Thursday, February 18, 2016

Today's Headlines

  • Kurds Warn Turkey of ‘Big War’ With Russia If Troops Enter Syria. Russia has promised to protect Kurdish fighters in Syria in case of a ground offensive by Turkey, a move that would lead to a “big war,” the Syrian group’s envoy to Moscow said in an interview on Wednesday. “We take this threat very seriously because the ruling party in Turkey is a party of war,” Rodi Osman, head of the Syrian Kurds’ newly-opened representative office said in Kurdish via a Russian interpreter. “Russia will respond if there is an invasion. This isn’t only about the Kurds, they will defend the territorial sovereignty of Syria.” Conflicting interests in Syria have created a dangerous new phase in the country’s five-year war, even as world powers struggle to implement a truce agreement.
  • Turkey Blames Kurd Groups for Bomb, Urges U.S. to Cut Ties. Turkey’s leaders blamed two Kurdish groups for a bombing in the capital that killed 28 people, including one backed by the U.S. as a major ally in the fight against Islamic State in Syria. Speaking in Ankara the day after a car bomb blasted through a military bus, Prime Minister Ahmet Davutoglu said the attack was carried out by separatists from the Turkey-based Kurdistan Workers’ Party in coordination with the armed wing of the U.S.-backed Democratic Union Party in Syria, or PYD.
  • Citigroup(C) Plans Argentina, Brazil Retail-Banking Exit. Citigroup Inc. plans to exit retail banking in Argentina and Brazil, where the company has maintained operations for more than 100 years, a person familiar with the matter said. Citigroup had about 6,000 employees in Brazil as of 2014, a company executive said at the time. It operates 71 branches in Brazil, where it began banking in 1915, according to the website. Citigroup is the 10th largest commercial bank in the country, with 80.6 billion reais ($20 billion) in assets, according to central bank data. Foreign lenders including London-based Barclays Plc and Frankfurt’s Deutsche Bank AG have been pulling back from the South American nation as it faces what’s predicted to be the worst recession in more than a century.
  • OECD Cuts Global Growth Forecast and Warns of Growing Risks. (video) The OECD cut its global growth forecasts, saying the economies of Brazil, Germany and the U.S. are slowing and warning that some emerging markets are at risk of exchange-rate volatility. Global gross domestic product will expand 3.0 percent in 2016, the same pace as in 2015 and 0.3 percentage point less than predicted in November, the Organization for Economic Cooperation and Development said Thursday in a report. “Financial stability risks are substantial,” the Paris-based organization said. “Some emerging markets are particularly vulnerable to sharp exchange-rate movements and the effects of high domestic debt.” 
  • Hungary Central Bank Stockpiles Guns, Bullets Citing Terror Risk. Hungary’s central bank, already facing criticism for a spending spree ranging from real estate to fine art, is now beefing up its security force, citing Europe’s migrant crisis and potential bomb threats among the reasons. The National Bank of Hungary bought 200,000 rounds of live ammunition and 112 handguns for its security company, according to documents posted on a website for public procurements. Additional protection is needed due to the rise of "international security risks" including bomb and terror threats and migration, central bank Governor Gyorgy Matolcsy said in a written response to a lawmaker who asked about the purchases, posted on Parliament’s website Feb. 17.
  • Europe's Refugee Impasse Deepens With More Balkan Border Checks. Europe’s efforts to contain refugee flows frayed further as Austria and Slovenia stepped up border patrols and terror attacks struck Turkey, the key transit land for Middle Eastern asylum seekers. Bombings of military convoys Wednesday and Thursday threatened to drag Turkey further into Syria’s civil war, raising questions whether the European Union can rely on it to stem the inflow. Prime Minister Ahmet Davutoglu canceled a trip to Brussels for EU-Turkey meetings on the refugee problem.
  • Europe Leveraged Loans Post Longest Run of Losses Since Crisis. (graph) Europe’s leveraged-loan market is in freefall. Prices for the riskiest loans to companies dropped for the 13th straight day on Wednesday, the longest run of declines since the global financial crisis, according to an S&P index tracking 95 billion euros ($106 billion) of debt. The yield premium that investors demand to hold bonds backed by such debt is at a record for collateralized loan obligations, or CLOs, sold since the market re-opened in 2013, according to Barclays Plc.
  • Swiss Watch Exports Drop as Slowing Economies Curb Demand. Swiss watch exports slid for the seventh consecutive month as plummeting stocks and slowing economies damped demand for luxury timepieces in their main markets. The two biggest destinations for Swiss watch exports -- Hong Kong and the U.S. -- were almost exclusively responsible for the global downturn, the Federation of the Swiss Watch Industry said in a statement Thursday. Shipments dropped 8 percent to 1.52 billion francs ($1.53 billion) in January, according to data from Switzerland’s customs office. That compares with a 3.7 percent gain in the same month in 2015.
  • How the ‘Brexit’ Summit Will Unfold and Why You Should Care: Q&A. (video) When Prime Minister David Cameron meets with the other European Union leaders in Brussels on Thursday, he’ll be seeking to reconstruct the U.K.’s terms of membership in the 28-country bloc.
  • European Stocks Give Up Gains as Banks, Energy Shares Decline. (video) European stocks gave up almost all the gains they had held on to for the better part of the day, as investors sold shares most closely linked with economic growth. Banks, miners and energy shares slid, with the Stoxx Europe 600 Index following oil lower after a report showing U.S. crude inventories advanced to an 86-year high. The regional benchmark added less than 0.1 percent at the close of trading, paring an advance of much as 1 percent. It fell as much as 0.6 percent earlier. A gauge of euro-area stock volatility reversed losses to snap a four-day declining streak.
  • Shale Faces March Madness With $1.2 Billion in Interest Due. The U.S. shale industry must come up with $1.2 billion in interest payments by the end of March as $30-a-barrel oil makes it harder for companies to scrape up the cash needed to stay current on their debts. Almost half of the interest is owed by companies with junk-rated credit, according to data compiled by Bloomberg on 61 companies in the Bloomberg Intelligence index of North American independent oil and gas producers. Energy XXI Ltd. said in a filing Tuesday that it missed an $8.8 million interest payment. The following day, SandRidge Energy Inc. announced that it didn’t make a $21.7 million interest payment.
  • Oil Pares Gain After U.S. Crude Inventories Rise to 86-Year High. (video) Oil pared gains after a government report showed U.S. crude inventories advanced to an 86-year high as imports surged. Crude stockpiles rose 2.15 million barrels to 504.1 million last week, according to the Energy Information Administration. Imports climbed 11 percent, the biggest gain since April. Prices climbed earlier as Iran cautiously supported a proposal by Saudi Arabia and Russia to freeze production at near-record levels.
  • Tech Startups Load Up on Convertible Debt for Quick, Cheap Money. As venture capital reaches a high not seen since the dot-com boom, more technology startups are becoming addicted to quick, cheap loans. The percentage of U.S. venture rounds involving convertible debt has doubled since 2012, according to data from research firm Pitchbook Data. In 2015, 19% of venture deals included convertible debt, compared with 13% in 2014, Pitchbook said. In 2012, it was 9.2%. Rounds involving convertible loans had previously peaked at 12% in 2008, around the time of the global financial crisis, before slumping. They rose sharply in the last few years. Venture capital firms invested $58.8 billion in U.S. companies last year, the highest amount since 2000, according to a report from PricewaterhouseCoopers LLP and the National Venture Capital Association.
  • Federal Reserve Staffers Say Mutual Funds Vulnerable to Runs. Mutual funds are vulnerable to runs that can spill over and cause problems in the broader financial system, according to a blog post published today on Liberty Street Economics by staffers at the Federal Reserve Bank of New York. The authors, Nicola Cetorelli, Fernando Duarte and Thomas Eisenbach, argue that a run can occur when heavy withdrawals from a mutual fund cause the fund company to sell illiquid assets at fire sale prices. In that situation, the post says, investors will have an incentive to get their money out early, triggering a race for the door that can have a ripple effect beyond the original fund. “Redemption runs at the fund level trigger fire sales that depress market prices and spread losses to the broader financial system,” the authors wrote.
  • Rubio Says He's the One to Stop Trump. In a riverside pavilion in Summerville, South Carolina, on Tuesday, Marco Rubio returned to the central selling point of his case to win the Republican presidential nomination: electability. “I am as conservative as anyone in this race, but I can win,” he said at the Dorchester Boat Club along the Ashley River. “I am the last one left in this race who can unify the party. This is a divided party right now. We'll eventually come together, but if it's in October it's too late. We need to nominate someone who can bring us together quickly.” “I will never ask you to be angry at another group of Americans so that I can win an election,” Rubio added Thursday morning at a crossfit gym in Greenville. “I will never pit 51 percent of us againt the other 49 percent.” No fan of Trump herself, Haley took not-so-veiled shots at the billionaire in her response to the State of the Union. “During anxious times, it can be tempting to follow the siren call of the angriest voices,” Haley said in January. “We must resist that temptation. No one who is willing to work hard, abide by our laws, and love our traditions should ever feel unwelcome in this country.”
  • House flipping: Deja vu all over again. House flipping is always hottest when home prices are nearing a peak. That is not the case right now nationally, and so flipping has remained pretty stable overall ... with two very glaring exceptions. Las Vegas and Miami. Sound familiar? They should.
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