Saturday, January 09, 2016

Today's Headlines

  • U.S. Stocks Tumble, Cap Worst Five-Day Start to Year on Record. (video) U.S. stocks tumbled in a late-afternoon selloff that sent major equity indexes to their worst weekly declines in more than four years, as investors found little relief in moves by China to restore calm to its sinking markets and data that showed resilience in the U.S labor market. Bank stocks led the late slide, with JPMorgan Chase & Co. and Citigroup Inc. falling at least 2.2 percent to cap the week with drops of nearly 11 percent. Energy shares in the Standard & Poor’s 500 Index lost 1.3 percent to press deeper into five-year lows. Seven of the benchmark’s 10 main industries sank more than 5.5 percent this week in the gauge’s worst five-day start to a year in data going back to 1928. The S&P 500 dropped 1.1 percent to 1,922.03 at 4 p.m. in New York, and fell 6 percent for the week. The Dow Jones Industrial Average sank 167.65 points, or 1 percent, to 16,346.45. The index lost more than 1,000 points this week in its worst opening five-days to a year ever. The Nasdaq Composite Index declined 1 percent, stretching its losing streak to seven days, the longest since 2011. “When investors saw there was no traction and the market was unable to hold rallies over several attempts throughout the day, it just became fear of going into the weekend,” said Gene Peroni, a fund manager at Advisors Asset Management Inc. in Conshohocken, Pennsylvania. “The market has just been so reactive to news, people will wait on the sidelines and see what the weekend brings. It has been a rough week.”
  • World's Richest Lose $194 Billion In First Trading Week of 2016. The world’s 400 richest people lost almost $194 billion this week as world stock markets began the year with a shudder on poor economic data in China and falling oil prices. Forty-seven billionaires lost $1 billion or more during the worst week for U.S. stocks since 2011, according to the Bloomberg Billionaires Index. The combined drop was almost seven times the $29 billion lost in the first five trading days of 2015. The 400 people on the index had a combined $3.7 trillion at the end of the week, compared with more than $4 trillion a year ago.
  • Credit Market's Fear Gauge Jumps to 3-Year High on China, Oil. The cost to protect against defaults by North American investment-grade companies rose to the highest level in three years amid a new year’s equities rout triggered by the latest cracks in China’s financial market. The end cost for high-yield debt approached a three-year high as concern grew that the selloff in Chinese capital markets will weigh on a global economy already reeling from an extended commodities slump. “The year has gotten off to a terrible start," said Martin Fridson, chief investment officer at Lehmann Livian Fridson Advisors LLC in New York. "The high-yield market, like equities, is being affected by the oil prices and the slowdown in China. The connection with China is more indirect, but clearly it’s affecting the overall market." The risk premium on the Markit CDX North America Investment Grade Index, which is composed of 125 equally weighted credit-default swaps on investment grade entities, soared 10.4 basis points this week to 98.65 basis points in New York. That’s the highest level since December 2012. A similar benchmark for junk debt jumped 52.36 basis points this week to 522.27 basis points, compared with 522.76 basis points on Dec. 11 that was the most since December 2012. "People are concerned about headline risk," said Ken Monaghan, the head of global high yield at Amundi Smith Bredeen. "They’re wondering about the extent to which the moves in the market will influence fundamentals, just because it can really change people’s willingness to take risk."
  • China's Factory-Gate Deflation Extends Record Stretch. China’s consumer inflation remained muted while factory-gate prices fell more than forecast as weakening domestic demand dimmed the outlook for growth. The consumer-price index rose 1.6 percent in December from a year earlier, the National Bureau of Statistics said Saturday, compared with a 1.6 percent median estimate in a Bloomberg survey and 1.5 percent in November. The producer-price index fell 5.9 percent, compared to a projected 5.8 percent drop, extending declines to a record 46 months"We believe that China’s inflation will continue to slide and the CPI could fall further" to around 1 percent in 2016, Australia & New Zealand Banking Group Ltd. economists led by Liu Ligang wrote in a report ahead of the data.
  • China's Currency But Emerging-Market Peers' Problem: New Yuan. In an echo of the Nixon administration’s missive when a depreciating U.S. currency was roiling its trading partners, the yuan may be China’s currency but it’s increasingly the problem of others -- and especially its emerging-market peers. Smaller developing economies are struggling to cope with China’s decision to weaken the yuan, with Mexico warning of the risk of competitive devaluations and Thailand saying its exports will be affected. In Indonesia, where the central bank had seen room last month to cut borrowing costs, its governor says it’s prioritizing stability when setting rates and monitoring global developments. “Emerging markets can’t decouple from what is happening in China,” said Jonathan Cavenagh, head of Asia emerging-market currency strategy at JPMorgan Chase in Singapore. “The parts of China that matter for most other emerging economies are still quite weak, and in a backdrop of a weakening currency, it will weigh on sentiment elsewhere.”
  • Hedge Funds Are Bullish on Yen for First Time Since October 2012. Hedge funds and other large speculators are bullish on the yen for the first time in more than three years. Positions that profit from yen gains against the dollar outnumbered bearish positions by a net 4,103 contracts in the week to Jan. 5, according to data from the U.S. Commodity Futures Trading Commission. That’s the first time since October 2012 the data haven’t shown net short positions. "Dollar-yen has plunged on yen safe haven flows in the midst of turmoil in the global equity markets, and could fall further if China’s financial/economic woes continue to weigh on the markets," said Matt Weller, an analyst at Gain Capital Holdings Inc.’s unit in Grand Rapids, Michigan.
  • Tensions High on Korean Border as North Raises Threat of War. Tensions remained high on the fortified border dividing North and South Korea as the resumption of propaganda broadcasts prompted Pyongyang to raise the risk of war, overshadowing diplomatic efforts to respond to North Korea’s surprise nuclear test. South Korea turned on the powerful loudspeakers on Friday in retaliation for the nuclear test conducted on Wednesday. The South Korean military also fortified its positions near the huge banks of loudspeakers that can broadcast miles into North Korea. The broadcasts risk pushing the two sides “toward the brink of war,” Yonhap News cited North Korean Workers’ Party Secretary Kim Ki Nam as saying at a rally in Pyongyang.
  • Gulf States Urge Action Against Iran to Prevent Terror Acts. The GCC, whose members are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, “calls upon the international community to take serious measures against Iran to prevent repetition of such attack on diplomatic missions in the future,” Abdul Latif Al Zayani, the secretary-general of the council, told reporters in Riyadh Saturday after a meeting of its foreign-affairs ministers. It “welcomes the strong rejection of Iran’s actions against Saudi Arabia from neighboring Arab and Islamic countries.”
  • Humana(HUM) to Record 2016 Obamacare Shortfall, Membership Drops. Humana Inc. is the latest insurer to run into trouble in Obamacare’s individual health-insurance markets. The health insurer said that it probably won’t collect enough money to cover costs for some customers who bought individual plans, and will set aside what’s known as a premium deficiency reserve. The shortfall is for 2016 plans that comply with new rules under the Affordable Care Act, Louisville, Kentucky-based Humana said Friday. UnitedHealth Group Inc., the biggest U.S. health insurer, said in November that it might stop participating in the Obamacare next year after taking losses. One analyst predicted that Humana would follow suit.
Wall Street Journal:
  • Suspect in Philadelphia Police Shooting Had Visited Egypt and Saudi Arabia. Authorities try to determine if man has terrorist connections and whether his overseas travel is significant to investigation. The man arrested for allegedly shooting a Philadelphia police officer three times in a late-night ambush traveled to Saudi Arabia in late 2011 and to Egypt in 2012, according to a person familiar with the matter.
  • Saudi Arabia Steps Up War of Words With Iran. Kingdom’s execution of Shiite cleric Nemer al-Nemer has inflamed tensions. Saudi Arabia on Saturday accused Iran of not acting like a nation state and said it is considering further measures against its regional rival, as tensions between the two countries escalated further over the kingdom’s execution of a dissident Shiite cleric.
  • Had bullish commentary on (HBI), (DECK), (AAPL), (INTC), (MRK), (DOW), (JPM), (C), (BAC), (GS), (SLB), (XOM), (EOG) and (NFX).
  • Had bearish commentary on .
Fox News:
  • Protests in Cologne after assaults; Merkel pledges new laws. Women's rights activists, far-right demonstrators and leftwing counter-protesters took to the streets of Cologne on Saturday to voice their opinions in the debate that has followed a string of New Year's Eve sexual assaults and robberies blamed largely on foreigners. Amid the heightened public pressure, Chancellor Angela Merkel's party proposed stricter laws regulating asylum-seekers in the country -- some 1.1 million of whom arrived last year. Police said that around 1,700 protesters from the anti-Islam PEGIDA movement were kept apart from 1,300 counter-demonstrators in simultaneous protests outside the city's main train station.
  • Sanders calls Bill Clinton's affair 'totally disgraceful and unacceptable'. (video) Democratic presidential candidate Bernie Sanders said Friday night that former President Bill Clinton, now stumping on the campaign trail for wife Hillary Clinton, committed a “totally disgraceful” act in having an affair with White House intern Monica Lewinsky. Sanders’ remark was in response to a question at an Iowa town hall meeting, not part of a speech. However, the Vermont senator had until this point in the primary season largely avoided saying anything negative related to the front-running Hillary Clinton, expect to attack her on policy issues.
Zero Hedge:
Business Insider:
  • China is going back in time. China is about to go back nearly 40 years in time, one of the most in-demand analysts on the country says. Charlene Chu at Autonomous Research published a prediction this week that secondary-industry output — think production and construction — could contract in 2016. That would be the first reduction on record since 1978.
  • Thermo Fisher to buy Affymetrix for $1.3 billion. Thermo Fisher Scientific Inc (TMO), the world's largest maker of scientific instruments, said it agreed to buy Affymetrix Inc (AFFX) for $1.3 billion in cash, beefing up its genetic analysis products business. Thermo Fisher's offer of $14 per share represents a rich 52 percent premium to Affymetrix's Friday close of $9.21. Affymetrix shares were trading at $13.70 after market, while Thermo Fisher was unchanged.
Financial Times:
  • Germany Sees 1M Refugees Trying to Cross Turkey in 2016. One million refugees to try to pass through Turkey on their way to Europe this year, citing German Deputy Interior Minister Ole Schroeder. Says Turkey may be able to hold back and accommodate 200,000 of them at best.
South China Morning Post:

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