Tuesday, October 06, 2015

Today's Headlines

  • IMF Cuts Global Outlook as Commodity Slump Hits Emerging Markets. The global economy is having power problems. A slowdown in emerging markets driven by weak commodity prices forced the International Monetary Fund to cut its outlook for global growth this year to 3.1 percent from a July forecast of 3.3 percent. Next year the world economy will expand 3.6 percent, less than the 3.8 percent projected in July. “The ‘holy grail’ of robust and synchronized global expansion remains elusive,” IMF chief economist Maurice Obstfeld said in a statement Tuesday accompanying the Washington-based fund’s World Economic Outlook. Six years after the world emerged from a financial crisis and recession, the deteriorating picture showed a global recovery that’s uneven still from Australia to Germany. Brazil and Russia’s economies are contracting, Japan and the euro area are struggling to impress, and long-time growth engine China is decelerating.
  • How the Ghost of Stimulus Past in China Haunts Li Keqiang. As China’s leadership steps on the economic-stimulus gas pedal, there’s one image in the rear-view mirror that looms large. Then-Premier Wen Jiabao’s cabinet unveiled a $586 billion program to boost growth in the depths of the 2008 global credit turmoil, a move that opened the floodgates for a record debt surge that current Premier Li Keqiang and President Xi Jinping have had to cope with. Unlike that binge, Li and Xi are opting for targeted measures, more of which were unveiled last week.
  • Blame It on Brazil: DuPont to Tiffany Find One Problem in Common. There’s one thing that executives from New York to Madrid to Mexico City can agree on these days: Brazil is a serious drag. Dupont, the 213-year-old chemical maker, added to the ranks of companies blaming the currency collapse and recession in Latin America’s largest economy for its earnings woes when it lowered this year’s profit forecast. Telefonica SA, America Movil SAB, Monsanto Co. and Tiffany & Co. have all seen damage to their bottom line this year as Brazil’s real posts the biggest decline among the world’s major currencies and the economy heads for its longest contraction since the Great Depression.
  • Jain Says Some Emerging Markets Are a `Worry' as Funds Exit. Anshu Jain,  the former co-chief executive officer of Deutsche Bank AG, said some emerging markets have become a “worry” as they come under pressure from plunging commodity prices and capital outflows. “In certain parts of ex-Japan, ex-China, ex-India Asia we could have some bad news,” Jain said in an interview at Bloomberg Markets Most Influential Summit 2015 in London on Tuesday. He pointed to Brazil, South Africa, Russia, Turkey as other emerging markets that harbor risks.
  • German Factory Orders Unexpectedly Fall Amid Economic Risks. German factory orders unexpectedly fell in August in a sign that Europe’s largest economy is vulnerable to weaker growth in China and other emerging markets. Orders, adjusted for seasonal swings and inflation, dropped 1.8 percent after decreasing a revised 2.2 percent in July, data from the Economy Ministry in Berlin showed on Tuesday. The typically volatile number compares with a median estimate of a 0.5 percent increase in a Bloomberg survey.  
  • European Stocks Advance as Weak Data Spur Stimulus Speculation. European stocks advanced for a third day as investors assessed valuations and speculated that weak economic data will encourage central banks to keep monetary policy accommodative for longer. Total SA and Royal Dutch Shell Plc pushed energy shares to the best performance of the 19 industry groups on the Stoxx Europe 600 Index, rising at least 3.3 percent amid a rebound in oil prices. Among auto-related companies, Renault SA gained 5.8 percent as people familiar with the matter said the carmaker is considering plans to restructure its alliance with Nissan Motor Co. PSA Peugeot Citroen climbed 3.9 percent and Daimler AG added 2.5 percent. SBM Offshore NV jumped 5.2 percent after a report that it agreed to pay a lower fine than analysts had estimated in a Brazilian bribery case. The Stoxx 600 rose 0.6 percent to 360.41 at the close of trading, its highest level in more than two weeks.
  • Who follows Glencore in commodities crisis? As commodity prices continue to fall, bankruptcies among producers and industry consolidation will no doubt accelerate. Suppliers of farm, mining and construction equipment are already troubled. With this onslaught, it's no surprise that Glencore, the huge Swiss company that dominates global commodities markets, lost a third of its value in a single day last week.  
  • For Clue on Iron Ore Price Trend, Watch China Port Holdings. Iron ore stockpiles at ports in China will probably expand in the coming months as mills in the top supplier are forced to reduce steel output while supplies from mines increase further, hurting the outlook for prices that have lost 25 percent this year. Inventories may increase by about 10 million metric tons through to the year-end, according to Colin Hamilton, head of commodities research at Macquarie Group Ltd. That could lift holdings to about the highest since May, according to Bloomberg calculations. Iron ore is headed for a third annual drop after BHP Billiton Ltd. and Rio Tinto Group in Australia and Brazil’s Vale SA boosted low-cost production while demand growth slowed in China. The port inventories, which are tracked as one gauge of demand in the largest user, climbed by 3.8 percent in the three months to September, snapping four quarters of declines. Global seaborne supplies are poised to expand this quarter with inaugural exports due from Gina Rinehart’s Roy Hill mine in Australia’s ore-rich Pilbara.
  • Oaktree's Marks Says Time for Fed to Stop Suppressing Rates. Years of "unnaturally low" interest rates create an environment that distorts capital markets and penalizes investors, according to Howard Marks of Oaktree Capital Group LLC. "I wish the government would get out the business of setting rates, and I wish rates would stop being unnaturally low," Marks, co-founder of Oaktree, the world’s biggest manager of distressed debt, said in a television interview Tuesday on "Bloomberg " with David Westin and Stephanie Ruhle. "The problem is that the Fed should stimulate the economy when it is very weak and then get out of that business." 
  • Bain to Liquidate Absolute Return Hedge Fund After Losses. Bain Capital is liquidating its Absolute Return Capital hedge fund after more than three years of losses, citing a “challenging” environment for macro trading. The fund, run by Jonathan Goodman and Jeff Woolbert, had about $2.2 billion in assets as of Aug. 1, including $552 million of internal money, according to an investor presentation dated August 2015. The fund was down 13 percent this year through July, which would be its worst year since inception in 2004.
Zero Hedge:
Washington Post:

No comments: