Today's Headlines

Bloomberg:

• Chinese Margin Debts Shrink by $156 Billion as Trades Unwind. China’s margin debt has plunged by 1 trillion yuan ($156 billion) from its June peak as stock traders close out bets using borrowed money amid a $5 trillion rout. Outstanding margin loans on the Shanghai and Shenzhen exchanges fell to about 1.25 trillion yuan on Monday from a record high of 2.27 trillion yuan on June 18. The Shanghai Composite Index has plunged 45 percent from its June peak amid concern that the highest valuations among major world markets are unjustified given the outlook for slowing economic growth. While KGI Securities Co. and Shenwan Hongyuan Group Co. say the slump in margin lending will help reduce volatility from the highest level in almost two decades, CIMB Securities Ltd.’s Scott Hong sees little chance of a sustained rally without a rebound in leverage. “The bull run was driven by leveraged funds, and the bull will cease to exist when leverage fades,” Hong, an analyst at CIMB Securities in Hong Kong, wrote in an e-mail. “Range-bound consolidation would be the best-case scenario.” 

• China's Stunning Stock Market Moves in One Huge, Annotated Chart. Bloomberg Intelligence economist Tom Orlik has put together a fantastic, annotated chart that shows both the market's huge upswing and subsequent crash. As he notes, "Along the way there have been five rate cuts, a raft of interventions from the government aimed at stabilizing the market and a global stock correction with China at its core."

• Hong Kong Dollar Options Suggest Peg Is Most at Risk in a Decade. Options traders are betting the Hong Kong dollar’s peg is the most vulnerable it’s been in a decade as China’s shift to a freer exchange rate prompts speculation the city’s link will come under pressure. The currency’s one-year implied volatility, a gauge of expected price swings used to price options, has more than tripled to 3.2 percent since a surprise yuan devaluation on Aug. 11. That’s near the yuan’s reading on the day before it was weakened in a move that ended China’s de facto peg of more than four months. Hong Kong’s currency has been kept at about HK$7.80 per U.S. dollar since 1983. 

• Emerging Companies With $23 Billion to Repay Show Risks of Rout. A $23 billion pile of debt is stifling emerging-market companies already strained by the tumble in commodity prices to 16-year lows and weaker currencies. The bonds in U.S. dollars, which come due before the end of 2016, have become more expensive to roll over or repay after the selloff triggered by China’s yuan devaluation this month sent yields soaring to close to the highest levels in four years. Brazil’s Petroleo Brasileiro SA and billionaire Carlos Slim’s Mexican wireless company America Movil SAB are among the 10 most-burdened borrowers, according to data compiled by Bloomberg.

• The Hardest-Hit Bond in All of Emerging Markets Just Plunged 43%. Bond investors in Mexico’s largest construction company are starting to sense desperation. Empresas ICA SAB’s debt due 2021 has lost 43 percent this month, the most in emerging markets. The decline to a record low is remarkable even by the standards of developing nations, which are suffering one of the worst selloffs since the financial crisis.

• Petrobras(PBR) Taps Brazil Bond Market as Dollar Borrowing Costs Soar. Petroleo Brasileiro SA is seeking refuge in Brazil’s domestic bond market as overseas borrowing costs surge amid a plunge in the local currency has exposed a mismatch between its real-based revenues and dollar debt payments. The world’s most-indebted oil producer said it’s planning to sell 3 billion reais ($830 million) in local bonds. The move from the state-controlled company comes as crude prices trade near the lowest in a decade and after Brazil’s currency tumbled 27 percent this year, pushing up the cost of its debt. Yields on benchmark dollar bonds due in 2024 jumped to a record 8.71 percent this week amid a global selloff in emerging markets and heightened concern that Brazil won’t be able to maintain its investment-grade credit rating.  

• Stocks in Europe Resume Retreat as Rebound Proves Temporary. Even the best day since 2011 wasn’t enough to reverse fortunes for European stocks, which resumed declines on Wednesday. Investors have dealt with zigzags this week, as European stocks first slid the most since the financial crisis, before rallying yesterday after China cut interest rates. A late-day announcement that Monsanto Co. abandoned efforts to acquire Syngenta AG sent shares of the Swiss company down 18 percent, the most on the Stoxx Europe 600 Index. The benchmark gauge for European equities lost 1.8 percent at the close of trading.

• The Stock Market Hasn't Had a Selloff Like This One in Over 75 Years. (graph) By one metric, investors would have to go back 75 years to find the last time the S&P 500's losses were this abrupt. Bespoke Investment Group observed that the S&P 500 has closed more than four standard deviations below its 50-day moving average for the third consecutive session. That's only the second time this has happened in the history of the index. Indexing the S&P 500 to five sessions prior to the tumult shows that a replication of the mid-1940 plunge could see equities run much further to the downside and into a bear market:

• Levered ETF Bets on U.S. Stocks Go Bananas After Drop. “Go big or go home” is what the cool kids say, and yesterday exchange-traded fund investors did the former: they went big on tripled-leveraged bets that stocks will rebound and other bets that short-term Treasuries will gain.

• The U.S. Is Short on Options to Confront Next Crisis. Lawmakers seemingly averse to fiscal stimulus while Fed rates already near zero.

MarketWatch.com: 

• High-yield-bond market is under an August curse. (graph)

CNBC:

• New radical Greek leftist leader calls for Grexit. 

Zero Hedge:

• Full Witch Hunt: Chinese Police Probe Securities Regulator While Securities Regulator Probes Brokers.

• When The FOMC Completely Loses The 'Inflation' Argument. (graph)

• Iran Prepared To Defend Old Market Share "At Any Cost".

• Dudley Says "We Are A Long Way From Additional QE".

• Dudley Sends Rate-Hike Odds Plunging, Hammers USDJPY, Slams Stocks. (graph)

• "Central Bankers Look Naked... & Investors Have Nothing Else To Believe In".

• DOE Confirms Major Inventory Draw, Crude Production Slowest In 3 Months. (graph)

• AAPL(AAPL) Suffers First Death Cross Since 2012.

• Recession Watch - Durable Goods Growth Slows In July, Core Capex Orders Decline 6 Straight Months. (graph)

• Time To Pull Out The Nasdaq/China Comparison Chart. (graph)

• Virginia Reporter, Photographer Killed During Live TV Report; "Disgruntled Employee" Gunman Tweets Attack, Shoots Himself. (video)

Business Insider:

• 'She was the most radiant woman I ever met': Boyfriend of reporter killed during broadcast posts touching tribute.

• These are the 10 cities where living standards have gone through the floor in the last 5 years.

• There has been nowhere to hide during the market selloff.

• Americans haven't been this worried about a stock market crash since the last one. (graph)

Reuters:

• Monsanto(MON) drops pursuit of Swiss agribusiness rival Syngenta. U.S. agribusiness leader Monsanto Co. (MON.N) on Wednesday abandoned efforts to acquire Swiss rival Syngenta AG (SYNN.VX), which has rejected a recently sweetened offer. Syngenta shares fell more than 18 percent after the announcement while Monsanto shares jumped more than 7 percent.

• Schlumberger(SLB) to buy oilfield gear maker Cameron in $14.8 billion deal. Cameron's shares rose nearly 44 percent to $63.14, below Schlumberger's $66.36 per share cash-and-stock offer, in early trading on Wednesday. Schlumberger's shares fell 3.5 percent to $70.02.

Telegraph:

• China cracks down on 'rogue' traders after Black Monday fears come back to spook investors. Beijing launches criminal pursuit of banks and brokers to stop money bleeding from the country after markets sell-off resumes. 

Vedomosti:

• Russian Ministry Sees Recession in 2016 If Oil at $40. Conservative economic forecast assumes oil at $40/bbl in 2016-2018, citing person familiar with the estimates made by Economy Ministry. GDP -.9%, Ruble seen at 75/USD, inflation at 8.8%, Fixed Capital Investment -6.3% in 2016, according to the estimates.