Bloomberg:
- Spain Bond Sale Hits Target as Moody's Threatens Cut. Spain sold 3.5 billion euros ($4.3 billion) of five-year bonds at an auction today, reaching the maximum sale target even as its borrowing costs rose after Moody’s Investors Service said it may cut the country’s top credit rating. Spain sold the notes at an average yield of 3.657 percent, compared with 3.532 percent at an auction of those bonds on May 6. Demand was 1.7 times the amount sold, below the bid-to-cover ratio of 2.35 at the May sale. “They did fill it at pretty much the maximum of their guidance, and when you consider the backdrop, you’d have to say that’s encouraging,” said Sean Maloney, a fixed-income strategist at Nomura International Plc in London.
- Dollar Drops to 7-Month Low Versus Yen on Outlook; Euro Climbs. The dollar tumbled to a seven-month low against the yen on speculation the world’s largest economy may be slow to recover, while the euro climbed amid signs that funding pressures are easing on Europe’s financial institutions. The euro surged as much as 2 percent to $1.2485, from $1.2238 yesterday, before trading at $1.2475. It was the biggest gain on an intraday basis since May 10, when European leaders announced an almost $1 trillion package to support debt-laden governments and shore up the shared currency.
- Gold Tumbles Most Since February as European-Bank Concerns Ease. Gold futures tumbled the most since February on signs that Europe’s financial industry may be in better shape than investors estimated, curbing demand for the metal as a haven. The euro jumped as much as 2 percent against the dollar after European banks borrowed less than the amount they are due to repay. “People are thinking maybe the European debt situation is not so bad,” said Matt Zeman, a trader at LaSalle Futures Group in Chicago. “Some of the safe-haven money is coming out of the market.” Gold futures for delivery in August fell $37.20, or 3 percent, to $1,208.70 an ounce at 1:07 p.m. on the Comex in New York. A close at that price would mark the biggest drop for a most-active contract since Feb. 4.
- Mortgage Rates on 30-Year U.S. Loans Fall to Record. Mortgage rates on 30-year U.S. loans slid to a record low for the second straight week, lowering borrowing costs for homebuyers as demand slumps. Rates for 30-year fixed loans sank to 4.58 percent in the week ended today from 4.69 percent last week, Freddie Mac said in a statement. The average 15-year rate fell to 4.04 percent, also a new low, the McLean, Virginia-based company said.
- Pending Sales of Existing U.S. Homes Fell 30% in May. The number of contracts to purchase previously owned houses plunged in May by more than twice as much as forecast after a homebuyer tax credit expired. The index of pending home resales dropped 30 percent from the prior month, figures from the National Association of Realtors showed today in Washington. The drop was the biggest in records dating to 2001 and compared with a 14 percent decrease forecast in a Bloomberg News survey of economists. All four regions saw decreases in May, today’s report showed, led by a 33 percent plunge in the South. Sales also fell 32 percent in both the Midwest and Northeast and 21 percent in the West. Compared with May 2009, nationwide pending sales were down 16 percent.
- Manufacturing in U.S. Expanded Less Than Forecast. Manufacturing in the U.S. expanded in June at a slowest pace this year as factories received fewer orders and demand from abroad cooled. The Institute for Supply Management’s manufacturing gauge fell to 56.2 last month from 59.7 in May. The ISM’s production index decreased to 61.4 from 66.6. The The new orders measure dropped to 58.5 from 65.7.employment gauge decreased to 57.8 from 59.8. The measure of export orders declined to 56 from 62. The measure of orders waiting to be filled dropped to 57 from 59.5. The index of prices paid decreased to 57, the lowest since November, from 77.5.
- Goldman Sachs(GS) Pressed By Born for Derivatives Data. Goldman Sachs Group Inc. has declined to provide the Financial Crisis Inquiry Commission with information on its revenue and profit from derivatives, unlike its rivals. “Some other firms have provided us with that data when we’ve asked for it and Goldman Sachs hasn’t,” Commissioner Brooksley Born said at a hearing today in Washington.
- Oil Has Longest Drop in Seven Weeks on China Data. Crude oil fell for a fourth day in New York, the longest losing streak in seven weeks, amid concern the economic recovery in the U.S. and China will slow and curb demand in the world’s two largest energy consumers. “The Chinese manufacturing index was disappointing and adds to the whole array of bearish macro data and sour market sentiment,” said Andrey Kryuchenkov, an analyst with VTB Capital in London. Oil for August delivery fell as much as $1.42, or 1.9 percent, to $74.21 a barrel in electronic trading on the New York Mercantile Exchange, its lowest since June 14.
- New York City Voters Oppose Mosque Near Ground Zero, Poll Says. New York City voters, by an almost 2- to-1 ratio, oppose a plan by a Muslim group to build a mosque and cultural center two blocks from the site of the Sept. 11 terrorist attacks, according to a Quinnipiac University poll. New Yorkers, by 52 percent to 31 percent, don’t want the Cordoba Initiative, a group that seeks to improve Muslim relations with Western societies, to build a community center near Ground Zero in Manhattan, the survey said. Opposition was strongest on Staten Island, where respondents were against the plan by 73 percent to 14 percent in favor. “Opponents suggest that the mosque would dishonor the memory of the attack’s victims,” Carroll said. The cultural center plans include a 500-seat auditorium, swimming pool, restaurants, bookstores and space for art exhibitions, according to the organization’s website. While a majority opposed the center, 55 percent of those questioned said “mainstream Islam” is a “peaceful religion.” To 22 percent of respondents, the religion “encourages violence against non-Muslims.”
- Biggest China Bears in Beijing, MIT's Johnson Says: Tom Keene. As Group of 20 nations look to China to underpin global growth, the Chinese anticipate their economy slowing, said Simon Johnson, a professor of finance at Massachusetts Institute of Technology’s Sloan School of Management. In China, bankers and economists expect their economy will slow after growth accelerated to the fastest pace in almost three years in the first quarter, Johnson said today in a radio interview with Tom Keene on Bloomberg Surveillance. “The biggest China bears I’ve met recently were in Beijing,” said Johnson, who said he was in China last weekend. Johnson said China can’t maintain growth at previous levels. Chinese who fear economic “overheating” worry their country’s heavy infrastructure investment, overburdened state sector and focus on objectives such as air quality instead of economic expansion will slow growth, Johnson said in a column today on the Economix blog on NYTimes.com. They do not agree with others who claim “China is going to be great,” he said. “They haven’t drunk the same Kool-Aid,” Johnson said during the radio interview. “G-20 and the industrialized countries are saying: ‘Assume China will grow fast, and that will help the world economy,’” Johnson said. “In China, they’re much less convinced they can continue to grow at these rates.” Johnson, who also co-authored with James Kwak the book “13 Bankers: The Wall Street Takeover and the Next Financial Meltdown,” said the U.S. financial-regulatory bill, approved by the House of Representatives yesterday, didn’t go far enough to restrict bank size, making it “nothing more than mush.” “The big banks have won, and they’ve won hands down, and they’ve won with a terrific smokescreen,” Johnson said. “There’s a lot of pretense there’s actually some sort of reform going on.”
- FDIC Securitization Rule May Harm Markets, Industry Group Says. U.S. securitization and mortgage- industry groups said a Federal Deposit Insurance Corp. plan for overhauling part of the $4 trillion asset-backed securities market could restrict credit and undermine economic recovery. The FDIC proposal requiring sellers of securitized loans to keep 5 percent of credit risk in exchange for protection that makes the bonds more attractive to investors “could greatly inhibit its effectiveness and the restart of the markets,” Tom Deutsch, executive director of the American Securitization Forum, said in a comment letter filed with the agency today.
- Apple(AAPL): J.P. Morgan Boosts Price Target To Street High $390. J.P. Morgan analyst Mark Moskowitz this morning repeated his Overweight rating on Apple (AAPL), added the stock to the firm’s “Analyst Focus List,” and increased his target price on the stock to a Street-high $390, up from $316. “Apple stands to be the high-growth, technology leader, having no rival for some time,” he writes in a research note. “The
iPhone and iPad rapid growth phenomena, coupled with untapped opportunities internationally for Mac, underpin our confidence in the stock’s major appreciation from current levels.” Moskowitz writes that Apple is “the growth story without rival,” and says he doubts the latest round of estimate revisions will be the last. He sees sales and profit growth “far exceeding 20%” over the next two years. He notes that at 14x his calendar 2011 EPS estimate, the stock trades below its 3-year average multiple of 23x.
- $500 Billion Cash Stash. High prices, weak growth deter PE deals. Private-equity firms sitting on $500 billion of uninvested cash and facing a deadline for spending it are nonetheless taking their sweet time making deals -- much to the chagrin of sellers eager to do a deal before capital-gains tax rates rise next year.
- Paterson Flees From Hedge Fund Tax. Gov. Paterson is running away from his $50 million tax on hedge fund managers, a day after his Connecticut counterpart lauded the levy as a boon to the Nutmeg State. The New York executive trashed the tax on out-of-state fund executives as a potential job-killer and blamed “special interests” for its inclusion in a legislative budget plan unveiled last weekend. “We were not favorable to this,” he insisted during an interview on WOR 710AM this morning. “We did it because we couldn’t get the Legislature to do the other revenue raisers that we thought were far more constructive.” The tax – endorsed by Paterson last week after negotiations with the Legislature – could soon be voted into law as part of a $1 billion “revenue” bill. Now, Paterson says he agrees with critics that the action could spur fund managers to simply relocate offices to low-tax locales, like Greenwich, Conn. Connecticut Gov. Jodi Rell, a Republican, sent a letter to the New York Hedge Fund Roundtable yesterday proclaiming “Connecticut welcomes you!” “What Gov. Rell said is right,” Paterson said. “She’s trying to take advantage of it. That is why that is worth revisiting.”
The Daily Beast:
- A New Magazine for Terrorists. Al Qaeda in the Arabian Peninsula, known by the acronym AQAP at the CIA, is about to release its first English-language magazine. It’s a Web-based journal of propaganda aimed at inciting violent acts among would-be terrorists living in the United States, Great Britain, Australia, and other Western countries. American officials are deeply concerned.
- State Default Risk and a Comparison to Sovereign Debt. (graph/table)
- China will "gradually" cancel export rebates on steel, base metals and products over the next 5 1/2 years, citing Fan Jianping, director general of the State Information Center's Economic Forecasting Department. The government may impose export taxes on the metals and products during the same period, as it seeks to limit production capacity.
- Exclusive: U.S. small businesses cut borrowing in May: Paynet. Borrowing by small U.S. businesses in May dropped to its lowest level in seven months, data released by PayNet Inc on Thursday shows, a sign that the nascent recovery may already be faltering. The Thomson Reuters/Paynet Small Business Lending Index, which measures the overall volume of financing to U.S. small businesses, sank about 5 percent from the prior month on a seasonally adjusted basis, hitting its lowest reading since October. It was the fourth-lowest level on record. William Phelan, PayNet's president and founder, said the numbers suggest the economic recovery has stalled. "We are in these irons," he said in an interview, using a sailor's term for a boat pointed so straight into the wind that its sails flap ineffectively. "Small business owners are cautious about expanding. They are retaining their capital and they are not interested in going out on a limb at this point because they are uncertain about the future." Impending regulatory overhauls in the U.S. healthcare and finance industries are making it difficult for small businesses to gauge what their costs will be in the future, and are holding them back from spending now, Phelan said. Investment in plants and equipment at small businesses has decreased for most of this year, the index shows. While that trend in itself does not signal the economy is headed for a so-called double dip recession, it does raise the chances, Phelan said. "Smaller companies may not have the resources to last in stalled economic times," Phelan said. "I'd be really cautious that a time like this couldn't force us into a double dip if this continues."
Financial Times:
- Immelt Hits Out at China and Obama. Jeffrey Immelt, General Electric’s chief executive, has launched a rare broadside against the Chinese government, which he accused of being increasingly hostile to foreign multinationals. He warned that the world’s largest manufacturing company was contemplating better prospects elsewhere in resource-rich countries and that those nations did not want to be “colonised” by Chinese investors. “I really worry about China,” Mr Immelt told an audience of dozens of top Italian executives, referring to the Chinese government which he accused of becoming increasingly protectionist. “I am not sure that in the end they want any of us to win, or any of us to be successful.” Mr Immelt also had harsh words for Barack Obama, US president, lamenting what he called a “terrible” national mood and expressing concern that over-regulation in response to the global financial crisis would damp a “tepid” US economic recovery. Business did not like the US president, and the president did not like business, he said, making a point of praising Angela Merkel, Germany’s chancellor, for her defence of German industry. “People are in a really bad mood [in the US],” the 54-year-old executive told an audience of somewhat surprised Europeans who had seen higher levels of US growth as a beacon of recovery. “We [the US] are a pathetic exporter… we have to become an industrial powerhouse again but you don’t do this when government and entrepreneurs are not in synch.” “China and India remain important for GE but I am thinking about what is next,” he said, mentioning what he called “most interesting resource-rich countries” in the Middle East, Africa, Latin America plus Indonesia. “They don’t all want to be colonised by the Chinese. They want to develop themselves,” he said. The comments from the GE chief echo a rising chorus of complaints from foreign business groups in China about the regulatory environment they face. However, it is extremely unusual for senior executives at companies with extensive operations in the country to voice such public criticisms, for fear of retaliation from Beijing.
- Twenty-one percent of European executives say the euro's existence is "no longer secure" after the sovereign debt crisis, a Handelsblatt poll showed. Some 42% of the 1,180 managers polled in five countries said they expect the currency to show "sustained weakness." Polling company Psephos GmbH conducted the survey in June, questioning managers in Germany, France, the UK, Switzerland and Italy. The companies they represent employ a minimum of 500 workers.
- Greece's Court of Audit deemed at least five provisions in the labor reform bill as unconstitutional. The court found that planned measures, including merging the public-sector workers' pension fund with IKA, are unlawful. The Court of Audit said that changes such as the scale of pension payments can only be altered by legislative reform and not by ministerial decree. The Athens Bar Association, civil servants union ADEDY and the Federation of Retired Civil Servants plan to submit objections to the measures.
- Bank of China Ltd. plans to raise up to $8.8 billion in additional share offering.
- Gillard Bows to Mining Giants on Tax. JULIA Gillard has caved in to the mining industry, watering down the tax on so-called super profits as she clears the decks for a federal election. After a two-month-long dispute that ultimately cost Kevin Rudd his leadership, the new Gillard government has agreed to:
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