Today's Headlines

Bloomberg:

- China’s benchmark stock index, the world’s worst performer this month, may fall another 10 percent as bank lending slows, said Andy Xie, a former Morgan Stanley chief Asian economist. “The current correction is reflecting the tightening in lending,” said Xie, who correctly predicted in April 2007 that China’s equities would tumble. “We’ve seen the peak of this market cycle, though there’s likely to be a bounce as the government seeks to stabilize the market.” The benchmark Shanghai Composite Index plunged 5.8 percent yesterday, the most since Nov. 18, extending its decline from this year’s high on Aug. 4 to 17 percent. The gauge, the worst performer among 89 benchmark indexes tracked by Bloomberg worldwide, sank as foreign direct investment plunged and Yunnan Copper Industry Co. posted a loss, saying there are “no clear signs” of a recovery.

- Manufacturing in the New York region grew in August for the first time in more than a year, reinforcing signs the worst recession since the 1930s is nearing an end. The Federal Reserve Bank of New York’s general economic index climbed to 12.1, higher than forecast and the first expansion since April 2008, the bank said today. Economists projected the Empire State index would rise to 3, according to the median of 41 estimates in a Bloomberg News survey. Forecasts ranged from 8 to minus 5. “We think the recession is ending right now,” Abby Joseph Cohen, senior investment strategist at Goldman Sachs Group Inc., said in an interview today on Bloomberg Radio. The economy may grow by 3 percent in the next couple quarters and by 1.5 percent to 2 percent next year, Cohen said. The August reading on the New York Fed index was the highest since November 2007, the month before the recession began. The index was at minus 0.6 in July. The gauge measuring the manufacturing outlook rose to 48.2, the highest level since July 2007, from 34.

- Confidence among U.S. homebuilders rose to a one-year high, another sign that the worst of the housing decline that began in 2006 has passed. The National Association of Home Builders/Wells Fargo confidence index climbed to 18, matching forecasts by economists and reaching the highest level since June 2008, the Washington-based group said today. Last month’s gain was led by an increase in sales expectations over the next six months, which reached the highest level since April 2008. The measure of buyer traffic also improved, while a gauge that tracks current sales was little changed.

- Foreign direct investment in China fell for a tenth straight month in July as companies stalled expansion plans amid the global financial crisis. Investment declined 35.7 percent from a year earlier to $5.36 billion, the Commerce Ministry said at a briefing in Beijing today. That compared with a 6.76 percent drop in June. The situation for foreign direct investment in China remains “severe” even as “positive signs” have emerged in the past two months, Vice Commerce Minister Fu Ziying said last week. “This is a reflection of global overcapacity and the earlier credit squeeze,” said Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong.

- Foreigners renewed purchases of American financial assets in June, as investors sought safe haven in Treasuries amid concerns about the timing of a recovery in financial markets and economies worldwide. Total net purchases of long-term equities, notes and bonds were a net $90.7 billion, more than forecast and compared with net sales of $19.4 billion in May, the Treasury said today in Washington. Net buying of U.S. government notes and bonds totaled $100.5 billion, the most since records began in 1977, after net selling of $22.6 billion in May. Investors in Japan and the U.K. increased their holdings of U.S. assets as the Obama administration sold debt to finance a record budget deficit and fund economic stimulus spending. China, the biggest foreign holder of U.S. Treasuries, decreased its total holdings of U.S. government securities by $25.1 billion to $776.4 billion. China’s holdings of notes and bonds climbed $26.6 billion in June to $617.7 billion, a 4.5 percent increase, while bill holdings fell 25 percent to $158.7 billion, the Treasury’s data showed. Japan, the second-biggest international investor, raised its total by $34.6 billion to $711.8 billion. Holdings by investors in the U.K. rose by $50.2 billion to $214 billion. Russia’s holdings fell by $4.6 billion to $119.9 billion. Net purchases of American equities rose to $19.1 billion in June after $16.7 billion the prior month.

- The cost to protect against defaults on U.S. corporate bonds using a benchmark derivatives index rose to the highest level in more than three weeks. Credit swaps on the Markit CDX North America Investment- Grade Index, used to speculate on the creditworthiness of 125 companies in the U.S. and Canada or to protect against losses on their debt, rose 5 basis points to 122 basis points as of 7:27 a.m. in New York, according to broker Phoenix Partners Group. The CDX index has climbed 17 basis points since Aug. 7, when it reached a 14-month low amid economic reports signaling the recession may be ending.

- Ken Griffin’s $12 billion Citadel Investment Group LLC is trying to set up a leveraged-loan- trading unit as the market for the debt has returned 42 percent from a December low, a person familiar with the effort said.

- Gold fell to the lowest price this month in New York and London as the dollar strengthened, curbing the metal’s appeal as an alternative investment. Other precious metals slid. The U.S. Dollar Index, a six-currency gauge of the greenback’s value, gained as much as 0.8 percent for a second consecutive increase.

- Crude oil and gasoline fell to two- week lows as global equities dropped and the dollar advanced, reducing the appeal of commodities to investors. Oil slipped as much as 3.4 percent as the Standard & Poor’s 500 Index slid 2.1 percent and China’s Shanghai Composite Index slumped the most since November.

- Natural gas futures fell for an eighth day, touching the lowest price in almost seven years, on concern that fuel demand will be slow to strengthen because of a sluggish economic recovery.

- U.S. banks tightened standards on all types of loans in the second quarter and said they expect to maintain strict criteria on lending until at least the second half of 2010, a Federal Reserve Report showed today. “Domestic banks indicated that they continued to tighten standards and terms over the past three months on all major types of loans to businesses and households,” the Fed said in its quarterly Senior Loan Officer survey. “The net percentages of banks that tightened declined compared with the April survey.”

Wall Street Journal:

- In 1994, Tennessee launched an ambitious public insurance program to cover its uninsured. The plan, TennCare, fulfilled that mission but nearly bankrupted the state in the process. As originally envisioned, the Tennessee plan expanded Medicaid, the government health-care program for the poor, to cover people who couldn't afford insurance or who had been denied coverage by an insurance company. With an initial budget of $2.6 billion, TennCare quickly extended coverage to an additional 500,000 people by making access to its plans easy and affordable. But the program became so expensive that Tennessee was forced to scale it back in 2005. Now, as Congress debates a national health-care overhaul, state experiments like Tennessee's are informing the discussion. Unlike Massachusetts's more recent universal coverage law, the TennCare plan is most often cited by opponents. They say TennCare's runaway costs show that the public health-insurance proposal by House Democrats could bankrupt the federal government.

- President Barack Obama insisted Monday that he still wants to scrap what he calls a discriminatory federal marriage law, even as his administration angered gay-rights activists by defending it in court. The president said his administration's stance in a California court case isn't about defending traditional marriage, but is instead about defending traditional legal practice.

CNBC:

- China Investment Corp, the country's $200 billion sovereign wealth fund, is set to pour up to $2 billion soon into the U.S. mortgage system by hiring mandates under the U.S. Treasury-backed Public-Private Investment Plan (PPIP), sources told Reuters.

- RIM Outpaces Rivals to Lead Fortune Fastest-Growing List.

- 8 Reasons Why Big Government Hurts Economic Growth.

NY Times:

- Everyblock.com, the two year-old experiment in hyper-local news, is being acquired by MSNBC.com, a joint venture between NBC and Microsoft, the companies said today. The Chicago startup, which has been funded by a two-year grant from the Knight Foundation, has been working to publish data feeds from governments in 15 American cities, including San Francisco, New York and Atlanta. The feeds deliver information such as police reports, new-building permits and restaurant inspections–providing a statistical glimpse into neighborhood news at a time when local coverage from financially deteriorating newspapers is weakening.

- Last summer, Richard A. Posner, a federal appeals court judge, issued a surprising and prescient dissent. Executive pay is out of control, he said, and the marketplace cannot be trusted to rein it in. Judge Posner is a conservative with libertarian leanings, and he is a leader of the law and economics movement associated with the University of Chicago. He often relies on economic analysis in his judicial decisions, and he believes that many questions are best sorted out by the marketplace. But corporate America has insulated pay decisions from market discipline, Judge Posner wrote. “Executive compensation in large publicly traded firms often is excessive,” he added, “because of the feeble incentives of boards of directors to police compensation.” The Supreme Court will hear the case this fall, as anger over huge bonuses paid to the executives of failing firms continues to grow.

CNNMoney:

- Inside the trillionaires’ club. With more than $3 trillion in assets, Larry Fink and his team at BlackRock(BLK) are the world's largest money managers. And Fink thinks he's just getting going.

Fox News:

- The federal government has only reimbursed auto dealers for 2 percent of the claims they've submitted through the popular "cash for clunkers" program, a Pennsylvania congressman said, calling on the Obama administration to help speed up the process. Rep. Joe Sestak, D-Pa., called for "immediate action" to address the problem in a statement Sunday, after writing a letter to President Obama Saturday expressing his concerns. In the letter, Sestak said only 2 percent of claims have been paid and that four of every five applications have been "rejected for minor oversight."

The Daily Beast:

- Federal prosecutors, who have worked for nearly six months to figure out who helped Bernie Madoff pull off history’s biggest Ponzi scheme, are poised to make multiple indictments in the weeks after Labor Day, according to two people familiar with the investigation. Moreover, an FBI source tells The Daily Beast that investigators have compiled additional evidence against members of Bernie Madoff's family, specifically his brother Peter Madoff, and his sons Andrew and Mark Madoff. “There is enough hard evidence [against the family members] that the U.S. Attorney’s office could provide to a grand jury,” says the FBI source. “Whether they will is anybody’s guess. They’re in a mess over there. They really don’t know what they’re doing.”

The Detroit News:

- Toyota Motor Corp.(TM), the world's biggest automaker, will become the biggest seller of vehicles in the U.S. market next year after overtaking General Motors Co. , according to forecaster IHS Global Insight.

Politico:

- As the Obama administration presses Israel to cease settlement expansion as part of a renewed push for a Middle East peace deal — a course of action that many Israelis have interpreted as evidence of the president’s favoritism towards Palestinians — Israelis have increasingly focused their disappointment not on Obama, but rather on his chief of staff, Rahm Emanuel.

AP:

- South Carolina Republican Bob Inglis, frustrated by a restive crowd at a recent forum to discuss health care reform, suggested people turn off the TV when Fox News Channel's Glenn Beck came on. Big mistake. Judging by the escalating boos and catcalls, squirting lighter fluid on burning coals would have been wiser. Beck is a hero to many people who are not buying the Age of Obama, and so is Fox. The network was already on pace for its best ratings year even before the health care debate sent viewership jumping during a traditionally slow month for news. Fox's viewership is up 11 percent over last year, according to Nielsen Media Research. CNN and MSNBC, which benefited from interest in the campaign last year, are down. Since Fox is already the network of choice for conservatives, the ratings indicate it must be drawing in more moderates and even liberals, said Bernard Goldberg. According to the Pew Research Center, the three networks had about the same number of Independent followers in June, and Fox had more Democratic followers than CNN and MSNBC had GOP fans. Even if outnumbered, opposing voices are more likely heard in Fox's prime-time than on MSNBC's. Fox has also largely ignored the more extreme Obama opponents who question whether the president was born in the United States.

USA Today:

- Six months after President Obama launched a $787 billion plan to right the nation's economy, a majority of Americans think the avalanche of new federal aid has cost too much and done too little to end the recession. A USA TODAY/Gallup Poll found 57% of adults say the stimulus package is having no impact on the economy or making it worse. Even more —60% — doubt that the stimulus plan will help the economy in the years ahead, and only 18% say it has done anything to help improve their personal situation. That skepticism underscores the challenge Obama faces in trying to convince the public that the stimulus has helped turn the economy around. It also could complicate the administration's plans to overhaul the nation's health care system. "This is a wake-up call for the administration." says House Minority Whip Eric Cantor, R-Va. "People see the stimulus hasn't worked, and now you want to lay on over $1 trillion in a health care plan."

- Former Democratic Party Chairman Howard Dean, a leading figure in the liberal wing of his party, said Monday he doubts there can be meaningful health care reform without a direct government role. Dean urged the Obama administration to stand by statements made early on in the debate in which it steadfastly insisted that such a public option was indispensable to genuine change. The shift in the administration's stance on a government-run insurance program leaves open a chance for compromise with Republicans that probably would enrage Obama's liberal supporters but could deliver a much-needed victory on a top domestic priority.

- The rate of credit card defaults showed signs of stabilizing last month, an indication that American consumers are in better financial shape than feared despite job losses and the housing slump. Bank of America (BAC) in a regulatory filing Monday said credit card defaults dropped in July after several months of a steep deterioration. JPMorgan Chase (JPM), Citigroup (C) and Discover Financial Services (DFS) also said bad-loan levels fell. Bank of America, the bank with the highest default and delinquency rates among the top credit card issuers, said its charge-off rate — debt the company believes it will never collect on — inched down to 13.82% in July from 13.86% in June.

Reuters:
- Comcast Corp(CMCSA) has been hoarding cash to better manage its balance sheet but investors worry that it could be building a war chest for a splashy acquisition similar to its failed 2004 bid for Walt Disney Co. Investors value shares of Comcast at close to historical lows, as the top U.S. cable service provider's conservative balance sheet strategy has rekindled speculation that it wants to be a major player in the media content market.

- The U.S. green technology sector, which suffered a drop in funding early this year, is seeing renewed interest with venture dollars flowing in once again to promising startups and some companies looking to resurrect public offerings that had been set aside. Investment is seen shifting from capital-intensive energy generating technologies, such as solar and wind, to those associated with energy storage, transportation and efficiency. Bets are being placed on lithium-ion battery makers and startups in the smart grid sector that offer a range of possibilities from helping electric utilities operate systems more efficiently to enabling consumers to control energy use.

- Dendreon Corp (DNDN) on Monday said it expects quick success for its Provenge prostate cancer treatment if it is approved by U.S. regulators, with initial demand for the world's first cancer vaccine exceeding supply. The company's Chief Financial Officer Gregory Schiffman said its New Jersey manufacturing plant was unlikely to keep pace with prescriptions for Provenge, but several other plants should be up and running and be able to fully meet its needs within several years after Provenge is launched.

- President Barack Obama on Monday called the conflict in Afghanistan "a war worth fighting" as he sought to stiffen U.S. public support before an election there this week that will test his new strategy. Obama's words were designed to prepare Americans for the long haul. U.S. combat deaths have risen since he ordered a troop buildup to confront a resurgent Taliban, and polls show public backing for the eight year-war has softened.

Financial Times:
- Chinese commodity imports are expected to slow in the second half of the year from record levels as the impact of the country’s stimulus package, arbitraging opportunities and stock-piling fade, according to a Royal Bank of Scotland report being published Monday.

TimesOnline:

- It’s tough at the top — especially, it seems, in a recession. The chief executives of America’s 1,000 leading companies saw a total of $53 billion wiped off their personal wealth last year, shrinking their assets by more than 40 per cent and leaving many of them feeling “demoralized” and hard done by, according to research. A study by Watson Wyatt, an international management consultancy, concludes that chief executives have suffered disproportionately as a result of the global financial meltdown, losing on average $53 million (£32 million) each.