Weekend Headlines
Bloomberg:
- Syria Vote in Skeptical Congress Puts Obama’s Agenda at Risk. President Barack Obama enters one of the most pivotal weeks of his presidency, as he makes a final push to persuade a skeptical Congress and a reluctant American public to support air strikes against Syria. With U.S. lawmakers increasingly lining up against the president, the looming congressional vote threatens to undermine Obama’s domestic agenda and weaken his clout internationally. Bashar al-Assad disputed U.S. allegations he used chemical weapons against civilians, according to CBS News correspondent Charlie Rose who interviewed the Syrian president in Damascus. A failure in Congress could reverberate through Obama’s second-term agenda, heightening the difficulty he’ll face in winning congressional support for domestic initiatives and hampering his foreign policy agenda during his final three years in office. “The president’s asking a lot for Republicans to support him on Syria,” Tom Davis, a former Republican representative from Virginia who was head of his party’s campaign operation, said in an interview on Bloomberg Television. “To go back again on immigration or on the budget is going to be very tough.”
- Japan Boosts GDP Estimate as Abe Weighs Sales-Tax Increase. Japan’s economy grew faster than previously estimated in the second quarter, aiding Prime Minister Shinzo Abe’s reflation campaign as he considers whether the nation can withstand a sales-tax increase. Gross domestic product expanded an annualized 3.8 percent from the first quarter, higher than an initial estimate of 2.6 percent, reflecting stronger private capital investment, the Cabinet Office said in Tokyo today. The median forecast of 23 economists surveyed by Bloomberg News was for a 3.9 percent increase. The economy grew 4.1 percent in the first quarter.
- BlackRock(BLK) Predicts Deeper Emerging-Markets Rout: Credit Markets. Wall Street's biggest firms are predicting intensifying bond losses in emerging markets, where borrowing costs have already soared to the highest in more than four years versus U.S. corporate debt, as the Federal Reserve considers curtailing record stimulus. "We're not yet convinced that we've seen the worst in terms of flows out of emerging markets," Jeffrey Rosenberg, the chief investment strategist in fixed-income at NY-based BlackRock Inc., the world's largest asset manager, said in a telephone interview. "We see a lot of valuation change but we see the potential for even more valuation change." Investors have yanked $22.1 billion from emerging-market bond funds since the end of April, almost five times the amount pulled from U.S. corporate credit, according to EPFR Global.
- China May Cut 2014 Growth Target to 7%, State Economist Fan Says. The drop would be in line with the goal set in the country’s 2011-2015 five-year plan for annual average expansion of 7 percent, Fan, who works at the State Information Center under the National Development and Reform Commission, said in an interview in Shanghai on Sept. 7. “It’s hard to find good reasons to be optimistic” about a recovery in China’s growth, Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong, said in a Sept. 6 interview. “The economy has been pretty much supported by investment, especially property and infrastructure, but it’s hard to see how the momentum can continue.” Zhang, who sees “moderate upside risks” to his third-quarter growth estimate of 7.4 percent after better-than-expected economic data, said he’s maintaining his 2014 forecast of 6.9 percent as the current recovery is unsustainable.
- Chinese Zombies Emerging After Years of Solar Subsidies. Only five solar-power vendors remain in a space built for 170 at a sprawling complex of offices stacked three stories high outside Xinyu city in China’s southeast. Locked doors and empty offices are what’s left of the government’s audacious plan to dominate the global solar industry. What happened in Xinyu is being replicated across China, which used subsidies and $47.5 billion of credit to wrest supremacy from Germany, Japan and the U.S., saddling an industry with losses for at least two years. “There is definitely a slew of smaller zombie companies out there that are going to continue to fall one by one,” said Angelo Zino, an analyst at S&P Capital IQ in New York. “You’ll see 10 to 12 names here when it all shakes out. The remaining names will either go bankrupt or be consolidated.”
- Asian Stocks Gain as Yen Drops on Olympics; Metals Rise. Asian stocks rose, with Japan’s benchmark index reaching a one-month high, and the yen weakened after Tokyo was selected to host the 2020 Olympics. Metals rallied and the won gained on improving Chinese exports and easing concerns over a reduction in U.S. stimulus. The MSCI Asia Pacific Index climbed 0.8 percent by 11:06 a.m. in Hong Kong, rising for an eighth day.
- WTI Crude Drops From Two-Year High as China’s Crude Imports Slip. West Texas Intermediate fell from the highest price in more than two years. Hedge funds reduced their bullish bets last week and China’s net crude imports shrank in August from a record high. Futures slid as much as 0.7 percent in New York after two days of gains.
- Gold Declines as Investors Expect Fed to Press On With Tapering. Gold fell, extending two weeks of losses, as investors weighed the prospects of reduced stimulus in the U.S. against signs of increased demand. Gold for immediate delivery dropped as much as 0.5 percent to $1,385.50 an ounce, and traded at $1,389.71 at 9:11 a.m. in Singapore.
- Rebar Rises First Time in Five Days as Traders’ Inventory Falls. Steel reinforcement-bar futures in Shanghai rose for the first time in five days as traders’ inventory fell to the lowest in more than seven months. Rebar for January delivery on the Shanghai Futures Exchange gained as much as 1.1 percent to 3,762 yuan ($615) a metric ton, before trading at 3,758 yuan at 10:45 a.m. local time. The contract fell to the lowest close in almost a month on Sept. 6.
- Merkel Says Danger SPD May Break Vow and Ally With Left Party. German Chancellor Angela Merkel said there’s a danger that the opposition Social Democrats and the Greens may break an election pledge not to ally with the anti-capitalist Left Party in a bid to take power. Merkel said the vote “will be very close” in a speech at a rally in Dusseldorf yesterday, marking the start of the final two weeks of campaigning before Sept. 22 elections.
- Treasuries Drop as Weak Jobs Growth Can’t Derail Fed Taper View. Treasuries fell for the first time in three weeks, pushing 10-year note yields to a two-year high, on speculation economic growth has improved enough to make the Federal Reserve comfortable slowing bond purchases this month. Benchmark yields breached 3 percent yesterday for the first time since July 2011 before a lower-than-forecast jobs report sent them plunging the most on an intraday basis since November. Fed policy makers are debating whether the pace of economic growth merits reducing the asset purchases they have made to support the economy and keep borrowing costs low. The Treasury Department sale of $63 billion in notes and bonds next week includes the smallest auction of three-year debt in four years.
- Russia to Brazil Intervention Adds to U.S. Debt Woes Amid Losses. Investors suffering the worst losses in Treasuries since at least 1978 can add dollar sales by emerging-market central banks to their list of challenges. Speculation that the Federal Reserve, the biggest buyer of Treasuries, will reduce its purchases sent U.S. debt down 4.1 percent this year and boosted the dollar against developing-nation currencies for four straight months, matching the longest streak since 2001, according to Bloomberg data. India, Brazil, Russia and Indonesia have intervened in foreign-exchange markets, and dollar sales mean liquidating Treasuries, according to bond traders at Scotiabank and Bank of America Corp.
- Obama Hones Pitch on Syria As Opposition Rises at Home. In a week poised to define his second term, President Barack Obama will mount an intensive campaign to promote a U.S. military strike on Syria as opposition rises in both Congress and across the country. Mr. Obama will make his case repeatedly in coming days to Americans wary of opening a new military front in the Middle East, including in a battery of interviews set for Monday and a nationally televised address Tuesday evening. He also is sending aides to hold closed-door intelligence briefings for members of Congress about the alleged gassing deaths of more than 1,400 Syrian civilians by the forces of President Bashar al-Assad.
- Hedge Funds Cut Back on Fees. Pressure From Disappointed Investors Changes '2 and 20' Model. Pressure from disappointed investors is forcing hedge funds to roll back their fees, putting the standard charge of 2% of assets under management and 20% of investment profits on the endangered list. Until a few years ago, most funds were like upscale New York restaurants: Some succeeded, others failed, but almost none cut prices. This pricing power was a product of the tens of billions of dollars that flowed into the industry after the tech meltdown of 2000, when savvy investments by some hedge funds shielded their investors from the drubbing suffered by holders of broad stock funds.
- Obama's Successful Foreign Failure. The president may look incompetent on Syria. But his behavior fits his strategy to weaken America abroad.
Fox News:
- Benghazi anniversary hurts White House push to win Syria support. The Obama administration’s effort Sunday to win support for a punitive military strike on Syria is facing opposition and criticism in part because of its handling of the fatal Benghazi terror attacks, which occurred one year ago Wednesday. Federal prosecutors last month filed the first criminal charges related to the Sept. 11, 2012, attacks on the U.S. outpost in Benghazi, Libya, in which four Americans were killed.
Zero Hedge:
Business Insider:- Obama's Stance On Syria Is One Contradiction Too Many. First, the Middle East. For the last six years, Obama has told Americans that the United States needs to extricate itself from the region. He proclaimed a "pivot to Asia" — the region, he said, that was far more important to America's economic future than the Middle East. Iraq and then Afghanistan were countries that the United States should get out of,Obama declared. And never look back. For two years, this same message was conveyed about Syria. Now, Obama is telling Americans that acting in Syria is vital. Voters respond with a simple question: Why now?
Telegraph:
- Brussels fears European 'industrial massacre' sparked by energy costs. Europe's industry is being ravaged by exorbitant energy costs and an over-valued euro, blighting efforts to reverse years of global manufacturing decline.
- China to dictate tough terms on BRICS rescue fund. A top Chinese official has dashed hopes for imminent use of a new $100bn BRICS fund to rescue emerging market currencies in crisis, warning that China will not deploy its reserves unless tough terms are imposed.
- India is reeling under crisis of confidence: Yashwant Sinha. India's top economic minds like Yashwant Sinha, Pratip Chaudhary, Meera Sanyal, and Brinda Jagirdar lament the fact that the fundamental structure of the economy has become weak during the UPA-II regime. Speaking at Bharat Bhagya Vidhata 'India Ka Agenda' show to be aired tonight @ Zee News at 10 pm, they identified elevated twin deficits, low growth rate, and high inflation as three key factors that had weakened the pillars of the economy.
Weekend Recommendations
Barron's:- Bullish commentary on (MSFT), (AET), (CAT), (GE), (JOY), (BOBE) and (TXT).
- Bearish commentary on (MCD).
- Asian indices are +.50% to +1.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 143.0 -12.0 basis points.
- Asia Pacific Sovereign CDS Index 122.50 -3.25 basis points.
- FTSE-100 futures +.11%.
- S&P 500 futures +.29%.
- NASDAQ 100 futures +.38%.
Earnings of Note
Company/Estimate
- (HOV)/.06
- (JW/A)/.42
- (CASY)/1.26
- (HDS)/.18
- (PANW)/.06
- (FIVE)/.09
- (PVH)/1.37
3:00 pm EST
- Consumer Credit for July is estimated to fall to $12.3B versus $13.81B in June.
- (DVA) 2-for-1
- The Fed's Williams speaking, BoJ minutes, Barclays Financial Services Conference, KeyBanc Basic Materials/Packaging Conference and the (NS) analyst meeting could also impact trading today.
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