Wednesday, February 22, 2017

Today's Headlines

  • France's Bayrou Steps Aside, Backing Macron for President. (video) French centrist Francois Bayrou said Wednesday he won’t run in this year’s election and offered his support to the independent candidate Emmanuel Macron, a fellow moderate. “We are in such a risky situation and for this situation we need an exceptional answer,” Bayrou said during a press conference in Paris. “Macron is brilliant.”
  • China's $9 Trillion Moral Hazard Is Now Too Big to Ignore. (video) China may be about to embark on its most ambitious -- and perilous -- campaign to convince investors that they shouldn’t depend on a bailout when markets go south. In a rare show of cooperation, the nation’s main financial regulators are drafting new rules for asset-management products that aim to make clear the investments don’t have government guarantees, people familiar with the matter told Bloomberg News on Tuesday. The products, which promise higher returns than bank deposits but are viewed by many investors as a form of risk-free savings, have become an integral part of the Chinese financial system after swelling in recent years to almost $9 trillion as of June 30.
  • China Insurance Watchdog Vows to Severely Punish Speculators. The chairman of China’s top insurance regulator vowed to impose “stringent” rules and “severely” punish short-term speculation by insurers, the latest sign of tightening controls on the nation’s industry. The watchdog will also curb “aggressive” pricing and the “unreasonably” high returns of some insurance products, Xiang Junbo, Chairman of the China Insurance Regulatory Commission, told reporters in Beijing on Wednesday. Insurers shouldn’t attempt to interfere in the management of listed companies, Xiang said.
  • China Home Prices Rise in Fewest Cities in a Year Amid Curbs. (video) China home prices increased last month in the fewest cities in a year, signaling property curbs to deflate a potential housing bubble are taking effect. New-home prices, excluding government-subsidized housing, gained last month in 45 of the 70 cities tracked by the government, down from 46 in December, the National Bureau of Statistics said Wednesday. Prices fell in 20 cities and were unchanged in five.
  • China's Worst Bond Rout in a Decade Seen Worsening on Rules. (video) The prospect of new rules in China on asset management products is sparking speculation that the worst corporate bond rout in a decade is about to get even worse. Such concern is spreading a day after people familiar with the matter said the nation’s regulators are drafting new regulations for asset-management products, including banning third-party managers from investing some funds in other firms’ products. The plans flag the possibility that authorities may unveil stricter steps to cut leverage throughout the nation’s credit markets.
  • Italy Warned by EU Over High Public Debt With Spillover Risk. The European Commission warned that Italy faces excessive economic imbalances as the country’s shaky center-left government struggles to control public debt, boost sluggish growth and mend ailing banks. Troubles including soured bank loans risk spilling into other euro-area countries, the commission said on Wednesday. Italy’s public debt is projected to rise to 133.3 percent of gross domestic product this year from an estimated 132.8 percent in 2016.
  • Aussie Debt Binge Meets Anemic Wages in Conundrum for RBA's Lowe. For 20 years Australians doubled down on debt, confident rising wages would inflate away the burden and grow their wealth. Their lucky streak may be coming to an end. Reserve Bank of Australia Governor Philip Lowe’s acknowledgement of the rising risks can be seen in his determination to draw a line under a five-year easing cycle and avoid further escalating debt. But the horse may already have bolted: household debt has surged to a record 187 percent of income and data Wednesday showed private wage growth at 1.8 percent, an all-time low. “If household borrowing keeps rising at the current rate or were to accelerate then I think that could be quite problematic,” Lowe said in Sydney, hours before the wage report’s release. “The risk that we focus on is, at some future point, households might decide they’ve just borrowed too much and then they, in response to some bad piece of news, really cut back a lot.” 
  • Europe Stocks Little Changed as Miners Decline, Unilever Jumps. The Stoxx Europe 600 Index lost less than 0.1 percent at the close, halting a three-day rally that had pushed the gauge to a 14-month high. Miners slid the most in three weeks after Goldman Sachs Group Inc. analysts said investors need to see proof of demand and shrinking stockpiles to support the recent rally in commodity prices. Unilever climbed 5.7 percent in London after vowing to boost shareholder returns with a strategic review that might point to a breakup of the consumer-goods giant. Signs of stronger economic activity in the euro area and earnings reports had boosted European shares in recent sessions, notwithstanding concern over France’s upcoming election. The Stoxx 600 rose as much as 0.5 percent earlier today.
  • OPEC Still Waiting for Evidence Oil Cuts Are Doing Their Job. (video) OPEC officials this week hailed the “excellent” and “unprecedented” implementation of their agreement to cut oil production, but were still waiting for solid evidence that the deal was fulfilling their key measure of success and shrinking the global glut.
  • Many Fed Officials See Rate Hike `Fairly Soon,' Minutes Show. Federal Reserve officials expressed confidence they can raise interest rates gradually, while a hike “fairly soon” might be appropriate to avoid the risk of an overheated economy, minutes of Federal Open Market Committee’s latest meeting showed. “Many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations or if the risks of overshooting the committee’s maximum-employment and inflation objectives increased,” the minutes released Wednesday in Washington said.
Wall Street Journal:
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