Today's Headlines

Bloomberg:

• Investors Leery Europe Can Fix Greek Crisis: IMF. Greece’s sovereign-debt crisis risks infecting the rest of the euro region even if officials avert a default, threatening the global economic recovery, the International Monetary Fund said. Both the European Commission and the European Central Bank “considered that a sovereign default or a credit event would likely trigger contagion to the core euro-area economies with severe economic consequences,” according to an IMF staff report on the region’s economy. “Staff however also saw serious risks of contagion, even under a strategy which tries to avoid default or credit events.” German Chancellor Angela Merkel said today that the crisis can’t be resolved in “one spectacular step” at this week’s European leaders’ summit on July 21. Government chiefs are meeting for the second time in a month, aiming to break a deadlock over a new Greek rescue that has spooked investors. Spanish and Italian bond yields surged yesterday, piling pressure on officials to end the turmoil. “Despite adjustment efforts and support from euro-area member states and the ECB, market participants remain unconvinced that a sustainable solution is at hand,” the Washington-based fund said. An intensification of the debt crisis, “especially if stress were to spread to the core euro area, could have major global consequences,” the IMF said in a separate report. “This is supported by financial market signals” and “thus, decisive further policy actions to contain the crisis are critical not only for the euro area itself, but also from a global perspective.” European leaders are at odds with one another and with the ECB over demands by Germany and Finland that private investors bear some of the burden of a new Greek bailout. The IMF said leaders need to “scale up the capacity” of the region’s rescue fund and make it more flexible. “We would really advocate the crisis management facilities to allow interventions in secondary markets, provide guarantees, backstops for other fiscal agents and for banks if necessary,” Luc Everaert, division chief for euro area policies in the IMF’s European Department, said on a conference call with reporters. Everaert also said European Union authorities must clarify their approach on private sector involvement and need stronger economic governance. “We need fiscal disciple and it will be unavoidable to subordinate some fiscal sovereignty for the common good,” Everaert said.
• Sovereign Credit-Default Swaps Index Falls From Record in Europe. The cost of insuring against default on European government debt fell from a record as investors pared bets that a sovereign default is imminent. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments fell 14 basis points to 292 at 11 a.m. in London. Swaps on all of Europe’s peripheral governments and France dropped from all-time highs, signaling improvement in perceptions of credit quality. Markets rebounded from a selloff triggered by concern a disorderly Greek default would infect Europe’s governments and banks. Greek Finance Minister Evangelos Venizelos said an agreement is “attainable” at a European summit in two days and European Central Bank Governing Council member Ewald Nowotny said the ECB may accept Greek bonds as collateral. “It looks like correctional tightening, but I’d refuse to dip my toe in the market until Thursday, and only if we see some clarity emerge,” said Harpreet Parhar, a strategist at Credit Agricole SA in London. “Even if we see something positive on Greece on Thursday, which I think is unlikely, I’m still not convinced it will be enough to drag Italy and Spain back across the firewall.” Swaps on Italy dropped 18 basis points to 303 and Spain declined 25 to 360, according to CMA. Contracts on Ireland fell 16 basis points to 1,180, Portugal declined 22 basis points to 1,192 and France was 8 lower at 116. Swaps on Greece fell 33 to 2,535 basis points, signaling an 88 percent probability of default within five years. Contracts on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings decreased 14 basis points to 457, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell from the highest level in more than a year, dropping 3.5 basis points to 123.25 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers decreased 9.5 basis points to 185.5 and the subordinated index dropped 14.5 to 326.5.
• European Stress Tests May Spark Need to Raise Additional Capital, S&P Says. European banks may seek to raise additional capital after last week’s stress tests revealed their riskiest investments and showed a need to curb their dependence on governments, ratings company Standard & Poor’s said. “The stress test process is likely to add further impetus to banks’ capital raising efforts in the lead-up to the implementation of Basel III,” Richard Barnes, a London-based credit analyst said in a report today. “Sovereign support remains an important rating factor for many European banks.”
• Soros's Quantum Holding 75% Cash Leads Hedge Funds Baffled by Instability. Keith Anderson, who runs the $25.5 billion Quantum Endowment Fund for Soros Fund Management LLC, has seen enough of choppy global markets. In mid-June, Anderson told his portfolio managers to pull back on trades as the hedge fund’s losses hit 6 percent for the year, according to two people familiar with the New York-based firm. As a result, the fund is about 75 percent in cash as it waits for better opportunities, said the people, who asked not to be identified because the firm is private.
• Oil Gains in NY as U.S. Supplies, China Demand Counter Europe Debt. Oil climbed in London for the first time in four days on speculation that European lawmakers may reach an agreement to resolve the region’s debt crisis, and on signs of shrinking crude stockpiles in the U.S. Crude for August delivery on the New York Mercantile Exchange rose as much as $1.31, or 1.4 percent, to $97.24 a barrel after a government report showed that housing starts in the U.S. rose more than forecast in June to the fastest pace in five months.
• Japan Should Have Nuclear Weapons: Ishihara. Tokyo Governor Shintaro Ishihara criticized Prime Minister Naoto Kan’s vow to reduce dependency on atomic energy after the Fukushima disaster, saying instead the country should deepen its nuclear embrace to include weapons. “Japan should absolutely possess nuclear weapons,” Ishihara said in a July 15 interview at his office in Tokyo, citing China and North Korea as potential threats. “I don’t think we can easily do away with atomic power. Nuclear energy is inexpensive if managed well,” he also said.
• Chinese Police Shoot Rioters in Xinjiang as Xi Warns Tibetan Separatists. China’s Vice President Xi Jinping warned Tibetans against separatist activities after forces fired on rioters in the northwestern region of Xinjiang, underscoring the struggle to manage ethnic tensions. China will fight against separatist activities by the “Dalai group,” the official Xinhua News Agency cited Xi as saying in a speech in Lhasa today, a reference to supporters of the Dalai Lama, Tibet’s exiled spiritual leader. The government will “completely destroy” any attempt to undermine stability in Tibet and unity in China, Xi said. His remarks followed yesterday’s assault on a police station in the ethnic Uighur-dominated city of Hotan that killed two hostages, two policemen and a security guard, the People’s Daily said. Authorities today executed a former vice mayor of the eastern city of Hangzhou and an ex-vice mayor of Suzhou city, who were convicted of bribery, Xinhua said, citing the Supreme People’s Court. Xinjiang, where the central government in Beijing faces sporadic challenges to its power, was the scene of clashes two years ago involving Uighurs that left almost 200 people dead. The Munich-based World Uyghur Congress, citing unidentified people in Xinjiang, said police fired on about 100 Uighurs protesters in the city’s main bazaar, according to a statement from the affiliated Washington-based Uyghur American Association. The demonstration was against land seizures and disappearances after the riots two years ago, the group said. The Xinjiang riots also come as protests increase across China as income gaps widen. So-called mass incidents -- riots, strikes and protests -- doubled in five years to 180,000 in 2010, Sun Liping, a professor at Beijing’s Tsinghua University, said in a Feb. 25 article in the Economic Observer.

Wall Street Journal:

• Obama Backs New Senate Debt Plan. President Barack Obama on Tuesday backed a $3.7 trillion deficit-reduction plan after it gained fresh momentum from a bipartisan group in the Senate.
• Global Hedge-Fund Assets Rise. Global hedge-fund assets rose to a record $2.04 trillion by the end of the second quarter, as investors continued to allocate new capital to hedge funds despite volatile markets, Hedge Fund Research said Tuesday.
• German Auditors: German Banks, Insurers To Write-Down Greek Bonds In 2Q. German banks and insurers might have to write off 30%-50% of their exposure to Greek sovereign bonds in second quarter earnings reports, the head of the German auditors association IDW, Klaus-Peter Naumann, told Dow Jones Newswires Tuesday.
• Goldman(GS) Profit Misses Estimates; 1,000 Jobs to Be Cut. Goldman Sachs Group Inc. reported a second-quarter profit of $1.05 billion, significantly lower than expectations, as difficult markets led the Wall Street bank to reduce risk taking to the lowest levels in five years. The per-share earnings of $1.85 were 42 cents below the consensus expectations of analysts, only the fifth profit miss in its 12 years as a publicly traded company. "Certain of our businesses had disappointing results as we reduced our market risk in response to attempting to manage fluctuations in prices and market liquidity," said Chief Executive Lloyd Blankfein in a statement.
• Live Blog: Murdochs, Brooks Face UK Panel on Phone Hacking.
• Currency 'Fear' Gauges Show Anxiety as Europe Crisis Worsens. The currency market's fear gauges are flashing red as investors dump wagers that the euro will rise ahead of Thursday's European summit aimed at tackling Greece's financial crisis. A gauge of expected volatility in the euro/dollar exchange rate, based on options prices, has risen to about 13.6 from 13.2 on Friday--near its highest level of the year. A similar measure for the euro/Swiss franc rate hit 14.8, the highest level in two years.
• PPP Survey Shows Bachmann Ahead. Tea-party favorite Rep. Michele Bachmann (R., Minn.) took first place – just barely — in Public Policy Polling’s new national survey of Republican primary voters, besting former Massachusetts Gov. Mitt Romney 21% to 20%.
  

Fox Business:

• Exclusive: FBI Raids Homes of Suspected 'Anonymous' Hackers. The FBI executed search warrants at the New York homes of three suspected members of notorious hacking group Anonymous early Tuesday morning, FoxNews.com has learned. More than 10 FBI agents arrived at the Baldwin, N.Y., home of Giordani Jordan at 6:00 a.m.EST with a search warrant for computers and computer-related accessories, removing at least one laptop from the premises.

MarketWatch:

• IBM(IBM), Chips Give Strong Lift to Tech Stocks. Big Blue’s shares jump 3% on results; semiconductors gain on bullish note.

CNBC.com:

• European Central Bank Governing Council member Ewald Nowotny said that the bank isn't "able or willing to deal with the problems of specific countries," according to an interview. "For the ECB there is the very clear priority to maintain price stability, that is our compass, our clear goal," he said. "So whatever we do has to be seen in this context."
• House to Vote on Tea Party-Backed Debt Plan.
  

Business Insider:

• June Housing Starts Smash Expectations, With Big 14.6% Jump.

Zero Hedge:

• Senators Warn China That Escalation in South China Sea Threatens US "National Interests", China Likely to Retaliate.
• Moody's Warns That Any Fluff Deficit Reduction Plan Will Likely Result In Downgrade.
  

IHS:

• DRAM Price Reductions Decelerate in 2012. Slower advancements in semiconductor manufacturing technology this year will cause a deceleration in price reductions for dynamic random access memory (DRAM), according to the IHS iSuppli Memory and Storage Service from information and analysis provider IHS (NYSE: IHS). Following a drop of 14.2 percent in the first quarter of 2011, the global average decline in pricing for DRAM slowed to 12 percent in the second quarter. The rate of decrease is expected to decline to 9 percent in the third quarter and then dwindle to just 4 percent in the fourth quarter. The rate of decrease will further slow to just 1 percent in the first quarter of 2012, and then remain in the 3 to 4 percent range during the rest of 2012.

The Daily Beast:

• Piers Morgan's Murdoch Apologia. The CNN host and former News of the World editor says on his show that ex-boss Rupert Murdoch is victim of a witch hunt.
  

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 24% 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 -18 (see trends).

USA Today:

• Some Federal Workers More Likely to Die Than Lose Jobs. Federal employees' job security is so great that workers in many agencies are more likely to die of natural causes than get laid off or fired, a USA TODAY analysis finds. Death — rather than poor performance, misconduct or layoffs — is the primary threat to job security at the Environmental Protection Agency, the Small Business Administration, the Department of Housing and Urban Development, the Office of Management and Budget and a dozen other federal operations. The federal government fired 0.55% of its workers in the budget year that ended Sept. 30 — 11,668 employees in its 2.1 million workforce. Research shows that the private sector fires about 3% of workers annually for poor performance, says John Palguta, former research chief at the federal Merit Systems Protection Board, which handles federal firing disputes.

Telegraph:

• Only Germany Can Save EMU As Contagion Turns Systemic. Europe's leaders have finally run out of time. If they fail to agree on some form of debt pooling and shared fiscal destiny at Thursday's emergency summit, they risk a full-fledged run on South Europe's bond markets and a disorderly collapse of monetary union.

FAZ:

• Greece's creditors should agree to a reduction of the country's public debt by 50% to help it regain financial stability, Germany's five-strong council of economic advisers said in a joint article. That would cut debt to 106% of GDP from 160% of GDP, the council said. The debt reduction should be combined with an offer to investors to trade Greek bonds against European Financial Stability Facility bonds, the council said.

Chinamining.org:

• China Considers Expansion of Tax on Natural Resources. A plan regarding the expansion of the natural resources tax has been submitted to the State Council, China's cabinet for approval, as stated by an official from the State Administration of Taxation (SAT) on Saturday, according to the Shanghai Securities News Monday. Guo Xiaolin, deputy head of the general office at the SAT, made the statement at a press briefing Saturday. The scope for levying a natural resources tax will be expanded from including petroleum and natural gas to also including other resource products such as coal.