Tuesday, January 05, 2016

Today's Headlines

  • China Battles to Shore Up World's Priciest Stock Market: Chart. (video) Chinese authorities are contending with sky-high valuations as they revive support for the nation’s tumbling equity market. Government funds purchased local stocks on Tuesday after a plunge on Monday triggered a share halt, according to people familiar with the matter. Even after the drop, the median stock on mainland exchanges trades at about 65 times earnings -- more than three times higher than the U.S.’s multiple of 19. "Although they would want to support the stock market, they should have realized that it’s impossible," Stephen Ma, senior portfolio manager at LGM Investments Ltd., said in Hong Kong.  
  • Bank of America Merrill Lynch: The Shanghai Composite Will Plummet by Nearly 30% in 2016. This time is not different. The early January blues for Chinese stocks will persist through 2016, according to Bank of America Merrill Lynch, which expects the Shanghai Composite index to end the year down roughly 27 percent, at about 2,600. David Cui, head of China equity strategy, is known to be bearish on the world's second-largest economy—which is to say that he's less sanguine than most of his peers about the consequences of unwinding leverage that has mounted in a short period of time. For China—which has enjoyed a rapid expansion of debt relative to the size of its economy—this time will not be different, Cui contended in a note.
  • Dragon Tail Risk for World Economy on Higher Fear of China Slump. It took exactly one trading day in 2016 for the year’s first Black Swan to appear on the horizon. As Monday’s 7 percent slide in China’s CSI 300 Index triggered a worldwide rout in equities, UBS Group AG reminded clients of its December analysis of what a slump in the world’s second-largest economy would imply for global growth. The worst-case scenario of the Swiss  bank’s economists and strategists is for the Chinese economy to grow just 4 percent this year rather than the 6.2 percent they actually predict.
  • China's Terrible Start to 2016 Has Beijing Fighting Market Fires. (video) China has started 2016 in fire-fighting mode. After three months of relative calm in the nation’s $6.5 trillion stock market, a 7 percent rout to open the new year prompted government funds to prop up share prices on Tuesday, according to people familiar with the matter. The central bank injected the most cash since September into the financial system to keep a lid on borrowing costs, while the monetary authority was also said to intervene in the currency market to prevent excessive volatility. With Chinese shares and the yuan posting their worst starts to a year in at least two decades, the ruling Communist Party is being forced to scale back efforts to let markets have more sway in the world’s second-largest economy.  
  • Dassault Business Jet Orders Tumble on Russia, Brazil Slumps. Dassault Aviation SA said sales of its Falcon business jets tumbled 50 percent last year, hurt by slumping demand from once buoyant markets including Russia and Brazil. The French company won orders for 45 corporate jets in 2015, half the previous year’s total, it said Tuesday, sending the stock down the most in 4 1/2 months. The tally was just 25 planes factoring in the cancellation of a contract for 20 Falcons previously placed by U.S. fractional-ownership specialist NetJets inc. Sales were impacted by the economic environment, “especially in emerging countries,” Paris-based Dassault said. Some 55 new Falcons were delivered, 10 fewer than anticipated, it said, reflecting “the weakening of the order intake.”
  • VW Shares Tumble on U.S. Taking Hard Line in Diesel Scandal. (video) Volkswagen AG fell the most in two months after the U.S. government filed a lawsuit seeking penalties as high as $80 billion -- more than the company is worth -- and faulted the German carmaker for a lack of progress fixing cars with rigged engines. Chief Executive Officer Matthias Mueller and Herbert Diess, head of the VW brand, will visit the U.S. for the first time since the scandal broke in September. Diess will work to repair the brand’s tarnished image with appearances at the Consumer Electronics Show in Las Vegas this week and at the North American International Auto Show in Detroit starting Sunday. Mueller is set to meet politicians and possibly other officials next week, though his schedule hasn’t been published.
  • Yen Benefits as Stock-Market Losses Drive Appetite for Havens. The yen advanced against 15 of its 16 major counterparts as stock markets struggled to shrug off Monday’s rout, spurring demand for haven investments. Japan’s currency surged the most against the Swedish krona and the New Zealand dollar and climbed to a nine-month high versus the euro even as China moved to support its equities market. The Asian nation’s CSI 300 Index eked out a gain, while the Stoxx Europe 600 Index closed the day higher.
  • European Stocks Reverse Early Gains on China, Middle East Worry. (video) European stocks advanced, recovering some of the session’s earlier gains, after yesterday’s worst start to a year. Commodity producers posted the biggest gains among Stoxx Europe 600 Index groups. Glencore Plc and ArcelorMittal added at least 3.5 percent, helping send the regional benchmark up 0.6 percent at the close of trading. It rallied as much as 1.1 percent in the first ten minutes of trading, and then fell as much as 0.5 percent in intraday trading. The Stoxx 600 tumbled the most in a month yesterday as a selloff in China reignited concern that a slowdown there will hamper global recovery.
  • This Time Mideast Tensions Are Bad News for Oil. At almost any other time, an escalating diplomatic conflict between OPEC members Iran and Saudi Arabia would mean a spike in oil prices. That the rally this time couldn’t be sustained shows just how abnormal things are in the oil market. Brent crude is little changed this week as a global supply glut and the slowest Chinese growth in a generation trumped mounting strife between the nations on either side of the world’s busiest waterway for oil tankers.
  • Baltic Dry Ship Index Tumbles to Fresh Record Amid China Turmoil. The Baltic Dry Index, a measure of the cost of transporting commodities, plunged to a record amid signs of slowing economic growth in China that’s also hurting the nation’s stock market. The index retreated 1.1 percent to 468 points, tumbling below a previous record low set in December. Rates declined for all except one of the vessel types monitored. China moved to support its sinking stock market after a $590 billion sell off as state-controlled funds bought equities and the securities regulator signaled a selling ban on major investors will remain beyond this week’s expiration date, according to people familiar with the matter.
  • Fed Playing Whac-A-Mole Faces Limits in Hammering Asset Bubbles. A seasoned Federal Reserve policy maker likened the central bank’s effort to prevent financial bubbles to playing a game of Whac-A-Mole: It can tamp down excessive risk-taking in one area only to see it pop up in another. What’s more, the potentially dangerous speculative activity has a tendency to shift outside the regulated banking industry to places where the Fed has less oversight and control, San Francisco Federal Reserve Bank President John Williams told the American Economic Association’s annual conference.
  • Nissan Leads December Sales as Ford, GM Fall Short of Estimates. Fiat Chrysler Automobiles NV, Ford and General Motors ended 2015 with December sales gains that, while lower than analysts predicted, did little to dispel the idea the year was one for the record books. Automakers rode a wave of demand for light trucks as gasoline prices hovered at about $2 a gallon. Fiat Chrysler and Toyota Motor Corp. each posted increases of at least 11 percent, while Nissan Motor Co. led with a 19 percent jump. Shares of Ford and GM fell after they failed to make the gains of at least 10 percent analysts predicted.
  • Hong Kong Retail Sales To Record Worst Slump Since 2003 SARS. Hong Kong retail sales is on track to record 3% fall in 2015, the worst since the SARS epidemic in 2003. In November, retail sales in Hong Kong fell 7.8%, worse than the 6.4% decline expected by the street. Hong Kong’s retail stocks retreated today. Watch retailer Hengdeli (3389.Hong Kong) dropped 2.8%, jewelry retailers Luk Fook (590.Hong Kong) and Chow Sang Sang (116.Hong Kong) fell 1.6% and 1.7% respectively.
Zero Hedge:
Thrillist Health:
Global Times:
  • China Rail freight posts record drop. Rail freight volume in China last year declined by a record amount, Beijing-based financial news site caixin.com reported Tuesday, citing data obtained from the national railway administrator. Rail freight movements fell 10.53 percent year-on-year to 3.4 billion tons, caixin.com noted, citing data from the National Railway Administration. Since China Railway Corp, a spin-off from the now defunct railway ministry, was established in 2012, rail cargo movements have been dropping, media reports said. However, the 2015 volume was roughly the same as that six years earlier, when rail freight data was first published. Experts on railway transport said they weren't surprised by the decline in rail cargo levels, which used to be considered an important indicator of the country's overall economic growth.
Tasnim News Agency:
  • Iran’s 2nd Underground “Missile City” Unveiled. (pic) Pictures from an underground missile facility of the Islamic Revolution Guards Corps (IRGC) were released on Tuesday, after Parliament Speaker Ali Larijani paid a visit to the base. Around 3 months after the IRGC Aerospace Force broadcast footage from a tunnel dug deep in the ground and filled with numerous ballistic missiles, photos of another missile city were made public on Tuesday. Seen among the gear stored in a seemingly impregnable mountain base are the country’s “Emad” long-range ballistic missiles on their launch vehicles parked along an underground tunnel.

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