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posted on 29 July 2016

Early Headlines: Asia Stocks Mixed, BoJ Timid, More Terror In West, Clinton Makes Pitch, BoE Bond Buying Mystery, IMF Admits Greek Disaster, Zombies In China And More

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Early Bird Headlines 29 July 2016

Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.

early-bird-301-180

Global

  • Nikkei whipsaws after BOJ disappointment; yen surges against dollar (CNBC) Japan shares whipsawed and the yen surged after the Bank of Japan threw markets a smaller-than-expected bone in keenly watched decision on Friday. While the BOJ eased its monetary policy further by increasing its buying of exchange-traded funds (ETFs), it didn't change interest rates or increase the monetary base. Reuters reported the BOJ will increase its ETF buying so that its holdings rise at an annual pace of 6 trillion yen, compared with 3.3 trillion yen previously. The BOJ left its base money target unchanged, said Reuters. The Japanese yen surged against the dollar after the announcement, with the dollar/yen pair falling as low as 102.85, compared with around 103.75 immediately before the decision. The yen was already volatile before the announcement, touching a session high of 105.33. At 12:12 p.m. HK/SIN, the dollar was fetching 103.30 yen. See more news under Japan, below.

asia.pac.2016.jul.29

  • U.S. 2Q GDP report

  • ECB stress test results on European banks

  • Bank of Japan meeting (possibly on the table - increased QE stimulus, even helicopter money)

  • Canada GDP report for May

  • FBI chief: Success against ISIS means more terror (CNN) Battlefield success against ISIS may produce more terrorism for the West, FBI Director James Comey warned this week. Speaking to a cybersecurity conference at Fordham University Wednesday, Comey predicted that eventually crushing ISIS in its self-proclaimed caliphate in Syria and Iraq will likely result in dispersing terrorists elsewhere. The FBI director's warning that the collapse of the caliphate will mean increased attacks in Western Europe and the United States mirrors a consensus among intelligence officials. Comey said:

"At some point there is going to be a terrorist diaspora out of Syria like we've never seen before. Not all of the Islamic State killers are going to die on the battlefield."

U.S.

  • Clinton's pledge: Steady hand at 'moment of reckoning' (Associated Press) Promising Americans a steady hand, Hillary Clinton cast herself Thursday night as a unifier for divided times, steeled for the challenges of a volatile world by decades in politics that have left some Americans skeptical that she understands their lives. Clinton said as she accepted the Democratic nomination, becoming the first woman to lead a major U.S. political party:

"I know that at a time when so much seems to be pulling us apart, it can be hard to imagine how we'll ever pull together again. But I'm here to tell you tonight - progress is possible."

  • Second-Quarter U.S. GDP Forecasts Tumble on New Advance Data (Bloomberg) Some forecasts for second-quarter U.S. gross domestic product tumbled after a new report showed weaker inventories and a wider trade deficit in June. Economists at JPMorgan Chase & Co. lowered their growth estimate to 1.7% from 2.2%, while the Federal Reserve Bank of Atlanta's GDPNow projection declined to 1.8% from 2.3%. Others issued smaller reductions. The new data came from a wider than previously expected trade deficit and less than expected inventory change. You don't have to live very long with these estimates: the latest GDP report is out later today.

  • Police and protesters credited with restraint at convention (Associated Press) Bernie Sanders' devoted followers were careful to pick up after themselves and wore hats embroidered with a dove to remind everyone to remain peaceful. And the police, instead of hauling demonstrators off to jail, issued them $50 tickets for disorderly conduct and released them with a complimentary bottle of water. As the Democratic National Convention drew toward a close Thursday afternoon, Philadelphia police reported making a four-day total of only 11 arrests, and officers and protesters alike were credited with showing restraint and courtesy. The rallies and marches that some feared would result in violence and mass disruptions instead brought a festival-like atmosphere at times to City Hall and Broad Street. Police Commissioner Richard Ross said:

"I'm very happy so far with everyone." [His officers] "took pride in what they did all week. Very patient, tolerant and courteous is what I was hearing from a lot of people."

  • How Abigail Adams Proves Bill O'Reilly Wrong About Slavery (The Atlantic) Bill O'Reilly's view that the slaves who helped build the White House were "well-fed and had decent lodgings" conflicts with the account of Abagail Adams, who observed them personally while living in the partially constructed White House, as being "half fed, and destitute of cloathing". O'Reilly's remarks in context:

UK

  • Figuring Out the Bank of England's Corporate Bond-Buying Program Is Turning Into Big Business (Bloomberg) Has the British bond market gotten ahead of itself? Speculation that the Bank of England could announce a corporate bond-buying program to help cushion the impact of the Brexit decision has sparked a rally in the debt sold by British companies, with borrowing costs now hovering near a record low. Estimates for the size of the program - a potential successor to the corporate bond-buying endeavor launched by the BOE in the aftermath of the 2008 financial crisis - have ranged to well upwards of £100 billion ($131 billion) in recent weeks.

Greece

  • IMF admits disastrous love affair with the euro, apologises for the immolation of Greece (The Telegraph) Hat tip to Roger Erickson. The International Monetary Fund's (IMF) top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory. This is the lacerating verdict of the IMF's top watchdog on the Fund's tangled political role in the eurozone debt crisis, the most damaging episode in the history of the Bretton Woods institutions. Read this critical report: The IMF and the Crises in Greece, Ireland, and Portugal (Independent Evaluation Office of the IMF). Amazingly. in the section where IMF Managing Director Christine Lagarde comments on this report, she denies there was political intervention in the IMF decisions. Econintersect: If no political considerations then the only explanation for what transpired would be stupidity. Is that the Managing Director's problem?

Norway

  • Statoil Suffers Surprise Loss Amid Collapse in Oil Prices (Bloomberg) Statoil ASA deepened spending cuts after Norway's biggest oil producer reported an unexpected loss amid lower crude prices and taxes on unprofitable international operations. The adjusted loss after tax, which excludes financial and other items, was $28 million in the second quarter after a profit of $929 million a year earlier, the Stavanger-based company said Wednesday. That missed the average estimate of 16 analysts for a profit of $294 million.

India

  • India should continue fiscal consolidation for better prospect: IMF (The Economic Times) In order to reduce external vulnerabilities and improve investment prospects, the government should continue with its fiscal consolidation activities including passage of GST Bill, further subsidy reforms and easing domestic supply bottlenecks, says an IMF report. According to the IMF, India's external sector position in 2015-16 is broadly consistent with medium-term fundamentals and desirable policy settings. From the IMF research note:

"To reduce external vulnerabilities and reach the authorities' fiscal deficit goal of 3 per cent of GDP by 2017-18, continued fiscal consolidation is needed, including by passage of goods and services tax (Bill) and further subsidy reforms."

Japan

  • Abe's Unusual Stimulus Unveiling May Be Directed at the BOJ (Bloomberg) By announcing plans for a 28 trillion yen ($265 billion) fiscal stimulus package the week before the entire budget is rolled out, PM Shinzo Abe has put a deficit expansion number in front of the Bank of Japan before its meeting today (29 July). Now the question is: Will the BoJ give any indication how it will deal with financing the deficit no that a number is on the table. We will know very soon. See also The Heat Is On for Japan's Central Bank to Act (Bloomberg). If the BoJ acts before we post this article there will be another article immediately below. Otherwise, it will be discussed in 'What We Read Today' this afternoon.

  • Bank of Japan ups ETF purchases, keeps interest rates steady (CNBC) The Bank of Japan (BOJ) pledged to increase purchases of exchange-traded funds (ETF) but kept interest rates steady at the close of its two-day meeting on Friday, confounding market expectations of hefty stimulus. Econintersect: Other than saying the fiscal stimulus was good idea, the BoJ did nothing to indicate they would take action to avoid increasing Japan's already sky-high national debt. No helicopters today. From Bloomberg:

China

  • Report says 7.51 pct of China's industrial businesses are "zombies" (Xinhuanet) Around 7.51% of China's industrial businesses are "zombie companies", according to a recent research paper, which recommended deregulation to allow them to perish. "Zombie companies" are economically inviable businesses, usually in industries with severe overcapacity, kept alive only with aid from the government and banks. A report released by Renmin University of China found that in 2000, about 30% of China's industrial firms were "zombies". During 2005-2013, they represented around 7.51%. Compiled on the basis of a survey of roughly 800,000 companies, the report said zombie firms are more prevalent in underdeveloped western and northeastern China. State-owned enterprises and large and medium-sized companies have the highest ratio of zombie firms.

Peru

  • Peru's new president Pedro Pablo Kuczynski sworn in (BBC News) A 77-year-old former investment banker has been sworn in as Peru's new president at a ceremony in Lima. In his inaugural speech, Pedro Pablo Kuczynski - known as PPK - said he longed for Peru in five years "to be more modern, more just, more equal". The conservative beat Keiko Fujimori in run-off elections last month. Peru's economy has risen sharply in recent years fueled by a commodities boom but many Peruvians live in poverty and lack basic services. Mr Kuczynski has pledged to work for all Peruvians, calling for a "social revolution". He will need support from Ms Fujimori's party to enact reforms, however, since it controls congress. Ms Fujimori, the daughter of incarcerated ex-President Alberto Fujimori, was once favourite to win the vote but eventually lost by less than a quarter of a percentage point.

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