- Emerging-Market Stocks Decline as Ruble Breaches Band. Emerging-market stocks dropped the most in almost seven months amid concern a slowdown in the Chinese economy will curb global growth. Russia’s ruble breached the upper boundary of Bank Rossii’s target corridor. The MSCI Emerging Markets Index fell 1.9 percent to 931.61 at 2:31 p.m. in New York, set for the biggest slump since July 3. Benchmark gauges from China to India and South Africa decreased at least 1 percent. The ruble sank to lowest level on a closing basis since 2009 against its dollar-euro basket, before paring declines. Turkey’s lira snapped a 10-day slide on speculation the central bank will raise interest rates tomorrow. “The sluggish growth we see in China underscores the general concern that the economy is a lot weaker than it seemed,” Bruce McCain, who helps oversee more than $25 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a telephone interview. “If you look at economic data from China, you see that there are few chances things are going to get better, more likely things are going to get worse.”
- China's Trade Data Under Scrutiny as Hong Kong Imports Diverge. China's trade numbers, distorted by fake exports last year, are set to come under renewed scrutiny after a discrepancy between Hong Kong and Chinese figures for bilateral trade widened to the largest in eight months. Hong Kong's December imports from China fell 1.9% from a year earlier to HK$176 billion($22.7 billion). the city's statistics department said today. That compares with $38.5 billion in exports to Hong Kong reported earlier this month by China's customs administration, up 2.3%, based on data compiled by Bloomberg.
- China Deepens Crackdown on Dissent With Jail Term for Xu. China’s ruling Communist Party intensified its crackdown on dissent with the jailing of legal scholar Xu Zhiyong and another prominent dissident saying on Twitter that he was taken away by police. Xu, the most prominent activist jailed since Nobel Peace Prize winner Liu Xiaobo in 2009, was sentenced by a Beijing court yesterday to four years in prison on charges of gathering a crowd to disturb public order. While he was not given a formal opportunity to respond, Xu, 40, told the court that “the last dignity of Chinese law has been destroyed,” his lawyer Zhang Qingfang said by telephone.
- China’s Aluminum Overcapacity Seen by Fitch Holding Down Prices. Rising capacity at aluminum plants in China, which account for almost half of world output, will weigh down prices this year in a market that’s already over-supplied, according to Fitch Ratings Ltd.
- Top Trades in Disarray Amid Emerging-Market Rout: Currencies. It’s less than a month into 2014 and already currency strategists are seeing their top trade recommendations for the year upended by the rout in emerging markets. Buying Mexico’s peso versus the yen has lost about 1 percent since Bank of America Corp. named the trade one of its top picks in November, with a targeted return of 9.4 percent. Danske Bank A/S exited a trade this month buying Turkey’s lira versus Denmark’s krone at a loss of 2.9 percent. Of 31 major emerging-market currencies, 13 have already weakened beyond their median year-end forecasts in Bloomberg analyst surveys.
- LG Electronics Posts Surprise Quarterly Loss on Currency. LG Electronics Inc. (066570), the world’s second-largest maker of televisions, posted an unexpected loss as a stronger South Korean won curbed the value of overseas sales and the company boosted promotion of the G2 smartphone.
- Sony Cut to Junk by Moody’s as Mobile Devices Lure Buyers. Sony Corp. (6758) had its credit rating cut to junk by Moody’s Investors Service as Japan’s biggest television maker struggles to capture consumer demand for smartphones and tablet computers. The rating was lowered to Ba1, one level below investment grade, from Baa3 and the outlook is stable, Moody’s said in an e-mailed statement today. Sony is also rated junk at Fitch Ratings, while Standard & Poor’s has the company on the second-lowest investment grade.
- Euro Jobless Record Not Whole Story as Italians Give Up. Euro-area data this week will probably show the region ended 2013 with a record jobless rate that reveals only part of the social legacy of the debt crisis. While economists predict unemployment in December stayed at an all-time high of 12.1 percent, with about 19 million jobless, that tally excludes legions of adults who would also work if they could. Bloomberg calculations for the third quarter show a wider total of 31.2 million people of all ages are either looking for jobs, willing to do so though unavailable, or else have given up.
- Italy Banks Tumble as Banco Popolare Spreads Concerns on Capital. Banco Popolare SC led a decline in Italian bank shares after announcing an unexpected loss and plans for a capital increase, fueling doubts about the quality of assets at the country’s lenders. Banco Popolare, Italy’s fourth-biggest bank, dropped as much as 16 percent, the most since December 2008, and was 13 percent lower at 1.31 euros by 12:23 p.m. in Milan. Banca Popolare dell’Emilia Romagna SC, Italy’s No. 7 bank by assets, declined 9 percent, while Banca Popolare di Milano Scarl, the eighth-biggest lender, fell 8 percent.“Banco Popolare’s capital hike raises additional questions over Italian banks’ asset quality,” analysts at Goldman Sachs Group Inc., including Jean-Francois Neuez, wrote in a note to clients today.
- RBS Set for Biggest Loss Since 2008 After $5.1 Billion Provision. Royal Bank of Scotland Group Plc set aside a further 3.1 billion pounds ($5.1 billion) to cover legal and compensation claims, putting Britain’s biggest bailed-out lender on track to post its largest pretax loss since 2008. The provision includes 1.9 billion pounds for lawsuits and fines tied mostly to the sale of $91 billion of mortgage-backed securities from 2005 to 2007, according to the lender. It follows agreements Deutsche Bank AG, JPMorgan Chase & Co. and UBS AG (UBSN) struck with U.S. regulators to settle claims they didn’t provide adequate disclosure about mortgage-backed debt sold in the housing bubble that preceded the 2008 financial crisis.
- ECB Confronted by Banks Testing Exit, Threat to Recovery. Rising market rates are posing a dilemma for European Central Bank officials trying to keep their ultra-expansive monetary policy in place. Overnight borrowing costs for banks have surged above the ECB’s benchmark rate even as policy makers argue that it’s not yet time to exit emergency stimulus. When officials meet in Frankfurt on Feb. 6 they’ll have to assess whether the tighter financing conditions show a resurgence of tensions that warrant a policy response or simply increased confidence in the region’s economic recovery.
- Europe Stocks Drop for Third Day; BG Group, Vodafone Fall. European stocks fell for a third day, sending the Stoxx Europe 600 Index to its lowest level in a month, with BG Group Plc and Vodafone Group Plc tumbling. BG Group plunged 14 percent after the U.K. oil and gas producer said 2013 earnings would be lower than forecast. Vodafone lost 3.9 percent after AT&T Inc. said it doesn’t intend to make an offer for Europe’s largest mobile-phone operator. Lanxess AG climbed 8.2 percent after the chemical maker named Merck KGaA finance chief Matthias Zachert as its chief executive officer. Merck tumbled 10 percent. The Stoxx 600 dropped 0.8 percent to 322.02 at the close of trading in London, sending its three-day decline to 4.2 percent.
- Fed Would Need to Reveal More on Bank Oversight Under New Bill. The Federal Reserve would have to disclose more about supervision of the biggest, riskiest banks under legislation aimed at increasing Fed accountability introduced by Representative Scott Garrett, a New Jersey Republican on the House panel overseeing the central bank. The bill would require the Fed (FDTR) to perform a cost-benefit analysis of any new banking rule and disclose more about bank stress tests. The Fed vice chairman would have to testify on financial rulemaking if the post of vice chairman for supervision remains unfilled, and the Fed Board would need to release to Congress its internal audit of supervision and regulation.
- Obama’s Plan to Use Executive Action Triggers Criticism. Republican lawmakers said President Barack Obama risks antagonizing an already polarized Congress by threatening to use executive authority to make good on the policy agenda he will outline in his State of the Union address. Senate Republican Leader Mitch McConnell of Kentucky said Obama is wrong to think he can bypass lawmakers if they don’t make legislative progress this year. “Ronald Reagan didn’t think that and Bill Clinton didn’t think that,” McConnell said yesterday on Fox’s “Fox News Sunday” program. “Frequently, times of divided government are quite good times in terms of achieving things for the American people.”
CNBC:
ZeroHedge:
- Remember The "European Recovery"? (graph)
Business Insider:
The Atlantic:
- Is China's Historic Credit Bubble About to Pop? What happens if the shadow-bank boom turns to bust? Bad, bad things. The Chinese government would presumably bail out any state-owned banks and companies that got into trouble, but not the shadow banks. It would leave them to die. In fact, the central bank has been trying to kill—or at least rein in—the riskiest of these underground lenders by engineering three credit crunches the past half-year.
- What Blows Up First? Part 3: Subprime Countries. The crucial point here is that this crisis is not a case of one or two little countries screwing up. It's everywhere, from Latin America to Asia to Eastern Europe. Each country's problems are unique, but virtually all can be traced back to the destabilizing effects of hot money created by rich countries attempting to export their debt problems to the rest of the world. ZIRP, QE and all the rest succeeded for a while in creating the illusion of recovery in the US, Europe and Japan, but now it's blow-back time. The mess we've made in the subprime countries will, like rising defaults on liar loans and interest-only mortgages in 2007, start moving from periphery to core.
- Two bitcoin exchange operators charged in money laundering scheme. Two men who operate bitcoin exchange businesses have been charged with money laundering for helping drug merchants exchange $1 million in cash for bitcoins, the digital currency, U.S. prosecutors said on Monday.
- Caterpillar(CAT) tops estimate, sees gains in 2014; stock up. Caterpillar Inc posted a stronger-than-expected quarterly profit on Monday as cost cuts and an uptick in demand for its building equipment offset continued weak sales to the mining industry.
- Emerging markets will have to tighten, says Brazil’s Tombini. Emerging market countries faced fresh pressure on Monday to hike interest rates as Brazil warned that others would need to follow its lead in tightening monetary policy and Turkey’s central bank convened an emergency rate-setting meeting. Alexandre Tombini, Brazil’s central bank governor, said the “vacuum cleaner” of rising interest rates in the developed world would continue to suck money out of emerging markets and force other central banks to tighten policy to beat inflation.
- China to Cut Number of Counties Getting Poverty Aid. China will reduce the number of key counties that need poverty-alleviation aid, citing Wang Guoliang, deputy director of the State Council Leading Group Office of Poverty Alleviation and Development.
1 comment:
In comment of the report Germany to feel brunt of 5,291 Airbus job cuts, I respond ...
Economic deflation is defined as a permanent type of economic recession, and is exemplified by Reuters report Germany to feel brunt of 5,291 Airbus job cuts, and by the Jordan Shilton WSWS report Over 400 jobs cut in Ireland as Lufthansa subsidiary shuts plant, and by the Market Watch report Ryanair paints a bleak outlook for budget airlines which caused Ireland’s RYAAY to tumble.
Derisking out of liberalism’s credit will be profoundly painful in Germany; it is not only a nation of large manufacturing companies, but also one of many small companies, who have paid their employees a subsistence wage in order to become an export superstar. Thus, as disinvestment comes out of Germany, EWG, and German Small Cap Stocks, GERJ, the economic deflation will be both rapid and painful, producing a great human toll of personal suffering.
Bust always follow boom. Now after five years of money market capitalism, the tail risk of Global ZIRP coming from derisking out of debt trade investments, and deleveraging out of currency carry trade investments,is economic deflation and economic recession; these will produce authoritarianism’s economic fascism, as well as its debt serf.
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