Today's Headlines

Bloomberg:

- Mortgage applications in the U.S. rose last week to the highest level in almost three months, led by gains in refinancing and purchases that signal housing is stabilizing. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan increased 7.5 percent to 566.4 in the week ended Aug. 21 from 527 in the prior week. The group’s refinancing gauge jumped 13 percent, while the index of purchases advanced 1 percent.

- Purchases of new homes in the U.S. jumped more than forecast and demand for long-lasting goods such as autos and computers climbed, reinforcing signs the economy is rebounding from the worst recession since the 1930s. Home sales increased 9.6 percent in July, the most in four years, to a 433,000 annual pace, figures from the Commerce Department showed today in Washington. Another report from the department indicated bookings for durable goods climbed 4.9 percent, also exceeding forecasts and the most since July 2007. The median price of a new home decreased 12 percent to $210,100 from $237,300 in July 2008. Sales of new homes were down 13 percent from a year earlier. The jump in sales was led by a 32 percent surge in the Northeast. Purchases increased 16 percent in the South and 1 percent in the West. They dropped 7.6 percent in the Midwest. It would take 7.5 months to sell all homes at the current sales pace, the shortest time since April 2007.

- China’s three-year interest-rate swap will decline as banking regulators curb lending to prevent asset bubbles, said China International Capital Corp.

- China’s cabinet said it’s studying curbs on overcapacity in industries including steel and cement as policy makers seek to rein in investment growth fueled by a record credit expansion this year. The government will also increase “guidance” over parts of the coal, glass and power industries, the State Council said on its Web site today.

- Aluminum Corp. of China Ltd., the country’s largest producer, said Chinese smelters, traders and warehouses hold as much as 600,000 metric tons of inventories because of surplus output. Privately held inventories would be equal to two-and-a-half weeks of forecast Chinese demand this year, according to figures from Chalco, as the company is known. It’s also three times more than the reported stocks held by Shanghai Futures Exchange warehouses. “The biggest pressure for the aluminum industry is excessive capacity,” Chalco President Luo Jianchuan told reporters in Hong Kong today. “Both alumina and aluminum producers have stepped up the pace of restarting idled plants since the second quarter.” “It would take three years to turn China’s aluminum market from a surplus to a deficit, along with an economic recovery and demand improvement from users such as builders, automakers and power producers,” Chairman Xiong Weiping said at the same conference.

- Crude oil fell for a second day as the dollar strengthened, undermining demand for assets used to hedge against inflation. Oil dropped as much as 1.9 percent as the dollar advanced on a report by the Xinhua News Agency that China is studying curbs on industrial overcapacity, increasing concern the global economic recovery will slow. Inventories of crude oil rose 128,000 barrels to 343.8 million, the department said today in a weekly report. Supplies were forecast to drop by 1.15 million barrels. The American Petroleum Institute reported yesterday that oil supplies climbed 1.3 percent, the most since April, to 346.7 million barrels. U.S. total daily fuel use averaged 19.2 million barrels in the past four weeks, down 0.9 percent from a year earlier, the Energy Department said. U.S. travel during the Labor Day weekend will decline 13 percent from last year because the holiday falls later than usual, AAA said today. The retail price of regular gasoline will be down about a dollar to $2.60, the group said.

- Public support for charter schools, a component of President Barack Obama’s $100 billion education overhaul, rose to almost two-thirds of Americans this year even as most remained confused about what they are. Sixty-four percent of U.S. adults said they favor charter schools, up from 51 percent a year ago, Gallup Inc. and Phi Delta Kappa International, a public-school advocacy group in Bloomington, Indiana, found in a poll released today.

- The U.S. economy needs the stimulus from low interest rates for some time as it begins a “fragile” recovery from the worst recession since the 1930s, said Dennis Lockhart, president of the Federal Reserve Bank of Atlanta. “Overall, the U.S. economy is improving but still fragile,” Lockhart said today in remarks prepared for a speech in Chattanooga, Tennessee. “The FOMC has stated its intention to keep the policy interest rate low for an extended period. I agree that this approach is needed.”

- Senate Banking Committee Chairman Christopher Dodd is considering whether to succeed Edward Kennedy as leader of the Health Committee and give up his post on the panel that steers legislation on the financial industry. Dodd, the second-ranking Democrat on the Committee on Health, Education, Labor and Pensions, said today he will wait before deciding to exercise an option to replace Kennedy, who died yesterday of brain cancer.

Wall Street Journal:

- In an effort to keep potentially unsafe children's items from being resold, Toys "R" Us Inc. is launching a program that allows consumers to trade in used cribs, car seats and other baby products for discounts on new items in those categories. For each used item consumers bring in to Babies "R" Us or Toys "R" Us locations nationwide, they will receive a 20% discount on any new product from select manufacturers. Additional products that can be brought in are bassinets, strollers, travel systems, play yards and high chairs.

- The world's largest pilots union said Tuesday it wants bulk shipments of lithium batteries and products containing the batteries immediately banned from passenger and cargo planes because they can start a fire. The Federal Aviation Administration said it wasn't prepared to take emergency action on the issue.

- The U.S. and its allies are planning to reinforce Afghan police and army units guarding Kandahar with American and Canadian troops, a move that acknowledges the deteriorating condition of the south's largest city. According to senior military officials, U.S. and Canadian soldiers will for the first time deploy to bases on the outskirts of the city. The local Afghan forces will be bolstered by an expanded number of embedded American trainers. The plan represents a high-stakes wager that the Afghans have the ability to keep Kandahar safe, a mission they and North Atlantic Treaty Organization forces have so far largely been unable to accomplish. It is also a tacit admission that the U.S. and its NATO allies erred by sending troops to sparsely inhabited parts of eastern and southern Afghanistan instead of to major population centers, such as Kandahar.

- The Justice Department's decision to investigate CIA interrogation practices increased tension between the agencies and prompted a sense of betrayal among some CIA officers, current and former officials said.

- World trade volumes rose at the fastest rate in almost a year in June, another indication that the global economy is emerging from its most severe downturn since the Great Depression. According to figures Wednesday compiled by the Netherlands Bureau for Economic Policy Analysis -- also known as the CPB -- trade volumes increased by 2.5% from May, the largest increase in a single month since July 2008.

CNBC:

- Hedge funds and bank trading desks are hiring again and have already snapped up some of the most talented managers who were dislodged while firms struggled in the credit crisis, industry insiders said.

NY Times:

- This fall, law students are competing for half as many openings at big firms as they were last year in what is shaping up to be the most wrenching job search season in over 50 years.

Washington Post:

- The ranking Republican on the Senate Health, Education, Labor and Pensions Committee has asked President Obama to withdraw his nominee for Department of Labor solicitor, saying she gave inconsistent testimony to the panel about a program she helped launch in New York this year. Obama nominated New York State Labor Commissioner M. Patricia Smith in March to the third-ranking job at the Labor Department. If confirmed, she will serve as general counsel to Labor Secretary Hilda L. Solis after more than 30 years of work on labor issues. In a letter sent Monday to Obama, Sen. Mike Enzi (R-Wyo.) said Smith's testimony before the Senate panel in May contradicted documents obtained by committee staffers about New York's Wage Watch program. The project, started in January and modeled after the Neighborhood Watch program, is an effort to root out companies that do not pay proper wages. Enzi and his staffers suggest that the program unfairly targets small businesses and was developed without input from small-business representatives. Most notably, Enzi said Smith made "at least four significant statements" that contradicted documents describing the program's development, according to his letter. Smith told the committee that the program was developed internally by state officials, but documents show that a union and a public interest entity partially financed by unions were involved in its development, according to Enzi spokesman Michael Mahaffey. Smith also described the program as an educational effort, but documents quote her aides, as well as unions and public interest groups, describing it as an enforcement program. Other statements by Smith about the involvement of labor unions and the future of the program also contradicted information in the documents.

NY Post:

- A union-backed investor called on Whole Foods to oust its controversial CEO John Mackey, charging a recent opinion piece Mackey wrote on health-care reform alienates the pricey grocery chain's left-leaning customer base. CtW Investment Group -- the investor arm for unions including the United Food and Commercial Workers -- said Mackey damaged the upscale supermarket's reputation when he published an Aug. 12 op-ed in The Wall Street Journal.

Washington Times:

- A month after they voted to punish some corporate executives for taking hefty bonus payouts, members of the House of Representatives quietly gave their own staffers a new potential bonus by making even their top-earning aides eligible for taxpayer dollars to repay their student loans. The change, which took effect in May, means House employees earning up to $168,411, or the top level, are now eligible for government-funded subsidies to help pay down their student loans.

zerohedge:

- Hedge Funds Have Failed To Participate In Equity Rally.

Rassmussen:

- Seventy percent (70%) of likely voters now favor a government that offers fewer services and imposes lower taxes over one that provides more services with higher taxes, according to a new Rasmussen Reports national telephone survey. That’s up five points over the past month and is the highest level measured in nearly three years. Just 19% would prefer a government that provides more services in exchange for higher taxes, down five points from July and the lowest level in over two years. This marks the first time the percentage of voters who prefer this type of government has fallen below 20%.

Politico:

- Edward Moore Kennedy, Camelot’s youngest brother who never reached the White House but grew into the most accomplished legislator of his generation in the Senate, died late Tuesday night at home in Hyannis Port after a long battle with cancer.

LA Times:

- Mortgage delinquencies will continue to rise and set records the rest of this year in California, according to projections to be released today by TransUnion, one of the three big U.S. credit-reporting companies. The good news from TransUnion's number-crunching is that, even in the tarnished Golden State, the trend may finally reverse itself by the middle of next year. In the immediate future the percentage of California home loans that are delinquent at least 60 days or are in foreclosure is projected to skyrocket to more than 14% by year's end from 9.7% as of June 30, TransUnion said. In the region including Los Angeles, Orange, Ventura, Riverside and San Bernardino counties, the delinquency rate also was expected to hit 14% at the end of the year, up from 10.7% as of June 30. "We think that's about as bad as it's going to get," Guarrera said.

USA Today:

- Cash for clunkers ended this week — for cars. But old energy-hogging refrigerators and freezers qualify for recycling and cash from more than 60 utilities across the nation. And the federal government is making money available to states so consumers could get rebates of $50 to $200 for new, more energy-efficient appliances later this year in a so-called "cash for appliances" program. Combined, the appliance initiatives have a goal similar to the cash-for-clunker program for autos: They get less-efficient appliances off the nation's energy grid in favor of newer efficient ones. The government's rebate program, in which the Department of Energy is providing states with $300 million approved earlier this year as part of President Obama's $787 billion stimulus plan, serves another goal similar to the cash-for-clunker program: It's designed to boost the economy.

Reuters:
- U.S. regulators have been negotiating until the last minute on highly anticipated guidelines for private equity investments in distressed banks. The Federal Deposit Insurance Corp is meeting later on Wednesday and is expected to soften the private equity guidelines first proposed in July, in an attempt to attract more investors to the assets of distressed banks.

Financial Times:
- More investment thanks to China’s rescue package threatens to worsen the already severe overcapacity, while the cash injection is already creating asset bubbles. The reason for China’s stimulus is simple. While it did not suffer a western-style financial crisis, it was hit hard by the second-order effects, as exports suddenly collapsed. In 2007, the growth rate of exports was 25.7 per cent, and exports made up 36 per cent of GDP. In November last year the exports shrank 2.2 per cent on the year, and have fallen continuously since then. In May 2009, exports plunged 26.4 per cent against a year earlier. The fall of exports may have cut GDP growth 3 percentage points. If its indirect impact is included, it may have shaved more than 5 points off China’s 2008 growth. The most important component in the stimulus package is investment in infrastructure. Fixed asset investment has long been the most important driving force for China’s economic growth, and has been growing faster than GDP since the turn of the century. Due to the dual role of fixed asset investment in creating demand in the short run and supply in the long run, an increasing investment rate will create immediate excess demand for a while, then the economy will shift from a phase of overheating to overcapacity. Correspondingly, inflation pressure will be replaced by deflation pressure. It is right that China should adopt an accommodating monetary policy in response to the global financial crisis and domestic slowdown. However, China did not suffer a liquidity shortage and credit crunch. Its monetary multiplier has been more or less stable. China does not need a helicopter to drop money from the sky. The excess liquidity has led to the resurgence of asset bubbles.

The Scotsman:

- JUSTICE secretary Kenny MacAskill was last night under pressure to reveal more details of the medical evidence that led to the release of the Lockerbie bomber, after it emerged that only one doctor was willing to say Abdelbaset Ali Mohmed al-Megrahi had less than three months to live. Labour and Conservative politicians have demanded the Scottish Government publish details of the doctor's expertise and qualifications, amid suggestions he or she may not have been a prostate cancer expert. The parties have also raised questions over whether the doctor was employed by the Libyan government or Megrahi's legal team, which could have influenced the judgment. The evidence provided by the doctor is crucial as compassionate release under Scots law requires that a prisoner has less than three months to live. Doubts about Megrahi's life expectancy have already been raised by American relatives of the 270 victims of the bomb that blew up Pan Am flight 103 over Lockerbie on 21 December, 1988. But last night the Scottish Government said it would not publish details of the individual who gave the crucial advice.

Bild:

- Germany faces “dramatically” higher costs for its health system from 2020 as the population is getting older, citing a forecast by the health-system-research. Services by the country’s health insurances will have to be reduced.