Tuesday, August 02, 2016

Today's Headlines

  • Abenomics Return to Fiscal Lever Shows Failure to Hit High Goals. (video) Prime Minister Shinzo Abe’s return to the fiscal-stimulus lever that he first pulled three years ago showed how far he remains from hitting ambitious targets for reviving Japan’s economy. The cabinet Tuesday approved a spending-and-lending package totaling 28 trillion yen ($275 billion), including 4.6 trillion yen in outlays this year and just under 3 trillion yen further out. The administration completed its plan days after the central bank adopted a modest boost to its own stimulus efforts. Behind the government’s move: public concern that the Abenomics program isn’t working. While voters were happy to give Abe a resounding win in an election for the upper house of parliament last month, polls have shown at least half of respondents say a policy rethink is in order. Consumers, who will get some of the largesse in the fiscal package set to be approved by parliament by October, have yet to recover from the wallop of a sales-tax hike Abe allowed to go through in 2014. That’s contributed to at least three years of growth below 1 percent -- a far cry from Abe’s 2 percent goal.
  • ECB Bond-Buying Pace Slows for Portugal, Spain and Italy: Chart.
  • Commerzbank Scraps Full-Year Target, Sees Decline in Profit. (video) Commerzbank AG dropped the most in more than a month after Germany’s second-largest lender forecast a decline in full-year profit, adding pressure on Chief Executive Officer Martin Zielke to lower costs further. Both operating profit and net income will be lower this year, the Frankfurt-based lender said in a statement on Tuesday. In 2015, Commerzbank posted operating profit of 1.9 billion euros ($2.1 billion) and net income of 1.06 billion euros. In the second quarter, the bank reported a 32 percent drop in net income, in line with a preliminary release on July 26. Record-low interest rates and deposit charges, designed to spur economic growth across the euro area, have eroded bank earnings as the cost of holding cash for their clients rises.
  • Infineon Drops After Earnings Disappoint on Smartphone Miss. Infineon Technologies AG fell as much as 5.6 percent in Frankfurt trading after reporting third-quarter sales and earnings that missed analysts’ estimates because of weakness at its smartphone business. Sales were 1.63 billion euros ($1.82 billion), and the segment result, a measure of profitability, totaled 254 million euros, according to a statement Tuesday. Analysts had forecast sales of 1.65 billion euros and a segment result of 265 million euros. Infineon’s power-management and multimarket business, which includes the major part of the smartphone activities, missed profitability expectations “significantly,” Baader Bank AG analyst Guenther Hollfelder said in an e-mailed note. That was a surprise after stronger results from chip peers and customers Apple Inc. and Samsung Electronics Co. The shares fell 3.8 percent to 14.14 euros at 12:22 p.m. local time.
  • Europe’s Tumbling Lenders Lose Almost Half Their Value in a Year. On Tuesday, the second day of trading since stress tests showed almost all euro-area lenders would have sufficient capital to cope with a crisis, Germany’s Commerzbank AG and Deutsche Bank AG tumbled to fresh record lows, dragging a Stoxx Europe 600 Index gauge of their peers towards its biggest two-day loss in almost four weeks. “I don’t want to say it, but it’s Armageddon for the banks,” if the index drops any further, said Joe Tracy, head of continental European equities at Svenska Handelsbanken AB in Stockholm. Analysts forecast bank earnings will drop 18 percent this year, behind only energy and mining companies as the Stoxx 600’s biggest-contracting industry group.
  • Global Stocks Drop, Yen Strengthens as Growth Worries Resurface. (video) The MSCI All-Country World Index fell 0.8 percent, while the Stoxx Europe 600 Index lost 1.3 percent.
  • Junk Bonds Aren't Ignoring the Fall in Oil Prices. (graph) High-yield debt sold by energy companies is tracking the fall in crude.
  • Trump Says He’ll Spend More Than $500 Billion on Infrastructure. The proposal would amount to a massive new government program. Donald Trump on Tuesday proposed a plan to rebuild U.S. infrastructure that costs “at least double” the amount that Hillary Clinton has floated, in what would amount to a massive new government program.Asked on Fox Business Network how much he'd spend, the Republican presidential nominee said, “Well, I would say at least double her numbers, and you're going to really need more than that. We have bridges that are falling down. I don't know if you've seen the warning charts, but we have many, many bridges that are in danger of falling.” Trump was vague when asked how he'd pay for his much larger plan. “We'll get a fund. We'll make a phenomenal deal with the low interest rates,” he said. Who would provide the money? “People, investors. People would put money into the fund. The citizens would put money into the fund,” he said, adding that he'd use “infrastructure bonds from the country, from the United States.”
  • Trump Urges Exit From Stock Market Boosted by ‘Artificially Low’ Rates. Donald Trump on Tuesday said interest rates set by the Federal Reserve are inflating the stock market and recommended 401(k)-holders to get out of equities, just like he did. “I did invest and I got out, and it was actually very good timing,” the Republican presidential nominee said in a phone interview with Fox Business. “But I’ve never been a big investor in the stock market.” “Interest rates are artificially low,” Trump said. “The only reason the stock market is where it is is because you get free money.”
  • Aetna’s(AET) Obamacare Reversal Is Latest Blow to U.S. Health Law. Aetna Inc., facing more than $300 million in losses from Affordable Care Act health plans this year, may exit Obamacare markets in some states as challenges to the health-care overhaul pile up. While the health insurer has yet to leave any states in which it now sells Obamacare programs, Chief Executive Officer Mark Bertolini said Aetna is evaluating its participation by market and will start making decisions in coming weeks. The company, which covers 838,000 people through Obamacare, is halting a planned expansion of those offerings in new states for next year. “We’ve got to be able to cover the costs associated with providing the care,” Bertolini said in an interview.
  • Macy’s(M), Kohl’s(KSS) Fall on Concern About Slow Department-Store Sales. Shares of Macy’s Inc., Nordstrom Inc. and Kohl’s Corp. fell on Tuesday after reports about weak summer sales reignited fears of a department-store slump. Macy’s, the biggest department-store company, suffered a sales downturn in July, following improving trends in late May and June, Cleveland Research said in a note. The slowdown has forced the retailer to be more aggressive with markdowns, the firm said. Nordstrom, meanwhile, is getting less of a bump from its famous Anniversary sale, according to Detwiler Fenton.
  • U.S. Airlines Tumble After Delta Issues Weak July Revenue Report. U.S. airlines marked the second-sharpest decline on the Standard & Poor’s 500 Index, following a weak revenue report from Delta Air Lines Inc. Passenger revenue for each seat flown a mile fell 7 percent in July from a year earlier, the country’s second-largest carrier by traffic reported Tuesday. The Atlanta-based airline blamed bad bets on currency exchange, excess seat supply on trans-Atlantic flights and reduced prices for tickets booked shortly before travel.
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