Evening Headlines
Bloomberg:
- China Said to Order Action by Banks as Developer Loans Sour. China’s banking regulator told lenders to push developers for faster home sales, citing signs that credit quality is worsening, a person with knowledge of the matter said. The China Banking Regulatory Commission told lenders they should also demand more collateral, or tell developers to sell projects or stakes, if the banks predict they’ll have difficulty repaying loans due within 12 months, the person said, asking not to be identified because the instructions aren’t public. Mortgages and developer loans classified as “special- mention,” or those at risk of souring, started to rise recently, the person said. Lack of funding, high leverage and a peak of loans maturing have increased the risk that some developers’ financing chains may collapse, the CBRC told lenders, according to the person. Developers are facing “significant liquidity issues,” KPMG LLP said last month. Housing sales by area dropped 7.5 percent in the first seven months as the government enforced restrictions to stem speculation, which Premier Wen Jiabao has said will remain in place to keep property affordable. Lenders were also told at the end of last month they should enhance monitoring of developers’ cash flows, the person said. The CBRC also warned that risks may be obscured because some real estate companies obtained funding through personal loans or borrowing by affiliated businesses after bank credit tightened, the person said. The regulator told banks that risks in lending to local government financing vehicles remain prominent, the person said. Chinese banks’ bad loans increased for a third straight quarter in the three months ended June 30, rising by 18.2 billion yuan, the CBRC said Aug. 15. That’s the longest streak of deterioration in eight years, highlighting pressures on asset quality and profit growth as the economy weakens. Shanghai Pudong Development Bank Co. (600000) said this week non- performing loans, or those overdue for at least three months, surged more than 30 percent in the first half to 7.7 billion yuan as of June 30, mainly because of rising defaults in the eastern Chinese cities of Wenzhou and Hangzhou. Special-mention loans, normally overdue for fewer than 90 days, jumped 28 percent in the same period, the bank said.
- China’s Stocks Head for Biggest Weekly Decline in Two Months. China’s stocks fell, putting the benchmark index on course for its biggest weekly loss in two months, on signs corporate earnings growth is slowing. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. slid to a two-week low after the National Business Daily said the company asked its units to halt production. Yunnan Copper Industry Co. (000878) dropped for a third day after first-half profit fell. Consumer staple and health-care companies, the CSI 300 Index’s best performers this year, declined. EGing Photovoltaic Technology Company Ltd. paced gains among companies reliant on overseas sales after U.S. housing permits climbed. “Corporate earnings haven’t hit the bottom yet and the third and fourth quarters may get even worse,” said Wei Wei, an analyst at West China Securities Co. in Shanghai.
- China’s Yuan Decades From Challenging Dollar: Cutting Research.
- Brazil Company Sales Miss Analysts’ Estimates Most Since ‘09. Brazilian companies missed analysts’ revenue estimates by the most since 2009 in the second quarter as the slowdown in Latin America’s biggest economy curbed domestic demand. Of 58 companies listed on the benchmark Bovespa index that reported, 32 missed sales forecasts from Redecard SA (RDCD3), Brazil’s second-biggest card-payment processor to PDG Realty SA Empreendimentos & Participacoes, the nation’s third-biggest homebuilder, data compiled by Bloomberg show. The 55 percent ratio after the Bovespa companies’ final earnings reports were released yesterday is the highest since the first quarter of 2009, according to the data.
- UN Ends Syria Mission as Gulf Citizens Urged to Flee Lebanon. The United Nations Security Council agreed not to renew its unarmed observer mission in Syria, conceding it was unable to stem the violence as concerns grew that the Syrian conflict was spilling across borders.
- Marvell(MRVL) Falls After Results Miss Analysts’ Estimates. Marvell Technology Group Ltd. (MRVL), a maker of chips used in mobile phones, communication equipment and computer storage, declined in late trading after predicting third-quarter sales and profit that fell short of analysts’ estimates. The stock declined (MRVL) 8.2 percent to $11.19 after Marvell said profit, excluding certain costs, will be 24 cents a share, plus or minus 2 cents, in the current quarter, which ends in October. That compared with 32 cents, the average analyst estimate (MRVL) compiled by Bloomberg. Sales will be $800 million to $850 million, compared with the $913 million analysts predicted.
- Rob Portman: The Regulatory Cliff Is Nearly as Steep as the Fiscal One. The president has postponed damaging rules until after the November election. Americans are learning more about the "fiscal cliff" approaching at the beginning of next year, when tax rates for families and small businesses are set to spike and new taxes in President Obama's health-care spending law take effect. But unless there's real change in Washington, we're also headed for a steep "regulatory cliff" that could compound the damage. After three years of bureaucratic excess, the Obama administration has been quietly postponing several multibillion-dollar regulations until after the November election. Those delayed rules, together with more than 130 unfinished mandates under the 2010 Dodd-Frank financial law, could significantly increase the regulatory drag on our economy in 2013.
- Backstop for Futures Trades. Support is growing for an insurance fund that would protect customers of futures brokerages that collapse. While numerous hurdles remain, the process took an important step Thursday when futures-exchange operator CME Group Inc. met with other industry officials and a customer-advocacy group in Chicago to discuss how to set up a customer-protection fund. It could take months or even longer for a specific plan to emerge, but participants in the meeting said it is increasingly likely that the government, futures industry or both will propose such an insurance fund.
- Dallas Steps Up West Nile War. City to Spray Pesticide From Planes as Cases of Mosquito-Borne Disease Surge. A warm winter and recent rains have helped prompt a surge in cases of West Nile virus nationwide, and the toll is so severe here that officials planned to conduct aerial spraying Thursday night for the first time in more than four decades to kill mosquitoes that spread the potentially fatal disease.
- White House Revives Talks Over Emergency Oil Release. The White House is reviving talks over the possible release of U.S. emergency oil supplies as the price of crude oil topped $95 a barrel, an Obama administration official said.
Business Insider:
- 2 Bad Things Happened The Last Time Food And Gas Prices Moved Up Like This.
- Here Are Apple's Plans To Make TV A Thousand Times Better.
Zero Hedge:
- Deleveraging Needed In Next 4 Years: $28 Trillion. (graphs)
- Behold The Fed's Takeover Of The Bond Market.
- Housing Recovery Lessons From Japan (In One Chart).
- Gap(GPS) Earnings Beat but Full-Year Outlook Falls Short. Specialty retailer Gap reported quarterly earnings and revenue that beat Wall Street's expectations on Thursday but its full-year guidance missed analysts' estimates.
- For Europe’s Economy, a Lost Decade Looms. The euro zone is hurtling back into recession, economists declared after official figures this week portrayed a shrinking economy. But by some measures the downturn has been under way for years. With the exception of Germany, none of Europe’s biggest economies have returned to the level of economic output they had at the beginning of 2008, before the subprime mortgage crisis in the United States spread across the Atlantic, according to calculations by two U.S. economists, Peter Rupert and Thomas F. Cooley. The figures suggest that Europe is already well into what could become a lost decade — a period of pernicious stagnation and wasted potential that could have lasting effects on ordinary citizens.
IBD:
NY Times:
- U.S. Reliance on Saudi Oil Heads Back Up. The United States is increasing its dependence on oil from Saudi Arabia, raising its imports from the kingdom by more than 20 percent this year, even as fears of military conflict in the tinderbox Persian Gulf region grow.
- Fact-Checking the Obama Campaign's Defense of its $716 Billion Cut to Medicare. It’s only been a few days since Mitt Romney picked Paul Ryan as his running mate. My strong impression is that a lot of Democrats weren’t even aware that Obamacare cut Medicare by $716 billion, which is why they’ve been caught off-guard by how the 2012 Medicare debate has evolved thus far.
- 15% Decline in Global Gold Jewelry Demand. Worldwide gold jewelry demand fell 15 percent, year-over-year, to 418.3 tons for the second quarter of 2012, largely due to a sharp decline in Indian jewelry demand, according to the World Gold Council. Gold jewelry accounted for 42 percent of global gold demand during the second quarter. Indian demand for gold jewelry in the second quarter of 2012 fell by 30 percent to 124.8 tons amid record high local currency gold prices as depreciation in the rupee against the US dollar.
- China August Export Growth May Be Below 1%. Worse than July and below 1% reports MNI , citing unnamed source close to the Chinese commerce ministry. China’s government has “underestimated ” the impact of the European debt crisis on trade flows. China’s export situation is” not very optimistic ” as there is little prospect of a global economic recovery. It may be difficult to reach the trade growth target of 10% this year if the European market remains sluggish, the report cites Cheng Yongru, a div. director in the commerce ministry. Cheng sees export grow at 8% this year, according to the report.
TVNewser:
- Fareed Zakaria to Remain with CNN, Time. Fareed Zakaria will remain at TIME after his weeklong suspension for plagiarism, the magazine announced in a statement this afternoon:
- On Economy, 45% Trust Republicans, 40% Democrats. Voters now trust Republicans slightly more than Democrats on eight of 10 important issues regularly tracked by Rasmussen Reports, including the most important one: the economy.
Reuters:
- White House: Biden stays on Obama's ticket, gaffes or not. Vice President Joe Biden's place as President Barack Obama's running mate is secure, the White House said on Thursday. "That was settled a long, long time ago," White House spokesman Jay Carney told reporters, trying to put to rest a question that comes up whenever the loquacious leader makes a verbal misstep.
- Echoes of Lebanon civil war as Syrian turmoil spreads. Tit-for-tat kidnappings by Syrian rebels and Lebanese Shi'ite gunmen have escalated tensions in Lebanon, where the spectre of contagion from Syria's conflict is alarming the fractured and war-scarred Mediterranean nation. Despite government efforts to insulate it from turmoil in its once dominating neighbour, Lebanon has seen armed clashes in its two largest cities, and last week authorities said they uncovered a Syrian plot to destabilise the country. The sight of masked gunmen in Beirut on Wednesday claiming the capture of 20 Syrians, and the kidnapping in broad daylight of a Turkish businessman near the airport, was another dramatic sign of Syria's crisis spilling over into Lebanon.
- Bloody day of blasts in Iraq kills more than 70. A series of bombings and shootings killed more than 70 people across Iraq on Thursday in a bloody day of attacks underscoring the country's struggle with a stubborn insurgency more than half a year after the U.S. military withdrew.
- Low yields fail to put damper on US debt. Record low yields for US corporate bonds are failing to deter investors from flocking to the world’s deepest capital market. With central banks, including the Federal Reserve, set to keep overnight rates confined near zero for a prolonged period and also suppressing benchmark government bond yields through quantitative easing, all signs point to investors throwing in the towel and grabbing corporate bonds. In a world of limited alternatives, they still provide a semblance of a return.
- Finland prepares for break-up of eurozone. Finland is preparing for the break-up of the eurozone, the country’s foreign minister warned today. The Nordic state is battening down the hatches for a full-blown currency crisis as tensions in the eurozone mount and has said it will not tolerate further bail-out creep or fiscal union by stealth. “We have to face openly the possibility of a euro-break up,” said Erkki Tuomioja, the country’s veteran foreign minister and a member of the Social Democratic Party, one of six that make up the country’s coalition government. “It is not something that anybody — even the True Finns [eurosceptic party] — are advocating in Finland, let alone the government. But we have to be prepared,” he told The Daily Telegraph. “Our officials, like everybody else and like every general staff, have some sort of operational plan for any eventuality.” Mr Tuomioja’s intervention is the bluntest warning to date by a senior eurozone minister. As he discussed the crisis, the minister had a copy of the Economist on his desk. It had a picture of Angela Merkel, the German Chancellor, reading a fictitious report entitled “How to break up the euro”, with a caption: “Tempted, Angela?”
China Securities Journal:
- China's export growth may continue to slow in the next two months because of weak demand from the U.S. and the euro zone, Li Jian, a researcher at the Ministry Commerce, wrote in an article today.
- Some Chinese cities plan to set up a database to track the number of existing homes owned by individuals in preparation for a property tax trial and increases of the transaction tax, citing a personal familiar with the matter.
- Food prices in China may gain in the fourth quarter because a drought-stoked rally in global grain markets impact domestic futures, citing Zhu Zianfeng, an economist with the monitoring division of the National Development and Reform Commission.
- None of note
- Asian equity indices are -.50% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 148.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 126.0 +1.25 basis points.
- FTSE-100 futures +.28%.
- S&P 500 futures -.06%.
- NASDAQ 100 futures +.05%.
Earnings of Note
Company/Estimate
- (ANN)/.51
- (FL)/.33
- (HIBB)/.27
- (SJM)/1.00
9:55 am EST
- Preliminary Univ. of Mich. Consumer Confidence for August is estimated to fall to 72.2 versus 72.3 in July.
10:00 am EST
- Leading Indicators for July are estimated to rise +.2% versus a -.3% decline in June.
Upcoming Splits
- None of note
Other Potential Market Movers
- The Germany PPI Data and the Eurozone current account data could also impact trading today.
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