Tuesday, June 14, 2016

Today's Headlines

  • Brexit Camp Is Ahead in Fifth U.K. Opinion Poll in 24 Hours. (video) The campaign for Britain to leave the European Union led in a fifth opinion poll published over the past 24 hours, showing Prime Minister David Cameron is foundering in his efforts to persuade voters to reject a so-called Brexit. The pound fell to a two-month low. The online survey of 2,497 adults carried out by TNS June 7-13 found 47 percent backing “Leave” and 40 percent for “Remain.” It comes after four phone and online surveys released Monday by ICM, YouGov Plc and ORB showed leads of between 1 point and 7 points.
  • China Near-Term Outlook Buoyed as Medium-Term Risks Rise: IMF. (video) China’s near-term economic outlook is being buoyed by policy support even as its medium-term prospects become more uncertain because of rapidly rising credit, excess industrial capacity and financial sector risks, the International Monetary Fund said. Overall reforms have advanced impressively in areas from shifting to services as a greater driver of growth to liberalization of financial markets, the IMF Deputy Managing Director David Lipton said in a press statement at the conclusion of its annual Article IV review of China’s economy in Beijing. Because of a lack of progress reining in credit growth and hardening budget constraints on state enterprises, vulnerabilities are still rising even as the buffers to deal with shocks are eroding, he said.
  • Yuan Approaches Five-Year Low Amid Concern Over Economy, Brexit. The yuan drew closer to a five-year low as concern over China’s economic slowdown and Britain’s vote on European Union membership spurred selling in riskier assets. The Chinese currency traded within 0.1 percent of its low set in January after slumping the most in a month on Monday. The exchange rate fell 0.11 percent to 6.5917 a dollar as of 4:53 p.m., and dropped to its lowest level since 2014 versus trading peers including the yen and the euro. Volatility in China’s financial markets is growing amid speculation authorities won’t add to stimulus even as the economic outlook deteriorates. The Shanghai Composite Index tumbled the most in three months on Monday before MSCI Inc.’s decision Wednesday on whether to add yuan-denominated shares in its global indexes. 
  • Sub-Zero Bond Yields Strike the German 10-Year. (video)
  • Bond Risk Rises in Europe With Brexit Concerns as Issuance Slows. Corporate bond risk surged in Europe and issuance slowed as concern grew that the U.K. will vote to leave the European Union. The Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies rose for a fourth day, climbing to a three-month high of 87 basis points, according to data compiled by Bloomberg. Non-financial companies sold about 14 billion euros of bonds this month, compared with about 30 billion euros in the same period in May, according to data compiled by Bloomberg. “There’s massive insecurity in the market,” said Anthony Peters, a strategist at Sol Capital Markets. “Who’s going to commit their customers’ money if they don’t know what happens next?”
  • Brazil Stocks, Real Decline Amid Brexit Concern as Vale Retreats. The Ibovespa led losses among major equity benchmarks in the world and the real retreated amid increased angst over the possibility of the U.K. leaving the European Union and as commodities slumped. Vale SA, the world’s largest iron-ore producer, and state-controlled oil producer Petroleo Brasileiro SA were among the index’s biggest losers on Tuesday. Raw-material companies, which account for 21 percent of the Ibovespa’s weighting, have been hit as the prices of their products fall on the uncertainties regarding global growth. The real dropped 0.3 percent to 3.4945 per dollar. The Ibovespa dropped 2.4 percent to 48,460.65 at 3:17 p.m. in Sao Paulo as all but one of its 59 stocks fell. Vale and Petrobras dropped at least 2.3 percent, while the Bloomberg Commodity Index slumped.
  • European Stocks Slide for Fifth Day as Brexit, Fed Decision Loom. (video) Stocks in Europe fell to an almost four-month low as speculation intensified that Britain will vote to leave the European Union and traders awaited central-bank meetings. The Stoxx Europe 600 Index dropped 1.9 percent at the close of trading. The benchmark capped its worst five-day plunge since February as Britain’s largest-selling newspaper backed a so-called Brexit and five polls put the U.K.’s “Leave” campaign ahead of “Remain,” before the June 23 referendum. The pound fell, and Germany’s 10-year bund yield dropped below zero for the first time ever. A measure of euro-area stock volatility jumped 12 percent, taking its five-day gain to 64 percent, as investorsalso prepared for policy reviews by the Federal Reserve and the Bank of Japan tomorrow. All 19 groups on the Stoxx 600 fell, with miners and energy shares sliding the most.
  • Oil Drops as Dollar Strength Curbs Investors’ Commodity Appetite. Oil fell to the lowest level in more than a week as risk aversion among investors sent equities lower and bolstered the U.S. dollar, reducing the appetite for commodities. Futures lost as much as 1.8 percent in New York after falling 4.6 percent the previous three sessions.
  • U.S. Recession Odds Climb to 55% as Yield Curve Flattens: Chart.
  • Credit-Card Issuers Fall as Synchrony Sees Higher Write-Offs. Credit-card issuers were the worst performers among financial stocks Tuesday after Synchrony Financial said it expects higher write-offs within the next year as consumers struggle to repay loans. Synchrony tumbled as much as 15 percent, the biggest drop since its 2014 initial public offering, and American Express Co. fell 3.9 percent, the most in the Dow Jones Industrial Average. Capital One Financial Corp. and Discover Financial Services also slid.

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