Monday, July 29, 2013

Today's Headlines

Bloomberg:  
  • China’s Provinces Trail Growth Targets in Slowdown Signal. Most Chinese provinces reported first-half growth below annual targets that in some instances were already lower than last year’s goals, underscoring the breadth of the nation’s slowdown. Seventeen of 30 provinces and provincial-level cities said January-to-June expansion trailed 2013 targets, compared with 14 of 31 in last year’s first half, according to data compiled by Bloomberg News. Inner Mongolia, Jilin and Ningxia had the widest gaps, each at 3 percentage points below a 12 percent target. One province, Qinghai, has yet to release its latest figures.
  • Bad-Loan Risk Puts Bank Yield Gap at 17-Month High: China Credit. Chinese policy banks' borrowing costs are the highest in more than a year relative to the government's as a slowdown in the world's second-largest economy fans concern bad loans will climb. The average yield on one-year debt sold by the three lenders - China Development Bank Corp., Export-Import Bank of China and Agricultural Development Bank of China - was 74 basis points higher than comparable sovereign notes on July 25, the biggest gap since March 2012, ChinaBond data show. That compares with this month's low of 41 basis points on July 10 and precedes $8.5 billion of debt sales by China Development Bank and Exim Bank today and tomorrow. "Loan default is something we are worried about," said Wee-Khoon Chong, a Societe Generale SA strategist in Hong Kong. "The rise in bank bond yields is also driven by a liquidity squeeze as well. Money is at a premium and investors demand higher yields." 
  • Brazil Swap Rates Rise on Inflation Outlook; Real Little Changed. Brazil’s swap rates climbed after economists raised their 12-month inflation forecast for a fourth straight week, adding to speculation that the central bank will step up increases in borrowing costs. Swap rates due in January 2015 rose five basis points, or 0.05 percentage point, to 9.45 percent at 10:04 a.m. in Sao Paulo. “You need to tighten more on the monetary side unless there’s room to let inflation accelerate, and I don’t think there is,” Eduardo Suarez, a Latin America foreign-exchange strategist at Bank of Nova Scotia, said in a telephone interview from Toronto
  • S&P Sees Downgrade Risk Rising as Debt Costs Climb: India Credit. India's attempt to buoy the rupee by creating a cash crunch has driven corporate debt costs to a 2009 high, threatening the creditworthiness of businesses already battling the worst economic slowdown in a decade. The extra yield on three-year company bonds over government notes surged 113 basis points in July to 211, data compiled by Bloomberg show
  • European Stocks Are Little Changed. Banca Popolare di Milano Scrl led financial companies lower, retreating 5.9 percent. The Stoxx Europe 600 Index added less than 0.1 percent to 299.06 at the close of trading, having earlier climbed as much as 0.7 percent.
  • Dollar Strengthens Versus Euro Before Fed Meeting; Yen Gains. The dollar strengthened versus the majority of its most-traded peers amid expectations the Federal Reserve will reiterate plans this week to reduce stimulus if economic performance continues to show signs of improvement. Japan’s currency advanced against all of its 16 major peers after Japanese retail sales fell and Chinese industrial companies reported slowing profits, boosting demand for haven assets.
  • Egypt Warns Against Unrest as Brotherhood Presses Protest. Egypt’s interior minister, speaking after dozens of people died in protests, said security forces are determined to bring about stability, a veiled warning to Islamists who want President Mohamed Mursi reinstated. Interior Minister Mohamed Ibrahim’s comments signaled impatience with demonstrations that have roiled the country since the military deposed Mursi on July 3 after mass rallies seeking his ouster. The pro-Mursi protests have led to fatal clashes, undercutting hopes for national reconciliation.
  • Corn Extends Drop to 33-Month Low on U.S. Crop; Soybeans Decline. Corn extended declines to a 33-month low and soybeans fell on speculation that U.S. crops will benefit from cooler weather and rain in the next two weeks. Wheat rose. Temperatures will average below normal over much of the Midwest in the next two weeks, helping to boost yields in areas with adequate soil moisture and reducing stress on crops that have not received significant rain this month, World Weather Inc. said in a report today. Fields from Kansas to Kentucky will get rain during the next two days and some crops in Nebraska and Iowa will benefit from moisture beginning Aug. 1, the private forecaster said.
Wall Street Journal: 
  • Bank of Italy Inspecting Top Lenders' Books. Rise in Bad Loans Prompts Quiet Inspections. The Bank of Italy is quietly inspecting the finances of some of the country's top lenders, which could push some Italian banks to sell assets or take other major steps, according to a central-bank document reviewed by The Wall Street Journal. The central bank's examinations, which were previously undisclosed, come against a backdrop of increasing worry about the health of some of the country's lenders amid a rising tide of souring loans. The current inspections are a follow-up to a previous round last fall that resulted in the Bank of Italy ordering banks to set aside a total of about €3.4 billion ($4.5 billion) more to guard against losses on bad loans. Those results haven't previously been made public. Now, the Bank of Italy is digging even deeper into the loan portfolios of some top banks, according to the document, while launching on-site inspections of an additional 20 lenders.
  • Big Hedge Funds to Swoop on Start-Up Talent. Some of the world’s biggest hedge funds, including Marshall Wace, Millennium Management, CQS and BlueCrest Capital Management, are among firms that are capitalizing on a difficult environment for start-ups, hiring potential managers who might once have considered setting up on their own.
  • Many Dead in Baghdad Bombings. At Least 47 Killed in Coordinated Attacks. A dozen car bombings hit in and around the Iraqi capital during morning rush hour on Monday, officials said, killing at least 47 people in the latest coordinated attack by insurgents determined to undermine the government. The blasts, which wounded scores more, are part of a monthslong surge of attacks that is reviving fears of a return to the widespread sectarian bloodshed that pushed the country to the brink of civil war after the 2003 U.S.-led invasion. Suicide attacks, car bombings and other violence have killed more than 3,000 people since April, including more than 500 since the start of July, according to an Associated Press count.
CNBC:
  • Rising rates zap pending US home sales momentum. Contracts to purchase previously owned U.S. homes fell in June, retreating from a more than six-year high touched the prior month, suggesting rising mortgage rates were starting to dampen home sales. The National Association of Realtors said on Monday its Pending Homes Sales Index, based on contracts signed last month, decreased 0.4 percent to 110.9. May's index was revised down to 111.3 from a previously reported 112.3
  • The new American poor: 4 in 5 live in danger of it. Four out of five U.S. adults struggle with joblessness, near-poverty or reliance on welfare for at least parts of their lives, a sign of deteriorating economic security and an elusive American dream. Survey data exclusive to The Associated Press points to an increasingly globalized U.S. economy, the widening gap between rich and poor, and the loss of good-paying manufacturing jobs as reasons for the trend
  • 'Rally has gone too far,' Citi strategist says. Investors are getting a little too comfortable these days with unspectacular earnings and weak economic growth, suggesting to one otherwise-bullish Wall Street analyst that some pain is ahead.
  • Forget growth, China is contracting, experts say. (video) Many China bears, including closely watched short-seller Jim Chanos, have warned that economic numbers from the Chinese government dramatically overestimate growth. But Robert Barbera, co-director of Johns Hopkins Center for Financial Economics, argued on CNBC on Monday that China's economy is actually contracting.
Zero Hedge: 
Business Insider: 
Reuters:
Financial Times: 
  • US money market funds return to EU banks. In the first half of the year, the 10 biggest US money market funds allocated about 15 per cent of their $652bn in assets to short-term deposits and debt securities with eurozone banks, according to Fitch, the credit rating agency. That represents an increase of nearly 90 per cent since June 2012, when fears over a eurozone break-up were at their peak.
Telegraph: 
European Central Bank:
Economic Information Daily:
  • China Should Start Probe of Imported Car Prices. China should start an investigation on imported car prices, citing industry people. Profit from selling imported luxury cars in China was 30% higher than global average, citing China Automobile Dealers Assoc. executive vice president and secretary general Shen Jianjun.

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