Thursday, November 19, 2015

Today's Headlines

Posted by Gary .....at 3:10 PM
Bloomberg:
  • Why ISIS Has All the Money It Needs. Weeks before the attacks that killed 129 people in Paris, U.S. warplanes resumed sorties above Syria and Iraq, targeting anew oil fields and other parts of a vast petroleum infrastructure that fuels—and funds—Islamic State, one of the richest terrorist armies the world has known. These airstrikes were launched not because U.S. officials were prescient. They came after the Obama administration found and quietly fixed a colossal miscalculation. U.S. intelligence had grossly overestimated the damage they’d inflicted during airstrikes on the militants’ oil production apparatus last year, while underestimating Islamic State’s oil revenue by $400 million. According to U.S. Department of the Treasury officials and data they released in the wake of the Paris mayhem, the terrorist group is actually taking in $500 million from oil a year. What’s more, just a few hours before the first Islamic State suicide bomber blew himself up outside the Stade de France on Nov. 13, U.S. Army Colonel Steve Warren conceded at a press briefing that some American airstrikes disrupted IS oil operations for no more than a day or two.
  • More Terrorism `Likely' in Europe, Police Agency Director Says. Islamic State has built a “serious capability” to inflict terror and is bent on staging more attacks in Europe, possibly at several places simultaneously, the head of Europol said. After the Paris atrocities, it is reasonable to assume “without any recourse to exaggeration, that further attacks are likely,” Rob Wainwright, director of the European Union’s crime-fighting agency, said on Thursday in Brussels. He called Paris the first European instance of shootings and suicide bombings at several venues, similar to the four-day Mumbai rampage of 2008 at sites including a luxury hotel and Jewish community center.
  • France Weighs Threat to Biggest Diplomatic Event Since 1948. As the police work to uncover the terrorist network that murdered 129 people in Paris, the French government is turning its attention toward how to maintain security at its biggest diplomatic gathering since 1948. Foreign Minister Laurent Fabius, who will preside over a two-week United Nations summit on global warming, told France Inter radio on Thursday that the country’s forces couldn’t guarantee the security of public demonstrations.
  • Refugee Crisis Hits Sweden's Rich-Poor Divide Fueling Pay Debate. Sweden’s plan to absorb hundreds of thousands of Middle Eastern refugees looks set to widen the pay gap in one of the world’s most equal societies. Decades-old practices that have propped up wages and restricted hiring have so far stopped unskilled immigrants from joining the workforce. But with some 350,000 asylum seekers, mostly from Syria and Afghanistan, set to arrive in Sweden by the end of next year, keeping all those people on state handouts rather than letting them do low-paid jobs looks untenable.
  • Spanish Bonds Increasingly at Risk as Catalonia Shapes Election. The risk of a political stalemate will drag down Spanish bonds as the country heads into an election with its biggest economic region agitating for independence, according to a poll of banks active in the debt market. Investors should apply a premium of 25 basis points to the nation’s bonds to account for the risk of a multi-party backed government after next month’s vote, based on the median estimate in a Bloomberg survey of 18 economists conducted between Nov. 6 and Nov. 13. Ten of the analysts said Catalonia’s move to set up a separate state are adding to the pressure on Spanish debt. With opinion polls showing Prime Minister Mariano Rajoy’s People’s Party may lose about a third of its seats on Dec. 20 while remaining the largest parliamentary group, the risk of legislative gridlock is mounting as Catalan separatists grow bolder. Their battle with officials in Madrid reached new levels of antipathy last week when regional lawmakers in Barcelona declared the start of the secession process.
  • U.K. Manufacturers Offer Downbeat Outlook for Industry. U.K. manufacturers are feeling grim about the outlook for their business. For the first time in three years, factory executives expect output to drop over the coming three months, according to a monthly survey by the Confederation of British Industry published on Thursday. The report also showed continued weakness in foreign demand, with a gauge of export orders slipping to the lowest since early 2013. Exports have been called the “weak link” in the economy by the London-based lobby group as softer global demand drags on U.K. output. Cooling factory activity and easing overseas sales may undermine hopes of Bank of England officials that growth can become more balanced and less dependent on domestic consumer spending.
  • China Has a $1.2 Trillion Ponzi Finance Problem. Chinese borrowers are taking on record amounts of debt to repay interest on their existing obligations, raising the risk of defaults and adding pressure on policy makers to keep financing costs low. The amount of loans, bonds and shadow finance arranged to cover interest payments will probably rise 5 percent this year to a record 7.6 trillion yuan ($1.2 trillion), according to Beijing-based Hua Chuang Securities Co., whose lead fixed-income analyst was top-ranked by China’s New Fortune magazine in 2012 and 2013. Dubbed “Ponzi finance” by Hyman Minsky, the use of borrowed funds to repay interest was seen by the late U.S. economist as an unsustainable form of credit growth that could precipitate financial crises.
  • A Hard Landing in China Could 'Shake the World'. "A slowing China redistributes global economic activity through the commodity channel as much as dampening it". China's slowdown is already playing out across the world, dragging down commodity prices and weighing on trade partners. And that's while the economy is still growing at about 7 percent. So imagine what happens in a hard-landing scenario. The crew at Oxford Economics have done just that in a new report that makes stark reading for anyone with a stake in the global economy. China's economic boom of the past 30 years means it now accounts for 11 percent of world GDP and around 10 percent of world trade. For resources, it's an even bigger player, accounting for 11 percent of world oil demand and 40 to 70 percent of demand for other key commodities,  according to the Oxford Economics research. Its financial system is massive, with its broad money supply now larger than the U.S.'s and amounting to over 20 percent of the world's. So were China to sneeze, the world may well catch a cold.  
  • How Chinese Slowdown Turned Rolls-Royce's Slump Into a Crisis. Rolls-Royce Holdings Plc’s revelation last week that a 350 million-pound ($533 million) earnings hit expected next year is in large part due to lower deployment of older wide-body planes surprised investors who had believed cheap oil would make such aircraft more popular. The reality, Chief Executive Officer Warren East said in an interview, is that models such as Airbus Group SE’s out-of-production A340 and older Boeing Co. 777s remain out of favor even with cheap fuel, as airlines add vast numbers of new jets in an Asian market feeling the strain of China’s economic slowdown. That’s weighing on maintenance revenue at London-based Rolls, which gets the bulk of income from overhaul work calculated according to hours flown.
  • Brazil's Inflation Surpasses 10% for First Time in 12 Years. Brazil’s inflation exceeded 10 percent for the first time in 12 years, complicating President Dilma Rousseff’s efforts to revive an economy that is also battling higher-than-forecast unemployment. Consumer prices rose 0.85 percent from Oct. 15 to Nov. 12, pushing the 12-month inflation rate to 10.28 percent, the national statistics agency said Thursday. The monthly gain, the fastest since mid-June, compares with the median estimate of 0.86 percent in a Bloomberg survey of 44 analysts. As consumer prices in Latin America’s biggest economy continue to accelerate, Brazil’s central bank has delayed its plan of slowing inflation to its 4.5 percent target to 2017 from 2016. The bank has signaled it will keep rates on hold for a third consecutive meeting next week as it is caught between higher living costs and the deepest recession in 25 years.
  • Petrobras's(PBR) Dangerous Debt Math: $24 Billion Owed in 24 Months. The debt clock is ticking down at Brazil’s troubled oil giant, Petrobras. Next up: $24 billion of repayments over 24 months. That’s a towering hurdle for a company that hasn’t generated free cash flow for eight years and whose borrowing rates are soaring. Annual debt servicing costs have doubled to 20.3 billion reais ($5.4 billion) in the past three years.
  • Swiss Watch Exports Fall Most in Six Years on Hong Kong Drop. Swiss watch exports had their biggest decline in six years in October, led by a 39 percent slump in shipments to Hong Kong, the industry’s largest market. Shipments declined 12 percent to 2 billion Swiss francs ($2 billion), the Swiss customs office said in a statement Thursday. Adjusted for fewer working days, the drop was 7.6 percent. Exports to the U.S. dropped 12 percent. “2015 has been one to forget for the watchmakers,” said Jon Cox, an analyst
    at Kepler Cheuvreux in Zurich. 
  • Top Goldman Trades See Dollar Rising With Inflation Outlook. In Goldman Sachs Group Inc.’s vision of 2016, the dollar climbs, U.S. inflation expectations pick up and the currencies of Mexico and Russia advance. The U.S. investment bank recommended buying the greenback against the euro and yen when it published its top trades for next year on Thursday. 
  • European Stocks Climb to 3-Month High After Dovish Fed Minutes. (video) European stocks rose for the third time in four days, as minutes from the Federal Reserve’s last meeting reassured investors the world’s biggest economy can withstand higher borrowing costs. Optimism about global growth sent the Stoxx Europe 600 Index to its highest level in three months. The benchmark gauge added 0.4 percent at the close of trading. It pared an advance of as much as 1.2 percent after commodity producers gave up some gains. 
  • Iron Ore Bludgeoned to Record Low in Asia on China Steel Concern. Iron ore contracts in Asia slumped to records amid speculation that mills in China are reining in steel production as they battle losses, slumping prices and tighter credit, hurting demand for the raw material that’s mainly shipped from Australia and Brazil. Futures sank 1.8 percent to 331 yuan ($51.89) a metric ton on the Dalian Commodity Exchange, the lowest close since trading started in October 2013, while the SGX AsiaClear contract in Singapore fell to a fresh low. Losses on markets in Asia can signal declines in the Metal Bulletin Ltd. price for 62 percent content spot ore in Qingdao, which is updated once a day. That was at $46.35 a dry ton on Wednesday from $45.58 a day earlier, a four-month low.
  • Citigroup(C) Says Commodity Markets Yet to Price In Rate Hike. Think the global commodity markets have fully priced in prospects for higher U.S. interest rates this year? Think again, says Citigroup Inc., which says keep an eye out for payrolls numbers due next month and prospects for an even stronger dollar. “We’re fast approaching December: we very much expect the first rate hike to take place at that point,” Ivan Szpakowski, a commodities strategist at Citigroup, told a conference in Shanghai in Thursday. “We think the market is already pricing that to some degree for sure. It’s pricing it in also to a degree. But not the full extent, not to 100 percent.”
  • Baltic Dry Shipping Index Drops to All-Time Low. The cost of shipping commodities fell to a record, amid signs that Chinese demand growth for iron ore and coal is slowing, hurting the industry’s biggest source of cargoes. The Baltic Dry Index, a measure of shipping rates for everything from coal to ore to grains, fell to 504 points on Thursday, the lowest data from the London-based Baltic Exchange going back to 1985. Among the causes of shipowners’ pain is slowing economic growth in China, which is translating into weakening demand for imported iron ore that’s used to make the steel. “The main issue is the lack of demand for iron ore from China,” Eirik Haavaldsen, a shipping analyst at Pareto Securities AS in Oslo, said by phone. “This market is looking like a disaster and the rates are a reflection of that. It is looking scary for the market and it doesn’t look like there is going to be any life in the market in the near term.” 
  • Chesapeake Energy(CHK) Bonds Plunge to the Lowest Ever as Oil Falls. Debt of Chesapeake Energy Corp. tumbled to a record low on Thursday as the price of oil plunged. Nine of the energy producer’s unsecured notes plummeted, some losing more than 12 cents on the dollar, as it was the most actively traded company in the junk-debt market. Credit-default swaps, which are used by investors to protect against defaults, rose to the highest ever.
  • Americans' Outlook for Economy Holds Close to a 13-Month Low. One in five Americans in November said the economy is improving, matching the smallest share in two years and keeping a monthly gauge of expectations close to a 13-month low. The measure tracking the economic outlook was little changed at 42.5 last month after October reading of 42, which was the lowest since September 2014, data from the Bloomberg Consumer Comfort Index showed Thursday. While 20 percent of respondents said the economy was getting better, 45 percent viewed it as staying the same, the largest share since February 2012.
  • Large Cap Bias Masks Worst Year for Retail Stocks Since '08. Retail stocks are up. Or are they down? Depends where you look. While the Standard & Poor’s 500 Retailing Industry Index has gained 23 percent this year, making it the best performing of 24 industries in the benchmark gauge, Amazon.com Inc. has overshadowed broader weakness. But investors can’t trade that group without shelling out fees to recreate it. Instead, the most-actively traded exchange-traded fund of retail stocks paints a different picture. The SPDR S&P Retail ETF, which is based on an equal-weighted index, has tumbled almost 9.2 percent in 2015 and is on track for its worst year since 2008.
  • Best Buy(BBY) Tumbles After Predicting Slow Holiday Season Sales. Best Buy Co. shares fell as much as 8.6 percent after the retailer’s sales missed estimates, raising doubts about its turnaround bid and the health of the broader electronics industry. Revenue slid 2.4 percent to $8.82 billion in the quarter that ended Oct. 31, the Richfield, Minnesota-based company said in a statement Thursday. Analysts had estimated $8.83 billion. For the current quarter, Best Buy expects revenue to decline at a low single-digit percentage rate, hurt in part by the closings of Canadian stores. The company sees U.S. consumer-electronics demand continuing to weaken, stoking fears about a category that used to be a solid performer during the holidays. Both Target Corp. and Wal-Mart Stores Inc. also reported disappointing sales of gadgets and other technology earlier this week. Demand for tablets -- a hot product in past years -- has been particularly weak. “From an industry standpoint, there was a significant decline in that,” Best Buy Chief Executive Officer Hubert Joly said on a conference call. 
  • What Are the Concerns in the Credit Markets? (video)
  • Central Banks Fight to Ensure Crisis Tools Become the Norm. Unconventional tools deployed by central bankers from Frankfurt to Washington to mitigate the economic fallout of the financial crisis may be conventional when the time comes to combat the next downturn. The Federal Open Market Committee is already discussing the issue while other central bankers and economists in developed nations debate whether to holster emergency policies -- bond buying, targeted credit programs and negative interest rates -- or make them part of their everyday armories.
 Fox News: CNBC:
Forbes:
Zero Hedge:
Business Insider: 
Financial Times: 
  • Fed futures remain reluctant on US rates. Futures still pricing in just a 66% probability of a hike. The general consensus among analysts and investors after the latest Federal Reserve minutes is that a rate rise on December 16 is, all things remaining equal, even more likely. Yet, the federal funds futures markets appear reluctant to reflect this growing certainty: by mid-session on Thursday they were still pricing in just a 66 per cent probability of a hike.
sky NEWS: 
Corriere della Sera:
  • FBI Warns Italy on Terrorism Threats. FBI warned Italy about terrorism threats, saying that it received information about plans for attacks in Rome and other cities.
news.com.au:
  • Islamic State operates a 24-hour help desk to train terrorists. IT HAS Facebook pages, Twitter accounts, online magazines and even an app, now it has emerged IS have another tool to assist in its global campaign of terror — a 24-hour help desk. As France and its allies try to piece together how eight jihadists managed to launch the orchestrated attacks on Paris last week, it now appears the militant group has a around-the-clock propaganda hotline. And its main purpose — to train terrorists.

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