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Daily Agenda: Chinese Data Drives Investor Debate

More grim data from China sparks bulls-and-bears debate; MetLife expands stock buyback program; European PMI data registers expansion but fall short of expectations.

With China’s growth prospects remaining the most prominent risk narrative for global markets, the debate among investors could be summed up as “is it getting better, or is it getting worse?” In the present, the news continues to look grim. The Caixin-Markit flash manufacturing purchasing managers index (PMI) released this morning at 47, falls short of consensus forecasts and hits the lowest level since spring of 2009. Although all individual sub-indices contracted for the period, a drop in employment and new orders was particularly ominous for the near future of the mid-sized industrial segment of the mainland China economy. Bullish investors, however, point out that these measures are largely distorted by weak external demand and that targeted increases in government spending in recent month have not yet been felt through the system. With more easing measures anticipated from the People’s Bank of China and signs that the central bank’s recent moves to reduce down-payments for mortgages has sparked a modest recovery in property prices, the glass-half-empty argument appears to be picking up more adherents.

European PMI data mixed. Flash Markit purchasing manager index data for the primary euro-zone economies released today were mixed, with France achieving a composite reading of 51.4, after manufacturing measures turned positive for the first time since June, and Germany registering a slightly weaker than forecast composite of 54.3. Aggregate levels for the common currency region were also marginally lower than expected.

MetLife expands buyback. On Tuesday MetLife, the largest life insurer in the U.S., announced an expansion of its share-repurchase program, from the $260 million remaining from its existing buyback launched last December to $1 billion. The plan to return more capital to shareholders comes as the company seeks to avoid designation as a systemically important financial institution by regulators, a move that could increase capital requirements.

Leadership change for America’s oldest private bank. Brown Brothers Harriman & Co. on Tuesday announced a change in leadership, with William Tyree rising to the post of managing partner, the partnership’s equivalent of CEO, replacing Douglas “Digger” Donahue, who will soon reach the age when the firm’s partners customarily relinquish managerial responsibility. Tyree is a 30-year employee of the firm and a partner since 2001.

Citic under regulatory scrutiny. One day after news broke that Shenzen-based Citic Securities, China’s largest brokerage, was potentially backing away from a $1.8 billion dollar acquisition of Russell Investments from the London Stock Exchange, reports surfaced that the China Securities Regulatory Commission has opened an investigation into the brokerage for possible frontrunning of equity purchase orders from government-controlled entities. Although there has been no official confirmation that regulators are close to charging the firm for these offenses, seven individual executives of the company are being investigated, including the firm’s president, according to official state media.

Santander to raise capital ratios. For the third time this year, Spain’s largest bank, Banco Santander, has raised its capital-ratio target. The bank plans to increase its common equity Tier 1 ratio to more than 11 percent by 2018, while separately announcing plans to increase dividends in the coming years after slashing them earlier in 2015. Some analysts still anticipate further cuts in dividends in the near-term as the bank seeks to raise capital.

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