Monday, October 19, 2015

Today's Headlines

  • Putin Officials Said to Admit Real Syria Goal Is Far Broader. As Russia’s air war in Syria nears its fourth week, officials now admit that Moscow’s aim is far broader than the publicly announced fight against terrorist groups. The Kremlin’s real goal is to help Syrian President Bashar al-Assad retake as much as possible of the territory his forces have lost to opponents, including U.S.-backed rebels, Russian officials told Bloomberg News. Moscow’s deployment of several dozen planes, as well as ships in the Black and Caspian Seas, could last a year or more, one official said. President Vladimir Putin is willing to run the risk of falling into the kind of quagmire that helped sink the Soviet Union a generation ago for the chance to roll back U.S. influence and demonstrate he can dictate terms to Washington.
  • Assad's march on Aleppo raises fears of new refugee exodus. With Russian warplanes in the air and Iranian special forces on the ground, an emboldened Syrian President Bashar al-Assad is turning back to the biggest trophy in his country's civil war, and this time Europe is also on the front line. As his troops head toward Aleppo, Syria's former commercial hub and largest city, helicopters are dropping warnings to residents to vacate areas. Should Aleppo and other Sunni towns fall to Assad's forces, the potential for another, larger, wave of refugees would be nightmarish, according to one official in a European government.   
  • The Great Ball of China Money Rolls Into Bonds. Bringing leverage and distortion in its wake. China's markets resemble nothing if not a great rolling ball of money that moves from asset class to asset class, constantly searching for the next source of sizable returns. After shifting away from stocks this summer, when the value of the Shanghai Composite Index almost halved in a dramatic market selloff, the Great Ball of China seems to have found a new home: bonds sold by Chinese corporates.
  • China's New Economy Won't Pack the Same Punch for Global Growth. The data showed President Xi Jinping’s government is making headway transforming the $10 trillion-plus economy from one driven by debt-fueled investment and exports into a more sustainable one led by consumer spending and services. The not-so-great news: policy makers and investors hoping a resurgent China will revert back to its role as global-growth turbocharger are set to be disappointed.
  • Radicals gaining ground in Catalonia send warning to bond market. After failing to win a majority in the region's assembly with a mainstream separatist alliance on Sept. 27, acting President Artur Mas is trying to keep his position as leader of the drive for independence from Spain by bringing the more radical CUP into the process. The party is demanding Mas pursues "non-reversible acts of disobedience" toward Spain before starting talks on whether to support him remaining president. At stake is the future of a region that makes up a fifth of Spain's economy, and Mas's post-electoral strategy is doing nothing to assuage concerns. In the run-up to last month's vote, Catalan bonds maturing in February 2020 dropped, with the yield jumping to a level four times that of Spanish debt of a similar maturity. Tension between Madrid and Barcelona was among the reasons cited by Standard & Poor's to cut Catalonia's debt rating on Oct. 9 to BB-, three steps below investment grade.
  • Dubai Property Seen too Expensive to Get Iran Sanctions Bounce. Dubai homes are 4.4 times more expensive for Iranians using local currency than they were five years ago, meaning a lifting of sanctions against the Islamic republic would have little short-term effect on the emirate’s slumping real estate market, according to Phidar Advisory. “This is simply a matter of economics,” Phidar Managing Director Jesse Downs said by phone Monday. “The rial will take time to appreciate and until that happens, Dubai property will be very expensive for Iranian buyers.” 
  • Currency Rally Sows Seeds of Own Destruction in Policy Paradox. This month’s rally in higher-yielding currencies is in danger of snuffing itself out. The Australian dollar to the South African rand have strengthened in the past three weeks after the Federal Reserve held off raising interest rates in September, citing global market turmoil. The decision preserved their yield advantage over the U.S., fueling the currencies’ recoveries from this year’s lows. Here’s the catch: Those gains are starting to contribute to the sort of calm policy makers would like to see before they act. That may rekindle the threat of a Fed liftoff. And such a prospect risks derailing the recovery, whipping up volatility, and starting the cycle afresh.
  • Europe Stocks Rise on Earnings as Deutsche Bank Up on Reshuffle. A gain in Deutsche Bank AG and positive earnings reports helped push European stocks to a two-month high. The German lender rose 3.7 percent as it’s undertaking the biggest management reshuffle in more than a decade and splitting up its investment bank. Danone and Metro AG advanced after earnings, while miners fell as data showed China’s economy expanded at the slowest pace since 2009. The Stoxx Europe 600 Index added 0.3 percent to 364.25 at the close of trading in London, with the volume of shares changing hands 34 percent below the 30-day average.
  • Iran Sees No OPEC Output Change as Country Seeks $70-$80 Oil. Iran’s oil minister sees no imminent change in OPEC’s output strategy even as he urged fellow members of the group to cut their collective production to buoy crude to a range of $70 to $80 a barrel. Iran is preparing to ramp up its own output once world powers remove sanctions on its economy, regardless of any decisions by the Organization of Petroleum Exporting Countries, Oil Minister Bijan Namdar Zanganeh told reporters Monday at an industry conference in Tehran.
  • Halliburton(HAL) Cuts More Jobs as Fracking Hit Worst in Oil Downturn. Halliburton Co. cut another 2,000 jobs in the past month as the worst oil market slump in decades saps demand for work at the world’s largest provider of fracking services. The Houston-based company said the first quarter of next year may represent the lowest point for its North American profit margin as customers start fresh with new spending budgets for 2016 and tap Halliburton’s pressure-pumping expertise to start new wells. The comments came after the company reported a third-quarter loss of $54 million.
  • Copper Sags Most in Three Weeks as China Woes Dim Demand Outlook. Copper declined the most in more than three weeks as signs of slowing manufacturing added to demand concerns in China, the world’s biggest metals consumer. China’s industrial output in September climbed 5.7 percent from a year earlier, compared with a 6.1 percent gain in August and economists’ median estimate of 6 percent, government data showed. A separate report showed the slowest quarterly growth in the economy since 2009. Shares of mining companies fell, with Anglo American Plc dropping the most this month in London trading.
  • Morgan Stanley(MS) Misses Estimates on Drop in Bond Trading Revenue. (video) Morgan Stanley reported profit that missed analysts’ estimates as fixed-income trading revenue tumbled and investment-management fees dropped by more than half on an Asian private-equity loss. The stock dropped 5.7 percent in early trading. Third-quarter net income fell to $1.02 billion, or 48 cents a share, from $1.69 billion, or 83 cents, a year earlier, the New York-based company said Monday in a statement. Excluding an accounting gain and legal expenses, profit was 42 cents a share, missing the 63-cent average estimate of 23 analysts surveyed by Bloomberg.
  • China’s GDP at 6.9%? Try 3%: Analysts react to latest growth figures. “We don’t believe them at all. It’s not just that they come in suspiciously close to the target, which is pre-set. They’re produced remarkably quickly and rarely revised. And our own estimate — which is based on Premier Li’s advice, which is that the GDP data are untrustworthy, that we should use alternative measures to gauge the level of activity in China like electricity use, credit growth and other domestic indicators — we combine those and we get a number closer to 3%. Not 7.3 – three!”Danny Gabay, co-director at Fathom Consulting, in an interview with BBC Radio 4 (starting around the 17:00 mark)
Zero Hedge:
Business Insider:
Wolf Street:
  • Pummeled by Lousy Global Demand and Rampant Overcapacity, China Containerized Freight Index Collapses to Worst Level Ever. (graph) The CCFI, operated by the Shanghai Shipping Exchange and sponsored by the Chinese Ministry of Communications, is not being beautified in the manner that more publicly visible statistics, such as GDP growth, are subject to. It is allowed to get very ugly. And it got very ugly. The index plunged below 800 in early July for the first time in its history (it was set at 1,000 in 1998). It then recovered to a smidgen above 800, but now re-collapsed to even lower levels. The latest weekly reading dropped another 2.3% from the prior week to 764.84, a new all-time low:
  • Exclusive: Clinton urges U.S. regulators to examine Daraprim price hike. Democratic presidential candidate Hillary Clinton on Monday urged U.S. regulators to determine how to bring lower-cost generic drugs to market more swiftly and combat anticompetitive practices in the pharmaceutical industry. Clinton's requests to the Food and Drug Administration and the Federal Trade Commission were prompted by what she called the "egregious actions of Turing Pharmaceuticals," according to letters reviewed by Reuters.
  • China Sept power output falls 3.1 pct on yr -stats bureau. China generated 454.8 billion kilowatt-hours (kWh) of power in September, down 3.1 percent from the same month last year, the country's statistics bureau said on Monday, with industrial demand still under pressure as the economy slows.

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