Bloomberg:
- China’s Exports Drop as External Demand Fails to Offer Relief. China’s exports declined in July, adding pressure on Premier Li Keqiang’s government to stabilize growth. Overseas shipments fell 8.9 percent from a year earlier in yuan value, the customs administration said in Beijing on Saturday. Imports fell 8.6 percent, widening from a fall of 6.6 percent in June, leaving a trade surplus of 263 billion yuan ($42.4 billion). Along with weak domestic investment, subdued global demand is putting Li’s 2015 growth target of about 7 percent at risk. As slowdown pressures mount, the government has rolled out fresh pro-growth measures, including special bond sales to finance construction projects. “The yuan has been stronger against the euro, and it’s hurting Chinese exports to Europe,” Li Miaoxian, a Beijing-based economist at Bocom International Holdings Co., wrote in a note before the release. At the same time, China’s big trade surplus will make it hard for China to weaken the yuan “due to international political pressures,” Li wrote.
- Steel Exports Jump From China Expanding Glut, Hurting Mills. China’s steel exports climbed to the highest level since January, adding to a surplus that’s hurting global producers and prompting trade disputes worldwide. Shipments surged 9.5 percent to 9.73 million metric tons in July from June and were up from 8.1 million tons a year earlier, customs data show. That’s the third-highest total ever. Sales rose 27 percent to 62.13 million tons in the first seven months. Iron ore purchases advanced to the year’s high. Mills in China are facing slower domestic demand for the first time in a generation. They’re boosting exports, raising competition and pushing down prices. China produces half the world’s steel and exports are similar to output in Japan, the second-biggest producer. The industry is “bleeding to death,” Gary Klesch, chairman of Klesch Group, said on Aug. 4 after pulling out of talks to buy a Tata Steel Ltd. U.K. business.
- Sliding Commodities Push Credit Risk in U.S. to Highest of 2015. Pressure from sliding commodities prices is spreading from the junk-bond market to a broader gauge of U.S. corporate-credit risk. The cost to insure against default on high-grade bonds as measured by the Markit CDX North American Investment Grade Index rose to 75.1 basis points, the most since December. The Bloomberg Commodity Index fell for the third straight day, touching its lowest level since 2002. Credit-default swaps on companies exposed to plunging commodity prices weighed on the swaps gauge, which typically rises as investor confidence deteriorates. Crude oil’s decline to its lowest price since March 17 rekindled concern that energy companies will be less able to service their debt. “Commodities appear to be weighing on the market. They have a greater effect on the high-yield market, but both markets have been reacting in sympathy lately,” said Collin Martin, who heads fixed-income research at the Schwab Center for Financial Research. “Even if oil prices were to rise a bit from here, they are likely still well below what many firms had budgeted for.” A swaps index tied to speculative-grade companies added 8 basis points to 375, the highest since January. The cost to insure against default by Freeport-McMoRan Inc. for five years rose 29.5 basis points to 515.5. Five-year swaps on energy-services provider Nabors Industries Ltd. jumped 15 basis points to 361. A basis point equals $1,000 annually on a contract protecting $10 million of debt. The cost of credit-default swaps of media companies including CBS Corp. and Viacom Inc. also increased as investors grew skeptical about the health of the pay-TV industry.
- RedState Disinvites Trump Over Kelly Comment; Fiorina Defends Moderator. “I just don’t want someone on stage who gets a hostile question from a lady and his first inclination is to imply it was hormonal,” editor Erick Erickson writes. The conservative political blog RedState rescinded Republican presidential candidate Donald Trump's invitation to appear at a conservative gathering in Atlanta Saturday, citing the billionaire's comments about Fox News debate moderator Megyn Kelly. “It is unfortunate to have to disinvite him. But I just don’t want someone on stage who gets a hostile question from a lady and his first inclination is to imply it was hormonal,” RedState editor Erick Erickson wrote Friday night. Complaining about Kelly's question for him at Thursday night's first Republican primary debate, regarding his history of making disparaging comments about women, Trump said Friday on CNN, “You could see there was blood coming out of her eyes. Blood coming out of her wherever.”
Wall Street Journal:
- Afghan Capital Suffers Deadliest Day of Attacks in Years. Three bombings in Kabul kill dozens, including one U.S. service member. More than 50 people were killed in three separate bombings in Kabul, including a late-night attack on a U.S. forces base that left one service member dead, making it the single bloodiest day for the Afghan capital in recent years, local and foreign officials said Saturday.
- Berkshire Hathaway(BRK/A) Nears Deal to Buy Precision Castparts(PCP). Takeover could be biggest by Warren Buffett’s conglomerate.
- Schumer’s Iran Dissent. The New Yorker joins a growing list of Democratic opponents. Chuck Schumer’s decision to oppose President Obama’s Iran nuclear deal may not defeat the accord, but it certainly does showcase its flagging political support. Mr. Schumer is a party stalwart who wants to succeed Harry Reid as Senate leader, and his defection suggests that the deal will be opposed by at least a bipartisan majority in both houses of Congress.
Fox News:
- ISIS seizes Syrian Christians in attempt to further establish stronghold in strategic city. Islamic State is holding dozens of Christians in the southeastern Syrian province of Homs, Syrian Orthodox community leaders said on Friday, after it captured the town of Qaryatain in its efforts to establish a stronghold outside the major city of Homs. The seizing of Christians came as Islamic State fighters entered the town on Wednesday, after attacking Syrian-regime checkpoints by detonating three suicide bombs, according to Islamic State media.
Zero Hedge:
- Flushing Cash Into The Casino - The Media Stock Swoon Shows That It Works Until It Doesn't. (graph) If you don’t think the Fed and other central banks have transformed financial markets into debt besotted gambling casinos, consider the last few days of carnage in the media stocks. That sector is rife with bubble finance infections. Viacom levitated its stock the new fashioned way. During the last 19 quarters it has plowed $17.6 billion back into the casino in the form of stock buybacks ($15.1 billion) and dividends ($2.5 billion). But before you praise VIA for its seemingly shareholder friendly ways, consider this: During the same period it only earned $10.2 billion of net income. That’s right. It distributed 175% of its net income! Under the rules of old-fashioned finance that kind of reckless self-liquidation would have been considered a flashing red warning signal to hit the sell button. During the most recent quarter debt issuance by US companies reached an all-time high, raising a question as to why companies still need to borrow so much after selling $7 trillion of U.S. debt securities since 2008. This weeks S&P Media index swoon leaves no doubt as to the answer. Companies have not been borrowing to grow; they have been borrowing in order to flush cash into the casino.
- Weekend Reading: Serious Indigestion. (graph)
- Something Doesn't Add Up... (graph)
Telegraph:
- Raising rates is trickier now that QE is a lifestyle choice. QE is a slippery slope and no-one knows what will happen on financial markets when our zero-interest policy finally ends.
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