Monday, July 18, 2016

Today's Headlines

  • The Coup Failed, But Erdogan’s Wrath Keeps Investors on Edge. Fresh from an election victory that secured his party’s rule for four years, Prime Minister Ahmet Davutoglu in January assured investors in London that Turkey was a safe place for their cash. Four months later he was forced to resign and two months on from that, F-16 fighter jets bombed parliament in a coup attempt. Already embroiled in Syria’s war, a conflict with the Kurds and beset by a string of terrorist attacks, Friday’s failed plot to topple President Recep Tayyip Erdogan risks shattering what’s left of Turkey’s image as a stable country that can attract enough investment to finance one of the highest current-account deficits among G-20 economies.
  • Gloomy Post-Brexit Outlook in Larger Euro-Area Economies: Chart.
  • China Curbs Leverage of Asset Management Plans Investing in Debt. China is tightening the leverage of structured asset management plans that invest in bonds, highlighting the authorities’ concern about financial risks as the number of corporate defaults surge. The China Securities Regulatory Commission said the size of the senior tranche of fixed-income products should not be more than three times that of the junior tranche, according to the statement, which didn’t specify the previous figure. Senior portions of such products are usually bought by banks’ wealth management products, which help brokerages and asset management firm subsidiaries to boost their buying in the bond market. The cap before was 10 times, according to Industrial Securities Co. “The regulators have realized the possible risks the leverage can bring,” said Fan Lei, an economist at Mizuho Securities Asia Ltd. “The new rules would help lower financial risks.”
  • Yuan Weakens Past 6.7 Versus Dollar for First Time in Five Years. China’s yuan fell beyond 6.7 per dollar for the first time in more than five years, fueling depreciation concerns amid cooling property prices and a rebound in the dollar. There’s room for further declines because the greenback is set to strengthen further, although the People’s Bank of China may provide some verbal support, according to HF Financial Group Ltd. in Hong Kong. Official data released Monday showed new home prices rose in fewer cities in June compared with a month earlier, blunting optimism prompted by last week’s figures showing forecast-beating economic growth.
  • SoftBank to Buy Britain’s ARM for $32 Billion in Record Deal. (video) SoftBank Group Corp. agreed to buy ARM Holdings Plc for 24.3 billion pounds ($32 billion), securing a slice of virtually every mobile computing gadget on the planet and future connected devices in the home. The Japanese company is offering 1,700 pence in cash per share or a 43 percent premium to Friday’s close, according to a statement Monday.
  • European Stocks Advance as ARM Holdings Leads Chipmakers Higher. A surge in ARM Holdings Plc after a deal announcement pushed chipmakers higher, boosting European equities at the close of a volatile session. ARM jumped 41 percent to a record after SoftBank Group Corp. agreed to buy the chip designer for 24.3 billion pounds ($32 billion). Peers Dialog Semiconductor Plc and Ams AG advanced more than 4.7 percent, pushing a gauge tracking the region’s technology shares to their biggest surge since last August. Miners erased earlier declines, while energy companies in the Stoxx Europe 600 Index fell as oil slipped. The market showed resilience after a failed coup in Turkey, with the benchmark gauge for Europe’s stocks adding 0.2 percent at the close of trading in London. Speculation that central banks will limit the fallout of Britain’s vote to leave the European Union has helped the Stoxx 600 rise in two of the past three weeks. It closed 2.2 percent away from its level on the day of the referendum.
  • Swelling Pile of Iron Ore Casts ‘Dark Cloud’ Over Prices: Chart. Iron ore holdings at China’s ports just posted the longest run of gains this year, expanding for five straight weeks to 105.4 million metric tons, according to Shanghai Steelhome Information Technology Co.
  • Copper Drops on Outlook for Credit Tightening in Top User China. Copper fell with most industrial metals amid speculation that credit conditions in China, the biggest user, will curb demand in the second half of the year. Nickel held last week’s advance as the Philippines shuttered more mines as part of as environmental crackdown. While new lending figures released last week topped estimates, the stimulative effects of the easing of credit conditions in real estate look to be moderating, Barclays Plc said. Copper also retreated after data on Monday showed China’s home-price gains taperedoff last month, as second-tier cities joined some of the nation’s largest hubs in imposing housing curbs to cool surging prices.
  • Traders Reviving Fed Rate-Rise Bets Put a Floor Under the Dollar. Traders boosted bets of an increase in U.S. borrowing costs this year, helping a gauge of the dollar hold its advance after climbing to a one-week high on Friday. The U.S. currency has strengthened against all its Group of 10 peers since July 14 after data the following day showed retail sales and factory output beat estimates. Futures contracts show the probability of a rate increase by the Federal Reserve by December has climbed to 44 percent from 9 percent at the end of last month, when global markets convulsed following the U.K.’s vote to leave the European Union. 
Wall Street Journal:
Fox News:
  • Another billionaire questions whether US stocks should be at new highs. (video) The U.S. stock market, making a string of recent record highs, "doesn't make much sense," distressed debt specialist Marc Lasry told CNBC Monday, sharing the view of fellow billionaire investment titan Larry Fink.
  • A Goldman metric shows stocks extremelyovervalued. Extreme valuations in stocks should cause investors to think twice before chasing the rally at these levels, Goldman Sachs cautions. "S&P 500 stands at an all-time high and the median stock's P/E is at the 99th percentile relative to the past 40 years," Goldman's market strategist David Kostin wrote in a note to clients Friday.
Zero Hedge:
  • AP Exclusive: Secret document lifts Iran nuke constraints. A document obtained by The Associated Press shows that key restrictions on Iran's nuclear program will ease in slightly more than a decade, halving the time Tehran would need to build a bomb. The document is the only secret text linked to last year's agreement between Iran and six foreign powers. It says that after a period between 11 to 13 years, Iran can replace its 5,060 inefficient centrifuges with up to 3,500 advanced machines. Since those are five times as efficient, the time Iran would need to make a weapon would drop from a year to six months. Iran says its enrichment is peaceful, but the program could be used for nuclear warheads. Two diplomats providing the information Monday demanded anonymity because they weren't authorized to do so.
El Pais:
  • Spain Rejects EU Demand for More Spending Cuts. Spanish govt won't comply with EU demands to make EU 10b of structural spending adjustments by 2017.

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