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Daily Scan: China dips on glum outlook; Europe creeps up
Capital Markets
<p>Updated throughout the day.</p> <p>Good evening. China’s growth data was better than many analysts expected, but the overall picture is still glum with China growing at its slowest pace since the global financial crisis -- the markets have reacted accordingly. The Shanghai composite index closed down 0.14% while Hong Kong’s Hang Seng index showed little change -- up slightly at 0.04%. Elsewhere in Asia markets have seen little change, the most pronounced drop was seen in Japan where the Nikkei 225 was down 0.88%.</p> <p>In Europe, markets opened flat but soon started tracking upwards with the pan-European STOXX 600 up 0.6%. One of the noticeable winners in early trading was Deutsche Bank which saw its stock climb 3.1% after it announced restructuring plans earlier Monday. </p> <p>Here’s what else you need to know:</p> <p>China 3Q GDP 6.9%, a six-year low. The number is slightly better than expected. But underlying data signalled underlying weakness especially industrial production, which expanded 5.7%, below expectations of 6.0%.  Makes ya' wonder what it would have been without all the stimulus the government launched this past year. The Guardian</p> <p>Britain rolls out the red carpet for President Xi and everyone wonders why. Says one advisor:  "(It's) the only place where China is truly influential right now because they are so desperate for Chinese investment." Ouch. Financial Times (payall)</p> <p>Japan Post subsidiaries priced at top of market range. Shares in the banking and insurance units of Japan Post have been priced at the top end of their proposed price ranges ahead of their November IPO. It's the country’s largest privatisation since the 1980s. Financial Times (paywall)</p> <p>Heads roll as Deutsche Bank splits its investment bank. Deutsche Bank’s new head John Cryan has launched a radical overhaul of the bank’s senior management and structure, parting ways with several top executives and splitting its powerful investment banking unit in two. The Financial Times (paywall)</p> <p>UK to treat Islamic extremists ‘like paedophiles’. Hate preachers will be treated like paedophiles and banned from all contact with children, UK PM David Cameron is to announce today as part of the government’s counter-terrorism strategy. The Telegraph. </p> <p>Goldman Sachs chief economist says December rate hike likely. Jan Hatzius says his confidence level is about 60%, twice that of the Street. Calculated Risk</p> <p>Wildfire kill 7 Indonesia hikers. Seven hikers were killed and two others suffered severe burns after a wildfire broke out on a mountain on Indonesia's main island of Java.The group was climbing</p>
Weekend Scan: Deutsche Bank in major revamp; China GDP slows in 3Q to 6.9%
Capital Markets
<p>&nbsp;</p> <p>Good evening.</p> <p>Earnings madness continues apace this week. Monday, look for earnings from IBM and Morgan Stanley. The big q for Big Blue: Will earnings continue to decline? Morgan Stanley may get a lift from its wealth management business. Also on Monday: Richmond Federal Reserve President Jeffrey Lacker speaks at noon. Housing starts are the next big economic indicator to keep an eye on, Tuesday at 8:30 a.m. ET.</p> <p>Here's what else you need to know:</p> <p>It's official. Even China says it's growth is under 7%. Make that 6.9% to be precise in the last quarter, a six-year low. Makes ya' wonder what it would have been without all the stimulus the government launched this past year. The Guardian</p> <p>Deutsche Bank in major revamp. The bank is splitting its investment bank into two units -- one focused on M&amp;A  and the other on corporate finance and trading. Its former head, Colin Fan, is resigning. The board has been reorganized in an effort to make the bank more competitive after a series of legal and financial missteps. Wall Street Journal (paywall)</p> <p>Goldman Sachs chief economist says December rate hike likely. Jan Hatzius says his confidence level is about 60%, twice that of the Street. Calculated Risk</p> <p>Britain rolls out the red carpet for President Xi and everyone wonders why. Says one advisor:  "(It's) the only place where China is truly influential right now because they are so desperate for Chinese investment." Ouch. Financial Times (payall)</p> <p>10,000 more North Sea oil workers likely to lose jobs. The prediction from two major independent oil producers comes after the sector has already lost 5,500 jobs, 15% of the work force. Financial Times (paywall)</p> <p>Pentagon says Qaeda leader killed in airstrike in Syria. In a statement, the Pentagon said Sanafi al-Nasr, a Saudi national, was the cell he led was involved in planning terrorist attacks in the U.S. and Europe. The New York Times (paywall)</p> <p>Gripping read: "The Lonely Death of George Bell." The story of a man who died alone and the people who piece together a life gone off the rails. The New York Times (paywall)<br /> You won't believe this:<br /> Don't even think about sitting down. A Bronx elementary school principal ordered the custodians in her school to haul all th</p>
Deflation watch: Consumers anticipate price cuts, wait to buy
Capital Markets
<p>Halloween is almost here -- which means one thing:  Time to start thinking about Christmas sales, the make-or-break time of year for retailers.</p> <p>The early drumbeat is worrisome. Sunday, Business Insider reviewed all the ways that retailers are playing to the consumers who figure that they can bide their time and buy once the markdowns come rolling in. Some sellers just simply cut to the chase and begin with low prices: Everlane promises high quality, well-priced items compared to department stores. The online retailer along with e-tailer Oliver Cabell share the gory details of their costs and how they price things so much more fairly than those big mean retailers who actually have brick and mortar overhead.</p> <p>The Consumer Price Index tells the story: Apparel prices are down 1.4% from September 2014. Car prices are also down 1.7%.  The huge drop in energy prices -- down 18.4% -- doesn't seem to be encouraging consumers to go and spend their savings. What? Why would they if prices are likely to drop further?<br /> Photo: Eli Christman</p>
Goldman Sachs chief economist sees 60% chance that Fed will raise rates in December
Capital Markets
<p>Bill McBride at Calculated Risk snagged a copy of recent commentary from Jan Hatzius, chief economist at Goldman Sachs. In the research piece, Hatzius says the Federal Reserve is likely to raise rates in December -- despite weak recent numbers. Hatzius says "we are only about 60% confident." The wildcards, of course, are the data.</p> <p>That "only about 60%" confident level is about twice as confident as the rest of the market.</p> <p>Read the full excerpt here.<br /> Photo: Rich Mitchell</p>
Who would you trust for existing home sales estimates: The trade group or this guy?
Capital Markets
<p>You decide: Calculated Risk has tabulated the monthly existing home sales estimates of the National Association of Realtors vs the estimates of economist Tom Lawler vs the reported data for the past five years. Which ones would you trust? The report for September is due on Thursday.</p> <p>&nbsp;</p> <p>Existing Home Sales, Forecasts and NAR Report<br /> millions, seasonally adjusted annual rate basis (SAAR)</p> <p>Month<br /> Consensus<br /> Lawler<br /> NAR reported1</p> <p>May-10<br /> 6.20<br /> 5.83<br /> 5.66</p> <p>Jun-10<br /> 5.30<br /> 5.30<br /> 5.37</p> <p>Jul-10<br /> 4.66<br /> 3.95<br /> 3.83</p> <p>Aug-10<br /> 4.10<br /> 4.10<br /> 4.13</p> <p>Sep-10<br /> 4.30<br /> 4.50<br /> 4.53</p> <p>Oct-10<br /> 4.50<br /> 4.46<br /> 4.43</p> <p>Nov-10<br /> 4.85<br /> 4.61<br /> 4.68</p> <p>Dec-10<br /> 4.90<br /> 5.13<br /> 5.28</p> <p>Jan-11<br /> 5.20<br /> 5.17<br /> 5.36</p> <p>Feb-11<br /> 5.15<br /> 5.00<br /> 4.88</p> <p>Mar-11<br /> 5.00<br /> 5.08<br /> 5.10</p> <p>Apr-11<br /> 5.20<br /> 5.15<br /> 5.05</p> <p>May-11<br /> 4.75<br /> 4.80<br /> 4.81</p> <p>Jun-11<br /> 4.90<br /> 4.71<br /> 4.77</p> <p>Jul-11<br /> 4.92<br /> 4.69<br /> 4.67</p> <p>Aug-11<br /> 4.75<br /> 4.92<br /> 5.03</p> <p>Sep-11<br /> 4.93<br /> 4.83<br /> 4.91</p> <p>Oct-11<br /> 4.80<br /> 4.86<br /> 4.97</p> <p>Nov-11<br /> 5.08<br /> 4.40<br /> 4.42</p> <p>Dec-11<br /> 4.60<br /> 4.64<br /> 4.61</p> <p>Jan-12<br /> 4.69<br /> 4.66<br /> 4.57</p> <p>Feb-12<br /> 4.61<br /> 4.63<br /> 4.59</p> <p>Mar-12<br /> 4.62<br /> 4.59<br /> 4.48</p> <p>Apr-12<br /> 4.66<br /> 4.53<br /> 4.62</p> <p>May-12<br /> 4.57<br /> 4.66<br /> 4.55</p> <p>Jun-12<br /> 4.65<br /> 4.56<br /> 4.37</p> <p>Jul-12<br /> 4.50<br /> 4.47<br /> 4.47</p> <p>Aug-12<br /> 4.55<br /> 4.87<br /> 4.82</p> <p>Sep-12<br /> 4.75<br /> 4.70<br /> 4.75</p> <p>Oct-12</p>
Struggling to become even an 'emerging' market
Capital Markets
<p>Ghana recently completed an offering of $1 billion of 15-year bonds at 10.75% interest, with a World Bank guarantee of 40% of the issue.</p> <p>That's a hefty price to pay.</p> <p>I have a fondness for Ghana, going back to 1962 when I wrote my masters thesis on West Africa and had the privilege of staying at the Ghanaian Embassy in Washington on the day that the U.S. approved a loan that enabled Ghana to build its first hydroelectric project, the Volta River Dam. Ghana was among the first African nations to become independent of its colonial ruler, it had a young president who had gone to college in the U.S., and dreamers like me thought the nation had a great future. The dam, for example, would provide electricity for the capital city of Accra and for the aluminum smelter for the alumina that Ghana had plenty of. What a great step forward for a new country—from selling the raw material to, eventually, selling the finished goods.</p> <p>That was 53 years ago, as I calculate it, and our hopes have not been realized. The reasons are many. I will not try to detail them here. Suffice it to say that after the passage of over 50 years, there is again some optimism about the future of Ghana, but that optimism wears thin.</p> <p>How can a nation with a growth rate of about 7% (Ghana, lately, if the figures are right) get ahead by paying 10.75% (plus whatever it is paying the World Bank for its support) to fund itself? The use of proceeds section of the prospectus is, as I suppose is usual in such cases, vague. Proceeds will be used for “budgeted capital projects”, three words that sound right in the context but tell the reader nothing. There is nothing there to give a reader any confidence that the funds will be used wisely.</p> <p>How, also, can it make sense for a developing nation to fund domestic projects in dollars when its currency has been depreciating significantly in recent years, as the Ghanaian currency has been doing, it has a seriously negative balance of payments, and its export products have been declining in price in the world’s markets? In all likelihood, Ghana will end up having to plunder other sources of income in order just to pay the interest.</p> <p>Borrowings like these tend to make nations forever developing, never quite emerging.<br /> Photo: Tulane Public Relations</p>
The Week Ahead: China GDP, an ECB rate decision, more guidance for the Fed
Capital Markets
<p>(Note: all times HKT)<br /> Good day. It is a busy economic calendar across the world this week. Markets will scrutinise important data from China on Monday, including quarter 3 GDP figures, for clearer signs that annual economic growth is on course. President Xi Jinping warned last week that maintaining an annual 7% rate is tough, but he has also repeatedly emphasised that the Chinese economy is in transition to a consumer-led model. The retail sales number should indicate whether a shift is underway.</p> <p>In Europe, the ECB will announce its interest rate decision on Thursday. Few analysts expect any change from the current 0.5% benchmark against a backdrop of continued sluggish economic activity in most of the Eurozone and following recent official statements that the ECB’s quantitative easing program might be extended.</p> <p>Housing and employment figures as well as earnings announcements by leading manufacturers will provide further clues about the effects of a strong dollar on the sustainability of US economic growth. Speeches by two Fed officials might give markets a better idea about interest rate intentions – but don’t bet on it.</p> <p>Here is a list of the most important official data releases this week:<br /> Monday, Oct 19 <br /> 09:00    China Gross Domestic Product   (Q3, YoY) - Forecast: 7%; Previous: 7%</p> <p>12:30     China Retail Sales (Sep, YoY) – Forecast: 10.8%; Previous: 10.8%</p> <p>12:30     China Industrial Production (Sep, YoY) – Forecast: 6%; Previous: 6.1%</p> <p>15:30     Hong Kong Unemployment (Sep) – Forecast: 3.4%; Previous: 3.3%</p> <p>17:00     German Buba Monthly Report</p> <p>21:00     US NAHB Housing Market Index (Oct) – Previous: 62 62</p> <p>23:00     US Fed Lacker speech</p> <p>Tuesday, Oct 20 </p> <p>08:30     Australia RBA Meeting Minutes</p> <p>13:00     Germany Producer Price Index (Sep, YoY) – Forecast: -1.7%; Previous: -1.7%</p> <p>19:30     US Housing Starts (Sep, MoM) – Forecast: 1.147m; Previous: 1.126m</p> <p>20:30     US Fed's Dudley speech</p> <p>Wednesday, Oct 21 </p> <p>24h         Hong Kong Chung Yeung Festival – Markets closed</p> <p>06:50     Japan Exports (Sep, YoY) (Sep) – Forecast: 3.4%; Previous: 3.1%</p> <p>06:50     Japan Imports (Sep, YoY) – Forecast: -11.7%; Previous: -3.1%</p> <p>11:30     Japan All Industry Activity Index (Aug MoM) – Previous: 0.2%</p> <p>15:30     UK Public Sector Net Borrowing (Sep) – Previous: £11.305B</p> <p>Thursday, Oct 22 </p> <p>08:30     National Australia Bank's Business Confidence (QoQ) (Q2)</p> <p>13:00     Spain Unemployment Survey (Q3, YoY) – Previous: 22.37%</p> <p>15:30     UK Retail Sales (Sep, YoY) – Forecast: 4.7%; Previous: 3.7%</p> <p>15:30     Hong Kong Consumer Price Index (Oct, YoY) - Previous: 2.4%</p> <p>18:45     ECB Interest Rate Decision</p> <p>19:30     US Continuing Jobless Claims (Oct 9) – Previous: 2.158m</p> <p>19:30     US Initial Jobless Claims (Oct 16) - Previous: 255,000</p> <p>19:30     US Chicago Fed National Activity Index (Sep) – Previous: -0.41</p> <p>19:30     ECB Monetary Policy Statement</p> <p>20:00     US Housing Price Index (Aug, MoM) – Previous: 0.6%</p> <p>21:00     US Existing Home Sales Change (Sep, MoM) – Previous: -4.8%</p> <p>21:00     US CB Leading Indicator (Sep, MoM) – Forecast: 0.0%; Previous: 0.1%</p> <p>21:00     Europe (Prelim.) Consumer Confidence (Oct) – Forecast: -7.5; Previous: -7.1</p> <p>Friday, Oct 23 </p> <p>08:35     Japan: Nomura/JMMA (Prelim) Manufacturing Purchasing Manager Index (Oct)</p> <p>09:00     China Leading Economic Index (Sep) – Previous: 1%<br /> Photo: </p>
Barron's Roundup: The bulls still have it
Capital Markets
<p>October 17, 2015</p> <p>The bulls aren't gone yet. More than half, or 55%, of those surveyed by Barron's say they are bullish or very bullish about stocks at least through next June. When Barron's did a similar poll in the spring, only 45% of respondents were so optimistic. Maybe that 11% market correction in August has people feeling a bit better about the the value of stocks, or maybe it's the Fed's continued drag on actually raising interest rates. Either way, it's pretty much sunshine and rainbows for these equities guys.</p> <p>Hold on to your EMC stock; double digit gains are in your future. Dell's proposed purchase of EMC hasn't benefited shareholders yet, but Barron's is pretty optimistic that it will. Investors could earn a more than 10% return when the $67 billion deal closes, likely next summer, Barron's reports. Worst case scenario for EMC, if the Dell deal does fall through, there are other available options, such as a spin off.</p> <p>Looking for your next best stock pick? Chris Davis, chairman of Davis Advisors, sees opportunities in financials. Investors are, of course, still feeling the financial crisis burn when it comes to investing in financial stocks. But financials are looking as compelling as they did in 1991, Davis tells Barron's. Top picks? Wells Fargo, JP Morgan Chase, and Markel.</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;<br /> Photo: Uguran Betin</p> <p>&nbsp;</p>
Weekend Scan: Risk on pushes major bourses higher; Europe's refugee crisis worsens
Capital Markets
<p>October 17, 2015</p> <p>Good day.</p> <p>Major world stock markets enjoyed strong gains throughout the week, closing at two-month highs on Friday. Investors absorbed a raft of quarterly earnings announcements in the US which in the end contained few negative surprises. Earlier caution gave way to confidence, boosting share prices on most global bourses.</p> <p>China A-shares were the stellar performer, surging more than 6% during the week on hopes of further stimulus measures. The same expectation in Japan too pushed the Nikkei 225 index over 3% higher.</p> <p>For a change, traders also turned their attention away from speculation about US interest rates and instead were encouraged by hints from European Central Bank (ECB) officials that they would inject more liquidity into a still moribund European economy.</p> <p>The prospect of further ECB quantitative easing provided support for the US dollar against both the euro and the yen. Meanwhile, oil prices staged a rally as traders covered short positions</p> <p>Stocks in major world markets rose to a two-month high on Friday and the dollar ticked up, boosted by views that the European Central Bank may provide more stimulus to the euro zone economy.</p> <p>Here’s what else is happening in the world:</p> <p>Hungary closes its border with Croatia to stem migrant flow. Europe’s refugee crisis continues with Hungary erecting razor wire fences against the tide of hapless people escaping from worn-torn Syria and Iraq. Hungary has been the gateway to their transit to Germany and Austria, and Croatia says it will now direct them to Slovenia instead. BBC </p> <p>Palestinian-Israeli fighting ignites again. After weeks of  fighting between Palestinians and Israeli soldiers that has claimed several lives, a group of Palestinians set fire last night to a compound housing Joseph's Tomb, a Jewish religious site in the West Bank. Both Palestinian and Israeli authorities condemned the act.</p> <p>UN corruption scandal. A US judge set bail at $50 million for Ng Lap Seng, a Macau property tycoon, accused of orchestrating an alleged bribery scheme involving United Nations officials. Prosecutors want to keep him in jail and are considering an appeal because they consider him a flight risk. WSJ (paywall)</p> <p>Europe and Russia plan trip to assess settlement on the Moon. European and Russian space agencies intend to send a robotic lander to the Moon's South Pole to determine the feasibility of permanent settlement. It is not a sci-fi fantasy. Luna 27 will embark in five years’ time and the project’s scientists are confident that in future this largely unexplored area will be an outpost of human civilisation. BBC </p> <p>Barclays plans further investment banking job cuts. The new chief of the UK lender Jes Staley plans to speed up reductions in staff levels in its troubled investment banking business and focus on its “core markets”. Does that mean more branches on UK high streets or simply slashing the wage bill? Financial Times (paywall)</p> <p>Goldman Sachs fires cheating analysts. About 20 analysts have been fired from Goldman's New York and London offices for cheating on internal tests. The tests are firm specific, and not regula</p>
Daily Scan: Stocks end week with gains; Goldman fires analysts for cheating
Capital Markets
<p>October 16</p> <p>Good evening. Stock rose Friday, ending the week on a positive note for the third straight week. The Dow grew 0.4% Friday. The Nasdaq added 0.3% and the S&amp;P 500 gained 0.5%. Stock options expired today in the U.S., which normally spells a fall for stocks. Earnings season has kicked off with rocky results, but don't seem to be quite as disappointing as anticipated. European stocks also rose with the Stoxx Europe gaining 0.6%.</p> <p>Here’s what else you need to know:</p> <p>Goldman Sachs fires cheating analysts. About 20 analysts have been fired from Goldman's New York and London offices for cheating on internal tests. The tests are firm specific, and not regulatory exams. CNN</p> <p>Trump suggests Bush could have stopped 9/11. Presidential candidate Donald Trump suggested Friday that former President George Bush failed to stop terrorist attacks. "When you talk about George Bush, I mean, say what you want. The World Trade Center came down during his time," he said. Needless to say, Trump's 2016 rival and Bush brother Jeb responded with disgust. New York Times</p> <p>United CEO hospitalized. The 56-year-old Oscar Munoz was named CEO of the airline last month. The airline did not confirm whether Munoz had suffered a heart attack, as rumored, but the stock fell 3.1% Friday with the news. Reuters</p> <p>FIFA is at it again. A new report shows that Germany likely only hosted the 2006 World Cup because of bribes. The report alleges that four FIFA execs were paid for their votes, and that FIFA helped launder the money. DeadSpin</p> <p>U.S. industrial production drops. Industrial production fell in September for the second straight month, dropping 0.2%, as expected. The August decline was revised to a 0.1% fall. CNBC</p> <p>JOLTS report shows job openings down. The quits rate has held steady at 1.9% for the fifth consecutive month. Job openings in August were at 5.6 million, down from the adjusted 5.67 million in July. Business Insider</p> <p>GE surprises with better-than-expected earnings. Boosted by better aviation and transportation earnings, General Electric reported a profit of $2.51 billion, or 25 cents a share, last quarter. Excluding the finance business, which GE is moving to cut, the company had revenue of $27.9 billion, on a profit of 29 cents a share. Wall Street Journal</p> <p>Theranos backs away from much vaunted "nanotainer" tests. After an inspection by the Federal Drug Administration, the hot startup (company valuation $9 billion) is now able to use the assay to test just one condition -- not the 100 originally publicized. </p>