Wednesday, April 09, 2014

Today's Headlines

Bloomberg: 
  • IMF Sees Rising Risks for Emerging Markets’ Corporate Debt. Years of cheap credit have inflated corporate and sovereign debt in emerging markets that now find themselves at greater risk of capital flight if global interest rates rise further, the International Monetary Fund said. While the IMF predicts a smooth withdrawal of monetary stimulus by the Federal Reserve, a “bumpy exit” is possible, Jose Vinals, the head of the IMF’s capital markets department, said in prepared remarks. The result could be a faster-than-anticipated increase in interest rates, widening credit spreads and greater financial volatility, he said. “Emerging markets are especially vulnerable to a tightening in the external financial environment, after a prolonged period of capital inflows, easy access to international markets, and low interest rates,” Vinals said in remarks accompanying the release of the IMF’s Global Financial Stability Report. Years of low interest rates in advanced economies have encouraged global investors to seek higher yields in fast-growing developing countries. Investment from advanced economies into emerging-market bonds reached an estimated $1.5 trillion by the end of 2013, the IMF said. Emerging-market corporate debt tripled from 2009 to 2013, with debt levels in countries such as China, Hungary and Malaysia reaching or exceeding 100 percent of gross domestic product.
  • Ruble to Micex Decline as Putin Discusses Ukraine Energy Ties. The ruble weakened for a third day and the Micex equities gauge declined as President Vladimir Putin said Russia can’t subsidize Ukraine’s economy “forever” amid continued unrest in the east of the country. The ruble retreated 0.1 percent versus the central bank’s target basket of dollars and euros to 41.8325 by 6 p.m. in Moscow, when the central bank stops its market operations. The Micex Index (INDEXCF) dropped 0.3 percent to 1,348.85, having earlier decreased as much as 1.1 percent, and yields on 10-year ruble-denominated debt fell one basis point to 8.89 percent. 
  • Russia’s First-Quarter Capital Outflows Largest Since Late 2008. Russian capital outflows in the first quarter were the largest since the last three months of 2008 when the collapse of Lehman Brothers Holdings Inc. triggered the biggest credit squeeze since the Great Depression. Net outflows totaled $50.6 billion, more than double the $17.8 billion that left in the previous quarter, the central bank in Moscow said in a statement on its website today. In the final quarter of 2008, capital outflows were $132.1 billion. Outflows for the whole of last year reached $59.6 billion. 
  • World Steel Use Growth to Slow as China Decelerates, Lobby Says. Growth in world steel use will slow this year as China’s consumption of the metal decelerates, the World Steel Association trade lobby said. Global “apparent” steel use will increase 3.1 percent in 2014 to 1.53 billion metric tons, after 3.6 percent growth last year, the Brussels-based group said today in a report. Chinese consumption will rise 3 percent, down from 6.1 percent. “Many emerging economies continue to struggle with structural issues and financial market volatility,” Hans Jurgen Kerkhoff, chairman of the Worldsteel Economics Committee, said in the report. “This, along with China’s deceleration, is the reason for our slightly lower global growth rate forecast for 2014.”
  • China's NDRC Said to Start Inspection of Corporate Bond Risks. China's National Development and Reform Commission is conducting an inspection of risks associated with corporate bonds for which it holds oversight, people familiar with the matter said. The inspections, which began in March, focus mainly on how companies are using funds they raise from bond sales, according to the people.    
  • China Stimulus Would Be ‘Mistake’: Nobel Laureate Phelps. Nobel laureate Edmund Phelps was among a group of economists who called on China to refrain from introducing a stimulus package as pressure grows on the government to take steps to support economic growth. It would be a “mistake” for Premier Li Keqiang to use stimulus to maintain the expansion, Edmund Phelps, winner of the 2006 Nobel Prize in Economic Sciences, said at the Bo’ao Forum yesterday in southern China’s Hainan province.
  • Brazil March Inflation Faster Than Every Economist Estimate. Brazil’s consumer prices rose more in March than economists estimated, increasing pressure on the central bank to extend the world’s longest cycle of interest rate increases. Swap rates rose. Inflation as measured by the benchmark IPCA index accelerated to 0.92 percent from 0.69 percent in February, the national statistics agency said today in Rio de Janeiro. That was faster than forecast by all 40 analysts surveyed by Bloomberg, whose median estimate was for an 0.85 percent rise. Annual (BZPIIPCY) inflation quickened to 6.15 percent from 5.68 percent, marking its fastest rate since July.
  • LVMH Sales Trail Estimates as China Destocking Hurts Cognac. LVMH Moet Hennessy Louis Vuitton SA, the world’s largest luxury-goods company, reported an unexpected decline in wine and spirit sales in the first quarter as a Chinese crackdown on lavish spending hit cognac sales. Revenue advanced 4 percent to 7.21 billion euros ($10 billion), Paris-based LVMH said today in a statement after European markets closed. Analysts predicted 7.4 billion euros, according to the median of 17 estimates compiled by Bloomberg. Sales from wines and spirits sales fell 3 percent on an organic basis, led by cognac in China, LVMH said. Analysts predicted growth of 3 percent.
  • Draghi’s Hunt for QE Assets Leaves ECB Scouring Barren Market. Mario Draghi’s asset-purchase plan to ward off deflation may be lacking one key element: enough assets to buy. Since the European Central Bank President buoyed investors last week by saying policy makers backed quantitative easing as a way to boost prices if needed, officials including Governing Council member Ewald Nowotny have signaled any purchases may center on asset-backed securities. While that makes sense in an economy funded mostly by bank loans, it’s also a market Draghi once described as “dead.” 
  • European Stocks Rise After Two-Day Drop as Carmakers Gain. European stocks advanced, after the region’s equities posted their first back-to-back losses in more than three weeks, as carmakers climbed. Daimler AG rose as its chief executive officer predicted significant profit growth this year. Wirecard AG jumped 5.8 percent as a broker recommended buying the stock as the company confirmed its 2014 forecast and increased its annual dividend. Norsk Hydro (NHY) ASA added 1.9 percent as U.S. peer Alcoa Inc. posted a higher-than-projected quarterly profit and reiterated its forecast for global aluminum demand to grow 7 percent this year. The Stoxx Europe 600 Index gained 0.4 percent to 335.16 at the close of trading
  • WTI Crude Rises to One-Month High on Gasoline Demand. WTI for May delivery rose 54 cents, or 0.5 percent, to $103.10 a barrel at 1:02 p.m. on the New York Mercantile Exchange after reaching $103.19, the most since March 5. Prices were at $102.60 before the EIA report was released at 10:30 a.m. in Washington. The volume of all futures traded was 44 percent above the 100-day average
  • Copper Futures Fall in London Amid China Demand Concern. Copper for delivery in three months fell 0.8 percent to settle at $6,617 a metric ton ($3 a pound) at 5:50 p.m. on the London Metal Exchange, the biggest loss since March 26. On the Comex in New York, copper futures for delivery in May declined 0.5 percent to $3.037 a pound.
Wall Street Journal:
Fox News:
  • UN finding on climate change is just a bunch of hot air, new report claims. A U.N.-commissioned panel says climate change is hurting the growth of crops, affecting the quality of water supplies and forcing wildlife to change the way it lives – but what if it’s all just smoke and mirrors? A new report from the Nongovernmental International Panel on Climate Change (NIPCC), written by an international collection of scientists and published by the conservative Heartl and Institute, claims just that, declaring that humanity's impact on climate is not causing substantial harm to the Earth.
ZeroHedge: 
Reuters:
  • ECB dismisses latest bank appeal over health-check deadlines. The European Central Bank has dismissed the latest appeal by the region's biggest lenders for concessions, including easier deadlines, to make rigorous health checks of their industry less logistically onerous, sources told Reuters. ECB officials indicated to representatives of the European Banking Federation, an industry lobby group, that they would not alter the timetable of this year's "asset quality review", two sources familiar with a meeting between the two sides said.
  • Non-banks notch win in long-running derivatives battle. A group of small brokerages and large commodities companies have convinced lawmakers to tweak a rule they say would have made derivatives trading more expensive for them and sent more business to Wall Street banks that already dominate the market. 
Washington Times:
  • IRS under fire: Vote for Obama stickers, campaign cheerleading commonplace. Agency still under fire for Lois Lerner-tea party targeting scandal. Even as the IRS faces growing heat over Lois G. Lerner and the tea party targeting scandal, a government watchdog said Wednesday it’s pursuing cases against three other tax agency employees and offices suspected of illegal political activity in support of President Obama and fellow Democrats.
Sky News:
  • IMF Warns Investors Over 'Rock-Bottom Rates'. Investors are becoming dangerously reliant on rock-bottom interest rates, with many becoming so indebted they will face serious problems when borrowing costs rise, the International Monetary Fund (IMF) has warned. The IMF said that the amount of cash spent on leveraged loans - the high-debt instruments with financial problems - now exceeds the level in 2007 before the crisis. The same is the case with covenant-lite loans, which have become more lax than normal debt - they are also being created at a significantly faster rate than in 2007. The warnings came in the IMF's Global Financial Stability Report. It said that financial markets may struggle when, eventually, the Federal Reserve, Bank of England and other central banks raise interest rates. The report's lead author, Jose Vinals, said that many economies were reliant on these "liquidity crutches".
Telegraph:
La Figaro:
  • JPMorgan Chase(JPM) CEO Says France's Future Worries Him. Jami Dimon tells Le Figaro he worries for the future of France when he hears that thousands of French, "not just the rich but also the young and entrepreneurs" are leaving the country.
NDTV:
  • China Sees Less Policy Room to Fight Growth Slowdown. China has less and less room to rely on policy tools to support the economy, the country's top economic planning agency said on Wednesday, as the government tries to arrest a slowdown this year.Policy fine-tuning is needed to smooth out economic volatility, but room for the government to underpin growth is narrowing, the National Development and Reform Commission(NDRC) said in a report evaluating the implementation of the country's 12th five-year plan (2011-2015). "Against the backdrop of rising local government debt burdens, high debt ratios and rapid money supply growth and excessively large social financing, room for simply using fiscal and monetary policy to manage demand and promote economic growth is getting smaller and smaller," the NDRC said. "Improper operation will exacerbate overcapacity and delay structural adjustments, increase inflationary pressures and accumulate debt risks."
Daily News:
  • Turkey does not need Europe and its extensions, PM Erdoğan’s advisor suggests. Turkey does not need Europe and its “material-moral extensions,” according to Prime Minister Recep Tayyip Erdoğan’s economic adviser, Yiğit Bulut. Writing in his column in daily Star on April 9, Bulut suggested that the “new world order” would consist of three main components: the American continent, the Turkey-Russia-Eurasia-Middle East line, and the China-India-Iran line. He wrote that Turkey had been "used by Europe and its extensions" for years, being "humiliated and scorned" in the process. “Today we don’t need this and the most important thing is that there is no Europe and it is impossible for it to be in the new balance of the world order,” Bulut wrote.

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