Evening Headlines
Bloomberg:
- China's Manufacturing Grows Least in 28 Months as Inflation Campaign Bites. A Chinese manufacturing index fell to the lowest level since February 2009, signaling that the world’s second-biggest economy is cooling as export demand weakens and the government reins in credit to control inflation. The Purchasing Managers’ Index was at 50.9 in June from 52 in May, the China Federation of Logistics and Purchasing said in an e-mailed statement today. The median forecast in a Bloomberg News survey of 13 economists was 51.5. The report “will further depress markets which have been increasingly worried about a hard-landing in China,” said Lu Ting, a Hong Kong-based economist at Bank of America Merrill Lynch in Hong Kong.
- U.S. Reserve Oil May Be Stored by Traders. Some of the oil being released from the U.S. Strategic Petroleum Reserve to bring down prices may be held by traders for later sale rather than sent directly to refiners for processing into gasoline or other fuels. The U.S. Energy Department is offering 30 million barrels of light, low-sulfur crude for sale, half of the 60 million barrels to be released by International Energy Agency member nations to make up for the loss of Libyan oil exports during the civil conflict. Bids for the oil were due by 1 p.m. central time yesterday. “The DOE has no preference for bids from refiners versus traders and both have participated significantly in past sales,” an official from the Energy Department wrote in an e- mail. “There is nothing to stop buyers from putting the oil they have purchased into their own storage.” Traders can profit from buying the oil and selling more valuable contracts for later delivery, if the SPR oil is sold at a big enough discount to cover storage costs. Representatives of trading companies including JPMorgan Chase & Co., Morgan Stanley (MS), Hess Trading Company and Koch Supply & Trading LP joined Valero Energy Corp. (VLO) and Statoil ASA in questioning Energy Department officials June 28 about shipping options and requests for waivers of the Jones Act. The Jones Act restricts the shipment of goods between U.S. ports to American-flagged vessels. Most oil is shipped on foreign-flagged vessels.
- Geithner to Consider Leaving After Debt Debate. Treasury Secretary Timothy F. Geithner has signaled to White House officials that he’s considering leaving the administration after President Barack Obama reaches an agreement with Congress to raise the federal debt limit, according to three people familiar with the matter. Geithner said speculation about his departure was being driven by his decision to commute to New York so his son can finish his final year of high school there. “I live for this work,” he said at the Clinton Global Initiative in Chicago. “It’s the only thing I’ve ever done. I believe in it. We have a lot of challenges as a country. I’m going to be doing it for the foreseeable future.”
- NY Fed Halts Controversial AIG Bond Auctions. The Federal Reserve Bank of New York is halting its sales of mortgage bonds acquired in the rescue of American International Group Inc. (AIG) after coming under criticism that auctions were damaging credit markets. “Given prevailing market conditions” for residential mortgage-backed securities, “we do not anticipate any sales of bonds in the near term or until such time as the New York Fed deems it will achieve value for the public,” Jack Gutt, a New York Fed spokesman, said in an e-mail. The New York Fed began unloading the bonds piecemeal after rejecting a $15.7 billion bid from New York-based AIG for the entire pool in March. As traders blamed declines in debt from high-yield bonds to subprime-mortgage securities on the sales, the bank slowed their pace. Its last auction ended June 9. “On the surface, this is a positive because these sales will not weigh down the market,” Jason Weiner, a money manager who helps oversee $18.6 billion in fixed-income assets at M&I Investment Management Corp. in Milwaukee, said in an e-mail. “Longer term it will loom over the market until it clears.”
- How Fannie's Silence Opened Way to $3 Billion Fraud.
- Icahn Seeks Talks With Armored-Truck Maker Oshkosh(OSK) After Reporting Stake. Billionaire investor Carl Icahn in a filing said he owned 9.5 percent of Oshkosh Corp. (OSK), the U.S. military’s biggest supplier of armored trucks, and sought talks with the company to enhance shareholder value. Following Icahn’s announcement, Oshkosh rose 8.3 percent in New York trading after closing at $28.94.
- Justice Department Orders Criminal Probe of Detainees' Deaths in CIA Case. Attorney General Eric Holder ordered a criminal investigation into the deaths of two prisoners in U.S. custody overseas following a U.S. Justice Department review of CIA interrogations. The department determined that an expanded criminal investigation into allegations of CIA mistreatment of other detainees isn’t warranted, Holder said in a statement today. The probe is examining the 2002 death of Gul Rahman in a facility in Afghanistan and 2003 death of Manadel al-Jamadi at the Abu Ghraib prison in Iraq, according to a person familiar with the matter who spoke on condition of anonymity and wasn’t authorized to comment publicly.
- Goldman Sachs'(GS) Connections With Central Banks Reach Ever Deeper After Hire. The revolving door between Goldman Sachs Group Inc. (GS) and central banks is spinning again. The fifth-biggest U.S. bank by assets said yesterday it hired Bank of England economist Andrew Benito after recruiting Huw Pill from the European Central Bank in May and Naohiko Baba from the Bank of Japan in January. Moving in the other direction, Ben Broadbent, Goldman Sachs’s ex-chief U.K. economist, started at the Bank of England last month. Former vice chairman Mario Draghi will take up the presidency of the ECB in November.
- Bullard Says Fed's Extended Period Pledge for Rates Difficult to Prolong. Federal Reserve Bank of St. Louis President James Bullard said the Fed’s pledge to keep interest rates low for an “extended period” represents the longest duration it can signal for holding down borrowing costs. “I just don’t think it’s a viable option to say we’re going to go to a super extended period,” of low rates, Bullard said to reporters today in St. Louis. “We’ve already said ‘extended period,’ and it’s harder to promise anything even further out.” For now, the Fed has “gone on pause, we have to gather more information” to ensure that the economy will strengthen during the second half of the year, he said at his regional bank’s conference on quantitative easing. “If the economy is not performing well the committee should consider taking additional action,” Bullard said, adding that “the situation today is very different from” the months before the Fed started its second round of bond buying in November. “Inflation has picked up fairly substantially,” Bullard said, and the central bank’s record $2.87-trillion balance sheet “could turn into a lot of inflation if we don’t play our cards right going forward.”
- Why China's Heading for a Hard Landing, Part 5: A. Gary Shilling.
- Japan's Tankan Deteriorates to Minus 9. Japan’s Tankan survey showed companies are confident demand will pick up this year as they restore production and hire workers after the earthquake that triggered the biggest plunge in sentiment since 2009. The quarterly Tankan index of sentiment at large manufacturers fell to minus 9 in June from 6 in March, the Bank of Japan said in Tokyo today. A negative number means pessimists outnumber optimists. Large companies said they will boost capital spending 4.2 percent in fiscal 2011, exceeding analysts’ forecasts for a 2.4 percent increase.
- Lagarde Signals to IMF Staff More Power for Emerging Markets. Christine Lagarde signaled that as the new head of the International Monetary Fund she will follow through on a promise to increase the stature of emerging-market nations at the global lender. Lagarde, speaking to IMF staff in a video message, distanced herself from her previous role as French finance minister and indicated she would advance efforts to give more voting power to countries such as China and Brazil, according to a transcript obtained by Bloomberg News yesterday.
- Corn Extends Worst Monthly Loss Since 2008, Wheat Falls on U.S. Plantings. Corn extended its biggest monthly loss since October 2008 and wheat tumbled to the lowest level in almost a year after the U.S. reported acreage and inventories that topped estimates by analysts. Corn for December delivery slumped as much as 6.3 percent to $5.815 a bushel, the lowest for the most-active contract on the Chicago Board of Trade since Dec. 16, and traded at $5.8875 at 10:14 a.m. Singapore time. The grain lost 17 percent in June, narrowing the gain in the past year to 53 percent.
- FDA Stance on Avastin Irks Lawmakers. The Food and Drug Administration’s move to stop use of the drug Avastin for breast cancer has provoked anger among some Republican leaders in the House, where the issue is likely to be raised in a hearing next week. Energy and Commerce Committee Chairman Fred Upton (R., Mich.) has “grave” concerns about the FDA’s handling of the Avastin issue, House aides said this week. They added that Mr. Upton or another lawmaker is likely to address the FDA move at the Thursday hearing.
- FTC Makes Twitter Inquiries. The Federal Trade Commission is reviewing Internet messaging-service Twitter Inc. and its interactions with at least one other company that build programs using Twitter data, according to a person familiar with the matter. The precise focus of the review is not clear, but representatives of the FTC's antitrust arm have requested information from a company called UberMedia Inc., which owns applications that let people read and send "tweets," or messages, broadcast by Twitter users, this person said. Twitter considers UberMedia to be a potential competitor, people familiar with the matter have said. The review is "narrow" in scope and won't impact Twitter's fledgling advertising business, this person said.
- Paulson Urged BofA(BAC) to Fight Investor Claims. Months before Bank of America Corp. began negotiating a settlement with large holders of mortgage-backed securities, hedge-fund manager John Paulson told senior executives not to give in to such demands, according to people familiar with the situation. In one meeting last fall, Mr. Paulson, one of the bank's largest shareholders and a man who had made billions betting against risky mortgage-related debt, laid out a roadmap for fighting one group of prominent institutional investors. The claims brought in October by that group, which included giant money manager BlackRock Inc, evolved into the larger, $8.5 billion pact announced Wednesday.
- Asia Stock Story Stumbles. Asian stock markets closed out the second quarter in the red, as investors fretted about economic growth trends that remain unclear going into the second half of the year. The Shanghai Composite Index shed 5.7%, Hong Kong's Hang Seng Index dropped 4.8%, India's Sensex fell 3.1%, the Australian S&P/ASX 200 index lost 4.8% and South Korea's Kospi declined 0.3%. The Japanese Nikkei Stock Average edged up 0.6%.
- The Jobless Summer. Why only one in four teens is employed. Perhaps you've already noticed around the neighborhood, but this is a rotten summer for young Americans to find a job. The Department of Labor reported last week that a smaller share of 16-19 year-olds are working than at anytime since records began to be kept in 1948.
- Fed's Massive Stimulus Had Little Impact: Greenspan. The Federal Reserve's massive stimulus program had little impact on the U.S. economy besides weakening the dollar and helping U.S. exports, Federal Reserve Governor Alan Greenspan told CNBC Thursday. In a blunt critique of his successor, Fed Chairman Ben Bernanke, Greenspan said the $2 trillion in quantative easing over the past two years had done little to loosen credit and boost the economy. "There is no evidence that huge inflow of money into the system basically worked," Greenspan said in a live interview. Greenspan said he "would be surprised if there was a QE3" because it would "continue erosion of the dollar."
Zero Hedge:
- The CDO at the Heart of the Eurozone.
- Caught in the Act: HFT Option Algos Observed Frontrunning Today's PMI Release.
- RealPages(RP) Rides Crest of Rental Market. New-home sales may be hovering near record lows. But the nation's rental market is flying high.
- Clinton: U.S. 'Would Welcome' Dialogue With Muslim Brotherhood. The Obama administration is open to dialogue with the Muslim Brotherhood in Egypt, U.S. Secretary of State Hillary Clinton said Thursday. "We believe, given the changing political landscape in Egypt, that it is in the interests of the United States to engage with all parties that are peaceful and committed to nonviolence, that intend to compete for the parliament and the presidency," she told reporters in Budapest, Hungary. "And we welcome, therefore, dialogue with those Muslim Brotherhood members who wish to talk with us." Mahmoud Ghozlan, a spokesman for the Muslim Brotherhood, said he had heard of the U.S. interest in dialogue only from media reports. "The U.S. administration has supported dictators for decades and authorized torture, repression and colonization," he said. "The U.S. is hated in the Middle East region more than any other country according to polls published in the U.S. If the U.S. is serious in opening a dialogue, they must first respect the people's choices for a true democracy, independence and respect their choice of leaders. We would welcome the open dialogue, if they are serious and transparent."
- Strauss-Kahn Case Seen in Jeopardy. The sexual assault case against is on the verge of collapse as investigators have uncovered major holes in the credibility of the housekeeper who charged that he attacked her in his Manhattan hotel suite in May, according to two well-placed law enforcement officials.
- Glenn Beck Uses Last Show on Fox to Allude to His New Venture. Mr. Beck, 47, who reached an agreement with Fox to leave half a year before his three-year contract expired, evidently was not permitted to mention GBTV by name, but he was allowed to mention his personal Web site, GlennBeck.com, so on his last broadcast on Thursday he repeatedly encouraged his viewers to go there to “find out where I’m going.” His personal Web site redirected visitors to GBTV. Then, half an hour after the broadcast, Mr. Beck left Fox’s studio in Midtown Manhattan and headed to a theater nearby where he hosted a webcast on GBTV.com. The webcast was part of an effort by his production company, Mercury Radio Arts, to sign up paying customers for the site before the debut of his new daily show in September. Speaking through the television set to the members of the media that he said were “celebrating” the end of his Fox show, Mr. Beck said, “You will pray for the time when I was only on the air for one hour every day.” His forthcoming show on the Web will be two hours long.
- Boeing(BA) Labor Dispute is Making New Factory a Political Football.
- White House Press Pool Losing Scoops to Twitter. Some reporters in the rotating pool of journalists who chronicle the president’s movements are sending TwitPics, revealing factoids and delivering one-line quips in 140 characters before the pool reports go to all of their colleagues.
- A Giant Stimulus to Nowhere. Mired in excruciating negotiations over the budget and the debt ceiling, President Barack Obama might reflect that things didn't have to turn out this way. The impasse grows mainly out of one major decision he made early on: pushing through a giant stimulus. When he took office in January 2009, this was his first priority. The following month, Obama signed the American Recovery and Reinvestment Act, with a price tag eventually put at $862 billion. It was, he said at the time, the most sweeping economic recovery package in our history," and would "create or save three and a half million jobs over the next two years." The president was right about the first claim. As a share of gross domestic output, it was the largest fiscal stimulus program ever tried in this country. But the second claim doesn't stand up so well. Today, total nonfarm employment is down by more than a million jobs.
- Sonic, Burger King, Other Fast-Food Chains Selling Alcohol. The trip to the fast-food joint that was once all about burgers and fries is increasingly about something that could require you to flash your ID: beer and wine.
- U.S. Rejects Demands to Vacate Pakistan Drone Base. The United States is rejecting demands from Pakistani officials that American personnel abandon a military base used by the CIA to stage drone strikes against suspected militants, U.S. officials told Reuters. U.S. personnel have not left the remote Pakistani military installation known as Shamsi Air Base and there is no plan for them to do so, said a U.S. official familiar with the matter, who asked for anonymity to discuss sensitive material. "That base is neither vacated nor being vacated," the official said. The information was confirmed by a second U.S. official. The U.S. declaration that drone operations in Pakistan will continue unabated is the latest twist in a fraught relationship between security authorities in Washington and Islamabad, which has been under increasing strain for months.
- Romney to Obama: Quit Golf Course, Work for Jobs. Republican White House hopeful Mitt Romney accused President Barack Obama on Thursday of failing to understand how to fix the U.S. economy and urged him to focus on jobs instead of playing golf. "Obamanomics is not working," Romney said, standing in a weed-strewn back entrance to the shuttered American Metal Works plant Obama had visited in 2009 as a potential symbol of economic renewal. It closed early this year. Taking aim at an issue that could be Obama's key vulnerability in the 2012 election, Romney also launched a 40-second Web video blaming the Democratic president's economic policies for 100,000 job losses in Pennsylvania.
- Equity Fund Outflows $6 Billion, Bonds Get Cash - Lipper.
- Syria: US Presses For Opposition Dialogue With Assad. Details emerge of a controversial 'roadmap' for reforms that would leave him in power despite demands for his overthrow. The US is pushing the Syrian opposition to maintain dialogue with Bashar al-Assad's regime as details emerge of a controversial "roadmap" for reforms that would leave him in power for now despite demands for his overthrow during the country's bloody three-month uprising.
- China's lead-battery production capacity may fall by half in three years, citing Hu Xinguo, a director at the China Battery Industry Association. 95% of makers don't meet the 500-meter safety zone required by the government, the report said.
- None of note
- Asian equity indices are -.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 109.0 -5.0 basis points.
- Asia Pacific Sovereign CDS Index 118.75 -3.25 basis points.
- S&P 500 futures -.09%.
- NASDAQ 100 futures -.13%.
Earnings of Note
Company/Estimate
- None of note
9:55 am EST
- Final Univ. of Mich. Consumer Confidence for June is estimated to rise to 72.0 versus a prior estimate of 71.8.
- Construction Spending for May is estimated to rise +.1% versus a +.4% gain in April.
- ISM Manufacturing for June is estimated to fall to 52.0 versus a reading of 53.5 in May.
- ISM Prices Paid for June is estimated to fall to 70.9 versus a reading of 76.5 in May.
- Total Vehicle Sales for June are estimated to rise to 12.08M versus 11.76M in May.
- (TMK) 3-for-2
- (PLCM) 2-for-1
- None of note
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