Thursday, July 28, 2016

Today's Headlines

  • Erdogan’s Putsch Purge Spreads Into Media, Energy, Finance. (video) Turkey’s post-putsch purge of dissent reached deeper into the economy as authorities shuttered scores of media outlets, detained the head of a major company and banned the chief strategist of a leading brokerage. More than 130 media organizations, including 16 television broadcasters and 45 newspapers, were ordered closed in a decree published late Wednesday. The Cihan news agency, which has more than 500 employees, and the newspapers Taraf, Zaman and its English-language Today’s Zaman were among them. Turkey has suspended or removed at least 60,000 people from jobs in the military, security services, judiciary, Finance Ministry and academia since the failed July 15-16 coup left more than 250 dead. Another 1,600 soldiers, including 149 generals and admirals, were dismissed just hours after President Recep Tayyip Erdogan huddled with the chief of the armed forces. “More than 40 percent of Turkey’s highest ranking officers have been discharged, suggesting that this coup attempt had considerable support, or acceptance, from the highest levels of the armed forces,” said Aaron Stein, resident senior fellow at the Washington-based Atlantic Council. “The implication is that they either were supportive of the coup attempt, or that the top civilian leaders felt that they couldn’t be trusted. Both are bad.”
  • Households on the Hook for Italy’s Next Bailout. Vincenzo Imperatore wants you to know he was just following orders: Selling risky bonds to customers seeking safe retirement nest eggs was only part of the job. When financial markets shut during the financial crisis, depositors were Italian banks’ most reliable source of funding. “I was getting five, six calls a day from my bosses pushing me to sell them,” says Imperatore, who helped sell products to retail customers for six years at UniCredit SpA in the Naples region and has written two tell-all books about his experiences. “I was instructing the local salesmen to do the same.” The households that helped prop up the nation’s banks during the crisis are again on the front line of efforts to bolster Italy’s tottering financial system. The subordinated debt they hold may be first to take losses in a government-orchestrated recapitalization now being negotiated in Rome and Brussels. It’s a popularity-destroying outcome Prime Minister Matteo Renzi is trying to avoid before a referendum later this year to overhaul the political system -- a vote he needs to win to stay in power.
  • Merkel Faces Critics After Attacks Leave Germans Stunned. Chancellor Angela Merkel is breaking off her vacation to defend herself against renewed criticism of her refugee policies following a rash of violent attacks in Germany. Merkel, who had planned to remain out of public view during the summer break, will answer questions on Thursday afternoon for the first time since the four assaults -- a shooting spree, ax attack, suicide bombing and machete assault -- left 13 dead this month. Three of the attacks were committed by asylum seekers. “The chancellor certainly can’t keep her head low after such events,” said Ulrich Sarcinelli, a politics professor at the University of Koblenz-Landau. While Merkel will have to address the terror threat, “she’ll do everything not to escalate the general agitation.”
  • China Bank Regulator Said to Resist Push to Cut Loan Buffers. China’s banking regulator is resisting lobbying by the nation’s biggest lenders to lower a minimum threshold for bad-loan buffers which some of them breached earlier this year, people with knowledge of the matter said. The China Banking Regulatory Commission is instead urging banks whose provisions for covering nonperforming loans are below the 150 percent minimum ratio to take steps to restore their buffers, said the people, who asked not to be named discussing private information. The CBRC’s move is another signal that China’s regulators are toughening their stance on curbing risks in the country’s highly-leveraged financial system. Credit has roughly doubled as a proportion of gross domestic product over the past eight years to stand at 243 percent by the end of 2015, according to Fitch Ratings.
  • China Politburo Flags Caution on Property Stimulus, Goldman Says. China’s top leaders signaled this week that they’re likely to be cautious on further easing measures even if the property market continues to cool. That’s the analysis by Goldman Sachs Group Inc. economists of a statement released this week following a Politburo meeting led by President Xi Jinping. The leaders also pledged to curb asset bubbles, according to a report from official Xinhua News Agency. "The mention of asset bubbles was new for a Politburo statement," Song Yu, the Beijing-based chief China economist at Beijing Gao Hua Securities Co., the mainland joint-venture partner of Goldman Sachs, wrote in a research note Thursday. "The near-term implication of such a view is that the government is likely to be very cautious with property loosening measures in the future even if the property market continues to cool down, and financial regulators might be increasingly hawkish to minimize the risks of asset bubbles."
  • Deutsche Bank: Not Even Fiscal Stimulus Will Save Global Growth. The fiscal policy we need is not the fiscal policy we're likely to get. While monetary policy may be at — or beyond — the limits of its usefulness in stoking global growth, economists at Deutsche Bank AG say fiscal stimulus is unlikely to be much more effective. At least, not the kind that is politically possible.
  • Shell Earnings Tumble to 11-Year Low on Oil, Weaker Refining. Royal Dutch Shell Plc reported the lowest quarterly earnings in 11 years and missed estimates by more than $1 billion as a mix of lower energy prices, weaker refining margins and production halts weighed on Europe’s largest oil company. Profit adjusted for one-time items and inventory changes sank 72 percent from a year earlier to $1.05 billion, The Hague-based Shell said Thursday. Analysts had expected a $2.16 billion result. Chief Executive Officer Ben Van Beurden, who this year completed Shell’s record purchase of BG Group Plc, has vowed to boost savings from the acquisition following a two-year slump in crude. While Brent’s 25 percent rebound last quarter provided some prospect of relief, the rally is now fading while the safety net provided by refining hasgiven way. Production shutdowns in Nigeria, Canada and the Netherlands increased the pain for Shell. “This is a very big surprise from Shell,” said Brendan Warn, a managing director at BMO Capital Markets in London. “Things are not looking up in the third quarter either, with weakness in the industry’s refining environment and Shell’s oil production still under pressure.”
  • Europe Stocks Fall From 1-Month High Amid Lloyds, Shell Earnings. (video) European stocks dropped as investors assessed a slew of earnings reports and lenders fell before Friday’s stress-test results. Lloyds Banking Group Plc and Royal Dutch Shell Plc fell after releasing results, while Rolls-Royce Holdings Plc and Adidas AG rose. On one of the busiest day for earnings updates this season, with more than 70 companies reporting, the Stoxx Europe 600 Index lost 0.9 percent at the close. Banks posted the biggest declines among groups, before regulators publish their latest health check on the industry.
  • Goldman(GS) Sees Oil Hurt by Dollar Gain, Not Gasoline Glut. (video) Ignore the gasoline glut, a stronger U.S. dollar presents the most risk to oil prices in the near term, according to Goldman Sachs Group Inc. Further dollar strength on economic uncertainty outside the U.S., along with a potential interest-rate increase by the Federal Reserve could push oil prices lower, Goldman analysts including Damien Courvalin said in an e-mailed report. The gain in gasoline stockpiles is not a catalyst for further price declines because it is supply and not demand driven.
  • Hidden Message in Fed's Statement: U.S. Is at Full Employment. (video) Shift in language suggests slack in labor market has finally evaporated. 
  • Wall Street Said to Face Renewed Pressure on Risky Lending. Wall Street banks are facing renewed pressure from federal regulators on their lending standards for risky corporate loans just as credit markets roar back, according to people with knowledge of the matter. Bankers who generally retreated from the riskiest corner of the leveraged lending market since new guidelines were issued three years ago are now being queried on their plans for loans that just sneak in as acceptable under the measures, the people said. Regulators are questioning how such loans would perform under adverse conditions, one of the people said, asking not to be identified as the information isn’t public.
  • Ford(F) Profit Miss Imperils 2016 Target as U.S. Demand Stalls. (video) Ford Motor Co.’s second-quarter profit fell short of analysts’ estimates, driving shares down the most in 11 months, after the company warned that a stalling U.S. auto market threatens its full-year earnings target. “We’re committed to meeting our guidance, but it is at risk,” Chief Financial Officer Bob Shanks told reporters Thursday. The company now says it’s unlikely that U.S. vehicle sales will break last year’s record, and Shanks predicted further contraction in 2017. “We don’t see growth, at least in the near term.” Ford fell 9.5 percent to $12.52 at 12:05 p.m. New York time. The stock dropped as much as 10 percent, the most since Aug. 24 of last year. The shares had slipped 1.8 percent this year through yesterday.
Wall Street Journal:
  • Islamic State Threat in Europe Shifts. Some U.S. officials see terror group benefitting from smaller attacks while continuing to plot. The mushrooming of small-scale terror attacks in Europe has allowed Islamic State and its adherents to keep people here on edge without having to train and equip teams to pull off highly sophisticated operations.
Fox News:
  • Despite unity push, Sanders supporters now urge Dem 'exit'. (video) Despite the Democratic Party’s robust efforts this week to put forward a show of unity at their Philadelphia convention – including bringing Hillary Clinton onstage Wednesday night for a handoff hug from President Obama – a rowdy swath of disaffected voters is making clear the theatrics haven’t healed the fractured base. Anti-Clinton and other demonstrators are moving forward Thursday with at least one protest, and holding events encouraging voters to “de-register” from the party. They’re operating in part under the Twitter hashtag #DemExit, one that Green Party candidate Jill Stein has deftly been using as she openly appeals to Sanders supporters to join her team outside the Philly convention arena. “DNC wants your support for lying, undermining, and insulting you. They'll lock you out if you don't comply. #DemExit,” Stein tweeted.
  • DNC Convention: Live Blog
Zero Hedge:
  • China's Economy Faces Severe Challenges Currently. China's economy still faces difficulties and severe challenges currently in key period of restructuring, according to a report on the Sate Council's website. China should focus on structure in economic development, where earlier the focus was on pace, the report said.
  • China's CBRC Says It's Drafting Rules on Wealth Products. China Banking Regulatory Commission says it's drafting rules governing China's market for wealth management products to prevent risks in the sector, citing the commission.

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