Bloomberg:
- Putin Sets New Condition on Syrian Chemical Weapons Plan. Russian President Vladimir Putin set a condition that endangers the diplomatic initiative to eliminate Syria’s chemical weapons, saying it depends on the U.S. and other nations renouncing the use of force against Bashar al-Assad’s regime. Putin’s remarks complicate the outlook for the Russian proposal a day after it was presented by Russian Foreign Minister Sergei Lavrov, who had seized on comments in London by U.S. Secretary of State John Kerry about the possibility of Syria turning over its chemical-weapons stockpile.
- Obama Calls for Pause in Authorizing U.S. Strikes on Syria. President Barack Obama pulled the U.S. from the brink of a military strike on Syria to pursue “encouraging signs” of a possible diplomatic solution to the confrontation over the Assad regime’s use of chemical weapons. In a nationally televised speech from the White House that attempted to navigate between international calls for action and a war-weary public at home, Obama said he’s asked Congress to delay a vote authorizing the use of military force while the administration pursues a proposal that would have Syria surrender its chemical arms stockpiles.
- S&P Warns Defaults to Mount as Smokestacks Choked: China Credit. Chinese companies will miss more debt payments in the coming year as smokestack industry losses mount on Premier Li Keqiang's plan to switch the economy's focus toward services, according to Standard & Poor's. Metal producers were the worst hit as corporate downgrades in China surged to 52 in the first seven months, more than in the last six years combined, according to Chengxin. Mining and metal companies face 259 billion yuan of bond payments by the end of 2014 just as industrial-profit growth has cooled to the least since December. That's more than the total due on all corporate notes in Thailand, Malaysia and Singapore combined. "The number of defaults in the corporate space will increase over the next six to 12 months," Christopher Lee, managing director of corporate ratings at S&P in Hong Kong, said in reference to payments on all financial obligations. That "would increase the risk premium for the bonds and it could result in more selective lending and investments," he added.
- China’s Shadow Banking Surges as Growth Rebound Adds Risks. China’s broadest measure of new credit almost doubled in August from the previous month in a sign leaders are committed to meeting economic goals even at the cost of adding financial risks. Aggregate financing was 1.57 trillion yuan ($257 billion), the People’s Bank of China said in Beijing yesterday, topping the 950 billion yuan median estimate of 10 analysts surveyed by Bloomberg News. New yuan loans from banks accounted for about 45 percent of the total, down from July’s 87 percent, as non-traditional credit played a bigger role. The first pickup in credit growth after an unprecedented four straight declines, the fastest gain in industrial output in 17 months and above-forecast exports signal better odds that Premier Li Keqiang will achieve his 7.5 percent expansion target this year. The data also mark a resurgence in shadow banking that poses risks for the financial system after a record credit boom in the first quarter. “If credit growth picks up persistently from here, China’s current growth recovery may well last a bit longer and go a bit further,” said Yao Wei, China economist at Societe Generale in Hong Kong. “However, that only adds to the downside risk afterwards, as the leverage of Chinese corporates and local governments keeps rising from the already alarmingly high level.”
- China’s Ships Near Islands Before Japan Purchase Anniversary. Eight Chinese ships entered Japan-controlled waters near an island chain claimed by both nations, a day before the first anniversary of Japan’s purchase of the territory that sparked protests across China. The Chinese Coast Guard vessels left the area yesterday after spending several hours in what Japan sees as its territorial waters, the Japanese Coast Guard said in e-mailed statements. The move prompted Japanese Vice Foreign Minister Akitaka Saiki to summon China’s ambassador, Cheng Yonghua, to lodge a diplomatic protest, the Foreign Ministry said on its website. “We will do everything in our power to protect the lives of the people as well as our territory, water and airspace,” Japan’s Chief Cabinet Secretary Yoshihide Suga said yesterday. Asked if that could include stationing public officials on the islands, he said that was “one option to be considered.”
- Most Asia Stocks Rise; U.S. Backs Away From Syria Strike. Most Asian stocks rose as the President Barack Obama pulled the U.S. from the brink of a military strike against Syria. Energy producers led declines. Rio Tinto Group, (RIO) the world’s second-biggest mining company, gained 1.4 percent after copper futures climbed in Sydney. Yakult Honsha Co., a maker of fermented milk products, climbed 2.2 percent in Tokyo after JPMorgan Chase & Co. raised its rating to overweight. Inpex Corp., Japan’s biggest energy explorer, sank 2.4 percent after crude oil fell as prospects for a diplomatic solution over Syria eased concern shipments from the Middle East will be disrupted. The MSCI Asia Pacific Index was little changed at 137.11 as of 12:02 p.m. in Tokyo, paring gains of as much as 0.4 percent.
- Rubber Gains as Yen Declines to Seven-Week Low on Syria Reprieve. Rubber climbed as the yen weakened to the lowest level in seven weeks after the U.S. called for a pause in authorizing military strikes on Syria, boosting demand for the commodities priced in the Japanese currency. The contract for February delivery gained as much as 1.1 percent to 285.5 yen a kilogram ($2,844 a metric ton) on the Tokyo Commodity Exchange, before trading at 285 yen at 11:55 a.m. local time. The gain pared losses to 5.9 percent this year.
- Swedes Face Forced Deleveraging as Debt Loads Swell to Record. Sweden is looking into the option of forcing households to start amortizing their mortgages in an effort to prevent debt loads rising from a record.
- Gundlach Says How Fed Is Ending Easing Is ‘Big Mistake’. DoubleLine Capital LP’s Jeffrey Gundlach said the U.S. Federal Reserve is making a “big mistake” in the way it ends its unprecedented asset-purchase program. “We thought the Fed wouldn’t walk away from QE,” or quantitative easing, and would buy securities until targeted yields were reached like in Japan and Europe, Gundlach said today during a webcast for investors. Instead, the central bank is opting for a “seat of the pants” way of handling policy, said the manager, whose firm is based in Los Angeles.
- NSA Phone-Records Spying Said to Violate Rules for Years. The U.S. National Security Agency violated rules on surveillance of telephone records for almost three years and misled a secret court, raising fresh concerns that spy programs lack adequate controls to protect Americans’ privacy. The latest revelations show NSA spying was broader, violated restrictions on domestic surveillance more often, and may have targeted innocent Americans to a greater degree than previously known. They are contained in documents released today by Director of National Intelligence James Clapper in response to privacy groups’ lawsuits. The agency ran a select list of phone numbers against databases of millions of call records between May 2006 and January 2009 without having reason to suspect some of the numbers’ owners of terrorist ties, according to the records.
- Apple(AAPL) Offers New IPhones For China’s Two Smaller Carriers. Apple Inc. (AAPL) is offering its newest iPhones through China’s smaller wireless carriers and has yet to announce a deal with China Mobile Ltd. (941), which has a customer base more than twice the size of the U.S. population.
- Sheila Bair: U.S. Banking System Still Fragile. In this special Crisis Plus 5 series of The Big Interview, former FDIC Chair Sheila Bair reflects on the five-year anniversary of the 2008 financial collapse, telling WSJ’s David Wessel the banking system in the U.S. remains fragile but that regulators succeeded in enforcing higher capital requirements for big banks. Transcript of the interview:
- Apple(AAPL) Unveils Two iPhones. Company Continues to Fight Rivals in Smartphone Market; the 5C, in Five Colors, Is Priced at $99.
- Banks Face Physical Commodity Curbs. Fed Is Expected to Issue Rules Soon. Wall Street is bracing for a ruling that may hasten the exit of J.P. Morgan Chase JPM +1.53% & Co., Goldman Sachs Group Inc. GS +3.54% and Morgan Stanley MS +2.19% from businesses such as metals warehousing, oil shipping and power generation. Financial-industry executives expect the Federal Reserve to issue guidelines as soon as this month limiting bank participation in so-called physical-commodities businesses.
- Syria plan in limbo, Obama asks Congress to postpone strike vote. President Obama, in a national address originally intended to rally the country behind a strike on Syria, instead used the moment to announce he was hitting pause on military action in order to let negotiations over a Russia-backed plan run their course. “This initiative has the potential to remove the threat of chemical weapons without the use of force,” Obama said Tuesday night.
- House leadership pushes new legislative strategy to defund ObamaCare. House Republican leaders on Tuesday defended their proposal for a temporary spending bill that essentially puts the contentious issue of “defunding” ObamaCare in the hands of the Democrat-controlled Senate. “The House has voted 40 times to defund, repeal and change ObamaCare,” House Speaker John Boehner said. “This strategy is intended not to really satisfy the House. We've already voted. It enforces the fight in the United States Senate. … Let's get the issue over there and force them to actually have a vote.”
- Apple(AAPL) supplier shares slump on iPhone 5C pricing. Shares of Apple suppliers slumped on Wednesday, a day after the U.S. consumer technology giant unveiled two highly anticipated smartphones that failed to wow investors – the iPhone 5S and its lower-cost version, the iPhone 5C.
- Small Business Is Going Nowhere. (graph)
- China: No Leverage, No Growth. (graphs)
Washington Post:
- Extremist groups took part in Benghazi attack, U.S. officials say. U.S. counterterrorism officials have determined that several extremist groups, including Ansar al-Sharia, took part in last year’s attack in Benghazi, Libya, that killed the U.S. ambassador there and three other officials. They think the terrorist organizations selected the U.S. diplomatic outpost there as a potential target ahead of time. The officials have identified numerous people involved — some new to U.S. intelligence and others who are well-known — and have issued several sealed indictments in recent months.
- Sen. Corker of Tennessee calls Volkswagen talks with UAW 'incomprehensible'. Volkswagen would become a “laughingstock” if it goes through with a deal to have the United Workers represent workers at its Tennessee plant, U.S. Sen. Bob Corker said Tuesday. The Tennessee Republican told The Associated Press in a phone interview that he was dismayed when VW last week sent a letter to employees regarding its discussion with the UAW about creating a German-style works council at the Chattanooga plant. “For management to invite the UAW in is almost beyond belief,” Corker said. “They will become the object of many business school studies — and I’m a little worried could become a laughingstock in many ways — if they inflict this wound.”
- Analysis: Brazil may be spending its way towards a downgrade. Brazil's finances are set to deteriorate substantially next year, leaving the government with few options to revive a sputtering economy and raising the threat of a credit downgrade. The government is likely to miss its key 2014 budget target, the primary surplus, by as much as 50 billion reais ($22 billion), delivering only about half its goal, estimates by Reuters and private economists show. Unlike most other countries, Brazil's most-watched budget goal strips out interest payments on its debt, meaning its overall deficit would widen if the primary surplus dwindles. Such an event could deal a major setback to Latin America's biggest economy, which won its investment-grade credit rating in 2008 through a commitment to fiscal responsibility and strong economic growth.
- Texas Instruments(TXN) narrows 3rd-quarter forecast. No. 3 U.S. chipmaker Texas Instruments Inc narrowed its third-quarter forecast. The company now estimates earnings of 51 to 55 cents per share on revenue of $3.15 billion to $3.29 billion for the quarter ending Sept. 30. It had previously estimated earnings per share of 49 to 57 cents on revenue of $3.09 billion to $3.35 billion.
- Colo. Senate President Loses Recall Over Gun Laws. The leader of the Colorado state senate lost his job in the state's first ever legislative recall Tuesday and a second Democratic lawmaker challenged over her support for stricter gun laws after last year's mass shootings also appeared in trouble in a race seen as a measure of popular support for gun legislation.
Financial Times:
The Guardian:- Asian groups struggle with end of cheap money. Few companies have hedges against strengthening dollar. Hong Kong-based hedge fund Senrigan Capital is suing Thailand’s Charoen Pokphand Group over the compensation it says it is owed as a shareholder in Siam Makro, a Thai retailer that CP is acquiring. The dispute revolves around the appropriate exchange rate between the baht and the dollar. If the investors prevail, it could raise CP’s transaction costs by millions of dollars.
- Japan considers stationing workers on disputed islands. China says it will not tolerate 'any provocative acts of escalation' in dispute over uninhabited islands in East China Sea.
The Financial Express:
Evening Recommendations - Banks slammed for ‘reckless’ lending to infra, power sectors. In a scathing letter addressed to the Indian Banks' Association, Gajendra Haldea, principal adviser (infrastructure) at Planning Commission, has slammed banks for their infrastructure lending practices. The reckless lending to the infrastructure and power segment will lead to asset quality issues, resulting in a lack of future lending towards these sectors, Haldea noted. "Indiscriminate lending by commercial banks has led to gold plating of infra projects that may either raise consumer tariffs or cause defaults in debt service," said Haldea in strongly worded discussion paper dated June 12. The paper was sent to the ninistry of finance, which, then, forwarded it to the IBA.
Susquehanna:
- Rated (CSC) Positive, target $62.
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 135.0 unch.
- Asia Pacific Sovereign CDS Index 114.0 -3.0 basis points.
- FTSE-100 futures -.11%.
- S&P 500 futures -.07%.
- NASDAQ 100 futures -.02%.
Earnings of Note
Company/Estimate
- (MW)/1.14
- (VRA)/.32
10:00 am EST
- Wholesale Inventories for July are estimated to rise +.3% versus a -.2% decline in June.
- Wholesale Trade Sales for July are estimated to rise +.5% versus a +.4% gain in June.
- Bloomberg
consensus estimates call for a weekly crude oil inventory decline of
-2,100,000 barrels versus a -1,836,000 barrel decline the prior week.
Gasoline supplies are estimated to fall by -1,000,000 barrels versus a
-1,827,000 barrel decline the prior week. Distillate inventories are
estimated to rise by +600,000 barrels versus a +549,000 barrel gain the
prior week. Finally, Refinery Utilization is estimated to fall -.9%
versus a +.5% gain the prior week.
- None of note
- The 10Y Note auction, weekly MBA mortgage applications report, Australia Unemployment report, German CPI report, (AAPL) iPhone China event, (MA) Investment Community Meeting, Barclays Energy-Power Conference, BofA Merrill Real Estate Conference, BofA Merrill Healthcare Conference, BofA Merrill Media/Communications/Entertainment Conference and the Stifel Nicolaus Healthcare Conference could also impact trading today.