Evening Headlines
Bloomberg:
- China Effect Seen as ADB Cuts Asian Growth Forecasts Again. China’s
declining appetite for energy, metals and other commodities
will hurt commodity-focused export economies, including Mongolia,
Indonesia, Azerbaijan, and Kazakhstan, the Asian Development Bank said.
For the second time in just over two months, the ADB cut China’s
economic growth forecasts -- to 6.8 percent in 2015 and 6.7 percent in
2016 -- it said in its Asian Development Outlook 2015 Update report
released Tuesday. In July, it estimated a 7 percent expansion for
this
year and 6.8 percent for next. Mongolia, which exports copper, will
suffer an estimated 2.7 percentage-point decline in gross domestic
product growth for every 0.2 percentage-point drop in China’s expansion,
the ADB said. Kazakhstan, which sells piping oil, will lose about 0.5
percentage
point, it said.
- Five Things on the Agenda When China's Xi Goes to Washington. Pollution, cyber threats and human rights are on the list. Xi
Jinping is coming to America. The Chinese leader will land in Seattle,
visit the White House and address the United Nations for the first time.
His words will be parsed by economists, activists and politicians
seeking answers from
the world's second-biggest economy on where it stands on climate change,
monetary policy and cyber espionage to name but a few hot-button
issues. Here is a quick ranking of what Americans are most worried about when it comes to China:
- China could dodge Fed bullet, but Malaysia in the firing line. Malaysia needs to braced for a hit to growth. When
the U.S. Federal Reserve last week opted against its first rate
hike in nine years, governments around Asia breathed a sigh of relief.
But that relief could be short lived. While the region's biggest
economy, China, can likely withstand any negative flow through whenever
the Fed does
eventually move, others, like Malaysia are braced for a hit to growth.
That's
because a U.S. rate hike could accelerate declines in developing Asian
currencies and in the process raise funding costs for firms and
consumers, constraining demand and disrupting growth, according to HSBC
Holdings Plc. The relationship is particularly dangerous in economies
where consumption and investment is driven by debt and may be
exacerbated when U.S. dollar interest rates begin to rise, it said.
- Barclays: These Advanced Economies Need More Currency Depreciation to Offset the Commodities Crash. Competitiveness is just a crashing currency away. The hangover from the end of the commodity supercycle has wreaked havoc on a number of advanced economies. Barclays’s
foreign exchange research team found that Australia, Canada, Norway,
and New Zealand have been victims of a “Dutch Disease pandemic during
the recent commodity boom.” What’s Dutch Disease, you ask? Dutch
Disease refers to the process by which an increase in commodity prices
exerts upward pressure on the currency of a nation that exports that
natural resource, and causes a decline in the country’s manufacturing
sector, which loses competitiveness as the exchange rate rises.
- Volatility Sets in for Currencies as Fed Leaves Traders Hanging. Foreign-exchange
volatility, already the highest in four years, looks set for an
extended stay after the Federal Reserve rattled markets last week by not
raising interest rates. With
the central bank leaving the question of when it will move hanging over
markets, its focus on economic data and international circumstances
means every report will stir more volatility, according to Morgan
Stanley. Fed Chair Janet Yellen says she’s monitoring risks from China,
while central banks in Europe and Japan weigh further stimulus as the
Fed looks to raise U.S. rates for the first time since 2006.
- Most Asian Stocks Advance as Consumer, Material Companies Rally. Most Asian stocks rose, following a rebound in U.S. equities. Consumer and material shares led gains. Four shares climbed for each that fell on the
MSCI Asia Pacific Excluding Japan Index, which was little changed as of
8:04 a.m. in Hong Kong. Japanese markets are closed for a holiday.
- Scott Walker Exits the Republican Presidential Race. The
Wisconsin governor took a parting shot at front-runner Donald
Trump, urging remaining candidates to "offer a positive, conservative
alternative to the current front-runner." "Today, I believe that I am being called to lead by helping to clear
the field in this race, so that a positive, conservative message to rise
to the top of the field," Walker said. "I encourage other Republican
presidential candidates to consider doing the same, so that the voters
can focus on a limited number of candidates who can offer a positive,
conservative alternative to the current front-runner."
He described the appeal as "fundamentally important to the
future of party, and more importantly to the future of our
country," though Walker did not call out Trump by name.
- Chicago Plans $543 Million Property Tax Hike Over Four Years. Chicago Mayor Rahm Emanuel will propose raising property taxes by
$543 million over the next four years to help cover soaring pension-fund
costs that have triggred downgrades to the city’s bond rating. Emanuel, a Democrat who won re-election this year, will propose an
increase of $318 million for 2015, his office said in a statement
Monday. That will be followed by an additional $109 million in 2016, $53
million in 2017 and $63 million in 2018.
Wall Street Journal:
- Russia, Iran Seen Coordinating on Defense of Assad Regime in Syria. U.S., regional officials say military buildup in coastal base aimed at safeguarding regime’s stronghold.
Russia and Iran have stepped up coordination inside Syria as they move
to safeguard President Bashar al-Assad’s control over his coastal
stronghold, according to officials in the U.S. and Middle East, creating
a new complication for Washington’s diplomatic goals.
- For Multinational Firms, Brazil Becomes a Pain in the Wallet. Weak currency, recession keep recent investments in once-hot market from paying off. As many multinational companies close their third-quarter books in
coming weeks, their finance chiefs are likely to face a stark reality:
the weakest results coming out of Brazil in over a decade.
- The Politics of Pope Francis. Perhaps America and this pope can learn from each other. The pope will also visit the White House and speak to Congress, and this
is where his tour takes on an extra-religious resonance. Pope Francis
has overtly embraced the contemporary progressive political agenda of
income redistribution and government economic control to reduce climate
change.
Business Insider:
- Another sign that things are going wrong in 3 of the world's largest economies.
UK construction machinery firm JCB has said it will cut 400 jobs around
the world, mostly due to a massive slowdown in business in Russia,
China, and Brazil. This is a horrible sign for three of the biggest
economies in the world. "In the first six months of the
year, the market in Russia has dropped by 70%, Brazil by 36% and China
by 47%," said JCB CEO Graeme Macdonald in a press release.
"Parts of Europe are also struggling, with France down by 26%," he added.
Financial Times:
- Russia to deploy 2,000 in Syria air base mission’s ‘first phase’. Russia
is to deploy 2,000 military personnel to its new air base near the
Syrian port city of Latakia, signalling the scale of Moscow’s
involvement in the war-torn country. The deployment “forms the first phase of the mission there”, according to an adviser on Syria policy in Moscow.
Evening Recommendations
Night Trading
- Asian equity indices are unch. to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 147.0 -1.25 basis points.
- Asia Pacific Sovereign CDS Index 76.50 -1.75 basis points.
- NASDAQ 100 futures -.21%.
Earnings of Note
Company/Estimate
Economic Releases
9:00 am EST
- The FHFA House Price Index for July is estimated to rise +.4% versus a +.2% gain in June.
10:00 am EST
- The Richmond Fed Manufacturing Index for September is estimated to rise to 2.0 versus 0.0 in August.
Upcoming Splits
Other Potential Market Movers
- The Fed's Lockhart speaking, China Manufacturing PMI, $26B 2Y Note auction, weekly US retail sales reports, Raymond James Equity Conference, (PH) investor meeting and the (SPLK) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
