Tuesday, October 20, 2015

Today's Headlines

  • China Stabilizes on Shaky Pillar, Making More Stimulus Likely. China’s economy is relying on a shaky pillar, making more stimulus likely. While authorities won’t unleash the same flood of credit that followed the 2008 financial crisis, more targeted measures to get money flowing to jump start infrastructure projects is on the way. Recently announced measures also include a tax cut for vehicle purchases and a reduction in the minimum down payment for first-time home buyers. And unlike global peers, the People’s Bank of China still has room to cut interest rates.
  • For Mongolia, China's Slowdown Is Provoking Emergency Response. While China’s slowing economy has singed stock markets around the world, no nation is more affected than neighboring Mongolia. Things have gotten so bad that the government in this mineral-rich nation is planning job and salary cuts for bureaucrats, and the sale of of shares in state-owned companies including the postal service. Mongolia, sandwiched between China and Russia, is an early illustration of fallout from slower growth in the world’s second-biggest economy. “When China sneezes, we get a cold. That is how the situation is. It really affects us in a major way,” Dale Choi, founder and director of the research firm Independent Mongolian Metal & Mining Research, said in a phone interview.
  • China Mobile Profit Misses Estimates as User Growth Slows. China Mobile Ltd. posted third-quarter profit that missed analyst estimates as the world’s largest carrier faces stiffer competition, slowing subscriber growth and costs for its new high-speed network. Net income rose 13 percent to 28.2 billion yuan ($4.4 billion) in the three months ended September, according to figures derived from nine-month results published Tuesday. That’s the highest quarterly growth in at least five years. China Mobile has boosting investment to get more users onto its fourth-generation network as competitors with virtual operator licenses enter the market, escalating competition and hitting average revenue per user.
  • Swiss Watch Quarterly Exports Decline the Most Since 2009. Swiss watch exports had their biggest quarterly decline since 2009 as the industry struggles with the strong franc and as a slump in demand in China and Hong Kong began to spread across Asia. The value of shipments fell 7.2 percent in the third quarter, adjusted for working days, the Swiss customs office said Tuesday in a statement. Exports dropped 2 percent in the first nine months of the year to 15.8 billion francs ($16.5 billion), according to the Federation of the Swiss Watch Industry.  
  • Emerging Stocks, Currencies Decline on Global Stimulus Outlook. Emerging-market stocks fell from a two-month high as investors weighed the prospects for a pullback in the monetary stimulus in developed nations that has helped prop up demand for riskier assets. The MSCI Emerging Markets Index slipped 0.4 percent to 864.19 at 12:01 p.m. in New York, ending a three-day gain.
  • European Stocks Fall After ECB Report Dims Prospects of More QE. European stocks declined after a report showing an improvement in the region’s lending conditions lowered the prospects for additional monetary stimulus. After hovering near a two-month high in the first hour of trading, equities slid as a European Central Bank survey showed credit standards on loans to companies eased for the sixth straight quarter. Banks fell after the ECB said its quantitative-easing program will drag on profitability at those companies in the next six months. The report gives policy makers less cause to act when they meet this week, said Mirabaud Securities’ John Plassard. “The market is disappointed because if there is any improvement there, then for sure there’s no expansion of the purchases,” said Plassard, a senior equity-sales trader at Mirabaud in Geneva. “Good news is bad news. Draghi will probably continue saying ECB will use all its tools and they will repeat what is in the bank lending report.” The Stoxx Europe 600 Index dropped 0.4 percent to 362.67 at the close of trading.
  • Iran Plans 20-Year Contracts as Incentive for Energy Investments. Iran will pay foreign oil companies larger fees than it did under previous buy-back contracts to attract $100 billion of investments needed to rebuild its energy industry. The Persian Gulf state, once OPEC’s second-largest crude producer, will also offer 20-year contracts on oil and natural gas projects, Roknoddin Javadi, managing director of state-run National Iranian Oil Co., said in an interview in Tehran.
  • Posco Posts Biggest Loss Since at Least '10 as Steel Slumps. Posco, South Korea’s biggest steelmaker, reported the largest quarterly loss in at least five years amid losses on foreign exchange and mining assets, a lawsuit settlement and as a deluge of Chinese exports pushed down world prices. The net loss, excluding minority interests, was 534.2 billion won ($474 million) in the three months ended September, from a 237.8 billion won profit a year earlier, the Pohang-based company said Tuesday. That compares with an expected loss of 156 billion won, according to the average of 13 analyst estimates compiled by Bloomberg. 
  • Hedge Funds are Bringing Back Everyone's Least Favorite Toxic Investment. Joshua Siegel is bringing back a version of one of the most toxic financial vehicles ever devised and arguing that this time it’s going to be different. His StoneCastle Financial is among the funds that are reviving the collateralized debt obligation, or CDO. CDOs stuffed with mortgages and their derivatives caused billions in losses around the world during the 2008 crisis.
  • Bernie Sanders's Danish Utopia Girds for Deeper Welfare Cuts. Bernie Sanders’ utopia needs fixing. The Vermont senator used part of a debate this month with Senator Hillary Clinton and other contenders vying to become the Democratic Party’s candidate for U.S. elections to tell voters they should model their society on Scandinavia. “We should look to countries like Denmark, like Sweden and Norway,” he said. Ironically, the Denmark that Sanders wants the U.S. to emulate is now taking a long, critical look at its welfare model as it decides which bits to scale back.
  • IBM Drops to Almost 5-Year Low as Profit Forecast Is Cut. IBM’s stock dropped to almost a five-year low after the company cut its profit forecast, underscoring the difficulty of trying to reinvent itself as a powerhouse in cloud computing and data analytics. The shares tumbled 5.4 percent to $141.23 at 11:07 a.m. Tuesday in New York. The stock earlier fell to $140.50, its lowest intraday price since late October 2010.
Business Insider:
  • Chinese shipping imports just nosedived to their worst levels ever. Growth of exports from China has been dropping relentlessly, for years. Now this “growth” has actually turned negative. In September, exports were down 3.7% from a year earlier, the “inevitable fallout from China’s unsustainable and poorly executed credit splurge,” as Thomson Reuters’Alpha Now puts it. Most of these exports are manufactured goods that are shipped by container to the rest of the world. And imports into China – a mix of bulk and containerized freight – have been plunging: down 20.4% in September from a year earlier, after at a 13.8% drop in August.

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