Wednesday, March 02, 2016

Today's Headlines

Posted by Gary .....at 2:56 PM
Bloomberg:
  • China's Other Growth Figure Is Flashing a Warning. Obscured by the focus on the accuracy of China’s growth figures is a tumble in estimates for the economy without adjusting for inflation -- a slide that gives a clearer picture of why the country’s slowdown has stoked rising concern about its debt burden. Gross domestic product in dollars, unadjusted for price changes, rose just 4.25 percent in the fourth quarter of 2015 compared with the same period of 2014 -- a gain of $439 billion. Just two years before, China added $1.1 trillion to the global economy, expanding 13 percent from a year earlier. "Looked at in this way, financial markets reaction to deteriorating Chinese data is more understandable," said Arthur Kroeber, the founding partner and managing director at research firm Gavekal Dragonomics in Hong Kong.
  • China's Default Risk Climbs Above Lower-Rated Philippines: Chart. The credit-default swaps market indicates China’s creditworthiness is worse than that of the Philippines, a country rated five grades lower at Moody’s Investors Service. The cost of insuring China’s sovereign bonds has risen by about twice as much over the past three months, having been roughly the same at the start of the period. Moody’s lowered the outlook on its China debt rating to negative from stable on Wednesday, citing concerns about rising public debt and falling foreign-exchange reserves.
  • Coeure Says ECB Watching Impact of Negative Rates on Banks. The European Central Bank is monitoring the risk that negative rates will hurt bank profitability while sticking to its commitment to deliver price stability first, Executive Board Member Benoit Coeure said. “We are well aware of this issue,” Coeure said in a speech in Frankfurt on Wednesday. “We are studying carefully the schemes used in other jurisdictions to mitigate possible adverse consequences for the bank lending channel. But I also think we need to qualify the narrative that banks’ challenges flow largely from our monetary policy.” 
  • Luxottica Falls in Milan After Lowering Earnings Growth Outlook. Luxottica Group SpA fell in Milan after the Ray-Ban maker sunglasses curbed its earnings growth outlook as it invests more than 1.5 billion euros ($1.6 billion) to revitalize and expand its business. Net income will increase at least 1.5 times the pace of sales each year through 2018, Milan-based Luxottica said late Tuesday after European markets closed. The company’s goal for the past six years has been twice as fast. The shares fell as much as 6 percent.
  • Untapped Loans Double Canadian Banks Oil Exposure to $80 Billion. Canadian banks’ exposure to the struggling oil-and-gas industry totals C$107 billion ($80 billion) when including untapped credit lines with outstanding loans, according to a review of company filings. That’s double the C$50 billion in total outstanding loans generally highlighted by Royal Bank of Canada, Toronto-Dominion Bankand the country’s four other large lenders in quarterly earnings calls and presentations. The figure represented 2 percent of total lending as of Jan. 31. That only describes part of the picture. The banks also have exposure in the form of commitments, such as credit lines. They can potentially increase a bank’s risk, because the weakest borrowers often tap their entire credit line when nearing default. The banks’ exposure to oil-and-gas companies from outstanding loans and commitments range from about C$5 billion for National Bank of Canada to C$32 billion for Bank of Nova Scotia.
  • Banks Bloated on Sovereign Debt Weaken Italy in Row With Germany. A drive to tighten rules over how much sovereign debt banks are allowed to own has raised the alarm in the home of the euro region’s largest bond market. Italy’s prime minister, Matteo Renzi, vowed last month to veto any attempt to cap holdings, putting him at odds with Germany. Italian government securities account for 10.4 percent of the country’s bank assets, the most among major European economies and compared with 3.2 percent in Germany, the latest European Central Bank figures show. A limit would mean “altering the balance of the Italian banking system,” said Francesco Boccia, a lawmaker from Renzi’s Democratic Party who heads the budget committee in Italy’s lower house of parliament. “Banks are already struggling to lend money to small- and medium-sized companies,” he said. “This would be the final blow.” In essence, the euro region’s biggest debtor is on a collision course with its biggest paymaster over how to fix the failures of the past.
  • Stoxx Europe 600 Index Adds 0.6 Percent. (video)
  • Even a Modest Oil Recovery Is Doubted by Options Traders: Chart. (video) Oil reached an eight-week high of $37 a barrel in London, analysts predict a recovery to $47 in the fourth quarter and hedge funds are making record bullish bets, but options traders aren’t convinced. They are paying the most since July to protect against lower prices by the end of the year, compared with the cost of hedging the risk of more expensive crude. As U.S. production shows continued resilience to low prices, Iran returns to global markets and Saudi Arabia keeps pumping, options markets show the threat of “lower for longer” prices hasn’t disappeared.
  • Shale Oil Isn't Saudi Arabia's Only Nemesis. Even if Saudi Arabia wins its struggle with U.S. shale producers over market share, it will face a new billion-barrel adversary. It won’t be regional nemesis Iran, a resurgent Iraq or long-standing competitor Russia. The answer will be more prosaic: Even when overproduction ends, a stockpile surplus of more than 1 billion barrels built up since 2014 will remain, weighing on prices. Inventories will keep accumulating until the end of 2017, the International Energy Agency forecasts, and clearing the glut could take years.
  • World's Top Copper Miner Says Rally to Fade as Gluts Persist. Codelco, the world’s biggest copper producer, said that a global surplus will persist through this year and next, and dismissed suggestions that a recent gain in prices was likely to endure. The metal will probably fluctuate at around $2 to $2.10 a pound for a couple of years, with extreme volatility, Chairman Oscar Landerretche said in an interview in Florida. After the gluts this year and in 2017, the market may swing to a deficit of 50,000 to 100,000 metric tons in 2018, with the shortfall expanding to 300,000 to 400,000 tons in 2019, he said.
  • Williams Says Fed Rate Outlook Could Change Slightly After March. Interest-rate forecasts the U.S. Federal Open Market Committee is set to publish after its March meeting could differ “slightly” from those issued at the end of last year, according to Federal Reserve Bank of San Francisco President John Williams. There “could be a tweak here or there” in projections known as the dot plot, Williams told reporters Wednesday in San Ramon, California. He declined to comment on whether he’d support a rate increase at the FOMC’s March 15-16 meeting, and said he won’t “opine” on how often policy makers will tighten borrowing costs this year.
  • Earnings Downgrades Turning Into Deluge as First Quarter Craters. (graph) The pace at which earnings estimates are being cut is getting worse, not better. While bulls cling to predictions that profit growth will resume for Standard & Poor’s 500 Index companies in 2016, analysts just reduced income estimates for the first quarter at a rate that more than doubled the average pace of deterioration in the last five years. Forecasts plunged by 9.6 percentage points in the last three months, with profits now seen dropping the most since the global financial crisis, data compiled by Bloomberg show.
  • Wall Street's No. 1 Technical Analyst Says 'Fade This Breakout'. One of the most widely-followed Wall Street analysts isn’t convinced that the recent rally in U.S. stocks means the worst is over. While the Standard & Poor’s 500 Index’s 2.4 percent surge Tuesday pushed it through its average price over the past 50 days and above the 1,950 level, the three-week rally that’s restored more than $1.5 trillion to U.S. shares hasn’t come with sufficient trading volume or lifted enough individual stocks to signal an end to the recent downturn, said Jeff deGraaf, chairman at New York-based Renaissance Macro Research LLC. “This entire 150-point rally has been one of the weaker rallies in my 25-year career,” deGraaf, the top-ranked technical analyst in Institutional Investor’s annual survey for the last 11 years, wrote in a note Wednesday. The market’s long-term trend has stayed bearish and with more stocks showing signs of rising too far too fast investors should “fade this breakout,” he said. “We appreciate price momentum, but it has to be contextualized.”
  • Monsanto(MON) Cuts Profit Forecast on Herbicide Price Decline. Monsanto Co., the world’s largest seed producer, cut its full-year profit forecast as lower prices for its glyphosate herbicide and a devalued Argentine peso add to the pressures from weaker agricultural markets. The St. Louis-based company now sees profit excluding one-time items of $4.40 to $5.10 a share, it said Wednesday in a statement, compared with a January prediction of $5.10 to $5.60. The shares fell 4.3 percent to $88.48 at 9:31 a.m. in New York.
  • De Blasio Says Clinton Need Not Disclose Her Wall Street Talks. (video) New York Mayor Bill de Blasio said that Democratic presidential candidate Hillary Clinton doesn’t need to release transcripts of speeches she gave to employees of Wall Street firms such as the Goldman Sachs Group Inc., for which she was paid hundreds of thousands of dollars. De Blasio, who endorsed Clinton in October after remaining neutral for several months, said Clinton’s stand on Wall Street regulation was more important than what she may have said privately to groups of executives.
Wall Street Journal:
MarketWatch.com:
CNBC:
  • Why Trump can't be president. (video) We've been telling Trump supporters that he is a racist, a sexist, and a bigot, as reasons for why Trump should not and cannot be the next president of the United States. We have been going about this all wrong. There is really only one reason Trump supporters should not support Trump: He is not qualified. And by that, I mean that he is not qualified to deliver on any of his promises. 
  • Pro Insight: Santelli talks with Peter Boockvar. In a Santelli Exchange interview exclusive to CNBC Pro subscribers, Lindsey Group's Peter Boockvar discusses the impact of Federal Reserve monetary policy. "'Short termism,' that's their entire policy," Boockvar said. "They have no clue whatsoever of when to get out of it (easy monetary policy)."
  • Citron exec: This is Tesla’s biggest problem. (video) Shares of Tesla Motors will have a hard time going higher because of the news surrounding the company, Andrew Left, Citron Research's executive editor, said Wednesday. "What I underestimated [about] Tesla the first time is, when the Model S was introduced, nine of 10 stories were saying how great the car is, and the stock just followed. Right now, there's more balance," he told CNBC's "Fast Money: Halftime Report." "If you look at the Geneva auto show, which happened last week, it's no longer about if someone will have long-range electric vehicles in 2019-20, it will be who doesn't have them."
Zero Hedge:
Business Insider:
Rasmussen Reports:
  • Supreme Court Nominee Looms Large for Voters. A new Rasmussen Reports national telephone survey finds that 81% of Likely U.S. Voters say the selection of a new U.S. Supreme Court justice is important to their vote in November, with 60% who say it’s Very Important. Only 16% say the nomination of the next justice is not very or Not At All Important when it comes to their voting decisions.
Telegraph:
  • Fresh recession will cause eurozone collapse, warns Swiss bank. A recession in Europe could lead to the collapse of the eurozone, as the single currency would buckle under the political turmoil unleashed by a fresh downturn, a leading investment bank has warned. In a research note titled "Close to the edge", economists at Swiss bank Credit Suisse warned the fate of monetary union hangs in the balance if Europe's policymakers are unable to ward off another global slump and quell anti-euro populism. "The viability of the euro is contingent on the current recovery," said Peter Foley at Credit Suisse. "If the euro area were to relapse back into recession, it is not clear it would endure."
  • UK exposed to steel deluge as US clamps down on Chinese imports. The UK’s embattled steel sector faces fresh pressure after the US government stepped in to protect its domestic industry against the growing glut of cheap Chinese supply, industry groups have warned. UK steel producers have been dealt a double blow by the US plans to impose crippling import duties of up to 266pc against Chinese companies, and around 30pc against UK steel makers. This could result in more Chinese exports being diverted to Europe while making it more expensive for UK firms to sell their wares in the US.
The Globe and Mail:
  • Trudeau, Obama set to endorse continental strategy on climate change. Prime Minister Justin Trudeau is poised to sign on to a continental environment and climate-change strategy with outgoing President Barack Obama when the two leaders hold their first formal bilateral meeting in the Oval Office next Thursday. International Trade Minister Chrystia Freeland, who chairs the cabinet committee on Canada-U.S. relations, told The Globe and Mail that the White House talks will also result in improved border-security measures and steps to conclude a new softwood-lumber agreement. Canadian and U.S. officials are now working hard behind the scenes to present an environmental and climate-change package for the leaders to announce, but the exact details of what it entails are being kept closely under wraps. But sources say the agreement is expected to deal with tighter fuel and auto-emission standards and measures to foster innovation such as electric cars, charging stations, self-driving vehicles and ride-sharing apps.

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