Thursday, June 27, 2013

Today's Headlines

  • Junk Bonds Drop Below Par as Asia Suffers China: Credit Markets. For the first time since August, junk bonds are trading below par amid speculation that companies will have a harder time meeting debt payments as the Federal Reserve prepares to reduce its extraordinary stimulus measures and China reins in its shadow-banking system. Average prices on speculative-grade corporate notes dropped to 99.42 cents on the dollar on June 25, from a record 106.04 cents in May, according to Bank of America Merrill Lynch’s Global High Yield Index. The declines were led by Asia, which saw prices tumble to 97.2 cents, the lowest level in a year. 
  • European Stocks Climb After U.S. Data; Alcatel Rallies. European stocks climbed for a third day, the longest winning streak for the Stoxx Europe 600 Index in five weeks, as a report showed that U.S. consumer spending rebounded last month. Alcatel-Lucent (ALU) SA rose 6.4 percent as Morgan Stanley recommended the stock. Drax Group Plc jumped 7.3 percent as the U.K. government updated the subsidies for the different forms of renewable-power generation. Subsea 7 SA (SUBC) tumbled the most in more than 4 1/2 years after the oil-field services provider said its earnings will fail to grow this year. The Stoxx 600 climbed 0.7 percent to 286.42 at the close after earlier declining as much as 0.3 percent.
  • Fed’s Powell Sees Scaling Back Asset Purchases Later This Year. Federal Reserve Governor Jerome Powell said the central bank’s asset purchases may be scaled back later this year if growth holds up, and any such trimming depends on economic data rather than the calendar. The Fed may wait “before moderating purchases or even increase them” if the economy weakens, while the large-scale asset purchases “may be moderated somewhat more quickly” should the economy strengthen faster than officials anticipate, Powell said today in the text of remarks prepared for delivery in Washington. 
  • Gold Tumbles to 34-Month Low. Gold futures for August delivery dropped 2.2 percent to $1,202.30 at 2:01 p.m. on the Comex in New York. The price touched $1,198.90, the lowest since August 2010. The metal headed for a record quarterly drop amid an equity rally and muted inflation.
  • Natural Gas Drops to 16-Week Low on Above-Forecast Supply Gain. Natural gas futures fell to the lowest price in 16 weeks in New York after U.S. stockpiles increased more than forecast. Gas tumbled as much as 4.7 percent as the Energy Information Administration said inventories rose 95 billion cubic feet in the week ended June 21 to 2.533 trillion cubic feet. Analyst estimates and a survey of Bloomberg users both showed a 90-billion increase. Supply gains have topped five-year averages for four straight weeks as mild weather reduced demand. ”Today’s inventory report is a reflection of the fact that we have very sluggish demand picture right now,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “I don’t see a significant call on natural gas for power generation to meet cooling needs because cooling needs aren’t going to be all that high.” Natural gas for August delivery dropped 16.3 cents, or 4.3 percent, to $3.575 per million British thermal units at 12:17 p.m. on the New York Mercantile Exchange after sinking to $3.563, the lowest intraday price for a front-month contract since March 7. Trading was 36 percent above the 100-day average for the time of day.
  • Crude Rises for Fourth Day as U.S. Jobless Claims Drop. WTI for August delivery rose $1.63, or 1.7 percent, to $97.13 a barrel at 1:21 p.m. on the New York Mercantile Exchange. The price reached $97.41, the highest since June 20. The volume of all futures traded was 5.2 percent higher than the 100-day average for the time of day. Futures were little changed the second quarter.
Fox News: 
  • Watchdog knocks down Dem claim that liberal groups were targeted by IRS. The government watchdog that exposed IRS targeting of conservative groups gave a blunt response to Democrats' claims that the agency also targeted liberals: It never happened. "We found no indication in any of these other materials that 'Progressives' was a term used to refer cases for scrutiny for political campaign intervention," IRS Inspector General J. Russell George wrote in a letter to Democrats.  
Zero Hedge: 
Business Insider: 
  • Mortgage rates soar to 4.46% - biggest jump in 26 years. Rising interest rates have hit mortgages big time. Rates on 30-year, fixed-rate home loans spiked 0.53 percentage points to an average of 4.46% this week -- the largest weekly increase in more than 26 years, according to mortgage giant Freddie Mac. The 30-year loan, which stood at 3.35% as recently as early May, is at its highest level since July 2011. Rates for 15-year loans, popular with homeowners refinancing their mortgages, jumped 0.46 percentage points to 3.5%. An extra percentage point will cost homebuyers with 30-year, fixed-rate mortgages $56 more a month for every $100,000 they borrow.
  • Smithfield(SFD) sale warrants close federal review. FOR VIRGINIANS, Smithfield Foods represents a taste of home. When news broke of a merger agreement between China's largest meat processing enterprise and Smithfield, many mourned the loss of a hometown company to a Chinese firm.
  • Brazil central bank sees inflation up, GDP growth down. Brazil's central bank raised its inflation forecasts for 2013 and 2014, signaling that policymakers could accelerate the pace of interest-rate increases in coming months to bring down persistent price pressures. In its quarterly inflation report released on Thursday, the central bank raised its 2013 inflation forecast to 6.0 percent from 5.7 percent. That is above the bank's own informal goal for the year to bring inflation below the 5.84 percent posted in 2012. The new forecast for 2013 topped private estimates in a weekly central bank survey.
Financial Times:
  • Iran, Russia and China prop up Assad economy. Iran, Russia and China are propping up Syria’s war-ravaged economy, with President Bashar al-Assad’s regime doing all its business in rials, roubles and renminbi as it seeks to beat western sanctions, according to the country’s senior economics minister.
WBP Online:
  • Spanish retail sales decline 4.6% in May. Retailers reported that sales dropped 4.6% in April, seasonally and calendar adjusted, after recording a upwardly revised 4.8% year-on-year decline in April. Analysts had expected a 6.7% contraction. Retail sales on a calendar adjusted basis in Spain have been on a downward slide since June 2010, while the extent of the 4.6% year-on-year drop this month is the lowest since August last year.
  • China Faces 'Huge' Pressure to Meet Fiscal Revenue Goal. China faces "huge" pressures to meet annual fiscal revenue goal after central government's fiscal revenue drops -.8% y/y in Jan.-April period, citing Finance Minister Lou Jiwei. The central government fiscal revenue will need to growth +11.3% monthly in the remainder of this year to meet the target, Lou said in a report to the National People's Congress today.

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