Thursday, October 20, 2016

Today's Headlines

Posted by Gary .....at 3:03 PM
Bloomberg:
  • ECB Leaves Stimulus Unchanged as Decision Deadline for QE Looms. (video) The European Central Bank kept its quantitative-easing program and interest rates unchanged as suspense builds up over a possible extension of bond-buying later this year. The Governing Council left the main refinancing rate at zero, the deposit rate at minus 0.4 percent and asset purchases at 80 billion euros ($88 billion) a month, as predicted by all economists in a Bloomberg survey. The future path of asset purchases, which are currently scheduled to end in March, will loom large when President Mario Draghi addresses reporters at 2:30 p.m. in Frankfurt. “The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases,” the ECB said in a statement Thursday. “The Governing Council confirms that the monthly asset purchases of 80 billion euros are intended to run until the end of March 2017, or beyond, if necessary, and in any case until it sees a sustained adjustment in the path of inflation consistent with its inflation aim.”
  • European High-Yield Investors Are Getting Defensive. Event risks and poor liquidity challenge the outlook. 
  • China’s Housing Bubble Wobble. 
  • China Construction Slows, in Potential Sign of Turn in Property. China’s construction growth slowed in the third quarter, signaling that developers might have turned more cautious toward a property market seen at risk of becoming a bubble. Construction output rose 6 percent from a year earlier in the quarter, the National Bureau of Statistics said Thursday. That was down from 7.3 percent in the second quarter, and marked a second straight period of slower growth.
  • Luxury Market Stagnates as Wealthy Chinese Shoppers Stay at Home. The world’s luxury-goods market stopped growing this year, according to a forecast from researcher Bain & Co., as the industry struggles to emerge from one of its weakest periods since the global recession. Sales of personal luxury goods from Louis Vuitton coats to Hermes handbags are projected to linger at about 249 billion euros ($273 billion) in 2016, the weakest performance since 2009 at constant exchange rates. At actual rates, sales are set to slip 1 percent, Bain predicts. The outlook adds to the gathering gloom around the industry. Burberry Group Plc this week reported declines in its Asian business and worsening results at its wholesale unit. The luxury market is entering a slower “new normal”, said Claudia D’Arpizio, head of Bain & Co.’s luxury division. The top of the market “will not have an enormous number of new consumers coming up in the near future.”
  • Brexit Drop Almost Forgotten for Euro-Area Bank Shares After ECB. (video) Mario Draghi’s policy update lifted almost all European equity markets, with euro-area banking shares stealing the spotlight. The Euro Stoxx Banks Index climbed 2.1 percent, a fifth day of gains and the most on a European Central Bank decision day since January. Draghi said the ECB probably won’t stop its asset buying abruptly, indicating a potential extension of its stimulus program. Speculation that the central bank president is getting ready to loosen the limits of assets eligible for buying has sent lenders rallying about four times more than the rest of the market in October. The benchmark Euro Stoxx 50 Index rose 0.7 percent to its highest level since Sept. 8, while its banks closed just 1.2 percent away from its level before the U.K. vote to leave the European Union.
  • OPEC Price War Offers Meager Rewards as U.S. Shale Survives. When the Organization of Petroleum Exporting Countries started its price war, the U.S. shale boom looked doomed. Two years and one OPEC policy u-turn later, executives at the annual Oil & Money conference in London painted an upbeat outlook for shale, with giants like Exxon Mobil Corp. and ConocoPhillips saying the industry hasn’t just survived the bust, but will continue to have a global influence. "We have confirmed the viability of a very large resource base in North America," said Exxon Chief Executive Officer Rex Tillerson. "Never bet against the creativity and tenacity of this segment of our industry."
  • El-Erian Holds 30% in Cash as Central Banks Distort Markets. (video) Mohamed El-Erian said he’s favoring cash as well as the riskiest investments, such as venture capital, in his own portfolio. El-Erian is less bullish on publicly traded securities such as stocks and bonds because global central banks have pushed their prices to “distorted” levels, he said in an interview in Singapore. Cash comprises about 30 percent of his portfolio, which is more than most people have, according to El-Erian. “There’s enormous risk in public markets because that’s the one that central banks have distorted to the greatest extent,” said El-Erian, chief economic adviser at Allianz SE and a Bloomberg View columnist. “It’s very hard to say I’m going to buy a basket of public equities and go to sleep for the next five to 10 years and feel good about the returns. Similarly with bonds.” 
  • Hedge Fund Managers Expect ‘Massive’ 34% Pay Cut, Survey Says.
  • Hedge Fund Investors Withdrew $28.2 Billion in Third Quarter. Hedge fund investors pulled $28.2 billion from the industry in the third quarter, the most since the aftermath of the global financial crisis, according to Hedge Fund Research Inc.
Wall Street Journal:
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