Tuesday, March 11, 2014

Today's Headlines

  • Russia Gets Crimea Deadline as Yanukovych Warns of Civil War. Germany told Russia it must switch course in Crimea by next week or risk more sanctions as Ukraine’s deposed president warned of a possible civil war. The European Union will discuss harsher penalties on March 17 barring “obvious changes in Russia’s actions,” German Foreign Minister Frank-Walter Steinmeier said today in Estonia. A planned March 16 referendum in Crimea on whether to join Russia should be halted, he said. Toppled President Viktor Yanukovych told reporters in Russia that lawlessness is spreading in Ukraine, fomented by the “fascists and ultranationalists” who are in charge in Kiev. “We don’t want a confrontation, but the actions of the Russian side make the preparations necessary,” Steinmeier said in Tallinn. “We continue to urge Russia to use the last possibilities that are still there for a diplomatic solution against such an escalation. Otherwise, relations between Europe and Russia won’t improve.”
  • Russia Scraps Fifth Bond Auction as Crimea Crisis Deepens Slump. Russian bonds declined, pushing yields to the highest in 21 months, and stocks dropped as the government canceled its fifth local-currency debt auction this year amid escalating tension in Crimea. The Micex Index (INDEXCF) dropped 2.3 percent to 1,308.70 by closing in Moscow, the lowest in a week. Ruble government bonds due February 2027 fell for a third day, lifting the yield 10 basis points to 8.96 percent, the highest since June 2012.
  • China Ties Backfire on Australia in Job Slump: Chart of the Day. A plunge in exports from Chinese factories is reverberating 3,500 miles south in Australia, as joblessness rises and iron ore prices slump the most since 1999. Australia's increased reliance on shipments to China hasn't stemmed unemployment, which rose to a decade high of 6% in January.  
  • Rio Tinto Sees Iron Ore Volatility on China Credit Squeeze. Rio Tinto Group (RIO), the world’s second-biggest iron ore shipper, said short-term price fluctuations will continue after a credit squeeze in China and high stockpiles plunged the commodity into a bear market. Closely held steel mills in China are “struggling to get funding at the moment,” said Joel Crane, a Melbourne-based commodity analyst with Morgan Stanley Australia Ltd. “So they’ll be refusing both contracted and spot iron ore, and that’s led to the panic selling.”
  • Iron’s Bear Market Drives Up Aussie Bond Risk: Australia Credit. Australia’s sovereign bond risk rose toward the highest in six months relative to the U.S. as the price of iron ore, the nation’s biggest export earner, dropped to a 1 1/2-year low. The cost of credit-default swaps on Australian government widened to 21.8 basis points more than that for U.S. Treasuries this week, near the 22.1-basis-point gap on Feb. 21 that was the most since September, data compiled by Bloomberg show. Benchmark iron ore prices lost 27 percent from a five-month high on Aug. 14 as demand slows in the world’s second-largest economy just as output rises. 
  • European Stocks Are Little Changed; African Barrick Falls. European stocks were little changed, after swinging between gains and losses, as investors weighed economic data and the growing conflict in Ukraine for their impact on company earnings. African Barrick Gold Plc plunged the most in 14 months after its majority shareholder sold a 10 percent stake. Galenica AG (GALN) tumbled the most since July 2012 as its forecast fell short of some analysts’ estimates. Hannover Re fell 1.3 percent after reporting a 35 percent drop in quarterly operating profit. Geberit AG rallied to a record after naming a new chief executive officer and saying profitability increased. The Stoxx Europe 600 Index added less than 0.1 percent to 331.49 at the close in London.
  • WTI Oil Falls Below $100 for First Time in Three Weeks. WTI for April delivery dropped $1, or 1 percent, to $100.12 a barrel at 2:06 p.m. on the New York Mercantile Exchange. Earlier, it touched $99.96, the lowest level since Feb. 14. Futures are up 1.7 percent this year. The volume of all futures traded was 24 percent above the 100-day average.
  • UniCredit Posts Record Loss, Plans 8,500 Job Cuts. UniCredit SpA (UCG), Italy’s biggest bank, posted a record 15 billion-euro ($20.8 billion) fourth-quarter loss as it set aside money for bad loans and wrote down goodwill from acquisitions. It plans to cut 8,500 jobs. Provisions for doubtful loans soared to 9.3 billion euros in the quarter, more than double the year-ago level, while impairments, including those on the goodwill of units in Italy, central and eastern Europe and Austria, amounted to more than 9 billion euros, the Milan-based lender said today.
Wall Street Journal:  
  • Probe Is Profiling Passengers, Exploring Many Possibilities. Search Widens Over Waters, Expands to Land in Southern Vietnam. Malaysian police said they were investigating whether a hijacking or sabotage caused an airliner to vanish midair, and were compiling psychological and personal profiles of passengers and crew.
  • China Expands Into a World of Peril. Beijing Faces Mounting Vulnerabilities on the Global Stage. The impression that China often projects to the world is one of supreme confidence, a country convinced that its moment has arrived. That's been particularly true since the 2008 global financial crisis when the idea took root in China that America was on the wane—its time had come and gone. This bred a new assertiveness that gave rise to anxious questions in the region about how China intends to exercise its growing power.
  • Big hedge fund money warns about tech bubble. Prominent money managers are warning of a bubble in some technology stocks and recommending investors avoid emerging markets in favor of Europe. "The high probability is when you look back on this period five years from now, you'll say some of these companies grew into their (earnings) multiples … but I think biotech and other areas in tech have seen multiple expansions beyond what we can justify beyond any kind of reasonable cash flow expectations," Doug Silverman, co-founder of $6.7 billion hedge fund firm Senator Investment Group, said Monday at the Portfolios with Purpose Awards Night in New York. "You can only call it a bubble. But I have not guessed when it will end," Silverman added. Rich Pzena of $23.7 billion Pzena Investments agreed. "Yeah, I think we are in a bubble. I don't know if I would say it's broadly in tech stocks. I think it's in certain stocks. But the hype feels like we're in another Internet-type bubble like 1999," Pzena said.
Business Insider: 
  • ECB to take tough stance in health check on banks. The European Central Bank (ECB) will press euro zone banks to revalue their assets and take a more realistic view on likely losses when it probes their balance sheets in the coming months, signalling a new, more aggressive era of banking supervision. 

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