Friday, January 23, 2015

Today's Headlines

  • Surge in Ukraine Violence Is Deadliest Since Truce Deal, UN Says. The United Nations said the surge in violence in Ukraine is the most significant since a September cease-fire, as a separatist leader threatened to mount a new offensive and warned that he will stop taking government troops prisoner. Some 262 people were killed in hostilities between Jan. 13 and Jan. 21, an average of 29 a day, making it “the most deadly period” since the truce was signed Sept. 5 in Minsk, Belarus, the UN said. At least 5,086 have been killed since fighting erupted in April and “the real figure may be considerably higher,” Rupert Colville, spokesman for the UN High Commissioner for Human Rights, said in a statement on the body’s website Friday. 
  • Ruble Colluding With Oil Brews Russian Toxic Loan Morass. An increasingly toxic mixture of high interest rates, spiraling inflation and plunging oil means Russian banks will probably need a lot more than the $18 billion set aside last year to protect against bad loans. Russia is facing an “extremely widespread” banking crisis in 2015, and lenders may need to boost provisions for souring debts to $50 billion should oil stay in the mid-$40s, according to Herman Gref, the head of the nation’s biggest lender, OAO Sberbank. That’s after banks increased reserves by 42 percent last year, compared with 27 percent in Turkey and 7.5 percent in Poland in the first 11 months, official figures show.
  • Day One for New Saudi King Shows Challenges at Home and Abroad. Saudi King Salman bin Abdulaziz began his first day on the job with a crisis. Just hours before he was named king following the death of King Abdullah bin Abdulaziz, the Yemeni president appointed through a Saudi-led initiative resigned under pressure from rebels the Gulf Arabs say are backed by their main rival, Iran. 
  • Anxiety Over Government Probes Spreads to Top-Rated Chinese Borrowers. The surge in borrowing costs for Chinese junk bond issuers is spreading to investment-grade companies amid the nation’s corruption campaign and following missed payments by Kaisa Group Holdings Ltd. The average spread at issuance on dollar-denominated notes from China sold since Jan. 1 with investment-grade ratings has leapt to 259 basis points from 207 in the second half of last year, data compiled by Bloomberg show. Corporate securities from China in the U.S. currency have lost 0.45 percent this year. Only debt from Bangladesh, Mongolia and Sri Lankan companies has lost more among emerging Asian countries, JPMorgan Chase & Co. indexes showed. 
  • European Stocks Post Biggest Weekly Advance Since 2011 After ECB. European stocks climbed, posting the best weekly performance since December 2011, amid optimism the European Central Bank’s quantitative-easing measures will spur economic growth in the region. The Stoxx Europe 600 Index rose 1.7 percent to 370.37 at the close of trading, the highest level since December 2007.
  • Oil Erases Gains as New Saudi King Says Policies Stable. Oil erased gains in New York following the death of King Abdullah of Saudi Arabia as his successor said policies won’t change in the world’s largest crude exporter. Brent pared an earlier advance of as much as 2.6 percent in London. Salman Bin Abdulaziz Al Saud, who succeeds Abdullah on the throne, said he would maintain his predecessor’s policies.
  • Goldman Joins Banks Cutting Iron Ore Outlook on Global Glut. First Citigroup Inc., then UBS Group AG, now Goldman Sachs Group Inc. For iron ore, which plummeted 47 percent in 2014, the cuts to price forecasts from global banks just keep coming in the opening weeks of the year. The steel-making ingredient may average $66 a metric ton this year from an earlier estimate of $80, Goldman Sachs said in a report dated Jan. 23. This is the first time the New York-based bank has reduced its 2015 prediction since March 2013, and it’s at least the fifth bank this month to lower estimates, citing rising seaborne supplies and weaker demand growth from China, the biggest user.
  • Copper Set for Longest Slump Since October on China Slowdown. Copper headed for the longest run of weekly losses since October after a report showed manufacturing contracted for a second straight month in China, the world’s top industrial-metals consumer. The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 49.8 this month, after 49.6. in December. Numbers below 50 indicate contraction. Copper stockpiles monitored by the London Metal Exchange rose for a ninth session, the longest stretch since April 2013. “The fundamental story is very weak for copper,” Edward Meir, an analyst at INTL FCStone Inc. in New York, said in a telephone interview. “The stockpile rise is telling us that supplies are ample.” Copper futures for March delivery dropped 3.3 percent to $2.494 a pound at 11:25 a.m. on the Comex in New York. Prices are down 4.8 percent this week, heading for a third straight weekly decline in the longest slump since Oct. 3. The commodity lost 8.7 percent this month through Jan. 22 amid concerns that slower growth on China would erode demand. On the LME, copper for delivery in three months slid 2.8 percent to $5,508.50 a metric ton ($2.50 a pound). In a report Friday, analysts at Goldman Sachs Group Inc. including Max Layton said they “remain bearish” even after prices fell more than 20 percent in the past year. The New York-based bank expects “the fundamentals to weaken further,” and forecast the metal at $5,200 a ton in the next 12 months. Aluminum, lead, nickel, tin and zinc also declined in London
  • Goldman’s Commodity Outlook Buckles Under Deflation Threat. Cheaper energy and the U.S. dollar’s advance are darkening the outlook for commodities, according to Goldman Sachs Group Inc. The U.S. bank cut its forecasts for metals and mined raw materials including copper, gold and iron ore over the next three years by about 10 to 20 percent as production costs shrink, according to an e-mailed report Friday.
  • Dalio’s Call for Doom Borne Out in Mom and Pop Fleeing Junk Debt. The promise of yet another trillion-dollar cash infusion from a central bank isn’t enough to bring individual investors back into the market for risky corporate debt. In fact, they keep bailing. Investors pulled $523 million from global high-yield bond mutual and exchange-traded funds in the week ended Jan. 21, according to data compiled by EPFR Global. They withdrew $868 million from funds that buy U.S. speculative-grade loans, bringing their total assets below $100 billion for the first time since September 2013, Wells Fargo & Co. (WFC) data show. The goal of the European Central Bank’s new 1.1 trillion ($1.3 trillion) euro bond-buying program announced Thursday is to push investors into less-creditworthy notes for bigger -- or even just positive -- returns. So, why aren’t junk bonds getting a serious boost? Individual investors are either leaving a seemingly indefatigable party in risky debt too early, or their sentiment is a harbinger of a deeper, more worrisome idea: That policy makers’ main tool to ignite growth isn’t working so well anymore. With yields so low, “the transmission of the monetary policy mechanism will be less effective,” said Ray Dalio, the U.S. hedge fund manager who runs the $160 billion Bridgewater Associates. “We have a deflationary set of circumstances,” which makes it appealing to just stuff your money under a mattress, he said at a panel discussion in Davos, Switzerland, this week.
  • Nothing Is Going to Save the Housing Market. U.S. housing activity remains weak despite six years of federal government aid, strong interest from overseas buyers, rock-bottom interest rates and massive purchases of mortgage bonds by the Federal Reserve. Does this mean housing may never spring back to its pre-recession levels? Many signs point to yes.
  • Box Surges in Cloud-Storage Debut After $175 Million IPO. Box Inc. jumped in its trading debut after raising $175 million in its initial public offering. The shares rose 73 percent to $24.25 at 1:41 p.m. in New York, after being priced at $14 in the IPO. At the most recent price, Box is valued at about $2.8 billion, above the $2.4 billion valuation it received in a July private-funding round.
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