Friday, November 06, 2015

Today's Headlines

Posted by Gary .....at 2:17 PM
Bloomberg:
  • Global Investors Threatened as China Shanshui Faces Debt Woe. International investors in Chinese corporate debt face fresh risks after a cement producer said it may default on onshore notes, which could lead to nonpayment on its dollar securities. China Shanshui Cement Group Ltd. isn’t sure it can repay 2 billion yuan ($315 million) of local securities due Nov. 12 after a shareholder tussle stymied financing, it said in a filing Thursday. Failure to repay those notes would trigger a default on its $500 million 7.5 percent bonds due 2020, according to the statement. The dollar debentures dropped to a more than three-month low of 87.7 cents as of 3:57 p.m. in Hong Kong. Global investors have been scarred by defaults from Chinese companies this year in industries including property and commodities as economic growth slows and anti-corruption investigations continue.  
  • China to Resume IPOs by Year-End as Stocks Enter Bull Market. China will lift a five-month freeze on initial public offerings by the end of the year, removing one of its key measures of support for the stock market as equities recover from a $5 trillion rout. New share offerings will restart after improvements to the listing system, Deng Ge, a China Securities Regulatory Commission spokesman, said at a briefing in Beijing. SGX FTSE China A50 Index futures dropped 0.7 percent at 7:21 p.m. in Singapore amid concern that new offerings will divert funds from existing equities.
  • Tata Motors Posts Surprise Loss on China Slump, Blast Costs. A slump in China sales at Jaguar Land Rover amid a market slowdown and a one-time expense contributed to its Indian parent Tata Motors Ltd. posting an unexpected loss. The net loss was 4.3 billion rupees ($65 million) in the quarter through September, compared with a 32.9 billion rupees profit a year earlier, the Mumbai-based company said Friday. Jaguar Land Rover suffered a 92 million pound ($139 million) loss. Tata Motors took a one-time charge of 24.93 billion rupees on damages to the vehicles of its luxury unit from a blast at Tianjin port where they were stored. Jaguar Land Rover retail sales plunged 32 percent in China.
  • China's Economy: What Concerns Investors Most? (video)
  • ArcelorMittal(MT) Is Latest Victim of China's Steel-Export Glut. ArcelorMittal is taking the latest knock from record Chinese steel exports hurting producers across the globe. The world’s biggest steelmaker on Friday cut its full-year profit target and suspended its dividend, putting the blame on the flood of cheap steel from China’s loss-making mills. The market is being overwhelmed with material coming from the nation’s state-owned and state-supported producers, a collection of industry associations said Thursday. “It is obvious that we are operating in a very challenging market,” Chief Financial Officer Aditya Mittal said on a call with reporters. “This is essentially the result of very low export prices out of China that are impacting prices worldwide.”
  • German Industrial Output Unexpectedly Drops Amid China Risks. (video) German industrial production unexpectedly dropped in September as a slowdown in China and other emerging markets took its toll. Output, adjusted for seasonal swings and inflation, fell 1.1 percent from August, when it declined a revised 0.6 percent, data from the Economy Ministry in Berlin showed on Friday. The reading, which tends to be volatile, compares with a median estimate for a 0.5 percent gain in a Bloomberg survey of economists. Germany is grappling with a slowdown in China and other emerging markets, key destinations for its exports. With factory orders from countries outside the 19-nation euro region down 8.6 percent in the third quarter, the focus is shifting to strengthening domestic spending fueled by pent-up investment demand and consumption. “Disappointing industrial production doesn’t bode well for German third-quarter gross domestic product,” said Carsten Brzeski, chief economist at ING-Diba AG in Frankfurt. “The Chinese and emerging-markets slowdowns are also leaving their marks on the euro zone’s largest economy.”
  • Emerging Assets Tumble as U.S. Jobs Data Back December Liftoff. Emerging-market currencies sank to a one-month low and commodity producers led stocks lower as better-than-forecast U.S. employment growth supported the case for the Federal Reserve to increase the near-zero interest rates that have propped up demand for riskier assets in developing nations. Futures traders see the odds of a Fed move in December at 70 percent, up from 56 percent on Thursday, after the payrolls report was released. At least 10 exchange rates from Turkey’s lira to the Russian ruble tumbled a minimum of 1 percent versus the dollar. South Africa’s rand slumped to a record. Taiwan’s benchmark equity gauge dropped from the cusp of a bull market after Acer Inc. reported a quarterly loss. Brazilian stocks slumped the most in the world as disappointing corporate earnings highlighted the deepening recession in Latin America’s biggest economy. A Bloomberg gauge of 20 developing-nation currencies fell 1.1 percent at 12:08 p.m. in New York, heading for a fourth weekly decline. The index has declined 12 percent this year, touching a record-low in September, amid concern that higher lending rates in the U.S. will reduce the appetite for riskier assets. The MSCI Emerging Markets Index of stocks dropped 1.6 percent to 850.04 on Friday, led by raw-material and energy companies.
  • European Stocks Advance as Euro Falls After U.S. Payroll Data. European stocks advanced as better-than-expected U.S. jobs data fueled the possibility of a Federal Reserve rate hike this year, weakening the euro currency and boosting the attractiveness of exports from the region. Germany’s DAX Index was among the biggest gainers of western-European indexes, with BMW AG and HeidelbergCement AG adding at least 2.2 percent. Cie. Financiere Richemont SA slid 5.7 percent, leading a gauge of personal-and-household goods stocks to among the worst performances on the Stoxx Europe 600 Index, after the owner of Cartier and Montblanc forecast a challenging end to its year amid a slump in demand for watches in Asia. Swatch Group AG and LVMH Moet Hennessy Louis Vuitton SE fell at least 2.7 percent. The Stoxx 600 rose 0.3 percent to 379.95 at the close of trading, paring earlier gains of as much as 0.9 percent.
  • Commodities Plunge to 16-Year Low as Job Gains Fuel Dollar Surge. The improving U.S. job market is making the commodity meltdown even worse, sending prices to the lowest in 16 years and dragging down shares of mining companies and energy producers. The Bloomberg Commodity Index, a measure of returns for 22 components, tumbled to the lowest since 1999. The gauge dropped after gains for American payrolls sent to the dollar to its highest in data going back to 2005, cutting demand for alternative assets. The strong labor market is helping clear the way for the Federal Reserve to raise interest rates, which dim the appeal of raw materials because they don’t offer yields or pay dividends.
  • The Oil Industry Has Been Put on Notice. Keystone rejected, Exxon investigated—this doesn’t end well for oil. There were two huge developments today, both for the oil industry and the earth's climate. New York’s top lawyer issued a subpoena to Exxon, seeking information on whether the world’s biggest oil explorer deceived the public for almost 40 years about climate change. Hours later, President Obama announced that the U.S. would reject the Keystone pipeline.
  • Companies Smash Debt Mark and Keep Going in Race to Fed Liftoff. U.S. companies are pushing their borrowing binge to new heights before the Federal Reserve gets a chance to end seven years of zero-rate policies. Halliburton Co. led almost $16 billion in investment-grade bond sales Thursday as the oilfield services provider raised financing to fund its $34.6 billion takeover of Baker Hughes Inc. The offerings pushed issuance for 2015 to a record $1.17 trillion, according to data compiled by Bloomberg. That, along with $263 billion of debt raised by junk-rated borrowers this year, means U.S. companies are now closing in on $10 trillion of debt offerings since the central bank lowered its short-term interest-rate target to about zero in December 2008, the data show.
  • Traders Now See 70% Chance of Fed Rate Increase in December. Traders see a 70 percent chance that the Fed will raise its benchmark rate from near zero at its next meeting, up from a 56 percent probability before Friday’s release of stronger-than-forecast U.S. labor data. The calculation assumes the effective fed funds rate averages 0.375 percent after the first hike. "It’s definitely a hurdle that’s out of the way,” said Thomas Simons, a government-debt economist in New York at Jefferies Group LLC, one of the 22 primary dealers that are obligated to bid U.S. debt sales. “The November report doesn’t have to be a blowout to justify an increase in December. It really does check a lot of boxes for the Fed: good wage data, good payrolls."
  • Jobs Report Gives a Green Light to Fed. The October jobs report on Friday provides a domestic green light for the Federal Reserve to raise rates when its policy-making committee meets on Dec. 15-16. Whether it ends up doing so will be a function of two things: whether the balance of the U.S. data in the next six weeks is consistent with the report (which I think will be); and whether international conditions remain as calm or calmer than they are today (more of a question mark, though the Fed can have a beneficial influence). 
  • Bullard Says Stronger Labor Market Supports Near Term Liftoff. Federal Reserve Bank of St. Louis President James Bullard said a stronger labor market and reduced financial market stress are among the factors supporting the case for the Fed to raise rates for the first time since 2006. “In October, the committee removed the key sentence citing global factors and suggested that the zero interest rate policy could be ended soon, depending on incoming data,” Bullard said Friday in St. Louis. “The market-based probabilities of a near-term end to the zero interest rate policy have increased.”
  • Berkowitz Lifts Fairholme Cash to Highest Level Since '06 Heyday. Bruce Berkowitz is stockpiling cash at levels last seen almost a decade ago. His Miami-based Fairholme Fund had 30% of its assets invested in Treasury bills, money markets and short-term corporate debt known as commercial paper at the end of August, according to documents filed last week with the SEC. 
  • A Bunch of Hedge Funds Got Burned by Valeant(VRX). (video) From Bill Ackman down, hedge-fund managers piled into Valeant Pharmaceuticals International Inc. like no other stock in North America. After its stunning fall, the question now is who’s left to buy. Valeant, in many ways, was designed for hedge funds. Cobbled together by veterans of Goldman Sachs Group Inc. and McKinsey & Co., the drugmaker borrowed heavily to buy everything in sight and raised earnings almost 20 percent a year. But as its stock has plummeted 70 percent since August over questions about its business model, the high concentration of big-name stockholders has suddenly become a liability.
  • Adidas Will Pay High Schools to Change Offensive Mascots. If you’re a high school with an American Indian mascot, Adidas AG will pay you to switch. The world’s second-largest maker of sporting goods announced a nationwide initiative on Thursday to provide financial assistance and design resources to any U.S. high school open to a change. The company said there are roughly 2,000 schools that have logos or mascots that are offensive to tribal communities.
Fox News:
  • Obama rejects Keystone XL pipeline bid. (video) President Obama announced Friday that he has rejected Canadian energy giant TransCanada's application to build the Keystone XL pipeline, saying that the pipeline was not in the U.S. national interest. "The State Department has decided the Keystone XL pipeline would not serve the interests of the United States. I agree with that decision," Obama said at a White House press conference.
  • Carson campaign pushes back at published report questioning candidate's West Point claim. (video) Ben Carson's presidential campaign pushed back Friday at a published report questioning a seminal moment in the personal narrative of the Republican candidate -- that the top U.S. general in the Vietnam War had guaranteed him admission and a scholarship to the U.S. Military Academy at West Point. Academy officials, responding to the POLITICO report Friday, confirmed that there is no record of Carson ever applying to the elite military academy, much less gaining entrance or a scholarship offer. But in Carson's 1996 memoir "Gifted Hands," he appears to tell a different story: that the young Carson, a 17-year-old top ROTC officer from Detroit, had dined with Gen. William Westmoreland, who was a fresh out of his command in Vietnam, in 1969. He said Westmoreland later offered him a full scholarship. He has said in the retelling of the story that that he turned down the supposed offer because he wanted to be a doctor. He later graduated from Yale University in 1973.
CNBC:
  • Kyle Bass is not short Chinese banks but... (video) Hedge fund manager Kyle Bass has a theory about what could happen to credit growth in Asia over the next couple of years. And he has a trade strategy to match.
Zero Hedge:
Business Insider:
Reuters:
  • Doubters question 'strange' stock market rebound. The double-digit stock-market rebound after a bruising summer has put European shares back into positive territory for the year, but sentiment around the central-bank-fueled rally remains fragile. Weak trading volumes, a so-far disappointing earnings season and a focus on reliable dividend payouts rather than blockbuster growth have all contributed to the view that investors are being sucked into a market updraft rather than enthusiastically betting on a cyclical upturn.

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