Thursday, September 26, 2013

Today's Headlines

Bloomberg:
  • China Stocks Drop to 3-Week Low as Free-Trade Firms Fall. China’s stocks fell to the lowest level in almost three weeks as companies linked to the Shanghai free-trade zone tumbled amid concern gains were excessive. Shanghai International Port Group Co. (600018) and Shanghai Material Trading Co. slumped by the 10 percent daily limit after more than doubling this quarter. Haitong Securities Co. (600837), the country’s second-largest listed brokerage by market value, declined for a third day after saying it plans to buy a Shanghai-based leasing company from private-equity firm TPG. The Shanghai Composite Index (SHCOMP) dropped 1.9 percent to 2,155.81 at the close, the lowest level since Sept. 6. China’s local markets will be shut Oct. 1-7 for National Day holidays. The statistics bureau is due to release August data on industrial companies’ profits at 9:30 a.m. tomorrow. Shanghai International Port traded at 27.5 times 12-month projected earnings on Sept. 25, the highest level since April 2010, according to data compiled by Bloomberg. Shanghai Jielong Industry Corp. (600836) slumped 10 percent to 10.12 yuan after saying in an exchange statement that the approval of the Shanghai free-trade zone will have no direct impact on the company’s earnings in the short term. The stock jumped 50 percent in the past month through yesterday
  • European Stocks Little Changed as U.S. Jobless Decline. European stocks were unchanged as data showing the number of Americans filing jobless claims unexpectedly fell last week offset investor concern that budget wrangling in Washington will lead to a government shutdown. Ladbrokes (LAD) Plc plunged to its lowest price in almost a year after issuing a profit warning for its digital division. Thomas Cook Group Plc slid 6.6 percent after it said winter bookings have slowed. Hennes & Mauritz AB (HMB), Europe’s second-biggest clothing retailer, rose to its highest price after posting third-quarter profit that beat analysts’ estimates. The Stoxx Europe 600 Index was unchanged at 313.02 at the close of trading.
  • WTI Rebounds From 12-Week Low; Iran Diplomats in New York. WTI for November delivery was up 42 cents at $103.08 a barrel on the New York Mercantile Exchange as of 1:51 p.m. London time, after falling by 46 cents earlier today. WTI settled yesterday at the lowest close since July 3. The volume of all futures traded was 42 percent below the 100-day average. Prices are up 5.2 percent this quarter and 12 percent higher in 2013.
  • House Debt-Cap Conditions Hit Resistance in Budget Fight. House Republican leaders offered a proposal today to increase the U.S. debt ceiling that drew protests from some members as the disputes over federal spending risk a government shutdown in four days. The leaders are preparing for what House Speaker John Boehner last month called a “whale of a fight” on the debt limit. They think they would win public support for pairing spending cuts, looser regulations and an Obamacare delay with the increase in the debt cap rather than risking a government shutdown over the budget on Oct. 1.
  • Lacker Says Expanding Fed Assets Increases Costs of Any Missteps. Federal Reserve Bank of Richmond President Jeffrey Lacker, who voted repeatedly last year against expanding stimulus, said the Fed’s $3.72 trillion-dollar balance sheet and guidance on the likely path of interest rates increase the risks and costs of policy mistakes. “My concern is that the combination of forward guidance and a very large balance sheet has raised the likelihood of policy mistakes going forward, and also has raised the cost of such mistakes, should they occur,” Lacker said today in a speech at the Swedbank Economic Outlook Seminar in Stockholm. “When a central bank uses its independent balance sheet to choose among private sector assets, it invites special pleading from interest groups and risks entanglement in distributional politics,” Lacker said. “Of the risks associated with unconventional monetary policies, those associated with central bank holdings of unconventional asset classes may be the most consequential,” he said
  • Democrat Manchin Breaks Ranks to Back Mandate Delay. U.S. Senator Joe Manchin of West Virginia broke ranks with fellow Democrats and said he’d support a stopgap spending plan that delays the individual mandate in President Barack Obama’s health-care law. “There’s no way I could not vote for it,” Manchin said at a Bloomberg Government breakfast today. “It’s very reasonable and sensible.” “Don’t put the mandate on the American public right now,” Manchin said. “Give them at least a year. If you know you couldn’t bring the corporate sector, you gave them a year, don’t you think it’d be fair?”
  • Americans Reject by 61% Obama Demand for Clean Debt Vote. Americans by a 2-to-1 ratio disagree with President Barack Obama’s contention that Congress should raise the U.S. debt limit without conditions. Instead, 61 percent say that it’s “right to require spending cuts when the debt ceiling is raised even if it risks default,” because Congress lacks spending discipline, according to a Bloomberg National Poll conducted Sept. 20-23. That sentiment is shared by almost three-quarters of Republicans, two-thirds of independents, and a plurality of Democrats. Just 28 percent of respondents backed Obama’s call for a clean bill that has no add-on provisions. “Sometimes it can be hard to negotiate if Republicans are making irrational demands, but to say ‘I’m not going to talk at all’ -- I’ve just never found not negotiating to be an effective way to get something done,” Sam Manders, a 29-year-old lacrosse coach from Gray, Maine, and a Democrat, said in a follow-up interview.
  • Boomers Face Caregiver Shortage as U.S. Offers New Rules: Jobs. Fewer Americans signed contracts in August to buy previously owned homes, a sign that rising mortgage rates may have slowed housing market momentum. The index of pending home sales fell 1.6 percent, after a revised 1.4 percent decrease in July that was bigger than initially reported, figures from the National Association of Realtors showed today in Washington. Economists forecast a 1 percent decline in the gauge from the month before, according to a median estimate in a Bloomberg survey.
  • Iron-Ore Freight Swaps for 4Q Slump 8.6% to $29,250/d: Clarkson. Biggest one-day decline for Capesize contracts since Jan. 8. Spot shipping rates slide 3.3% to $40,813/day today: Baltic Exchange data.
  • Negative Rates on Treasury Bills Show Little Debt-Limit Concern. A slide below zero in rates on some Treasury bills that mature beyond October shows investors have little angst lawmakers may fail to agree on a debt limit. Treasury bills that mature as soon as November traded below zero today, with the bill maturing on Nov. 29 having a negative 0.005 percent rate at 2:02 p.m. New York time. The three-month bill rate was negative 0.0051 percent, compared to 0.0152 percent yesterday. Treasury bills that mature on Oct. 24 were at a rate of 0.038 percent, up from 0.018 percent yesterday.
Wall Street Journal:
  • Boehner Weighs GOP Options on Spending Bill as Shutdown Looms. House Speaker Says Measure Must Include Some Republican Provisions. House Speaker John Boehner (R., Ohio) said the House is unlikely to pass a short-term spending bill to keep the government funded beyond Monday if it doesn't include policy proposals favored by GOP lawmakers.
  • Mortgage Trouble in Chinese City. Borrowers Walk Away From Homes in Wenzhou. Tighter credit and falling housing prices in the eastern Chinese city of Wenzhou have led to a wave of mortgage defaults and abandoned properties in the city, where persistent property-price drops have flown in the face of a national upturn in prices. Homeowners in the city have abandoned 580 homes and there are another 15 cases of mortgages in default, according to a national state-radio broadcast citing a local official in charge of investigating mortgage defaults. The broadcast, which followed local-media reports of more widespread defaults, didn't give a timeframe for the cases cited, and the official numbers are hardly staggering. But the trend is noteworthy because Chinese property buyers have typically preferred to hang on to their investments rather than surrender to a sinking market. Credit problems are the key reason behind the rising number of buyers who walk away from their purchases, the official said.
Barron's:
CNBC:
Zero Hedge:  
Business Insider:
New York Times:
Reuters:
  • Mexico to escape recession after floods, but risks to growth rise: Reuters poll. Mexico is unlikely to be dragged into recession by severe flooding that has laid waste to large areas of farmland, destroyed homes and killed dozens of people, but the flooding has increased risk, a Reuters poll showed on Wednesday. Mexican gross domestic product (GDP) suffered a surprise contraction of 0.7 percent in the second quarter compared with the previous three month period after eking out growth of less than one tenth of a point in the January-March period. That stumbling performance has put Latin America's second biggest economy on track for its worst year since 2009.
  • Italian bond yields rise as political tensions flare anew. Italian government bond yields jumped on Thursday as tensions within the country's fragile governing coalition flared up again, a day before an auction at which Italy aims to raise up to 6 billion euros. Italian bonds underperformed all other euro zone paper as centre-right deputies supporting former premier Silvio Berlusconi renewed threats to resign if their leader is expelled from parliament after a tax fraud conviction.

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