Today's Headlines
Bloomberg:
- China Bad-Loan Alarm Sounded by Record Bank Spread Jump. Borrowing costs for Chinese banks have surged the most in at
least six years this month as rating companies say a cash crunch
threatens to swell bad loans. The yield spread for one-year AAA
bank bonds over similar-maturity sovereign notes jumped 56 basis points
so far this month to 163 basis points, the most in ChinaBond records
going back to 2007. The similar AA gap widened 59 basis points to 188.
Even as China Construction Bank Corp. (939) President Zhang Jianguo said
yesterday cash conditions have normalized, the benchmark seven-day
repurchase rate was fixed at 6.85 percent, almost twice the 3.84 percent
average for this year. Money-market rates touched the highest
level last week since at least 2003, prompting three of the largest
rating agencies to warn banks may run out of cash to pay investors in
their wealth management products and to extend new loans, increasing the
risk their customers will default. The People’s Bank of China is
seeking to wring speculative lending out of the system after total
credit approached 200 percent of gross domestic product, according to
Fitch Ratings. “There could be unintended consequences from the
central bank’s approach,” said Liao Qiang, a Beijing-based director at
Standard & Poor’s. “We expect some deleveraging at banks’ interbank
and wealth management businesses to unfold. Credit growth would slow.
This could pressure banks’ asset quality.”
- Lula Default Scare Echoed in Brazil’s Worst Bond Sell-Off. Brazilian government bonds are
suffering the biggest quarterly losses since the run-up to
former President Luiz Inacio Lula da Silva’s election in 2002
led to speculation that the nation would default. Dollar-denominated bonds from Brazil, Latin America’s
biggest nation, plunged 7.55 percent since the end of March,
the biggest slide since a 16 percent drop in the third quarter
of 2002 before Lula’s October election that year. The loss
this quarter exceeds a decline of 6.15 percent for countries
with triple-B ratings, according to Bank of America Corp. Investors are
becoming concerned that President Dilma Rousseff’s administration is
undoing the progress of her mentor
and predecessor, who overcame bondholder skepticism to win the
nation’s first-ever investment grade in 2008. Brazil is now
grappling with inflation above its 6.5 percent target, the
prospect of a credit downgrade and the biggest street protests
in more than two decades as speculation increases the Federal
Reserve will reduce its unprecedented bond buying that had
pushed investors into higher-yielding emerging markets.
- Merkel Says She Blocked Car Carbon Curbs to Shield Auto Jobs. German Chancellor Angela Merkel said
that she blocked a draft European Union law aimed at reducing
carbon-dioxide emissions from cars over concerns the measure
would cost jobs in the auto industry. A coalition of EU states led by Germany prevented approval
of the measure at a meeting of diplomats in Brussels earlier
this week. Merkel said that she moved to delay the proposal --
which would cap average carbon discharges by passenger vehicles
in the bloc at 95 grams a kilometer in 2020 -- to defend jobs. “This is also about employment,” Merkel told reporters in
Brussels today after a European Union summit. “That’s why we
need time to review and evaluate and decide what we will do.
That’s why the vote didn’t happen.”
- European Stocks Drop After U.S. Business Activity Report. European
stocks dropped, paring their biggest weekly gain in almost two months,
as drugmakers retreated and a measure of business activity in the U.S.
fell
more than economists had projected. Air France-KLM Group (AF),
Europe’s second-biggest airline by sales, retreated 2.8 percent.
Mediaset SpA climbed 2.8 percent after Credit Suisse Group AG raised its
price target on the Italian broadcaster. Serco Group Plc added 2.7
percent after predicting that its revenue growth in the first half will
exceed its previous estimates. The Stoxx 600 declined 0.5 percent to
285.02 at 4:30 p.m. in London, after earlier advancing as much as 0.4
percent. The equity benchmark has increased 1.6 percent this week,
halting a
five-week decline. The gauge has still dropped 5.3 percent in
June, paring its gain this year to 1.9 percent.
- Gold Rebounds From 34-Month Low on Physical Demand. Gold prices rebounded from a 34-month low on signs of increased demand for jewelry, coins and
bars after the metal headed for the biggest quarterly drop in at
least 93 years. “We did see physical buying come in a bit, and if that
continues it will provide some support,” Marc Ground, a
commodity strategist at Standard Bank Plc in Johannesburg, said
in a telephone interview. Through yesterday, the spot price slid
25 percent this quarter, poised for the largest decline since
1920, when Bloomberg data starts. Standard Chartered Plc advised
buying gold around $1,200 an ounce. “There is definitely some
increase in the pace of physical
purchases,” Matt Zeman, a strategist at Kingsview Financial in Chicago,
said in a telephone interview. “We are also seeing some short covering
after prices started rising.” Gold for immediate delivery advanced 1.5
percent to $1,218.81 at 11:56 a.m. New York time. Earlier, the price
touched $1,180.50, the lowest since August 2010.
- Corn Leads Grain Plunge as U.S. Acreage Tops Analysts Estimates. Corn, soybean and wheat futures
tumbled to the lowest prices in a year after the government said
U.S. farmers will plant more grain than forecast and the largest
oilseed crop ever. Planting of corn, the biggest domestic crop, jumped to
97.379 million acres, the most since 1936, the U.S. Department
of Agriculture said today in a report. Analysts in a Bloomberg
survey expected 95.431 million. Wheat acreage reached a four-year high of 56.53 million, and soybeans were sown on a record
77.728 million.
- BlackBerry Falls Most in 12 Years After Touch-Screen Model Flops. BlackBerry’s shares tumbled the
most since 2001 after the company reported a surprise loss and weak
sales of a new touch-screen model, underscoring its challenges in
competing directly with the iPhone and Android devices.
The company shipped 6.8 million smartphones last quarter, including
about 2.7 million new BlackBerry 10 models -- primarily its flagship
Z10 touch-screen phone. Analysts had estimated total shipments of 7.5
million, with about 3.6 million BlackBerry 10 units.
Wall Street Journal:
- Euro Zone Set to Keep Shrinking. Continued Slump. Will Likely Be Accompanied by Rise in Unemployment. An
indicator that has correctly recorded contractions in the euro zone
suggests the currency area's economy shrank for a seventh straight
quarter, extending its longest postwar slump. Official figures for second-quarter economic activity won’t be
released until Aug. 14, but the monthly Eurocoin measure of euro-zone
output released Friday signaled a contraction for June, having earlier
signaled declines in activity in April and May.
Fox News:
MarketWatch:
- Noodles & Co. shares soar in trading debut. Shares of Noodles & Co. soared in their trading debut on Friday.
The shares were last up 95% at $35.11 in midday trade, after surging to
an intraday high of $37.69. The casual-restaurant chain had priced its
initial public offering at $18, exceeding its revised range of $15 to
$17.
- Home health companies hammered by proposed cuts from Medicare. Home health-care companies took it on the chin Friday after the Centers
for Medicare and Medicaid recommended what one analyst called the “worst
possible outcome” in rate cuts to the facilities over the next four
years.
- U.S. investors stuck in emerging markets crunch. Commentary: Abandoning American stocks was a huge mistake. The
iShares MSCI Emerging Markets index ETF EEM +0.43% has lost 16% of
its value since its recent high in January — and unlike U.S. indexes,
which have made all-time highs this year, it’s
still a third below its 2007 peak. That suggests major emerging markets —
especially the popular BRIC
countries — are in a long-term, secular bear market, leaving little hope
for investors counting on outsized returns.
CNBC:
- New Investors Shouldn't Go to China, Starnes Says. (video) American businessman Chip Starnes—who had been held hostage by his
workers in China—told CNBC Friday that he was in a no-win situation and
received no help from local officials in resolving the pay dispute that
started his ordeal.
Zero Hedge:
Business Insider:
New York Times:
- Merkel Plays to Germans as She Jousts With Europe. As European leaders from 27 countries once again trudged off to Brussels
on Thursday, this time to discuss how to help their millions of
unemployed, few could have any illusion about whose wishes carried the
most weight: those of Chancellor Angela Merkel and her country, Germany.
Risk Reversal:
- Macro Wrap – 3 Reasons to Expect Continued Volatility, $VIX, $SPX. Most of our recent trade strategies have been long volatility
structures. Whether that’s long outright calls or puts, long call
spreads or put spreads, or long calendars, our trade structure selection
is much different than it was in the spring. A major reason for that
shift is that the underlying volatility regime for the broader market
seems to have shifted.
Washington Examiner:
- Europe exits climate money pit as Obama jumps in. What does America have to show for the billions of taxpayer dollars
spent to stop climate change? Is the climate better now because of 20
years of throwing money at it? The issue is the climate, not the loads of exorbitantly expensive
subsidy scandals, secretive scientists and bureaucratic claptrap we've
generated to allegedly stop climate change. The question is, did the
claptrap make the climate better?
Reuters:
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