Saturday, February 13, 2016

Today's Headlines

  • Republican Threats Complicate Obama Replacing Scalia on Court. U.S. Senate Majority Leader Mitch McConnell said he would block President Barack Obama from getting a nominee confirmed to replace Supreme Court Justice Antonin Scalia amid a heated presidential campaign, saying the choice should be left to the next president. Harry Reid, the Democratic leader in the Senate, warned Republicans against trying to run out the clock on Obama’s presidency by holding up any nominee to replace Scalia, who was found dead Saturday at a resort in West Texas. “The American people‎ should have a voice in the selection of their next Supreme Court Justice,” McConnell, a Kentucky Republican, said in a statement. “Therefore, this vacancy should not be filled until we have a new president.” The ferocity of early reactions from McConnell and Reid, barely an hour after Scalia’s death became public, foreshadowed a bitter and bruising political fight over how to replace him, directly in the middle of the 2016 White House campaign.
  • Credit-Default Swaps Are Back as Investor Fear Grows. As markets plunge globally, investors are seeking refuge in an all-but-forgotten place. Trading volumes in the credit-default swaps market -- where banks and fund managers go to hedge against losses on corporate and government debt -- have surged. Transactions tied to individual entities doubled in the four weeks ended Feb. 5 to a daily average of $12 billion, according to a JPMorgan Chase & Co. analysis of trade repository data. The volume of contracts on benchmark indexes in the market increased two-fold during that period to an average of $87 billion a day. The growth could represent a shift. The credit derivatives market has contracted for almost a decade, after loose monetary policies triggered a big rally in assets including corporate bonds, which made investors less eager to protect against the worst. Regulators have also urged banks to curb their risk taking, reducing the appetite for at least some dealers to trade the instruments. Now, stock markets are selling off and junk bond prices are plunging, increasing investor demand for protection. “The surge we’ve seen in trading is likely to stay with us for the foreseeable future,” said Geraud Charpin, a portfolio manager at BlueBay Asset Management in London, which oversees $58 billion and has traded more credit-default swaps on individual credits in the past three months. “The credit cycle has turned, so there’s more appetite to go short and buy protection.”
  • Yen's Best Two-Week Run Since 1998 Just the Start for Citigroup. When the going gets tough, foreign-exchange traders turn to the yen. Japan’s currency may extend its biggest two-week rally since 1998 as investors continue to seek out refuge assets amid market turmoil, according Citigroup Inc. State Street Global Advisors Inc., which oversees about $2.4 trillion, says it’s buying yen and selling dollars as the tumult gripping financial markets bolsters the Japanese currency’s appeal. "We’re not counting on the market mood shifting any time soon," said Steven Englander, Citigroup’s New York-based global head of Group-of-10 currency strategy. Citigroup, world’s biggest foreign-exchange trader according to Euromoney magazine, expects haven currencies including the yen, euro and Swiss franc to appreciate in the near term, even though it said investors are being overly pessimistic about the prospects for economic growth in the U.S. and monetary stimulus elsewhere.
  • Bond Investors' Dash for Safety Tramples Cushion Against Shock. Investors have seldom been gloomier about prospects for the global economy, judging by this week’s Treasury-market performance. As worries about European banks’ credit pushed global stocks into a bear market, demand for U.S. debt heated up, driving benchmark 10-year yields toward record lows. During the Treasuries rally, investors discounted the risk of any surprise jump in interest rates or inflation by the most since January 2015, according to a gauge known as the term premium. The measure of how much extra return investors demand against unexpected developments over the life of the security approached the 45-year low set during last year’s global deflation scare, going by the Federal Reserve Bank of New York’s favored formula.  
Wall Street Journal:
  • Had bullish commentary on (HYG), (UNG), (BMY), (KEY), (CUB), (GOOGL), (BMY) and (CB).
  • Had bearish commentary on (CORE).
Fox News:
  • Supreme Court Justice Scalia dead at 79. (video) Supreme Court Justice Antonin Scalia, the judicial standard-bearer of the conservative movement and the court's most provocative member, died Saturday. He was 79. His death means President Obama could have an unprecedented chance to try to shift the balance of the court during his final year in office -- setting up a Senate battle in the heat of an election year. The U.S. Marshals Service in Washington confirmed Scalia's death at a private residence in the Big Bend area of south Texas. The service's spokeswoman, Donna Sellers, says Scalia had retired for the evening and was found dead Saturday morning when he did not appear for breakfast. "He was an extraordinary individual and jurist, admired and treasured by his colleagues," Chief Justice John Roberts said on behlf of the high court and and retired justices. "We extend our deepest condolences to his wife, Maureen, and his family."
  • 'Deafening silence:' Obama, 2016 Dems mum on recent police deaths. (video) A Fargo police officer fatally shot responding to a routine domestic disturbance call. A 25-year police veteran killed while trying to serve a warrant outside Atlanta. These are just the latest tragedies of cops murdered while performing their sworn duty -- "to protect and serve." But while President Obama and the Democratic candidates vying to succeed him are putting America's police departments on trial in the court of public opinion in response to a rash of deadly police shootings, the murder of police officers on America's streets is being met with a “deafening silence.” “I cannot recall any time in recent years when six law enforcement professionals have been murdered by gunfire in multiple incidents in a single week,” National Law Enforcement Officers Memorial Fund CEO Craig W. Floyd said in a statement Friday. “Already this year there have been eight officers shot and killed, compared to just one during the same period last year and represents a very troubling trend."
  • New batch of Clinton emails released, 81 now marked 'classified'. (video) The State Department on Saturday released more emails from the private server that Hillary Clinton used when secretary of state, including 81 that have now been marked as “classified.” The agency released more than 1,000 new pages of emails, as part of a federal court order for officials to comply with a Freedom of Information Act request for the official correspondence. Clinton, a Democratic candidate in the 2016 White House race, has denied any wrong-doing. However, her use of the private server and email accounts, from 2011 to 2013, is being investigated by the FBI.
Zero Hedge:
Business Insider:
  • Saudi Arabia might not be ready to fold just yet. "Possible ongoing talks on coordinated OPEC and non-OPEC crude oil production cuts are unlikely to be successful in the near-term, in our view," argued BAML's MENA economist, Jean-Michel Saliba, in a recent note to clients. "Saudi Arabia appears to be continuing in the meantime to position its energy and fiscal policies for a lower for longer oil price environment, if need be, as suggested by the possible flotation of Saudi Aramco or parts thereof."
  • This could be Trump's biggest weakness in a state where a lot of voters don't like foul language. At a candidates' forum at evangelical Bob Jones University on Friday, Bush told the crowd: "Is anybody worried about the front-running candidate shouting out obscenities at children?" Trump was not at the event, sending instead a surrogate to speak for him, Pastor Mark Burns. When Burns told the crowd that Trump is "pro-faith," someone shouted out from the audience "Trump is profane."
Sueddeutsche Zeitung:
  • Saudi Arabia Says Russia Joining Religious War in Syria. Russia is getting involved in a religious war by fighting alongside Iran and Syrian President Bashar Al-Assad, Saudi Arabian Foreign Minister Adel Al-Jubeir said in an interview. Not in Russia's benefit to signal to its Sunni Muslim population that it's fighting alongside Shi'ite Muslims. Assad's grip on Syria not tenable, he'll be gone in "three months, six months or three years". Saudi Arabia willing to participate in ground combat in Syria if anti-IS coalition decides that's necessary.
  • PBOC Zhou Says Outflows Need Not Be Capital Flight. China has ample reserves to ensure payments and defend yuan stability, PBOC Governor Zhou Xiaochuan says in an interview. No basis for continued yuan devaluation. No need to worry about short-term decline in forex reserves. Zhou dismisses rumors on China tightening capital controls. Rumors designed to shake confidence, benefit speculation, he said. China won't allow speculation lead market sentiment.

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