Today's Headlines

Bloomberg:

• Europe's Services, Manufacturing Growth Accelerates. Growth in Europe’s services and manufacturingindustries unexpectedly accelerated in July as concern over the sovereign-debt crisis eased and an increase in global trade spurred exports. A composite index based on a survey of euro-area purchasing managers in both industries rose to 56.7 from 56 in June, London-based Markit Economics said today. Economists had projected a drop to 55.5, the median of 18 estimates in a Bloomberg survey showed.
  
• China's Banks Face Rising Credit Risks, S&P Says. Chinese banks face rising credit risks and their non-performing loan ratios are likely to climb as the nation’s economy slows and lending for government projects comes due for repayment, according to Standard & Poor’s. It’s “highly likely” that some loans to local government financing vehicles will turn bad over the next few years, S&P said today. Loans to these entities account for about 18 percent to 20 percent of total lending, the rating company said. The banking regulator aims to cap new loans at 7.5 trillion yuan ($1.1 trillion) this year, down 22 percent from 2009, and has told lenders to report risk exposure to local-government financing vehicles by the end of June to prevent a pileup of bad loans. Quality of loans offered last year to support government stimulus is “probably one of the weakest in recent years,” Ryan Tsang, a senior director at S&P, said today in a teleconference. Many of the projects are not commercially viable even if they may benefit the macro economy, he said. Fitch Ratings last week estimated that bank lending in the first half of the year was 28 percent higher than the official 4.6 trillion yuan figure as loans were repackaged into off-balance sheet investment products. The regulator imposed a temporary ban on such “informal securitization” earlier this month, according to Fitch.
• Hungary's Survival Without IMF Support Is 'a Myth,' Nomura Says. Hungary won’t be able to access capital markets if it can’t reach agreement with the International Monetary Fund and the European Union on the terms of its bailout loan, Nomura International Plc said.
• Jobless Claims in U.S. Increased More Than Forecast. More Americans than projected filed applications for unemployment benefits last week, a sign firings remain elevated even as the economy is expanding. Initial jobless claims jumped by 37,000 to 464,000 in the week ended July 17, exceeding the highest estimate of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The survey median projected claims would climb to 445,000. “Underlying demand for labor is fairly sluggish,” said Omair Sharif, an economist at RBS Securities in Stamford, Connecticut, who had forecast claims would rise to 460,000. “If that continues, it will have an impact on wages and salaries and clearly have some negative implications for consumer spending.” The four-week moving average, a less volatile measure than the weekly figures, climbed to 456,000 last week from 454,750, today’s report showed. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, fell to 3.5 percent in the week ended July 10 from 3.7 percent in the prior week. Thirty-four states and territories reported an increase in claims, while 19 reported a decline.
• 3M(MMM) Boosts Profit Forecast as Earnings Top Estimates. 3M Co., the maker of stethoscopes and sandpaper, raised its full-year forecast and posted profit that beat analysts’ estimates as sales climbed at all divisions for the third straight quarter. Profit excluding Medicare-related charges will be as much as $5.80 a share this year, up from a maximum of $5.60 forecast in April, the St. Paul, Minnesota-based company said today in a statement. Analysts had predicted $5.64, the average of 16 estimates compiled by Bloomberg.
• Caterpillar Raises Forecast as Profit Tops Estimates. Caterpillar Inc., the world’s largest maker of construction equipment, raised its full-year earnings forecast and posted second-quarter profit that topped analysts’ estimates as demand rose in developing countries. Full-year earnings may be $3.15 to $3.85 a share, more than its April forecast of $2.50 to $3.25, the Peoria, Illinois-based company said in a statement today. The average estimate was $3.27 in a Bloomberg survey of analysts. Second-quarter profit was $1.09 a share, beating the 84-cent estimate.
• Purchases of U.S. Existing Homes Fell in June. Sales of U.S. previously owned homes fell in June for a second month, adding to evidence the market will slump as the effects of a federal tax credit fade. Purchases of existing houses dropped a less-than-forecast 5.1 percent to a 5.37 million annual rate, figures from the National Association of Realtors showed today in Washington. The number of transactions will be “very low” in coming months, reflecting the end of the government incentive, the group’s chief economist said in a news conference. The median price increased 1 percent to $183,700 from $181,800 in June 2009. The number of previously owned homes on the market climbed 2.5 percent to 3.99 million. At the current sales pace, it would take 8.9 months to sell those houses compared, the most since August 2009. The supply is likely to jump to 10 or more in coming months as sales slow, said Lawrence Yun, the group’s chief economist. Foreclosures and short-sales are boosting the so-called shadow inventory, and competing with owners trying to sell properties. Home seizures jumped 38 percent in the second quarter from a year earlier, RealtyTrac Inc. said last week, putting lenders on pace to claim more than 1 million properties this year.
• Hamptons Home Sales Jump as Wall Street Buyers Return. Hamptons, New York, home sales more than doubled in the second quarter from a year earlier, solidifying a turnaround after two years of Wall Street reluctance to splurge on beachfront property. Transactions climbed to 479 in the towns on Long Island’s East End, the second-biggest jump in at least a decade of record keeping. Larger, more expensive homes boosted the median price 17 percent to $900,000, New York-based appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said in a report today.
• Feinberg Said to Cite 17 Companies for Unwarranted Payments. Kenneth Feinberg, the Obama administration’s special master on executive compensation, will cite 17 bailed-out companies for making unwarranted or ill- advised payments to executives during the financial crisis, a person with knowledge of the matter said. Almost all the firms Feinberg plans to disclose tomorrow are banks, said the person, who declined to be identified because the findings haven’t been released. Feinberg has been reviewing pay at 419 companies covering the period from October 2008, when U.S. government bailout money was first awarded, to February 2009, when President Barack Obama signed economic stimulus legislation that included executive-pay curbs.

Wall Street Journal:

• Five of Six Greek Banks Seen Passing Stress Test. Greece's leading private lenders are expected to pass an upcoming health check of Europe's banking sector, but questions remain over whether one of two state-controlled banks being tested may be forced to seek new capital under a worst-case scenario. The so-called stress tests, the results of which are due Friday at noon ET, are being conducted by Europe's banking regulators on 91 European banks, including six Greek lenders, to see how the banks would fare in the event of an economic slowdown or sovereign loan default.
  
• Bill Would Make Half of All Cars Electric by 2030. The bill approved by the committee would allocate about $3.9 billion over 10 years toward building infrastructure for charging electric vehicles, continuing their development and for incentives to encourage consumers to buy battery-powered cars. The goal is to electrify half the country’s cars and trucks by 2030, which could reduce demand for oil in the U.S. by as much as one-third. The legislation, which passed 19-4 in favor, was one of several bills cleared by the committee that could become part of a larger energy and climate bill. The committee also approved a bill that would provide incentives for homeowners and businesses to install solar energy systems.

CNBC:

• 30-Year Mortgage Rate Falls to New Low. Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 4.56 percent for the week ended July 22, down from the previous week's 4.57 percent and its year-ago level of 5.20 percent, according to the survey.

NY Post:

• Comcast's(CMCSA) No. 4 Claim Surprises. Comcast, General Electric and NBC Universal claim their new joint venture entity won't dominate the TV market -- declaring it ranks fourth among media companies in terms of its advertising and affiliate revenue. The proposed $28 billion entity will have only a 12 percent share of advertising and affiliate revenue in the national cable market -- and will sit behind Disney, Time Warner and Viacom and only just ahead of News Corp. (owner of The Post), Comcast claimed in a 327-page filing with the Federal Communications Commission in response to the regulator's request for information.
• Barr Wins Support as Consumer Watchdog. Assistant Treasury Secretary Michael Barr appears to have the inside track as the candidate to lead the new consumer-oriented watchdog -- a key post established as part of new regulatory measures to clean up Wall Street. As the financial regulation was signed into law by President Obama, many Washington and Wall Street sources voiced their support for a Barr nomination. One Washington insider said Obama is expected to select a nominee for the consumer post within the next two weeks -- one of his first moves after signing off on the historic law. Barr's name is emerging as a candidate amid growing opposition to brainy Harvard law professor Elizabeth Warren -- a front-runner in the early going to run the Consumer Financial Protection Bureau. Praised by fans as a sharp-tongued advocate for average people, critics believe Warren could create divisiveness in Washington due to her tendency to pursue philosophical objectives like a personal crusade, according to one source. "We need someone who is going to be a traffic cop for consumers, not someone who is going to try and become an urban planner," said Rep. Mike McMahon (D-SI), who attended the president's signing.
• O's Jobs Errors. The White House last year released a supposedly sci entific analysis that claimed to show that adopting the "stimulus" bill would cut unemployment. Indeed, the report specifically estimated that the unemployment rate today would be down to 7.5 percent. Something obviously went wrong. The actual unemployment rate is 9.5 percent, a statistic that doesn't include the millions who've given up looking for work or can only find part-time jobs. What were President Obama's biggest mistakes?

Business Insider:

• Here's Your 60 Second Guide to Tomorrow's European Stress Test Results.

The Daily Beast:

• Brewing Coup Against Microsoft(MSFT) CEO. Senior Microsoft executives, disenchanted with the company's stagnant stock, have been secretly discussing how to kick Chief Steve Ballmer, and maybe the board, to the curb.

Dealbreaker:

• Attention New York Hedge Fund Managers: Jodi Rell Wants a Piece of You. As you may have heard, Albany is currently debating whether or not to lay a $50 million tax upon the asses of certain hedge fund managers. Though nothing is set it stone yet, said managers are none too pleased with the proposal and have aired their grievances in public. Sensing friction on the home-front, Connecticut Governor Jodi Rell has jumped all over the situation. Earlier this month she conveyed, in her own words, a “simple yet heartfelt message” (which was “Connecticut welcomes you”) and now she’s hoping to win the boys over with raw meat, having invited Timothy Selby, president of the New York Hedge Fund Roundtable, and all of his friends, to an “intimate” steak dinner.
  

Chicago Tribune:

• Chicago Neighborhoods Foundering in Wave of Foreclosures.

AOL News:

• Onward Toward an Entitlement Society. Are we, by having the government doing so much to help everyone, encouraging an entitlement mentality in this country that is making problems worse? In my view, we are already well along this troubling road. Consider:

Politico:

• Obama's Words Sting CEOs. In the eyes of corporate America, President Barack Obama relied on a healthy dose of industry-bashing to sway votes in Congress for health reform and the new Wall Street regulations signed into law Wednesday. Now those efforts threaten to undermine the one agenda item essential to Democrats’ hopes in the midterms and Obama’s chances for reelection: turning around an economy still just a half step out of recession. Some corporate leaders said Obama’s comments prove that he’s hostile to business. Others cited corporate fears of a credit crunch as banks comply with financial reform or the possibility of significant tax hikes if the Bush administration tax cuts are allowed to expire. But it all adds up to a lack of confidence in Obama among some in corporate America — and that’s fueling a reluctance among executives from Wall Street to Main Street to deploy their large cash reserves to make new investments and hire new workers.
• Boxer: "We don't have the 60 votes." Senate Majority Leader Harry Reid appears set to punt on a controversial climate proposal while moving to the floor next week with a more limited bipartisan bill that responds to the Gulf of Mexico oil spill and contains other more popular energy items, according to aides and senators.

Reuters:

• U.S. Senate Asking BP(BP) CEO to Testify on Lockerbie. A U.S. Senate panel is inviting BP Plc (BP) chief executive Tony Hayward to testify next week at a hearing on the release of the Lockerbie bomber, a Senate source told Reuters on Wednesday. The Senate Foreign Relations Committee also is requesting testimony from Mark Allen, who has served as an advisor to BP, said the source, who asked not to be named.
• CFTC Expands Large-Trader Financial Futures Report.
  

Financial Times:

• Trichet Calls for Global Tightening. Public spending cuts and tax increases should be imposed immediately across the industrialised world as evidence of a healthy European recovery mounts, according to Jean-Claude Trichet, president of the European Central Bank. In a strident article for the Financial Times, Mr Trichet argues that policymakers who want to prolong the stimulus are mistaken and that cutting borrowing would have “very limited” effects on growth. The view from Europe’s senior economic policymaker contrasts with continued US demands for fiscal tightening to be delayed at least until 2011 and suggests there is still little agreement over the best way to foster a strong global recovery from the financial and economic crisis of the past two years. Firing a shot at the US administration and the International Monetary Fund, Mr Trichet criticises last year’s global push for budgetary stimulus. “With the benefit of hindsight, we see how unfortunate was the oversimplified message of fiscal stimulus given to all industrial economies under the motto: ‘stimulate’, ‘activate’, ‘spend’.”

Globe and Mail:

• GM Turns to Subprime. General Motors Co.'s decision to buy AmeriCredit Corp. (ACF-N24.014.3121.88%) is getting some traction among observers on Thursday. No, it's not the price tag of the deal, at $3.5-billion (U.S.). Nor is it the perplexing move by GM to expand into auto financing so soon after selling its GMAC financial division in 2006. Rather, it's because the deal will give GM the ability to give subprime loans to prospective car buyers. Yes, subprime: the dirty word that got the U.S. economy into big trouble earlier this decade, at least in its application to the real estate sector.

DigiTimes:

• Strong iPad, iPhone Demand Causing Tight Touch Panel Supply. Strong channel demand for Apple's iPad and iPhone has resulted in tight supply of touch panels, and with the IT market entering the third quarter, the traditional peak season, the pressure is expected to continue rising, according to sources with touch panel suppliers. The sources said suppliers are now trying to increase output by improving yield rates. They are also expanding their production lines, with the new capacities expected to go online at the end of third quarter and in the fourth quarter, the sources said, adding that their overall capacities will still not be sufficient to satisfy all demand, market sources added.