Wednesday, September 23, 2015

Today's Headlines

Posted by Gary .....at 3:01 PM
Bloomberg:  
  • Shadow Finance Expansion by Chinese Banks Deepens Credit Mystery. China’s riskier banks are investing more customer funds in financing that is kept off their loan books, making it harder for rating companies to gauge their asset quality. There has been a surge in a balance-sheet item known as receivables, which often includes shadow funding such as trusts and wealth products, said Moody’s Investors Service. Fitch Ratings said it is hard to analyze this escalation in activity. Listed banks excluding the Big Four saw short-term investments and other assets -- which include receivables -- jump 25 percent in the first half, compared with total asset growth of 12 percent, data compiled by Bloomberg show. Slower growth in the world’s second-largest economy coupled with "still significant" credit expansion prompted Standard & Poor’s to cut its view of the banking industry’s economic risk to negative from stable this week. Shadow-finance assets, estimated at 41 trillion yuan ($6.4 trillion) by Moody’s at the end of 2014, have become more attractive as five interest-rate cuts by the central bank since November curbed profits from lending. "Our concern with some of these investment positions is banks are using them as a way to bypass lending restrictions," said Grace Wu, a senior director at Fitch in Hong Kong. "Unlike bank loans, they don’t get reported into loan provisions, so it’s more difficult for us to ascertain the asset quality."
  • China and the Possible Currency War in Asia. (video)
  • Chinese Art Auctions Fall to $7.9 Billion as Speculators Flee. Auction sales of Chinese art and antiques worldwide fell 7 percent to $7.9 billion in 2014, hampered by the country’s economic slowdown, government anti-corruption measures and fleeing speculators, according to a report. Sales are down 31 percent from the Chinese art market peak in 2011, according to the third annual report published Wednesday by art researcher and database Artnet and the China Association of Auctioneers. Auctions in mainland China accounted for most of last year’s decline, falling 9.3 percent from 2013.
  • Macau Casinos Drop as Analyst Says Gaming Fell 19% Last Week. Macau casino shares closed lower in Hong Kong after Deutsche Bank AG said gaming revenue was hurt last week due to a move by junket operators to reduce credit offered to high-end gamblers. Gross gaming revenue fell 19 percent to 493 million patacas ($62 million) a day last week, or 18 percent below the average so far this quarter, Deutsche Bank AG analyst Karen Tang wrote in a note Wednesday. Junket operators reduced lending after a reported theft at a competitor "prompted others to withdraw deposits from various junkets," Tang wrote. MGM China Holdings Ltd. fell 7.7 percent to HK$10.30 by the close of trading in Hong Kong, while Wynn Macau Ltd. fell 5.6 percent. and Galaxy Entertainment Group Ltd. was down 5 percent, SJM Holdings Ltd. dropped 5.8 percent and Sands China Ltd. lost 2.9 percent. The Bloomberg Intelligence Macau Gaming Index declined more than 5 percent to a three-year low.
  • VW Chief Winterkorn Steps Down After Emissions Scandal. (video) Volkswagen AG Chief Executive Officer Martin Winterkorn resigned after U.S. officials caught the company cheating on emissions tests, leaving the world’s top-selling automaker to appoint a fresh leader to repair its reputation among customers, dealers and regulators around the globe. Stepping down after almost a decade in charge, Winterkorn said he was accepting the consequences of the mushrooming scandal that has wiped 20 billion euros ($22 billion) off the company’s market value.
  • TSMC's Fourth-Quarter Guidance Misses Estimates on Weak Demand. Taiwan Semiconductor Manufacturing Co. gave revenue guidance below analysts’ estimates, putting the chipmaker on track for its first quarterly sales drop in four years amid a weak smartphone market. Fourth-quarter sales will be NT$198 billion to NT$204 billion, the world’s largest customer chipmaker said, compared with estimates for NT$213 billion. The surprise announcement comes as the maker for Apple Inc., Qualcomm Inc. and MediaTek Inc. suffers from sluggish global demand for the semiconductors used in smartphones, personal computers and tablet computers. Chairman Morris Chang said in July the slow rate at which chip inventories were declining was “not a very good omen” for fourth-quarter sales. “It’s disappointing, even with the benefits of the currency move, and shows there’s weakness in orders from smartphone chip customers like Qualcomm, MediaTek and also non-smartphone players due to slow inventory digestion,” said Mark Li, an analyst at Sanford C. Bernstein. 
  • Canada Dollar Reaches 11-Year Low as China Economic Growth Slows. The Canadian dollar fell to an 11-year low after signs of slowing growth in China added to speculation there will be no quick recovery from the collapse in commodity prices that already led the economy to contract during the first half of the year. The Canadian dollar, called the loonie for the picture of the aquatic bird on the C$1 coin, fell as much as 0.6 percent to C$1.3357 per U.S. dollar, its lowest level since June 29, 2004. It traded at C$1.3330 per U.S. dollar at 12:44 p.m. in Toronto. One loonie buys 75 U.S. cents.
  • Mexico Moves to Support Peso For Third Day as Currency Tumbles. Mexico’s central bank held an extraordinary dollar auction for a third consecutive day to support the peso as the local currency tumbled to the lowest level in a month amid an emerging-market selloff. Policy makers sold an extra $200 million today, following similarly-sized auctions Monday and Tuesday. Still, the peso fell 1.3 percent to 17.1113 per dollar, reaching what would be the lowest closing level since Aug. 25.
  • At 4-Per-Dollar, Brazil's Currency and Reputation Are in Tatters. The collapse of Brazil’s currency is becoming emblematic of all the progress in the past decade that the nation has now squandered. The real tumbled to the lowest level since Brazil introduced the tender in 1994, wiping out the gains -- as well as the hard-earned credibility -- that former President Luiz Inacio Lula da Silva won over the course of his tenure. Lula overcame skeptics who worried that he would push Brazil to default and helped Latin America’s biggest economy win its first-ever investment grade as the nation transformed into an emerging-market powerhouse.
  • Draghi Says Time Needed to Judge If More Stimulus Necessary. Mario Draghi said it’s too soon to say whether risks to the economic outlook warrant a step-up in the European Central Bank’s stimulus. “More time is needed to determine in particular whether the loss of growth momentum in emerging markets is of a temporary or permanent nature,” the ECB president said in his quarterly testimony to European Parliament lawmakers in Brussels on Wednesday. Officials need to “assess the driving forces behind the drop in the international price of commodities and behind the recent episodes of severe financial turbulence,” he said.
  • Euro May Suffer in Potential Fallout From VW Emissions Scandal. Volkswagen AG’s diesel scandal is big enough that some analysts are saying it has the potential to damage the euro. The widening crisis over vehicles that cheated U.S. air-pollution tests caused the German carmaker’s shares to plunge almost 40 percent earlier this week, dragging European equities lower. The scandal may reverberate through the currency market by undermining confidence in Europe’s largest economy in the short term and damaging the reputation of the nation’s products. Overseas cars sales accounted for almost 18 percent of German exports last year.
  • Emerging Stocks Drop With Currencies as China PMI Spurs Selloff. Emerging-market stocks headed for a two-week low and currencies tumbled as a surprise decline in a Chinese manufacturing gauge to a six-year low deepened concern that the slowdown in the world’s second-largest economy is curbing global growth. The Hang Seng China Enterprises Index sank 2.7 percent and the Shanghai Composite Index ended a three-day advance. Citic Securities Co. slumped to an 18-month low in Hong Kong after people familiar with the matter said a government probe has found evidence of insider trading. The ruble rose with oil prices, while Russia’s Micex Index headed for the longest streak of declines since July 2014. Brazil’s real deepened its drop to record lows as the outlook for China, the country’s biggest trading partner, overshadowed progress in reining in government spending. The MSCI Emerging Markets Index dropped 2 percent to 792.17 at 11:17 a.m. in New York. A Bloomberg gauge tracking developing-country currencies slipped 0.5 percent, dropping for a fourth day in a row. 
  • European Stocks Little Changed as Investors Weigh Recovery. European stocks were little changed, as investors weighed signs that the region’s economy is recovering, after shares yesterday had their worst decline in a month. The Stoxx Europe 600 Index gained 0.1 percent at the close.
  • Oil Producers' Credit Lines to Shrink as Banks Revalue Reserves. Oil producers in the U.S. are about to see their credit lines shrink, just when they need the money most. The latest round of twice-yearly reevaluations is under way, and almost 80 percent of oil and natural gas producers will see a reduction in the maximum amount they can borrow, according to a survey by Haynes and Boone LLP, a New York law firm. Companies’ credit lines will be cut by an average of 39 percent, the survey showed. "There’s going to be a reduction to the majority of these credit lines," said Neal Dingmann, an analyst at SunTrust Robinson Humphrey Inc. "It’ll make a lot of these companies reduce a bit more on spending."
  • Machinery Stocks Latest S&P 500 Group to Flash Sign of Weakness. The road back from the first correction for U.S. equities since 2011 just got another pothole. Machinery companies became the latest Standard & Poor’s 500 Index group to briefly slide under its intraday low on Aug. 25, the day that marked the bottom of the broader gauge’s 10 percent selloff over four days. For chart watchers, breaching that nadir signals sentiment has shifted and the group, which includes Caterpillar Inc. and Cummins Inc., may be ripe for additional selling. The group is down 0.6 percent at 9:55 a.m. in New York today, poised for the lowest close since July 2013.
  • U.S. Holiday Sales Growth Expected to Slow, Hurt by Stagnant Wages. U.S. retail sales may increase as much as 4 percent this holiday season, less than last year’s gain, as shoppers’ wages remain stagnant, according to Deloitte LLP. Sales, excluding purchases of motor vehicles and gas, may climb to between $961 billion to $965 billion in the November-through-January shopping season, Deloitte said today in a statement. Holiday sales by that measure rose 5.2 percent last year, according to the New York-based consulting firm. U.S. shoppers may be cautious with their disposable income this year, restrained by average hourly earnings that the Labor Department says climbed just 2.2 percent in August from the year before. Slowing global growth and financial-market volatility also may shake consumers’ willingness to spend. 
Fox News:
Zero Hedge:
Telegraph: 
Expansion:
  • Investors now seek clauses in contracts to cover themselves against potential risk of secession of Catalonia from Spain, citing law firms.

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