Monday, September 21, 2015

Today's Headlines

Posted by Gary .....at 2:59 PM
Bloomberg: 
  • Merkel demands stamina to help refugees as U.S. admits Syrians. German Chancellor Angel Merkel told her European Union counterparts they face a long battle to help refugees flooding into the bloc as Secretary of State John Kerry said the United States will take in thousands more people fleeing the conflict in Syria. Divisions resurfaced in the European Union on Monday with Hungary and the Czech Republic reiterating their opposition to mandatory quotas that Germany and the European Commission want to set for distributing refugees. Leaders are trying to manage an unprecedented influx of people caused by the turmoil around their borders while assuaging the concerns of their voters.
  • Empty Punchbowl Leaves Central Banks Powerless to Bolster Stocks. Central banks are past the point of having to worry about withdrawing the punch bowl before the party gets out of hand. It’s already running dry. Where once-continued easy money would have been a recipe for rising stocks, the Federal Reserve’s decision not to end its zero interest rate policy last week sent stocks tumbling. It’s not just the Fed. The Euro Stoxx 50 Index fell 2.75 percent the day after European Central Bank President Mario Draghi signaled more stimulus. Meantime, the Shanghai Composite Index dropped 1.27 percent the day after the People’s Bank of China delivered its fifth rate cut since November on Aug. 25. “Central bankers no longer enjoy the same power to reassure” markets, Michala Marcussen, head of global economics at Societe Generale SA, said in a report to clients on Sunday.
  • Europe Stocks Rebound From Two-Day Drop Despite Volkswagen Slide. After their worst fall in two weeks, European stocks clawed back some losses today, helped by a broad-based rally. Equities are recovering after the Federal Reserve’s decision to keep rates unchanged last week raised questions about global growth. Three Fed officials argued over the weekend that a rate increase is still warranted for this year. Investors will get a clearer picture over the next few days, and those focused on the long term can find value in European shares after recent declines, according to MPPM EK’s Guillermo Hernandez Sampere. The Stoxx Europe 600 Index added 0.9 percent at the close of trading, reversing a drop of 0.2 percent. 
  • Iron Ore Outlook Cut by ANZ After China Steel Demand Peaks. Steel consumption in China has peaked and economic growth is cooling, according to Australia & New Zealand Banking Group Ltd., which reduced price forecasts for iron ore and coal for next year and 2017. Iron ore may average about $52 a metric ton next year, 5.3 percent lower than previously forecast, and $54 in 2017, a reduction of 10.5 percent, Head of Commodity Research Mark Pervan said in a report on Monday. The outlook for coking coal was pared back by as much as 13.5 percent. “In iron ore in particular we see little upside in prices for the next few years,” Pervan wrote with analyst Anurag Soin. “Lower Chinese growth forecasts have prompted us to lower our steel-demand outlook.”
  • Fed’s Lockhart Favors Interest-Rate Liftoff Later This Year. Federal Reserve Bank of Atlanta President Dennis Lockhart said while recent market volatility raised risks to the U.S. economic and inflation outlook, he remains confident the central bank will raise interest rates this year. “I put most of the decision weight on prudent risk management around recent and current market volatility,” Lockhart said in a speech in Atlanta Monday, referring to his vote backing the Fed’s decision last week to hold rates near zero. “As things settle down, I will be ready for the first policy move on the path to a more normal interest-rate environment. I am confident the much-used phrase ‘later this year’ is still operative.” 
  • Top Strategist: Fed Mistake to Delay Rate Hike. (video)
  • Hedge Funds Burned by Fed Set to Unwind Bearish Rate Positions. Hedge funds and other speculators were ready to profit last week if the Federal Reserve lifted interest rates. Their bets proved wrong-footed, leaving traders poised to reverse course, according to TD Securities. The net aggregate short position in all interest-rate contracts traded through CME Group Inc. was the largest since February as of Sept. 15. The wagers would’ve proven prescient if yields had spiked following the Fed’s Sept. 17 announcement. 
  • Corporate Credit-Default Swap Indexes Rolling Into New Series. The latest series of benchmarks measuring the cost of insuring corporate debt against default started trading today. Gauges of credit-default swaps on companies in Europe, Asia and Australia rolled into their 24th series. The 25th version of the Markit CDX North America Investment-Grade Index also opens today and its high-yield measure starts trading on Sept. 28. The 24th series of the Markit iTraxx Japan starts on Thursday. The Markit iTraxx Crossover Index of swaps linked to 75 non investment-grade companies cost 309 basis points at 10 a.m. in London. That compares with 322 basis points for the previous series at the close of trading on Friday, according to data compiled by Bloomberg.
  • The Rent Crisis Is About to Get a Lot Worse. Millions of households could join the ranks of those spending more than half their income on rent, Harvard study warns. The number of U.S. households that spend at least half their income on rent—the "severely cost-burdened," in the lingo of housing experts—could increase 25 percent to 14.8 million over the next decade. More than 1 million households headed by Hispanics and more than 1 million headed by the elderly could pass into those ranks. Households shouldn't spend more than 30 percent of income on housing, by the general rule of thumb.
Wall Street Journal:
  • Hillary Clinton Tweet Sends Biotech Stocks Tumbling. Biotechnology stocks took a sharp dive Monday after Hillary Clinton said she would propose a plan to counteract “price gouging” by drug makers. Ms. Clinton, who is seeking the Democratic nomination for president, was responding to New York Times article published Sunday that told of a price increase for a drug used to treat a life-threatening parasitic infection. The cost of the drug was recently increase from $13.50 a tablet to $750, the story said.
  • Brazil’s Real Continues Slump. Brazil’s currency weakens past 3.98 to the dollar for the first time since 2002.
Zero Hedge:
Financial Times:
  • Hedge fund leader bets on emerging market rout. The world economy is locked on a course towards an emerging markets crisis and a renewed slowdown in the US, regardless of the Federal Reserve holding off on a rise in rates last week, according to one of 2015’s most successful hedge fund managers. John Burbank, whose Passport Capital has placed a raft of lucrative bets against commodities and emerging markets this year, forecast that the Fed would eventually be forced into a fourth round of quantitative easing to shore up the economy.
Telegraph:

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