Wednesday, November 04, 2015

Today's Headlines

  • China's Economy Is Worse Than You Think. (video)
  • PBOC Inadvertently Boosts Stocks With Dated Zhou Comments. China’s central bank unintentionally sparked a surge in the nation’s stock market by publishing five-month-old comments from governor Zhou Xiaochuan that said a link between exchanges in Shenzhen and Hong Kong would start in 2015. Zhou’s comments appeared in a lengthy article dated Tuesday that focused on the need for Communist Party discipline. It was published on the PBOC’s website without any indication that the statements were old. The central bank later said via text message that the comments were taken from a speech on May 27, while Hong Kong’s bourse said the link is still subject to regulatory approval. The clarifications came after a 3.3 percent surge in the Shenzhen Composite Index and a 3.1 percent gain in Hong Kong’s Hang Seng Index in early trading. The PBOC article moved markets because it came as a surprise to many investors who had anticipated the link would be delayed after a $5 trillion rout in Chinese shares. Ten of the 13 respondents in a Bloomberg survey in September predicted the Shenzhen connect would start next year as authorities focused their efforts on stabilizing mainland equity prices.
  • Brazil, Desperate for Cash, Plans to Start Ranking Tax Debtors. Brazil’s Finance Ministry, seeking to shore up the country’s accounts, is creating a system that would determine how much it’s likely to be able to collect from companies that owe it back taxes and overdue pension contributions. Ministry lawyers are working with the central bank to evaluate the creditworthiness of companies that owe the government 1.5 trillion reais ($400 billion), according to Luiz Roberto Beggiora, the manager for active debt at the Finance Ministry in Brasilia. About 1.2 trillion reais are for taxes, and 300 billion reais are tied to pension-related debts.
  • UBS: Emerging Markets Are Entering 'a New and Dangerous Phase' in 2016. (video) Balance sheets are in disarray.
  • Maersk Line to Cut Capacity and Jobs as Global Demand Sags. A.P. Moeller-Maersk A/S is scaling back capacity and cutting jobs in the world’s largest shipping line to adapt to a drop in demand. The Danish company, which last month lowered its profit forecast for 2015 citing a gloomier outlook for the global shipping market, will shed 4,000 jobs in its Maersk Line unit as part of a program to “simplify the organization,” it said in an e-mailed statement on Wednesday.
  • Euro-Area Bonds Fall as Yellen Says 2015 Rate Move Is Possible. Euro-area government bonds fell, following U.S. Treasuries, after Federal Reserve Chair Janet Yellen said it’s a “live possibility” to raise interest rates at the December meeting if data supported such a step. The region’s securities erased gains made after European Central Bank President Mario Draghi reiterated that the institution will reconsider their policy stance at the December meeting to assess whether enough support was being provided to the region’s economy. German bunds, Europe’s benchmark sovereign securities, declined for a third day, pushing the 10-year yield to the highest level in two weeks.
  • Hollande Says Rich Countries Must Pay Up for Climate Technology. French President Francois Hollande issued a thinly veiled call to the U.S. to pay its promised share into a United Nations fund for climate projects in developing countries. “The richest countries must do their part,” Hollande said in Seoul after a round-table discussion on climate at a South Korean University, without specifically referring to the U.S. “Sometimes those who talk the most do the least.” 
  • European Stock Rally Continues as Draghi Reiterates Ready to Act. Mario Draghi’s reiteration that the European Central Bank is ready to act to support the euro-area economy helped the region’s stocks extend a rally that has recouped about half the losses from a summer rout, although speculation of a Federal Reserve rate increase this year pruned gains in late trading. Glencore Plc led miners to the best performance of the 19 industry groups on the Stoxx Europe 600 Index, adding 5.4 percent after selling a share of its future silver output, while also maintaining its full-year profit forecast. ING Groep NV gained 2 percent after the Dutch lender reported a 14 percent rise in third-quarter profit. Marks & Spencer Group Plc rose 2.8 percent after first-half earnings beat analyst estimates and it raised its profitability forecast. The Stoxx 600 climbed 0.5 percent to 380.28 at the close of trading.
  • God Wants Yellen to Delay Rate Hike Until Spring, Lawmaker Says. (video) “God’s plan is not for things to rise in the autumn, as a matter of fact, that’s why we call it fall, nor is it God’s plan for things to rise in the winter, through the snow,” Sherman, a Democrat from California, told Yellen at a hearing of the House Financial Services Committee. “God’s plan is that things rise in the spring. And so if you want to be good with the Almighty, you might want to delay until May.” Sherman more seriously went on to say that he’s worried about the risks if the Fed lifts off too early and then has to return to zero, among other issues. While his comments were a little more colorful than the typical rationale for postponing liftoff, they underline an important point: Yellen is coming under congressional and political pressure as the Fed inches closer to raising rates.
  • Yellen Signals Solid Economy Would Spur December Rate Hike. (video) Fed Chair Janet Yellen said an improving economy has set the stage for a December interest-rate increase if economic reports continue to assure policy makers that inflation will accelerate over time. “At this point, I see the U.S. economy as performing well,” Yellen said on Wednesday in testimony before the House Financial Services Committee in Washington. “Domestic spending has been growing at a solid pace” and if the data continue to point to growth and firmer prices, a December rate hike would be a “live possibility,” she said in response to a question from Representative Carolyn Maloney, a New York Democrat.
  • Bond Liquidity Seen Worsening by BofA as Regulations Tighten. Dwindling liquidity in bond markets may get worse next year as more regulation hits the financial industry, raising questions as to whether rules are making financial markets safer, Bank of America Merrill Lynch said. New supply of corporate debt is having a bigger impact on government rates than in the past years, suggesting the sovereign bond-market depth has decreased, according to the report published Wednesday by the bank, one of 22 primary dealers that trade directly with the Federal Reserve. Other signs that point to a decline in ease of trading include all-time high Treasury futures volume relative to the cash market, and “very large differentials” between generic off-the-runs, or older securities, and futures contracts on deliverable bonds, BofA Merrill Lynch said. 
  • This Is the Worst U.S. Earnings Season Since 2009. Biggest quarterly drop since the aftermath of the financial crisis. This U.S. earnings season is on track to be the worst since 2009 as profits from oil & gas and commodity-related companies plummet. So far, about three-quarters of the S&P 500 have reported results, with profits down 3.1 percent on a share-weighted basis, data compiled by Bloomberg shows. This would be the biggest quarterly drop in earnings since the third quarter 2009, and the second straight quarter of profit declines. Earnings growth turned negative for the first time in six years in the second quarter this year.
  • Loeb Boosts Short Bets Citing Sloppy Accounting, Volatility. Billionaire hedge fund manager Dan Loeb said he’s building bets against stocks that surged because companies are relying too much on dubious financial metrics. “There’s been some real sloppiness in accounting, and this move toward using adjusted Ebitda and adjusted earnings has produced some companies that I think are trading on valuations that are not supported by the real numbers,” Loeb said Wednesday in a conference call held by Third Point Reinsurance Ltd., referring to earnings before interest, taxes, depreciation and amortization. “We’ve seen some real themes that favor the type of short selling that we do.” Loeb, who oversees investments for the insurer, said there are several shifts in recent months that make shorting more attractive. He cited increased volatility, a more tempered economic outlook and a rally that may have lost momentum.
  • 'Wal-Mart(VIAB) Moms' Hold Warnings for Candidates. New focus groups offer early hints about which way the key voting demographic is leaning ahead of the 2016 election. In focus groups conducted Tuesday night, likely Republican primary voters in New Hampshire and likely Democratic caucus-goers in Iowa cited the national deficit, the U.S. debt to China, insufficient wages, student loans, and dysfunctional government among their leading concerns. The Republican women were “overwhelmingly negative about the mood of the country,” said pollster Neil Newhouse, who observed the focus groups. “They’re still stressed by the economy.” The Democratic group sounded “Republican-lite” rather than like a markedly different group, on “everything from mood of the country, their personal finances, their attitudes toward” Washington dysfunction, he said. The groups were made up of 10 women in each state who have shopped at Wal-Mart in the past month and have at least one child under 18 living at home, a swing-vote subgroup in past elections.
  • U.S. Senators to Investigate Valeant, Turing. The U.S. Senate’s Special Committee on Aging will investigate drug pricing practices by four drug companies, including Valeant Pharmaceuticals International Inc., in the latest political challenge to an industry under intensifying scrutiny. The panel, led by Senator Susan Collins of Maine, a Republican, and Senator Claire McCaskill of Missouri, a Democrat, sent letters to the companies asking about why they raised prices on drugs. Along with Valeant, the senators contacted Turing Pharmaceuticals AG, Retrophin Inc. and Rodelis Therapeutics. Daraprim, Turing’s anti-infection drug that increased from $13.50 to $750 per tablet, is of particular interest, the senators said.
Zero Hedge:
  • Exclusive: OPEC confidential report sees market share squeeze to 2019. Global demand for OPEC's crude oil will remain under pressure in the next few years, the producer group said in an internal report, potentially fuelling a debate on its strategy of defending market share rather than prices. The draft report of OPEC's long-term strategy, seen by Reuters, forecasts crude supply from OPEC - which has an output target of 30 million barrels per day (bpd) - falling slightly from 2015's level until 2019, unless output slows faster than expected in rival producers.

No comments: