Wednesday, June 29, 2016

Today's Headlines

  • Hollande Takes Aim at City of London in Euro Clearing Threat. (video) The City of London is facing the first direct threat to its role as Europe’s dominant financial center as French President Francois Hollande takes aim at a key pillar of the U.K. industry. European Union member states should prepare to take over euro-denominated clearing that will no longer be possible in the U.K., Hollande said. “The City, which could handle clearing operations in euros thanks to the U.K.’s presence in the EU, won’t be able to do them any more,” the French head of state said after the first day of an EU summit in Brussels. Hollande is the second French leader to target London’s leading role in clearing euro-denominated transactions since Britons decided last week to leave the EU. Francois Villeroy de Galhau, governor of the Bank of France and a member of the ECB’s Governing Council, said on Saturday that clearing cannot be located in London without following EU rules. Hollande wanted to illustrate the consequences of last week’s Brexit decision, and he will make clearing a key point in exit talks with the U.K., according to French officials who asked not to be identified. The EU will seek concessions from Britain in return for continued access to the single market, the officials said. EU officials have said repeatedly that freedom of movement for workers and adhering to market regulations are conditions for access to the single market. The negotiations may determine where clearing will fit in the U.K.’s future financial relationship with the EU, one of the officials said.
  • EU Calls for ‘Orderly’ Brexit at Historic Meeting Minus U.K. (video) European Union leaders called for an orderly British withdrawal from the bloc to minimize instability as they pledged to learn lessons from the U.K.’s political earthquake and do better at serving their citizens. As EU government chiefs took the historic step of meeting without one of the bloc’s members for the first time, they lamented the British decision to part ways then began to lay plans for a new union minus its second-largest economy. That included setting the parameters of Britain’s future relationship with the EU, and insisting that negotiations to finalize secession won’t be started until the U.K. gives official notification of departure.
  • Brexit Vote Stokes Euro Breakup Concern Among Investors: Chart.
  • Pound Extends Rally From 1985 Low as Post-Brexit Markets Calm. (video) The pound extended its advance from a three-decade low as traders took advantage of the global market rout to go on a buying spree. Stocks, oil and higher-yielding euro-zone bonds all recovered some of the losses seen in the wake of Britain’s vote to leave the European Union. Sterling is still down 8 percent since the nation went to the polls June 23, though the U.K.’s FTSE 100 stocks index wiped out its post-Brexit slide.
  • Bitter Scotland Weighs Its Own Divorce. (video) Despite voting to stay in the European Union in last week’s Brexit referendum, Scots now face being forced to leave after being outvoted by a predominantly English majority. That realization has brutally exposed the lopsided nature of the U.K., a union of four nations in which there are almost 10 English voters for every Scottish one. 
  • Italian Bank-Rescue Push Falters as Merkel Sticks to the Rules. Prime Minister Matteo Renzi’s efforts to shore up Italy’s struggling banks ran into a roadblock, as German Chancellor Angela Merkel insisted on sticking to the rules put in place since the financial crisis to prevent taxpayer bailouts. “We can’t do everything all over again every other year,” Merkel told reporters after a European Union summit in Brussels on Wednesday. The bloc’s laws on the resolution and recapitalization of banks “offer enough leeway for the specific conditions in individual member states.”
  • Nomura Joins Yen Capitulators, Raises Forecast 17% on Brexit. Long-time yen bear Nomura Holdings Inc. has finally bowed to the market forces that drove the currency to 99 per dollar for the first time since 2011. It’s far from alone. HSBC Holdings Plc, Citigroup Inc., and Mizuho Financial Group Inc. join Japan’s biggest brokerage in raising year-end yen forecasts by as much as 20 percent after the U.K.’s decision to leave the European Union spurred a rush for the currency as a haven. The median of  estimates compiled by Bloomberg has shifted 3.6 percent stronger this month, the most for year-end forecasts within any year since 2011, when the yen was on its way to a record high following the devastating earthquake and tsunami in March.
  • India Central Bank Sees Sharp Rise in Bank Risk on Bad Loans. (video) Risks to India’s banking industry have “sharply increased” since September as surging bad loans drag lenders’ profitability to the lowest since at least 1999, according to the Reserve Bank of India. Banks’ return on assets fell to 0.4 percent at the end of March from 0.8 percent a year earlier, according to the central bank’s Financial Stability Report released Tuesday. The industry’s gross bad-loan ratio jumped to a 13-year high of 7.6 percent, following a six-month RBI audit of banks’ bad-debt disclosures. Under a “baseline stress scenario,” that ratio may rise to 8.5 percent by next March, the deadline set by RBI Governor Raghuram Rajan for banks to clean up soured credit, the report showed.
  • Rosenberg: Vancouver Housing Market in ’Outright Bubble’. (video)
  • Europe Stocks Recoup More Brexit Losses as Commodity Shares Rise. (video) European equities rose for a second day, recovering more of the declines triggered in the immediate aftermath of the U.K.’s decision to leave the European Union. The Stoxx Europe 600 Index climbed 3.1 percent at the close of trading, with miners and energy producers as the best performers.
  • San Francisco Landlords Gird for Slowdown as Startup Frenzy Ebbs. Office landlords are bracing for a cooling of San Francisco’s red-hot market as weaker startup valuations and lower venture-capital funding temper years of runaway growth in the technology-industry hub. The city’s office-vacancy rate jumped in the second quarter by the most since the last recession, while the amount of space available for sublease almost doubled, according to a report to be released this week by brokerage Cushman & Wakefield Inc. New lease deals have tumbled so far this year. With demand seen cooling further, office owners who benefited from years of heated leasing by the likes of Uber Technologies Inc., Airbnb Inc. and Twitter Inc. are now rushing to seal deals and capture rents near record highs. They’re seeking to sign longer leases with creditworthy companies before prices slide, renewing agreements well ahead of their expiration and offering concessions, including free rent and cash for space improvements, according to J.D. Lumpkin, a managing director at Cushman & Wakefield in San Francisco. “We may not be in a free fall, but it’s a sign of things to come,” Lumpkin said. “Those who are smart know it’s time to get aggressive and lock in credit tenants that you want for the next five, seven, 10 years in new leases and do whatever it takes.”
  • Millennials Are Pretty Cocky About Their Investing Skills.
  • Apple(AAPL) to Face More Scrutiny as China Cracks Down on Apps. More than half a billion Chinese smartphone users face increased monitoring of their mobile app usage thanks to new laws targeting operators including Apple Inc. App stores and providers must establish the identity of users, while monitoring and reporting postings that contain banned content. The legitimacy of developers who post apps for download must also be verified, according to new rules posted on the Cyberspace Administration of China’s website. All app stores and providers are now required to keep a record of users’ activity for 60 days. And in an effort to boost privacy protection, they must now seek a user’s consent before collecting personal information, location data and contacts lists.
Wall Street Journal: 
  • Death Toll From Istanbul Airport Attack Rises. Islamic State implicated in early investigation, Turkey’s prime minister says. The death toll from the brutal attack on this city’s main airport rose to 41, including 13 foreign citizens, and dozens more are injured, officials said Wednesday, as condolences and condemnation poured in from the country’s allies.
  • Climate Denial Finally Pays Off. A series of Journal editorial page-bashing ads shows the climate cause in mid-crackup.
  • Clinton’s Benghazi Cover Story. She wonders why she’s so distrusted. Here’s the reason.
Fox News:
  • Wall Street charting legend Yamada sees dying bull. Similar to previous market tops in 2007 and during the dot-com bubble in 2000, a sideways trading market paired with fading momentum does not bode well for stocks, the founder of Louise Yamada Technical Research Advisors explains in an exclusive video for CNBC PRO. She started the independent research company in October 2005 after a 25-year career as the top chart analyst at Citigroup.
Zero Hedge:
  • ECB happy to stay put after Brexit vote as markets regain pose-sources. The European Central Bank is in no rush to ease its monetary policy in response Britain's vote to leave the European Union, taking comfort in a calmer-than-feared market reaction, several sources have told Reuters. The Brexit vote has hit the shares of euro zone banks and is likely to act as a drag on the euro zone economy, as ECB President Mario Draghi told EU leaders on Tuesday. It is also raising fundamental questions about the future of the EU. But conversations with around a dozen officials familiar with the ECB's thinking showed that the bank found some reassurance in the market rebound this week and was happy to take a wait-and-see stance, given the lack of hard evidence about the actual impact of Brexit.
  • Lou Says China Struggling to Meet Annual Fiscal Target. Outlook for achieving China's annual target for national fiscal revenue is not optimistic, citing China's Finance Minister Lou Jiwei delivering the state council report to National People's Congress Standing Committee. The Chinese economy is generally running steady in reasonable range this year, while facing great downward pressure, he said. Lou said China will set limits to control debt scale at local govt level.

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