Tuesday, May 10, 2016

Today's Headlines

  • Dead-of-Night Reversal Puts Brazil Impeachment Back on Track. (video) The drive to oust President Dilma Rousseff is back on track after the head of the lower house reversed a decision that had earlier threatened to throw the entire impeachment process into chaos. Lawmaker Waldir Maranhao released a statement in the dead of night revoking his own call to annul impeachment sessions in the lower house. That puts the Senate back in the spotlight, with a vote on whether to put the unpopular president on trial still slated for Wednesday. If successful, it would temporarily remove her from office. Rousseff is charged with illegally using state banks to plug a hole in the budget.
  • Germans Fret Draghi Rate Cuts Are Fueling a Housing Price Bubble. Anna Pesch had long assumed she’d be a renter for years to come, but this month she’s buying a three-bedroom house near the German city of Cologne. She’s got Mario Draghi to thank for that. “We didn’t want our money to keep going into rent,” said Pesch, a 32-year-old speech therapist who started looking for a home two years ago, around the time European Central Bank chief Draghi dropped the benchmark deposit rate below zero. “We prefer to invest,” Pesch said, “especially since prices in our area just keep going up.” With record-low costs for mortgages and savings accounts earning almost nothing, Germany is warming to real estate investing. For decades, Germans showed a strong preference for living in rented apartments and stowing cash in the bank, but that tradition is fraying as the ECB keeps interest rates near zero. In the past five years, housing costs in Berlin, Hamburg and Munich have jumped by more than 30 percent, prompting official hand-wringing over rising prices.
  • German, French Industrial Production Disappoints in March. Industrial production in the euro area’s three biggest economies disappointed in March, possibly signaling slackening demand in Europe. German production, adjusted for seasonal swings, fell 1.3 percent, its second consecutive decline and exceeding a 0.2 percent drop predicted by economist in a Bloomberg survey. In France, output unexpectedly fell 0.3 percent, and Italy saw production stagnate in March after a drop in February. Output dropped 2.4 percent in the Netherlands. 
  • Here's More Evidence That Negative Rates Ain't Working: Chart.
  • Europe Stocks Rise for 2nd Day as Credit Suisse Paces Bank Gains. (video) European shares rebounded further as investors speculated a selloff that spurred their worst week since February was overdone, and banks advanced. Credit Suisse Group AG climbed 5 percent after posting a smaller-than-estimated loss. Greek lenders rose on optimism the country will reach an accord on debt relief. Carmakers also climbed, buoyed by an increase in China’s monthly passenger-vehicle sales. Volkswagen AG and PSA Peugeot Citroen gained at least 3.7 percent. The Stoxx Europe 600 Index added 0.9 percent at the close of trading.
  • Saudi Arabia Plans to Expand Oil Business as Global Demand Rises. (video) Saudi Arabian Oil Co., the world’s biggest oil exporter, said it will keep expanding and meet demand from customers as global consumption increases, the head of the state-run producer said. Saudi Arabian Oil Co., also known as Saudi Aramco, will boost capacity at the Shaybah oil field in the Rub Al-Khali desert in southeastern Saudi Arabia by 33 percent to 1 million barrels a day in the next couple of weeks and will double natural gas production over the next decade, Chief Executive Officer Amin Nasser told reporters Tuesday. Aramco is looking for joint ventures in countries from the U.S. to China, he said.
  • Chronicle of a Bust Foretold as Iron Ore Futures Slide Below $50. Iron ore sagged again on Tuesday, fulfilling widespread expectations that a bust would follow a brief boom as a trading frenzy in China unwound and swelling inventories revived concerns about oversupply. The SGX AsiaClear contract for June settlement sank as much as 2.3 percent to $49.85 a metric ton in Singapore, the lowest since March 16, and traded at $51.25 at 3:20 p.m. local time. In Dalian, iron ore futures closed 0.6 percent lower as steel in Shanghai tumbled for the fifth time in six days. In Sydney, BHP Billiton Ltd., Rio Tinto Group and Fortescue Metals Group Ltd. all fell.
  • Bearish Grantham Admits `Major Error' Being Bullish on Metals.
  • Bank of America Strategist Warns of Imminent 'Vortex of Negative Headlines' to Send U.S. Stocks Plummeting. Get ready for an interesting summer. Markets are quiet right now. Too quiet. The Chicago Board Options Exchange's Volatility Index, a measure of implied volatility, is near its lowest levels of the year. It's been over a month since the S&P 500-stock index moved more than 1 percent in either direction. All the worries that people were really anxious about earlier this year—from rising corporate defaults to a Chinese hard landing and central banks running out of ammunition—have mostly been put on the back burner. Yet some strategists say this calm belies a storm.
  • Credit Risk Creeping in Stocks as Low-Quality Rally Reverses. (video) The last time corporate leverage weighed as heavily as it does now on U.S. stock selection, equities were in the grips of a decline that wiped out $1 trillion in market value. The concern is visible in a Goldman Sachs Group Inc. index of American equities backed by the weakest balance sheets, which is down for five straight days, data compiled by Bloomberg show. It’s the longest losing streak since the lead-up to the February low, when investors ditched debt-ridden companies in anticipation of broader declines.
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