Wednesday, October 21, 2015

Today's Headlines

  • China Defaults Seen Rising After Sinosteel Misses Payment. China bond defaults are forecast to climb after a state-owned steelmaker missed an interest payment, raising questions about the government’s commitment to stand behind such firms. Sinosteel Co. failed to pay interest due Tuesday on 2 billion yuan ($315 million) of 5.3 percent notes maturing in 2017 after saying it will extend the deadline as it plans to add a unit’s stock as collateral. That came after the National Development and Reform Commission planned to meet noteholders and ask them not to exercise a redemption option on Tuesday to force full repayment, people familiar with the matter said last week.
  • China's Stocks Fall Most in Month as Small-Caps Lead Declines. China’s stocks dropped the most in a month on heavy volume, led by smaller companies, as investors weighed whether an equity rebound had gone too far. The Shanghai Composite Index slid 3.1 percent to 3,320.68 at the close, the most since Sept. 15. The ChiNext index of smaller companies slumped 6.6 percent after soaring 40 percent through Tuesday from last month’s low. Leshi Internet Information & Technology Corp. and East Money Information Co., the heaviest-weighted ChiNext stocks, both tumbled by the 10 percent daily limit. Jiangxi Copper Co. paced declines for material producers, tumbling 7.8 percent.
  • ABB Profit Drops 21% Amid China Slowdown, Drop in Oil Prices. ABB Ltd, the power-grid maker that has activist Cevian Capital as a shareholder, said third-quarter margins improved on cost cutting even as profit dropped 21 percent amid a slowdown in China and feeble demand from oil and gas customers. Net income declined to $577 million, the Oerlikon, Switzerland-based company said in a statement on Wednesday. Earnings before interest, taxes and amortization fell 9 percent to $1.08 billion while a savings push lifted the operating ebitda margin 50 basis points to 12.5 percent. 
  • Khamenei Endorses Nuclear Deal But With Warning Over Sanctions. Iranian Supreme Leader Ayatollah Ali Khamenei threw his authority behind the country’s nuclear accord with world powers for the first time, while issuing a warning over the removal of sanctions. In a statement addressed to President Hassan Rouhani and published by state news agencies, Khamenei said he appreciated the work of Iran’s diplomats in securing the deal. But he said the government should remain vigilant over any failure to deliver on commitments to remove sanctions by European nations and the U.S. 
  • Rousseff Impeachment Bid Filed as Crisis Hits New Stage. A group of high-profile lawyers filed a request on Wednesday to impeach President Dilma Rousseff, bringing closer a decision on her political survival as months of uncertainty have paralyzed Congress, rattled financial markets and deepened an economic slump. Lower house President Eduardo Cunha, a vocal critic of Rousseff who himself faces corruption allegations, pledged no bias in deciding whether to accept the plea that alleges she manipulated budget accounts in 2014 and this year. Accepting the petition could take days or weeks and would trigger a protracted legal process that could eventually force the president from office.
  • EU Calls for Talks as Migrant Crisis Deepens in Balkans. European Commission President Jean-Claude Juncker called for emergency talks and Slovenia gave its army a green light to help control a surge in migrants as Europe’s refugee crisis deepened before the onset of winter. German Chancellor Angela Merkel will join government leaders from eight other countries from central and southeastern Europe at the meeting scheduled for Sunday in Brussels, Juncker said. Earlier, Slovene lawmakers gave the army additional powers to help police man border posts overwhelmed with migrants, according to the parliament’s website. The Adriatic nation of 2 million people will also ask the European Union for assistance.
  • Draghi May Lack What It Takes to Do Whatever It Takes on Prices. Having once saved the euro with his 2012 pledge to do “whatever it takes,” the European Central Bank president is now signaling a willingness to boost his 1.1 trillion-euro ($1.3 trillion) quantitative-easing program in response to a negative inflation rate. The problem is that the ECB risks running into political and technical limits on just what bonds it can purchase. Those constraints mean investors are already starting to question just how much more the euro area’s policy makers can do to revive inflation. The ECB Governing Council starts a two-day monetary policy meeting in Malta on Wednesday and Draghi will hold a press conference on Thursday.   
  • Emerging Currencies Slide to Two-Week Low as China Stocks Drop. Emerging-market currencies fell to a two-week low and stocks retreated as falling commodity prices and a slide in Chinese shares refocused concern on slowing growth in the world’s second-largest economy. A gauge tracking 20 developing-nation currencies weakened 0.5 percent, dropping for a fourth day. South Africa’s rand and Russia’s ruble slumped at least 1.1 percent against the dollar as oil prices retreated. The real fell for a second day on speculation Brazil will change this year’s budget target to a deficit from a surplus, underscoring its inability to shore up government finances.
  • European Stocks Are Little Changed as ARM Climbs, Miners DeclineEuropean stocks fluctuated throughout the day, before closing little changed, as investors oscillated between concern about global growth and optimism regarding corporate earnings. Anglo American Plc and Glencore Plc led resource-related companies lower, erasing an earlier advance, amid slumping commodity prices. ARM pushed a gauge of technology shares to the biggest gain on the Stoxx Europe 600 Index, jumping 6.5 percent after third-quarter revenue beat analyst estimates. Reckitt Benckiser climbed 2.5 percent after raising its full-year growth target. Credit Suisse Group AG lost 3.6 percent after saying it will raise fresh capital and reorganize its operational focus. The Stoxx 600 lost less than 0.1 percent to 362.64 at the close of trading, after earlier rising 0.4 percent and falling as much as 0.8 percent.
  • Jim Chanos Nails the Link Between Debt and Energy. Shale companies have relied on eager capital markets for growth.  So begins the latest presentation from renowned short-seller Jim Chanos. What follows is a powerful outline of the spirally debt dynamics that now dominate the future of the oil industry. At the heart of Chanos's thesis is the contention that years of low interest rates, cheap financing, overeager investors and ambitious managers have helped propel the boom in U.S. shale and imbue it with near unstoppable momentum; U.S. oil production is expected to grow 6 percent in 2015, despite a stunning 59 percent drop in the U.S. rig count over the past year.
  • Loan-Market Slump Threatens to Gum Up Wall Street's M&A Machine. Here’s an ominous sign for Wall Street’s debt-fueled M&A bonanza: Investors are increasingly wary of loans that fund leveraged takeovers. Almost half of the $75 billion buyout loans arranged in the U.S. last year and tracked by Bloomberg in the secondary market are trading below their issue price.
  • Barclays Sees VIX Rebound With Risk Premium at Bull Market Low. The U.S. stock market is quiet -- too quiet. One example is the price investors are paying for options on the Standard & Poor’s 500 Index, a value that is captured by the Chicago Board Options Exchange Volatility Index. At present, options dealers are charging so little for protection in equities that the VIX is trading at a six-year low compared with the actual volatility of the benchmark gauge. That’s not a good sign to Barclays Plc derivatives strategist Maneesh S. Deshpande, who sees the potential for the VIX to snap back from its recent slide.
  • Valeant(VRX) Plummets on Allegation of Enron-Like Accounting. Valeant Pharmaceuticals International Inc. shares took a beating, falling more than 20 percent, after a stock-commentary site run by a short seller accused the company of an Enron-like strategy of recording fake sales by using phony customers. Citron Research said Valeant is using a specialty pharmacy called Philidor RX Services to store inventory and record those transactions as sales. “Is this Enron part deux?” the report said. “These similarities are too close to ignore.”
Fox News:
Zero Hedge
Tehran Times:
  • Russia Seeks Five-Fold Boost in Iran Trade to $10B. Russian Energy Minister Alexander Novak heading a high-ranking Russian energy delegation will arrive in Tehran today to explore ways for boosting the value of trade between Iran and Russia. The two-day visit of the Russian delegation is aimed at boosting Iran-Russia worth of annual trade to $10 billion from the current $2 billion, according to the IRNA news agency. 

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