Tuesday, October 27, 2015

Today's Headlines

Bloomberg: 
  • U.S. Rivalry With China Heats Up Over Vital Asia Shipping Lane. The moment the U.S. Navy sailed a warship into waters claimed by China in the South China Sea it gave President Xi Jinping a pretext to accelerate his country’s military presence in the disputed waterway, further placing the vital shipping lane at the heart of U.S.-China rivalry in the Pacific. The patrol by the USS Lassen prompted an angry response by Beijing and came just weeks after Xi met with President Barack Obama in Washington, where he said China “does not intend to pursue militarization” of the area. The decision to send in the warship -- the most direct attempt by the U.S. to challenge China over its island building in the waters -- may change that.  
  • China's Top Graft Buster Turns Sights on Financial Industry. China’s top graft buster is turning its sights on the financial industry with plans to dig into organizations ranging from the world’s biggest bank to the regulator overseeing a volatile stock market. The People’s Bank of China, the nation’s five biggest lenders, sovereign-wealth fund China Investment Corp. and the banking, securities and insurance regulators are among 31 entities that will be inspected for possible misconduct or corruption.    
  • Hitachi Construction Cuts Forecasts as Demand Slump Deepens. Hitachi Construction Machinery Co., Asia’s second-biggest maker of building equipment, cut its sales and profit targets for the year as the slowdown in China extends to the developed world. The company trails only Komatsu Ltd. in Japan’s construction equipment market and is among the world’s top suppliers of the large excavators and dump trucks used by miners. Both Komatsu and Hitachi Construction have been quick to warn on the impact of China’s slowdown, and in a statement Tuesday Hitachi signaled the slump is spreading. “ Sales are expected to fall short of the company’s previous forecast due to demand slowdown in developed countries and further slowdown in emerging markets,” Chief Financial Officer Tetsuo Katsurayama told reporters in Tokyo. For China, he said there are no signs of a recovery in demand. “We have a view that we won’t see a recovery in the second half,” he said.
  • Stock Shock: The Threat to Global Growth If Equities Slide Again. That markets are skittish again and remain beneath their peaks nevertheless has economists debating how much power equities wield over global growth. The worrying answer is quite a bit, according to a report from Oxford Economics Ltd., which notes the recent slide in stocks is similar in scale to that seen in 1998.
  • Brazil Real Falls for Second Day on Renewed Concern Levy Leaving. Brazil’s real declined for a second day as President Dilma Rousseff’s government struggles to win support for measures to shore up the nation’s finances amid speculation Finance Minister Joaquim Levy could leave his post. The currency dropped less than 0.1 percent to 3.9088 per dollar at 12:41 p.m. in Sao Paulo, and was the most volatile among 31 major tenders tracked by Bloomberg. Rousseff’s aides are said to see former minister Antonio Palocci Filho as a candidate for finance minister if Levy leaves the position, according to a report in Valor Economico newspaper that didn’t say how it got the information.
  • Emerging Stocks Decline Before Fed Meeting as Ruble Weakens. Emerging-market stocks fell with currencies before a Federal Reserve meeting as utility companies tumbled and lower oil prices dragged down energy producers. Russia’s ruble depreciated the most among its peers. Gazprom PJSC dragged Russian equities lower as oil prices declined before U.S. data forecast to show crude stockpiles expanded in the world’s biggest consumer. The ruble headed for a three-week low. Brazilian raw-material producers led the Ibovespa lower. Indian stocks dropped for a second day. Stocks fell to the lowest level in six weeks in Dubai, while Saudi Arabian shares retreated 3 percent. The MSCI Emerging Markets Index fell 0.7 percent to 861.51 at 11:03 a.m. in New York, dropping for a second day.
  • Europe Stocks Fall for a Second Day as Earnings Miss, Oil Drops. (video) European stocks fell for a second day as some disappointing earnings reports cast doubt on the strength of the euro-area economic recovery, amid weak commodity and oil prices. Total SA and Royal Dutch Shell Plc slid at least 1.9 percent, contributing the most to a drop in energy stocks. Novartis AG pulled health-care shares down, falling 1.6 percent after reporting profit that missed estimates and agreeing to pay $390 million to settle claims that it paid kickbacks to some U.S. pharmacies. Anglo American Plc was among the biggest mining decliners, falling 5.7 percent. BASF SE dragged chemical shares lower, losing 4.7 percent after cutting its targets for sales and profit this year. The Stoxx Europe 600 Index slid 1.1 percent to 371.88 at the close of trading.
  • Arch Coal(ACI) Ends Debt Exchange, Restructuring Talks Continue. Arch Coal Inc. terminated a debt-exchange offer that it initiated almost four months ago as disputes among creditors helped derail the deal that would have enabled the struggling coal miner to slash its $5.1 billion debt load. The company, which had extended the deadline six times, said the decision was based on opposition from a lender group and a pending law suit, among other factors, according to a company statement Tuesday. 
  • IBM(IBM) Says the SEC Is Investigating Accounting for Revenue Recognition. IBM disclosed that the U.S. Securities and Exchange Commission is conducting a probe into the way the technology seller accounts for revenue recognition. International Business Machines Corp. fell 3.5 percent to $138.60 at 1:57 p.m. in New York. The Armonk, New York-based company said Tuesday in a filing that it learned in August that the SEC is looking into the accounting treatment of certain transactions in the U.S., the U.K. and Ireland.
  • Fed's Quest to Keep December Options Open: Decision Day Guide. Here’s what to look for when the Federal Open Market Committee releases its policy statement at 2 p.m. Wednesday in Washington following a two-day meeting. Economists don’t expect a rate rise and will scour the statement for clues on what the FOMC may do at its December meeting, amid betting the Fed will delay until next year. Fresh economic data has been mixed, at best, since officials met last month, when they left their benchmark federal funds rate near zero. Figures on U.S. jobs, retail sales, manufacturing, inventories and exports all disappointed, while new jobless claims and housing data -- for the most part -- have showed continued strength. The challenge for policy makers will be to keep their options open for a move this year, while acknowledging tepid data that could tilt the tone of the statement toward liftoff in 2016. 
  • Cummins(CMI) Falls After Trimming Annual Forecast, Earnings Miss. Cummins Inc. fell after third-quarter profit trailed analysts’ estimates and the company reduced its annual sales forecast because of weakening demand for its heavy-duty engines. The company also said it’s cutting 2,000 jobs as part of a plan to save as much as $200 million a year. And Chief Financial Officer Pat Ward said on a conference call that Cummins will resume share buybacks this quarter. Its board authorized a $1 billion repurchase program in July 2014.
Wall Street Journal
Zero Hedge:
Business Insider:
  • This recession indicator just collapsed to a 6-year low. (graph) An offbeat economic indicator is signaling a recession. The "McCulley indicator" — which measures "core" capex orders, or orders of capital goods excluding military orders and planes — is now at its lowest level since 2009. The indicator is named for former PIMCO managing director Paul McCulley, who views it as a leading recession indicator.

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