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IPOs
Crash, Startup Valuations Plunge, Era Ends - (www.wolfstreet.com) Box,
which tries to fight it out with the big boys in the “cloud” collaboration and
file-sharing environment, plunged 7.7% on Tuesday and 3.5% this morning, to
$9.07. It had gone public a year ago at an IPO price of $14, jumped to $24.73,
and went downhill. It’s down 63% from its instant peak and down 35% from its
IPO price. It has been that kind of hell for startup companies. The Renaissance
US IPO Index, which tracks newly public companies for two years, peaked in
April 2015 and has since plunged 29% as of Tuesday’s close. Behind the scenes,
it doesn’t look any better. There have been a spate of startups that
recently raised money in a “down round,” where the high-flying “valuations,”
negotiated by a handful of people and leaked to the media to create the
requisite hype for future rounds of funding, were cut in half.
Europe on the verge of collapse: Soros - (www.bloomberg.com) Billionaire
financier George Soros has warned that the European Union is on the "verge
of collapse" over the migrant crisis and is in "danger of kicking the
ball further up the hill" in its management of the issue which has seen
more than a million migrants and refugees arrive in the region in 2015. In an
interview with the New York Review of Books, Soros added that the German
Chancellor Angela Merkel is key to solving the crisis. Merkel led Europe's
response to the migrant crisis, opening Germany to the refugees that had
travelled from the Middle East, in particular Syria, to try and find a new home
in Europe. The decision by the German leader marked a sea-change in her policy.
In the interview, Soros said he welcomed Merkel's move.
Italian banks' bad loans continue to mount - (www.marketwatch.com) The
increased levels of bad loans confronting the Italian banking system is raising
investors' concerns about the health of the sector, prompting another selloff
in local banking stocks on Tuesday. According to data published Tuesday by
Italy's banking lobby ABI, Italian banks' gross bad loans, measured at their
face value, stood at EUR201 billion in November, 11% higher than the same
period a year prior. Gross bad loans were 10.4% of total loans in November, the
highest percentage figure since 1996. "The stock of bad loans is only
bound to grow in the near future," said Giuseppe Lusignani, vice chairman
of risk-management consultancy Prometeia SpA, which estimates that total bad
loans will start to decline between the end of this year and the beginning of 2017.
Junk-Bond Risk Gauge Set for Biggest Year-Start
Jump Since 2009 - (www.bloomberg.com) A
measure of investors’ fear of junk-bond defaults has staged its biggest jump at
the start of a year since 2009, when the world was in the midst of a
financial crisis, as investors have globally rushed out of riskier
assets. The risk premium on the Markit CDX North American High Yield
Index, a credit-default swaps benchmark tied to the debt of 100
speculative-grade companies, surged 87 basis points between Dec. 31 and
Wednesday, reaching 564 basis points, the highest level since 2012. That jump
was the biggest since the start of 2009, when it rose 227 basis points. A
similar index for investment-grade debt also rose to a three-year high. Weakness
in North American corporate-bond prices was one piece of larger market turmoil
on Wednesday as investors brace for slower growth in China. Global shares are
at the verge of entering a bear market, with the Dow Jones Industrial Average
sinking nearly 250 points, and oil prices fell to their lowest levels since
2003.
Ruble
Plunges 26% in 90 days, 6% in Two Days, Hits New Low, Government Says to Heck
with it - (www.wolfstreet.com) The ruble plunged 3.8% on Wednesday and another
2.8 on Thursday to a new all-time low of 83.85 to the dollar, at 5:30 PM Moscow
time, blowing through the previous catastrophic panic low of December
2014. At the time, the Ministry of Finance and the Central Bank deployed
desperate, and ultimately very costly shock-and-awe measures to stop the ruble
from spiraling out of control. And it triggered all kinds of drama. On December
16, 2014, the Central Bank announced that it increased its benchmark rate by a
brutal 6.5 percentage points to a dizzying 17%, after having already jacked up
rates in the prior week to 10.5%. And the Ministry of Finance announced it
would begin selling Russia’s crown jewels, its dwindling foreign currency
reserves, and with the proceeds mop up rubles.
PBOC
Injects Most Cash in Three Years in Open-Market Operations - (www.bloomberg.com)
Asian Stocks Gain as Rebound in Oil Eases Global Equities Rout
- (www.bloomberg.com)
SoftBank's Drop Deepens on Sprint Shares, Debt at Multiyear
Lows - (www.bloomberg.com)
U.S. Stocks Close Lower After Late-Day Rally - (www.bloomberg.com)
Oil Tumbling Most in Four Months Deepens Gloom for Producers
- (www.bloomberg.com)
Global Bond Downgrades Climb to Highest in Six Years, S&P
Says - (www.bloomberg.com)
These Favorite Hedge Fund Holdings Are Among 2016's Worst
Stocks - (www.bloomberg.com)
Why China Can't Keep a Stock Rally Going - (www.bloomberg.com)
Gross Says Global Selloff Shows Failure of Central Bank Efforts
- (www.bloomberg.com)
[Evans-Pritchard] World faces wave of epic
debt defaults, fears central bank veteran - (www.telegraph.co.uk) The
global financial system has become dangerously unstable and faces an avalanche
of bankruptcies that will test social and political stability, a leading
monetary theorist has warned. "The situation is worse than it was in 2007.
Our macroeconomic ammunition to fight downturns is essentially all used
up," said William White, the Swiss-based chairman of the OECD's review
committee and former chief economist of the Bank for International
Settlements (BIS).
"Emerging markets were part of the solution after the Lehman crisis. Now
they are part of the problem, too." William White, OECD. "Debts have continued to build up over
the last eight years and they have reached such levels in every part of the
world that they have become a potent cause for mischief," he said. "It
will become obvious in the next recession that many of these debts will never
be serviced or repaid, and this will be uncomfortable for a lot of people who
think they own assets that are worth something," he told The Telegraph on
the eve of the World Economic Forum in Davos.
Here's
Why International Business Machines Corp. Stock Dropped To A 6-Year Low - (www.bidnessetc.com) International Business Machines Corp. (NYSE:IBM)
has putting a considerable amount of effort into its cloud and software
business units for some time now. Its core business unit has recently been
taking a turn for the worse. After a series of bad ratings by analysts, and
below par revenue numbers, the company finally had an instance of optimism,
when it reported a higher than expected earnings per share (EPS) figure, and
revenue, for 4QFY15. The company reported $22.1 billion in revenue, while
Street analysts had expected the same to come in at $22.02 billion. EPS was
recorded at $4.84, compared to the consensus of $4.81.
Shrinking Sovereign Wealth Funds Are Ducking
Davos - (www.bloomberg.com) In
the days of the commodity boom a few years ago, oil-rich nations and their
petrodollar wealth were the darlings of the World Economic Forum. A panel
that included Kuwaiti, Saudi and Russian sovereign-wealth fund officials was
one the hottest tickets at Davos in January 2008, just before oil prices surged
to $150 a barrel. It was a time when crude producers were accumulating billions
of dollars in debt and equities, plus real estate, sports teams and other
trophy assets. So influential were the fund managers that a group of bank
chiefs told them behind closed doors at the Swiss resort to become more
transparent, or risk antagonizing American legislators. Now, with oil below $30
a barrel, the situation has reversed. Instead of buying U.S. Treasuries,
British department stores and French soccer teams, producing countries are
selling, helping depress already-spooked markets. Only a handful of wealth-fund
heads are scheduled to appear at the 2016 annual forum of the rich and
powerful. And not one panel is devoted to the topic.
Saudi Arabia Said to Ban Betting Against Its
Currency - (www.bloomberg.com) Pressured
by plunging oil prices and costly wars in the Middle East, Saudi Arabia moved
to stamp out speculation that it might be forced to break the link between its
currency and the dollar. Authorities this week ordered banks to limit traders’
ability to bet against against the riyal, whose peg to the dollar has been a
bulwark of the kingdom’s economic and financial stability since its
introduction three decades ago. Officials aimed “to kill this speculative
activity over the sustainability of the riyal peg," Apostolos Bantis, a
credit analyst at Commerzbank AG, said by phone from Dubai. "Over time,
this measure will lead to an easing of the forwards because it will make it far
more risky for investors to do this trade."
Exclusive:
Dallas Fed Quietly Suspends Energy Mark-To-Market On Default Contagion Fears - (www.zerohedge.com) We
can now make it official, because moments ago we got confirmation from a second
source who reports that according to an energy analyst who had recently met
Houston funds to give his 1H16e update, one of his clients indicated that his
firm was invited to a lunch attended by the Dallas Fed, which had previously
instructed lenders to open up their entire loan books for Fed oversight; the
Fed was shocked by with it had found in the non-public facing records.
The lunch was also confirmed by employees at a reputable Swiss investment bank
operating in Houston. This is what took place: the Dallas Fed met with the
banks a week ago and effectively suspended mark-to-market on energy debts
and as a result no impairments are being written down. Furthermore, as we
reported earlier this week, the Fed indicated "under the table" that banks
were to work with the energy companies on delivering without a markdown on
worry that a backstop, or bail-in, was needed after reviewing loan losses which
would exceed the current tier 1 capital tranches. In other words, the Fed has
advised banks to cover up major energy-related losses.
Indebted Chinese Companies Increase Pressures
on Government - (www.nytimes.com) Sainty
Marine Corporation started small, buying and selling a few ships in the 1980s.
But the state-owned Chinese company went on a debt-fueled binge over the last
few years, opening its own shipyards and signing orders worth hundreds of
millions of dollars apiece. Now, heavily indebted companies like Sainty Marine
are at the center of the economic troubles in China that have unsettled currency, commodity
and stock markets of late. Sainty Marine just found itself in court, as one of
China’s biggest banks asked to dismantle the company to recoup overdue loans.
Government regulators are investigating the accuracy of the company’s financial
reports, its bank accounts have recently been frozen and its shares have not
traded on the Shenzhen stock market since August.
Mideast Stocks Plummet as Iran Plans to Boost
Crude Exports - (www.bloomberg.com) Stocks
across the Middle East tumbled as the easing of sanctions against Iran raised
the prospect of a surge in oil supplies to a market already reeling from the
lowest prices in more than a decade. Shares in Tehran gained. Saudi
Arabia’s Tadawul All Share Index dropped 5.4 percent to its lowest level since
March 2011. Abu Dhabi’s ADX General Index fell into a so-called bear
market. The Bloomberg GCC 200 Index, which tracks 200 of
the six-nation Gulf Cooperation Council’s biggest companies, traded at 9.5
times estimated 12-month earnings, the lowest in almost seven years. Iran’s
TEDPIX Index climbed 0.9 percent, according to data on the bourse’s website,
extending Saturday’s 2.1 percent advance.
Blame, anger, frustration as China's stock
rescue effort looks defeated - (www.reuters.com) A
Chinese government campaign to restore confidence in the country's volatile
stock markets appeared to be in tatters on Friday as the benchmark Shanghai
index wiped out all the gains made since the depths of last year's crash. Among
a flurry of measures, a so-called national team of institutional investors had
promised last summer to buy and hold stocks on the index until it returned to
4,500 points - a level which at the time was considered in reach. However, the
Shanghai Composite Index .SSEC -
the most closely watched by Chinese investors - fell through the lows seen
during the depths of last year's crash and closed on Friday at 2,900 points -
its weakest level since December 2014.
BHP Billiton books $7.2 billion writedown US
shale assets - (www.reuters.com) Top
global miner BHP Billiton said on Friday it would book a $7.2
billion writedown on the value of its U.S. shale assets, reflecting a slump in
oil and gas prices and a bleak near-term outlook. The hefty impairment is the
third spawned by BHP's badly timed push into U.S. shale in 2011, when it spent
$20.6 billion, including assumed debt, on two acquisitions at a time when oil
and gas prices were much higher than they are now. "Oil and gas markets
have been significantly weaker than the industry expected," BHP Chief
Executive Andrew Mackenzie said in a statement. In the wake of the collapse in
oil prices over the past year, BHP has sharply cut its operating costs and
capital spending at its U.S. onshore operations, reducing the number of rigs
from 26 to five.
Investors pull $9 billion from stock funds
during weekly period: Lipper - (www.reuters.com) Fund
investors continued to sour on U.S. stocks and corporate debt during the weekly
period that ended Jan 13, Lipper data showed on Thursday, as risk appetite
waned in the wake of global market turmoil. U.S.-based stock mutual funds and
exchange-traded funds lost $9.0 billion to withdrawals during a week that saw
U.S. stocks continue one of their worst starts to a new year amid fears of a
further fall in oil prices. "We had another rocky week for equities,"
said Lipper analyst Jeff Tjornehoj, referencing losses logged by the Dow Jones
industrial average, a widely cited market benchmark. "We had three
triple-digit loss days. It's really hard to build any momentum when that's your
headwind, so naturally mutual-fund investors withdrew money out of equities
overall."
Asia shares hit 3-1/2-year lows as oil resumes
fall - (www.bloomberg.com) Oil
prices dove below $30 a barrel on Friday, dragging major equity indices around
the world sharply lower, as fears of a global slowdown amid a crude supply glut
roiled markets and unsettled investors who snapped up gold and other safe-haven
assets. Major stock indices in Europe and on Wall Street tumbled more than 2
percent while crude prices slid on expectations Iran will increase oil exports
once international sanctions are lifted, possibly within days. Yields on the
benchmark 10-year U.S. Treasury note were poised to fall below 2 percent and
gold rose as retreating oil prices and equity markets underpinned demand for
assets perceived as safer. The December futures contract on the federal funds
rate surged to its highest since October, implying the Federal Reserve will
raise rates only one more time this year.
French
drug trial disaster leaves one brain dead, five injured – (www.reuters.com)
One person has been left brain dead and five
others have been hospitalized after taking part in a clinical trial in France
of an experimental drug made by Portuguese drug company Bial, French Health
Minister Marisol Touraine said on Friday. In total, 90 people have taken part
in the trial, taking some dosage of the drug aimed at tackling mood and anxiety
issues, as well as movement coordination disorders linked to neurological
issues, Touraine said. The six men aged 28 to 49 had been in good health until
taking the oral medication at the Biotrial private facility that specializes in
clinical trials, she said.
[Bloomberg] Oil Slides, Deepening Gloom in
Stocks as Bond Buyers Celebrate - (www.bloomberg.com) Crude’s drop
to a 12-year low is sending shock waves around the world at the same time
concern is mounting that China’s policy interventions will fall short of
stoking growth in the world’s second-largest economy. Figures on retail sales
and manufacturing Friday showed the U.S. economy ended the year on a weak note,
and the start of 2016 wasn’t any better. Energy firms are laying off workers
and currency markets from commodity-producing countries are in turmoil. The
slump is also denting the outlook for inflation, causing traders to curb bets
on how far the Fed will raise rates this year. “Markets have to go through
several stages and right now they’re just holding their head and crying,”
Krishna Memani, chief investment officer at Oppenheimer Funds Inc. in New York,
said by phone. “The drama and issue overnight is more related to oil prices not
finding a floor. If it was just China and everything else was OK, we’d see
through that. But when China is down and oil drops everyday, the market
recognizes it has substantial issues.”
Deutsche Bank Said to Probe Sales of Subprime
Auto Securities - (www.bloomberg.com) Deutsche
Bank AG officials are reviewing whether some employees exaggerated demand
as they marketed new securities backed by risky auto loans, potentially
suppressing yields for investors, according to a person with knowledge of the
matter. The bank has looked at communications between the employees and
investors to determine whether such marketing practices were normal
salesmanship or if they crossed a line, said the person, who asked not to be
named because the matter is private. The lender has also looked at whether
preferential treatment in the allocation of the bonds may have improperly given
the biggest investors a leg up over smaller firms, the person said. The bank’s
inquiry comes as the U.S. Securities and Exchange Commission expands an
industrywide crackdown on trading and sales practices in markets where
mortgages, auto loans and other debt are bundled into securities.
Credit-Fear Gauge Jumps Above 100 for First
Time in Three Years - (www.bloomberg.com) The
cost to protect against defaults by North American investment-grade companies
soared to a three-year high as concern lingered over falling commodity prices
and financial-market turmoil triggered by China. The Standard & Poor’s 500
Index was poised for its lowest close since September, halting a global
equities rally. The Bloomberg Commodities Index on Tuesday fell to the lowest
level since at least 1991 on sluggish demand from developing nations. The
benchmark rebounded by 0.3 percent at 3:16 p.m. on Wednesday in New York. While
Chinese exports unexpectedly expanded in December in local-currency terms, the
world’s second-largest economy is expected to report the slowest annual
expansion since 1990 next week.
Goldman Sachs to shed up to 10 percent of its
sales, fixed income team: WSJ - (www.reuters.com) Goldman
Sachs Group Inc. is planning to shed up to 10 percent of its sales and fixed
income trading jobs later in the quarter, the Wall Street Journal reported on
Wednesday, citing sources. This workforce reduction, which is higher than the
bank's usual 5 percent annual cuts, is expected to affect not more than 250
people, the Journal said on Wednesday. The bank, which is set to report its fourth-quarter
results next week, is preparing for steeper cuts this year within its debt,
currencies and commodities division, the newspaper added.
Creditors
Accuse Portugal Of "Unfair, Populist Short-Cut" In €2 Billion Bank
Bail-In - (www.zerohedge.com) Two
weeks ago, The Bank of Portugal shocked markets by bailing in senior
Novo Banco bondholders. Novo Banco was the “good” bank forged from the ashes of
Banco Espirito Santo which had to be bailed out by the state in August of 2014.
The idea was to sell Novo Banco to pay for the cost of the bailout, but the
auction process eventually floundered amid turmoil in Chinese markets (at least
two of the potential bidders were Chinese) and uncertainty about whether this
“good” bank would in fact need more capital given the elevated level of NPLs
already on its books. In November, the ECB told Novo it woudl indeed need to
raise some €1.4 billion in fresh capital which the bank initially said would
come from asset sales. A little over a month later, Portugal’s central
bank essentially just gave up. On December 29, the bank announced it was
transferring €2 billion in NB senior notes back to Banco Espirito Santo which,
like a ghost skyscraper in China, is set for demolition. In other words, Novo
Banco plugged the €1.4 billion hole by essentially declaring €2 billion in
bonds null and void.
Shandong Shanshui Says Bond Payment Unlikely as
Dispute Deepens - (www.bloomberg.com) Shandong
Shanshui Cement Group Ltd., the main operating arm of China Shanshui Cement
Group Ltd., said it’s unlikely to make payment on a three-year yuan bond due
Jan. 21 amid a cash shortage and escalating management dispute that
threaten more defaults. The company is due to repay almost 1.9 billion yuan
($290 million) of bond principal and interest, according to a statement
Thursday. The announcement comes days after its parent, China Shanshui, filed
legal actions against Shandong Shanshui’s former directors. They have also
filed suit this month, alleging that
China Shanshui released "false and illegal statements." "The
root reason for Shandong Shanshui debt issues is the unresolved fight for
control for the company, the company’s financing has consequently been
limited," the operating unit said in the statement.
