Bloomberg:
- China’s Easy Money Flows Abroad as Credit Squeeze Hurts at Home. As China’s cash squeeze claims victims across the nation -- from a bailout-seeking shipyard to a solar-panel maker missing a bond payment -- there are places where Chinese money remains cheap and plentiful. Like Nigeria. China Development Bank Corp. and Export-Import Bank of China are lending billions of yuan to some of the world’s riskiest regimes at interest rates hundreds of basis points below the cheapest commercial loans available at home. That lending in turn generates overseas contracts to build airports, roads and shopping malls for state-owned Chinese companies that are mired in debt. “As opportunities go down and risks go up at home, these policy banks have gained a lot of power and they want to sustain themselves,” Kevin Gallagher, author of the 2010 book “The Dragon in the Room” about Chinese investment in Latin America, said in a telephone interview. “The majority of the countries that are getting the finance are countries with bond spreads that are through the roof.”
- China’s Thinning Margins Has Marubeni Betting on U.S. China’s economic slowdown could be worse than official forecasts and a recovery may not come before 2014, according to the chairman of Marubeni Corp. (8002), Japan’s biggest power and agriculture trading company. Thinning cargo volumes and trading margins suggest China’s gross domestic product may be expanding at less than the announced 7.5 percent in the second quarter, Teruo Asada said in an interview in Tokyo, making the U.S. a better prospect for the trader’s expansion.
- China June Home Prices Rise as Big Cities Post Record Gains. China’s June new home prices rose in all but one city, led by the biggest metropolitan centers and underscoring Premier Li Keqiang’s struggle to rein in speculative investment even as the economy cools. Prices climbed in 69 of the 70 cities the government tracked last month from a year earlier, the National Bureau of Statistics said in a statement today, matching the data in May. The southern business city of Guangzhou posted the biggest increase with a 16 percent advance from a year earlier. Prices climbed 13 percent in Beijing and 12 percent in Shanghai. All three cities had their biggest gains since the government changed its methodology for the data in January 2011. “With the economy slowing down and other industries weakening, investors don’t have many choices but seek out property investment for good returns,” Yao Wei, China economist at Societe Generale SA in Hong Kong, said by phone today. “Many of the government measures have targeted the supply, which actually pushed home prices up further.”
- Talks to Expand Technology Pact Collapse. Negotiations among dozens of nations aimed at eliminating duties on some electronic devices collapsed after China proposed excluding many items from the talks. “The United States is extremely disappointed that it became necessary to suspend negotiations,” U.S. Trade Representative Michael Froman said yesterday in a statement on the Information Technology Agreement. “A diverse group of members participating in the negotiations determined that China’s current position makes progress impossible at this stage.”
- Abe Set for Japan Election Win Faces LDP Dissent as Biggest Risk. Japanese Prime Minister Shinzo Abe is set to win control of both houses of parliament, giving his Liberal Democratic Party-led coalition the strongest grip on power since 2007. Winning the election will be the easy part. While a government victory in the July 21 upper house ballot would end Japan’s recent experiment with two-party politics, internal dissent looms within months should slowing growth undermine the promise of Abenomics. Economists forecast the economy to contract after an April 2014 sales-tax rise.
- Bowen Says Australia to Withstand End of Mining Investment Boom. Australia’s economy will remain resilient as the mining-investment boom peaks, with increased exports and a pick up in other industries supporting growth, the nation’s new Treasurer Chris Bowen said.
- China Stocks Fall for Second Day as Property Developers Retreat. Chinese stocks fell for a second day, led by real estate companies and commodity producers, amid concern increasing home prices will limit room for the government to spur economic growth. A gauge tracking developers slipped 1.2 percent. House prices in Beijing, Shanghai and Guangzhou rose the most since at least January 2011 last month from a year earlier, official data showed. The government may expand a tax on property purchases, Xinhua News Agency reported yesterday. Yunnan Tin Co. and Jiangxi Copper Co. retreated. The International Monetary Fund said risks are increasing that China’s growth this year will fall short of the lender’s forecast. The Shanghai Composite Index (SHCOMP) dropped 0.9 percent to 2,027.32 as of 11:02 a.m. local time, extending yesterday’s 1 percent loss. The CSI 300 Index declined 1.2 percent to 2,255.82.
- Asian Stocks Swing on Bernanke, China Growth Risks. Asian stocks swung between gains and losses after Federal Reserve Chairman Ben S. Bernanke said U.S. asset purchases are not on a preset course and the International Monetary Fund said risks are rising for slower growth in China. China Shanshui Cement Group slumped 9.8 percent in Hong Kong after saying first-half profit will drop at least 40 percent from a year earlier. SoftBank Corp., a Japanese mobile phone operator, jumped 4.5 percent on a report it will form a fuel-cell venture with Bloom Energy Corp. Woolworths Ltd., Australia’s largest retailer, fell 1.5 percent after saying it expects to lose A$157 million ($144 million) in the year ended June for its Masters home-improvement joint venture. The MSCI Asia Pacific Index fell 0.1 percent to 135.76 as of 11:53 a.m. in Tokyo after rising as much as 0.4 percent.
- Rebar Falls for First Time in Seven Days on Slower China Growth. Steel reinforcement-bar futures in Shanghai fell for the first time in seven days on the prospect of slower economic growth in China. Rebar for delivery in January on the Shanghai Futures Exchange fell as much as 0.4 percent to 3,665 yuan ($597) a metric ton before trading at 3,668 yuan at 10:30 a.m. local time.
- Bernanke Plays Down Link Between Jobless Rate, Fed Moves. Federal Reserve Chairman Ben Bernanke played down Wednesday the unemployment rate's weight in the central bank's calculation of when to start raising short-term borrowing costs, a fresh example of the challenge the Fed faces explaining its easy-money policies to an often perplexed public.
- Regulatory Rift Develops Globally Over Financial System. Global regulators are pursuing disparate approaches to protecting the financial system against future shocks. Global regulators are pursuing disparate approaches to protecting the financial system against future shocks, fracturing an agreement forged in the wake of 2008 financial crisis to adopt a coordinated response. Policy makers, at odds over how to reduce risk in the financial system, are disagreeing over proper capital levels for banks, derivatives regulation, criminal prosecutions of bankers and even the appropriate forum for brokering agreement on financial-services issues. Countries like the U.S., U.K. and Switzerland are demanding that banks build thicker capital cushions to absorb losses and bigger liquidity buffers than most other European countries are embracing.
- Dell(DELL) Buyout Pushed to Brink. Large Shareholders Expected to Reject Deal. Dell Inc.'s $24.4 billion buyout plan was foundering late Wednesday evening, as a group of big investors signaled their intent to vote against a deal that would remove the technology icon from the public markets. The new opposition from Vanguard Group Inc., State Street Corp. and BlackRock Inc. pushed the deal to a new level of brinkmanship, forcing Michael Dell and his backers to either sweeten the transaction or risk seeing the deal fail.
- Challenges in Bid to Revamp Banks. Lew, Bernanke Seek More Action in Fight Against 'Too Big to Fail'. In separate remarks, Lew and Bernanke call for additional measures to ensure banks can't threaten the economy.
- The IRS Goes to Washington. New testimony links political vetting to orders from D.C. We're starting to understand why Lois Lerner took the Fifth about her role in the IRS targeting of conservative groups. The testimony of at least three more employees in the IRS Washington office is now making clear that Ms. Lerner and other Washington IRS officials had a direct hand in slow rolling the tax-exempt applications of conservative groups in an election season.
- How high did it go? Republicans to step up pressure on IRS at scandal hearing. House Republicans plan to ratchet up scrutiny of the IRS during a hearing Thursday morning where agency workers are expected to discuss the involvement of high-level officials in slowing down applications from Tea Party groups. For the first time, the House oversight committee has invited two key agency officials to testify. Republican leaders of the committee claimed Wednesday that one of them recently revealed that the IRS chief counsel's office -- led by a political appointee -- played a role, along with embattled IRS official Lois Lerner, in scrutinizing conservative groups. Rep. Darrell Issa, R-Calif., chairman of the committee, told Fox News that agency officials in Cincinnati were taking their orders from Washington, and that the investigation needs to look next at both Lerner and the counsel's office.
- House votes to delay ObamaCare mandates. The House voted Wednesday to delay key components of ObamaCare, in a bid by emboldened Republicans to chip away at the law after the administration acknowledged new problems with its implementation. Republican leaders swiftly organized the votes after the administration, in early July, said it would delay until 2015 a requirement that businesses with 50 or more workers provide insurance coverage or pay a penalty. The House voted 264-161 for a measure that would do exactly that. But they also voted 251-174 for a measure that would delay the individual mandate -- the requirement on individuals to buy health insurance -- for a year as well.
- Ebay(EBAY) earnings: 63 cents adjusted EPS on revenue of $3.88 billion, in line with forecasts. EBay Inc reported solid second-quarter results on Wednesday but Chief Executive John Donahoe warned of "headwinds" in the second half of the year, sending shares of the e-commerce company down more than 6 percent in after-hours action. Second-quarter net income was $822 million, or 63 cents a share, versus $730 million, or 56 cents a share, in the same period a year earlier. Revenue rose 14 percent to $3.88 billion. EBay was expected to earn 63 cents a share on revenue of $3.89 billion, according to Thomson Reuters I/B/E/S. "Macroeconomic headwinds in Europe and Korea will continue to be a challenge in the second half of the year," Donahoe said. "But our core businesses are strong."
- Intel(INTC) cuts 2013 revenue forecast, capex as PC industry sags. Intel Corp cut its full-year revenue forecast and said it is scaling back capital spending as it adjusts to a painful contraction of personal computer sales and economic weakness in China, one of its biggest markets. The forecast and cut in capital spending were announced on Wednesday in the company's quarterly earnings report, the first under new Chief Executive Brian Krzanich.
- Bernanke: The Only Game In Town. (graphs)
- JP Morgan(JPM) Is Reportedly Getting Ready To Settle For $1 Billion For Manipulating Energy Markets.
Reuters:
- Monsanto(MON) to withdraw EU approval requests for new GMO crops. Monsanto Co said on Wednesday it will withdraw all pending approval requests to grow new types of genetically modified crops in the European Union, due to the lack of commercial prospects for cultivation there.
- Moody's cuts rating on Chicago's bonds due to pensions. Moody's Investors Service lowered on Wednesday Chicago's general obligation and sales tax ratings to A3 from Aa3 due to the city's large and growing pension liabilities and budget pressures related to them. The move affects $8.2 billion of Chicago's general obligation and sales tax debt, Moody's said in a statement, adding that its outlook is negative. "The current administration has made efforts to reduce costs and achieve operational efficiencies, but the magnitude of the city's pension obligations has precluded any meaningful financial improvements," the statement said.
Financial Times:
Telegraph:- Maersk CEO Sees Growth in Demand in Shipping Industry Falling. Maersk CEO Soren Skou sees annual growth 4-5% in yrs ahead, vs levels close to 10% before 2008 economic crisis, FT cites him as saying in an interview.
- NSA’s phone and web snooping more far-reaching than thought. The US’s National Security Agency, the electronic eavesdropping body, has disclosed that its telephone and internet data collection is far greater than previously known in the face of unusually sharp congressional questioning. The disclosures, and the more aggressive stance from members of the House judiciary committee, underlined how the NSA is losing support in a Congress which had initially largely backed the White House’s defence of anti-terror surveillance.
- China defies IMF on mounting credit risk and need for urgent reform. If you think China's Communist Party fully understands the mess it has created by ramping credit to 200pc of GDP and running the greatest investment bubble know to man, read its shockingly complacent response to warnings from the International Monetary Fund. The IMF's Article IV report on China states - as clearly as the IMF dares - that excess credit has been pushed to the outer limits of sanity, and that there is a growing risk of an "adverse feedback loop" as the financial system and the economy take each other down in a mutually reinforcing spiral. As you can see from the first chart, total credit has jumped from 129pc to 195pc of GDP since 2008, and has completely departed from its historic trend.
- Taiwan, Korea Panel Makers Cut Output This Month. Average
utilization rate of panels cuts to 80% in July and is expected to be
lower in August amid weak demand and prices falling, citing David Hsieh,
VP of the Greater China Market at DisplaySearch. Global TV panel
shipments fell 6%-8% in June m/m.
- Hong Kong's Home Prices Seen Falling 45%, Says Midland Unit. Home prices could fall as much as 45% over the next three to five years amid higher property taxes, rising interest rates and a bleak outlook for commercial property, says one real estate agent. Hong Kong Property, controlled by Midland Holdings, the city's only listed real estate agent, made the bearish forecast yesterday. With the government stepping up measures to cool the market, average monthly transactions in the secondary market could drop to 4,500, a level close to that during Sars in 2003. "In the worst scenario, home prices will drop by as much as 45%," Midland said.
- A property slump will affect the whole of Hong Kong's economy. Last week Monitor argued that the gradual tapering of quantitative easing and the eventual increase in American interest rates that will follow are likely to trigger a slump in Hong Kong property prices of 30 per cent or more. That might sound like a good thing. Lots of families would like to buy. But with the minimum down-payment on a typical Hong Kong flat now equal to four years of median household income, many have been priced out of the market. To them, forecasts of a property slump are welcome. But property prices do not fluctuate in isolation. In a city where the property market contributes a fifth of our gross domestic product, a big fall in prices will inevitably affect activity in all other sectors of Hong Kong's domestic economy. First of all, a property bear market will erode consumer demand. With residential mortgage debt currently standing at 46 per cent of Hong Kong's GDP, a decline in the value of flats would have a big effect on household balance sheets.
- Some China Provinces May Face Difficulty With Targets. Some Chinese provinces may still face difficulty in meeting economic growth targets this year after targets were lowered earlier in the year.
- PBOC's Ji Says Current Economic Growth 'Reasonable'. The public is probably "overly worried" about economic slowdown as the current growth is "reasonable," according to an article by PBOC's research bureau head Ji Zhihong. GDP growth of 7%-7.5% is "moderate" for China at a time when it is accelerating economic restructuring, Ji wrote.
- Lowest GDP Growth China Can Tolerate Can't Be Fixed. Lowest GDP growth and employment level China can tolerate is unclear now, Financial News says in a front-page commentary. The judgement of the markets is that 7.5% is the lowest GDP growth China can tolerate currently, the commentary said. The judgements of the markets is that 7% is the lowest GDP growth China can tolerate in the medium term, it said.
- None of note
- Asian equity indices are -.50% to +.50%. on average.
- Asia Ex-Japan Investment Grade CDS Index 137.0 -.5 basis point.
- Asia Pacific Sovereign CDS Index 106.25 unch.
- FTSE-100 futures -.06%.
- S&P 500 futures -.14%.
- NASDAQ 100 futures -.28%.
Earnings of Note
Company/Estimate
- (SWY)/.50
- (BLK)/3.81
- (DGX)/1.09
- (BBT)/.74
- (UNH)/1.25
- (AN)/.73
- (KEY)/.20
- (SNA)/1.46
- (POOL)/1.40
- (SHW)/2.57
- (BX)/.48
- (PPG)/2.34
- (NUE)/.30
- (GPC)/1.21
- (JCI)/.75
- (DHR)/.86
- (FITB)/.42
- (PM)/1.41
- (OMC)/1.08
- (BAX)/1.13
- (MS)/.43
- (VZ)/.72
- (UNP)/2.35
- (CMG)/2.81
- (SYK)/1.03
- (COF)/1.73
- (MSFT)/.75
- (FWRD)/.53
- (ISRG)/4.24
- (GOOG)/10.80
- (WERN)/.37
8:30 am EST
- Initial Jobless Claims are estimated to fall to 345K versus 360K the prior week.
- Continuing Claims are estimated to fall too 2959K versus 2977K prior.
- Philly Fed for July is estimated to fall to 8.0 versus 12.5 in June.
- Leading Indicators for June are estimated to rise +.3% versus a +.1% gain in May.
- None of note
- The Fed's Bernanke speaking, Spanish/French 10Y auctions, Bloomberg Economic Expectations Index for July, weekly EIA natural gas inventory report and the weekly Bloomberg Consumer Comfort Index could also impact trading today.