Thursday, March 20, 2014

Today's Headlines

  • Ukraine Military Concedes on Crimea as Russia Takes Hold. Ukraine said it plans to reinforce its eastern border with Russia and withdraw troops from Crimea, ceding control of the Black Sea peninsula as tensions remained high over Russian moves to annex the breakaway region. Demilitarizing Crimea “is the best way to de-escalate the situation,” Andriy Parubiy, head of Ukraine’s National Security Council, told reporters in Kiev yesterday. He declined to say when forces would leave, and his announcement came as pro-Russian civilians overran bases in the region and temporarily detained Ukrainian personnel, including its navy chief. 
  • Companies in Russia Urged to Dust Off Evacuation Plans. U.S. companies with operations in Russia should prepare for growing tensions by reviewing evacuation plans, tightening cybersecurity and being alert for a spike in anti-American sentiment, according to corporate-security analysts. Non-essential travel to the country should also be delayed, said Brian Michael Jenkins, senior adviser to the president of the RAND Corp., which is based in Santa Monica, California, and provides research to governments and companies.
  • China’s CSI 300 Falls to Five-Year Low on Yuan, Growth Concerns. China’s CSI 300 Index (SHSZ300) fell to the lowest level in five years, while Chinese stocks in Hong Kong entered a bear market after the yuan weakened and Goldman Sachs Group Inc. reduced the nation’s economic growth forecast. BYD Co. (002594), the automaker backed by Warren Buffett’s Berkshire Hathaway Inc., plunged more than 7 percent in Shenzhen and Hong Kong after the company’s first-quarter profit forecast trailed estimates. Aluminum Corp. of China Ltd. and Yanzhou Coal Mining Co. slid at least 2.4 percent to lead declines for material and energy producers. Yonyou Software Ltd. slumped 8.9 percent, halting a three-day, 17 percent rally. The CSI 300 fell 1.6 percent to 2,086.97 at the close, the lowest since Feb. 2, 2009. The Hang Seng China Enterprises Index (HSCEI) dropped 1.7 percent to 9,203.07, extending a slide to 21 percent since Dec. 2. The Shanghai Composite Index (SHCOMP) lost 1.4 percent to 1,993.48. Goldman Sachs cut its growth forecast for China’s gross domestic product to 7.3 percent from 7.6 percent. The yuan sank toone-year lows in onshore and offshore trading.
  • France Housing Seen Threatened Amid Pressure on Rates: Mortgages. Just when French homebuilders said nothing could make a 15-year low in business worse, a new banking rule is threatening to do exactly that. The moribund economy, with unemployment at a 16-year high, leaves developers with no other means than some of the lowest interest rates on record to spur demand. Now the Bank of France may push mortgage rates higher.
  • Corporate Default Swap Benchmarks Roll Into New Series in Europe. The latest series of indexes measuring the cost of insuring corporate debt against default started trading today. Gauges of credit-default swaps on companies rolled into their 21st series. New benchmarks are created every six months when companies are added or dropped depending on their ratings, cost of protection and ease of trading.
  • European Bonds Decline With Global Peers on Yellen Rates Signal. European government bonds slumped with counterparts from the U.K. to Australia after Federal Reserve Chair Janet Yellen signaled that U.S. interest rates may rise by the middle of next year. German bunds dropped for a fifth day after Yellen indicated yesterday the central bank’s bond-buying program will wind down by year-end as forecast while a rate increase may follow in about six months. Spain’s securities fell along with their Italian peers even as borrowing costs at a sale of five-year Spanish debt declined to a record. France’s 10-year yields climbed to the highest level in a week as the country auctioned 8 billion euros ($11 billion) of notes.
  • Most European Stocks Drop on Yellen’s Rate Remarks. Most European stocks declined as investors weighed Federal Reserve Chair Janet Yellen’s remark that benchmark interest rates could rise about six months after the central bank ends bond purchases. GlaxoSmithKline Plc lost 1.6 percent after saying its experimental lung-cancer drug failed to meet its objectives in a clinical study. Rheinmetall AG fell the most in four months after a report that Germany stopped the defense company from executing a deal in Russia because of the Ukraine crisis. Munich Re rose 1.4 percent after announcing a share buyback. The Stoxx Europe 600 Index added less than 0.1 percent to 327.67 at the close of trading, as two shares fell for every one that rose.
  • Copper Falls Most in Week as Fed Signals Higher Interest Rates. “The market is beginning to question whether the Fed will be more likely to raise interest rates earlier than what they say,” Tim Evans, the chief market strategist at Long Leaf Trading Group in Chicago, said in a telephone interview. “That’s not going to have a positive impact on base metals at all.” Copper futures for delivery in May dropped 2 percent to $2.9285 a pound at 1:29 p.m. on the Comex in New York, the biggest loss since March 11. Prices reached $2.877 yesterday, the lowest since July 2010.
  • Fewest Americans in Four Months See US Economy Improving. The percentage of negative responses about the future exceeded positive views by 12 points this month, the most since November, data from the Bloomberg Consumer Comfort Index showed. The weekly measure declined to minus 29 from minus 27.6 the prior period, the first drop in six weeks. “The latest results may mark the impact of challenges, including higher home-heating prices during the long winter, a sharp increase in food prices tied to California’s drought and the rising price of gasoline,” Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg, said in a statement.
Wall Street Journal:
  • S&P downgrades Russian outlook to 'negative'. Standard &Poor's on Thursday revised the outlook for the Russian Federation to negative from stable on rising geopolitical and economic risks. The rating agency affirmed Russia's BBB foreign currency rating. "The outlook revision reflects our view of the material and unanticipated economic and financial consequences that EU and U.S. sanctions could have on Russia's creditworthiness following Russia's incorporation of Crimea, which the international community currently considers legally to be a part of Ukraine," S&P said in a statement.
Business Insider:
NY Times:
  • Dudley Expresses Concern on Leverage Rule. An influential New York bank regulator has privately raised concerns in recent weeks about a proposed rule that seeks to make the nation’s largest banks safer, frustrating other regulators who see it as a centerpiece of a financial system overhaul and want it to take effect swiftly. William C. Dudley, president of the Federal Reserve Bank of New York, expressed his concerns to senior Fed officials in Washington, according to three people who knew about his efforts. The rule, proposed last July and known as the supplementary leverage ratio, would put a stricter cap on the amount of borrowing that the biggest banks can do. Mr. Dudley raised the possibility that the rule could inhibit the Fed’s ability to conduct monetary policy, these people said. They spoke on the condition of anonymity because they were not authorized to speak publicly about the regulation.
Seeking Alpha:
  • Investment banks should cut balance sheets by $1 trillion - report. Investment banks must take tough decisions to quit ailing business areas and should reduce their balance sheets by $1 trillion (£606 billion) - trillion (£606 billion) - or almost a tenth - to lift profitability, an industry report said. European banks face a particularly challenging outlook and are likely to continue losing market share to big U.S. rivals, according to the 2014 Wholesale & Investment banking Outlook by Morgan Stanley and Oliver Wyman, released on Thursday.

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