Today's Headlines

Bloomberg:

• Euro-Area Leaders May Accept Greek Default. Euro-area leaders may accept a temporary Greek default and widen the scope of their rescue fund as officials intensify efforts to resolve the region’s 21-month sovereign debt crisis. With Greece being charged about 35 percent to borrow for two years, government chiefs meeting in Brussels are devising a second aid package that could tip it into default for a few days. They may also cut interest rates on loans to Greece, Portugal and Ireland to about 3.5 percent and could double the repayment time to at least 15 years. Europe’s main rescue fund, boosted just last month to 440 billion euros ($632 billion), may be allowed to buy bonds directly from investors, help recapitalize banks and offer International Monetary Fund-style precautionary credit-lines to repel speculative attacks. The euro strengthened as officials worked on a twin-track strategy to help Greece and set up a bond-buying firewall to protect Spain and Italy. The summit is the latest attempt to fix a crisis that is now threatening to spread to the core of the euro region and this week drew calls for tougher action from U.S. President Barack Obama. “The challenges at hand have shown the need for more far- reaching measures,” the leaders said in a draft statement prepared for their summit. “We reaffirm our commitment to the euro and to do whatever is needed to ensure the financial stability of the euro area as a whole.”
• Euro Leaders May Avoid Swaps Trigger as They Weigh Default. European leaders meeting in Brussels to resolve the 21-month-old sovereign debt crisis may avoid triggering credit-default swaps on Greece if they agree to a plan that’s not binding on bondholders. A credit event enabling buyers of protection to seek compensation from swaps sellers wouldn’t occur if changes to the terms of Greece’s government bonds were voluntary, according to the International Swaps & Derivatives Association. The cost of insuring against a default by Greece plunged by the most ever as details of a draft plan started to emerge. Credit-default swaps on Greek bonds dropped 317 basis points to 2,000 as of 4:30 p.m. in London, the lowest level in more than two weeks, according to CMA. That still signals an 81 percent chance of default within five years. The record-high was 2,568 on July 18. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments fell 24 basis points to 257, down from a record 306 basis points July 18. Credit swaps protecting Irish debt fell 156 basis points to 909, while contracts tied to Portuguese bonds declined 155 to 945, dropping below the 1,000 basis-point mark for the first time in two weeks, CMA prices show. The cost of protecting European corporate bonds also fell, with the Markit iTraxx Crossover Index of swaps on 40 mostly junk-rated companies slumping 19 basis points to a two-week low of 420 basis points, according to JPMorgan Chase & Co. The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers dropped 11 basis points to 164.
• Euro Rises to Two-Week High on Bets Greek Default May Contain Debt Crisis. The euro advanced to the highest in two weeks against the dollar as officials said European governments may expand the region’s bailout fund and accept a temporary Greek default, reducing contagion concern. “Whatever it is and any imperfections that are in it, we’ve got a deal,” said Greg Anderson, a senior currency strategist at Citigroup Inc. in New York. “The euro isn’t going to break apart this weekend, or anything like that. We’ve got a short-covering rally that removes the break-up premium from the euro.”
• U.S. Economic Indicators Post Meager Gain. The index of U.S. leading indicators rose in June, confirming the Federal Reserve’s forecast that the economy will pick up in the second half of the year. The Conference Board’s gauge of the outlook for the next three to six months climbed 0.3 percent after a 0.8 percent gain in May, the New York-based research group said today. Jobless claims rose more than forecast and consumer confidence stagnated last week, while manufacturing in the Philadelphia area rebounded this month, other reports showed. Cheaper fuel costs, an easing of supply bottlenecks after the Japan earthquake and better weather may combine to help give the recovery a boost. At the same time, a reluctance to ramp up hiring and limited income growth may restrain consumer purchases, the biggest part of the economy. The economy “is not falling apart but not showing any great signs of reacceleration either,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “We’re in the doldrums. It is consistent with sluggish growth.”
• Oil Rises to 1-Month High on Manufacturing Index, Europe Debt Optimism. Crude oil surged to a one-month high after manufacturing in the Philadelphia area rebounded and on reports European Union officials have come up with a plan for the region’s debt crisis, bolstering the euro. Crude for September delivery rose $1.23, or 1.3 percent, to $99.63 a barrel at 11:07 a.m. on the New York Mercantile Exchange.
• Morgan Stanley(MS) Shares Surge Most in Two Years. Morgan Stanley rose the most in more than two years in New York trading after reporting a second- quarter loss that was smaller than analysts estimated and the only gain in trading revenue among major U.S. banks. Morgan Stanley climbed as much as 9.1 percent after posting a net loss of 38 cents a share, smaller than the 61-cent average estimate of 18 analysts surveyed by Bloomberg.
• Exxon Mobil(XOM) Seeks More Shale-Gas Acquisitions as Texas Wells Pump Profits. Exxon Mobil Corp. (XOM), the largest U.S. natural-gas producer since last year’s purchase of XTO Energy Inc., is evaluating more acquisitions with an eye toward expanding its gas holdings. Exxon is assessing targets in more than a dozen gas-rich shale-rock formations worldwide, Jack Williams, president of the Irving, Texas-based company’s XTO unit, said yesterday in an interview. The company has spent almost $3 billion to amass shale leases in Texas, Pennsylvania, Arkansas and Louisiana since closing the $34.9 billion purchase of XTO in June 2010. The company’s desire for additional gas comes amid a series of multibillion-dollar shale transactions.

Wall Street Journal:

• Eurozone Moves Towards Greek Deal. European negotiators were homing in Thursday on ways to reduce Greece's debt burden while containing the possible knock-on effects to other weak economies in the 17-nation euro zone, after the way to a deal was paved by an accord Wednesday night in Berlin by the German and French leaders. However, euro-zone leaders appear unlikely to agree on the overall size of a new bailout package for Greece at their summit Thursday even as they discussed specific terms of the deal, according to a revised draft statement expected to be released after the summit.
• As Cotton Unravels, Clothing Makers Revisit Pricing. After hitting historic highs this spring, cotton prices are plunging, the result of higher production and lower demand. It's an about-face for clothing makers that spent the last year grappling with higher costs and how much, if any, could be passed along to consumers. Now, retailers are wondering if the lower cotton prices, off 53% since their March 4 peak, will last or if the rollercoaster ride will continue.
• LBO, Recession Singe Quiznos. Now the company finds itself on the brink of default, also thanks to sour relations with franchise owners, costly rents and stepped-up competition from rivals like Subway. The chain now has about 3,500 stores, down from nearly 5,000 before the recession.
• FEC: John Edward's Campaign Owes $2.3 Million. The Federal Election Commission said Thursday that John Edwards’s 2008 presidential campaign owes the U.S. Treasury $2.3 million. The FEC said the campaign, which received $12.9 million in federal funds for the 2008 Democratic primaries, understated its cash balance and overstated its expenses. The matter is separate from the felony charges against Mr. Edwards — some based on alleged violations of campaign finance law — involving the cover-up of an extramarital affair.
• Express Scripts(ESRX) to Buy Medco(MHS) for $29.1 Billion. Express Scripts Inc. agreed to buy Medco Health Solutions Inc. for $29.1 billion in cash and stock, a deal that combines two of the largest U.S. pharmacy-benefit managers at a time when health-care services companies are searching for new opportunities in the face of sweeping industry changes.
• China Banking Regulator Steps Up Risk Controls on Local Government Loans. China’s banking regulator said it will step up oversight of local government financing vehicle loans and property-related credit in the nation’s smaller cities in the second half of this year. Banks should control the risks of new loans tied to the financing vehicles through “strategic cooperation” with local governments, stronger management of land-backed lending and accurately assigning risk-weightings based on actual cash coverage of projects, the regulator said. The statement posted on the China Banking Regulatory Commission’s website yesterday cited a speech by Chairman Liu Mingkang.

MarketWatch:

• NYC Mayor Bloomberg Gives $50M to Fight Against Coal Plants.
• The Intermediate-Term is Trending Higher For Stocks, But Lack of Volume a Concern.
• N.Y. Times(NYT) Prompts Investment Questions.
  

Business Insider:

• Report: Obama and Boehner Near Major Deal - White House, Boehner Deny. The New York Times is reporting that President Barack Obama and Speaker of the House John Boehner (R-OH) are close to major budget deal, citing congressional leaders. As we reported earlier today, Obama and Boehner met at the White House last night to consider a "grand bargain" deficit reduction proposal. Both White House Press Secretary Jay Carney, and spokesmen for Boehner and Cantor have denied a deal is near.
• Trend Reversal: Young Americans Are Choosing Suburbs Over Cities.
• John Paulson Just Told Investors He's Now More Bearish And Shorting The Euro.
• Some of New York's Wealthiest Might Get Charged in the Wall Street Prostitution Ring.
• Here Are The Details of the Greek Bailout That's Causing World Markets to Surge.
  

Zero Hedge:

• GAO Audit Exposes Fed's Corruption Once Again. Today, in addition to the official launch of Europe's PPT, we get a reminder that our own version, the Federal Reserve, is as criminal and corrupt as always, especially when working in conjunction with that old standby, Goldman Sachs. Just like back in 2009 and 2010 it was discovered that former Goldman director and New York Fed Chairman Stephen Friedman had bought tens of thousands of shares of Goldman stock while the entire system was being bailed out by the very same Fed, so today we learn that another former Goldmanite and then Plunge Protection Head team (i.e., Brian Sack predecessor) Bill Dudley had held shares of AIG stock while the Fed was arranging the bailout of the doomed insurer. But it's all good: Dudley had a waiver.

Seeking Alpha:

• Stocks With High Exposure to the China Boom. The global growth engine that is China has experienced its own boom fueled by cheap and loose credit. We think market participants should be cautious as a slowdown in China could have far reaching implications given the significant demand for commodities.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-one percent (41%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -17 (see trends).

Reuters:

• Union Pacific(UNP) Profit Up, Sees Stronger Second Half. Union Pacific Corp (UNP.N), the largest publicly held U.S. railroad, reported higher quarterly earnings as freight volumes increased and it raised prices, and the company said it expected to perform even more strongly in the second half of the year. Union Pacific said on Thursday that operating income and cash from operations rose to a record-high in the second quarter despite severe flooding in the Midwest. "Looking to the second half of the year, we expect stronger performance despite some economic uncertainties and ongoing flood challenges," CEO Jim Young said in a statement.

Telegraph:

• Eurozone Debt Crisis Summit: Live.
• IEA to Stop Selling Emergency Oil Despite High Prices.
  

Economic Information Daily:

• China's economy is facing increasing risks of a hard landing because slowing growth in major economies may lead to global destocking, Ba Shusong, a researcher at the State Council's Development Research Center, said in an interview. Manufacturing industry's destocking risks are increasing in the short term as prices of resources drop, Ba said.