Wednesday, March 19, 2014

Today's Headlines

  • EU Struggles for Common Russia Front Amid Crimea Tensions. Ukraine ordered the removal of its military from Crimea and said it will strengthen its deployments on the country’s border with Russia a day after Vladimir Putin cemented his grip over the breakaway Black Sea region. Andriy Parubiy, head of Ukraine’s National Security Council, said in Kiev that the government would seek compensation from Russia for its seized assets and would bolster security at nuclear installations. The move came after unarmed civilians stormed Ukraine’s naval headquarters in Sevastopol, home to Russia’s Black Sea Fleet, detaining officers, including the navy chief.
  • Faltering Bonds Condense Risk as Builder Collapses: China Credit. China’s faltering bond market is forcing banks to pick up the slack, spoiling Premier Li Keqiang’s efforts to spread financial risks as defaults extend from solar companies to real-estate developers. New notes issued minus maturing securities slumped 64 percent to 133 billion yuan ($21.5 billion) in the first two months of 2014, while new yuan loans made up about 69 percent of total credit in February, the most in seven months, according to central bank data. The yield on five-year company securities rated AA- jumped 128 basis points in the past year to 7.71 percent yesterday, compared with an average 5.64 percent on high-yield U.S. debt, according to a Bank of America Merrill Lynch Index.
  • Deutsche Bank(DB) Said to Plan Job Cuts at Investment Bank. Deutsche Bank AG(DB), Germany's biggest bank, plans to cut more jobs at its investment bank to lower costs as business stagnates, two people with knowledge of the plan said. The bank is weighing the reductions, which come in addition to the 2,000 announced in 2012, over the coming months across its corporate finance, capital markets and trading businesses, said the people, who asked not to be identified because the details aren’t public. Managing directors are included in the plan, they said. 
  • European Stocks Are Little Changed Before Fed Decision. European stocks were little changed, following two days of gains, as investors awaited a speech by Federal Reserve Chair Janet Yellen to gauge the central bank’s views on its stimulus program and interest rates. Inditex SA added 4.9 percent after saying sales rose in the first six weeks of the fiscal year. Bayerische Motoren Werke AG jumped to a record after forecasting pretax profit will rise this year. Ophir Energy Plc tumbled to its lowest price since December 2011 after saying it discovered little evidence of hydrocarbons at a well in Gabon. The Stoxx Europe 600 Index dropped 0.1 percent to 327.63 at the close of trading.
  • Fed Links Rate Outlook to Range of Data; Drops 6.5% Threshold. The Federal Reserve said it will look at a wide range of data in determining when to raise its benchmark interest rate from zero, dropping a pledge tying borrowing costs to a 6.5 percent unemployment rate. “A highly accommodative stance of monetary policy remains appropriate,” the Federal Open Market Committee said in a statement today following a meeting in Washington that was the first led by Chair Janet Yellen. In determining how long to keep rates low, the committee will assess progress towards its goals of maximum employment and 2 percent inflation, it said.
  • Junk Bonds at $2 Trillion as Gundlach Pulls Back: Credit Markets. The junk-bond bonanza that’s doubled the market to almost $2 trillion since the credit crisis has Jeffrey Gundlach heading toward the exit. Less than 12 months after saying the Federal Reserve’s stimulus and a plunge in defaults would support the market for speculative-grade debt for another four years, the head of DoubleLine Capital LP is trimming its allocations. With borrowing costs for the least-creditworthy companies approaching a record low, junk bonds no longer provide enough of a buffer from rising Treasury yields as the Fed scales back its bond buying, said Gundlach, whose firm oversees $49 billion. “They’ve squeezed all the toothpaste out of the tube,” the bond manager said in a telephone interview from Los Angeles. “There is interest-rate risk that’s just being masked by fund flows holding up the prices of junk bonds.” 
  • FedEx(FDX) Cuts Full-Year Forecasts as Winter Storms Add Costs. FedEx Corp. (FDX), operator of the world’s largest cargo airline, cut its 2014 profit forecast after unseasonably harsh winter weather grounded flights and slowed shipments by truck and train last quarter. The company trimmed its profit forecast for the full year to a range of $6.55 to $6.80 a share, from $6.73 to $7.10 previously. That falls short of analysts’ estimates of $6.90 a share, according to data compiled by Bloomberg. 
Wall Street Journal: 
Fox News:
Business Insider:
Washington Post:
  • Moscow signals concern for Russians in Estonia. Russia signaled concern on Wednesday at Estonia's treatment of its large ethnic Russian minority, comparing language policy in the Baltic state with what it said was a call in Ukraine to prevent the use of Russian. Russia has defended its annexation of Ukraine's Crimea peninsula by arguing it has the right to protect Russian-speakers outside its borders, so the reference to linguistic tensions in another former Soviet republic comes at a highly sensitive moment.
The Hill:
Financial Times:
  • Yellen points to earlier rate rises. Janet Yellen has begun her term as chair of the US Federal Reserve with a hawkish set of forecasts that point to earlier interest rate rises than previously thought.
  • Frustrations over China increase at US companies. Almost 80 per cent of US companies participating in an annual survey reported that their China revenues had “increased slightly” or were in decline over the past year, as frustrations mount over everything from government investigations to internet censorship.
  • US Pacific Fleet commander warns Asia it risks Crimea-like crisis. The commander of the US Pacific Fleet has hit out at China’s “revanchist tendencies” and warned that Asia-Pacific nations must forsake “unilateral actions and inflammatory rhetoric” or risk stumbling into a Crimea-like crisis that would damage the global economy.
Die Welt:
  • Russia Wants More Than Crimea, Ukraine's Parubiy Says. Russia is targeting wider Ukraine and Kiev, not just Crimea, Andriy Parubiy, head of Ukraine's National Security Council, says in an interview. Russia wants war with Ukraine. Ukraine will defend itself in case of new aggression such as in Crimea.
Epoch Times:
  • China's Bear Stearns Moment. In the end, it’s just going to be a few hundred million in write-offs. But the second imminent default of a Chinese corporate bond shows that China has passed its “subprime” moment and is staring into the face of a bankrupt debt juggernaut. It was only last week that Chinese Premier Li Keqiang told the world that defaults on private company bonds and packaged investment products called trusts are “unavoidable.” After years of unchecked credit growth and misallocation of resources, they indeed are. What Li didn’t tell us is: They cannot be centrally planned.

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