Today's Headlines

Bloomberg:

- Mortgage applications in the U.S. rose for a second week as the lowest borrowing costs since May propelled a surge in refinancing. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan increased 4.3 percent to 514.4 in the week ended July 10, from 493.1 in the prior week. The group’s refinancing gauge jumped 18 percent. The average rate on a 30-year fixed-rate loan fell to 5.05 percent, the lowest level since the week ended May 22, from 5.34 percent the prior week.

- Borrowers are poised to issue at least $4.25 billion of dollar-denominated debt as spreads on high-yield, high-risk bonds relative to benchmark rates fell the most in two weeks. Speculative-grade bond spreads over similar-maturity Treasuries narrowed 16 basis points yesterday to 1,076 basis points, the biggest drop since June 30, according to Merrill Lynch’s U.S. Corporate Master High Yield II index. Junk-bond spreads fell 50 basis points on June 30, Merrill data show.

- Crude oil rose by the most in two weeks after a government report showed a bigger-than-forecast decline in U.S. crude inventories as refineries increased operating rates. Refineries operated at 87.9 percent of capacity, the most since August. Supplies of distillate fuel increased 553,000 barrels to 159.3 million in the week ended June 10, the highest since January 1985, the report showed.

- Natural gas futures fell in New York on forecasts that a government report will show a bigger-than- average increase in U.S. stockpiles. Natural gas for August delivery fell 12.1 cents, or 3.5 percent, to $3.308 per million British thermal units at 12:03 p.m. on the New York Mercantile Exchange. Prices yesterday rebounded from an 11-week low on signs of a recovery in demand. Futures have fallen 41 percent this year and are down 76 percent from a July 2008 high of $13.694. Stockpiles rose 75 billion cubic feet in the week ended July 3 to 2.796 trillion cubic feet, the department said last week. Supplies were 19 percent higher than the five-year average. Industrial gas consumption is forecast to drop 8.2 percent this year and total demand will slide 2.3 percent to 62.1 billion cubic feet a day, the Energy Department said July 7 in its monthly Short-Term Energy Outlook.

- Industrial production shrank less than forecast and a New York regional factory gauge showed the smallest contraction in more than a year, signaling manufacturing is on the verge of stabilizing. Capacity utilization, which measures the proportion of plants in use, decreased to 68 percent last month, the lowest level since records began in 1967. The auto industry may get a lift from the “cash for clunkers” bill that Congress passed in June, which gives consumers as much as $4,500 to trade in their old cars for more fuel-efficient vehicles. Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York, is among those projecting carmakers will crank up production to meet the demand spurred by the program. A rebound in production will help pull the economy out of the recession, leading to economic growth of 3 percent in the second half of 2009, Maki said. Ford Motor Co.(F), the only major U.S. automaker to avoid bankruptcy, already said on June 29 that it’s boosting third- quarter North American production by 16 percent from a year earlier. Makers of personal computers are boosting orders for chips in anticipation of increasing demand in the second half, Intel’s Chief Executive Officer Paul Otellini said. While businesses probably won’t start buying new PCs until next year, consumers in Asia -- especially China -- are leading the recovery, he said. Intel reported a 12 percent jump in second-quarter sales from the previous three months, the largest sequential increase since 1988.

- Microsoft Corp.’s(MSFT) new Bing search grabbed market share at the expense of Yahoo! Inc. rather than Google Inc., research firm ComScore Inc. said.

- Investor sentiment for U.S. stocks fell to the lowest level since March and confidence in equities around the world declined as prospects for the global economy worsened in June, according to a survey of Bloomberg users. The Bloomberg Professional Confidence Survey’s measure for the Standard & Poor’s 500 Index fell 14 percent to 39.59 in July, its second consecutive drop. Readings below 50 show participants expect equity prices will decrease in the next six months.

- European consumer prices fell in June for the first time since at least 1996 as energy costs dropped and rising unemployment curbed household spending. Prices in the 16-nation euro area dropped 0.1 percent from a year earlier, the first annual decline since the data were first compiled in 1996, the European Union statistics office in Luxembourg said today.

- China’s probe of Rio Tinto Group and the iron-ore market may spur a decline in shipping costs and Chinese imports of the steelmaking ingredient, according to CIMB Investment Bank Bhd. China’s purchases in the second half may drop 16% form the first six months, Raymond Yap, an analyst at CIMB, said.

- Most Federal Reserve officials judged the economy at risk to further shocks last month even as they rejected an expansion in asset purchases, reflecting doubt at the likely impact of such a move. “Most participants saw the economy as still quite weak and vulnerable to further adverse shocks,” the central bank said in minutes of the Federal Open Market Committee’s June 23-24 meeting released today in Washington. “Although financial market conditions had improved, credit was still quite tight in many sectors.”

- American Express Co.(AXP), the largest U.S. credit-card company by purchases, said net write-offs for the second half of the year may be better than its previous forecast after uncollectible loans fell in June. “Assuming delinquency and bankruptcy trends continue to be below previously expected levels, the company believes that it is highly likely” that write-offs for the third and fourth quarters on U.S. cards “will be better than previously forecasted,” the New York-based company said today in a federal filing. The lender wrote off 9.9 percent of managed U.S. card loans, compared with 10 percent for May, the company said. American Express gained 9.1 percent to $26.68 in New York Stock Exchange composite trading at 12:54 p.m.

Wall Street Journal:

- Even as CBS has been hurt by the plunging ad market in both television and radio over the past year, a bright spot has been its strength in selling TV shows to TV stations and cable channels. But now there are questions hanging over that business. Rising financial distress among TV-station groups is likely to damp demand for program purchases. And a growing wave of bankruptcies means existing long-term deals could be renegotiated.

- Fund managers were more positive on economic growth in July but less positive on equities as risk appetite was kept on a tight leash, according to Merrill Lynch's monthly survey. A total of 221 fund managers, managing a total of $635 billion, participated in the survey which was conducted just ahead of the second-quarter earnings season. Fund managers were marginally more positive about the global economy in July, with a net 79% of managers believing that growth will improve in the next twelve months, the highest reading since February 2004. A net 78% took this stance in June. "Economic optimism is raising expectations of corporate profitability in both margins and earnings," the survey said. A net 51% of managers now believe the profit outlook will improve, compared to 49% taking this view on June. Still, managers were a little less positive on equities in the period, with a net 7% taking an overweight stance in equities down from a 9% overweight in June. At the same time, managers were slightly more positive about bonds, cutting their underweight to 13% from a previous level of 15%. Managers cut commodity-sector positions in July, moving the sector to a net overweight of 8% from an overweight position of 19% in June. "The thirst for commodities was quenched rather quickly as commodity prices tumbled," the survey said. Emerging markets continued to be popular with a net 54% of asset allocators overweight on the region, the second-highest reading in the survey's history. Asset allocators are now underweight on the U.S. for the first time in fourteen months. A net 10% are underweight on the region. "Investors seemingly lost patience with the U.S.," the survey said.

- A renewed push in Washington to limit commodity futures trading runs counter to lawmakers' goal of bringing more over-the-counter trading onto exchange platforms, according to the top executive at CME Group Inc.(CME) U.S. lawmakers have reignited the debate on "excessive speculation" in energy markets, calling for tighter regulation at a time when the Obama administration is also trying to push more over-the-counter derivatives trades onto exchange-run clearinghouses. CME Chief Executive Craig Donohue said proposals to tighten oversight of the energy markets through increased position limits on trading could drive more trading off-exchange.

- Congressional lawmakers released the names Wednesday of 10 members of the Financial Crisis Commission, a body set up to investigate the events that led to the monumental collapse of the financial markets last year. Former California State Treasurer Phil Angelides is to chair the group.

- More than 175 prominent economists warned that "the independence of U.S. monetary policy is at risk" because of stepped up congressional criticism of the Federal Reserve. The 185-word petition, circulated at a recent meeting of academic economists, urged Congress and the president to "avoid compromising [the Fed's] ability to manage monetary policy as it sees fit" and to refrain from politicizing its decisions on emergency loans to financial institutions.

- U.S. Commerce Secretary Gary Locke said multinational companies in China "need to have assurances and confidence" that their workers will be treated fairly, and indicated he would raise the case of a detained Australian executive with Premier Wen Jiabao in a meeting Thursday. "We just need to continue to press" China for transparency, fair enforcement of laws and openness to foreign investment and cooperation, said Mr. Locke, in an interview in China with CNN on Wednesday.

- Containing health-care costs is impossible under the current legal structure. That fact has to be addressed if President Barack Obama is to create an affordable health-care system that is accessible to everyone. Every incentive in the system now is to do more -- that's how doctors get paid and that's how doctors get protected from lawsuits. Billions of dollars are wasted in "defensive medicine." Bureaucracy built up over decades diverts resources from patient care to mindless compliance. Forms are everywhere.

CNBC:

- Hiring is picking up in finance and health care, Korn/Ferry International CEO Gary Burnison said. “That, hopefully, is a trend here,” Burnison told CNBC.

- For the last two years, housing has been at the center of the banking industry’s troubles. But for at least one quarter, it will help lift its results. Even as banks remain cautious about lending and millions of borrowers still risk losing their homes, the mortgage business is returning as one of the most lucrative corners of the financial industry.

LA Times:

- Southern California's median home sales price jumped to $265,000 in June, the first substantial increase since the housing market collapsed, and the total number of sales rose to the highest level in 30 months, a San Diego real estate information service reported today. The current price is down to what it was seven years ago and is 48% below the peak price of $505,000 two years ago, according to MDA DataQuick. The median home price had hovered around $250,000 for five months before June's 7% increase over May's $249,000 median price.

NY Times:

- Long before four employees of the Anglo-Australian mining giant Rio Tinto were detained here last week on suspicion of stealing state secrets, people working in China’s steel industry were complaining about bribery, deceit and a system turned rotten. One of the tricks is widely discussed. Big government-owned steel makers used their import licenses to buy more iron ore than they needed. Then they profited by illegally selling excess ore to small producers that lacked licenses to import iron ore, a critical ingredient to make steel. This practice, described in detail this week by analysts, traders and industry experts, was part of a system that they say violated industry regulations and bred a culture of corruption.

- Some influential members of the Democratic party want to give electronic reading devices to every student in the country. Amazon.com(AMZN) should like the name of their proposal: “A Kindle in Every Backpack: A Proposal for eTextbooks in American Schools,” by the Democratic Leadership Council, a left-leaning think tank, was published on the group’s Web site Tuesday.

MarketWatch:
- Comex August Gold futures have risen back to the halfway point of the April to June advance at $930 a troy ounce but should be capped by it and the $950 resistance area and fall back towards $910 in the weeks to come.(VIDEO)

The Washington Times:

- Rep. Ed Perlmutter of Colorado inserted a provision into the recently passed House climate change bill that would drum up business for "green" banks, such as the one he has invested in and his family and a political donor helped found in San Francisco. The bill calls on bank regulators to promote green banking and says federal dollars should be used to support energy-efficient home improvements at government-funded housing projects. Mr. Perlmutter, a two-term Democrat, has two investments in the 3-year-old New Resource Bank, which calls itself the nation's first green bank.

ContrarianProfits:

- Here’s Why It’s Time to Ban Credit Default Swaps.

NY Post:

- New York Attorney General Andrew Cuomo is pressing former car czar Steven Rattner to accept a legal settlement to avoid civil charges in an influence-peddling case, The Post has learned. Cuomo and the Securities and Exchange Commission have charged a state official and a political consultant with extracting millions of dollars in kickbacks from investment firms trying to raise money from the state's big public pension fund. Rattner, who resigned abruptly on Monday as the Obama administration's key adviser on the auto industry, was co-founder of Quadrangle Group. The private-equity firm paid more than $1 million to one of the people indicted in the case, New York political consultant Hank Morris.

Denverpost.com:

- Thousands of low-income Coloradans reliant on public assistance could get a free cellphone under a plan before the state Public Utilities Commission. If approved, the plan by TracFone Wireless in Miami would make Colorado the 17th state it has settled into with free cell service for the indigent, a form of wireless welfare that proponents say taps into one of the last untapped markets for the telecom technology.

Politico:

- The state that gave 54 percent of its vote to Barack Obama last November greeted his first return since the election with skepticism, doubt and anxiety about the future. Obama, accompanied by his campaign manager, David Plouffe, on Air Force One, arrived Tuesday in this Detroit suburb, where one in five residents is unemployed, to face one of the most challenging audiences of his presidency. The president came to Warren to unveil a new 10-year, $12 billion program to improve community colleges, but that topic was far down the list of priorities for residents who said their top concerns did not get beyond one word: jobs.

- Republicans pressed Supreme Court nominee Sonia Sotomayor into further retreat Wednesday morning on some of her past public statements, but the low-key exchanges generally lacked the sparks of Tuesday’s session.

USA Today:

- The Episcopal Church moved Monday toward affirming their acceptance of gays and lesbians for all roles in the ministry, despite pressure from fellow Anglicans worldwide for a decisive moratorium on consecrating another openly gay bishop. Bishops at the Episcopal General Convention in Anaheim, California, voted 99-45 with two abstentions for a statement declaring "God has called and may call" to ministry gays in committed lifelong relationships.

Reuters:
- The U.S. Treasury Department wants to find a "responsible" way to provide government aid to troubled lender CIT Group Inc, Representative Barney Frank said on Wednesday.

Financial Times:
- Last week the US Treasury Secretary Timothy Geithner provided more details on how he plans to give regulators greater powers in policing the world of commodity exchange-listed and OTC derivatives. The biteback from the industry is now gathering pace. Beating all those views in terms of audacity, however, is Goldman Sachs’(GS) take on CFTC-proposed position limits for exchange-traded futures specifically. According to Reuters the bank believes it will and should be exempt from any such restrictions as its positions are for energy-hedging purposes (our emphasis):

AFP:

- Ayman al-Zawahiri, al-Qaeda’s second-in-command, urged Pakistanis to support insurgents in their battle against a US-led “crusade.” American intervention in Pakistan’s military and politics could break up the South Asian nation, Zawahiri said in an eight-minute video yesterday titled “My Muslim Brothers and Sisters in Pakistan,” according to the report. Zawahiri, an Egyptian-born doctor, rallied Pakistanis in the video to support militants in the country and in neighboring Afghanistan, according to the report.

Cepifine:

- European office paper demand fell 18.9% in May.

Nepszabadsag:

- Billionaire investor George Soros’s Soros Fund Management LLC, which appealed a fine for manipulating the share price of OTP Bank Nyrt. last year, will have a court date on Dec. 3 on the case, citing Soros spokesman Michael Vachon. The Soros Fund has already paid the 489 million-forint fine imposed by the Hungarian financial regulator and is now awaiting the court’s ruling. Soros has said he was “sincerely sorry” for his fund shorting the stock of Hungary’s largest bank on Oct. 9 of last year, which caused the shares to drop 14% in the final 30 minutes of trade, according to the regulator.

Rubriken stern.de:

- It is one of the central questions for Western governments dealing with Iran: How close is the regime to a nuclear bomb? According to stern magazine they have nearly reached their aim. Experts from the Bundesnachrichtendienst, the German Foreign Intelligence Service, claim that Iran will be able to set off an atomic bomb within a few months.

China Securities Journal:

- China should “moderately” increase its holdings of US Treasuries and purchases this year should not be lower than the total for 2008, a People’s Bank of China economist wrote.

Xinhua:

- Australia's A/H1N1 flu cases have risen to 10,387, which is 10 percent more than WHO’S data. Australian Health Minister Nicola Roxon said on Wednesday the real number could be much higher, adding that 123 people were in hospital, with 58 in intensive care. Australia is the worst-hit Asia-Pacific country, and has pre-ordered 21 million flu jabs, enough for its entire population, as laboratories race to prepare a vaccine. Officials have expressed growing concern over the disease as it starts to contaminate the healthy people.