Evening Headlines
Bloomberg:
- China's Debt Burden Rises, What Happens Next? (video)
- Can China, Emerging Markets Bring on a Recession? (video)
- Brazil's Real Leads World Declines as Bonds Tumble After S&P Cut. (video) The real fell 2 percent to 3.8541 per dollar at 4:30 p.m. in New York,
the most in the world, after the nation lost its investment-grade rating
at Standard & Poor’s. The Ibovespa stock index dropped 0.3 percent
to 46,503.99, trimming an earlier slump of 2.3 percent. Oil producer
Petroleo Brasileiro SA, which was also downgraded to junk, extended this
year’s plunge. Yields on Brazil’s $4.3 billion of bonds due in 2025
rose to the highest since they were issued in 2013. The iShares MSCI
Brazil Capped ETF exchange-traded fund touched a decade low.
- Banco do Brasil Falls to Six-Year Low After Brazil Downgrade. Banco do Brasil SA’s bonds declined and its shares sank to a six-year
low, leading a drop among Brazilian banks on concern a cut in the
nation’s credit rating to junk will mean higher funding costs for
lenders. State-owned firms such as Brasilia-based Banco do Brasil
will probably be hardest-hit by Standard & Poor’s decision to
downgrade Brazil on Wednesday, said Max Bohm, an analyst at consulting
firm Empiricus Research. The rating company reduced the country to BB+
with a negative outlook.
- Modi Euphoria Turns to Angst Over Slow Pace of India Change. As Indian Finance Minister Arun Jaitley prepared his first budget
last year, a small group of bureaucrats walked into his office and
suggested a big splash: an end to a retrospective tax that’s soured the
investment climate for foreign companies. Normally budget speeches
in New Delhi are long monologues, fat with funding for projects pushed
by regional parties that hold together unwieldy ruling coalitions. The
senior ministry officials
argued that two months after winning the biggest electoral mandate in 30
years, Prime Minister Narendra Modi could take a stand.
- Goldman's Next 11 Markets Are Sinking Even Faster Than the BRICs. This time last year, it looked like Goldman Sachs Group Inc.’s
selection of emerging market up-and-comers was ready to fill the void
left by shrinking investment returns in Brazil, Russia, India and China.
Share
prices in these “Next 11” countries -- places like the Philippines,
Turkey and Mexico -- were trading at all-time highs as foreign investors
flooded their markets with cash. Inflows into Goldman Sachs’s
U.S.-domiciled Next 11 equity fund sent assets under management to twice
the level of the firm’s BRICs counterpart. Now, though, the Next 11 countries are looking even worse for investors
than the larger markets they were supposed to supplant. MSCI Inc.’s Next
11 equity gauge has tumbled 19 percent this year, versus a 14 percent
slump for the BRIC index. Foreign capital is rushing out, with the
Goldman Sachs fund shrinking by almost half as losses deepened to 11
percent since its inception four years ago.
- Asian Stocks Retreat, Paring First Weekly Advance Since July.
Asian stocks fell, paring the regional benchmark measure’s first weekly
advance since July. Consumer and industrial shares declined. The MSCI Asia Pacific Index declined 0.2 percent to 127.17 as of 9:02 a.m. in Tokyo.
- Why China Slowdown May Impact Oil Product Exports. (video)
- Shale Producers Clobbered by Oil Rout Face Added Iran Supply. Shale oil producers already awash in a supply glut face added crude
as early as next year after an agreement to ease sanctions on Iran
cleared a Senate obstacle. A Senate vote Thursday paved the way
for President Barack Obama to ease financial penalties for doing
business with Iran. Democrats kept Republicans’ disapproval resolution
from advancing in a 58-42 procedural vote, with 60 required. That may
allow additional Iranian exports to hit the market as early as the first
quarter of 2016. New supplies will exacerbate a global oversupply that
sent oil tumbling by more than half in the past year, and add to the
woes of the cash-strapped shale industry. “It’s more crude in a market that is already well supplied,” said
Sarah Emerson, managing director of ESAI Energy Inc., a consulting
company in Wakefield, Massachusetts. “It’s certainly not going to make
things any better.”
- Surviving Iron-Ore Bear Market Requires a Lot More Mining Robots.
When the rout in prices ends for the world’s iron-ore producers, those
left standing probably will have more robots on their side. Automated
drills and driver-less trucks are among the new tools employed by the
four biggest companies, including BHP Billiton Ltd., in a bid to
preserve profit margins during a bear market that began more than two
years ago. Using more technology helped reduce costs at Rio Tinto Plc by
8 percent since 2013, even as it boosted output by 5 percent, according
to Paul Young, an analyst at Deutsche Bank in Sydney.
- What's Causing the Wide Swings in U.S. Stocks? (video)
- Fund Flow Volatility Deepens as S&P 500 ETF Loses $10 Billion. U.S. investors are having trouble adhering to a game plan in a stock
market that is going up and down faster than any time in four years. In the latest fit of nerves, they pulled $10 billion from the
biggest exchange-traded fund tracking the Standard & Poor’s 500
Index in the three days through Tuesday. The withdrawal, the most since
August 2014, followed three days in which they added $7.5 billion, data
compiled by Bloomberg show.
- John Paulson's Funds Said to Decline in August as Markets Tumble. Billionaire
John Paulson’s hedge funds dropped in August as global stocks plunged,
according to a person briefed on the returns. The
firm’s merger fund fell 4.2 percent in August, said the person, who
asked not to be named because the information isn’t public. The loss
pared Paulson Partners’ gain to 6.5 percent in 2015. The returns
marked a setback in Paulson & Co.’s attempt to rebound from its
second-worst year in 2014. The merger strategy, which comprises more
than half the New York-based firm’s $19.3 billion in assets, was its
bright spot in 2014 and has made money this year as some other Paulson funds struggle.
Wall Street Journal:
- Emerging-Market Currencies: Things Look to Get Worse. Investor bets that Brazil and South Africa will default on their debt hit their highest level since the financial crisis.
Investor bets that Brazil and South Africa will default on their debt
hit their highest level since the financial crisis, underscoring the
stress mounting on emerging-market economies heading into the most
anticipated Federal Reserve meeting in years. The cost to buy
credit-default swaps—insurance-like contracts that compensate users for
debt defaults—is far from the only sign that investor anxiety is
building ahead of the Fed’s two-day meeting concluding Sept. 17.
Currencies in Turkey, South Africa and Malaysia...
- The Islamist Menace Shadowing This Sept. 11. The terror threat is growing, but our nation’s leaders are even deeper in denial than they were 14 years ago. The anniversaries and other reminders of the Islamic extremist attacks
of Sept. 11, 2001, stir a torrent of thoughts and emotions. But we
should try to focus on those most relevant today.
- Iran No Confidence Vote. Obama is flouting the nuclear review act he signed in May. The Senate held its first showdown vote on the Iranian nuclear deal
Thursday, with 58 Senators having declared their opposition, including
four Democrats and Republican non-hawks like Susan Collins of Maine and
Rand Paul of Kentucky. The American public is also overwhelmingly
opposed, with a Pew poll this week finding 21% approval for the
agreement versus 49% disapproval.
Fox News:
- Front-runner status challenged? Polls show Clinton trailing Sanders in Iowa, NH. (video) Just days after a New Hampshire poll showed Hillary Clinton slipping
further behind Bernie Sanders in the vital early primary state, a fresh
survey shows the Vermont senator narrowly edging ahead of her in Iowa as
well. The Quinnipiac University poll shows Sanders leading Clinton 41-40 percent.
- White House: Obama wants to admit 10,000 Syrian refugees in 2016. The United States is making plans to accept 10,000 Syrian refugees in
the coming budget year, a significant increase from the 1,500 migrants
that have been cleared to resettle in the U.S. since civil war broke out
in the Middle Eastern country more than four years ago, the White House
said Thursday.
South China Morning Post:
Evening Recommendations
JPMorgan:
- Added (LULU) to Focus List.
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 136.25 -1.5 basis points.
- Asia Pacific Sovereign CDS Index 85.5 +2.0 basis points.
- NASDAQ 100 futures +.36%.
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- PPI Final Demand for August is estimated to fall -.1% versus a +.2% gain in July.
- PPI Ex Food and Energy for August is estimated to rise +.1% versus a +.3% gain in July.
10:00 am EST
- Preliminary Univ. of Mich. Consumer Sentiment for September is estimated to fall to 91.1 versus 91.9 in August.
2:00 pm EST
- The Monthly Budget Deficit for August is estimated at -$77.5B.
Upcoming Splits
Other Potential Market Movers
- The German CPI report, EU Finance Ministers Meeting and the USDA's WASDE report could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
