Bloomberg:
- U.S., Allies Move Closer to Military Strike Against Syria. The U.S., France and Britain stepped closer to a military strike against Syria, laying the legal groundwork to justify action, moving forces into place and rounding up allies in the region. Any armed response would be narrowly focused on Syria’s weapons capabilities and wouldn’t be aimed at deposing President Bashar al-Assad, U.S. and U.K. officials said. U.K. Prime Minister David Cameron said in London that while no decision has been made on a course of action, it would be legal and proportionate. “This is not about wars in the Middle East; this is not even about the Syrian conflict,” Cameron said in televised remarks. “It’s about the use of chemical weapons and making sure as a world we deter their use.”
- Ito Backs Japan Sales-Tax Plan as Hamada Calls for Gradual Rise. Tokyo University Professor Takatoshi Ito said Japan’s sales tax should be increased as planned as a panel of economists and financial experts considering the levy split on the issue. “Economic indicators show the economy isn’t in a bad state and raising the sales tax wouldn’t slow the economy or the bid to end deflation,” Ito, a former finance ministry official, told reporters yesterday after the meeting in Tokyo. Not proceeding in line with the plan could lead to falling stocks, a stronger yen and a spike in bond yields, Ito wrote in a statement submitted to the panel.
- China Widens Anti-Graft Drive as PetroChina Ousts Managers. China widened its anti-corruption campaign to include the nation’s biggest company by market value, as PetroChina Co. (857) said four senior managers had been removed amid an investigation by authorities. The company’s shares dived as much as 5.9 percent in Hong Kong trading, the most in two years. The departing executives include the chairman of unit Kunlun Energy (135) Co. and the general managers of the company’s two biggest oilfields. Kunlun fell as much as 15 percent, the most in almost five years, slashing its market value to $11.6 billion. The probes signal a broadening crackdown on corruption by China’s new leaders under Xi Jinping that has snared targets from the nation’s biggest phone company to the railway ministry.
- China Trainmakers’ Profits Decline on Lack of New Orders. China’s biggest trainmakers said sales and profit fell in the first half after the nation delayed orders for bullet trains. CSR Corp. (1766), the country’s biggest trainmaker and a partner of Bombardier Inc. (BBD/B), and China CNR (601299) Corp. said the economic slowdown also damped operations in the period. Shares of both manufacturers declined today.
- China Asks U.S. Not to Meddle in Hong Kong Affairs, Song Says. China is “firmly opposed” to foreign powers meddling in Hong Kong’s affairs and the city’s political reform is an internal issue, Commissioner Song Zhe of China’s Foreign Ministry in Hong Kong told U.S. Consul-General Clifford Hart in a meeting, according to a release on the ministry’s website. China hopes the U.S. envoy in Hong Kong won’t conduct activities that are inappropriate for its status and won’t do things that would hurt Hong Kong’s prosperity and affect China-U.S. relationship, according to the statement.
- Property Stocks Decline on Latest Housing Curbs: Singapore Mover. Singapore’s property stocks fell, driving an index tracking developers to a one-year low, after the government tightened its public housing policy by reducing tenures for new loans and restricting purchases by foreigners. The Singapore property index tracking 43 stocks fell 1.2 percent to 694.15 as of 9:13 a.m. local time, set for the lowest since Sept. 11.
- Philippine Stocks Tumble to Nine-Month Low Amid Outflows Concern. Philippine stocks tumbled for a second day, sending the benchmark index to the lowest level in nine months, amid concern that capital outflows will accelerate. The Philippine Stock Exchange Index (PCOMP) dropped 5.7 percent to 5,578.53 at 10:20 a.m. local time, heading for the lowest close since Nov. 23. Ayala Corp. (AC), owner of the country’s biggest property developer, declined 4.8 percent. SM Investments Corp. (SM), owner of the largest shopping-mall operator and biggest grocery chain, slid 11 percent to the lowest level since October. The PSE index has tumbled 16 percent this month amid concerns that reduced U.S. Federal Reserve stimulus will spur capital outflows and local protests over discretionary government budgets will slow state spending. Foreign investors have sold a net $219 million of Philippine shares in August after buying $1.6 billion this year through July.
- Asian Stocks Drop While Oil Climbs on Syria; Aussie Slips. Asian stocks dropped for a second day, credit risk climbed and oil rose on concern the U.S. will take military action against Syria. Australia’s dollar weakened, while U.S. stock futures gained. The MSCI Asia Pacific Index lost 1.6 percent at 11:19 a.m. in Tokyo. The S&P GSCI Index of commodities jumped to a six-month high as West Texas Intermediate crude rose 2.2 percent. Credit risk in Asia advanced to the highest in two months. The Aussie dollar slid against all its 16 major peers and Indian rupee forwards extended declines.
- Gold Trades Near Highest Since May as Syria Tensions Spur Demand. Gold traded near the highest level since May after a four-day rally as speculation that the U.S. may lead military strikes against Syria within days spurred investors’ demand for a haven. Silver and platinum advanced. Bullion for immediate delivery rose as much as 0.3 percent to $1,419.55 an ounce and was at $1,417.17 at 11:38 a.m. in Singapore.
- WTI at Two-Year High on Concern Syria Unrest Will Spread. West Texas Intermediate crude surged to the highest price since May 2011 on concern that conflict in Syria may spread to other parts of the Middle East and threaten oil supplies. Futures gained as much as 2.1 percent in New York, extending yesterday’s 2.9 percent advance. The U.S., France and Britain stepped closer to a military strike against Syria, laying the legal groundwork to justify action after the nation allegedly used chemical weapons. London’s Brent may rise as high as $150 a barrel if conflict causes supply disruptions, according to Societe Generale SA. Libya’s National Oil Corp. said output may have dropped below 200,000 barrels a day, the lowest since the 2011 uprising against Muammar Qaddafi.
- Brent Crude May Spike to $150 on Syria Spillover, SocGen Says. Brent crude may “spike briefly” to $150 a barrel if a U.S.-led attack on Syria sparks further conflict in the Middle East and leads to supply disruptions, Societe Generale SA (GLE) said in a report e-mailed today.
- Rubber Declines for Second Day on Stronger Yen, Syria Tensions. Rubber fell a second day as Japan’s currency maintained its biggest gain in two months amid concern that the U.S. will take military action against Syria. Rubber for delivery in January on Tokyo Commodity Exchange retreated as much as 1.4 percent to 271.7 yen a kilogram ($2,795 a metric ton) and was 273.6 yen at 11:16 a.m. local time. The contract for delivery in February, which started trading today, was at 275.8 yen.
- Bond Binge Expanding Leverage Toward Crisis Peak: Credit Markets. Debt levels have increase faster than cash flow for six straight quarters, boosting the obligations of investment-grade companies in the second quarter to 2.09 times earnings before interest, taxes, depreciation and amortization, according to JPMorgan Chase. That's up from 2.07 times in the first three months of 2013 and compares with 2.13 in the third quarter of 2009, when it peaked after the deepest recession since the Great Depression.
- U.S. Bank Legal Bills Exceed $100 Billion. The six biggest U.S. banks, led by JPMorgan Chase & Co. and Bank of America Corp., have piled up $103 billion in legal costs since the financial crisis, more than all dividends paid to shareholders in the past five years. That’s the amount allotted to lawyers and litigation, as well as for settling claims about shoddy mortgages and foreclosures, according to data compiled by Bloomberg. The sum tops the banks’ combined profit last year. The mounting bills have vexed bankers who are counting on expense cuts to make up for slow revenue growth and make room for higher payouts. About 40 percent of the legal and litigation outlays arose since January 2012, and banks are warning the tally may surge as regulators, prosecutors and investors press new claims. The prospect is clouding outlooks for stock prices, and by some estimates the damage could last another decade. “They’ve crossed the point of no return when it comes to the effects that these expenses are going to have on earnings,” said Jeffrey Sica, who helps oversee more than $1 billion as head of Sica Wealth Management LLC in Morristown, New Jersey, and doesn’t recommend bank stocks. “This is going to keep on hurting them, and people will start paying more attention.”
- U.S., Allies Prepare to Act as Syria Intelligence Mounts. Evidence Includes Satellite Images, Intercepted Communications. Evidence Includes Satellite Images, Intercepted Communications. Positions hardened in the international standoff over Syria, as U.S. officials said privately that a flood of previously undisclosed intelligence, including satellite images and intercepted communications, convinced them the Syrian regime had used chemical weapons against its own people. French, U.K. and U.S. military officials talked Tuesday about coordinating their response to the alleged attacks.
- U.S. Tightens Grip on Telecom. The U.S. government has used the merger-approval process to increase its influence over the telecom industry, bringing more companies under its oversight and gaining a say over activities as fundamental as equipment purchases. The leverage has come from a series of increasingly restrictive security agreements between telecom companies and national-security agencies that are designed to head off threats to strategically significant networks and maintain the government's ability to monitor communications, according to a review of the public documents and lawyers who have negotiated the agreements.
- China's Transparency Standards, U.S. Investor Expectations Collide. Government Policy Curtails Scrutiny of Links Between Officialdom and Business. In the almost six years since VisionChina Media Inc. VISN -4.15% raised $115 million in a U.S. initial public offering, the Chinese broadcasting company hasn't told U.S. investors its co-founder is the daughter-in-law of a senior figure in the Chinese Communist Party. Should it have? The omission is legal. But it illustrates wide differences between China's transparency standards and U.S. investors' expectations. The issue of Chinese political interests overlapping with business comes as inconsistencies pile up over how the U.S. and China treat information. Over the past year, Beijing and Washington have butted heads over jurisdiction to regulate auditors and enforce legal rulings. Accusations by U.S. hedge funds that several China-based, U.S.-traded companies engaged in fraudulent accounting have erased billions of dollars in market value, also hitting shares of companies not accused of wrongdoing. More recently in China, one scandal after another has highlighted ties between business and the relatives of politicians.
- Loose Lips on Syria. U.S. leaks tell Assad he can relax. The bombing will be brief and limited. An American military attack on Syria could begin as early as Thursday and will involve three days of missile strikes, according to "senior U.S. officials" talking to NBC News. The Washington Post has the bombing at "no more than two days," though long-range bombers could "possibly" join the missiles. "Factors weighing into the timing of any action include a desire to get it done before the president leaves for Russia next week," reports CNN, citing a "senior administration official."
- Debt ceiling, government shutdown battles simmer in summer recess. The Washington dance of flirting with fiscal catastrophe intensified this week, as the Obama administration warned House Republicans that a deal on increasing the federal debt limit may have to come sooner than expected. The warning came in a letter from Treasury Secretary Jack Lew to House Speaker John Boehner, who along with other members of Congress is still on summer recess and not expected to return until early September. That leaves little time to deal with two looming deadlines that have not yet been addressed.
- Perfect Macro Storm Clobbers Stocks. (graphs)
Reuters:
- The rupee is where? Currency collapse confounds India Inc. Indian companies such as Whirlpool of India Ltd say they can't plan more than a couple of months out as a fast-falling rupee currency drives up the cost of imports, forcing them to raise prices even as consumer spending crumbles. The timing is particularly tough for consumer companies that were counting on India's September-to-December holiday season to spur sales. India's consumers, whose spending helped see the country through the global financial crisis in 2008, are closing their wallets, squeezing companies from carmakers to shampoo sellers. Companies that import finished goods or raw materials are the worst hit as they scramble to hold onto margins while balancing the need to raise prices without deterring buyers.
Financial Times:
Telegraph:- China companies feel the investment hangover. Wooden carvings of two elephants and an eagle, meant to symbolise wisdom and prosperity, flank the entrance to the Chinese chemical producer Yunwei. Today, they suggest a very different interpretation: a lumbering debt load and scavengers picking over the company’s scraps. “Lots of Chinese companies rushed to expand, to be the biggest in the world. This was a source of great pride. Now we see it as a headache,” says a soft-spoken Yunwei executive, back from a business trip where he was trying to sell more of the hard black coking coal piled high in the company’s storage facility in Qujing in the southwestern province of Yunnan.
- Angela Merkel: Greece should never have been allowed in the euro. Angela Merkel has said Greece should never have been allowed into the euro and put the blame on former chancellor Gerhard Schroeder.
- The Bank of England will lose control of inflation and 1980s mass unemployment will return. Since Bank of England governor Mark Carney issued his “forward guidance”, bond markets have reacted by bringing forward the date at which they implicitly expect interest rates to rise. Bank officials appear mystified by this reaction. But that just indicates how out of touch they are with how the Bank is perceived.
- Does Obama know he’s fighting on al-Qa’ida’s side? ‘All for one and one for all’ should be the battle cry if the West goes to war against Assad’s Syrian regime. If Barack Obama decides to attack the Syrian regime, he has ensured – for the very first time in history – that the United States will be on the same side as al-Qa’ida.
- Japan's April-Sept. China Tour Bookings Drop 75%. Reservations for package tours to China between April and September fell 75% y/y to 6,302 people amid a territorial dispute over islands in the East China Sea and China's air pollution issues, citing information from four Japanese travel agencies.
- China Shouldn't Focus on GDP in Urbanization. China shouldn't focus on boosting GDP as it urbanizes the country, according to a commentary published today. Development of "ghost cities" and "empty cities" only serve to waste resources and increase debt of local governmnts, the commentary said.
- China IPO Resumption 'Realistic'. The resumption of initial public offerings as soon as possible is a "realistic demand," according to a commentary written by Yan Yue.
- New China Consumption Tax. China is mulling on imposing a consumption tax on high-polluting and high-energy-consuming products, the National Development and Reform Commission (NDRC) said Tuesday. The measure is part of China's efforts to save energy and reduce pollution, as the country aims to cut energy consumption per unit of GDP by 3.84 percent annually between 2013 and 2015. Other measures include removing outdated industrial capacity, preventing the fast expansion of high-polluting and high-energy-consuming businesses, as well as encouraging the development of sustainable energy.
- None of note
- Asian equity indices are -2.25% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 175.0 +14.0 basis points.
- Asia Pacific Sovereign CDS Index 134.75 +8.0 basis points.
- FTSE-100 futures -.53%.
- S&P 500 futures +.13%.
- NASDAQ 100 futures +.13%.
Earnings of Note
Company/Estimate
- (ZLC)/-.33
- (CHS)/.32
- (JOY)/1.36
- (BF/B)/.71
- (WSM)/.47
- (TFM)/.32
- (GES)/.35
10:00 am EST
- Pending Home Sales for July are estimated unch. versus a -.4% decline in June.
- Bloomberg consensus estimates call for a weekly crude oil inventory gain of +750,000 barrels versus a -1,428,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,375,000 barrels versus a -4,029,000 barrel decline the prior week. Distillate supplies are estimated to rise by +550,000 barrels versus a +871,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.25% versus a +1.6% gain the prior week.
- None of note
- The 5Y Treasury auction, Japan Retail Sales report and the weekly MBA mortgage applications report could also impact trading today.