Bloomberg:
- Iran Supreme Leader Khamenei Says Israel Won't Exist in 25 Years. Supreme Leader Ayatollah Ali Khamenei said Iran won’t engage the U.S. in any issue beyond the nuclear program and renewed his attacks on Israel, saying the “Zionist regime” won’t exist in 25 years. “We only agreed, for specific reasons, to negotiations with the U.S. on the nuclear matter,” Khamenei told a gathering of Iranian citizens, according to his website. “We have not allowed talks in other areas and we won’t negotiate with them.” While a reiteration of earlier comments, the timing of Khamenei’s remarks creates an opportunity for critics of the country’s July nuclear accord in the U.S. and Israel to question any attempts to mend ties with Iran. The speech may also temper speculation that the Islamic Republic may seek to change its policy in the Middle East.
- Russia Weighs Deeper Military Role in Syria, Defying U.S. Russia said it’s ready to look at measures to fight Islamist insurgents in Syria if the conflict worsens, rejecting U.S. criticism of its deepening military involvement in the Middle Eastern country. “If additional measures to step up the anti-terrorist fight are required, Russia is ready to consider them, but only in strict compliance with international and Russian law,” Foreign Ministry spokeswoman Maria Zakharova told reporters Wednesday in Moscow. “The situation now doesn’t require it.” The U.S. administration has criticized Russia for suspected deployment of additional military personnel and aircraft in Syria, saying the move could trigger an escalation of the four-year conflict. France is preparing for air strikes against Islamic State as refugees flee to Europe.
- For China Brokerages, the Market Rescue Hurts More Than It Helps. China’s campaign to end its $5 trillion equity rout is driving investors away from an unlikely corner of the stock market: the brokerage industry. Instead of benefiting from government efforts to shore up the market, the Hong Kong-listed shares of Citic Securities Co., Haitong Securities Co. and China Galaxy Securities Co. have tumbled twice as fast as benchmark indexes since the beginning of July. Not only are brokerages being compelled to foot a portion of the rescue bill, they’re also getting hit by a plunge in volumes as policy makers restrict speculative trading.
- This Table Shows What's Happening With Chinese Trading Partners All Around the World. How China's slowdown is reverberating.
- S&P Follows Moody's in Cutting Asian Forecasts on China Fears. Standard & Poor’s cut its growth forecasts for Asian economies, citing “abysmal” trade data and fears about China’s market stability, a day after Moody’s Investors Service made a similar reduction. S&P now sees the region growing 5.4 percent in 2015 instead of 5.5 percent, dragged down by Indonesia, the Philippines, Singapore, Taiwan and Thailand. It also predicts that currencies will weaken. “Although market fears that the sky is falling are almost certainly overblown, in our view, they have been enough to move the needle,” Paul Gruenwald, S&P’s Asia-Pacific chief economist, wrote in a report on Wednesday. The company sees “slower growth, higher volatility, and more risks” compared with its previous report published in July.
- Citigroup Sees 55% Risk of a Global Recession Made in China. Citigroup Inc. is sounding the alarm bells for the world economy. In an analysis published late on Tuesday, the New York-based bank’s chief economist, Willem Buiter, said there is a 55 percent chance of some form of global recession in the next couple of years, most likely one of moderate depth and length. Unlike the U.S.-driven international slumps of the past two decades, this one will be generated by sliding demand from emerging markets, especially China, which has surged in size to become the world’s No. 2 economy. “The world appears to be at material and rising risk of entering a recession, led by EMs and in particular by China,” wrote Buiter, a former U.K. policy maker.
- Flowers Hands Back Most of $3.2 Billion China Investment Unspent. On the eve of the credit crunch, J. Christopher Flowers received $3.2 billion from China’s newly formed sovereign wealth fund to invest in distressed financial companies. Seven years later, his firm disclosed that the bulk of the money never got invested. J.C. Flowers & Co., a New York-based private equity firm that specializes in financial institutions, in a June filing adjusted its gross assets under management to $8.5 billion from $11.1 billion. The $2.6 billion decrease primarily reflects the firm’s view that it won’t be using the remaining commitment it received from China Investment Corp. in 2008, according to a person familiar with the matter who requested anonymity because the fund is private. The inability to deploy such a large chunk of investor capital is unusual because private equity firms typically only raise money if they’re confident they can invest it.
- GM(GM), Ford(F) Open Factories in China Just in Time for Slowing Growth. Auto sales in China are slowing and may fall for the first time in more than a decade, undercutting one of the few growth markets for carmakers like General Motors Co. and Ford Motor Co., according to consulting firm Alix Partners. The U.S. automakers expanded last year to capitalize on long-term growth and are now wrestling with a softer market, AlixPartners said in a study released Wednesday. Carmakers won’t get much relief in China until sales rebound because, even if the market grows this year, prices are under pressure, according to the study.
- Standard Chartered Priced for a Crisis as Asian Economies Weaken. Standard Chartered Plc is priced for a crisis, with a stock valuation that has sunk to lower than during Asia’s meltdown in the 1990s or the global turmoil of 2007-08.
- U.K. Manufacturing, Export Slump Give BOE Reason for Caution. U.K. industrial production unexpectedly declined and goods exports plunged the most in nine years, indicating a loss of economic momentum that may keep the Bank of England on a cautious policy footing. Total production fell 0.4 percent in July, the Office for National Statistics said in London on Wednesday, missing economists’ forecasts for a 0.1 percent increase. Sales of British goods abroad fell 9.2 percent, contributing to the biggest drop in factory output since January.
- Ruble Drops on Russia Rate-Cut Risk as RBS Reopens Bearish Bet. The ruble weakened as crude oil fell and Royal Bank of Scotland Group Plc warned that traders are underestimating the chances of the Bank of Russia cutting rates on Friday. The Russian currency slid 0.2 percent to 68.0980 against the dollar by 5:48 p.m. in Moscow. Oil, Russia’s main export earner, fell 1.1 percent to $49 a barrel in London. Government bonds advanced as the Finance Ministry placed 8.56 billion rubles ($126 million) of 10 billion rubles of bonds it offered in auctions today.
- Banks Pine for Fees as Junk-Bond Lull Hobbles Emerging Markets. Life’s getting tougher for global investment banks as some of the highest-paying deals in the world of bonds become scarce. Sub-investment grade companies in emerging markets globally have issued $5.5 billion of U.S. currency notes so far this quarter, on track for the least since the last three months of 2011, according to data compiled by Bloomberg.. That reduction may trim gains from debt underwriting, which at Credit Suisse Group AG -- 2015’s top arranger of emerging market high-yield debt -- dropped 16 percent in the first half. Companies from China to Brazil, Russia and Mexico are shying away from offshore markets amid risk aversion and political wrangling that pushed some coupons into the double digits. The mostly blue chips left selling international securities are far less lucrative to service, with bond underwriting fees for investment-grade companies averaging 0.433 percent compared with the 0.865 percent high-yield corporates pay. “I can imagine fewer high-yield bankers are required,” said Florian Schmidt, the head of debt capital markets at SC Lowy Financial (HK) Ltd. in Hong Kong. It’ll mean “less work on ratings advisory, it will impact lawyers, it will impact pretty much all professional parties. Anybody involved in primary activity will see pretty tough times ahead.”
- Russian Fashion Market's Plunge Turns Heat on Global Brands. Russia’s 2.25 trillion-ruble ($33 billion) fashion market is set to shrink at least 20 percent this year, adding to pressure that’s causing some global brands to quit the country, according to researcher Fashion Consulting Group. Consumer incomes have been sapped by the depreciation of the ruble against foreign currencies, Moscow-based Fashion Consulting said in an e-mailed report. Many Russians now spend half their budget on food, leaving less money for clothes, it said. Amid the slowdown, retailers including the U.K.’s New Look and River Island have quit Russia in the past year. Marks & Spencer Group Plc, Sweden’s Stockmann OYJ and Spain’s Mango have reduced the number of stores in the country, while brands such as Supergroup Plc’s Superdry are delaying opening plans.
- Refugee Flow May Mask Terrorist Infiltration, Spy Chief Says. The Obama administration is concerned that terrorists may use the flow of refugees from Syria to infiltrate Europe or the U.S., spurring more careful screening, Director of National Intelligence James Clapper said. “We don’t put it past the likes of ISIL to infiltrate operatives among these refugees,” Clapper said Wednesday in Washington, using the acronym for the self-described Islamic State. “That is a huge concern of ours.”
- Puerto Rico Plan Shows $13 Billion Debt Gap in Next Five Years. (video) Puerto Rico said it faces a $13 billion funding shortfall for debt payments over the next five years even after taking into account proposed spending cuts and revenue enhancement measures outlined in a long-awaited fiscal and economic growth plan. The report by Governor Alejandro Garcia Padilla’s administration said Puerto Rico will seek to restructure its debt in talks with creditors to avoid a legal morass that could further weaken the economy. No estimates were provided of potential losses for the owners of Puerto Rico’s $72 billion in debt. Prices of some of the commonwealth’s most actively traded bonds fell after the plan was released.
- European Stocks Advance for Third Day Spurred by Asia Optimism. (video) The Stoxx 600 advanced 1.3 percent at the close of trading, trimming intraday gains of as much as 2.6 percent. All 19 industry groups rose, with miners up the most. Glencore Plc and Anglo American Plc rallied more than 4.8 percent.
- Oil Default Wave Seen Spreading to China With 40-Cent Bonds. The wave of defaults and debt restructuring hurting oil bonds around the world looks set to reach China. Notes of oil services firms are the nation’s worst performers this quarter with a 5.9 percent slide amid record industry debt and slumping crude prices, according to a Bank of America Merrill Lynch index of foreign-currency notes. Explorers have lost 1.4 percent. Some private-sector companies have dropped to distressed levels with the 2019 notes of Honghua Group Ltd. at 38.8 cents on the dollar and Anton Oilfield Services Group’s 2018 paper at 43.8 cents. China’s quest to secure resources for the world’s second-biggest economy has sparked a fourfold expansion in petroleum industry debt in the past decade to 1.3 trillion yuan ($205 billion). Crude’s 13.5 percent slide this year is adding to stress on energy firms’ finances. Standard & Poor’s says oil and gas companies account for 28 percent of all corporate defaults globally this year, and that they are among the most vulnerable to failures in coming months.
- Investors Flee Biggest U.S. Crude Oil Fund as Volatility Surges. Investors bailed out of the United States Oil Fund last week as volatility surged. A net 19.3 million shares of the biggest exchange-traded fund that tracks oil were sold back, a weekly record since the ETF’s inception in 2006, according to data compiled by Bloomberg. Total shares outstanding dropped to 176 million on Sept. 4, the lowest since Aug. 11.
- India Proposes 20% Steel Import Duty as Surge Hurts Local Mills. A unit of India’s finance ministry recommended imposing a temporary 20 percent duty on certain steel products to arrest a surge in lower-priced imports. The Director General of Safeguards Wednesday recommended levying the duty for 200 days on certain flat steel products, including hot-rolled coil used in making cars and appliances, after probing claims that cheaper imports are hurting local mills. The proposal now needs approval from the government’s Board of Safeguards, and the finance ministry then will take a final decision.
- Fed Funds Glued to Stocks as September Odds Creep Back From Low. The probability of an increase in the fed funds target by the September meeting reached a high of 54 percent on Aug. 7, according to data compiled by Bloomberg. That figure slid to 24 percent by Aug. 26, one day after the S&P 500 fell to 1,867.61, the lowest level since October. Since then, odds of a September liftoff have risen as high as 32 percent while the S&P 500’s halting rebound has pushed the index about 5 percent higher. The connection wavered on Tuesday, as the S&P 500 jumped 2.5 percent in its second-biggest rally of 2015. Odds the Fed will hike next week slipped to 28 percent, from 30 percent the day before.
CNBC:
- Jim Chanos: New short position in Cheniere Energy(LNG). (video) Short-seller Jim Chanos announced on CNBC on Wednesday a new short position in liquefied natural gas player Cheniere Energy, a company in which billionaire hedge fund manager Carl Icahn has recently taken a sizable long position. "We've been pretty negative for the past six months on this LNG space. We think it's a looming disaster," the founder and president of Kynikos Associates said on "Squawk Box." "It's a little bit tied into Asia," Chanos said of his latest short. "LNG was seen as a savior of a lot of natural gas plays, a way to basically satiate the incredible demand for energy out of Asia. The problem is ... everybody figured it out ... at the same time."
Zero Hedge:
Sydney Morning Herald:
- William Ackman foresees bigger yuan devaluation, sees recession risk in China. Billionaire hedge fund manager William Ackman, whose investments include companies tied to China's growth, said the world's second-largest economy may be on the verge of a bigger currency devaluation and could face a major recession. "I think their recent small devaluation could be the beginning of a larger one," Ackman, who runs Pershing Square Capital Management, told Fox Business Network in an interview. "I think they could solve a lot of their problems by letting their currency depreciate. And I think ultimately that's where they're going to end up," the activist investor said, according to excerpts of the interview.