Wednesday, June 22, 2016

Today's Headlines

  • Final Brexit Appeals Made as ‘Leave’ Edges Ahead in Two Polls. (video) Campaigners issued 11th-hour appeals as Britain prepares to vote on its membership of the European Union, with the two latest opinion polls showing a narrow lead for “Leave.” An online survey by TNS on Wednesday put “Leave” two points ahead on 43 percent. It sampled 2,320 adults June 16-22. Luke Taylor of the polling company cautioned that “a late swing to the status quo” was possible. According to the survey, the voting intention figure for those likely to vote based on a turnout model from the last general election is 49 percent for “Leave” and 42 percent for “Remain.” An earlier online poll published by Opinium showed 45 percent of respondents for “Leave” and 44 percent for “Remain,” a lead the company called “a statistical dead heat.” The poll, with a sample of 3,011 people, was conducted June 20-22.
  • Brexit Matters Less Than Yuan Devaluation on VIX Index: Chart. Just before the U.K.’s referendum vote, a one-week measure of the Chicago Board Options Exchange Volatility Index shows it’s barely registering compared with other market shocks including last year’s yuan devaluation, the Russian ruble crisis, the downgrade of U.S. debt and the global financial crisis of 2008. Traders may be tracking odds offered by bookmakers more than what polls indicate, with Ladbrokes’ odds implying a 78% chance the U.K. will remain within the European Union.  
  • Yuan Extends Declines Versus Peers on Economic Outlook Concern. The yuan extended a slide against its trade-weighted peers for a fourth day amid concern the outlook for the world’s second-largest economy will deteriorate. A Bloomberg replica of the CFETS RMB Index dropped 0.1 percent against the basket that includes the yen and euro, taking its four-day loss to 0.7 percent. The Chinese currency has fallen against all but one of 17 major global peers in the past month, including losses of about 6 percent versus the yen and the South African rand. The yuan added 0.1 percent to 6.5808 per dollar at 4:48 p.m. local time.
  • The $83 Billion Danish Fund Preparing for a European Debt Bubble. Denmark’s biggest commercial pension fund says Europe’s debt market is in the grip of a bubble and is avoiding bonds from the region ahead of Britain’s June 23 vote on European Union membership. Instead, PFA has bought U.S. Treasuries and convertible Danish mortgage bonds to prepare for the market shock that might be triggered by this week’s referendum. The fund, which oversees $83 billion in assets, prefers debt from the U.S. because “it’s one of the few countries that’s not in a bubble,” said Anders Damgaard, chief financial officer at Copenhagen-based PFA. “European sovereign debt is in a bubble because of the artificially low interest rates caused by quantitative easing,” he said by phone. “I can’t say how overpriced it is, but for us there’s no doubt that we’re looking at a bubble.”
  • H&M Earnings Decline on Weakest Sales Growth in Three Years. Hennes & Mauritz AB reported earnings that missed analysts’ estimates as the Swedish fashion retailer was hampered by Europe’s unusually wet and wintry spring. Second-quarter pretax profit fell to 7 billion kronor ($846 million), H&M said Wednesday, compared with the 7.23 billion-kronor estimate of analysts polled by Bloomberg. Earnings were also hurt by increased discounting and the strength of the dollar, which H&M said will continue to add to purchasing costs in the third quarter.
  • European Stocks Pare Gains as Poll Damps ‘Remain’ Win Optimism. (video) European stocks pared gains in the final minutes of trading as a fresh poll damped investor optimism that the U.K. will vote to stay in the European Union. RSA Insurance Group Plc rose 2.1 percent, leading a gauge of insurers to the best performance of the 19 industry groups on the Stoxx Europe 600 Index after Barclays Plc said the company is confident of meeting its 2018 targets and well placed in the event of a Brexit. Rio Tinto Group and Glencore Plc paced miners higher as base metals climbed. The Stoxx 600 rose 0.4 percent to 341.32 at the close of trading.
  • IMF Cuts U.S. Growth Forecast, Urges ‘Very Gradual’ Rate Hikes. The International Monetary Fund cut its forecast for U.S. growth this year, urging the Federal Reserve to lean toward modestly overshooting its inflation target in considering whether the economy can handle higher interest rates. The IMF said the U.S. economy will grow 2.2 percent this year, less than its projection of 2.4 percent in April. The fund left unchanged its forecast for a 2.5 percent expansion in 2017.
  • Nearly Half of Sanders Supporters Won't Support Clinton. (video) The Vermont senator says he'll work to defeat Trump, but has yet to endorse the presumptive Democratic presidential nominee.
  • Drug Stocks Surge After U.S. Says Cost Panel Will Wait Until 2017. Drug and biotechnology stocks surged Wednesday after the U.S. government said a cost-cutting mechanism created under Obamacare, known as the Independent Payment Advisory Board, or IPAB, will likely be triggered in 2017, not this year as some investors had feared. The 2017 projection is in line with estimates from last year by Medicare’s Board of Trustees, which on Wednesday released its annual report on the U.S. health-care program’s long-term finances. The trustees also said that Medicare’s hospital insurance trust fund, which finances some care under the program, will be unable to meet all of its obligations in 2028, two years earlier than projected.
  • Musk Fails to Assure Investors Rattled About SolarCity(SCTY) Takeover. (video) Tesla(TSLA) investors haven’t embraced the news. The shares opened on Wednesday down 9.8 percent to $198.13 at 9:31 a.m. New York time after falling as much as 14 percent in extended trading Tuesday. In a sign of skepticism for the deal, SolarCity shares rose 7.5 percent to $22.77 at 9:55 a.m., well below the range of $26.50 to $28.50 Musk said Tesla would likely pay. Analysts raised concerns about management focus, the solar company’s debt and corporate governance issues between the two businesses that share the same chairman and largest shareholder -- Musk, who is also chief executive officer of the electric-car company. Oppenheimer & Co. analysts including Colin Rusch downgraded Tesla to perform from outperform in a research note published late Tuesday, saying they expect “a robust shareholder fight over this acquisition centered on corporate governance.” “We believe investors are likely to view this transaction as a bailout for SCTY and a distraction to Tesla’s own production hurdles,” Rusch said in the note. 
Wall Street Journal:
Fox News:
  • Trump hammers Clinton foreign policy record, foundation donations. (video) Donald Trump delivered a blistering attack Wednesday on Hillary Clinton's record as secretary of state, accusing the presumptive Democratic presidential nominee of milking oppressive regimes of tens of millions of dollars to benefit the Clinton Foundation -- while sleeping through her own "3 a.m. phone call" as terrorists were murdering four Americans in Libya, including Ambassador Chris Stevens. Speaking at his New York City hotel, Trump said Clinton “perfected the politics of personal profit” and “doesn’t have the temperament ... or the judgment to be president.”
  • Chanos: ‘Brazen' SolarCity(SCTY) deal is ‘corporate governance at its worst’. (video) High-profile investment manager Jim Chanos blasted Tesla Motors' proposed acquisition of SolarCity on Wednesday, telling CNBC that the "brazen Tesla bailout of SolarCity" is a "shameful example of corporate governance at its worst." "SolarCity, whose bonds were yielding 20 percent yesterday, is a company headed toward financial distress. It is burning hundreds of millions in cash every quarter, a burden that now Tesla shareholders will have to bear, at a total cost of over $8 billion," said Chanos, who has previously disclosed bets against both firms. "And if you don't want to believe me, consider this: The combined market drop in the value of both companies is more than the equity value of the deal itself — which means that Tesla shareholders think SolarCity shares are essentially worthless," Chanos said. "Finally, it is hard for me to believe that this deal was not being contemplated when Tesla, and Mr. (Elon) Musk himself, sold shares just a few weeks ago." 
  • What are the world's wealthiest worried about? (video)
  • Banks may have a subprime auto loan problem. Negative subprime auto data from CarMax'sKMX) earnings is bad news for regional banks, according to investment firm Piper Jaffray. "CarMax is the largest used car dealer in the country, we believe these developments indicate we will continue to see more pressure on used car prices in the coming months," Piper Jaffray's Kevin Barker wrote in a note to clients Tuesday.
Zero Hedge:
USA Today:
The Telegraph:
  • The risks of Remain are unacceptable to the British psyche. The British electorate collectively, when inspired to vote, has a canny instinct of getting things right. It has a natural instinct to do what is needed for the future and not what is easier to do now. Both Remain or Leave have risks but one has more of a future, by placing the opportunities for success in our own hands and allowing further changes in the way our country is governed. In my opinion, the risks of Remain are incalculable and therefore unacceptable to the British psyche.
  • China Should Phase Out 'Zombie Cos.,' PBOC Adviser Says. To let "zombie cos." go bankruptcy in an orderly way is crucial to China's supply-side reform, PBOC adviser Huang Yiping says in an article published on Caixin's website. Zombie cos. are still using credit resources without generating new economic activities, Huang said. China should strengthen "market disciplines" and ensure fair competition principle to cut overcapacity, Huang said. China should prevent risks and have contingency plan for financial instability.

No comments: