Bloomberg:
- Citi's Chief Economist Says China Is 'Financially Out of Control'. (video) Corporate debt is the elephant in Beijing's room. Willem Buiter, Citigroup chief economist, sees a storm brewing in China. This week, he estimated that there is a 55 percent chance of a made-in-China global recession in the not too distant future, which he defines as a period of sub-2 percent global growth. Without a massive, consumer-focused stimulus plan, he argues, Chinese growth will slip below 4 percent. This would constitute a recession for the world's second-largest economy, according to Buiter, and the rest of the world wouldn't be insulated from the slowdown. Buiter appeared on BloombergTV to discuss his headline-grabbing call.
- Brazil's Junk Relapse Makes Its Bonds Even Riskier Than Russia. (graph) Brazil’s plunge into junk status may be far from finished. On Wednesday, Standard & Poor’s stripped Latin America’s biggest country of its investment grade, lowering it to BB+ and keeping a negative outlook on its debt. With Brazil headed for its longest recession since the 1930s, bond traders are bracing for more rating cuts as political gridlock stymies desperately needed economic reforms. Brazil’s borrowing costs have soared and its $2.15 billion of bonds due in 2023 now yield just 0.06 percentage point less than similar-maturity debt from Bolivia -- which is rated one level lower and is South America’s poorest nation. The advantage is the smallest on record. It also now costs 0.22 percentage point more to protect Brazil’s debt securities than those issued by Russia, a nation battered by sanctions and plunging oil prices.
- Daimler Trucks Expects Brazil Crisis to Get Worse Before Revival. Daimler AG said it expects demand for trucks and buses in Brazil to plunge as much as 50 percent this year as the crisis in South America’s largest economy gets worse. The market in Brazil, struggling to overcome a crippling recession, will need one to three years to return to growth, Wolfgang Bernhard, head of Daimler’s commercial-vehicle unit, said at the Hamburg club of business journalists late Thursday. “We expect to continue hibernating,” Bernhard said. Industrywide truck sales plunged 44 percent in the first half of the year, the Stuttgart, Germany-based company said in August. Brazil is one of several markets in which “there’s a strong, very cold headwind,” he said.
- Europe Stocks Trim Weekly Gain, Unable to Shake Off Fed Concern. (video) Concern persisted over an impending Federal Reserve rate decision, sending European stocks lower for a second day. Declines in telecommunications shares contributed to losses after opposition from the European Union led Telenor ASA and TeliaSonera AB to scrap a merger of their Danish businesses. Rival TDS A/S slid 7.7 percent as the news ended its prospects of facing less competition. Telecom Italia SpA, a target of takeover speculation, slipped 3.1 percent. The Stoxx Europe 600 Index dropped 1 percent at the close of trading, paring its weekly advance to 0.7 percent.
- How Low Can Oil Go? Goldman Says $20 a Barrel Is a Possibility. (video) The global surplus of oil is even bigger than Goldman Sachs Group Inc. thought and that could drive prices as low as $20 a barrel. While it’s not the base-case scenario, a failure to reduce production fast enough may require prices near that level to clear the oversupply, Goldman said in a report e-mailed Friday while cutting its Brent and WTI crude forecasts through 2016. “The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016,” Goldman analysts including Damien Courvalin wrote in the report. “We continue to view U.S. shale as the likely near-term source of supply adjustment.”
- Why Vladimir Putin Won't Be Helping OPEC to Cut Oil Production. (video) Few things have more potential to spook the oil market than the prospect of Russia joining forces with OPEC. Speculation that such a move was afoot last month drove crude to its biggest three-day gain in 25 years. Despite the market buzz, there are sound economic and technical reasons why this is unlikely to happen. “Russia and OPEC have talked about cooperation in cutting production many times in the past, but the results of that were always dismal and disappointing,” said Nordine Ait-Laoussine, president of Geneva-based consultant Nalcosa and former energy minister of Algeria. “Russia has assumed that when oil prices go down, OPEC countries are in a weaker position and are more likely to be the first to cut its production, and they always did.”
- Commercial Credit is the New Mortgage Credit. Corporate debt products are the hot thing. Meet the incredible, shrinking mortgage bond market. In the wake of an unprecedented U.S. housing bust that evolved into a global financial crisis, the business of bundling home loans that aren't backed by the American government into bonds that can be sold to investors has all but disappeared. It's a point underscored on Friday by Laurie Goodman, Director of the Housing Finance Policy Center at the Urban Institute, in a paper titled: "The Rebirth of Securitization: Where Is the Private-Label Mortgage Market?"
- Venture Capital Legend Says Trouble Lies Ahead for Some of the World's Hottest Startups. Being a highly-prized unicorn can be tough. As growth slows in emerging markets and stock volatility picks up, there have been some questions about the future of so-called unicorns, or startups with valuations upwards of a billion dollars. Yesterday on Bloomberg TV, Alan Patricof, co-founder of venture capital firm Greycroft Partners, said there could be troubled times ahead for startups that have so far been much loved by flush investors.
Zero Hedge:
Telegraph:
- No more bail-outs: Germany blocks Juncker's eurozone reform drive. Berlin brands Juncker's visions to deepen monetary union as 'unacceptable', rejecting taxpayer rescues for banks and sovereigns.