Today's Headlines

Bloomberg:

• Consumer Spending in U.S. Tops Forecast, Incomes Lag. Consumer spending in the U.S. rose more than forecast in July, exceeding gains in incomes and indicating the economy may avoid slipping back into a recession. Purchases rose 0.4 percent, the most since March, after little change the prior month, Commerce Department figures showed today in Washington. Incomes climbed 0.2 percent, less than projected, and the savings rate dropped. Disposable incomes, or the money left over after taxes, dropped for the first time since January after adjusting for inflation, showing how the lack of jobs may prevent spending from strengthening. “It’ll be a real slog,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “We’ll see very slow growth, but it’s a far cry from a double dip,” he said, referring to the economy lapsing into another economic slump.
• Treasuries Advance After BOJ Says U.S. Economic Uncertainty Is Increasing. Treasuries rose, erasing their losses from last week, after the Bank of Japan said “uncertainty” regarding the American economy is growing, reviving demand for safety. U.S. government notes headed for a fifth monthly gain as the BOJ’s expansion of a bank-loan program fell short of traders’ expectations. The Federal Reserve bought $360 million of Treasury Inflation Protected Securities, the least amount since it resumed buying government debt this month. “The market was looking for a broader expansion of the package from the Bank of Japan and stronger steps to shore up their market,” said Christian Cooper, senior rates trader in New York at Jefferies Group Inc., one of the 18 primary dealers that trade directly with the Fed. “The increasing uncertainty that was mentioned also set the tone for the bid this morning. It’s positive for fixed income.” The 10-year yield fell 11 basis points, or 0.11 percentage point, to 2.54 percent at 12:29 p.m. in New York, according to BGCantor Market Data.
• Intel(INTC) Buys Infineon Wireless Radio Chip Unit for $1.4 Billion. Intel Corp., the world’s largest chipmaker, agreed to buy Infineon Technologies AG’s wireless unit for about $1.4 billion, gaining a foothold in the mobile- phone business it has struggled to crack for more than a decade. The all-cash transaction is expected to close in the first quarter of 2011, Infineon, Europe’s second-largest semiconductor maker, said in a statement today.
• HP(HPQ) Board Authorizes $10 Billion for Share Buybacks. Hewlett-Packard Co.(HPQ), the personal- computer maker in a $2 billion bidding war for data-storage provider 3Par Inc., said its board approved an additional $10 billion for share repurchases. The move, which adds to the $4.9 billion already available, will help offset dilution from employee stock purchases, the Palo Alto, California-based company said today in a statement. HP will repurchase at least $3 billion in shares in the fiscal fourth quarter ending in October, Cathie Lesjak, interim chief executive officer, said in the statement.
• Corn Advances to 14-Month High on U.S. Crop Demand; Wheat, Soybeans Climb. Corn futures climbed to a 14-month high on speculation the U.S., the top producer and exporter, may miss a record harvest and as growing areas in China face floods. Corn in Dalian gained to the highest level since at least 2004. December-delivery corn rallied as much as 2 percent to $4.4475 a bushel, the highest price for the most-active contract in Chicago since June 15, 2009.
• UN Climate Panel Should Change Management, Study Says. The UN climate-science agency that was criticized for errors in forecasting when Himalayan glaciers may melt should “fundamentally change its management structure,” a review of the Nobel Prize-winning body said. The United Nations-sponsored Intergovernmental Panel on Climate Change should appoint an executive director and name an executive committee with members who are outside of the IPCC or even are not part of the climate-science community, the Amsterdam-based InterAcademy Council said today on its website. The review by economists and scientists at the InterAcademy Council was called for in March by UN Secretary-General Ban Ki- moon after errors on glacier melt rates and flooding were flagged in 2010 by readers, more than two years after the IPCC published an assessment report that said scientists were more than 90 percent certain that humans are causing global warming. Climate-change skeptics including U.S. Senator Jim Inhofe, an Oklahoma Republican, have pointed to the errors by the IPCC as proof that the earth is not being warmed by human-caused carbon emissions.
• 3M(MMM) Agrees to Acquire Cogent Inc.(CGNT) for $943 Million. agreed to buy 3M Co.Cogent Inc., a manufacturer of fingerprint-identification systems for governments and companies, for $943 million to expand its security-services products. The offer is for $10.50 a share, 3M said today in a statement, or 18 percent more than Pasadena, California-based Cogent’s closing price on Aug. 27.

Wall Street Journal:

• The Folly of Subsidizing Unemployment. My calculations suggest the jobless rate could be as low as 6.8%, instead of 9.5%, if jobless benefits hadn't been extended to 99 weeks.

CNBC:

• Why Even Central Bankers Are Unsure What to Do Now.
• Another Home Buyer Tax Credit? Just when I thought the housing market was finally being left to correct on its own, I'm starting to hear talk regarding yet another home buyer tax credit. From HUD to the hedge funds, it sounds as if it is gaining steam yet again. This one could involve not just first time/move-up buyers, but a credit for buyers purchasing foreclosed properties or short sale.

MarketWatch:

• Is India's Stock Market Faltering?
• JPMorgan(JPM) Cuts 3rd-Quarter Oil Price Forecast to $75 a Barrel. J.P. Morgan Chase & Co. has lowered its price target for crude-oil futures, saying the recent bounce is likely temporary and forecasting prices around $65 a barrel by October.

Business Insider:

• China Has Picked The Wrong Time To End Its Love Affair With Capitalism.
  
  Michael Wines has an excellent report in today’s New York Times, about the rising dominance of China’s state-owned enterprises, at the expense of the once-vibrant private sector. Although partly an unanticipated consequence of China’s big stimulus push, he notes, the trend may — to some degree — reflect a more profound shift in philosophy:
• Dallas Fed: Manufacturing Is a Mess. The Dallas Fed Manufacturing Index declined by 13.5%, worse than the forecast -10%. Texas activity declined for the third month in a row. New orders, shipments, and other indices for Texas were also negative or flat:

Zero Hedge:

• Greeks "In Over Their Heads in Debt" Means Non Performing Loans Poised to Surge. A Bloomberg TV report looks at a troubling and all too expected trend developing currently in Greece: namely the overabundance of easy credit provided to Greek consumers to fund unprofitable business, and which loans the recipients have no intention of every paying back.
• Moody's Issues Stern Warning on China's Pyramid Bank Recapitalization Scheme; Has CIC Entered a Funding Crisis? Moody's is out with a surprisingly frank appraisal of the Chinese banking system's precarious capitalization trend, by looking at the recent RMB 54 billion capital raise in the interbank market by the domestic arm of the Chinese Sovereign Wealth fund (CIC), which was "the first part of an RMB 187.5 billion overall fund-raising program mainly to provide additional capital to the three largest state-owned banks, a policy lender, and a policy insurance company." As Moody's oh so correctly concludes: "Recapitalizing banks with bond proceeds from banks is credit negative because it increases the effective leverage of the banking system.

TechCrunch:

• Cisco(CSCO) May Be Making a Rune for Skype. Cisco has made an offer to acquire Skype before they complete their IPO process, says one of our more reliable sources.

Stratfor:

• China: Rumors of the Central Bank Chief's Defection.

Rasmussen Reports:

• 58% Favor Repeal of the Health Care Law, 36% Are Opposed. Just over half of U.S. voters continue to believe that the new health care law will increase the cost of care and believe the law will be bad for the country. A new Rasmussen Reports national telephone survey finds that 58% favor repeal of the new national health care law while 36% are opposed. These figures include 46% who Strongly Favor repeal and 28% who are Strongly Opposed.

USA Today:

• Record Number in Government Anti-Poverty Programs. Government anti-poverty programs that have grown to meet the needs of recession victims now serve a record one in six Americans and are continuing to expand. More than 50 million Americans are on Medicaid, the federal-state program aimed principally at the poor, a survey of state data by USA TODAY shows. That's up at least 17% since the recession began in December 2007. "Virtually every Medicaid director in the country would say that their current enrollment is the highest on record," says Vernon Smith of Health Management Associates, which surveys states for Kaiser Family Foundation. The program has grown even before the new health care law adds about 16 million people, beginning in 2014. That has strained doctors. "Private physicians are already indicating that they're at their limit," says Dan Hawkins of the National Association of Community Health Centers. More than 40 million people get food stamps, an increase of nearly 50% during the economic downturn, according to government data through May. The program has grown steadily for three years. Caseloads have risen as more people become eligible. The economic stimulus law signed by President Obama last year also boosted benefits.

AP:

• China has gone on a global management recruiting campaign as part of a plan to build 30 to 50 state companies that will become national champions in oil, banking, airlines and other businesses, citing an announcement by the State Asset Supervision and Administration Commission.

Financial Times:

• Oil Exploration in Cuba Expected to Go Ahead. Preparations for full-scale oil exploration are gaining momentum in Cuba’s Gulf of Mexico waters just 50 miles from the US, testing the limits of the trade embargo on the Caribbean nation. Cubapetroleo, the state oil monopoly, says seven exploration wells are scheduled for the Cuban waters up to the end of 2012. A new Chinese deep-water rig, owned by Saipem, a unit of Italian oil company Eni SpA, is scheduled to leave its shipyard by the end of 2010 for the two-month trek to Cuba. The rig was built to get around the 10 per cent limit on US technology demanded under the US trade embargo of Cuba. Preparatory work is moving ahead at Mariel, a port west of Havana, the staging area for drilling operations, diplomatic and industry sources said, and some companies have opened bidding for well casing. “It is ridiculous that Repsol, a Spanish oil company, is paying an Italian firm to build an oil rig in China that will be used next year to explore for oil 50 miles from Florida,” Sarah Stephens, executive director of the Center for Democracy in the Americas, said.

Telegraph:

• Backlash Over China Curb on Metal Exports. China's draconian export curbs on rare earth minerals needed by the rest of the world for frontier technologies is escalating into a serious diplomatic and trade clash with the United States and other leading powers. Japan's foreign minister Katsuya Okada issued what amounted to a formal protest at top-level meeting with Chinese officials in Beijing over the weekend, saying the sudden cut-off was "affecting the global production chain". It is the latest sign of rising pressure after angry complaints by companies outside China that rely on this family of 17 metals for hybrid cars, mobile phones, superconductors, navigation, and a host of high-tech industries.

Economic Times:

• Some banks in the Chinese municipality of Chongqing raised loan rates for first-home purchases by reducing discounts, citing people from two banks' Chongqing branches. Buyers can only get a 10% to 15% discount for interest rates paid on loans to buy first homes, compared with an earlier 25% to 30% off.

WAM:

• Ground Zero Mosque Leader: Radicalism Common Threat to Muslims and Non-Muslims. Imam Feisal Abdul Rauf, a central figure in plans to build a Muslim community center in Lower Manhattan, New York, near the site of attacks of Sept. 11, 2001, urged followers of all faiths to join hands against radicalism which he says exists in all religions. "We are all in this together.. there is a common threat: radicalism which exists in all religions," Abdul Rauf told WAM in an interview in Abu Dhabi. "The real battle front is not between Muslims and non-Muslims. The real battle front is between moderates and extremists." He is in the UAE as part of a mission from the United States government to promote religious tolerance in the Arab world. The Imam's trip also took in Bahrain and Qatar. While in the UAE, Feisal Abdul Rauf is holding meetings with senior officials, Muslim scholars and university students.