Thursday, February 04, 2016

Today's Headlines

  • China's Debt Default Risk Climbs to Highest Since June 2013. The cost of insuring Chinese sovereign debt against default climbed to the highest level since a record cash crunch in June 2013 as a slowing economy erodes confidence in the nation’s assets. Credit-default swaps protecting government bonds against non-payment for five years rose for a fourth day on Wednesday to 140 basis points, according to prices from data provider CMA. The contracts increased 19 basis points in January, the biggest jump in 16 months. Government notes are falling for a third week. The world’s second-largest economy grew 6.9 percent in 2015, the slowest pace in a quarter century, and expansion will ease to 6.5 percent this year, according to a Bloomberg survey of economists. In a sign of worsening outflows, the People’s Bank of China sold a record amount of foreign currency in December, more than twice as much as in any previous month. It also gave guidance to some Chinese lenders in Hong Kong to suspend offshore yuan lending to curb short selling. “The increase in the CDS is an expression of the sovereign risk outlook,” said Ben Sy, head of fixed income, currencies and commodities at the private banking arm of JPMorgan Chase & Co. in Hong Kong. “China’s slowdown has a lot of impact on global markets, so even global funds need to hedge a hard-landing case in China, and if you want to express a macro view, CDS is still one of the cheapest ways to hedge it.”
  • Daimler Strikes More Cautious Tone as Only `Slight' Growth Seen. Daimler AG is paring back expectations after a record year, highlighting the challenge of sustaining growth as Chinese consumers cut spending and heavy-truck demand slows in the Americas. The world’s second-biggest luxury-car maker said Thursday it only sees gains of less than 5 percent in revenue and earnings this year, with the rate of increase in unit sales “rather lower” than in 2015. Daimler fell as much as 5.5 percent in Frankfurt, the most in two weeks.
  • Another Wave of Refugees Looms as Assad Advances on Aleppo. In what could unleash a new wave of refugees into Europe, Turkey said on Thursday that hundreds of thousands of Syrians are ready to flee the country in the face of a northern offensive by government forces. Turkish Prime Minister Ahmet Davutoglu, speaking at a Syria aid conference in London, said as many as 70,000 Syrians were already on their way to Turkey from northern Aleppo, and warned that a humanitarian disaster would doom the peace talks in Geneva. The U.K.-based Syrian Observatory for Human Rights said about 40,000 people have fled the region in the past few days. The offensive by Syrian government troops, supported by Russian firepower and Iran-backed Hezbollah militants, led to the suspension of the United Nations peace talks until Feb. 25, just days after they officially began.
  • Credit Suisse Drags European Stocks Down Even as Miners Surge. (video) Losses in Credit Suisse Group AG and Daimler AG after earnings announcements dragged European stocks lower, even as commodity producers rallied the most since 2011. After a day of jumps and slumps, the Stoxx Europe 600 Index closed down 0.2 percent, dropping for a fourth straight session. Credit Suisse slumped to its lowest price since 1992 after posting its biggest quarterly loss in seven years. Daimler AG fell 3.2 percent after saying growth will slow down. That contrasted with energy and commodity producers, which remained up all day. Even Royal Dutch Shell Plc, which reported a slump in profit, added 4.7 percent. Fluctuations in the Stoxx 600 mirrored moved in oil. The gauge climbed as much as 1.1 percent and dropped 1.5 percent.
  • Aramco Cuts Oil Pricing to Asia With Iran Set to Boost Exports. Saudi Arabia lowered March pricing for Asian oil customers as the world’s largest crude exporter shows no signs of letting up on its campaign to keep market share, especially with Iran set to boost sales. State-owned Saudi Arabian Oil Co. lowered its official selling price for Arab Light crude to Asia by 20 cents a barrel to $1 a barrel less than the regional benchmark, the company said in an e-mailed statement Thursday. Saudi Aramco was expected to widen the discount by 40 cents a barrel, according to the median estimate in a Bloomberg survey of seven refiners and traders in that region.
  • Oil Seen `Lower for Longer' by Morgan Stanley(MS) as Forecasts Cut. (video) Low oil prices will persist for longer than previously expected, according to Morgan Stanley, which reduced its quarterly crude forecasts for this year by as much as 51 percent. Morgan Stanley now sees oil mostly falling through 2016, compared with a previous outlook for prices to rise each quarter, analysts including Adam Longson said in a report Thursday. Brent crude is expected to average $29 a barrel in the three months to December, compared with an estimate for $59 in a Jan. 18 note. “Weaker-than-expected demand, higher-than-expected supply, rising inventories and increased hedging incentives all work to delay rebalancing, and slow the rise in prices immediately thereafter,” Longson wrote in the Feb. 4 report. 
  • Tycoon Pickens Cashes Out on Oil, Awaits Time to Get Back In. (video) Oil tycoon T. Boone Pickens, who made and lost fortunes targeting some of the largest U.S. explorers over the past 40 years, has cashed out as the worst crude market downturn in decades drags on. Pickens has sold all his oil holdings and is waiting for the best moment to get back in, he said Thursday in an interview on “Bloomberg Go.” With prices low, mid-size U.S. oil companies such as Pioneer Natural Resources Co., Anadarko Petroleum Corp. and Apache Corp. are acquisition targets for larger firms like Exxon Mobil Corp., he said.
  • Recession Fears Stoked as Higher U.S. Labor Costs Crimp Profits. The biggest rise in U.S. labor costs in eight years is squeezing company profits and heightening fears of a recession. Expenses per worker -- so called unit labor costs -- increased 2.4 percent last year, the most since 2007, after a 2 percent gain in 2014, according to data released Thursday by the Labor Department. The rising wage bill is taking a bite out of companies’ bottom lines and prompting concern among some economists that firms will slash spending and hiring in response. "The outlook for profits is challenging," said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. "Hiring was strong but the pace of business activity was weak. It means hiring will decelerate."
  • Apparel Shares Slammed as Ralph Lauren(RL), Kohl's(KSS) Signal Weakness. Apparel investors are losing their shirts. The Standard & Poor’s Supercomposite Apparel & Accessories Index fell as much as 3.9 percent today, its biggest decline since Nov. 13, following a bearish forecast from Ralph Lauren Corp. and weakening sales growth from Kohl’s Corp., a Midwestern department-store chain. Ralph Lauren led the drop, declining as much as 19 percent, pulling down shares of peers such as VF Corp., PVH Corp. and G-III Apparel Group Ltd
  • Sports Authority to Take Steps Toward a Bankruptcy Filing. Sports Authority Inc. is preparing to file for bankruptcy as it faces a debt payment due in 10 days, according to people with knowledge of the matter. The retailer, once the biggest sporting-goods chain in the U.S., is in talks with lenders including TPG Capital Management LP on a deal to reorganize in Chapter 11 bankruptcy proceedings, said the people, who asked not to be named because the negotiations are private. It’s also mapping out a plan to close as many as 200 of its more than 450 stores under the bankruptcy plan, the people said.
  • Rubio Goes After Cruz Voters in Hopes of Stopping Trump. Armed with data showing Rubio was the second choice of 31 percent of Iowa Republicans who backed Cruz, the Florida senator’s campaign is making a pitch that he can get elected and the more outspoken Cruz simply cannot. Take enough Cruz voters, and Rubio could emerge closer to making the presidential contest after New Hampshire a two-person race -- the front-runner Trump versus the anti-Trump in Rubio. "We share a lot of supporters with Ted Cruz, more so than with (Jeb) Bush, (Chris) Christie and (Rand) Paul," Rubio campaign manager Terry Sullivan said in an interview. "I see voters rallying around Marco’s message and his inspirational story more than anyone else." "We have to grow the party," Rubio said. Rubio and his supporters said the results validated his argument that he’s the most electable candidate in a general election, since Cruz’s support was concentrated among self-described evangelical voters and Trump’s proved far less reliable. “If a voter is drawn to one, it might easily be stripped and brought to the other,” Levesque said. One such voter is Michelle Visser, 46, a homeschooling mother who lives in Gilmanton Ironworks, New Hampshire, who brought her daughter to a Rubio town hall in nearby Laconia. Visser said she was torn between Cruz and Rubio, finding both senators articulate avatars of the conservative philosophy. "Now that I see what happened in Iowa, I came off the fence," Visser said in an interview. "I hope the Trump supporters are going to wisen up and realize that he can’t even begin to be elected, and they’ll go to Rubio, too."
Zero Hedge:
  • Martin Shkreli, the hedge fund manager and Turing Pharmaceuticals owner who claimed that raising the price of Daraprim, a medication used to treat toxoplasmosis, a medical condition that can be fatal for people with AIDS, from $13.50/pill to a whopping $750/pill would be a "great thing for society", donated $33,400 to the Democratic Senatorial Campaign Committee (DSCC).
Rasmussen Reports:
  • Voters Say No to Obama on Supreme Court. Hillary Clinton seemed receptive the other day to naming President Obama to the U.S. Supreme Court if she is elected to succeed him this fall. Most voters, however, don’t approve of putting Obama on the high court and still aren’t interested in him running for a third term as president either. Even among his fellow Democrats, just 40% think an Obama nomination to the Supreme Court is a good idea. Eighty-two percent (82%) of Republicans and 65% of voters not affiliated with either major party are opposed.
  • Jimmy Carter endorses Donald Trump — over Ted Cruz. If he had to choose between Cruz and Trump for the Republican nomination, Carter chuckled, “I think I would choose Trump, which may surprise some of you.” (It did, judging by the loud laughter from the audience.) “The reason is, Trump has proven already he’s completely malleable,” Carter explained. “I don’t think he has any fixed (positions) he’d go the White House and fight for. On the other hand, Ted Cruz is not malleable. He has far right wing policies he’d pursue if he became president.”
  • Conoco(COP) cuts dividend for first time in 25 years on crude crash. ConocoPhillips slashed its quarterly dividend for the first time in at least 25 years and further lowered its capital budget for 2016 as a relentless fall in crude oil prices took its toll on the largest U.S. independent oil company. Shares of ConocoPhillips, which reported a bigger-than-expected quarterly loss, fell 4 percent to $37.08.
La Stampa:
  • EU 2016 Forecasts Will Revise Down Italy GDP, Up Deficit. The European Commission will cut on Thursday Italy's gdp estimate for this year to 1.4% from previous +1.5%. EU to revise up 2016 deficit forecast to 2.5% from previous 2.3%.
  • The government won't allow its pension fund to directly buy or sell stocks, citing people close to the matter. Welfare ministry had considered ending ban on Government Pension Investment Fund as part of reform bill. Decision based on concern of possible govt oversight of private cos. as expressed by business, labor groups.

No comments: