Bear Radar

Style Underperformer:

• Small-Cap Growth -1.51%

Sector Underperformers:

• 1) Airlines -2.81% 2) I-Banks -2.76% 3) Gaming -2.52%

Stocks Falling on Unusual Volume:

• PN, KWEB, INCR, FOSL, AHP, FRPT, ACM, ASCMA, SLH, LPCN, M, ZBRA, HF, JD, BABA, CEA, CLM, FNBC, GOF, MMI, EVDY, BSTC, CCD, LHO, BAC, BLUE, PACW, RENT, YUM, INVN, SF, PANW, HT, TIF, AFSI, FTAI, YHOO, NVAX, PCTY, SIVB, SKX, GPRO, OCUL, GIII and VTL

Stocks With Unusual Put Option Activity:

• 1) HEDJ 2) KBH 3) CY 4) KSS 5) M
  

Stocks With Most Negative News Mentions:

• 1) LB 2) FOSL 3) T 4) M 5) BABA
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value -1.21%

Sector Outperformers:

• 1) Gold & Silver +4.53% 2) Utilities +.68% 3) Oil Service +.34%
  

Stocks Rising on Unusual Volume:

• W, ENV, FIS, CREE, PE, MYGN, FNV, AEM, GOLD, SLW, CDK, GG, CF and NEM

Stocks With Unusual Call Option Activity:

• 1) SWFT 2) PNK 3) FOSL 4) AGNC 5) CREE
  

Stocks With Most Positive News Mentions:

• 1) KELYA 2) CSC 3) GBT 4) FOGO 5) EXC
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 41.0% Above 100-day average
• 1 Sector Rising, 9 Sectors Declining
• 23.6% of Issues Advancing, 74.6% Declining
• 29 New 52-Week Highs, 237 New Lows
• 38.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.1
• Vix 15.8
• Total Put/Call 1.15
• TRIN/Arms 1.13

Wednesday Watch

Evening Headlines 

Bloomberg:

• Yuan Set for Biggest Two-Day Drop Since 1994 as China Central Bank Devalues. The yuan was set for its biggest two-day drop in two decades, dragging currencies lower across Asia, after the People’s Bank of China set the weakest reference rate since 2012. The yuan fell 1.4 percent to 6.4105 per dollar as of 9:59 a.m. in Shanghai, after sliding 1.8 percent on Tuesday. The central bank lowered its daily fixing by 1.6 percent to 6.3306, a 0.1 percent discount to the previous closing level of 6.3231. The yuan sank 1.6 percent in Hong Kong’s offshore trading. “Today’s weak fixing indicates the PBOC wants to see further depreciation in the yuan, as yesterday’s drop won’t be enough to prop up China’s exports,” said Kenix Lai, a foreign-exchange analyst at Bank of East Asia Ltd. in Hong Kong. “Capital will flee from China to the U.S. due to the economic slowdown and the yuan devaluation.”

• China’s Devaluation May Exacerbate Capital Outflows. (video)

• What’s China’s Biggest Problem? (video)

• Brazil Rating Cut by Moody’s to Cusp of Junk; Outlook Stable. Moody’s Investors Service lowered Brazil’s rating to the cusp of junk in the second downgrade since President Dilma Rousseff came to office. Stocks and the real pared losses as it signaled another cut isn’t likely soon. Brazil’s grade was cut by one notch to Baa3, with a stable outlook. Standard & Poor’s cut its rating to the lowest investment grade in March 2014, the nation’s first downgrade in a decade. The move adds pressure to Rousseff’s economic team, led by Finance Minister Joaquim Levy, who has reduced spending and raised taxes to shore up fiscal accounts. With Brazil’s economy heading for its worst contraction in a quarter century, government revenue is falling more than expected. “Weaker-than expected economic performance, the related upward trend in government expenditures and lack of political consensus on fiscal reforms will prevent the authorities from achieving primary surpluses high enough to arrest and reverse the rising debt trend this year and next,” Moody’s said in a statement Tuesday.

• Emerging Market Stocks Enter Bear Market. Emerging-market stocks entered a bear market and currencies slid on concern China will curtail imports after the biggest slide in the yuan in two decades. The selloff took the MSCI Emerging Markets Index’s decline from a peak last September to 20 percent, the threshold for a bear market. The gauge declined 1.1 percent to 878.27 on Tuesday, ending a bull rally that started in 2012, according to data compiled by Bloomberg. The yuan helped lead declines among 24 developing-nation peers, as a Bloomberg index of 20 most-traded emerging currencies slumped 0.7 percent to a record low. Credit and currency markets in Brazil, Peru and Chile are exposed because of their reliance on China for exports, Commerzbank AG said. Russia and South Africa count China as their biggest trading partner. “There is a great deal of nervousness around emerging markets now that the general economic environment has been less favorable for them,” Alan Gayle, senior strategist for Atlanta-based Ridgeworth Investments, said by phone. “The fact that China decided to let its currency drift lower will add even more pressure.”

• Australia Bank Capital Raisings Surpass Crisis After CBA Offer. Commonwealth Bank of Australia is planning a A$5 billion ($3.6 billion) rights offer that will take capital raising by the nation’s biggest banks this year to levels surpassing the global financial crisis. In response to stricter regulatory requirements -- put in place partly to buttress lenders against a possible slump in the country’s booming property market -- the bank and its three largest rivals have now revealed plans to raise A$16 billion this year. That exceeds the A$13 billion raised to bolster balance sheets in the aftermath of the 2008 financial crisis.

• Currency Rout Goes Global as Jen Sees Risk of 50% Loss on China. As bad as things are for emerging-market currencies, China is about to make them a whole lot worse. Its devaluation of the yuan risks a new round of competitive easing that may send currencies from Brazil's real to Indonesia's rupiah tumbling by an average 30 percent to 50 percent in the next nine months, according to investor and former International Monetary Fund economist Stephen Jen. 

• Won Falls to Three-Year Low on Rate-Cut Bets After Yuan Devalued. The won fell to the lowest in more than three years amid speculation the Bank of Korea will cut interest rates further to spur growth after China devalued the yuan. South Korea faces uncertainties from China, the nation’s biggest overseas market, and persistent export weakness, Finance Minister Choi Kyung Hwan said at a meeting in Seoul Wednesday. The People’s Bank of China weakened the reference rate for its currency by record Tuesday amid a deepening slowdown in Asia’s largest economy. All 16 economists surveyed by Bloomberg see the BOK keeping borrowing costs at an unprecedented 1.5 percent on Thursday, after reductions in June and March. The won fell 0.3 percent to 1,182.88 a dollar as of 9:57 a.m. in Seoul, according to data compiled by Bloomberg. That’s the lowest since June 2012. The currency has declined 7.8 percent this year. 

• Malaysia Consumers Send Najib Warning on Growth as Ringgit Drops. There’s a growing risk for the Malaysian economy, and it’s not just the plunging currency, falling oil exports or the political scandal. The warning signs can be found right on the doorstep of Prime Minister Najib Razak’s party headquarters. At the Putra World Trade Centre in Kuala Lumpur, seat of the United Malays National Organisation, cafe employee Noraini Ibrahim is feeling gloomy and spending less due to rising living costs. The cashier even curbed festivities during Hari Raya Aidilfitri, the celebration that marks the end of the Muslim fasting month. 

• Singapore Stocks Head for Biggest Drop in Two Years on China. Singapore stocks tumbled, with the benchmark Straits Times Index heading for its biggest decline since June 2013 amid concerns China’s currency devaluation will hurt bank earnings and slow economic growth. The Straits Times Index sank 2.5 percent to 3,075.27 as of 10:37 a.m. in Singapore, the most in the Asia-Pacific region. DBS Group Holdings Ltd., Oversea-Chinese Banking Corp. and United Overseas Bank Ltd., the nation’s three key lenders, slumped at least 2.9 percent, among the eight biggest decliners on the benchmark measure.

• Chinese Stocks Slump in Hong Kong as Yuan Plunges for Second Day. Chinese stocks trading in Hong Kong fell the most in a week after the central bank cut the value of the yuan for a second day. The Hang Seng China Enterprises Index in Hong Kong slid 1.1 percent to 11,138.24 at 9:55 a.m. local time.

• Asian Stocks Head for Almost Seven-Month Low as Yuan Tumbles. Asian stocks fell, with the regional benchmark index heading for its lowest close since January, after China cut the value of the yuan for a second day, sending equity indexes across the region lower. The MSCI Asia Pacific Index slumped 1.6 percent to 137.88 as of 10:42 a.m. in Tokyo.

• Cheap Debt Evaporates for Junk Companies in Oil's Cruel Summer. The weakest corporate borrowers are finding the days of free-flowing credit quickly evaporating. The weakest corporate borrowers are finding the days of free-flowing credit quickly evaporating. The $39.6 billion of junk-rated bonds and loans issued since July is the least since the summer of 2008, according to data compiled by Bloomberg. For those that are coming to market, many are paying up or struggling to find buyers at terms they can stomach. Appetite for energy companies, in particular, has vanished just as they need to refinance big credit lines they took out when oil was more than twice its current price.

• Slumping Yuan Threatens More Gloom for World’s Metals Producers. It’s just what global producers of steel and aluminum didn’t need: a yuan devaluation that makes the flood of exports from the world’s biggest producer even cheaper. China’s shipments of steel and aluminum, used in everything from fridges to skyscrapers, surged to a record this year as the slowing economy left a domestic surplus with nowhere else to go. The surprise move by the central bank, which left the yuan heading for the biggest two-day slump in 21 years, make the products cheaper still, threatening more pain for world rivals struggling with lower prices.

• Treasuries Are a Winner as China Exports Deflation Says Bill Gross. Bill Gross said deflation will wash up on other shores after China devalued its currency, sending investors into Treasuries. ``The weak Chinese economy seems to require a competitive devaluation against other Asian producers which points to weak global growth, lower commodity prices and again, lower inflation worldwide,'' Gross, money manager at Janus Capital Group Inc., wrote in an e-mailed response to questions after the People’s Bank of China cut the yuan’s reference rate by the most in two decades to combat an export slump. ``The disinflationary/deflationary effect will keep 10- and 30-year Treasuries well bid.’’

• Parts of 2 Clinton E-Mails Now Earmarked as ‘Top Secret'. Intelligence officials have “recommended that portions of two of the four e-mails” in former Secretary of State Hillary Clinton’s personal e-mail account flagged by the intelligence community’s inspector general “should be upgraded to the top secret level,” State Dept. Spokesman John Kirby says in a statement.

• Berkshire(BRK/A) Risks S&P Rating Cut on Leverage From Buffett Deal. Warren Buffett’s Berkshire Hathaway Inc. may be downgraded by Standard & Poor’s after agreeing to buy manufacturer Precision Castparts Corp. for about $37.2 billion. Buffett’s company was put on CreditWatch Negative because of “uncertainty around the funding of the acquisition and how it may affect current cash resources and leverage metrics at the holding-company level,” the ratings firm said in a statement Tuesday on Omaha, Nebraska-based Berkshire. “To fund the acquisition, Berkshire is likely to use some of the capital resources available at its insurance companies.”

Wall Street Journal: 

• Cheaper Chinese Currency Has Global Impact. By devaluating yuan, Beijing is turning to a controversial growth-boosting tactic whose effects reverberate far and wide. Beijing signaled with its currency devaluation that the domestic economic slowdown it has failed to reverse is no longer a problem confined within China’s borders. It is now the world’s problem, too. Chinese officials have cut interest rates four times in the past 12 months, increased the amount of money banks can lend out and pumped funds into the stock market—measures meant to boost domestic demand in the world’s second-largest... 

• Devalued Yuan Set to Take Bite Out of Apple(AAPL), Give Boost to Chinese Rivals. Weakened currency means reduced China revenue when converted to dollars, while local firms will enjoy lower costs. Apple Inc. may be one of the biggest losers from China’s surprise decision to devalue its currency, while the U.S. company’s Chinese rivals and the main assembler of its iPhone are expected to be among the biggest winners. Foreign companies such as Apple and fast-food retailer Yum Brands Inc. rely heavily on sales in the world’s second-largest economy. For them, a weaker yuan means less revenue when the currency is converted back into U.S. dollars. Chinese manufacturers, on the

• The Democrats’ Socialist Surge. Bernie Sanders drew a crowd of 27,500 in Los Angeles on Monday. In the age of Obama, a liberal with a statist agenda fits right in. People who follow politics probably know that Bernie Sanders, the U.S. senator from Vermont who is challenging Hillary Clinton for the Democratic presidential nomination, is a socialist. Whether they give a fig is a separate matter, which may tell you something about today’s Democrats.

Fox News:

• FBI has Hillary Clinton emails from home server, official says. (video) The FBI has taken possession of thumb drives containing Hillary Clinton's emails, some of which have been deemed to contain highly sensitive classified information, according to a U.S. official briefed on the matter. The official was not authorized to be quoted publicly and spoke on condition of anonymity. Clinton's lawyer, David Kendall, turned over the emails after the FBI determined that he could not remain in possession of the classified information, the official said. The State Department previously had said it was comfortable with Kendall keeping the emails at his Washington law office.

• Wounded Iraq veteran speaks out against Iran deal. (video)

• After nuke deal, European companies rush into Iran to sell tools of oppression. (video) The lifting of international sanctions on Iran has triggered a stampede of European companies beating a path to Tehran to secure contracts, but some of the equipment being offered has dark, dual purposes in the hands of the Islamic Republic’s oppressive government. The cranes made by Austrian manufacturer Palfinger could be used to transform Tehran’s skyline, but also have played a starring role in Iran’s infamous public executions, where convicted criminals are often hanged from the giant booms high above public squares. German company Herrenknecht, whose senior officials visited the Iranian capital last month, makes industrial drilling rigs critics say could be used to nestle nuclear facilities deep inside mountains. Other companies lining up to do business with the mullahs make equipment that also could be used against Iran’s enemies – or its populace. “It reminds me of the economy and the industry of the Third Reich,” said Ariel Muzicant, vice president of Europe’s Jewish Congress.

CNBC: 

• Death cross: Dow forms perilous pattern.

Zero Hedge: 

• Global Markets Turmoil After China Extends Currency War To 2nd Day - Devalues Yuan To 4 Year Lows. (graph)

• The Fed Is Out Of Options, "QE Is All It Can Do Here" Art Cashin Predicts. (video)

• How Much More Faith In Central Banks Is Left? (graph)

• Just As Brazil Hits Rock Bottom, Things Are About To Get Even Worse. (graph)

• An Economic Earthquake Is Rumbling.

• The Cable Industry's Scariest Chart. (graph)

• How Economic Growth Fails. (graph)

• Biggest US Dark Pool Busted For Rigging Markets, Engaging In Precisely The Manipulation It Warned Against.

• 1997 Asian Currency Crisis Redux.

• Even The Dumb Money Is Dumping Stocks Now. (graph)

• How One Hedge Fund Is Betting Against The $1.2 Trillion Student Loan Bubble. (graph)

• Manic Monday Becomes Turmoil Tuesday As China Rocks The Global Boat. (graph)

Business Insider:

• GUNDLACH: If oil goes to $40 a barrel something is 'very, very wrong with the world'.

• Japan's 'no-holds-barred money printing campaign' has mauled auto sales.

• Capital is fleeing China.

• JIM RICKARDS: The worst is not over in China.

• Senators want Obama to press Xi Jinping over China's 'extraordinary assault' on human rights.

Reuters:

• Senior U.S. lawmakers condemn 'provocative' China currency devaluation. Senior U.S. lawmakers from both political parties on Tuesday condemned China's surprise currency devaluation as a grab for an unfair export advantage and urged inclusion of currency manipulation curbs in a new Pacific Rim trade deal. Several members of Congress said the devaluation of the yuan by China's central bank on Tuesday raised serious concerns. Some suggested it was further proof China cannot be trusted on currency policy. China's 2.0 percent yuan devaluation came weeks ahead of the first state visit to the United States by Chinese President Xi Jinping amid other tensions over trade, cybersecurity and international development. "It's time for the administration to focus more intensively on China's cheating and label the country a currency manipulator," Democratic Senator Bob Casey, a member of the Senate Finance Committee, said in a statement.

• Index-linked stock funds signal less faith in wobbly China market. Beijing's efforts to support collapsing shares have pulled Chinese stocks back to around 4,000 points, but index-linked funds trading at discounts tell a less optimistic story. Exchange-trade funds (ETFs) listed overseas, which track China's main share indexes, suggest the stock market is valued as much as 10 percent lower, and the gap between what ETFs price in and the actual market may widen the more Chinese stocks are seen to be artificially propped up. Outflows in China ETFs began in mid-June when the market tumbled 30 percent in a span of just one month after a 110-percent rally from November to June. Selling intensified after Beijing rolled out interventionist policies to support the market and allowed hundreds of companies to suspend trade. "These ETFs are just a reflection that foreigners are losing faith in the China market," said Nitin Dialdas, chief investment officer at Mandarin Capital Limited in Hong Kong. "Perhaps these ETFs now reflect the true value of the underlying stock market, given the heavy intervention in onshore stocks."

Financial Times:

• ‘Enormous’ rise in EM debt rings alarms bells. Emerging market private sector debt has surged by an “enormous” 33 per cent of gross domestic product since the global financial crisis, heightening the risk of financial crises, according to new analysis by JPMorgan. The findings come amid mounting expectations that the US Federal Reserve is drawing close to its first rate rise since the crisis, a move many fear many reduce capital flows to emerging markets, potentially raising borrowing costs even if central banks do not raise policy rates in order to defend their currencies. JPMorgan’s analysis suggests that the debt burdens of emerging market companies and households have jumped from 73 per cent of GDP in 2007 to 106 per cent at the end of 2014, virtually as high as in the developed world.

Telegraph:

• Greek bail-out: the crucial unanswered questions. A bail-out deal has been agreed, so that's that. Right? If only things were as simple as that.

21st Century Business Herald:

• China May Ban Brokerages From Off-Exchange Finance. China may ban brokerages, fund management cos. from doing off-exchange financing via asset-management schemes, citing people familiar with the matter. The regulator plans to revise rules on what securities cos. are banned from asset management.

Evening Recommendations 

Morgan Stanley:

• Raised (GOOG) to Overweight, target $820.

Night Trading

• Asian equity indices are -1.75% to -1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 118.75 +4.5 basis points.

• Asia Pacific Sovereign CDS Index 68.75 +4.25 basis points.

• S&P 500 futures -.50%.

• NASDAQ 100 futures -.43%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (BABA)/.58

• (M)/.76

• (BGG)/.39

• (CACI)/1.71

• (CSCO)/.56

• (FLO)/.22

• (NTES)/1.98

• (NWSA)/.05

Economic Releases

10:00 am EST

• JOLTS Job Openings for June are estimated at 5350 versus 5363 in May. 

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,735,830 barrels versus a -4,407,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -770,830 barrels versus a +811,000 barrel gain the prior week. Distillate inventories are estimated to rise by +1,658,330 barrels versus a +709,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.58% versus a +1.0% gain prior.

2:00 pm EST

• The Monthly Budget Deficit for July is estimated to widen to -$137.0B versus -$94.6B in June.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Dudley speaking, China Retail Sales/Industrial Production reports, Eurozone Industrial Production report, BoJ Minutes, $24B 10Y T-Note auction, Wasde Crop report, weekly MBA mortgage applications report, (CVA) analyst day, (T) analyst conference, (XLNX) general meeting, Oppenheimer Tech/Internet/Communications Conference, Canaccord Growth Conference and the (ROG) investor day could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by industrial and technology shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the day.

Stocks Falling into Final Hour on China Bubble-Bursting Fears, Global Growth Worries, Surging Emerging Markets/US High-Yield Debt Angst, Commodity/Technology Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Slightly Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 14.01 +14.55%

• Euro/Yen Carry Return Index 144.14 +.50%

• Emerging Markets Currency Volatility(VXY) 10.73 +15.4%

• S&P 500 Implied Correlation 55.05 +2.59%

• ISE Sentiment Index 54.0 -34.94%

• Total Put/Call 1.10 +96.43%

• NYSE Arms 1.50 +256.41% 

Credit Investor Angst:

• North American Investment Grade CDS Index 75.55 +2.58%

• America Energy Sector High-Yield CDS Index 1,852.0 -1.76%

• European Financial Sector CDS Index 77.16 +4.12%

• Western Europe Sovereign Debt CDS Index 21.79 -3.11%

• Asia Pacific Sovereign Debt CDS Index 68.59 +6.10%

• Emerging Market CDS Index 335.94 +2.02%
  

• iBoxx Offshore RMB China Corporates High Yield Index 121.09 -.12%

• 2-Year Swap Spread 25.0 -.25 basis point

• TED Spread 20.75 -4.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -19.25 unch.

Economic Gauges:

• 3-Month T-Bill Yield .10% +3.0 basis points

• Yield Curve 146.0 -5.0 basis points

• China Import Iron Ore Spot $56.22/Metric Tonne -.32%

• Citi US Economic Surprise Index -5.94 +.5 point

• Citi Eurozone Economic Surprise Index 11.9 -4.0 points

• Citi Emerging Markets Economic Surprise Index -4.8 +1.0 point

• 10-Year TIPS Spread 1.66 -4.0 basis points
• # of Months to 1st Fed Rate Hike(Morgan Stanley) 4.29 -.10

Overseas Futures:

• Nikkei 225 Futures: Indicating -85 open in Japan 
• China A50 Futures: Indicating -168 open in China

• DAX Futures: Indicating +3 open in Germany

Portfolio: 

• Slightly Higher: On gains in my index hedges and emerging markets shorts 

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:

• It’s End of Era for Yuan Appreciation, Says Ex-PBOC Adviser Yu. The era of yuan appreciation has come to an end with China’s move to lower the daily reference rate by 1.9 percent, said Yu Yongding, a member of China’s monetary policy committee when the currency was revalued in July 2005. The yuan exchange rate will enter “a period of stabilization or even depreciation,” said Yu, now a researcher with the Chinese Academy of Social Sciences. The People’s Bank of China’s reduction to the daily fixing was a “symbol” for the change, although signs of yuan depreciation were evident before Tuesday’s move, he said. 
• China Resorts to Old Growth Drivers as New Engines Struggle. China has stepped up efforts to boost old growth drivers as new ones fail to offset slowing investment and trade with the steepest yuan devaluation in two decades. A record 1.9 percent cut in the People’s Bank of China’s daily yuan reference rate Tuesday followed an 8.3 percent fall in July’s exports. To bolster sluggish investment, China had this year already expanded a debt swap program to ease financing pressure on local governments and injected funds into policy banks so they can channel more credit to the real economy.
• Yuan Devaluation Points to Growing China Risk for LVMH, BMW. For companies from LVMH Moet Hennessy Louis Vuitton SE to BMW AG to Kone Oyj, China is delivering a one-two punch. Years of surging economic growth that spurred sales of Louis Vuitton handbags, BMW 5-Series cars and Kone elevators already had given way to the deepest slowdown since 1990. Chinese policy makers on Tuesday added to the pain for international companies by devaluing the yuan by the most in two decades, sending shares of European automakers, luxury manufacturers and industrial companies slumping. The devaluation of the currency in the short term reduces the value of their sales in the country and makes Chinese producers more competitive. While in the longer term it will help revive growth in China, for now it signals just how concerned the authorities are about the slowdown, and that there may be further pain ahead for companies operating there.
• China Auto Sales Fall to 17-Month Low Despite Price Cuts. Chinese consumers bought the fewest passenger vehicles in 17 months in July, extending a slump in the world’s largest auto market as deeper discounts failed to revive demand. Retail deliveries fell 2.5 percent to 1.3 million units, the lowest level since February 2014, according to the China Passenger Car Association. A separate set of figures from the China Association of Automobile Manufacturers showed passenger-vehicle sales declined 6.6 percent, also to a 17-month low. The Stoxx 600 Automobiles & Parts Index of European manufacturers dropped the most in six weeks. Foreign automakers are facing slumping demand in China because of a slowing economy and resurgent competition from lower-priced local offerings. The move on Tuesday to devalue its currency by the most in two decades adds to the challenges by reducing the value of repatriated profits for multinational carmakers. “International automakers’ cash flow will be impacted, no doubt about it,” said Janet Lewis, an auto analyst at Macquarie Group Ltd. “The U.S. automakers would stand to lose the most, because they’re the strong currency.” Daimler AG, the German parent of luxury-car maker Mercedes-Benz, was the biggest decliner in the European car- and component-makers’ index, dropping 4.3 percent to 80.66 euros at 12:14 p.m. in Frankfurt.   
• China's Yuan Devaluation Is Great News for U.S. Dollar. The move cast doubt on the health of the world’s second-largest economy, weighing on the currencies of its trading partners and competitors. The dollar was already supported by speculation the Federal Reserve will increase interest-rates as early as next month. “The dollar story continues to look in almost splendid isolation compared to pretty much everywhere else,” said Jeremy Stretch, a foreign-exchange strategist at Canadian Imperial Bank of Commerce in London. “It just adds to the impetus” for a currency that’s rising because “the growth story is allied to the prospect of Fed tightening upcoming.”
• Roach Sees Currency Wars Just Getting Worse After Yuan Decision. China’s shock move to devalue the yuan risks opening a new front in a currency war that stretches from the euro zone to Japan as nations look to energize their economies. It triggered the steepest selloff among Asian currencies in almost seven years, led by slides in South Korea’s won and the Taiwan and Singapore dollars. The euro and the yen tumbled 18 percent against the greenback in the past 12 months as monetary policies diverged in the U.S., Europe and Japan. “In a weak global economy, it will take a lot more than a 1.9 percent devaluation to jump-start Chinese exports,” said Stephen Roach, a senior fellow at Yale University and former Morgan Stanley non-executive chairman in Asia. “That raises the distinct possibility of a new and increasingly destabilizing skirmish in the ever-widening global currency war. The race to the bottom just became a good deal more treacherous.” 
• German Investor Confidence Unexpectedly Drops Amid Risks. German investor confidence unexpectedly fell, signaling concern that a global slowdown could weigh on Europe’s powerhouse economy. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months ahead, slid to 25 in August from 29.7 in July. The reading is the lowest since November and compares with a median estimate of 31.9 in a Bloomberg survey of economists.  
• Ukraine Returns Artillery to Front Line as OSCE Warns on Unrest. Ukraine returned heavy artillery to the front line of its more-than-yearlong conflict with pro-Russian rebels after reporting shelling at levels not seen in weeks. Weapons, pulled out as part of a February truce, were sent back to a village in the Donetsk region on Monday after separatists stormed it, the military said Tuesday from the eastern combat zone. While the rebels denied attacking, the Organization for Security and Cooperation in Europe said it had seen a significant increase in cease-fire violations.
• Which Puerto Rico Bond Defaults Next? 46% Yields Provide a Clue. Puerto Rico defaulted for the first time on Aug. 3, when a little-known agency, the Public Finance Corp., paid investors just $628,000 of the $58 million they were owed. The Finance Corp. is only one of the 17 arms of the U.S. territory that have sold tax-exempt bonds, according to the Government Development Bank. Unlike debt typically issued by countries, the securities carry varying degrees of risk because they’re backed by different sources of funds and legal safeguards. 
• Ruble Leads Currency Slide as Yuan Risks Denting Russian Exports. The ruble slid the most in emerging markets as the biggest drop in China’s yuan in two decades drove down oil prices and sparked concern Russia’s exports to its largest trading partner will be curtailed. The currency weakened 2.1 percent to 64.1810 by 4:26 p.m. in Moscow, its sharpest decline on a closing basis since Aug. 3.
• Brazil’s Real Leads Global Declines as Stocks Retreat on China. Brazil’s real led world losses and the Ibovespa slid as China’s currency devaluation fueled concern that demand from the nation’s top trading partner will falter. The real dropped 1.9 percent, the most among 16 major currencies, on speculation that trade inflows from the Asian nation will slump and as Goldman Sachs Group Inc. said it may weaken to 4 per dollar in the next 12 months. Vale SA, which gets a third of its revenue from China, extended this year’s plunge to 24 percent. Commodity companies in the MSCI Brazil fell at least 4.1 percent, the most among 10 industries.
• Europe Stocks Fall Most in Two Weeks as Exporters Slide on China. Carmakers, miners and luxury-goods shares led a drop in European stocks after China devalued its currency by the most in two decades. BMW AG and Daimler AG slid 4.3 percent or more, while LVMH Moet Hennessy Louis Vuitton SE and Swatch Group AG slipped at least 5.1 percent amid concern the yuan’s drop will hurt sales from China. Pernod Ricard SA and Remy Cointreau SA led losses in food-and-beverage shares. BHP Billiton Ltd. and Rio Tinto Group, the world’s biggest miners, fell more than 3 percent. The Stoxx Europe 600 Index slid 1.6 percent to 393.61 at the close of trading, taking its decline since an Aug. 5 peak to 2.6 percent.
• Yuan Cut Blunts Commodity Rebound as China Faces Pricier Imports. Commodity investors betting on a sustained recovery in prices probably didn’t count on China devaluing its currency by the most in two decades. The world’s biggest user of energy, metals and grains surprised markets by cutting the daily reference rate for the yuan on Tuesday by a record in an attempt to bolster its economy. Prices of oil and industrial metals fell amid speculation the weaker currency will make dollar-denominated imports more expensive and slow demand. 
• Mining Stocks Are Taking a Beating. The devaluation raises the risk that exports from China will increase, adding more metal to markets that are already oversupplied. A weaker yuan may also make imports for Chinese businesses more expensive and cut demand for raw materials in the world’s biggest consumer of commodities.
• OPEC Supply Reaches 3-Year High as Iran Pumps Most Since ’12. OPEC pumped the most crude last month in more than three years as Iran restored output to the highest level since international sanctions were strengthened in 2012. The Organization of Petroleum Exporting Countries, responsible for 40 percent of world oil supplies, raised output by 100,700 barrels a day to 31.5 million last month, the group said in its monthly market report, citing external sources. This increase came even as Saudi Arabia, which often curbs output toward the end of peak summer demand, told OPEC it cut production by the most in almost a year.
• Fed Weighing Liftoff May See Yuan Devaluation as Minor Headwind. Federal Reserve officials won’t delay raising interest rates because of the surprise devaluation of China’s currency, economists said, even though the move could prove a headwind for U.S. growth if it drives up the dollar. “I wouldn’t see this as a big game-changer on the medium-term outlook” for the U.S. economy, said Roger Aliaga-Diaz, a senior economist at Vanguard Group Inc. in Valley Forge, Pennsylvania, noting the People’s Bank of China had described it as a one-time realignment.
• U.S. Identifies Insider Trading Ring With Ukraine Hackers. (video) Exposing a new front in cybercrime, U.S. authorities broke up an alleged insider trading ring that relied on computer hackers to pilfer corporate press announcements and then profited by trading on the sensitive information before it became public. In morning raids in Georgia and Pennsylvania, federal agents arrested five of nine men accused in the insider trading plot. Four others were indicted on hacking and securities fraud charges but remain at large.
• Here's One Sign of Trouble in the Subprime Auto Lending Market
  
  Hitting a speed bump. Subprime auto lending has attracted a lot of attention in recent years. New data out this month may show why regulators and investors remain concerned. Losses on car loans taken out by bad-credit borrowers are continuing to climb, thanks in part to the flood of rookie auto finance companies that have entered the market in recent years. You can see the rise in subprime borrowers struggling to make car payments in monthly data on bond deals sold on Wall Street. So-called subprime auto asset-backed securities (ABS) bundle together car loans and then sell them to big investors. July reports show that annualized net losses on such bonds—a measure of the cost of bad debt—rose 1.45 percentage points over the past year to reach 6.6 percent last month, according to Nomura analysts.

CNBC:

• This is 'more damaging...than the Great Recession'. (video)

Zero Hedge: 

• This Is Not A Drill: India, Russia And Thailand Prepare For Currency War.
• There's Hope America: Anchor Walks Off Live TV, Refuses To Report On Kardashians. (video)
• Americans Who See Economic Deterioration Outnumber Optimists By 50%. (graph)
• Small Caps Tumble Back Into The Red For 2015. (graph)
• Demand For Credit Plunges 55% In China As Slump Deepens. (graph)
• September Rate-Hike Odds Plunge. (graph)
• Rand Paul Blasts Donald Trump, Calls Him A "Fake Conservative" & Wannabe "King".
• Why "The Fed Is In A Bind" - Scotiabank Explains. (graph)
• 10Y, 30Y Treasury Yields Break Below Crucial Technical Support. (graph)
• Now The Bad News: This Is How Much More Downside Is Left For China's Currency. (graph)
• Dow "Death Cross"-es For First Time In 4 Years. (graph)
• Recession Imminent As Wholesale Inventories Surge, Sales Disappoint; Autos Worst Since 2009. (graph)
• Markets Turmoil After China Devaluation - Surveying The Damage. (graph)
• Wage Growth Meme In Tatters As Unit Labor Cost Growth Tumbles, Huge Downward Revisions. (graph)
• A Stunned Wall Street Reacts To China's Currency Devaluation.

Business Insider: 

• This is just the beginning of a dangerous game in China.
• These are the biggest losers from China's currency devaluation. (graph)
• China is about to absolutely hammer some of the weakest economies in the world.
• Google(GOOG) has a new corporate homepage, a new typeface, and new branding — take a look.
• 3 reasons why China’s historic currency move is deflationary to the world.
• Sexting is shockingly common, and the places people do it will surprise you.
• People are getting more worried about what's going on inside the stock market.
• Uh oh, Apple analysts are predicting zero growth for the iPhone at the end of the year.
• China is a mess. (graph)

Telegraph: 

• Greece reaches new debt deal but critics brand targets 'utterly unachievable'. Broad terms of a third bail-out deal for Greece agreed after marathon talks, but economists say fiscal targets are "fantasy" and will not be met.

RIA:

• Yuan Devaluation Puts Pressure on RUB, Other EM Currencies. Russian Economy Ministry sees no domestic factors for ruble devaluation. Crude prices to stay under pressure in 2015; short-term oil supply to remain excessive, he said.