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Just the Facts

For the Week:

The S&P500 added 0.5% (up 6.7% y-t-d), and the Dow increased 0.5% (up 6.1%). The Utilities gained 0.9% (up 14.7%). The Banks jumped 2.2% (down 0.7%), and the Broker/Dealers rose 2.0% (down 3.2%). The Transports advanced 1.6% (up 5.8%). The broader market was strong. The S&P 400 Midcaps gained 1.2% (up 12.9%), and the small cap Russell 2000 rose 1.1% (up 10.2%). The Nasdaq100 added 0.3% (up 4.5%), and the Morgan Stanley High Tech index increased 0.4% (up 9.7%). The Semiconductors gained 0.7% (up 21.6%). The Biotechs declined 1.4% (down 14.8%). With bullion recovering $8, the HUI gold index increased 0.7% (up 115%).

Three-month Treasury bill rates ended the week at 32 bps. Two-year government yields dropped five bps to 0.79% (down 26bps y-t-d). Five-year T-note yields fell four bps to 1.19% (down 56bps). Ten-year Treasury yields dipped three bps to 1.60% (down 65bps). Long bond yields were unchanged at 2.28% (down 74bps).

Greek 10-year yields rose six bps to 7.93% (up 61bps y-t-d). Ten-year Portuguese yields were unchanged at 3.01% (up 49bps). Italian 10-year yields gained four bps to 1.17% (down 42bps). Spain's 10-year yield jumped eight bps to 1.02% (down 75bps). German bund yields increased two bps to negative 0.05% (down 67bps). French yields added two bps to 0.19% (down 80bps). The French to German 10-year bond spread was unchanged at 24 bps. U.K. 10-year gilt yields surged 16 bps to 0.72% (down 124bps). U.K.'s FTSE equities index gained 0.8% (up 10.4%).

Japan's Nikkei 225 equities index rallied 3.5% (down 11.1% y-t-d). Japanese 10-year "JGB" yields rose four bps to an almost six-month high negative 0.04% (down 30bps y-t-d). The German DAX equities index rose 0.9% (down 1%). Spain's IBEX 35 equities index jumped 2.9% (down 6.7%). Italy's FTSE MIB index rose 2.0% (down 20%). EM equities were mostly higher. Brazil's Bovespa index jumped 3.3% (up 38%). Mexico's Bolsa gained 0.9% (up 11%). South Korea's Kospi was unchanged (up 3.9%). India's Sensex equities jumped 2.7% (up 9.2%). China's Shanghai Exchange was little changed (down 13.3%). Turkey's Borsa Istanbul National 100 index slipped 0.3% (up 7.2%). Russia's MICEX equities index increased 0.5% (up 13.8%).

Junk bond mutual funds saw outflows of $387 million (from Lipper).

Freddie Mac 30-year fixed mortgage rates rose three bps to 3.46% (down 43bps y-o-y). Fifteen-year rates gained three bps to 2.77% (down 32bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed rates unchanged at 3.57% (down 48bps).

Federal Reserve Credit last week dropped $19.5bn to $4.418 TN. Over the past year, Fed Credit declined $19.4bn. Fed Credit inflated $1.607 TN, or 58%, over the past 199 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt sank $18.5bn last week to a two-year low $3.188 TN. "Custody holdings" were down $158bn y-o-y, or 4.7%.

M2 (narrow) "money" supply last week jumped $27.7bn, surpassing $13 TN for the first time ($13.021 TN). "Narrow money" expanded $871bn, or 7.2%, over the past year. For the week, Currency increased $1.4bn. Total Checkable Deposits gained $24.5bn, and Savings Deposits rose $12.4bn. Small Time Deposits were little changed. Retail Money Funds declined $10.9bn.

Total money market fund assets fell $10.5bn to $2.724 TN. Money Funds rose $46bn y-o-y (1.7%).

Total Commercial Paper sank $22.6bn to an almost one-year low $981bn. CP declined $51bn y-o-y, or 4.9%.

Currency Watch:

September 1 - Bloomberg (Robin Ganguly and Justina Lee): "China's yuan has doubled its share of global currency trading in the three years through April 2016, according to the latest triennial survey conducted by the Bank for International Settlements. The yuan's average daily turnover rose to $202 billion in April from $120 billion in the same month of 2013, boosting its ratio of global foreign-exchange trading to 4% from the previous 2%... That puts the currency in eighth place overall. Dollar-yuan became the sixth-most traded currency pair, advancing from ninth place in 2013, BIS said, while the yuan overtook the Mexican peso as the most actively traded emerging-market currency."

The U.S. dollar index gained 0.4% to 95.88 (down 2.8% y-t-d). For the week on the upside, the British pound increased 1.2%, the New Zealand dollar 0.7%, the Brazilian real 0.3%, the Mexican peso 0.1%, the Canadian dollar 0.1% and the Australian dollar 0.1%. For the week on the downside, the Japanese yen declined 2.0%, the Swedish krona 1.2%, the South African rand 0.9%, the Norwegian krone 0.6%, the euro 0.4% and the Swiss franc 0.3%. The Chinese yuan slipped 0.2% versus the dollar (down 2.9% y-t-d).

Commodities Watch:

August 30 - Reuters (Mikael Holter): "Explorers in 2015 discovered only about a tenth as much oil as they have annually on average since 1960. This year, they'll probably find even less, spurring new fears about their ability to meet future demand. With oil prices down by more than half since the price collapse two years ago, drillers have cut their exploration budgets to the bone. The result: Just 2.7 billion barrels of new supply was discovered in 2015, the smallest amount since 1947, according to... Wood Mackenzie Ltd. This year, drillers found just 736 million barrels of conventional crude as of the end of last month."

The Goldman Sachs Commodities Index dropped 4.4% (up 11.4% y-t-d). Spot Gold recovered 0.6% to $1,329 (up 25%). Silver jumped 4.8% to $19.52 (up 41%). WTI Crude sank $3.44 to $44.20 (up 19%). Gasoline was hit 14.8% (up 1%), and Natural Gas fell 2.8% (up 19%). Copper slipped 0.3% (down 3%). Wheat dropped 2.0% (down 15%). Corn recovered 1.1% (down 8%).

Europe Watch:

August 27 - Bloomberg (Brian Parkin): "German Deputy Foreign Minister Michael Roth warned that the U.K.'s negotiations to leave the European Union 'will be very difficult' and that Britain won't be allowed to 'cherry pick' the best that the bloc has to offer. 'If the British want full market access but want to limit the access of workers from Germany, France or Poland, they will find there is no ala carte cooperation in this direction,' Roth, the government minister responsible for European affairs, said... 'We've told the British they can't expect to pick the best aspects of the EU and leave matters at that.'"

August 28 - Wall Street Journal (Ulrike Dauer): "German savers are leaving the security of savings banks for what many now consider an even safer place to park their cash: home safes. For years, Germans kept socking money away in savings accounts despite plunging interest rates. Savers deemed the accounts secure, and they still offered easy cash access. But recently, many have lost faith. 'It doesn't pay to keep money in the bank, and on top of that you're being taxed on it,' said Uwe Wiese, an 82-year-old pensioner who recently bought a home safe to stash roughly €53,000 ($59,344)... Interest rates' plunge into negative territory is now accelerating demand for impregnable metal boxes."

Fixed-Income Bubble Watch:

August 31 - Bloomberg (Eric Martin and Nacha Cattan): "Bond sales this year by blue-chip companies in the U.S. are about to exceed $1 trillion as investors seeking refuge from negative interest rates underpin a borrowing binge. Investors are embracing investment-grade debt, which has gained 9.49% this year after losing 0.7% in 2015... Sales in August, which are typically slow due to the summer holidays, topped $115 billion making it the busiest August in at least 12 years, according to... Bloomberg. More than $962 billion of the debt has been issued this year and at that pace sales may reach the $1 trillion mark in September."

August 29 - CNBC (Jeff Cox): "A large portion of the financial markets, and one that played a pivotal role during the financial crisis, is about to undergo substantial changes. At the core of the rules is an effort to stabilize the $2.7 trillion industry, which provides a generally safe climate where both retail and institutional investors can park funds and earn modest returns with the bonus that they will never lose money. For a brief moment in time, that compact was broken. In 2008, as the financial world crumbled... The new rules seek to prevent a similar occurrence in the future. They allow all funds to block investors — using what are known as 'gates' — from withdrawing cash during times of market volatility, a move that coincides with a mandate that retail and government funds maintain a $1 share price. The rules allow prime institutional funds to move to a floating value, meaning they have the possibility both for greater return and greater risk."

Global Bubble Watch:

August 28 - Reuters (Michelle Martin): "Germany's Economy Minister Sigmar Gabriel said on Sunday that talks on the Transatlantic Trade and Investment Partnership (TTIP), a free trade deal being negotiated by the United States and the European Union, had essentially failed."

August 30 - Reuters (Sophie Louet and Philip Blenkinsop): "France cast serious doubt on... on the prospects of an EU free trade deal with the United States, adding to opposition within Germany and growing scepticism among Americans. Washington and Brussels are officially committed to sealing the Transatlantic Trade and Investment Partnership (TTIP) before U.S. President Barack Obama leaves office in January, but their chances of doing so are being eroded by approaching elections on both sides of the Atlantic and Britain's vote in June to leave the European Union."

September 1 - Bloomberg (Kyunghee Park, James Nash and Jungah Lee): "Hanjin Shipping Co.'s vessels are getting stranded at sea after the South Korean container mover filed for court protection, roiling the supply chain of televisions and consumer goods ahead of the holiday season. LG Electronics Inc. is trying to find new carriers for its goods, the world's second-largest manufacturer of televisions said. Shipments through Hanjin account for between 15% and 20% of LG's deliveries to America. Hyundai Merchant Marine Co., the nation's second-biggest container line, stepped in, saying it plans to add 13 more vessels to ease the squeeze. Hanjin Shipping is South Korea's largest sea container-shipping firm and the world's seventh-biggest..."

September 1 - Financial Times (James Kynge): "For most of the last 15 years, China was a darling for emerging market investors as its demand for commodities lifted the economic fortunes of countries in Latin America, Africa and Asia. But now, as China struggles with the hangover from its debt-fuelled boom, fund managers are increasingly shunning Asia's giant. 'My way of describing our portfolio is to call it the post-China world portfolio,' said Ruchir Sharma, chief global strategist and head of the emerging markets equity team at Morgan Stanley... 'The whole positioning is that China's dream run is over and now you have to look for investments that are as uncorrelated to China as possible,' added Mr Sharma..."

U.S. Bubble Watch:

September 1 - Bloomberg (Charles Stein): "Vanguard Group Inc. is on track for another record year of inflows as investors increasingly shun stock pickers. The world's largest mutual fund company attracted $198.4 billion in the first eight months of this year, a 19% increase from the same period a year earlier... In 2015, Vanguard lured $236.1 billion, the most ever for the company. Vanguard is benefiting as investors, frustrated by the lackluster performance and high fees charged by active managers, are pouring money into low-cost funds that mimic indexes... Investors pulled $130.9 billion from active and exchange-traded funds through July 31, while adding $241.8 billion to passive funds, according to data from Morningstar... Vanguard had $3.3 trillion in U.S. mutual funds and exchange-traded funds as of July 31, 22% of the entire market..."

August 31 - Bloomberg (Tracy Alloway): "Rumors of leverage's death have been greatly exaggerated. In the aftermath of the 2008 financial crisis an abundance of leverage — borrowed money used to amplify returns — was blamed for exacerbating losses on subprime mortgages and contaminating the banking system with catastrophic results. Since then a host of new rules have been enacted to reduce financial leverage... While such efforts have made substantial steps in derisking the financial system — especially at large lenders — they've also encouraged the creation of new types of leverage and its migration to different players. Today, much leverage appears to sit on the balance sheets of large and small investors, often fueled by the need to generate returns amidst ultra-low interest rates and high correlations that see asset classes move together... Leveraged strategies may include selling volatility or dabbling in derivatives tied to interest rates or corporate credit."

August 30 - Wall Street Journal (Ben Eisen): "The stock market remains out for summer vacation. By some measures, the S&P 500 has been trading in its narrowest range in decades, a sign of just how muted market activity has been. In the 17 trading days through last Thursday, the S&P 500 moved less than 0.75% between its daily high and low. That is the most consecutive days with such a narrow trading range in records that go back to 1970, according to Ryan Detrick, senior market strategist at LPL Financial."

September 2 - Bloomberg (Emma Orr): "You'd have to go back to the months following the financial crisis to find so many companies facing potentially ruinous debt problems. That's according to the latest tally by S&P Global Ratings of 'weakest link' issuers. S&P counted 251 with ratings at the low end of junk status and a negative outlook, the most since October 2009, when the total was 264. The issuers collectively have about $359 billion of debt outstanding, led by energy companies..."

September 1 - Bloomberg (Sho Chandra): "Manufacturing in the U.S. unexpectedly contracted in August for the first time in six months amid slumping orders and production... The Institute for Supply Management's index dropped to 49.4, weaker than the most pessimistic estimate in a Bloomberg survey, from 52.6 in July... The decline of 3.2 points was the biggest since January 2014. Fresh orders to American factories shrank for the first time this year, as production was cut by the most since 2012 and employment fell... Eleven of 18 industries surveyed by the purchasing managers' group posted a contraction..."

August 30 - Wall Street Journal (Jesse Newman): "U.S. farm incomes will hit their lowest point this year since 2009, the U.S. Department of Agriculture said..., deepening pain in the Farm Belt amid a multiyear downdraft in commodity prices. The forecast reflects a painful slump in the U.S. agricultural economy driven by bumper corn and soybean harvests, swelling grain inventories and tougher export competition... As a result, the USDA said, net farm income will drop 11.5% to $71.5 billion this year, from $80.7 billion in 2015. That would be the third straight annual pay cut for farmers since incomes soared to record levels in 2013."

August 30 - Bloomberg (Lindsey Rupp): "Student debt isn't just a problem for job-hunting millennials -- it also could take a toll on retailers. As an increasingly large portion of Americans' budgets go to repaying the loans, there's less money left over for sweaters or home goods. Annual student debt payments have reached about $160 billion in the U.S., according to Moody's..."

August 30 - Bloomberg (Michelle Jamrisko): "Home prices in 20 U.S. cities continued to moderate in June, according to S&P CoreLogic Case-Shiller data... 20-city property values index increased 5.1% from June 2015, matching the median forecast and the smallest gain since August, after a 5.3% year-over-year advance in May..."

August 29 - New York Times (Charles V. Bagli): "From the roof of a building near the Atlantic Terminal transit hub in Brooklyn, the formerly expansive views of Manhattan are now blocked by a rising forest of towers, radiating off Flatbush Avenue... There are 19 residential towers either under construction or recently completed along the 10-block section of Flatbush... When all of them are finished, they will have added more than 6,500 apartments — overwhelmingly rentals — to New York City's housing stock. Another four buildings on Myrtle Avenue will add almost 1,000 more units. There are so many new apartments in the neighborhood — roughly one-fifth of all rental units expected to become available in the city in 2016 and 2017..."

September 1 - Bloomberg (Oshrat Carmiel): "Prospective buyers at one Upper East Side condo project are quietly being offered a 5% discount. At an almost-completed Midtown building, five-bedroom homes will be divided into smaller units. Brokers whose clients sign deals at a downtown tower before Labor Day are getting $5,000 gift cards. Such tactics have become more common in Manhattan, where developers are coping with a luxury-condo glut... With the market now sputtering, they're altering sales plans and making behind-the-scenes deals in an attempt to create momentum at their projects before an onslaught of even more competition."

August 31 - Wall Street Journal (Susan Pulliam, John D. Stoll and Charley Grant): "Two pillars of Elon Musk's empire are facing financial crunches as the entrepreneur seeks to combine the two companies through a controversial acquisition. Tesla Motors Inc., which makes electric cars, disclosed in a securities filing... that it has to pay $422 million to its bondholders in the third quarter, and that it will raise additional money by the end of the year. The purpose of the additional capital, among other things, is to support its proposed merger with home-solar company SolarCity Corp. Mr. Musk is the chairman of both companies. The filing also revealed that in recent weeks, 15 institutional investors passed on either acquiring SolarCity or injecting equity into it."

Federal Reserve Watch:

August 28 - Reuters (Jason Lange and Ann Saphir): "Federal Reserve policymakers are signaling they could raise U.S. interest rates soon but they are already weighing new tools they may need to fight the next recession. A solid U.S. labor market 'has strengthened' the case for the first rate increase since last December, Fed Chair Janet Yellen told a central banking conference... Several of her colleagues said the increase could come as soon as next month if the economy does well... But Fed officials at three-day conference that ended Saturday also said they need to consider new policy tools for use down the road, such as raising the inflation target or even Fed purchases of non-government-backed assets like corporate debt. Such ideas would test the limits of political feasibility and some would need congressional approval... Policymakers think new tools might be needed in an era of slower economic growth and a potentially giant and long-lasting trove of assets held by the Fed. And they are convinced the time to vet them is now... 'Central banking is in a brave new world,' Atlanta Fed President Dennis Lockhart said..."

August 28 - Financial Times (Sam Fleming): "As the world's central banking elite gathered at Jackson Hole, Wyoming, Janet Yellen provided the assurances that many of the attendees craved. Official interest rates may remain stuck at low levels, but the US central bank will not find itself out of weaponry if a new recession unexpectedly strikes, the Federal Reserve chair said... But, beneath the surface at the Kansas Fed's annual symposium, many economists remained anxious. Their meetings highlighted worries about whether western central banks have sufficient scope to galvanise growth without help from other branches of government... Eight years after the crash, major economies including the US are stuck with sub-target inflation, ultra-low rates, and economic growth that remains pedestrian."

August 30 - Bloomberg (Jeanna Smialek and Jana Randow): "Federal Reserve Vice Chairman Stanley Fischer said negative interest rates seem to be working in other countries, while reinforcing that they aren't on the table in the U.S. While the Fed isn't 'planning to do anything in that direction,' the central banks using them 'basically think they're quite successful,' Fischer said..."

September 1 - Reuters (Jason Lange): "The U.S. labor market is at full strength and the Federal Reserve needs to be on a path of gradual interest rate increases, Cleveland Fed President Loretta Mester said... 'It seems like a gradual increase from a very low interest rate that we are at now is pretty compelling to me,' Mester told reporters..., without saying whether she would support an increase at the Fed's policy meeting later this month. Her comments reinforced the signals sent from some policymakers of a growing readiness to raise interest rates if data shows the economy is gathering strength."

August 31 - Reuters (Ann Saphir): "Chicago Federal Reserve Bank President Charles Evans... said he is increasingly convinced that U.S. economic growth has slowed permanently, a situation that will keep U.S. interest rates low for a long time ahead. Embracing Harvard Professor Larry Summers' so-called secular stagnation theory, Evans argued that an aging U.S. population and slowing productivity growth mean there is little reason for interest rates to rise either fast or far. Expectations of low growth have become so embedded in corporate and investing behavior, he said, that even if inflation rises unexpectedly and the Fed has to raise rates faster than it now anticipates, a detrimental spike in long-term interest rates is unlikely."

Central Bank Watch:

September 1 - Bloomberg: "China's Vice Finance Minister Zhu Guangyao said conventional monetary policy, along with unconventional measures such as bond buying, are no longer proving effective in other economies, as he called for more fiscal policy support for his own economy. China should have a 'more active' fiscal policy to support growth, Zhu said... The G-20 communique will highlight the need for comprehensive use of monetary, fiscal, structural reform, he said. Zhu described fiscal measures in developed economies as having 'come to an end.' Asset purchases known as quantitative easing are unsustainable and negative interest rates adopted by some countries won't have an impact, Zhu said."

August 27 - Bloomberg (Jeff Black and Steve Matthews): "Bank of Japan Governor Haruhiko Kuroda said he won't hesitate to boost monetary stimulus if needed, reiterating a pledge during an annual policy retreat in Jackson Hole, Wyoming, at which central bankers stressed their need for backup from fiscal policy. 'There is no doubt that there is ample space for additional easing in each of the three dimensions,' Kuroda said Saturday... 'The bank will carefully consider how to make the best use of the policy scheme in order to achieve the price stability target,' he told the Federal Reserve Bank of Kansas City's symposium."

August 31 - Bloomberg (James Mayger and Masahiro Hidaka): "There's an 8.7 trillion yen ($84bn) gap between the value of government bond holdings on the Bank of Japan's balance sheet and their face value. While not an immediate problem because the BOJ's income can cover the losses, the widening gap raises questions about the sustainability of the central bank's bond purchases... The costs of the central bank's record stimulus are mounting, while its chief goal -- spurring inflation to 2% -- appears as far away as it was when Kuroda took the helm in 2013. The BOJ is in the midst of reviewing its policy before a board meeting later this month, but the governor has said there will be no scaling back of his monetary program. 'These numbers show the distortions of the BOJ's current policies,' said Sayuri Kawamura, a senior economist at the Japan Research Institute... 'The annual amortization losses are going to increase and consume the BOJ's profits, and the risk is increasing that the bank's financial stability will be shaken.'"

September 1 - Reuters (Dhara Ranasinghe and Atul Prakash): "The ECB may soon be forced to follow the Bank of Japan's example and buy equities as part of any expanded stimulus programme, but it faces significant hurdles in helping all 19 euro zone members equally without distorting a key market for investors. The European Central Bank could run out of eligible bonds for its 1.7 trillion euro bond-buying scheme, meaning alternative options are on the table should it decide to loosen policy further to lift growth and inflation across the bloc. Analysts say these could include large-scale share buying..."

China Bubble Watch:

August 28 - Financial Times (Don Weinland): "China's banks are set to be the biggest losers in the sweeping bailouts of the country's steel and coal industries. Local governments hoping to save their steel mills and coal miners have announced a series of restructuring plans, enlisting the banks to take the hit by improving the terms of the loans or swapping them for bonds or equity in the struggling groups. The reliance on the banking system to shoulder the burden comes at an inopportune moment, with China's banks already mired in bad debt — about Rmb15tn ($2.25tn), or 19% of total commercial lending by some accounts. Profit growth at the banks has also fallen over the past two years... 'With the finances of local governments being weak, the China Banking Regulatory Commission has been ordering Chinese banks to 'rescue' these companies, and we believe that banks are likely to suffer from the government's plans,' said Chua Han Teng, a senior analyst at Fitch Group's BMI Research. 'Not only do banks have to restructure the debt at the discretion of the government, these banks also purchase the bonds issued by these poor performing companies.'"

August 27 - Bloomberg (Jing Sun): "Some prominent investors are worried about China's debt. George Soros sees an 'eerie resemblance' between conditions in China now and those in the U.S. leading up to the financial crisis in 2008. 'It's similarly fueled by credit growth and an eventually unsustainable extension of credit,' Soros told the Asia Society in New York... And in June a Goldman Sachs report warned that the country's large and unaccounted-for shadow-banking activities raised concern 'about China's underlying credit problems and sustainability risk.' Indeed, many segments of the Chinese economy have taken on considerable debt, especially since the global financial crisis. Over the past decade, total debt grew 465%. Debt rose to 247% of gross domestic product in 2015, from 160% in 2005."

September 1 - Bloomberg: "Chinese households, companies and banks held a record 26.3 trillion yuan ($3.9 trillion) of wealth-management products as of June 30, underscoring risks to an increasingly leveraged financial system from an explosion in shadow banking. The products' value rose 11.8% in the first half from the end of last year, according to... China Banking Wealth Management Registration System's website. More than 450 banks raised a total of 84 trillion yuan by selling 97,636 WMPs in the first six months... China has been tightening rules on WMPs since late 2014 as a growing number of analysts issue warnings on the build-up of risks in the country's financial system. The products are a key reason behind the growth in shadow banking, which Moody's... estimates is worth more than 50 trillion yuan, and have been used by some financial institutions as a way to extend funds to risky borrowers and evade capital requirements."

August 30 - Bloomberg: "Billionaire Guo Guangchang called China's peer-to-peer lending industry 'basically a scam,' arguing that players in the multi-billion dollar sector, troubled by collapses and frauds, lack the ability to price risk... Chief Financial Officer Robin Wang said 'we never invested in any P2P projects,' while Guo, the company's chairman and founder, jumped in to say that he'd never been optimistic about the industry in China. While acknowledging exceptions, Guo said that in general the country's P2P operations were 'rogue.'"

August 28 - Bloomberg: "Across college campuses in China, a small army of marketers is recruiting students to borrow money at interest rates many times that charged by the nation's banks. Those without a credit history or parental approval can borrow money to buy a smartphone, pay for holidays, or get the latest sneakers through a raft of apps such as Fenqile. The market leader, whose name literally means Happy Installment Payments, has 50,000 part-time marketers across more than 3,000 universities and proudly touts the slogan 'Wait no more; love what I love.' Welcome to the regulatory gray area where peer-to-peer lending meets e-commerce in China. In the last three years, tens of millions of students have taken out micro-loans with the tap of a button to buy things."

August 28 - Bloomberg: "China's biggest banks are grinding out meager profit gains as they grapple with pressure from loans going bad. Agricultural Bank of China Ltd. on Friday posted a 0.5% increase in net income in the second quarter from a year earlier. China Construction Bank Corp. reported earlier in the week a 0.9% gain, while Bank of Communications Co.'s profit rose 1.3%."

August 29 - Bloomberg: "Chinese companies' borrowing costs have never been so low. That's little consolation to firms cutting debt rather than investing amid a slowing economy. The amount of local yuan bond sales minus maturities fell 39% in August from a year earlier for non-financial firms to 124 billion yuan ($18.6bn)... Net issuance since March 31 has slowed to 496 billion yuan after a record 810 billion yuan in the first quarter of 2016... The decline in bond financing and the lowest fixed-asset investment growth since 1999 suggest central bank monetary easing will have trouble reviving growth that's forecast to slow through next year. China must balance cutting corporate debt, which more than doubled in five years to 111.7 trillion yuan at the end of 2015, with steps to revive the world's second-biggest economy."

September 1 - Bloomberg: "China's official factory gauge unexpectedly rose last month to the highest level in almost two years, suggesting the economy's stabilization remains intact and that a weakening in July was flood-related and temporary. Manufacturing purchasing managers index rose to 50.4 in August from July's 49.9 and compared to the 49.8 median estimate... Non-manufacturing PMI stood at 53.5 compared with 53.9 in July..."

September 1 - New York Times (Michael Forsythe and Jonathan Ansfield): "Pingyang County's verdant hills still hint at a long-lost China. Rice paddies and villages surround its bustling towns, and in the fields, farmers wade into the mud to plant seedlings as they have for thousands of years. It is an odd place to find the people behind a Chinese corporate powerhouse that is turning heads on Wall Street with a global takeover binge. Yet the area is home to a tiny group of just such people — small-time merchants and villagers who happen to control multibillion-dollar stakes in the Anbang Insurance Group, which owns the Waldorf Astoria in New York and a portfolio of global names and properties. American regulators are now asking who these shareholders are — and whether they are holding their stakes on behalf of others. The questions add to the mystery surrounding a company that seemed to come out of nowhere, surprising deal makers with offers to pay more than $30 billion for assets around the world. Anbang's shopping spree is part of an outflow of money from China that has reshaped global markets but has often been shrouded in secrecy, sometimes by prominent Chinese looking to shift their wealth abroad without attracting attention at home."

August 28 - Bloomberg: "China's electric-vehicle industry, with 200-plus companies backed by a raft of billionaires, verges on a massive shakeout as the government imposes stricter technology standards on fledgling manufacturers and considers limiting their number to only 10. Any curbs would be aimed at weeding out the weak, said a senior executive with the state-backed auto manufacturers' association, and they may push as many as 90% of EV startups toward extinction, a government-linked newspaper said. So far, only two ventures have obtained approval to build cars..."

Japan Watch:

August 29 - Bloomberg (Keiko Ujikane): "Japan's household spending fell for a fifth straight month and retail sales also dropped, underscoring the weakness in domestic demand. The jobless rate was the lowest since 1995. Household spending fell 0.5% in July from a year earlier... Retail sales fell 0.2% from a year earlier... "

September 1 - Bloomberg (Connor Cislo): "Japan's capital expenditure data for the second quarter was slightly weaker than expected while company profits slumped as businesses held tight on spending amid a strong yen and sluggish demand at home and abroad... Company profits slid 10.0% during the second quarter, the biggest drop since 2011. Sales declined 3.5% in the quarter."

EM Watch:

September 1 - New York Times (Simon Romero): "Brazilians booed him as he presided over the opening of the Olympics in Rio. He has been accused of taking bribes. The economy he is supposed to rescue is on the cusp of a depression. Michel Temer, Brazil's new president, may have just vanquished his rival, Dilma Rousseff, in the bruising impeachment battle that resulted in her final removal from office... But for Mr. Temer, the hard part is just beginning. 'Get yourselves into the trenches,' urged Roberto Requião, a senator from Mr. Temer's party... 'Conflict will be inevitable,' he added, warning that Ms. Rousseff's ouster had cleared the way for an era of intense division in Brazilian society."

August 31 - Bloomberg (Sally Bakewell): "Mexico's central bank cut its 2016 growth forecast for a fourth time as exports slowed... The bank reduced its estimate to 1.7% to 2.5%, compared with a previous forecast of 2% to 3%. The board also cut its 2017 GDP estimate to 2% to 3% from 2.3% to 3.3%."

Leveraged Speculator Watch:

August 28 - Bloomberg (Saijel Kishan): "Job seekers with MBAs or experience as securities analysts no longer jump to the front of the hiring line. But if you're nimble with partial differential equations or wavelets, hedge funds want you. Hedge funds that have relied on people to make bets are hiring quants like never before in search of answers to lackluster returns. They're playing catch-up to firms such as Renaissance Technologies and Two Sigma Investments, among the leaders in using complex mathematical models for investing. 'I haven't seen demand for quants from hedge funds like this before -- any hedge fund you can name is looking,' said Michael Karp, chief executive of New York recruitment firm Options Group, who has been placing employees in the industry for 25 years."

Geopolitical Watch:

August 30 - Wall Street Journal (Emre Peker and Margaret Coker): "When Turkish ground forces delivered a lightning strike on Islamic State fighters in Syria last week, the Pentagon hailed what it described as close U.S.-Turkish coordination. But behind the scenes, cooperation between the North Atlantic Treaty Organization partners broke down at senior levels, according to officials on both sides. The two countries weren't as aligned on the operation as their public statements indicated. While the White House was preparing to consider a secret plan to have American special forces join the Turks, Ankara pulled the trigger on the mission unilaterally without giving officials in Washington advance warning. When clashes started between Turkish and Syrian Kurdish fighters—who are directly backed by U.S. Special Forces—the Pentagon issued unusually blunt calls for both to stand down."

August 29 - Bloomberg: "With tensions high in the disputed South China Sea, it would seem an odd moment for Beijing to pick another territorial fight with a neighbor. Still, China chose to send more ships near Japanese-administered islets in the East China Sea in recent months, triggering a flurry of protests from Tokyo. That's even as President Xi Jinping prepares to host global leaders including Japan's Prime Minister Shinzo Abe in Hangzhou this weekend. The strains come amid other frictions in North Asia, including Chinese criticism of South Korean President Park Geun Hye's plan to deploy a U.S. missile shield in her country. That points to a potentially chilly Group of 20 summit and clouds the prospects for any Xi-Abe or Xi-Park sit down."


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