest rates and a slowing Chinese economy pushed the MSCI Emerging Markets Index into a bear market last week, while a gauge tracking 20 currencies is extending its longest slump since 2000. Global funds are poised to be net sellers in developing Asian equities tracked by Bloomberg for a third straight month, the longest stretch since the middle of 2012.
• China-Led Concern Drags European Stocks to Lowest in Six Weeks. (video) European stocks succumbed to fears of a slowing Chinese economy, with exporters leading the losses.
  The Stoxx Europe 600 Index gave up two-days of gains, slipping 1.8 percent to 381.31 -- its lowest level in six weeks -- at the close of trading. Automakers and chemical companies retreated more than 2.4 percent, while a gauge of commodity producers closed at its lowest level since 2009. Glencore Plc tumbled 9.7 percent to a record low after the miner posted a slump in profit. PSA Peugeot Citroen and Daimler AG lost at least 2.6 percent, while BASF SE fell 2.7 percent.
• U.S. Oil Could Return to 2008 Low of $32 in Citigroup View. Oil could fall to lows last seen during the global financial crisis amid a persistent supply surplus, Citigroup Inc. said. “Balances point to further oversupply throughout 2015 begging the question how low can oil go,” Citigroup analysts led by Seth Kleinman said in an e-mailed report Wednesday. The U.S. crude price of $32.40 a barrel reached in 2008 “is a conceivable reality.” Crude has tumbled more than 30 percent since June amid signs that producers are maintaining output even after oil fell back into a bear market. West Texas Intermediate, the U.S. benchmark, fell $1.64 to $40.98 at 12:08 a.m. local time on the New York Mercantile Exchange, the lowest level since March 2009.
• Oil Patch's Biggest Losers Sell Crude for More Than Exxon Mobil(XOM). Some of the worst-performing oil companies in North America are getting more for their crude than Exxon Mobil Corp. and other giants. That may not help them for long. Goodrich Petroleum Corp., the biggest loser in the Bloomberg Intelligence index of North American independent producers, sold its output for $86.49 a barrel in the second quarter, according to data compiled by Bloomberg. Halcon Resources Corp., which is down 49 percent this year, reaped $81.18. Compare that with Chevron Corp., which received an average $54.26, and Exxon Mobil, which got $56.90.The reason: lack of cash.
• Fed Officials in July Saw Rate Rise Conditions Approaching. (video) Federal Reserve officials said last month that while conditions for raising interest rates were approaching, they saw more room for labor market healing and need more confidence that inflation is moving toward their goal, minutes of their meeting show. Most meeting participants “judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point,” according to minutes of the July 28-29 Federal Open Market Committee session, released Wednesday in Washington. The details come four weeks before the Fed’s September meeting, when most economists forecast the central bank will raise its benchmark interest rate for the first time since 2006. Policy makers say a decision to raise rates will hinge on continued improvement in the labor market and confidence that inflation will move higher.
• Pimco Sees Sept. Fed Move Underpriced, in Clash With Options. Investors are underpricing the chances of the Federal Reserve raising interest rates next month, according to Pacific Investment Management Co. Options on rates and currencies indicate investor skepticism may be growing that the first increase since June 2006 will come at the Fed’s Sept. 16-17 meeting. The odds for that had dropped to 46 percent on Wednesday from 54 percent almost two weeks ago. That’s based on fed-funds futures and on the assumption that the effective rate will average 0.375 percent after the increase. “We think the odds are a little higher,” Anthony Crescenzi, an executive vice president at Pacific Investment Management Co., said in an interview in Sydney. Most recent communications from the Fed “have been making it clear that the bar for a hike on Sept. 17 is fairly low,” he said.

Zero Hedge:

• FOMC Minutes Leaked Early After Embargo Broken, Fed Warns Risk To GDP Forecast "Tilted To The Downside".
• FOMC Reaction - Stocks Rip, USD & Bond Yields Dip As Sept Rate-Hike Odds Drop To 40%. (graph)
• Hilsenrath Confirms Fed Confusion In Leaked FOMC Minutes.
• The Next Leg Of The Commodity Carnage: Attention Shifts To Traders - Glencore Crashes, Noble Default Risk Soars. (graph)
• "A 2011-Style Breakdown": Global Advance-Decline Line Breaks To 6 Month Lows.
• WTI Collapses To A $40 Handle & What That Means For Earnings, In One Chart. (graph)
• No SDR For You: IMF Tells China To Wait At Least One Year Until Reserve Basket Inclusion.
• Distressed American Workers Expose The Fallacy Of Improving Unemployment Numbers. (graph)
• Is Your Name In The Ashley Madison Hack? Here Are Some Easy Ways To Find Out.
• After 6 Years Of QE, And A $4.5 Trillion Balance Sheet, St. Louis Fed Admits QE Was A Mistake.
• China Rushes To Inject Hundreds Of Billions In Liquidity To Offset Yuan Intervention.
• Turkey Turmoiling: Lira Plunges To Record Low On Financial, Political, Terrorism Fears. (graph)
• Consumer Prices Rise At Slowest Pace Since 2014 As Airfares Plunge, Car Costs Slide, But 'Rents' Jump. (graph)

AP:

• AP Exclusive: UN to let Iran inspect alleged nuke work site. Iran, in an unusual arrangement, will be allowed to use its own experts to inspect a site it allegedly used to develop nuclear arms under a secret agreement with the U.N. agency that normally carries out such work, according to a document seen by The Associated Press. The revelation is sure to roil American and Israeli critics of the main Iran deal signed by the U.S., Iran and five world powers in July. Those critics have complained that the deal is built on trust of the Iranians, a claim the U.S. has denied.

MNI:

• Bullard Says Fed Must 'Manage' Balance Sheet Post-Liftoff. Fed should meticulously "manage" shrinking of balance sheet after it starts raising rates, and not let maturing securities run off indiscriminately, St. Louis Fed President Bullard said in an interview. "I see no reason why you couldn't have a target level for the balance sheet and just manage to that level, and some of that could be through allowing run-off, and some of it through purchases or sales," Bullard said.