Today's Headlines

Bloomberg:

• China Stocks Sink Again as Growth Concerns Spur Investor Exodus. China’s stocks slumped for a second day in thin turnover amid concern government measures to support the world’s second-largest equity market and economy are failing. The Shanghai Composite Index dropped 3.5 percent to 3,005.17 at the close, led by commodity producers and technology companies. About 14 stocks declined for each one that rose on the gauge, while volumes were 36 percent below the 30-day average. The index completed its biggest two-day loss in three weeks with a decline of 6.1 percent. Mainland Chinese equity funds lost 44 percent of their value at the end of last month compared with July, data showed Monday, as unprecedented state measures to stop a $5 trillion selloff failed to avert redemption. The CSI 300 Index declined 3.9 percent. Hong Kong’s Hang Seng China Enterprises Index slipped 0.3 percent, while the Hang Seng Index retreated 0.5 percent. The Shanghai index may fall to 2,700 as stocks are still expensive, said Francis Cheung, CLSA head of China and Hong Kong strategy, said in a briefing on Tuesday. Equities on mainland bourses traded at a median 45 times reported earnings last week. That’s the highest among the 10 largest markets and more than twice the 18 multiple for the Standard & Poor’s 500 Index. 

• China Braces for Second Onshore Bond Default by State Firm. China National Erzhong Group Co. may miss an interest payment later this month after one of its creditors filed a restructuring request, putting it at risk of becoming the second state-owned company to default in the nation’s onshore bond market. The smelting-equipment maker might not be able to pay a coupon that’s due Sept. 28 on its 1 billion yuan ($157 million) of 5.65 percent 2017 notes if a local court accepts the creditor’s restructuring application before that date, according to a statement posted on Chinamoney.com.cn. China National Erzhong, based in China’s western Sichuan province, issued the five-year securities in 2012 at par and the debentures are currently trading at 67.72 percent of that.

• German Investor Confidence Damped by Weaker Emerging Markets. German investor confidence fell for a sixth month in September, adding to signs that the slowdown in emerging markets threatens to drag on growth in Europe’s largest economy. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months ahead, slid to 12.1 from 25 in August. The reading compares with a median estimate of 18.3 in a Bloomberg survey of economists. A measure for the euro area also fell.

• Stock Market Rout Not Over for Canada as Bears Boost Positions. Pessimism remains acute over the outlook for Canada’s largest stocks, with derivatives traders raising their bets that August’s turmoil in global equity markets will continue. Short positions have more than quadrupled since the beginning of 2015 and the ratio of put to call options remains elevated in the C$9.5 billion ($7.2 billion) iShares Standard & Poor’s/TSX 60 exchange-traded fund, according to data compiled by Bloomberg. The largest ETF in Canada tracks the performance of the biggest and most liquid equities in the Toronto Stock Exchange, from Suncor Energy Inc. to Teck Resources Ltd. Commodity producers make up about 27 percent of the gauge, second only to financial services. 

• European Stocks Rebound as Oil Shares, Carmakers Rise Before Fed. European stocks climbed, led by gains in carmakers and energy producers, after worse-than-forecast data signaled weakness in the U.S. recovery ahead of a Federal Reserve rate decision. Equities are volatile amid concern for global growth before the central bank meeting. The Stoxx Europe 600 Index erased gains in the first hour of trading, and fell as much as 0.6 percent as investors weighed a slump in Chinese shares and declining German investor sentiment. Shares then rose as much as 1.1 percent after U.S. data on retail sales, industrial production and manufacturing in the New York region all missed estimates, two days before the Fed decides whether the U.S. economy is strong enough to withstand its first rate increase since 2006. The Stoxx 600 added 0.8 percent at the close of trading, up for the first time in four days.

• Shale Drillers Pump More Oil From Each Well as Rigs Mean Less. Shale producers in the U.S. have learned to do more with less. Last year’s price crash forced drillers to cut budgets, reducing the number of rigs in U.S. oil fields by 59 percent from the peak. Crude production, though, has fallen only about 5 percent.

• Glencore Slumps to Record Low, Erasing Gains Since Debt Plan. Shares of Glencore Plc slumped to a record low, erasing gains since announcing a $10 billion debt-reduction plan designed to reassure investors amid mounting concern about the commodity trader and miner’s borrowing load. The stock slumped as much as 7.7 percent to 118.1 pence in London trading and was 4 percent lower at 122.75 pence by 12:38 p.m.  

• Brazil Real Leads Losses as Goldman Sachs Doubts Political Will. (video) Brazil’s real led global losses as Goldman Sachs Group Inc. questioned the viability of government proposals to shore up its finances. The currency traded near a 12 year-low, extending this year’s rout to 31 percent and dropping the most among the world’s 16 major currencies. Most of the government measures proposed on Monday require approval from Congress, which could be difficult as President Dilma Rousseff struggles with record-low popularity and the longest recession since the 1930s, said Alberto Ramos, the chief Latin America economist for Goldman Sachs.

• Investors Brace for Defaults as Distressed Debt Swamps Market. Junk-bond investors are bracing for a surge in corporate defaults that would exceed the most pessimistic forecast from credit raters as the Federal Reserve contemplates its first interest-rate increase since 2006. A measure of distress in the market is suggesting investors have priced in a default rate of 4.8 percent during the next 12 months, according to Martin Fridson, a money manager at Lehmann Livian Fridson Advisors LLC. That’s almost two percentage points higher than the pace being projected for June next year by Standard & Poor’s, the world’s biggest credit rater, as concern mounts that energy companies that loaded up on cheap debt are going to struggle to refinance.

• Yellen's Former Aide Says a Rate Hike Would Be a Serious Error. There's labor supply out there that isn't measured by the jobless rate. The U.S. is probably about two years away from achieving full employment, no matter what the jobless rate suggests and Federal Reserve officials think. That's the view of  Andrew Levin, who served as a special adviser to former Fed Chairman Ben S. Bernanke and then-Vice Chair Janet Yellen from 2010 to 2012. "We're not even close to full employment,'' he said in an interview. 

• Fed Forgoing September Risks Spoiling Bond Market's Gradual Path. As the Federal Reserve prepares to raise interest rates for the first time since 2006, almost all the talk of a potential policy misstep has centered on the peril of hiking too soon. The bigger concern is if the Fed waits too long, say Thomas Lam at RHB Securities Singapore Pte. Ltd and David Glocke at Vanguard Group Inc. A decision to keep the overnight rate near zero on Sept. 17 may wind up jolting debt markets more than actually raising it, said Lam, who according to Bloomberg was the fourth-most accurate forecaster of the U.S. economy last quarter.

• Why the Fed Is Likely to Stand Pat This Week. Market turmoil means moving from the zero bound gets even trickier.

• What's Behind Hillary Clinton's Drop in the Polls? Clinton has become the most polarizing candidate for members of her own party. Eleven percent of Democrats polled in an August Quinnipiac University survey said they would never vote for her, the most for any Democratic candidate. Worse, “liar” was the first word that came to mind when respondents were asked what they thought of Clinton, according to the poll.

Wall Street Journal: 

• China Investigates Citic Securities President for Insider Trading. Cheng Boming is the latest top executive to be embroiled in a government crackdown on ‘securities violations’.

CNBC: 

• Hayman Capital's Bass: China's real problem is its banking sector. (video) 

• This might be the worst Fed option. Whatever the Fed does Thursday will surprise someone, but not taking action could result in the least favorable course for markets since it will prolong the uncertainty.

Zero Hedge:

• Analyst Who Said "Buy Lehman" 20 Days Before Its Collapse Is Now On The Financial Stability Oversight Council.

• "You Get A New Car; You Get A New House" - Saudi Prince Alwaleed Hands Out Bribes To Saudi Citizens.

• "The House Will Likely Win". (graph)

• Steen Jakobsen Sums Up In 1 Word What We've Learned In The 7 Years Since Lehman.

• North Korea Restarts Nuclear Complex, May Nuke US "At Any Time" For "Mischievous Behavior".

• Refugee Crises At Dangerous Tipping Point As Hungary Deploys Army, Germany Loses Patience.

• The Most Loved Stock Market Rally In History. (graph)

• Market "Ominously Hints Recession Imminent" BofA Warns Unless "Unambiguous Pessimism" Leads To Stock Rally. (graph)

• Business Inventories Grow At Slowest Pace Since Jan, Sales-Ratio Signals Recession Imminent. (graph)

• The Next Financial Crisis Won't Be Like The Last One.

• Industrial Production Plunges Most In 3 Years As Auto-Maker "Nightmare" Comes True. (graph)

• Stocks & Bond Yields Surge As Bad-News-Is-Good-News Madness Returns (For Now). (graph)

• Recession Looms As Empire Manufacturing Collapse Show No Signs Of A Bounce. (graph)

• Retail Sales Disappoints, Tests Recessionary Waters Ahead Of Fed Meeting. (graph)

Business Insider: 

• Russia could have a dark ulterior motive with its moves in Syria.

• This map shows the routes of Europe's refugee nightmare — and how it's getting worse.