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posted on 26 October 2016

Early Headlines: Asia Srocks Mostly Lower, Energy HY Bonds Surge, Google Fiber Cutback, Shadow Banks Dominate Mortgages, NATO Crowds Russia, Coffee Surges And More

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Early Bird Headlines 26 October 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.




  • Energy HY bonds have seen a spectacular decline in spreads (Walter Kurtz, Sober Look, The Daily Shot) The recovery in oil prices from lows in February have had a dramatic effect on high yield energy bonds - yields have fallen dramatically as prices have recovered to levels not seen for over two years.


  • Donald Trump’s slimming chances of victory (The Economist) An average of professional polls with statistically sound methodologies - the kind the Republican nominee scorns - puts him roughly six percentage points behind his opponent, Hillary Clinton. This close to the election, presidential polls have historically missed the final tally by only 1.8 points, dispiriting news for still-hopeful Trumpistas.

  • Google Curbs Expansion of Fiber Optic Network, Cutting Jobs (The New York Times) Alphabet, the parent company of Google, is signaling a strategy shift for one of its most ambitious and costly efforts: bringing blazing-fast web connections to homes across America. The company said on Tuesday that it was curbing the expansion of its high-speed fiber optic internet network and reducing staff in the unit responsible for the work. Alphabet did not provide an exact number for the jobs that will be cut. Craig Barratt, chief executive of Access, the Alphabet division containing Google Fiber, also said he planned to step down because the company was shifting to new technologies and methods of deploying high-speed internet.

  • Housing Bust 2? Subprime No-Down-Payment Mortgages Surge, “Shadow Banks" Dominate (Wolf Street) The value of the US housing market has ballooned to $26 trillion. In many markets, prices exceed even the peak of the prior house price bubble that blew up so spectacularly. This construct is weighed down by $14 trillion in mortgage debt, or about 76% of US GDP. Of that, $10 trillion is owed on one- to four-family residences. The numbers are big - and they matter. But who’s doing the lending? More and more: nonbanks, evocatively called “shadow banks." They have now overtaken commercial banks “to grab a record slice" of government-guaranteed mortgages, Attom Data Solutions reported in its housing report.

  • Dollar index will hit $1; Trump, Clinton victory leave traders unmoved (CNBC) The Brexit and Janet Yellen's indecision on rates have been digested by the market. Now, the prospect of either a Donald Trump or Hillary Clinton victory in the U.S. election isn't seeming to induce any jitters in the dollar index. The Brexit has proved more difficult and complex than imagined when Brits went to the polls, and the dramatic drop in the pound was evidence that the market was beginning to understand the consequences of the referendum decision. However, the drop in the pound was not matched by a dramatic rise in the dollar index. The trading range for the dollar index seems likely to remain between $0.93 and $1.005 for some time to come, no matter who becomes president. A move above $1.005 "has the potential for the dollar to strengthen considerably". Econintersect note: The article repeatedly refers to $1.05 but, as shown in the chart below, that is a typo.



  • NATO seeks troops to deter Russia on eastern flank (Reuters) NATO will press allies on Wednesday to contribute to its biggest military build-up on Russia's borders since the Cold War as the alliance prepares for a protracted quarrel with Moscow. With Russia's aircraft carrier heading to Syria in a show of force along Europe's shores, alliance defense ministers aim to make good on a July promise by NATO leaders to send forces to the Baltic states and eastern Poland from early next year. The United States hopes for binding commitments from Europe to fill four battle groups of some 4,000 troops, part of NATO's response to Russia's 2014 annexation of Crimea and concern it could try a similar tactic in Europe's ex-Soviet states.



  • A special report with Iraqi troops as they near Mosul (BBC News) In Iraq, on the ninth day of the offensive to retake the city of Mosul, most Iraqi government and Kurdish forces are still some distance from the city which is a stronghold of so-called Islamic State. BBC correspondent Ian Pannell has sent this special report just three miles from Mosul as he travels with part of Iraq's elite Counter Terrorism Service.


  • Private Jets for Corgis and Other Secrets of Putin's Inner Circle (Bloomberg) Vladimir Putin is learning that embarrassing leaks are a two-way street. Infighting among Putin’s inner circle has led to a series of disclosures over the past few months that have shined a harsh light on the private dealings of the Kremlin court -- much as Hillary Clinton has endured the airing of thousands of e-mails as a result of what the U.S. calls Russian hacking of her campaign. As the Kremlin gears up for Putin’s last re-election bid in 18 months, anti-graft crusader Alexei Navalny has emerged as the conduit of choice for rival factions to scoop dirt on each other as they jostle to retain their fiefdoms. While Putin has largely stayed above the fray, anonymous tips and research by Navalny’s staff of 30 have led to a string of revelations about the extravagance of some of the Russian leader’s closest allies, including a new luxury home for his premier, army contracts for his personal chef and private-jet travel for the show dogs of a top official.


  • Philippine president assures Japan his visit to China was all about economics (Reuters) ​Philippine President Rodrigo Duterte sought to assure Japan on Tuesday that his high-profile visit to rival China last week was only about economics, but had more harsh words for long-time ally Washington, saying he might abrogate defense treaties. The volatile Philippine leader's visit to Japan comes amid jitters about his foreign policy goals after weeks of verbal attacks on ally the United States and overtures towards China. Duterte last week announced in China his "separation" from the United States, but then insisted ties were not being severed and that he was merely pursuing an independent foreign policy.


  • Coffee Rises to 20-Month High as Brazilian Exports Seen Falling (Bloomberg) Arabica coffee, the mild-tasting bean type favored by Starbucks Corp., surged to the highest since February 2015 after Brazil’s largest producer cut its export estimate for 2016 amid rising domestic consumption and the effects of drought.

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