Today's Headlines

Bloomberg:

• Corporate Bond Risk Falls in Europe as IMF Fuels Recovery Bets. The cost of insuring against losses on European corporate bonds fell to the lowest in two weeks after the International Monetary Fund raised global growth forecasts, fueling optimism the economic recovery is on track. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings dropped 27 basis points to 545, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment- grade ratings fell 5.75 basis points to 117.5. “It’s important for the market to be confident that we won’t go back to a weak growth scenario and that if we see an economic slowdown it’ll be relatively mild,” said Maureen Schuller, a strategist at ING Groep NV in Amsterdam. “The IMF forecast and retail sales are supportive signals.” The cost of protecting bank bonds from default fell even as proposed stress tests for European lenders drew criticism from analysts for underestimating potential losses. The Markit iTraxx Financial Index of swaps on the senior debt of 25 banks and insurers fell 11.5 basis points to 138.5, the lowest since May 13, and the subordinated index was down 17 at 211. Swaps on the European government debt also fell. Contracts on Greece dropped 10 basis points to 884, Portugal declined 12.5 to 279 and Spain fell 14 to 231, CMA DataVision prices show. Debt swaps tied to BP Plc’s bonds fell 35 basis points to 391, the lowest level in a month.
• U.S. 30-Year Mortgage Rates Decline to Record 4.57%. Mortgage rates for 30-year U.S. loans fell to the lowest on record for the third straight week, reducing borrowing costs for homebuyers as unemployment and foreclosures weigh on demand. The average rate declined to 4.57 percent in the week ended today, the lowest since Freddie Mac began compiling the data in 1971, the mortgage-finance company said in a statement. It was 4.58 last week. Rates for 15-year loans rose to 4.07 percent from 4.04 percent, McLean, Virginia-based Freddie Mac said.
• Corn, Soybeans Rise as Adverse Weather Reduces Global Crops. Corn rose to the highest price since January and soybeans gained for the second straight day on speculation that adverse weather will reduce yields in China and Russia, boosting demand for supplies from the U.S.
• Oil Rises to One-Week High as Retail Sales Gain, Supplies Drop. Crude oil climbed to the highest in a week as gains in U.S. retail sales and a drop in crude inventories added to signs of a recovery in the world’s largest energy consumer. Oil rallied 2.9 percent yesterday from a four-week low after the International Council of Shopping Centers estimated retail sales expanded at the fastest pace in four years. U.S. crude stockpiles fell 2 percent to 351.8 million barrels last week, the biggest drawdown since September, according to the American Petroleum Institute.
• Reid So Toxic His Son Campaigns Without Last Name. For Nevada Democrats, November’s election may prove that something more toxic than one Reid on the party’s ticket is two. Polls show Senate Majority Leader Harry Reid, 70, struggling in his bid for a fifth term, with disapproval ratings hovering around 50 percent. Efforts to rescue him reach to the White House: President Barack Obama hosts a campaign rally for Reid today at the Aria Resort & Casino in Las Vegas. Absent will be the state’s Democratic gubernatorial candidate, Rory Reid, who will be greeting supporters in the Washoe Valley more than 450 miles away. He is Harry Reid’s son. The Reids have been keeping their distance from one another. They’ve attended few events together, and the first statewide television advertisement for Rory Reid, 47, made no mention of his last name.
• Jobless Claims in U.S. Declined Last Week to 454,000. The number of Americans applying for jobless benefits fell more than forecast last week while staying at a level that indicates unemployment will be slow to decline. Initial claims for benefits decreased by 21,000 in the week ended July 3 to 454,000, Labor Department figures showed today in Washington. Economists had forecast claims would fall to 460,000 from an initially reported 472,000 for the prior week, according to the median of 36 projections in a Bloomberg survey. The four-week moving average, a less volatile measure than the weekly figures, fell to 466,000 from 467,250 the prior week, today’s report showed. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, fell to 3.4 percent in the week ended June 26 from 3.6 percent.
• U.S. Banks Recruit Investors to Kill FASB Fair-Value. Banking lobbyists have launched an e- mail and Web campaign to mobilize investors against a proposed expansion of fair-value accounting rules that may force banks such as Citigroup Inc. and Wells Fargo & Co. to write down billions of dollars of assets. The American Bankers Association opposes the Financial Accounting Standards Board’s plan to apply fair-value rules to all financial instruments, including loans, rather than just to securities. The group says the rule could make strong banks appear undercapitalized. Fair-value, also known as mark-to-market accounting, forces companies to adjust the value of most securities they hold to market prices each quarter. It became one of the biggest flash points of the financial crisis when banks barraged lawmakers and the Securities and Exchange Commission with complaints that the rule exacerbated their problems because they had to record losses on mortgage bonds they had no intention of selling. FASB in April 2009 relaxed that requirement after being pressured by lawmakers on a House Financial Services subcommittee. “History has proven that these rules simply do not work,” Boyle wrote. “They artificially spurred the bubble, then artificially worsened the downturn.”

Wall Street Journal:

• Oil-Sands Push Tests U.S.-Canada Ties. Pipeline Project Would Double Imports of the Crude From North, but Environmental Worries Fuel Opposition. A battle over whether the U.S. should curb its use of oil produced from Canada's oil sands is straining ties between the countries and comes amid a wider debate about the safest and cleanest ways to extract fossil fuels. Rep. Henry Waxman (D., Calif.), chairman of the House energy committee, this week urged Secretary of State Hillary Clinton to veto the expansion of a giant pipeline that would roughly double the amount of oil-sands crude Canada ships to the U.S., calling it a "multi-billion dollar investment to expand our reliance on the dirtiest source of transportation fuel currently available." Environmental groups are planning protests Thursday at the Canadian embassy in Washington, consulates and along the route of the proposed extension, sections of which run from Canada to Texas. A spokesman for TransCanada Corp., which is building the pipeline, said TransCanada disagreed with Mr. Waxman's assertions and that the project would create jobs and revenue for states. Mr. Waxman's statement follows a similar letter last week signed by 50 members of Congress, and is the latest volley in a struggle between environmentalists, lawmakers and Canadian oil producers over the rising amount of fuel imported from Canada's oil-sands reserves. The groups are already clashing in U.S. courts over everything from permits to ship or refine oil-sands oil to legislation that could effectively prevent the federal government from buying Canadian oil. The extension must be approved by the State Department. A decision could come as soon as in the next month, but Mr. Waxman and others are asking for a delay until emissions evaluations are done. Attacks on oil-sands production could complicate relations with Canada, the U.S.'s biggest trading partner, where energy makes up about a quarter of exports. Canadian oil-sands executives and politicians have said if the U.S. doesn't take the fuel, nations like China will. The government of Alberta last week took out a full-page ad in the Washington Post defending the oil sands, stating "A good neighbour lends you a cup of sugar. A great neighbour supplies you with 1.4 million barrels of oil per day."
• In Sun Valley, Media Chiefs Fret Over Economy. Media and technology executives and investors are sounding new alarms bells about the economy, worried it could wipe out recent growth.
• Plea Deal Expected in Russian Spy Case. Members of an alleged Russian spy ring in the U.S. are expected to plead guilty to criminal charges as part of a plea deal likely to be announced Thursday afternoon, people familiar with the discussions said.
• iSuppli Boosts '10 Revenue Estimate for Semiconductor Foundries. Market researcher iSuppli Corp. raised its 2010 revenue forecast for semiconductor foundries amid increased consumer spending.
• Banks Will Need More Cash After Stress Tests. Banks across the euro area will probably need around €90 billion ($113.78 billion) of additional capital to plug holes in their balance sheets revealed by stress testing, bank analysts say. German regional Landesbanks could require a €37 billion-injection and Spanish banks could be short around €12 billion, according to a report published Thursday by banking analysts at Credit Suisse.
• The Berwick Evasion. Obama dodges a Senate debate on his ideal Medicare chief.

Barron's:

• Bearish Sentiment Surges. Bullish sentiment fell 3.7 percentage points to 20.9% in the latest AAII Sentiment Survey. The proportion of individual investors who expect stocks to rise over the next six months is at its lowest level since March 5, 2009. The historical average is 39%. Neutral sentiment, expectations that stocks will stay essentially flat over the next six months, fell 11.3 percentage points to 22.0%. This is the first decline in neutral sentiment in six weeks. The historical average is 31%. Bearish sentiment, expectations that stocks will fall over the next six months, surged 15.1 percentage points to 57.1%. This is the 15th highest level reading for bearish sentiment since the survey started in 1987. The historical average is 30%. The last time bearish sentiment was higher was March 5, 2009. This coincided with the bottom of the last bear market.

Bloomberg Businessweek:

• U.S. Retail Sales Rise in June on Weather, Discounts. U.S. retailers reported sales gains in June as record-high temperatures on the East Coast pushed more shoppers into air-conditioned malls. Sales at stores open at least a year rose more than analysts projected at Nordstrom Inc., J.C. Penney Co. and Macy’s Inc., according to estimates compiled by Retail Metrics Inc. Gap Inc. and TJX Cos. fell short of predictions. “Department stores benefited toward the end of the month from the excess heat across the country, particularly in the northeast but also out west,” said Ken Perkins, president of Retail Metrics. “Results were clearly mixed, and there was selective buying going on.”

CNBC:

• US Government Will Issue New Drilling Ban if Appeal Fails. The Obama administration will "immediately" issue a revised drilling ban if a federal appeals court agrees with a lower court's decision to block the government's initial six-month moratorium on drilling in deep waters, an Interior Department official told Reuters on Thursday. The showdown starts at 3 p.m. local time at the U.S. Court of Appeals for the Fifth Circuit in New Orleans, where government lawyers will square off for one hour against drilling companies before a three-judge panel.

MarketWatch:

• New 'Volcker Rule' May Not Be as Tough as it Looks. Big banks would have years to divest units and bank regulators would have say.
• Man Group Funds Under Management Slip Further. U.K. hedge-fund manager Man Group on Thursday reported a 2.3% drop in its funds under management over the second quarter, but said it was pleased with the performance of its flagship AHL fund given the weakness in global equity markets. The group said funds under management fell to $38.5 billion at the end of June from $39.4 billion at the end of March.

Business Insider:

• John Paulson Is Close to Having His Reputation Torn to Shreds.
• Are We on the Brink of an AIDS Vaccine? Scientists have just confirmed the discovery of an antibody that protects against 91% of HIV strains, according to the Wall Street Journal.

Zero Hedge:

• Baltic Dry Drops Another 4%, Below 2,000, Longest Decline on Record Enters 31st Day. (graph)
  

Washington Post:

• Oklahoma, South Carolina and Utah May Follow Arizona's Lead on Immigration Law. Attention is focused on Arizona and the federal government's challenge to the state's strict new immigration law, but three other states could adopt similar legislation next year.

AppleInsider:

• Apple's(AAPL) new iPod touch rumored to have 5MP camera, FaceTime. A new report alleges that Apple's next iPod touch, expected to arrive this September, will have a 5 megapixel camera, capture HD video, feature FaceTime connectivity, and include a gyroscope, like the iPhone 4.

Market Folly:

• Hedge Funds Increase Short Exposure Yet Still Suffer Poor Performance.

NYPost:

• Dodging a Health-Care Fight. On Tuesday, the Obama administration decided to do something rather peculiar, somewhat shocking and politically fascinating: It circumvented the process by which the Senate advises and consents on executive-branch nominees. The move, which seems unprecedented in subtle but important ways, promises increased chaos in Washington -- but also hope on health care. This is as glaring an admission as there is that Obama and his people know they've lost the public on health care. Rather than using these hearings to bolster popular support for the landmark legislation they rammed through in the spring, they can't bear to submit to public questioning about it. By running away from this fight, Obama is signaling that the possibility of repealing the health-care monstrosity before it really begins to sink its teeth into the American system by 2014 is very real indeed.

Rasmussen Reports:

• 56% Oppose Justice Department Challenge of Arizona Law; 61% Favor Similar Law in Their State. Voters by a two-to-one margin oppose the U.S. Justice Department’s decision to challenge the legality of Arizona’s new immigration law in federal court. Sixty-one percent (61%), in fact, favor passage of a law like Arizona’s in their own state, up six points from two months ago. A new Rasmussen Reports national telephone survey finds that just 28% of voters agree that the Justice Department should challenge the state law. Fifty-six percent (56%) disagree.

Politico:

• Rod Blagojevich Trial Could Singe White House.

Reuters:

• Global Junk Default Rate to Fall Below 2% - Moody's. The global speculative-grade default rate fell for a seventh month in June and should dip below 2 percent within a year, Moody's Investors Service said on Thursday.

NRK:

• Norway's government will increase taxes on assets and wealth in its 2011 budget, citing Finance Minister Sigbjoern Johnson. The finance minister also said that the government wants to reduce taxes for citizens who are less well off in an effort to redistribute wealth.

Handelsblatt:

• European Central Bank Executive Board member Juergen Stark said introducing a bank tax may cause too much stress for financial institutions and impede credit supply.

Diario Economico:

• Portugal will increase income tax in 2011 as part of a plan that has already been announced to reduce tax deductions and benefits, citing Sergio Vasques, the secretary of state for fiscal affairs.

Caijing:

• China may extend a resources tax on coal, oil and gas production nationwide on Sept. 1, citing officials from the Ministry of Finance and the State Administration of Taxation.

Haaretz.com:

• Hezbollah Readying for Urban War in Southern Lebanon, IDF Warns. Deployment of UN forces has pushed militants into built-up areas where international troops have no authority, army says.