Evening Headlines
Bloomberg:
- China’s Economic Growth Not at Rate GDP Suggests. (video)
- China Commodity Deluge Extends to Diesel as Glut Shrinks Profits. Add diesel to the commodities flooding global markets from China. The nation exported a record volume of the fuel last month after already shipping unprecedented amounts of steel and aluminum overseas. The weakest economic growth since 1990 is sapping domestic demand for commodities, while refineries, mills and smelters grapple with excess capacity after years of expansion. “A lot of it has to do with slowing demand at a time when companies had plans for much a better demand environment, so capacities had been increased,” said Ivan Szpakowski, a commodities strategist at Citigroup Inc. in Hong Kong. “As demand slows, that’s led to an overcapacity in the domestic market and producers have sought to export the surplus.”
- Latin American Currencies Lead Emerging-Market Selloff on China. Latin American currencies led by the Brazilian real fell to their lowest on record, posting the steepest two-day decline in two years, after Chinese economic data showed the world’s second-biggest economy is slowing. The Brazilian central bank’s offer of $4 billion in foreign-exchange credit lines wasn’t enough to keep the real from tumbling 2.9 percent to a fresh record low as of 4:40 p.m. in New York. The Chilean peso breached 700 per dollar for the second time in a decade, falling 0.9 percent to 703.88 per dollar. Mexico’s peso slide 1.4 percent to 17.1227 per dollar even after the central bank sold dollars for a third straight day. The Colombian peso has weakened 4.8 percent in the past week, its steepest decline since 2009.
- Asian Stocks Decline as Japanese Markets Open After Holiday. Asian stocks fell, dragged down by a retreat in Japanese shares as the nation’s markets opened after a three-day holiday. Energy and material companies led losses. The MSCI Asia Pacific Index dropped 0.2 percent to 125.49 as of 9:01 a.m. in Tokyo.
Wall Street Journal:
- Cyber Sleuths Track Hacker to China’s Military. The story of a Chinese military staffer’s alleged involvement in hacking provides a detailed look into Beijing’s sprawling state-controlled cyberespionage. machinery.
- Energy Lending Caught in a Squeeze. Banks run up against regulatory review of loans to oil and gas firms. Banks are clashing with regulators over loan reviews that could crimp the flow of new credit to the oil patch.
- Total Faces U.S. Probe Over Gas Market Trades. CFTC probe comes as the French oil company faces similar allegations from FERC.
- A Politicized Pope. The battlegrounds of secular politics may undermine Francis’ moral authority. In the past two years, the plight of Christians in the Middle East has gone from persecution to slaughter. Decades of Vatican diplomacy there for the world’s most at-risk Christians has produced very little. Soon there may be nothing left to protect. On Friday, the pope reportedly will address the U.N. about climate change. A jeremiad against Christian extermination would be welcome this week, too.
Fox News:
- Fox News Poll: Outsiders rule 2016 GOP field, support for Biden nearly doubles. (video) Most Republicans feel betrayed by their party -- and show their displeasure by supporting outsiders over establishment candidates in the GOP presidential race.
- Fuel fraud: Stealing millions from taxpayers at the pump.
Barron's:
- Bears Are Back in Charge as Charts Flash Danger. Now that the Fed rate decision has been digested, the bears are on the prowl looking for more prey.
CNBC:
- Brazil real tumbles despite central bank support of currency. The Brazilian real tumbled on Wednesday as the central bank's increased intervention in the currency market failed to offset fears of deteriorating government finances, a mounting political crisis and weaker Chinese demand for raw materials.m As the real plunged to an all-time low of 4.14 per dollar, the central bank called extraordinary auctions to sell currency swaps and dollars with repurchase agreements, joining an array of emerging-market policymakers struggling to support their currencies.
Zero Hedge:
- Japanese Stocks Tumble After Holiday, China Default Risk Hits 2 Year Highs As Yuan Weakens For 4th Day. (graph)
- Is Volkswagen About To Unleash The Next Deflationary Wave? (graph)
- Endgame: Putin To Bomb ISIS With Or Without Obama. "The Government Is Literally Paying Itself" - Citi Calls For Money Paradrops.
- "The Government Is Literally Paying Itself" - Citi Calls For Money Paradrops.
- Government Shutdown & Debt Limit Questions Answered.
- The Colossal Failure Of Central Bank 'Trickledown'. (graph)
- Is The Bank Of Spain Quietly Pulling Its Gold From Catalonia Ahead Of This Weekend's Vote? (graph)
- Petrobras Default Looms Under $90B Dollar-Denominated Debt. (graph)
- Dear Janet: Here Is The Circle Jerk You Have Created Explained In 54 Words.
- Stocks Slide On Dreary Draghi, Crude Clobbering, & Brazilian Battering. (graph)
Business Insider:
Reuters:
- Exclusive: Wal-Mart(WMT) presses suppliers to share benefits of cheaper yuan. Wal-Mart Stores Inc (WMT.N) is seeking price cuts from suppliers that produce goods in China, saying the retailer should share in the savings generated by China's devaluation of the yuan, people with knowledge of the matter said. Wal-Mart managers in recent weeks have contacted more than 10,000 suppliers in various countries, all of which have manufacturing facilities in China, seeking cost cuts of 2 percent to 6 percent on mainly general merchandise including home furnishings, apparel, health and beauty products, appliances, electronics and toys, according to a consultant who advised Wal-Mart on the move and spoke on condition of anonymity to protect his relationship with the retailer.
- Rising copper output in Peru to offset price slump -central bank. Peru, the world's third-largest copper producer, will withstand slumping copper prices thanks to rising output from new projects and low operating costs that keep mining profitable, the head of country's central bank said on Wednesday. "There's no need to be dramatic," Governor Julio Velarde said in response to questions about the impacts of copper prices. The low cost of mining in Peru will keep copper miners here, even with the current price dip, he added. "Companies can still offset their costs by leaps and bounds," Velarde said. "That's why miners, despite current prices, still want to roll out projects."
- INSIGHT-China consumers tighten belts, a red flag for the global economy. Terry Xu considers himself one of the lucky ones. The 32-year-old father-of-one invested 10 percent of his savings earlier this year in Chinese stocks. Now, with markets down around 40 percent since mid-June, he's selling off his portfolio at a loss. Painful, but not a catastrophe - he says his colleagues lost more, and he earns well above the average wage. But the equity market turmoil, coupled with signs the economy is slowing means Xu, and millions of other middle class Chinese consumers like him, is scaling back his spending in an ominous sign for China's policymakers and the global economy.
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 148.5 -2.25 basis points.
- Asia Pacific Sovereign CDS Index 82.50 +1.0 basis point.
- S&P 500 futures -.01%.
- NASDAQ 100 futures -.02%.
Earnings of Note
Company/Estimate
- (ACN)/1.12
- (KBH)/.22
- (SCHL)/-1.51
- (AIR)/.23
- (BBBY)/1.21
- (CTAS)/.90
- (JBL)/.44
- (NKE)/1.19
- (PIR)/.07
Economic Releases
8:30 am EST
- Chicago Fed National Activity Index for August is estimated to fall to .24 versus .34 in July.
- Initial Jobless Claims are estimated to rise to 272K versus 264K the prior week.
- Continuing Claims are estimated to rise to 2240K versus 2237K prior.
- Durable Goods Orders for August are estimated to fall -2.3% versus a +2.0% gain in July.
- Durables Ex Transports for August are estimated to rise +.1% versus a +.6% gain in July.
- Cap Goods Orders Non-Defense Ex Air for August are estimated to fall -.1% versus a +2.2% gain in July.
- New Home Sales for August are estimated to rise to 515K versus 507K in July.
- The Kansas City Fed Manufacturing Activity Index for September is estimated to rise to -6.0 versus -9.0 in August.
- None of note
Other Potential Market Movers
- The Fed's Yellen speaking, Germany IFO Business Climate Index, Japan inflation data, $29B 7Y T-Note auction, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (TTWO) general meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology 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.