Tuesday, November 03, 2015

Today's Headlines

  • U.S. Investors Have One More Reason to Fret About Chinese Firms. A key accounting safeguard intended to protect U.S. investors who buy shares of Chinese companies is close to unraveling. Last month, a final agreement that would have allowed a U.S. regulator to examine the audits of Chinese companies listed on American stock exchanges fell through, according to two people with knowledge of the matter. The failed negotiations are a setback for the Public Company Accounting Oversight Board, a Washington-based watchdog that has sought access to Chinese audits for years as dozens of companies such as JD.com Inc. and Alibaba Group Holding Ltd. raised billions of dollars from U.S. investors. The impasse is also a blow to PCAOB Chairman James Doty, who said in June that his agency was “very close” to reaching an accord. The regulator’s inspectors had expected to start traveling to China this year to examine the audits of Chinese businesses, said one of the people who asked not to be named because negotiations aren’t public. “Without having the PCAOB involved in doing those evaluations, the quality and reliability of audits in China will continue to be a black box to U.S. investors,” said Jason Flemmons, a senior managing director at FTI Consulting Inc. and former deputy chief accountant for enforcement at the Securities and Exchange Commission.
  • Europe's Biggest Banks Are Cutting 30,000 Jobs. Standard Chartered Plc became the third European bank in less than two weeks to announce sweeping job cuts, bringing the total planned reductions to more than 30,000, or almost one in seven positions. The London-based firm said Tuesday it will eliminate 15,000 jobs, or 17 percent of its workforce, as soaring bad loans in emerging markets hurt earnings. Deutsche Bank AG, based in Frankfurt, last week announced plans for 11,000 job cuts, while Credit Suisse Group AG said it would trim as many as 5,600 employees.
  • Volkswagen Says 800,000 More Cars Affected in Emissions Probe. Volkswagen AG said an internal probe in the wake of the diesel scandal that has engulfed the German carmaker showed irregularities in CO2 emissions affecting an additional 800,000 cars, deepening a crisis that has already cost long-time Chief Executive Officer Martin Winterkorn his job, depressed the stock price and led to ballooning provisions. The company said the economic risk stemming from the latest finding is about 2 billion euros ($2.2 billion), according to a release on Tuesday, citing preliminary estimates. Volkswagen, based in Wolfsburg in northern Germany, said the revelations surfaced following a “comprehensive investigation to establish whether there were indications of further irregularities” after the initial findings rocked the company in September.
  • Oil Slump Weighs on Saudi, U.A.E Businesses as PMI Drops. The slump in oil prices is sapping growth momentum of private businesses in the two biggest Arab economies, according to a key indicator released on Tuesday. The Emirates NBD Purchasing Managers’ Index for Saudi Arabia dropped for a second month in a row to 55.7 in October, the lowest level since since the survey began in 2009, driven by weaker expansion in new business. The same measure for the United Arab Emirates fell to 54 from 56 in September, the lowest since April 2013, the Dubai-based bank said. Readings above 50 still signal expansion, while those below indicate contraction. Oil prices have dropped more than 40 percent over the last year, prompting some governments in the six-nation Gulf Cooperation Council to plan spending cuts and curb or eliminate fuel subsidies. Non-oil economic growth in the region will slow to 3.8 percent this year from 5.5 percent in 2014, according to International Monetary Fund estimates. In Egypt, business conditions also worsened at the quickest pace since February, PMI data showed, as a shortage in power supply and foreign currency continued to undermine output.
  • Saudi Stocks Sink to March 2013 Low as BofA Warns of Rating Cut. Saudi Arabian equities dropped at the lowest level in almost three years as Bank of America Merrill Lynch said the country’s creditworthiness may deteriorate further. The Tadawul All Share Index declined 1.6 percent to 6,955.11 at the close in Riyadh, the lowest level since March 2013. Property company Jabal Omar Development Co. was the biggest contributor to the loss, falling 6.8 percent after reporting its first loss in five quarters. 
  • European Stocks Climb for Second Day, Led by Oil Shares, Miners. (video) European equities extended a rally that has helped them recoup about half the losses from a summer rout, buoyed by gains in energy and commodity producers. Oil-and-gas stocks had the best gains among industry groups, following crude higher. Tullow Oil Plc jumped 18 percent amid optimism for production from its Ghana partner. Glencore Plc and Anglo American Plc rose 3.2 percent or more. Standard Chartered Plc fell 6.7 percent after posting a surprise loss and saying it will raise 3.3 billion pounds ($5.1 billion) in a rights offer. UBS Group AG slid 4.3 percent after postponing a profitability target. The Stoxx Europe 600 Index added 0.4 percent at the close of trading, reversing earlier losses of as much as 0.3 percent.
  • Goldman Sachs(GS) Cut Exposure to Oil and Gas Companies Last Quarter. Goldman Sachs Group Inc. went short oil and gas companies last quarter, bringing its total exposure to the industry below $12 billion for the first time since it started breaking out that risk to investors at the end of last year. The firm’s market exposure to oil and gas companies was negative $243 million at the end of September, compared with $482 million three months earlier and $805 million at the end of 2014, the New York-based company said a regulatory filing Tuesday. The bank had $12.2 billion of credit exposure to the industry, with $10.3 billion coming from lending and $1.9 billion from derivatives and other receivables. 
  • Barclays: Investors Are Way More Scared of China Than of Janet Yellen. Complacency over a Fed liftoff abounds. "Only 7 percent sees Fed normalization as the main risk for markets over the next 12 months, compared with 36 percent whose main worry is China," said Guillermo Felices, head of European asset allocation.
  • Are We Experiencing a 'Monetary Plague'? (video) Mitsubishi UFJ Securities Executive Director Brendan Brown discusses monetary policy and his book "A Global Monetary Plague: Asset Price Inflation and Federal Reserve Quantitative Easing."
  • Fed's Big Three Expected to Reinforce December as Liftoff Option. (video) Federal Reserve Chair Janet Yellen and her top two lieutenants, all speaking publicly Wednesday, have a chance to drive home a united message about their readiness to raise interest rates in December if the labor market continues to show modest improvement. Yellen testifies before the House Financial Services Committee at 10 a.m. on Capitol Hill. The official topic is financial regulation, but lawmakers are free to ask her anything, including about monetary policy or the economy. New York Fed President William C. Dudley will hold a press briefing at 2:30 p.m. in New York, and Vice Chairman Stanley Fischer will speak to the National Economists Club in Washington at about 7:30 p.m. “This is a unique opportunity to reinforce the message” from last week’s Federal Open Market Committee, said former Fed Governor Laurence Meyer, who is now senior managing director of Macroeconomic Advisers LLC in Washington.
  • Valeant's(VRX) Debt Addiction. Jacked-up drug prices and a convoluted distribution network have been at the heart of Valeant's controversies. A far thornier issue is simmering in the background: All those IOUs.
  • Ackman's Pershing Square Extends Losses to 19% as Valeant(VRX) Dives. Pershing Square Holdings, the publicly traded security of Bill Ackman’s activist hedge fund, extended annual losses last month to 19 percent as investments in Valeant Pharmaceuticals International Inc. and Platform Specialty Products Corp. tumbled. Pershing Square Holdings’s returns fell 7.3 percent in October, according to its website. Drugmaker Valeant plunged last month after short-seller Citron Research accused the company of generating fake sales using an affiliated pharmacy. Pershing Square owns more than 5 percent of the company, and added more than 2 million shares to that stake during the recent rout. Valeant has denied charges of accounting irregularities.
Wall Street Journal:
  • Trump accuses Fed of keeping rates low to help Obama. (video) Donald Trump on Tuesday accused the Federal Reserve of keeping interest rates low at the request of President Barack Obama. The GOP presidential hopeful, speaking at a news conference, also called Fed Chair Janet Yellen "highly political." Asked whether the Fed should raise rates, Trump said it should but would not for "political reasons." "They are not raising them because Obama has asked them not to raise them," the billionaire developer said. "In my opinion, he wants to get out of office, because we're in a bubble — when those rates are raised, a lot of bad things are going to happen." He added, "In my opinion Janet Yellen is highly political and she's not raising rates for a very specific reason: because Obama told her not to because he wants to be out playing golf in a year from now and he wants to be doing other things and he doesn't want to see another bubble burst during his administration." Obama is due to leave office in January 2017. 
  • October auto sales rate: 18.2M, up from 16.6M a year ago.
Zero Hedge:
ISIS has built near-impregnable base and mass appeal: New book - See more at: http://www.straitstimes.com/news/world/europe/story/isis-has-built-near-impregnable-base-and-mass-appeal-new-book-20150205#sthash.TSyXsl7s.dpuf
ISIS has built near-impregnable base and mass appeal: New book - See more at: http://www.straitstimes.com/news/world/europe/story/isis-has-built-near-impregnable-base-and-mass-appeal-new-book-20150205#sthash.TSyXsl7s.dpuf
  • BHP's Chirgwin Sees Iron Ore Price Falling Further. Alan Chirgwin, BHP Billiton's vice president of marketing for iron ore, sees price of steelmaking material sliding gradually over next few years, citing interview. Ultimate price to be set by marginal cost producer in either Australia or Brazil, he says.

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