Tuesday, September 01, 2015

Today's Headlines

Posted by Gary .....at 2:06 PM
Bloomberg: 
  • The $2 Trillion Emerging-Stock Drop Fixing All Eyes on China. (video) The August meltdown that wiped more value off emerging-market stocks than at any time since the collapse of Lehman Brothers Holdings Inc. has gotten investors more fixated than ever on China’s economic fortunes. As the shock Chinese yuan devaluation sent at least half of the main developing countries into bear-market territory last month, the capitalization of the 31 largest emerging equity markets slid by $2 trillion, according to data compiled by Bloomberg. The selloff continued on Tuesday as worse-than-expected manufacturing figures out of China sent the MSCI Emerging Markets Index tumbling 2.2 percent by 3:27 p.m. in London.
  • Is This the China Hard Landing Investors Fear? (video)
  • Is the China Carry Trade Unwinding? (video)
  • Lagarde Says Global Growth Outlook Weaker Than IMF July Forecast. International Monetary Fund Managing Director Christine Lagarde said the global expansion outlook is worse than the lender anticipated less than two months ago, with advanced and Asian economies growing more slowly than expected. “We expect global growth to remain moderate and likely weaker than we anticipated last July,” Lagarde said Tuesday in a speech in Jakarta. “This reflects two forces: a weaker than expected recovery in advanced economies, and a further slowdown in emerging economies, especially in Latin America.”
  • Brazil's Epic Era of Splurging Is Over. Higher taxes, loss of jobs and lower wages have cut into consumer spending. Gone are the days of Brazilians flooding Miami to spend millions on fast cars and bling.  An era of austerity has dawned in Latin America's largest economy as the country charts a course in fiscal tightening. “The good times are over,” Jankiel Santos, chief economist at BESI Brazil, said by phone. “Brazil is in a difficult situation, and needs to correct the excesses of the past.” These three charts illustrate the end of a decade-long consumption boom.
  • Petrobras Sinks With Ibovespa as UBS Cuts Profit Outlook by 80%. Shares of Petrobras extended a plunge over the past year to 62 percent, more than double the slide in the stock benchmark, after the Zurich-based bank said that a weaker currency may sap profitability. The Ibovespa has slumped 4.6 percent over the past three days, while the currency dropped to the lowest level since December 2002.
  • Will We See More Crises in Emerging Markets? (video)
  • Ruble Weakens as Morgan Stanley Forecasts Recession Through 2016. The ruble snapped four days of gains as oil declined and Morgan Stanley forecast the country’s recession will last another year. Russia’s currency weakened 1.5 percent to 65.1950 against the dollar by 1:52 p.m. in Moscow, starting September on a sour note after four consecutive months of declines. An index of manufacturing activity in August fell to 47.9 from 48.3 in July, the ninth straight month of contraction. The energy-dependent economy will contract 4.2 percent this year, according to Morgan Stanley, which joined Deutsche Bank AG in downgrading its outlook for Russia this week. That’s more than the 3.7 percent decline in gross domestic product forecast by 48 economists surveyed by Bloomberg. 
  • Dubai Property Prices Fall Most in the World, Knight Frank Says. Dubai property prices fell by 12.2 percent during the past year, the largest drop in the world, according to real estate consultancy Knight Frank. The decline in the twelve months through June was the biggest in 56 mainstream residential markets and larger than the 12 percent fall in real estate prices in Ukraine, which has been hit by almost two years of protests, a separatist insurgency, and political upheaval, Knight Frank said Tuesday in a report. Prices in Dubai fell 2.8 percent in the second quarter. Hong Kong was the best performing residential market, with prices up by 20.7 percent. 
  • Aussie Sinks to 6-Year Low as China Factory Gauge Clouds Outlook. The Australian dollar plunged to a six-year low as a decline in China’s official factory gauge eroded the outlook for commodities demand. The currency dropped as much as 1.1 percent to 70.37 U.S. cents, touching the cheapest since April 2009. China’s official Purchasing Managers’ Index dropped to 49.7 for August, the weakest in three years. Numbers below 50 indicate contraction. Australia’s central bank left interest rates unchanged Tuesday.
  • French Factory Drag Intensifies as Germany Leads Europe Recovery. France’s manufacturing industry shrank more than initially estimated last month, leaving Germany to take a greater share of the burden of driving the euro-area recovery. Markit Economics said its Purchasing Managers’ Index for France fell to 48.3 from 49.6 in July, lower than the 48.6 reading reported on Aug. 21. In contrast, the German gauge rose more than estimated and was well above the 50 level that divides expansion and contraction. The measure for the euro zone also signalled growth.
  • ECB Asset-Back Debt Holdings Fall Even With Renewed Buying Push. The European Central Bank’s holdings of asset-backed debt fell for the first time since January, even as the bank steps up purchasing efforts to help boost regional lending. The outstanding amount held in the ECB’s asset-backed securities purchase program declined by 106 million euros ($120 million) to 11.1 billion euros in the week ended Aug. 28, the Frankfurt-based institution said Monday. A spokesman declined to comment on the drop in holding of bonds backed by mortgages to auto loans. The decline is probably because the ECB can’t buy enough new bonds to replace maturing debt, said Gareth Davies, head of European asset-backed securities research at JPMorgan Chase & Co. 
  • Europe Stocks Selloff Deepens as Global Growth Worries Intensify. The plunge that led Europe’s equities to their biggest monthly losses since 2011 is showing no signs of easing. The Stoxx Europe 600 Index lost 2.8 percent at 4:32 p.m. in London, and dropped as much as 3.3 percent. The measure followed Asian stocks lower after a report showed China’s official factory gauge dropped to a three-year low, while separate data signaled manufacturing in the euro area shrank more than initially forecast and output in the U.S. expanded at the slowest pace since 2013. Miners again were the most hurt among European industry groups, sliding 5.7 percent as commodities resumed their declines. 
  • China Seen Driving Commodities Lower as Uncertainty Spreads. China will continue to hurt commodities in coming months as a volatile equity market and political uncertainty add to concern that economic growth is weakening, according to Citigroup Inc. Demand for raw materials will weaken while a spillover from financial markets adds further pressure on prices, analysts including Ivan Szpakowski wrote in a report Tuesday subtitled "Riding the Chinese Rollercoaster." Corruption investigations have also crippled investment by some state companies, particularly power grid operators that support copper demand, according to the bank.
  • Just the Mechanics of the Fed's Exit Strategy Could Boost the Dollar. But a stronger greenback could complicate matters. The U.S. dollar has risen 17 percent against the euro over the past year, as the Federal Reserve has drawn closer to raising interest rates for the first time since 2006. There could be further appreciation ahead for purely mechanical reasons, given the unique nature of the upcoming tightening cycle and the new tools the Fed will use to raise rates, according to Zoltan Pozsar, a director of U.S. economics at Credit Suisse Securities USA in New York.  
  • BofA Says its Clients Bought a Record Amount of Stocks Last Week. There was "buying across the board". According to Bank of America Merrill Lynch flow data, its clients were net buyers of $5.6 billion in U.S. equities last week, a record dating back to when the survey began in 2008.
  • Google(GOOG) Faces New Menace in EU as Hausfeld Eyes Damages Lawsuits. Perceived victims of Google Inc.’s alleged anti-competitive behavior have a new European dial-in number. U.S. law firm Hausfeld & Co. LLP and antitrust consulting company Avisa Partners set up a platform to evaluate potential damages suits as the European Union threatens the search-engine giant with antitrust fines.
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