Today's Headlines

Bloomberg:

• Will the Next Recession Be Made in China? When China sneezes, the world just might catch a cold. China accounted for almost 40 percent of global growth last year. Its appetite for raw materials has undergirded economies from Australia to Brazil to South Africa, and its production capabilities have lowered prices of industrial machines and consumer goods everywhere money changes hands. But it’s also kind of a mess. Fueled by real estate and shadow banking, China’s debt quadrupled from 2007 to 2014, according to a McKinsey analysis. Its economic growth is slowing, pollution is awful, and a hawkish foreign policy is alienating neighbors. 
• China Intervened Today to Shore Up Stocks Ahead of Military Parade. (video) China’s government resumed its intervention in the stock market on Thursday and has been cutting holdings of U.S. Treasuries this month to support the yuan, according to people familiar with the matter. Authorities want to stabilize equities before a Sept. 3 military parade celebrating the 70th anniversary of the World War II victory over Japan, said two of the people, who asked not to be identified because the move wasn’t publicly announced. Treasury sales allow policy makers to raise dollars needed to bolster the yuan after a shock devaluation two weeks ago, according to different people familiar with the matter.
• ICBC’s $25.5 Billion of Bad Loans Show Cost of Chinese Slowdown. The world’s biggest bank, Industrial & Commercial Bank of China Ltd., reported a 31 percent increase in bad loans in the first half as a sputtering Chinese economy drove businesses to the wall. Nonperforming loans jumped to 163.5 billion yuan ($25.5 billion), the company said on Thursday. The lender’s zero profit growth in the second quarter from a year earlier, shown in an exchange filing, was partly due to a doubling of provisions for soured credit. Prospects for bad debt to keep rising are dragging on China’s lenders, with the biggest banks trading below book value. A $5 trillion slump in stocks from their June peak is making it harder for the Communist Party to sustain business confidence and prevent a deeper economic slowdown that worsens debt risks. The increase in ICBC’s bad loans in the first half was at more than twice the pace of the same period in 2014.
• China Detains 23 After Deadly Warehouse Explosions in Tianjin. China’s top prosecutor is holding 10 officials and port executives as well as a senior Transport Ministry official under criminal detention for alleged neglect of duty and abuse of power in the Tianjin warehouse explosions that killed at least 139 people, the official Xinhua News Agency reported.
• Will Emerging Markets Be Held Back by Currencies? (video)
• Russia's Deceleration Is Most Damaging to Euro Area. (video)
• UBS Advises Wealthy Clients to Sell Euro, Sees Drop to $1.05. UBS Group AG, the world’s largest private bank, is advising its wealthy clients to sell the euro, saying a worsening inflation outlook has increased the risk of further quantitative easing in Europe. The single currency is set to weaken to $1.05 in three months, James Purcell, a Hong Kong-based cross asset strategist for UBS’s wealth management business, said in an interview Thursday. The euro has fallen for three straight days, losing 2.8 percent, to trade at $1.1291 as of 10:50 a.m. in London.  
• European Stocks Erase Weekly Declines, Joining Global Advance. Confidence is returning to the market, and European stocks have erased their weekly losses. The Stoxx Europe 600 Index climbed 3.5 percent on Thursday, extending the rally after data showed the U.S. economy grew more than previously forecast. The gauge is now up 0.3 percent for the week. All industry groups advanced, mirroring increases in commodities, while benchmark measures in the U.K., Germany and France rallied more than 3 percent.
• World Grain Stockpiles at 3-Decade High After Harvests Spur Glut. Global grain stockpiles are set to swell to the largest in almost three decades, further boosting supply that’s led to a slump in prices. World inventories of wheat, corn and other grains will reach 447 million metric tons by the end of the current marketing year, the highest since the 1986-87 season, according to the International Grains Council in London. The agency on Thursday raised its forecast by 2.8 percent from an estimate in July, when it had predicted inventories would fall from last year, citing better wheat crops in Europe and the former Soviet Union.
• Oil Jumps Most in Three Years. Oil climbed the most in three years in New York as data showed the U.S. economy grew more than previously estimated. West Texas Intermediate futures rose as much as 9.6 percent, the biggest intraday gain since June 2012. Prices extended gains after Royal Dutch Shell Plc issued a force majeure on Bonny Light exports from Nigeria.   
• Coal Seen Dropping Below $50 in Rout as Output Fails to Slow. Coal may drop below $50 a metric ton this year as a supply glut combines with a slide in emerging market currencies that supports exports.
• How Central Bankers Are Twisting Classic Bond-Investing Logic. The more central banks mess around with global bond markets, the more you have to question how you invest in bonds. Think safe-haven debt, such as U.S. Treasuries, will provide a hedge against losses on stocks? Not always. Or that central bankers really have control over borrowing costs? Or that you ought to get paid to lend money to Germany, Switzerland, France and Belgium? Nope, on both counts.
• First Ruhle: The Fed Blew Its Opportunity. Coulda ... woulda ... shoulda ... but didn't. The Federal Reserve has had many opportunities to raise rates over the last several years and—whether it was because of too many snowstorms, too few jobs, or not enough consumers hitting the malls—the Fed didn't raise. Why? Because it didn't have to. When the unemployment rate dropped to 7 percent in 2013 and 6.5 percent in 2014, many said this was enough cause to finally raise rates off the extraordinary zero bound. The Fed kept moving the goalposts and said: not just yet. Here we are: China is in crisis, Greece is hobbling along, and U.S. markets are operating in a liquidity vortex. Hampered by Dodd-Frank restrictions, Wall Street is unable to absorb risk and curb panicked volatility. The Fed balked, waited, and stalled and now has lost its opportunity to raise rates. Over the past five days, we've quickly learned how sweaty and uncomfortable it is to be backed into a corner in August.

Zero Hedge: 

• VIX Backwardation Continues - It's Not Over Yet. (graph)
• Former Greek FinMin Varoufakis Launches Pan-European Anti-Austerity Political Party.
• For Albert Edwards This Is The One Definitive Measure That "We Are Now In A Bear Market". (graph)
• A Nation Divided - Northeast Happiest In 8 Years As MidWest Comfort Collapses. (graph)
• Kansas City Fed Survey Misses For 8th Straight Month - Flashes Recessionary Signal. (graph)
• Bad News For Hillary, Poll Shows Joe Biden Would Fare Better In National Election.
• Pending Home Sales Miss, NAR Says Stock Plunge Is Good For Housing Affordability. (graph)
• China Exclaims "We Were Wronged" - Demands Fed Delay Rate Hike, Reiterates Blame For Market Rout. (graph)
• If You Doubted The Central Bankers' Brave New World, You Were Right.
• September Rate Hike Back On Table: Q2 GDP Soars In Revision From 2.3% To 3.7% Driven By Record Inventory Build. (graph)
• Initial Jobless Claims Ends Losing Streak, Unchanged Since January. (graph)
• Tiffany(TIF) Stock Tumbles After Revenue And Profit Drops, EPS Slide 16%; Forecast Cut; Strong Dollar Blamed.

Business Insider: 

• Xi just changed the rules of the game in China — and that makes things scarier for everyone.
• Hillary Clinton compared Republican views on women to 'terrorist groups'.
• Here comes the S&P 500 'Death Cross' ... (graph)
• Latin America is on the brink of a major debt crisis.
• Apple's(AAPL) next iPhone event is confirmed for September 9.
• I'm still convinced the 10-year yield is going much lower.

Telegraph:

• EMU crisis has let 'evil genie' of euro exit out of the bottle, says policymaker. Benoit Coeuré says single currency project can no longer force "integration through crisis" after turmoil in Greece.
  

Xinhua:

• China's Economy Faces Downward Pressure as Demand Weak. China's economy faces "relatively big" downward pressure, citing Xu Shaoshi, chairman of China's National Development and Reform Commission.

South China Morning Post:

• China’s local government debt up 6pc in 18 months, report says. China's local government debt rose by about 700 billion yuan (HK$845 billion), or 6.4 per cent, in the 18 months from June, 2013, Chinese news portal Caixin.com reported on Wednesday. The figures were contained in a report sent to the national legislature, which is considering a bill from the State Council that would limit how far local governments can move into the red. It would be the first such cap since the Budget Law was passed last year. There is no comprehensive breakdown of local authorities' debt loads in China, but the report sent to the National People's Congress and obtained by Caixin put the figure for the end of last year at 11.6 trillion yuan, up from the National Audit Office's 10.9 trillion estimate in June, 2013. About 6.6 trillion yuan of the 2014 year-end total was incurred through funding projects in transport, public facilities and energy projects. That was an increase of 27 per cent.