Today's Headlines

Bloomberg:

• Italian, Spanish Bonds Slump on Concern European Aid May Not Be Sufficient. Italian and Spanish government bonds declined, increasing the yield relative to benchmark German bunds, on speculation Europe’s aid package may not be sufficient to prevent contagion. German bonds rose for a fourth day and European bank stocks slid as Finance Minister Wolfgang Schaeuble said the government is against a “blank check” for the European Financial Stability Facility to buy bonds of troubled euro members in the secondary market. “If you look into the details of the EU summit decision, it doesn’t take you long to get to where the weak points are,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “You still have two countries that are too big to save and are not effectively protected from negative market sentiment." Italian 10-year bonds yields rose 14 basis points to 5.76 percent as of 4:12 p.m. in London. The difference in yield between Italian and Spanish bonds and their German counterparts widened. The Italian 10-year security yielded 311 basis points more than similar-maturity bunds, up from 289 basis points yesterday, while the Spanish- German spread rose to 334 basis points from 322. The cost of insuring against default on Italian government debt rose 16 basis points to 291 and Spain increased 14 to 337, according to CMA prices for credit- default swaps. “The mandate of the EFSF has been extended but the size hasn’t been increased accordingly,” said Daheim. “You get the impression that there are too many things the EFSF is supposed to be doing. The weak points justify spreads between Spain and Italy and bunds not having narrowed more since the summit.” The risk of bank writedowns and more contagion from the debt crisis helped to drag the Stoxx 600 Banks Index down 1.8 percent, led by Italian lenders. UniCredit SpA slid 3.9 percent while Intesa Sanpaolo SpA dropped 4.2 percent.
  
• Greece Will Default on Debt After EU Plan: S&P. Greece will partially default on its debt once European officials push through a plan that will see bondholders foot part of the bill of a second bailout agreed to last week in Brussels, Standard & Poor’s said. The rating company also cut its ranking for Greece to CC, two steps above default, from CCC, according to a statement published in London today. The outlook on the debt is negative. “The proposed restructuring of Greek government debt would amount to a selective default under our rating methodology,” S&P said. “We view the proposed restructuring as a ‘distressed exchange’ because, based on public statements by European policymakers, it is likely to result in losses for commercial creditors.” The cost of insuring against a default by Greece was at 1,695 basis points today, implying a 76 percent chance the government will fail to pay its debts within five years.
• Schaeuble Says European Union Must Prevent Uncontrolled Euro Member Exits. German Finance Minister Wolfgang Schaeuble said European governments must prevent a breakup of the euro region as well as an “uncontrolled” exit of one of its members.
• U.S. Could Lose AAA Rating Even With Budget Deal, BlackRock, Loomis Sayles, Templeton Say. Investors are warning a cut is likely as President Barack Obama and House Speaker John Boehner argue over how to increase the debt ceiling, while also trying to curb borrowing. “Addressing the debt ceiling is of course very important, but addressing it alone doesn’t avert a downgrade,” Barbara Novick, a co-founder and vice chairman at BlackRock, the world’s biggest money manager with $3.66 trillion in assets, said in an interview. “Without a credible plan to cut the deficit, that’s a real issue.”
• Orders for U.S. Durable Goods Fell in June. Orders for U.S. durable goods unexpectedly dropped in June, raising the risk that a slowdown in business investment will weigh on the world’s largest economy in the second half of the year. Bookings for goods meant to last at least three years fell 2.1 percent after a 1.9 percent gain the prior month that was smaller than last reported, the Commerce Department said today in Washington. Demand for business equipment, including machinery and computers, also dropped. Manufacturers face a slowdown in consumer spending just as they are poised to rebound from the parts shortages caused by Japan’s earthquake, indicating production may keep cooling. Companies are also cutting back on hiring, which may further temper household demand. Orders for non-defense capital goods excluding aircraft, a proxy for business investment in items like computers, engines and communications gear, decreased 0.4 percent after rising 1.7 percent the prior month. The drop signals companies scaled back investment plans. Demand for machinery dropped 2.3 percent, the most since January. Computer bookings fell 0.8 percent and those for automobiles decreased 1.4 percent. Shipments of non-defense capital goods excluding aircraft, used in calculating gross domestic product, increased 1 percent after rising 1.7 percent. The positive news from shipments was countered by a slowdown in stockpiling. Inventories climbed 0.4 percent in June, the smallest gain since March 2010.
• Inflation Drives Brazil Stocks to Bear Market. Brazilian stocks approached a bear market, with the benchmark index down 20 percent from a November high, as quickening inflation fueled concern earnings growth will flag in the world’s second-largest emerging economy. The Bovespa fell 1.6 percent in Sao Paulo to 58,398.49 at 11 a.m. New York time, extending the worst performance this year among major equity markets. A close at this level would indicate a bear market, typically defined as a drop of at least 20 percent from the preceding bull-market peak. The real tumbled 1.8 percent to 1.5665 per dollar today after the government said it will levy a tax on some investments in currency derivatives. “These measures reinforce the negative sentiment that foreign investors already had on Brazil,” said Eduardo Favrin, who helps manage $3.2 billion as head of equities at HSBC Global Asset Management’s Brazil unit in Sao Paulo. The Bovespa would be the first benchmark index in the world’s 10 biggest stock markets by capitalization to fall into a bear market since Japan’s Nikkei-225 Stock Average sank more than 20 percent below its 2011 high on March 15 following the earthquake that damaged nuclear power plants. “The combination of inflation plus currency strength is creating some real issues,” John Lomax, an emerging-markets strategist at HSBC Holdings Plc, said in a phone interview from London. “If they try to find ways to bring the currency down, these non-conventional approaches, that also ends up being bad for equities.”
• Spain's Biggest-Deficit Region Rules Out Tax Increases to Tame Shortfall. Castilla-La Mancha, which has Spain’s biggest regional deficit, aims to cut the shortfall fivefold this year without raising taxes as it stays shut out of debt markets, President Maria Dolores de Cospedal said. Cospedal said in an interview today she will seek to shrink a deficit that reached 6.5 percent of regional gross domestic product last year to meet a goal of 1.3 percent in 2011. Her government there currently has enough cash to pay wages through September, she said. “Of course we are going to try to meet the target, it’s our obligation,” Cospedal, who is also deputy leader of the opposition People’s Party, said at the party’s headquarters in Madrid. “We rule out raising taxes, it’s against what we want and believe. Spain has never emerged from an economic crisis by raising taxes.”
• N.Y. Crude Oil Falls on Durable Goods Orders, Unexpected Inventory Gain. Crude oil fell after U.S. supplies unexpectedly increased and orders for durable goods dropped in June, bolstering concern that the economic growth is slowing. Futures dropped as much as 2.3 percent after Energy Department said supplies gained 2.3 million barrels to 354 million last week. A 2 million-barrel decline was forecast, according to the median of 13 analyst estimates in a Bloomberg News survey. Bookings for goods meant to last three years or more fell 2.1 percent, the Commerce Department said. “We had a surprise build and the market dropped,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “The economic news is horrible.” Crude oil for September delivery fell $1.50, or 1.5 percent, to $98.09 a barrel at 12:15 p.m. on the New York Mercantile Exchange. Prices have climbed 27 percent in the past year. Refineries operated at 88.3 percent of capacity, down 2 percentage points from the prior week and the biggest decline since the week ended April 8.
• Kandahar Mayor Is Killed in Suicide Bombing While Mediating Land Dispute. The mayor of the southern Afghan city of Kandahar was killed in a suicide bombing at his office today, two weeks after the region’s most powerful politician, President Hamid Karzai’s half brother, was assassinated.

Wall Street Journal:

• Live Blog: The U.S. Debt Battle.
• CEOs in Their Own Words: Don't Plan on Much Hiring. The CEOs are speaking. And the message isn't encouraging: Don't expect many new U.S. jobs anytime soon. The Wall Street Journal scoured more than 100 earnings conference calls through July 21, looking to find what executives were saying about the struggling U.S. labor market. Culling transcripts available via Capital IQ and FactSet Research Systems, the Journal searched for any mention of key words such as "jobs," "employment" and "head count."
• Southern Copper Aims to Double Copper Output by 2015. Southern Copper Corp. plans to double its copper production by 2015 through the start-up of new mine projects and expansions at current operations in Mexico and Peru, Chief Executive Oscar González Rocha said.
• Financial News: Nasdaq(NDAQ) Echoes LSE Concerns On NYSE-Boerse Deal.
• Ford(F) to Build Its Second India Factory. Ford Motor Co. plans to invest about $900 million to build its second factory in India, as the auto maker prepares to introduce more cars and sport-utility vehicles in the country to gain a bigger foothold in its growing automobile market.
• IMF Seeks to Limit Greece Exposure. The International Monetary Fund, concerned about its enormous long-term exposure to the euro zone, is likely to contribute a smaller share of official financing in the new Greek aid package than it did for the Portuguese and Irish rescue programs, according to people familiar with the situation. The IMF has pledged to lend €78.5 billion ($113.91 billion) to Greece, Ireland and Portugal through 2014. That amount is many times the IMF shareholding of these three countries, a growing source of worry to fund officials. Following the first Greek aid package in May 2010, the fund said it would contribute one euro for every two pledged by the euro zone for rescue loans to other euro-zone countries that might need them. Euro-zone officials assumed in negotiations over the new Greek aid package that the IMF would again contribute a third of the financing. But the IMF has indicated that it is unlikely to follow that formula in the new aid package, these people said. "It certainly won't be one-third," one of them said. Greece's debt sustainability is still a particular concern to fund officials despite the new aid package, which will provide nearly €160 billion in new financing for Greece over the next three years. The IMF's commitment to Ireland is nearly 18 times the country's IMF shareholding, and the commitment to Portugal is 25 times its shareholding.
• SAC to Close Flagship Fund to New Investors. SAC Capital Advisors LLP, one of the nation's most prominent hedge funds, is closing its flagship fund to new investors starting Aug. 1, a person familiar with the situation said Wednesday.

MarketWatch:

• Juniper(JNPR) Slump Hits Techs, Networking Shares. Shares of Juniper Networks fell sharply Wednesday, leading a broad tech retreat that highlighted what analysts portrayed as a momentary pause in the networking gear market. Juniper JNPR -20.93% sank 20%, a day after shocking Wall Street with disappointing results and a weak outlook that also sent shares of other networking gear makers, including Cisco Systems Inc. CSCO -3.67% , tumbling.

CNBC.com:

• Hedge Fund Regulation Is Backfiring: SAC Capital Edition. This is another example of hedge fund regulation backfiring. Instead of providing more transparency, Dodd-Frank is driving hedge funds deeper into the shadows. It's unintended consequences gone wild.

Business Insider:

• Beige Book: Economy Slows in 8 Out of 12 Districts. Just out from The Fed, the latest Beige Book. The economy has slowed in 8 out of 12 distrcits. 4 continue to grow "modestly". The full report can be downloaded here.
• The SEC is Investigating Groupon's Weird Accounting Metrics.
• A Tour of the Luxurious Prison Norway Killer May Be Sent To.
• A Look at NYSE Margin Debt and The S&P 500.
• Here Is Your Chinese Riot Video Of The Day.
  

Zero Hedge:

• Bad News for Bank of America(BAC) Imminent? Attorney General Says Completing BofA Fraud Analysis.

Politico:

• Clinton Tries to Stop House Bill That Slashes Payments to UN and Limits Aid to Egypt, Pakistan and Palestinian Authority.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 25% 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 -17 (see trends).
• Consumer Confidence Falls to a New Two-Year Low.
  

Reuters:

• SEC Builds New Tips Machine to Catch the Next Madoff.
• US 5-Year Debt Auction Lackluster But No Disaster.
• Free-Wheeling Texas Lures California Companies.
• Italy Assets Close Sharply Lower on Contagion Fears. Italian assets fell strongly on Wednesday on renewed fears of euro crisis contagion, with shares in leading banks down more than 4 percent and benchmark bond yields sharply higher. Milan's bank-heavy FTSE MIB share index closed down 2.81 percent. The drop came as the yield premium on 10-year Italian BTP bonds over German Bunds widened to 313 basis points from 290 basis points on Thursday on worries that the euro zone crisis could widen to Italy. The 10-year BTP fell almost a full point in price, pushing its yield up to 5.76 percent. That is not far from the 6 percent psychological threshold it broke this month for the first time since 1997. Italy borrowing costs are expected to soar on Thursday when it sells up to 8.5 billion euros of bonds. Jitters about its debt pile are seen pushing the yield on the 10-year bond to an 11-year high.
• S&P Does Not Think U.S. Will Default On Its Debt.
  

Telegraph:

• Hedge Funds Wade in to US Debt Debate. Hedge fund billionaire Dan Loeb has joined the ranks of angry Americans seething about President Barack Obama failure to get agreement on the country’s $14.3 trillion (£8 trillion) debt ceiling. Mr Leob, a registered Democrat and who supported Obama in his 2008 presidential bid, turned on the President in an letter sent to investors, where he also told them he was considering curtailing investment - or at least would be “conservative” in investing - due to the uncertain economic climate in the US. He took the President to task for calling for the repealing of corporate tax breaks to generate revenue as part of an agreement with republicans to allow spending cuts in get their vote to raise the debt ceiling. n a letter to his investors, he wrote: “It is increasingly difficult to avoid the conclusion that while Washington burns, President Obama is fiddling away by insisting that the only solution to the nation’s problems — whether unemployment, the debt ceiling or deficit reductions — lies in redistribution of wealth.”
• Eurozone Debt Crisis Resurfaces as Markets Punish Italy and Spain for Merkel Delay on Bailout Package. Spain and Italy's borrowing costs marched back towards euro-era highs on Wednesday, as markets renewed their eurozone fears less than seven days after ministers agreed a €159bn (£140bn) second bail-out for Greece. Yields on Spanish ten-year government bonds climbed to 6.08pc on Wednesday morning, slightly below the highs of 6.337pc seen before Greece's new bail-out package was announced last Thursday. Italian bonds climbed to 5.793pc, just 20 basis points below its highs of 6.008pc. Concerns are now mounting that yields could reach the 7pc 'point of no return' mark that prompted smaller euro partners Greece and Portugal to seek bailouts.

Tijd:

• The Greek bailout will add 2.8 billion euros to Belgian debt.

CNBC-TV18:

• India's economic growth in the financial year that began April 1 will be "certainly less" than the previous 12-month period, Montek Singh Ahluwalia, deputy chairman of the nation's Planning Commission, said in an interview.

Economic Information Daily:

• A report produced by a research team from the Chinese Academy of Social Sciences and the Ministry of Finance has endorsed keeping China's use of U.S. debt short-term. The short-term use of U.S. debt would help China prevent "big losses" that could arise if the U.S. diluted its debt through currency devaluation or other methods, citing the report.