Thursday, March 10, 2016

Today's Headlines

Posted by Gary .....at 3:08 PM
Bloomberg: 
  • Draghi's Stimulus Effect Fizzles as Euro Drop Proves Short-Lived. (video) It took less than 90 minutes for the euro to reverse all of the 1.6 percent decline sparked by the European Central Bank’s package of monetary stimulus. The currency tumbled by the most since November on an intraday basis after the ECB lowered all its main interest rates and expanded its quantitative-easing plan, exceeding economists’ expectations with its package of stimulus measures. That move reversed as President Mario Draghi said he didn’t see any need to reduce rates further, sparking a swing of more than 2.5 percent. “Draghi basically said ‘that’s it,’” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt. “He indicated no further rate cuts. It would have been sensible to keep the expectation that they can do more. On the interest-rate side, he just destroyed this expectation without need.” The 19-nation shared currency climbed 1.6 percent to $1.1173 as of 12:11 p.m. New York time, after weakening as much as 1.6 percent. The declines in the euro were even more short-lived than losses in the yen sparked when Bank of Japan Governor Haruhiko Kuroda surprised investors by adopting negative interest rates on Jan. 29. That move spurred only a brief drop in the yen, which went on to post its best month since 2008.
  • Draghi: ECB Done for Now on Rates. (video) The European Central Bank can cut interest rates further but isn’t likely to, Mario Draghi said after unveiling stimulus on Thursday that brought borrowing costs to record lows, expanded asset purchases and offered a borrowing subsidy to lenders. “It’s a fairly long list of measures, and each one of them is very significant and devised to have the maximum impact in boosting the economy and the return to price stability -- we have shown we are not short of ammunition,” the ECB president told reporters in Frankfurt after a two-day meeting of the Governing Council. “From today’s perspective, we don’t anticipate it will be necessary to reduce rates further.” The steps mark a dramatic expansion of the central bank’s stimulus program after a disappointing remodeling was panned by investors in December. The intensification of the fight to prevent the 19-nation euro area’s lackluster economy from slipping into a deflationary spiral came just days after data showed the inflation rate is once again below zero despite a whole year of quantitative easing. The euro whipsawed as Draghi spoke, falling as he repeated guidance that rates can go lower, and then strengthening as he explained that more cuts might not be needed, given the breadth of the ECB’s measures. That package included a 10 basis-point cut in its deposit rate to minus 0.4 percent, a surprise drop in the benchmark to zero, a pledge to buy corporate debt as part of 80 billion-euros ($88 billion) of monthly QE purchases -- 20 billion euros more than at the moment -- and four more multi-year lending operations.
  • Top-Ranked Researchers Flag China Bond Risks as Inflation Surges. China’s accelerating consumer prices and a slowing economy are raising the chances of stagflation and increasing the risk to bonds, according to the nation’s top-ranked fixed-income analysts. A Haitong Securities Co. research team, graded the best by China’s New Fortune magazine in 2015, issued the warning after data Thursday showed consumer inflation accelerated 2.3 percent in February, the fastest pace in 20 months. The producer-price index extended a record run of declines to 48 months.
  • China is Facing a Ticking Demographic Time Bomb. Getting old isn't easy on an economy.
  • Shanghai Authorities Said to Discuss Ways to Cool Property. Shanghai authorities held a meeting on Tuesday to discuss measures to cool a surge in property prices after recent frenzied residential homebuying, according to people familiar with the matter. The municipal government’s National Development and Reform Commission held discussions with regional authorities from the People’s Bank of China and the China Banking Regulatory Commission, said the people, who asked not to be named because the matter isn’t public. Possible measures weighed include tightening mortgage policies for second-home buyers who plan to purchase larger properties, the people said.
  • Obama Says Libya Is a 'Mess' Due to Europe, Gulf Failure to Help. President Barack Obama said five years after the U.S. intervened in Libya to topple then-dictator Moammar Qaddafi and prevent a bloody civil war that the plan pushed by advisers including Hillary Clinton “didn’t work” and Libya is now “a mess.” Obama, speaking in interviews with The Atlantic magazine published Thursday, blamed lack of support from European and Gulf allies and longstanding tribal divisions within Libya for the failure of the mission intended to stabilize the country and usher in a democratically elected government. “When I go back and I ask myself what went wrong, there’s room for criticism, because I had more faith in the Europeans -- given Libya’s proximity -- being invested in the follow-up,” Obama said.
  • Euro Climbs, Stocks Fall as Stimulus Doubts Persist; Crude Drops. For global financial markets, central-bank stimulus just isn’t what it used to be. Stocks retreated with government bonds, while the euro rallied to the highest level in almost a month as investors looked past an unprecedented boost from European monetary policy to focus on rising anxiety that policymakers have lost the ability to jumpstart global growth and stave off deflation. European shares plunged 4 percent from the highs of the session as President Mario Draghi’s signal that further interest-rate cuts aren’t likely damped enthusiasm after the European Central Bank cut three key interest rates and increased its bond-buying program.
  • How Central Banks Have Made Wealth Inequality Worse. Central banks' attempts to kick-start advanced economies following the financial crisis have made the gap between the rich and poor wider, suggests the Bank for International Settlements. In the BIS' Quarterly Review, Analysts Dietrich Domanski, Michela Scatigna, and Anna Zabai studied the evolution of wealth inequality in France, Germany, Italy, Spain, the U.K. and the U.S. was influenced by monetary policy since the recession.
  • Clinton Misses Chance to Erase Michigan Loss in Immigration-Heavy Debate. (video) Coming off a huge upset in Michigan, Bernie Sanders turned in a strong performance in a debate with the former secretary of state in Miami, Florida. Hillary Clinton had a shot in Wednesday's Democratic debate at retooling her message to white working-class voters a day after they largely rejected her in Michigan, and just in time for a fresh set of primaries March 15. But she found little traction to steer the conversation back to jobs and the economy under aggressive questioning from debate moderators. And in that way, the event was a lost opportunity ahead of contests in states very much like Michigan, including Ohio and Missouri. Clinton spent much of the night on the defensive about her trustworthiness and use of private e-mails while serving as secretary of state. At one point, she was pressed to say whether she would drop out if she was indicted over sending and receiving classified information in some e-mails. Exasperated, she said she wouldn't even answer the question.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
  • Exclusive: China to ease commercial banks' bad debt burden via equity swaps - sources. China's central bank is preparing regulations that would allow commercial lenders to swap non-performing loans of companies for stakes in those firms, two people with direct knowledge of the new policy told Reuters. The new rules would reduce commercial banks' non-performing loan (NPL) ratios, and free up cash for fresh lending for investment in a new wave of infrastructure products and factory upgrades that the government hopes will rejuvenate the world's second-largest economy. NPLs surged to a decade-high last year as China's economy grew at its slowest pace in a quarter of a century. Official data showed banks held more than 4 trillion yuan ($614 billion) in NPLs and "special mention" loans, or debts that could sour, at the year-end. "Such a rule change shows banks' bad loans have risen to such a level that this issue has to be tackled now before it's too late," said Wu Kan, Shanghai-based head of equity trading at investment firm Shanshan Finance. The quality of assets held by banks is worse than it looks, analysts have said. To avoid stumping up capital and to protect their balance sheets, some banks have under-reported bad loans and under-recognized overdue debt. The top banking regulator has warned commercial lenders to pay special attention to risks. Bank shares fell more than 2 percent on Thursday, with Industrial and Commercial Bank of China down 2 percent and Bank of Communications losing 2.7 percent. "This was mainly due to a technical correction, but there's also investor uncertainty over how those non-performing assets would be valued, and disposed of eventually," said Wu at Shanshan Finance.  The sources had no further detail on how banks would value the new equity stakes, which would represent assets on their balance sheets, or what ratio or amount of NPLs they would be able to convert this way. On paper, the move would also represent a way for indebted companies to reduce their leverage, cutting the cost of servicing debt and making them more worthy of fresh credit. "(In China) credit to non-financial corporates has risen in the last five years from 120 percent of GDP to more than 160 percent in May 2015," Jose Vinals, director of monetary and capital markets at the International Monetary Fund, said at an event in Mumbai.
Telegraph:

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