Today's Headlines

Bloomberg:

• U.S. Economy: Growth Slows as Consumer Spending Decelerates. The U.S. economy slowed in the second quarter as a scarcity of jobs eroded consumer spending, leaving the rebound dependent on a surge in business investment. Gross domestic product grew at a 2.4 percent annual pace, less than forecast, after a 3.7 percent first-quarter gain that was larger than previously estimated, according to Commerce Department data issued today in Washington. Other reports showed business activity unexpectedly accelerated in July and consumer sentiment fell less than projected. “The economy is muddling through,” Ethan Harris, head of North America economics at Bank of America-Merrill Lynch Global Research in New York, said in an interview. “We’re probably not going to see a really strong number for a while. We need to see some pickup in job growth.”
  
• Business Activity in U.S. Expanded Faster in July. Business activity in the U.S. expanded in July at a faster pace than projected, signaling manufacturing is driving growth in the world’s largest economy. The Institute for Supply Management-Chicago Inc. said today its business barometer rose to 62.3 this month, exceeding the median forecast of economists surveyed by Bloomberg News, after 59.1 in June. The employment measure rose to 56.6 from 54.2 in June, and the production gauge increased to 65 from 64.2. The gauge of new orders climbed to 64.6 from 59.1. The index of backlogs rose to 57.6 from 50.7. The gauge of inventories increased to 50.8 from 46.5.
• Bank Debt Swaps Headed for Biggest Monthly Drop Since April 08'. An index of credit-default swaps insuring against losses on European bank bonds is heading for the biggest monthly drop since April 2008. The Markit iTraxx Financial Index linked to 25 banks and insurers has fallen 43.5 basis points this month and is near the lowest level since April 23. The gauge pared the decline today, rising 3.5 basis points to 118.5, according to JPMorgan Chase & Co. prices at 1:30 p.m. in London. “We believe the best course of action for investors is to go with the flow,” said Aziz Sunderji, a London-based strategist at Barclays Capital. “We would advise investors to spend the remainder of the summer adding risk.”
• Acquisition Spree May Point to Second-Half Pickup in Dealmaking. A spate of mergers and acquisitions during the past two weeks may signal the start of a comeback for global dealmaking in the second half of 2010. There have been 787 announced deals since July 19 with a total disclosed value of $86.4 billion, according to data compiled by Bloomberg. The surge pushed global deal volume past the $1 trillion mark for the year, more than a 10 percent increase over the first seven months of 2009. Companies are now getting more confident as they increasingly hoard cash and borrowing costs fall, according to some dealmakers. “While boards have been reluctant to pull the trigger, they’re getting more comfortable with the economic environment and so there may be a pickup,” said Wilhelm Schulz, head of European M&A at Citigroup Inc.
• Soybeans, Corn Gain as Small World Crops May Aid U.S. Exports. Soybeans jumped to a 12-week high and corn rose for a third day as hot, dry weather damaged crops from Russia to Germany, boosting demand for supplies from the U.S., the world’s largest grower and exporter. Russia, the seventh-largest feed-grain exporter and oilseed processor, declared emergencies in 27 crop-producing regions, four more than a week ago, as drought harmed crops across at least 10.3 million hectares (25.5 million acres). German grain production will fall as much as 11 percent to 44 million metric tons from last year, Alfred C. Toepfer International GmbH said. “People have underestimated the damage and the crops are still shrinking,” said Mark Schultz, the chief analyst for Northstar Commodity Investment Co. in Minneapolis. “There is a tightening global supply, and that means more U.S. exports.” Soybean futures for November delivery climbed 9.25 cents, or 0.9 percent, to $9.9725 a bushel at 11:03 a.m. on the Chicago Board of Trade, after rising to $10.0175, the highest price since May 3. The most-active contract was up 10 percent in July, heading for the biggest monthly gain since May 2009. Corn futures for December delivery rose 7.25 cents, or 1.8 percent, to $4.01 a bushel on the CBOT, after touching $4.025, the highest level since July 19. Corn has advanced 7.4 percent this month, which would be biggest monthly increase since April.
• Congress to Vote on Lifting Obama Ban on Deep-Water Drilling. Lawmakers will vote today on a proposal to overturn President Barack Obama’s suspension of deep-water drilling as the House debates legislation toughening rules for companies producing oil and natural gas offshore. An amendment that would end the Obama administration’s moratorium on exploration is among nine scheduled for debate before the House votes on an overhaul of drilling rules in the aftermath of BP Plc’s Gulf of Mexico oil spill.
• 'Meaningful Correction' Looms for China Housing, Economists Say. China’s housing prices, which have tripled in major cities in the past 10 years, face a “meaningful correction” in the next year or two, according to a paper from the U.S. National Bureau of Economic Research. Prices of like-for-like-quality land at auction in Beijing climbed almost 800 percent between 2003 and this year, economists Jing Wu, Joseph Gyourko and Yongheng Deng wrote in the working paper published by the Cambridge, Massachusetts- based arbiter of U.S. business cycles. Their calculations showed Beijing prices could fall as much as 40 percent if investors lost confidence in the market.
• McAfee Advances the Most in 17 Months on Third-Quarter Forecast. McAfee Inc., the second-largest maker of security software, rose the most in 17 months in New York trading after the company’s forecast allayed investors’ concerns about slowing growth. McAfee jumped $2.65, or 8.8 percent, to $32.90 at 1:53 p.m. in New York Stock Exchange composite trading. Earlier, it climbed 10 percent to $33.30 in the biggest gain since February 2009.

Wall Street Journal:

• BP(BP) Well-Plugging Effort Hits Snag. The government's point man for the Gulf oil spill said Friday there has been a delay in a procedure that will help stop the gusher for good.

CNBC:

• Letting Bush Tax Cuts Die 'Not a Good Plan': Fed's Bullard.

NY Times:

• Moody's Says Spain's Credit Rating Likely to Slip. Moody’s said on Friday that Spain’s sovereign debt, whose triple-A rating was put on review late last month, would likely be downgraded at the end of a three-month study, given the country’s growth prospects and the challenges it may face in implementing fiscal austerity. The cost of credit default swaps on Spanish sovereign debt widened to 185 basis points, 7 more than the previous day. By comparison, the cost of protecting Greek sovereign debt swung out by 15 basis points to 739, while the C.D.S. on Portuguese sovereign debt moved 3 basis points to 221. The Spanish national statistics agency said Friday that unemployment had edged higher for a second quarter, hitting 20.09 percent, up 0.04 percent since the last measure was announced in March. Despite the ratings review, Moody’s said “the credit fundamentals of Spain continue to be very strong.”

Lloyd's List:

• US Shippers Wary as Box Shortages Continue. SOME of the largest shippers in the US are continuing to suffer from container shortages as the back-to-school and pre-Christmas peak shipping season gets underway on the transpacific trade. During what is a traditional financial results season for US-listed corporations, executives leading firms shipping toys, clothing and household goods reported facing problems with both capacity on vessels and a shortage of boxes.

Market Folly:

• Hedge Fund Viking Global Likes American Tower(AMT), Invesco(IVZ): Q2 Letter.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 26% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-two percent (42%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -16 (see trends).

Politico:

• Budget-Cutting Democrats Are Undercut. A Democratic spending fight broke out behind closed doors Thursday, as party leaders successfully pressured four junior lawmakers not to offer an amendment slashing housing and transportation programs by $1.02 billion. House Appropriations Committee Chairman David R. Obey argued passionately against the amendment and its authors — though not by name — in a speech to the Democratic Caucus in the morning, according to Democratic insiders.
• Democrats Race Republican Party to Health 'Repeal'. For the first time, House Democrats are proposing repealing a piece of the health care overhaul, one that small businesses have been warning is going to be overly burdensome. The move comes just four months after the Democrats' health plan passed in March. The provision would have required businesses to file 1099 tax forms for all transactions with vendors that total over $600. Due for implementation in 2012, it would have raised $19 billion over 10 years to pay for the health care overhaul. Rep. Scott Murphy (D-NY) offered the bill on Friday morning. Ways and Means Chairman Sander Levin (D-Mich.), spoke in favor of the bill on the House floor Friday. The move comes after Republicans threatened to attach a similar amendment to a vote on the Democrats? jobs legislation late Thursday.

Real Clear Politics:

• Dems' Health Care Plans Mean Lower Quality, Long Waits. Senate Majority Leader Harry Reid, D-Nev., told a group of liberal activists meeting in Las Vegas they shouldn't worry about not getting the single-payer provision in the new health care law. "We're going to have a public option," Reid said. "It's just a question of when." Remember the objections conservatives and many Republicans raised during the debate about government-run health care and the danger of eliminating private health insurance, despite its many flaws? Recall that Britain's National Health Service was frequently cited as an example of where the U.S. health system might be headed: coverage for all, but with lower quality, long waits for major surgery and denial of care when the government decides the procedure is not "cost effective."Anyone who believes a U.S. health care system based on the NHS model can somehow fare better than Britain's had better consider this recent headline and story from London's Sunday Telegraph: "Axe Falls on NHS Services; Hip operations, cataract surgery and IVF rationed; Cancer care, maternity, pediatric services at risk."

MailOnline:

• America's Deadliest Month Yet: As 3 More U.S. Soldiers Are Killed in Afghanistan the Death Toll for July Stands at 63.

CESR:

• Report on Trends, Risks and Vulnerabilities in Financial Markets.

Vedomosti:

• Russia will boost defense spending 60% by 2013 to 2.03 trillion rubles to upgrade its arms, fleet and air forces, citing a three-year budget approved by the government yesterday.

Valor Economico:

• Brazil's economy will continue to have a "weak" expansion in the third quarter, after growth decelerated in the second quarter as a result of the withdrawal of fiscal and monetary stimulus, citing Economic Policy Secretary Nelson Barbosa. Growth is Latin America's biggest economy will be closer to .5% than to 1% in the second quarter over the first three months of the year, Barbosa said. Barbosa forecast the economy contracted .1% in July.