Wednesday, February 24, 2016

Today's Headlines

Posted by Gary .....at 3:00 PM
Bloomberg:
  • China's New Economy Is Hitting Asia's Exports. Take Korean cars: Shipments fell 21.5 percent in January from a year earlier, an even sharper decline than the month’s 18.8 percent drop in total exports. “With the big three sectors of Ulsan all in a slump, subcontractors to some of the big companies closed their businesses,” said Choi Jin Hyeok, research team leader at the Ulsan Chamber of Commerce & Industry. “I’m afraid headwinds may continue this year. Slower growth in China is the biggest risk as the main market for all those industries is China.”
  • China's Shadow Banking Evolves to Dodge Crackdown. China’s shadow lending has evolved to dodge a clampdown, with brokers and funds taking on the role previously played by more heavily regulated trusts in expanding informal financing. Banks are increasingly turning to so-called directional asset-management plans issued by brokerages and the subsidiaries of mutual-fund providers to channel lending. The amount of money placed in such products jumped 70 percent last year to 18.8 trillion yuan ($2.9 trillion), outpacing the 17 percent growth for trust assets, according to data provided by industry groups. The expansion of less-regulated lending makes it harder for authorities to contain a debt pile that’s ballooning as economic growth slows to the least in 25 years.
  • Hong Kong Expects Slowing Economic Growth as Tourism Slumps. Hong Kong’s economy may grow at its slowest annual pace since at least 2012, as a slump in tourist arrivals and exports continues to worsen, Financial Secretary John Tsang said. The economy may expand by 1 percent to 2 percent in 2016, slower than the 2.4 percent gain last year, Tsang told lawmakers on Wednesday in his annual budget speech. Gross domestic product growth advanced 0.2 percent in the fourth quarter from the preceding three months, below the 0.3 percent estimate of economists surveyed by Bloomberg. “Local consumption and investor sentiment have been dented by concerns over the uncertainties associated with the U.S. interest rate increases and the dimmer global economic outlook,” Tsang said. “The local economy is laden with risks in the year ahead; the outlook is far from promising.”
  • Brazil Credit Ratings Cut to Junk by Moody’s. Brazil’s sovereign rating was cut to junk by Moody’s Investors Service, the last of the major ratings companies to strip the country of its investment grade, as President Dilma Rousseff struggles to shore up fiscal accounts amid deepening political turmoil. The country’s benchmark stock gauge declined the most in three weeks and the currency weakened after the rating was reduced two steps to Ba2, putting Moody’s grade in line with Standard & Poor’s and one level below Fitch Ratings. The outlook is negative, meaning more downgrades may be coming, Moody’s said in a statement Wednesday. Brazil’s credit metrics have deteriorated "materially" in the past few months and will worsen over the next three years, according to the ratings company, which also cited the negative impact of political gridlock on the government’s efforts to close a budget deficit and undertake structural reforms. The Ibovespa stock gauge dropped 2.7 percent as of 10:10 a.m. in New York as state-controlled companies including Petroleo Brasileiro SA and Banco do Brasil SA tumbled. The real fell 0.9 percent, extending its decline over the past year to 29 percent, the most among the world’s 16 most-traded currencies.
  • Can Things Get Any Worse for Russia? (video) You're About to Find Out. Investors who’ve made a fortune in the country say that with oil's plunge, the ruble's collapse, and Putin in power, all bets are off.
  • A Nice Glass of Seawater? Drought Forces Australia to Rethink Desalination. On the southeast coast of Australia, a A$5.7 billion ($4.1 billion) processing plant to turn the ocean into a source of drinking water has sat idle since it was built in 2012. That could change soon. The state of Victoria will decide by April whether to switch it on, sucking water from the Bass Strait through an underground tunnel into a complex of more than two dozen buildings in a seaside town south of Melbourne. At the heart of the facility is technology that can remove salt and supply as much as 150 billion liters (40 billion gallons) of water a year, or about a third of the city’s consumption. 
  • Guardians of World Economy Hit Logjam of Conflicting Interests. When the Group of 20 declared itself the guardian of the global economy in September 2009, it had the unifying goal of pulling the world out of the worst downturn since the Great Depression. Fast forward to now, and finance chiefs from key industrial and developing economies gathering in Shanghai this week are once again worried about a weak outlook for global growth. The difference this time is that rather than rallying around a shared goal, each member has different needs, which in some cases are putting them in conflict.
  • Weidmann Says Any New ECB Measures Mustn't Be Counterproductive. The European Central Bank must be wary of introducing fresh stimulus that could backfire and weaken the transmission of policy to the economy, Governing Council member Jens Weidmann said. “What matters for us is that we don’t produce counterproductive effects,” Weidmann, who heads Germany’s Bundesbank, said in a Bloomberg Television interview in Frankfurt on Wednesday. “If through the effect on, for instance, the stability of banks our measures produce the opposite of what we want then it wouldn’t be smart to embrace them in the first place.” In the face of a deteriorating inflation outlook, ECB policy makers will review their current package of negative interest rates and a 1.5 trillion-euro ($1.7 trillion) bond-buying program when they meet March 9-10. With investors pricing in at least a 10-basis point cut in the deposit rate, currently at minus 0.3 percent, concern is mounting that a squeeze on bank profits will hinder lending. 
  • Europe Stocks Drop Second Day as Miners Tumble Most Since August. European stocks declined for a second day as sliding oil prices stoked investor concern about global growth. Miners led the losses, taking their two-day decline to 9.5 percent, the most since August. BP Plc and Royal Dutch Shell Plc fell more than 2.8 percent as oil spent more of the day down after Iran dismissed a proposal by Saudi Arabia and Russia for producers to freeze output. European automakers and banks, the weakest groups this year, were also among the worst performers on Wednesday. The Stoxx Europe 600 Index dropped 2.3 percent for its biggest two-day decline since Feb. 9. Lenders, the most battered among European industries this year, lost 3 percent. The group slumped to a three-year low this month amid worries over bad loans at Italian firms, the impact of a low-rate environment on profits and Deutsche Bank AG’s creditworthiness. Greek and Italian banks fell the most on Wednesday, and Denmark’s Sydbank A/S tumbled 8.4 percent after reporting profit that missed estimates.
  • What a Saudi Oil-Supply Freeze Would Really Mean for Markets. Saudi Arabia shot down rumors it might cut oil production, but reaffirmed its commitment to an output freeze that could restrict crude flows to market this summer. With the world’s biggest exporter already pumping near-record volumes, that may not matter. 
  • Another Oil Crash Is Coming, and There May Be No Recovery. Superior electric cars are on their way, and they could begin to wreck oil markets within a decade. It’s time for oil investors to start taking electric cars seriously. In the next two years, Tesla and Chevy plan to start selling electric cars with a range of more than 200 miles priced in the $30,000 range. Ford is investing billions, Volkswagen is investing billions, and Nissan and BMW are investing billions. Nearly every major carmaker—as well as Apple and Google—is working on the next generation of plug-in cars. This is a problem for oil markets.  
  • U.S. Crude Supplies Rise to Highest Level in 86 Years. (graph)
  • Wall St.'s Debt Gain Gives Way to Pain. Helping companies sell debt had been one of Wall Street's brightest businesses in recent years, but that's starting to fade. Corporations are borrowing less, in large part because investors aren't as willing to lend. That means fewer fees for the big banks that help them sell the deals.
  • Hedge Fund Cash Flows Back to Bets That VIX at 20 Won't Last. (graph) Hedge funds and investors in exchange-traded notes are plowing money into bets that pay off should last week’s soothing of U.S. stock market turbulence prove temporary. With the Chicago Boards Options Exchange Volatility Index closing below 20 for just the third time this year, a pair of securities that track the gauge have seen combined inflows of $140 million over the last week after losing almost $1 billion to start 2016. Hedge funds hold more long bets on VIX futures that any time since September, data from the U.S. Commodity Futures Trading Commission show. 
  • The Biggest Part of the U.S. Economy Is Showing Signs of Cracking.
  • Climate Activists Armed With Cameras Push Clinton to Commit. (video) Griffin Sinclair-Wingate was pressed against the edge of the stage after a debate in New Hampshire when he got his crack at Hillary Clinton. "Would you ban the extraction of oil, gas and coal on public lands?" the University of New Hampshire junior asked Clinton in a Feb. 4 exchange captured in blurry video shot on the iPhone tucked in his shirt pocket. "Yeah," Clinton shot back. "That’s a done deal." The four-word statement was the furthest Clinton had gone to embrace the growing "keep it in the ground" anti-fossil fuel movement -- a victory for Sinclair-Wingate and other climate activists who have stalked her on the campaign trail. The video was swiftly uploaded to YouTube, highlighted on Twitter and circulated to the news media.
  • Trump or Rubio: Now Place Your Bets. A contrasting view is that Marco Rubio is the candidate who is still set up nicely. He recovered from his disaster in New Hampshire to finish second (albeit a distant second) in South Carolina and Nevada, becoming the obvious challenger to Trump. He has finally won a large number of endorsements, putting him about even with John McCain in 2008 and John Kerry in 2004 as a late-breaking party choice. And, this argument goes, Trump is unlikely to increase his support. If he can't, then outside of his strongest states (and Nevada was one) he is only barely competitive in what will soon be a three-candidate race and not at all competitive in a two-man race.
  • Apple(AAPL) Brand Could Become Casualty of FBI Tussle Over iPhone Hack. (video) Apple Inc. is doubly vulnerable after taking a hard-line public stance on encryption. Not only does the company risk a defeat before judges who will decide whether it can legally oppose FBI demands to help it hack a terrorist’s iPhone, but it’s also susceptible to a setback in the court of public opinion. 
  • GM(GM), Ford(F) Fall as Morgan Stanley Analyst Cites Recession Risk. General Motors Co. and Ford Motor Co. declined the most in six months after Morgan Stanley analyst Adam Jonas said their profits are more at risk in a recession than the automakers have estimated.
  • Wells Fargo's(WFC) Souring Energy Loans Jump 49% as Oil Prices Drop. Wells Fargo & Co. said soured energy loans soared 49 percent in the last three months of 2015, fueled in part by tumbling oil prices. Oil-and-gas nonaccrual loans, which includes those that are delinquent or have been written off, totaled $844 million as of Dec. 31, compared with $566 million at the end of the third quarter, the San Francisco-based bank said Wednesday in its annual regulatory filing. The firm had $76 million of nonaccrual energy loans at the end of 2014.
CNBC:
Zero Hedge:
Business Insider:
@PeterLBrandt:
Telegraph:
Deutsche Presse-Agentur:
  • Schaeuble Sees Debt Threatening Market Confidence. "Ultimately you reach the point where ever more debt triggers a crisis of confidence," German Finance Minister Wolfgang Schaeuble is quoted as saying in an interview. "Easy money is a path to disaster". Fed "isn't providing clarity" as it sends contradictory signals on rates, he said. Says he'll urge central bank chiefs at G-20 talks in Shanghai his week "to create more stability and reliability" in their communication strategy. Sees high level of global uncertainty. European Union "isn't in the best shape".

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