Monday, January 04, 2016

Today's Headlines

Posted by Gary .....at 3:04 PM
Bloomberg:
  • China Halts Stock Trading After 7% Rout Triggers Circuit Breaker. (video) The worst-ever start to a year for Chinese shares triggered a trading halt in more than $7 trillion of equities, futures and options, putting the nation’s new market circuit breakers to the test on their first day. Trading was halted at about 1:34 p.m. local time on Monday after the CSI 300 Index dropped 7 percent. An earlier 15-minute suspension at the 5 percent level failed to stop the retreat, with shares extending losses as soon as the market re-opened. Traders said the halts took effect as anticipated without any major technical problems. The world’s second-largest stock market began the year on a down note after data showed manufacturing contracted for a fifth straight month and investors speculated that the end of a ban on share sales by major stakeholders may come as soon as this week. Chinese policy makers, who went to unprecedented lengths to prop up stock prices during a summer rout, are trying to prevent financial-market volatility from weighing on economy set to grow at its weakest annual pace since 1990. The CSI 300, comprised of large-capitalization companies listed in Shanghai and Shenzhen, fell as much as 7.02 percent before trading was suspended. The Shanghai Composite Index lost 6.9 percent. 
  • China Could 'Spook' Markets Again in 2016, IMF's Obstfeld Warns. China could once again “spook” global financial markets in 2016, the IMF’s chief economist warned. Global spillovers from China’s slowdown have been “much larger than we could have anticipated,” affecting the global economy through reduced imports and weaker demand for commodities, IMF Economic Counselor Maurice Obstfeld said in an interview posted on the fund’s website. After a year in which China’s efforts to contain a stock-market plunge and make its exchange rate more market-based roiled markets, the health of the world’s second-biggest economy will again be a key issue to watch in 2016, Obstfeld said.
  • China's Seven-Minute Selling Frenzy That Shook Global Markets. (video) The sell orders piled up fast on Monday at Shenwan Hongyuan Group, China’s fifth-biggest brokerage by market value. China’s CSI 300 Index had just tumbled 5 percent, triggering a 15-minute trading halt, and stock investors were scrambling to exit before getting locked in by a full-day suspension set to take effect at 7 percent. When the first halt was lifted, the market reaction was swift: it took just seven minutes for losses to reach the limit as volumes surged to their highs of the day. “Investors rushed to the door during the level-one stage of the circuit breaker as they fretted the market would go down further,” said William Wong, the head of sales trading at Shenwan Hongyuan in Hong Kong.
  • A Closer Look at the Carnage in World Markets.
  • Who Was the Cleric Saudis Executed and Why His Death Matters. (video) Saudi Arabia’s execution of a leading Shiite cleric has triggered the worst crisis between the Sunni kingdom and its chief Middle Eastern foe, Iran, in more than two decades. The execution of Nimr al-Nimr, who was a vocal critic of Saudi Arabia’s ruling royal family, triggered international condemnation, with the harshest reaction coming from Iran. Protesters stormed the Saudi embassy in Tehran and set the building on fire. Iran’s supreme leader, Ayatollah Ali Khamenei, warned Saudi officials they will face “divine” revenge for their actions. In Riyadh, authorities responded on Sunday by cutting diplomatic ties and giving Iran’s ambassador 48 hours to leave the country. The sharp escalation in tensions between the world’s largest oil explorer and a nation seeking to emerge from years of international sanctions may have wide-ranging regional repercussions, with the two already engaged in proxy confrontations from Syria to Yemen as they tussle for supremacy. Here’s an overview of who’s involved and what may happen next. 
  • Brazil Heads for Worst Recession Since 1901, Economists Forecast. (video) Brazil’s economy will contract more than previously forecast and is heading for the deepest recession since at least 1901 as economic activity and confidence sink amid a political crisis, a survey of analysts showed. Latin America’s largest economy will shrink 2.95 percent this year, according to the weekly central bank poll of about 100 economists, versus a prior estimate of a 2.81 percent contraction. Analysts lowered their 2016 growth forecast for 13 straight weeks and estimate the economy contracted 3.71 percent last year. Brazil’s policy makers are struggling to control the fastest inflation in 12 years without further hamstringing a weak economy.
  • India Index Signals First Manufacturing Contraction Since 2013. A closely watched index signaled a contraction in Indian manufacturing for the first time in more than two years, showing weakness in the economy even as headline growth numbers are among the fastest in the world. The Nikkei and Markit Economics Index fell to 49.1 in December, the lowest since August 2013, data showed Monday. A reading above 50 signals expansion while anything below that indicates a contraction. A similar gauge for crucial services growth is due on Wednesday. The data underscores Prime Minister Narendra Modi’s struggle to boost private investment in the face of legislative logjams, choked credit lines and weakened global prospects due to China’s slowdown. Government spending has underpinned India’s growth, which the Finance Ministry forecasts at 7 percent to 7.5 percent in the year through March. 
  • Canadian Dollar's Worst Rout Ever Raises Petro-State Worries. A decade ago, Canada set out to become an energy superpower. Now, it enters 2016 riding down one of the world’s most battered petro-currencies. When the clock struck midnight on Dec. 31, the loonie, so-called for the bird engraved on the dollar coin, officially recorded its longest and deepest downturn since it became a floating currency in 1970. And there’s no relief in sight. The loonie’s 16 percent decline against the U.S. dollar over the past year marks its third straight annual decline. The currency has lost more than a quarter of its value since 2012, falling to 72.27 U.S. cents from $1.01. That’s almost a penny a month.   
  • Biggest Economies Face $7 Trillion Debt Refinancing Tab in 2016. The value of bills, notes and bonds coming due for the Group-of-Seven nations plus Brazil, China, India and Russia will total $7.1 trillion, compared with $7 trillion in 2015 and down from $7.6 trillion in 2012. Japan, Germany, Italy and Canada will all see redemptions fall, while the U.S., China and the U.K. face increases, data compiled by Bloomberg show.
  • Iraq's Kurds to Continue Exporting Crude Independently in 2016. Authorities in Iraq’s cash-strapped Kurdish region will withhold delivery of oil to the central government and export crude independently in 2016 to ensure revenue amid a global price slump, according to a senior lawmaker in the territory’s parliament. The central government in Baghdad wasn’t committed last year to paying the self-ruled Kurdistan Regional Government its 17 percent share of the federal budget, and this lack of commitment persists in 2016, said Izzat Sabir Ismael, chairman of the Kurdish parliament’s finance and economic affairs committee. Ismael also serves on the KRG’s parliamentary committee for energy, industry and natural resources. “Oil prices are low, and government revenues in 2015 were about $50 billion at best, which means half of what has been forecast,” he said in a phone interview. “If the KRG delivers to Baghdad the agreed quantity of 550,000 barrels a day, Baghdad will not be able to pay the KRG its share of the budget -- which is about $1 billion a month. So, the KRG studied the situation and decided to export oil on its own.” 
  • Spain Deadlock Deepens as Political Turmoil Rocks Catalonia. Spain’s political deadlock deepened as the industrial region of Catalonia stumbled toward fresh elections, adding to an existing impasse over the formation of a new national government. Barcelona followed Madrid into uncertainty on Sunday as acting Catalan President Artur Mas failed to win support from the anti-capitalist CUP party for his bid to piece together a regional government dedicated to independence from Spain. That raises the likelihood of early elections in March in a region that accounts for about 20 percent of Spain’s output. Catalonia ran into further instability as political leaders in Madrid struggle with the result of last month’s general elections that left no one party or constellation of potential allies with a clear majority. The political mix, already complicated by national party leaders lining up on either side of the Catalan independence debate, is still harder to predict with the collapse of efforts to form a regional government.
  • Denmark Imposes Controls at German Border as Schengen Frays. Denmark is enforcing what it described as temporary controls on its German border, following its Scandinavian neighbors Sweden and Norway in stepping up measures to stem the influx of migrants from the war-ravaged Middle East. Prime Minister Lars Loekke Rasmussen, who signaled in a New Year’s speech that his government was considering the move, said the controls took effect at noon local time. German Chancellor Angela Merkel was briefed before the measures were enforced, Rasmussen said. The controls will initially be imposed for a period of 10 days, he said.   
  • Emerging Assets Slump on China Selloff as Iran-Saudi Ties Sour. (video) Emerging-market assets sank as a bigger-than-forecast slump in Chinese manufacturing fueled concern that the nation’s economic slowdown will curb global growth and escalating tension between Saudi Arabia and Iran underscored geopolitical risks in the Middle East. China halted stock, futures and options trading after a 7 percent slump in the CSI 300 Index caused the nation’s new circuit breakers to kick in. Equities in South Korea, India and South Africa slid at least 2.1 percent, while Saudi Arabian shares dropped 2.4 percent. Brazil’s stock benchmark fell for a fourth day. The offshore yuan weakened the most in five months. A gauge of 20 developing-nation exchange rates fell to a record low against the dollar. The MSCI Emerging Markets Index slumped 3.4 percent to 767.46 at 1:10 p.m. in New York. All 10 industry groups retreated, led by technology companies. The equity benchmark, which has traded below its 50-day moving average since late November, tumbled 17 percent in 2015. A gauge tracking 20 emerging-market currencies slid 0.9 percent to a record low. Malaysia’s ringgit and Indonesia’s rupiah fell the most in three weeks as an escalation of tension between Iran and Saudi Arabia bolstered demand for the dollar.
  • European Stocks Post Worst Start to a Year as China Rout Spreads. (video) European stocks fell after a rout in Chinese equities rekindled concern that the nation’s economic slowdown will hamper the global recovery, while tension between Saudi Arabia and Iran added to bearish sentiment. Automakers declined the most in the Stoxx Europe 600 Index, which lost 2.5 percent for its worst start to a year ever. Germany’s DAX Index, among the best performers in 2015, dropped 4.3 percent, the biggest slide for the export-driven gauge since the China-led rout in August.
  • Grains Fall to Nine-Year Low on Global Supply Glut, Equity Rout. A measure of wheat, corn and soybean prices fell to a nine-year low as beneficial weather in Latin America boosted concerns that global supply gluts will expand, while a slump in equities dragged commodities lower. The Bloomberg Grains Subindex fell as much as 2.1 percent to 38.77, the lowest since Sept. 15, 2006. Beneficial rain boosted prospects for crops in Brazil, and Argentina exporters are increasing shipments, partly after the government relaxed tariffs. World equities had the biggest drop to start to a year in at least three decades, led by a rout in China.
  • Debt Gauge Signals Concern for Stocks. (graph)
  • Fischer Worries Fed Can't Head Off or Contain Financial Crises. Federal Reserve Vice Chairman Stanley Fischer sounds concerned that the central bank may lack some key tools needed both to prevent another financial crisis and to contain the fallout should one occur. He told the American Economic Association on Sunday that the Fed is not as well-equipped with regulatory powers to rein in housing and other asset bubbles as some other central banks. And he questioned whether Congress had gone too far in limiting the Fed’s ability to intervene if a crisis erupted and threatened the financial system. "We won’t know until it’s very late" whether the Fed has been constrained too much, Fischer said at the AEA’s annual meeting in San Francisco. That’s something "we have to worry about a great deal." 
  • Too Much Momentum Is Hazard for U.S. Stocks Stuck in Neutral. (video) It may seem strange that in a stock market that went nowhere, investment strategies premised on buying shares based on their momentum just posted the best year since 2007. But they did -- and that’s not great news for bulls. Momentum stocks, defined as the ones showing the biggest gains in the last six to 12 months, kept rallying in 2015, returning 32 percent, according to data compiled by Evercore ISI and Bloomberg. That beat the next-best quantitative category, high earnings and sales growth, by 10 percentage points. Rallies in companies from Amazon.com Inc. to Regeneron Pharmaceuticals Inc. and industries such as biotech and software kept the engine humming even as the Standard & Poor’s 500 Index barely budged. Past instances when momentum stocks won have occurred closer to the end of rallies than the beginning, signaling indiscriminate buying at a time when more traditional share drivers such as earnings growth are starting to wane. “More and more funds were driven into a shrinking group of momentum stocks with other strategies not working,” said Jim Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management Inc., which oversees $351 billion. “It’s a characteristic you often get at the end of a market cycle.” 
  • Chipotle(CMG) Not the Only Fast-Casual Chain That's Suffering: Chart.
  • GM(GM) Invests $500 Million in Lyft. (video) General Motors Co. will invest $500 million in Lyft Inc., giving the ride-hailing startup a valuation of $5.5 billion and a major ally in the global battle against Uber Technologies Inc. The investment, part of a $1 billion financing round for Lyft, is the biggest move by an automaker to date when it comes to grappling with the meteoric rise of the ride-hailing industry.
Wall Street Journal: 
Fox News: 
  • Source: 'Al Qaeda followers' among 17 being transferred from Gitmo. (video) The group of 17 detainees expected to be transferred out of Guantanamo Bay as early as this week includes “multiple bad guys” and “Al Qaeda followers,” a source who has reviewed the list told Fox News. Little is known publicly about which prisoners are being prepared for transfer, but the Obama administration has notified Congress it plans to ship out 17 detainees – some of whom could be transferred within days.
CNBC: 
Zero Hedge: 
Business Insider: 
Telegraph:

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