Bloomberg:
- Syria Is Headed for Western Strike, Russia Says. The
U.S. and its allies are on a “slippery slope” to military intervention
in Syria that will have “extremely dangerous” consequences for the
region, Russian Foreign Minister Sergei Lavrov said. Any military
intervention without UN Security Council approval would be “a gross
violation of international law,” Lavrov told reporters in Moscow
today. He ruled out a Russian military response. World leaders from
Washington to Istanbul called for action to punish Syrian President
Bashar Al-Assad for what they said was his use of chemical weapons as
United Nations inspectors attempted to probe the allegations. Some
Syrian opposition groups say 1,300 people were killed in the Aug. 21
attack in the Damascus suburb of Ghouta. “Western leaders are making
statements that indicates that they won’t wait for the results of this
commission, they have already decided everything,” Lavrov said. “It’s a
very dangerous slippery slope that our Western partners have gone on
before. I hope common sense prevails.”
- Punitive Syria Military Strike Is No Game-Changer in Assad’s War. Anything short of a “sustained” military campaign against
Syrian President Bashar al-Assad for his alleged use of chemical weapons
probably wouldn’t tip the balance in favor of rebels, according to
research firm IHS. “An intervention on a small scale would be a
punitive measure, intended to show that there is a price to be paid for
using chemical weapons,” Firas Abi Ali, Middle East analyst at IHS in
London, said today. “It would mean his military capability would become
weaker but would not improve the ability of the insurgents to take urban
areas and hold them.” A lengthy military operation, though,
would hand an advantage to Islamist militants fighting Assad, an
objective Western powers would be reluctant to seek, Abi Ali said.
- Europe Stocks Drop as UniCredit Falls on Italy Wrangling. European
stocks fell for the first time in three days amid political wrangling
in Italy and as orders for U.S. durable goods declined more than
forecast. UniCredit SpA, Italy’s biggest bank, retreated 3.5 percent as
members of former premier Silvio Berlusconi’s People of Liberty party
threatened to topple Prime Minister Enrico Letta’s government. Royal
KPN (KPN) NV advanced 3 percent as the Dutch phone carrier won the
support of minority shareholder America Movil SAB for the sale of its
German business after acquirer Telefonica SA sweetened its bid. The
Stoxx Europe 600 Index lost 0.1 percent to 304.48 at the close of
trading, as two shares declined for each one that advanced. The volume
of shares changing hands was 57 percent lower than the 30-day average as
markets in London were closed
for a holiday.
- Leveraged Debt Exceeds $2 Trillion in Repression: Credit Markets. It took three decades for the amount
of speculative-grade debt to reach $1 trillion. It took about
seven years to reach $2 trillion as investors sought relief from
the financial repression brought on by near-zero interest rates. The market for dollar-denominated junk-rated debt has
expanded more than eightfold since the end of 1997 from $243
billion, according to Morgan Stanley. That compares with a
quadrupling of the investment-grade market to $4.2 trillion as
tracked by the Bank of America Merrill Lynch U.S. Corporate
Index. While Federal Reserve policies have pushed investors toward
riskier investments to generate high yields, allowing even the
neediest companies that might otherwise default to access
capital markets, concern is rising that missed payments may soar
when benchmark rates begin to increase. Martin Feldstein, a past
president of the National Bureau of Economic Research, said last
week that low rates should be allowed to rise because they’re
driving investors into risky behavior.
- Durable-Goods Drop Imperils Outlook for U.S. GDP Pickup. Orders for durable goods dropped in
July by the most in almost a year, calling into question the
strength of the projected pickup in U.S. growth. Bookings for goods meant to last at least three years fell
7.3 percent, the first decrease in four months and the biggest
since August 2012, the Commerce Department said today in
Washington. The retreat was broad-based, with demand excluding
the volatile transportation category unexpectedly falling. The setback
last month proved to be more broad-based than economists estimated with
bookings also falling for items such as computers and appliances. Orders
excluding transportation equipment declined 0.6 percent after a 0.1
percent gain in June. Demand for non-defense capital goods excluding
aircraft, a proxy for future business investment in computers,
electronics and other equipment, fell 3.3 percent in July, the biggest
decrease in five months. Shipments of those products, a measure used in
calculating
gross domestic product, declined 1.5 percent after falling 0.8
percent in June. The setback indicates business investment was
gaining little traction at the start of the third quarter.
- Copper Drops After U.S. Durable Goods Fall More Than Forecast. Copper fell the most this month on
concern that a bigger-than-expected drop in U.S. durable-goods
orders signals slower demand growth in the country, the world’s
second-biggest user of the metal. Bookings for goods meant to last
at least three years slid 7.3 percent, the Commerce Department said
today in Washington. The median forecast of economists surveyed by
Bloomberg called for a 4 percent drop. Orders waned for aircraft and
capital goods such as computers and electrical equipment. Copper prices
were down 8.1 percent this year through Aug. 23. “The durable-goods
number was a big disappointment,” Brian Booth, a senior market
strategist at Long Leaf Trading Group in Chicago, said in a telephone
interview. “Copper prices started dropping once traders had a chance to
leaf through the report.” Copper futures for delivery in December
declined 1.1 percent to $3.32 a pound at 10:42 a.m. on the Comex in New
York. A close at that price would mark the biggest loss since July 30.
Wall Street Journal:
- Brazil Real Weakens Intraday Despite Central Bank Swap Sale. Brazil's real extended weakening in intraday trade Monday as factors abroad
eclipsed the central bank's swap sale early in the session to offer liquidity
locally. As of 11:30 a.m. EDT, the real traded at BRL2.3950 after ending at 2.3534
Friday according to Tullet Prebon via FactSet. The latest weakening came despite central bank efforts to influence the
market earlier in the day with a currency swap auction.
Fox News:
- US waits for allies to determine Syria response. Despite indications that the Obama administration is leaning toward a
military strike in Syria, the U.S. could be hamstrung by its own desire
to wait for the say-so from top U.S. allies. Defense Secretary Chuck Hagel said Monday that the U.S. would only
act in coordination with the international community, according to
Reuters.
CNBC:
- This isn't 1997-98 again – but could it be worse? The current market rout in emerging Asia isn't another late
1990's-style financial crisis, most analysts agree, but some have larger
concerns that the region may have lost its ability to offer investors
"catch-up" growth with the developed world. "This is not 1997, but in many ways the current period is much more insidious and risky," Macquarie said in a report.
- The 5% recovery: Why most are still in recession. How strong the economic recovery has been since the Great Recession ended in 2009 probably depends on viewpoint. For those in the top 5 percent, the recovery has been pretty good. As for the other 95 percent, well ... maybe not so much.
Zero Hedge:
Business Insider:
New York Times:
Washington Times:
Quartz:
Reuters:
- Russia slashes economic growth forecasts, second time this year. Russia
cut its economic forecasts for the second time this year, increasing
pressure on Vladimir Putin to revive growth that has faded since a state
spending splurge helped secure his election to a third Kremlin term. The Economy Ministry slashed its forecasts for 2013 and 2014
after growth in the second quarter of this year was the slowest
since the slump of 2009, documents obtained by Reuters on Monday
showed. The news broke as the president made one of his many tours
to key industrial regions - this time to Kemorovo in the Kuzbass
coalfields - to demand greater urgency in developing Russia's
vast resource base. The lower growth forecast reflects home-grown problems of
weak industrial output - now expected to barely grow this year -
slowing investment and a waning of the feel-good factor that
helped Putin win a third term as president in March 2012. Not even oil prices at a historically-high $110 per barrel
have been enough to avert the slowdown in the world's top energy
producer - even if Russia's external surpluses and low debts do
shield it from the current turmoil in other emerging markets. The Economy Ministry cut its 2013 forecast to 1.8 percent
from 2.4 percent, also hit by weaker exports and consumption
growth. The forecast was below median expectations of 2.5
percent growth in a regular Reuters poll of economists. It downgraded the 2014 outlook to a range of 2.8-3.2 percent
from 3.7 percent.
- Brazil economy facing "mini-crisis" -Mantega. Speaking at a meeting of business leaders in Sao Paulo, Mantega added that despite the challenges of recent currency
volatility and weaker economic growth both domestically and
abroad.
Financial Times:
- The debt dragon: Credit habit proves hard for China to kick. The
Chinese government says its debt problem is under control, but the
people of Pianpo village have cause to disagree. Over the past year they
have seen their water cut off, rubbish
piling up in the streets and their wages going unpaid as debt has
mounted. An elevated motorway soars over the villagers’ concrete
homes, meant to connect them to central Guiyang, one of China’s
fastest-growing cities. Instead, the slip road to Pianpo ends in a patch
of gravel.
The Guardian:
- Iraq: at least 46 killed in bomb attacks. Car and roadside bombings in Baghdad and northern city of Baquba follow one of country's worst spates of violence.
A series of bomb attacks across Iraq has killed at least 46 people and
wounded at least another 80, medical officials have confirmed. The
blasts in Baghdad and the northern city of Baquba on Sunday were caused
by car and roadside bombings, according to police and local officials. The
death toll was put at 46 or 47 by different police and hospital
officials. The deadliest of the attacks took place in the centre of
Baquba when a car bomb exploded outside an apartment block killing at
least seven people, although some reports estimated up to 11 died in the
blast. Another 34 people were wounded. A second bombing in Baquba,
close to a wedding party convoy, killed four and wounded 17. Iraqi
authorities said there was a further bombing inside a coffee shop in
Baghdad's Shaab neighbourhood, which killed three and wounded 16. There
were reports that a car bomb at a market in the south-eastern and
largely Shia neighborhood of al-Ameen killed three civilians and wounded
13 others.
Echoing fears that
European policymakers remain in a state of cognitive dissonance –
recognizing the need for root-and-branch overhaul of peripheral banks,
but backtracking on joint liability plans – Christopher Flowers, the
legendary FIG investor who now runs the £2.3 billion ($3.5 billion)
private equity group JC Flowers, sounded the alarm over the negative
sovereign-bank feedback loop.
In a shot across the bows of market bulls, who cite the return of
capital flows to weaker eurozone states, Flowers issued a stark warning:
"There is a scenario where we have a Lehman-type event: we wake up some
Thursday and a big country is in trouble.
"And the ECB will have to decide to support banks x, y, z. And then the
ECB will, in fact, decide to own bank x, y, z.
While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3211790/CurrentIssue/88924/Restructuring-Flowers-slams-Europe-over-inaction.html?copyrightInfo=true
Repubblica:
- Italy-German Spread to Rise in Crisis, Roubini Says. New York
University Professor Nouriel Roubini says in interview with la
Repubblica that a crisis of PM Enrico Letta's govt would push the
Italian 10-year yield spread with German bunds over 300 basis points in a
few days. Market conditions for Italian bonds will worsen this week, he
said.
Xinhua:
- China Urbanization Drive Has Hidden Risks. China's local
government plans to raise funds for urbanization contain hidden risks.
Local governments, under high pressure to raise funds, are relying on
revenue from land sales. Property curbs have "noticeably" reduced
construction funds, citing a local official from Shandong province's
Qingdao city. Real estate bubbles are appearing because some property
developers are shifting to small- and medium-sized cities, resulting in
huge urban construction investment without market demand. A single real
estate project in Guizhou province's Kaili city has room to house
200,000 people, half of the city's total population. Some local
governments and real estate companies collude to horde land and profit
from land price appreciation.
Style Underperformer:
Sector Underperformers:
- 1) Utilities -.33% 2) REITs -.15% 3) Steel -.09%
Stocks Falling on Unusual Volume:
- CEL, PTNR, CIG, NRGY, NQ, ING, NOAH, TSN, AMBA, ANF, CTB, PPC, ADM, CNH, ALDW, SINA and MOS
Stocks With Unusual Put Option Activity:
- 1) AMGN 2) EWJ 3) EFA 4) TIF 5) AGQ
Stocks With Most Negative News Mentions:
- 1) TSN 2) CNH 3) RTN 4) TXN 5) GCOM
Charts:
Style Outperformer:
Sector Outperformers:
- Biotech +2.47% 2) Gold & Silver +1.73% 3) Coal +1.53%
Stocks Rising on Unusual Volume:
- QIHU, AMGN, IMMU, ONXX, SSH, SPEX, IPI, DDD, CHRW, AFOP, BIG, OVTI, TSLA, BTU, SSYS and ABFS
Stocks With Unusual Call Option Activity:
- 1) CHRW 2) RSH 3) ONXX 4) SWY 5) AMGN
Stocks With Most Positive News Mentions:
- 1) ALTR 2) DLTR 3) TCO 4) NOC 5) CHRW
Charts:
Weekend Headlines
Bloomberg:
- U.S. Says Syria Used Chemical Arms as UN Plans Inspection. The
Obama administration has concluded Syrian President Bashar
al-Assad’s regime probably used chemical weaponry against civilians,
calling an agreement today to let United Nations inspectors review the
area not credible. Syria and the UN agreed to the inspection of the
Ghouta area outside Damascus starting tomorrow, a UN spokesman said in a statement today. The
agreement five days after the purported attack is too late because
constant shelling of the area could have corrupted or destroyed
evidence, according to a senior U.S. administration official in an
e-mailed statement.
- Egypt’s Brotherhood Leaders Go on Trial for July Violence. The
trial of the supreme guide of Egypt’s Muslim Brotherhood and two of his
deputies on charges of inciting violence started in their absence as
the Islamist group faces its toughest crackdown in over three decades.
In a separate case, former ruler Hosni Mubarak appeared in the court to
answer charges relating to his alleged role in the death of protesters
in 2011, when a mass uprising led to his ouster and opened the door for
the Brotherhood’s rise to power and subsequent fall with the deposing of
President Mohamed Mursi. The start of criminal proceedings against Mohammed Badie,
the Brotherhood’s top leader, along with Khairat el-Shater and
Rashed Bayoumi, comes days after Mubarak was released from
prison under a court order and moved to house arrest. It marked
part of the military-backed government’s attempt to quash the
Islamist organization and stabilize the country after clashes
left nearly 1,000 people dead since Mursi’s July 3 ouster.
- Japan to Decide on Sales-Tax Increase by Early Oct., Amari Says.
Japanese Prime Minister Shinzo Abe will make a decision on a sales-tax
increase by early October, before a gathering of Asia-Pacific leaders in
Indonesia, according to Economy Minister Akira Amari. Abe will decide “at the latest” before a summit of leaders from the Asia-Pacific Economic Cooperation forum, which
starts in Indonesia on Oct. 7, Amari said yesterday on NHK
television.
- Emerging-Market Currencies Fall to Lowest Since 2010 on Fed. India’s
rupee led declines among the currencies of the biggest emerging-market
economies as the Federal Reserve signaled a reduction in stimulus is
still on track, spurring a wave of cash to flow back into larger nations.
The Bloomberg U.S. Dollar Index rose for a second week and touched its
highest level since Aug. 2. An equally weighted basket of currencies of
Brazil, Russia, India, China and South Africa touched its lowest level
versus the dollar since June 2010 on concern a paring of stimulus under
the Fed’s quantitative-easing strategy would intensify outflows from the
currencies. The Commerce Department may report Aug. 30 that U.S.
consumer spending increased 0.3 percent in July.
- Bank Profits to Fall Below 5-Year Low on Rupee: Corporate India. Indian
banks’ profitability, already at the lowest since 2009, is poised to
decline further after measures to stem the rupee’s record slump drove up
borrowing costs and exacerbated rising bad loans and slowing loan
growth. Return on equity, which measures profit generated with
shareholders’ funds, may fall below 10 percent in the year to
March for banks from last year’s 12.8 percent, said Vibha Batra,
co-head of financial-sector ratings in New Delhi at a unit of
Moody’s Investors Service. Stressed assets are approaching
levels last seen in 2002, she said on Aug. 21.
- Freedom on
Rates Sparks Worst Bond Drop Since 2010: China Credit. Speculation that
China will give banks the freedom to set deposit rates is combining with
a cash crunch to spark the worst monthly slump in benchmark sovereign
bonds in almost three years. The rate on government notes due 2023
jumped 27 basis points this month to 399% on Aug. 23, the most since
November 2010, ChinaBond data show. That has widened their rate
advantage to 110 basis points over similar-maturity U.S. treasuries from
as low as 78 basis points on July 5.
- China Construction Bank Profit Growth Slows on Rising Bad Loans. China
Construction Bank Corp. (939), the nation’s second-largest lender,
posted the smallest profit increase in five quarters, weighed down by
rising bad-loan charges as the economy slowed. Net income in the
second quarter climbed 9.7 percent to 60.1 billion yuan ($9.82 billion)
from 54.8 billion yuan a year earlier, based on figures published by the
Beijing-based lender yesterday. That compared with the 58.2 billion
yuan median estimate of 11 analysts surveyed by Bloomberg. The earnings
reflect how Chinese banks are grappling with rising defaults and weak
lending demand as the world’s second-largest economy heads for the
slowest pace of expansion in 23
years.
- BYD Predicts Smaller Third-Quarter Profit on Weak Sales. BYD
Co. (1211), the Chinese automaker that counts Warren Buffett’s
Berkshire Hathaway Inc. (BRK/A) as a shareholder, predicted the smallest
quarterly profit in a year on weaker vehicle sales and mobile phone
orders. Net income for the July-to-September quarter may be 3
million ($490,000) to 50 million yuan, according to Bloomberg
calculations subtracting the company’s six-month figures from its
nine-month projection. A profit at the low end of the forecast would
give the Shenzhen, China-based automaker its smallest three-month profit
since a loss in the second quarter
last year, according to data compiled by Bloomberg.
- China Growth Can Sink Closer to 6% on Waning Job Needs: Economy. Chinese officials shifting the economy away from exports and
investment can allow growth to sink closer to 6 percent within the next
five years without triggering a destabilizing jump in unemployment. The
pace of expansion needed to absorb new entrants to the labor force will
slip to 6.4 percent in 2018 from 7.3 percent this year, according to
the median forecast in a Bloomberg News survey of 12 economists last
month.
- Asian Stocks Rise as U.S. Housing Data Eases Fed Concerns.
Asian stocks rose for a second day after a slump in U.S. home sales
eased speculation the Federal Reserve will reduce economic stimulus next
month. Belle International Holdings Ltd., a retailer of woman’s
footwear, advanced 6.9 percent in Hong Kong after reporting first
half-net income. Newcrest Mining Ltd. jumped 6.9 percent, leading a
surge in Australian gold producers after the price of the precious metal
rose above $1,400 an ounce last week. Tokyo
Electric Power Co. slumped 7.7 percent in Tokyo after eight tons
of filtered water leaked at its crippled Fukushima Dai-Ichi
nuclear power plant. The MSCI Asia Pacific Index advanced 0.3 percent to 131.77
as of 12:26 p.m. in Tokyo, with all of the 10 industry groups on
the gauge rising.
- Rebar Near 4-Month High on Speculation China to Cut Steel Output.
Steel reinforcement-bar futures in Shanghai extended a fourth weekly
gain to trade near the highest level in four months on speculation
China’s drive to reduce air pollution will cut steel output. Rebar
for January delivery gained as much as 0.8 percent to 3,848 yuan ($629) a
metric ton, the same level as the high on Aug. 14 which was the highest
since April, and was 3,824 yuan at
10:33 a.m. local time. The contract rose 0.2 percent last week.
- Hedge Fund Gold Bets Reach Six-Month High After Rally. Hedge funds and other speculators
raised bets on higher gold prices to the most in six months as
signs of slowing U.S. growth drove bullion above $1,400 an ounce
for the first time since June. The net-long position increased 29
percent to 73,216 futures and options by Aug. 20, U.S. Commodity Futures
Trading Commission data show. Short contracts fell for a second week
and to the lowest since Feb. 12. Net-bullish holdings across 18
U.S.-traded commodities jumped 34 percent, the most since July 2010, as
wagers on copper and soybeans more than doubled.
- ECB Council Members Split in Jackson Hole Over Room for Rate Cut. European Central Bank Governing
Council members split over whether scope remains for further
interest-rate cuts as evidence mounts that the euro-area economy
is on the mend. Policy makers still can’t rule out lowering the benchmark
rate from the record low of 0.5 percent, Bank of Cyprus Governor
Panicos Demetriades said in an Aug. 24 interview. By contrast,
Bank of Austria Governor Ewald Nowotny said on Aug. 22 that he
doesn’t see “many arguments now for a rate cut” after the
recent “stream of good news.”
- Merkel Says G20 Needs to Push Harder to Control Hedge Fund Risks. German
Chancellor Angela Merkel told voters at an election rally that she’ll
push for greater regulation of hedge funds at next month’s Group of
Twenty meeting. Addressing a crowd of about 2,000 in the Rhine city
of Bonn, Merkel said she hoped European members of the G20 would “speak
with one voice” at a meeting in St. Petersburg, amid slow progress on
tightening controls on hedge funds. “It’s not enough to regulate just
banks but not hedge funds and shadow
banks and I’ll fight for that,” she said.
- Germany Must Pay for Euro, Merkel Challenger Steinbrueck Says. Chancellor Angela Merkel’s
challenger in next month’s election said Germany will again have
to pay the bill to save the euro and that the chancellor has failed to alert voters about a looming third Greek rescue.
Social Democrat Peer Steinbrueck said Merkel should have been up front
about the cost of rescuing the euro area since 2010, when the first
bailout package was set up. Greece will “most likely” need new funds,
Finance Minister Wolfgang Schaeuble said, adding that the amount will be
“much lower”
than previous packages and won’t be determined until next year.
- Demetriades Says Cannot ‘Rule Out’ Another ECB Interest Rate Cut.
European Central Bank Governing Council Member Panicos Demetriades said
policy makers can’t “rule out” lowering their key interest rate to a
new record low even amid signs the euro-area economy is improving.
“That option is still on the cards,” Demetriades said of a rate cut in
an interview today in Jackson Hole, Wyoming. “We cannot rule out that
possibility although one has to take a look
at the new data. That data is more encouraging.”
- Multiples Expanding Fastest Since Dot-Com Bubble as Rally Ages. Price
gains of stocks in the Standard & Poor’s 500 Index (SPX) are
outpacing profits by the fastest rate in 14 years as the bull market
extends beyond the average length of rallies since Harry S. Truman was
president. The benchmark gauge for U.S. equities has risen 14 percent
relative to income over the past 12 months to 16 times earnings,
according to data compiled by Bloomberg. Valuations last climbed this
fast in the final year of the 1990s technology bubble, just before the
index began a 49 percent tumble. The rally that started in March 2009 has now outlasted the average gain since 1946, the data show.
- Leveraged
Debt Exceeds $2 Trillion in Repression: Credit Markets. It took three
decades for the amount of speculative-grade debt to reach $1 trillion.
It took about seven years to reach $2 trillion as investors sought
relief from the financial repression brought on by near-zero interest
rates. The market for dollar-denominated junk-rated debt has expanded
more than 800% since the end of 1997 from $243 billion, according to
Morgan Stanley. That compares with a quadrupling of the investment-grade
market to $4.2 trillion as tracked by the Bank of America Merrill Lynch
U.S. Corporate Index.
- Fed Officials Rebuff Coordination Calls as Stimulus Taper Looms. Federal Reserve officials rebuffed international calls to
take the threat of fallout in emerging markets into account when
tapering U.S. monetary stimulus. The risk that the Fed’s trimming
of bond buying will hurt economies from India to Turkey by sparking an
exodus of cash and higher borrowing costs was a dominant theme at the
annual meeting of central bankers and economists in Jackson Hole,
Wyoming, that ended Aug. 24. An index of emerging-market stocks last
week fell 2.7 percent, the steepest in two months, compared with a 0.5
percent gain in the Standard & Poor’s 500 Index.
Wall Street Journal:
- Nasdaq Focuses on Pivotal 2 Minutes in Trading Halt. The Period Foretold Just How Severe the Market's Problems Were
About to Get. Regulators and exchange officials trying to unravel
the cause of last week's Nasdaq Stock Market NDAQ +1.21% failure are
focusing on an apparently pivotal two-minute period that foretold just
how severe the market's problems were about to get, according to people
familiar with the discussions. The period between 10:53 a.m. and 10:55
a.m. in New York on Thursday appears to have been crucial to signaling
the coming impact of a connection problem between Nasdaq OMX Group
Inc.'s systems and rival electronic market NYSE NYX -0.07% Arca, the
people said.
- Pipeline-Capacity Squeeze Reroutes Crude Oil. More U.S. oil is moving via truck, barge and train than at any point since 1981. More crude oil is moving around the U.S. on trucks, barges and trains
than at any point since the government began keeping records in 1981, as
the energy industry devises ways to get around a pipeline-capacity
shortage to take petroleum from new wells to refineries. The improvised approach is creating opportunities for transportation
companies even as it strains roads and regulators. And it is a precursor
to what may be a larger change: the construction of more than $40
billion in oil pipelines now under way or planned for the next few
years, according to energy adviser Wood Mackenzie.
- Stagnant Wages Are Crimping Economic Growth. Employers Seem Wary to Raise Pay. Americans are spending enough to keep the economy rolling, but don't
expect them to splurge unless their paychecks start to grow.
Four years into the economic recovery,
U.S. workers' pay still isn't even keeping up with inflation. The
average hourly pay for a nongovernment, non-supervisory worker, adjusted
for price increases, declined to $8.77 last month from $8.85 at the end
of the recession in June 2009, Labor Department data show.
Stagnant wages erode the spending power
of consumers. That means it is harder for them to make purchases
ranging from refrigerators to restaurant meals that account for most of
the nation's economic growth.
Fox News:
- Cruz presses ahead with defunding ObamaCare, says it will take a 'tsunami' of support. The race to stop ObamaCare before Americans can officially sign up
this fall for the government-backed health insurance intensified Sunday
with two of the movement’s biggest champions confident they will succeed
but acknowledging it will take a “tsunami” of support. Texas Republican Sen. Ted Cruz, a Tea Party-backed lawmaker at the
center of the effort to “defund” ObamaCare, said the fight will play out
in the weeks before the Oct. 1 signup date and that success will
require a grass-roots effort in which Americans across the country must
“demand” their elected officials “do the right thing.” “This fight is likely to heat up in the month of September,” Cruz
told CNN’s “State of the Union." “That's going to be when the battle is
engaged.”
- Muslim Brotherhood's bid to scapegoat Christians failing, say Egyptians. As their nation descends into violent chaos, Egyptians are
increasingly blaming the Muslim Brotherhood, despite attempts by the
Islamist group to scapegoat Christians and the military, according to
several sources who spoke to FoxNews.com from Cairo. “The
Muslim Brotherhood has lost all sympathy with their points due to their
violence,” said a Long Island, N.Y., Egyptian-American, who is in a
Cairo suburb for a family wedding.
CNBC:
Business Insider:
Reuters:
- Tropical Storm Fernand forms in Gulf of Mexico, oil ports open. A tropical depression
strengthened into tropical storm Fernand on Sunday in the Gulf
of Mexico, the U.S. National Hurricane Center said, though the
country's main oil exporting ports remained open according to
the latest official report. The oil ports of Cayo Arcas, Coatzacoalcos and Dos Bocas
were operating normally, officials said on Sunday afternoon.
However, Mexican authorities closed the eastern port of
Veracruz.
- Insight: Zombie borrowers haunt China's shadow banks. Call
it the new China Syndrome: Although Asia's biggest economy is slowing
down markedly, credit continues to surge. Dead-end projects and dying
industries are sucking up an ever-larger portion of new credit, while
more productive borrowers are starved for funds. Nowhere is this more
evident than in China's shadow banking sector, the non-bank
financiers that have pumped credit into the economy at a spectacular
rate. Trust companies - firms that sell investment products to Chinese
savers and use the proceeds to make loans or buy other types of assets -
have posted the fastest growth. A Reuters examination of proprietary
data shows that as little as half of trust loans issued in 2012 were
used to finance current economic activity, such as a new investment
project or increased production at an existing factory. The other half
may have been used for refinancing old debt that funded past projects
but is no longer contributing to economic growth. The finding offers a
possible explanation for the growing disconnect between lending and
growth in China. Many analysts have expressed concern that the
so-called "credit intensity" of Chinese growth is increasing. Ever more
borrowing is required to produce the same amount of economic output. But
no one is sure why. Rising credit intensity is exacerbating the huge buildup of debt in China's financial system since Beijing launched its credit-fueled 4 trillion yuan ($650billion) stimulus plan in 2008.
Financial Times:
Focus:
- Merkel Warns Against Debt Cut for Greece. Angela Merkel says debt cut for Greece could trigger a "domino effect" that would unsettle investors, according to an interview with the German chancellor.
Handelsblatt:
- Weidmann Says It's Wrong to Think Crisis Ending. European Central Bank Governing Council member Jens Weidmann said debate over Greek debt cut shows euro crisis not over, according to an interview. Greece must not have more debt write-offs, he said. Draghi's statement that ECB will do everything to rescue euro helped calm markets, but calm is "deceptive", he said. ECB will soon begin to examine European banks' books, conduct stress tests. Stress tests may show some banks need more capital.
WirtschaftsWoche:
- Germany's Schaeuble Rejects Euro Bonds. Schaeuble rejects
introduction of euro bonds or any other form of liability of the
European Union, he said in an interview. Joint liability leads to "false
incentives" and "weakening of reform efforts," citing him.
Euro am Sonntag:
- Pimco Sees No Progress on Common Fiscal Policy. Politicians
aren't making "real progress" on a banking union or a common fiscal
policy, Andrew Balls, head of European portfolio management at Pimco,
said in an interview. European politicians don't have "real growth
strategy", Balls said. Pimco is "underweight" in Italian, Spanish bonds
as growth will remain weak in the next 3-5 years in those countries. The
EU crisis isn't over yet, he said. Pimco doesn't expect German
government to change its fundamental positions after the elections.
To Vima:
- Greece Must Not Undo Its Achievements, Asmussen Says. Greece
leaders must preserve their success in dealing with the country's debt
crisis, citing Joerg Asmussen, ECB executive board member. While he
understands political situation in Greece, Asmussen says there's no
alternative solution to the loan agreement with the so-called troika of
the ECB, IMF, European Commission.
Proto Thema:
- Greece May Need EU10B in Aid, Stournaras. Such aid would be
economic support package without need for another loan agreement,
Finance Minister Yannis Stournaras is cited as saying in an interview.
Asahi:
- Japan Sales Tax Hike Support Rate Rises to 43% in August. 43% of people surveyed in August said sales tax should be raised as scheduled, 13 points higher than the support rate in July, according to a poll conducted Aug. 24-25. Disapproval rating for the sales tax policy falls 9 points to 49%.
Financial News:
- PBOC Reverse Repos Doesn't Mean Easing. Injections into the money
supply by the Chinese central bank with reverse repurchase operations
doesn't indicate a monetary policy easing, according to a commentary
written by Xu Shaofeng. A cut in banks' reserve requirement ratio
wouldn't be good for economic restructuring, the commentary said.
Weekend Recommendations
Barron's:
- Bullish commentary on (TTWO), (MSFT) and (BTU).
Night Trading
- Asian indices are +.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 160.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 128.25 -3.25 basis points.
- NASDAQ 100 futures +.27%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Durable Goods Orders for July are estimated to fall -4.0% versus a +4.2% gain in June.
- Durables Ex Transports for July are estimated to rise +.5% versus unch. in June.
- Cap Goods Orders Non-defense Ex Air for July are estimated to rise +.5% versus a +.7% gain in June.
10:30 am EST
- Dallas Fed Manufacturing Activity for August is estimated to fall to 3.9 versus 4,4 in July.
Upcoming Splits
Other Potential Market Movers
- The German import/export data and the (VMW) financial analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and industrial shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 75% net long heading into the week.
U.S. Week Ahead by MarketWatch (audio).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.
BOTTOM LINE: I expect US stocks to finish the week mixed as increasing Mideast
unrest, rising energy prices and more emerging markets debt angst
offsets stable long-term rates, short-covering and diminishing fed
"taper" worries. My intermediate-term trading indicators are giving
neutral signals and the Portfolio is 75% net long heading into the week.
