Weekend Headlines
Bloomberg:
- Congressional Leaders: Obama Approve Debt-Limit Increase. President Barack Obama said tonight that leaders of both parties in the U.S. House and Senate had approved an agreement to raise the nation’s debt ceiling by $2.1 trillion and cut the federal deficit by as much as $2.5 trillion over a decade, a deal that must now be sold to Congress. “The leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default,” Obama said at the White House. “This compromise does make a serious down payment on the deficit-reduction we need. Most importantly it will allow us to avoid default.” Congressional leaders reached a bipartisan agreement to raise the debt ceiling by at least $2.1 trillion, sufficient to serve the nation’s needs into 2013. They are preparing to sell to members the deal to cut $917 billion in spending over a decade, raising the debt limit initially by $900 billion, and to charge a special committee with finding another $1.5 trillion in deficit savings by the year’s end. They confront an Aug. 2 deadline for approval of the agreement.
- Spain Remains in 'Danger Zone' as European Debt Crisis Persists, IMF Says. Spain is still in “the danger zone” and must keep up momentum in restructuring its economy to stave off contagion from Europe’s sovereign-debt crisis, the International Monetary Fund said. “The outlook is difficult and the risks elevated,” the Washington-based IMF said in a report yesterday after a visit by staff to Spain. “The policy agenda remains challenging and urgent -- there can be no let up in the reform momentum.” The assessment coincided with Prime Minister Jose Luis Rodriguez Zapatero’s decision the same day to call early elections on Nov. 20 and Moody’s Investors Service’s warning that it may downgrade Spain. The euro-region’s fourth-biggest economy is trying to rein in surging borrowing costs that have pushed the yield on its 10-year bond above 6 percent, hindering efforts to stoke growth as unemployment stays above 20 percent. “Many of the imbalances and structural weaknesses accumulated during the boom remain to be fully addressed,” the fund said. “Spain is not out of the danger zone” and “scenarios of negative spillovers from Spain indicate a substantial impact on the rest of Europe and indeed globally, given the country’s systemic importance.”
- Chinese Social Unrest Leaves 14 Dead. Police in China’s northwest Xinjiang province shot and killed four people, bringing the death toll from two days of violence to at least 14, the state-run Xinhua News Agency said. The four were killed after three people were slain by rioters yesterday in the city of Kashgar, the news agency said. Xinhua had earlier reported that the three were killed in an explosion that was heard in the city in the afternoon. Police took four people into custody and were looking for four more. The shootings in Xinjiang, where the Beijing government has faced ethnic-related violence in the past, came after at least seven people were killed July 30 in Kashgar, Xinhua said. Two people hijacked a truck, stabbed the driver to death and rammed into pedestrians, the agency said. They then got out of the truck and started stabbing people, it said. Years of central government policies encouraging migration of majority Han Chinese to areas such as Tibet and Xinjiang have stoked ethnic tensions. On July 18, police in the Xinjiang city of Hotan shot 14 people who attacked a police station, Xinhua said. citing an unidentified Communist Party official in the city.
- BRIC Banks Signaling Credit Risks as Loans Sour. Banks in the biggest emerging markets are losing the confidence of investors as loans turn sour after a two-year credit binge. Brazil’s financial shares have lost more this year than counterparts in crisis-stricken Europe as consumer defaults hit a 12-month high in June and borrowing costs climbed to 46 percent. Bank stocks in China are trading at lower valuations than global emerging-market indexes for the first time since 2006. The country faces a financial crisis with bad debt that may jump to 30 percent of total loans, Fitch Ratings said. In India, the cost of insuring banks against default has climbed to the highest level in a year. Loan-loss provisions at State Bank of India (SBIN), the nation’s largest lender, rose 77 percent in the first three months of 2011, while net income fell 99 percent. “People are beginning to smell the credit cycle turning,” Michael Shaoul, chairman of Marketfield Asset Management and chief executive officer of New York-based brokerage Oscar Gruss & Son, said in an interview. “Credit cycles have tremendous momentum, and whenever they turn you want to pay attention,” said Shaoul, who recommends selling high-yield bonds in emerging markets and betting on further losses in bank shares. Loans to Brazilian shoppers, Chinese infrastructure projects and Indian developers have fueled the global economic recovery and turned emerging-market banks into some of the world’s biggest companies by market value. Now increased debt burdens threaten growth as central banks raise interest rates to fight inflation, U.S. hiring stalls and Europe deepens austerity measures. China and Brazil may see expansion cut by at least 50 percent in the next few years, according to economic consulting firms A. Gary Shilling & Co. and Capital Economics Ltd.
- Syria Kills at Least 150 in Hama on Ramadan Eve. At least 150 people were killed in Syria yesterday, al Jazeera reported, as soldiers sought to reassert control over a restive nation in one of the deadliest bouts of violence since the uprising against President Bashar al-Assad began more than four months ago. The army took action the day before the start of Ramadan, the Muslim month of fasting and prayer. Tanks shelled Hama, Syria’s fourth-largest city, where at least 113 people were killed, the Qatari-based television network said, citing the National Organization for Human Rights in Syria.
- Funds Increase Bullish Commodity Bets. Funds lifted bets on rising commodity prices to a six-week high after traders snapped up raw materials as alternative assets amid the escalating U.S. debt crisis. Speculators raised their net-long position in 18 commodities by 10,063 futures and options contracts to 1.27 million in the week ended July 26, government data compiled by Bloomberg show. That’s the highest since June 14. Silver holdings rose for a fourth straight week, and bullish sugar bets climbed to the highest since February 2010. Investors put $570 million into commodity funds in the week ended July 27, the fourth consecutive increase, and year-to-date inflows totaled $11.05 billion, Cameron Brandt, director of research at Cambridge, Massachusetts-based EPFR Global, said in a telephone interview.
- Bolton Calls for U.S. to Close Listings Loophole, FT Reports. Fidelity International Ltd. fund manager Anthony Bolton urged the U.S. to close a loophole that allows Chinese companies to list on its exchanges through reverse takeovers, the Financial Times reported. Chinese companies use the practice by merging with a U.S. shell company to avoid the scrutiny of an initial public offering, the newspaper cited Bolton as saying. He made his comments yesterday at the first general meeting of the Fidelity China Special Situations fund, the Financial Times said. U.S.-listed Chinese companies were among the lowest performers in Bolton’s portfolio at Fidelity, the FT said.
- Lansdowne Sells $850 Million Goldman(GS) Stake, Sunday Telegraph Reports. Lansdowne Partners Ltd., a London- based hedge fund, sold its $850 million stake in Goldman Sachs Group Inc. (GS), the Sunday Telegraph reported, without saying where it got the information. The decision was based partly on reduced proprietary trading at Goldman Sachs stemming from regulation in the U.S., the newspaper said. Lansdowne was among the top 20 investors in Goldman Sachs, and the stake made up almost 10 percent of the hedge fund’s $10 billion under management, according to the Sunday Telegraph. The last time Lansdowne sold shares of Goldman Sachs was before the collapse of Lehman Brothers Holdings Inc. in 2008, the paper said.
- India Shunning 'Big Bang' Economic Change Risk Singh's Legacy. Prime Minister Manmohan Singh’s push to deepen India’s welfare system may divert focus from the investment and regulatory changes needed to sustain an economic transformation that he unleashed two decades ago. The government is expanding education and rural jobs plans whose costs could swell by almost 2 percentage points of gross domestic product, International Monetary Fund estimates show. Singh also aims to submit a bill in the parliamentary session starting today securing low-cost food for more than 800 million people, more than the combined U.S. and euro-area population. While embracing such populist measures may help shore up support for a government roiled by corruption charges, it means proposals to boost investment and overhaul tax and land-use laws risk languishing, analysts said.
- Worst Europe Earnings Hitting Industrials as Stoxx 600 Falls 9%. Profits at European companies are trailing analyst estimates by the most in at least five years, dragged down by manufacturing shares that had been forecast to lead a rally in the second half of the year. About 53 percent of companies in the Stoxx Europe 600 Index that have reported earnings since July 11 missed analysts’ projections. That’s the most in data compiled by Bloomberg since 2006. The benchmark gauge lost 3.1 percent in the period, the largest decline to start an earnings season since April 2010.
- Dollar Bear Bets Rise to Highest Since May. Investors boosted bearish bets on the dollar to the highest level in more than two months on concern the political stalemate in Washington on raising the U.S. debt limit will erode the value of the world’s reserve currency. Aggregate wagers against the greenback rose for the fourth consecutive week, data from the Commodity Futures Trading Commission in Washington show. Futures traders added to bets the dollar will weaken against the euro, yen, Australian and Canadian dollars, British pound and Mexican peso. Hedge funds and other large speculators had reduced bets against the dollar to 147,684 contracts as of June 28, the lowest level in more than nine months, as European policy makers debated a debt restructuring for Greece. CFTC data as of July 26 show traders added 162,538 so-called net shorts as the focus shifted to the U.S. debt negotiations.
- China Says Restaurant Attack Was Terror. Violence in western China’s Xinjiang region in the past two days killed at least 18 people in the city of Kashgar, with police calling one of the incidents a “premeditated terrorist attack,” according to the official Xinhua News Agency and the city government. Yesterday a “group of terrorists” entered a restaurant in Kashgar, the westernmost city in China near the border with Tajikistan and Kyrgyzstan, killing the owner and a waiter and setting fire to the restaurant, the Kashgar government said on its website. The attackers then killed four people and injured another 12 in knife attacks outside the restaurant before five of them were killed by police, the report said. Another four suspects were arrested, Xinhua said. The attacks yesterday followed a July 30 late-night knife attack in Kashgar that left six bystanders and one suspect dead and injured another 28 people, according to the city government. In that incident, two people allegedly stabbed a truck driver to death at a traffic light before turning on the crowd, the report said. Less than two weeks earlier, a July 18 riot in the city of Hotan, also in Xinjiang, left at least four people dead.
- Investor confidence in Brazil's central bank and Finance Ministry is flagging. Local bonds posted the biggest weekly decline in six months after the central bank signaled it may be done raising interest rates to curb inflation and the government levied a new tax on currency trading. Yields on government notes due in 2021 surged 26 basis points last week to 12.84%.
- Gold Coins Selling Out in Lisbon as Biggest Wager Sees 10% Gain. Rui Lola says gold sales at his foreign exchange and coin store in downtown Lisbon almost doubled this year, draining inventories faster than he can replace them. What’s happening at the Mundial Agencia de Cambios in the historic center of the capital underscores the global rush from investors seeking refuge from debt and banking crises. Holdings in exchange-traded products backed by gold reached a record $113 billion July 29, data compiled by Bloomberg show.
- China's July Home Prices Rise at Slowest in 11 Months on Government Curbs. China’s home prices rose at the slowest pace in 11 months in July after the government expanded efforts to curb the risk of an asset bubble, according to SouFun Holdings Ltd. (SFUN) Home prices gained 0.2 percent in July from June, the slowest since August last year. Residential prices increased in 66 out of 100 cities tracked by the nation’s biggest real-estate website owner, with average home values nationwide climbing to 8,874 yuan ($1,378) a square meter (10.76 square feet), SouFun said on its website today. China’s cabinet said last month it will expand measures to rein in residential prices to smaller cities after limiting home purchases in metropolitan areas including Beijing and Shanghai. The government is intensifying real-estate restrictions nationwide after developers posted gains in first-half sales and housing transactions climbed 31 percent in June, even as down payments on some mortgages were increased this year.
- Leaders Agree on Debt Deal. Plan to Cut $2.4 Trillion in Spending, Avoid Default Fails to Resolve Fraught Issues. After weeks of partisan wrangling, President Barack Obama and congressional leaders reached a deal Sunday night to raise the government's debt ceiling while cutting spending by about $2.4 trillion, avoiding a government default but setting the stage for months more of stormy debates over how Washington taxes and spends.
- Live Blog: US Debt Battle.
- A Tear Party Triumph. The debt deal is a rare bipartisan victory for the forces of smaller government.
- China Manufacturing Activity Shrinks in July: HSBC. China’s manufacturing activity contracted slightly in July, signaling a deterioration in the operating environment at the nation’s factories, as tighter monetary conditions weighed further on the sector, according to data released Monday by HSBC. The monthly purchasing managers index fell to 49.3, its lowest reading since March 2009, compared with 50.1 in June, HSBC said in its monthly statement. The final outcome was better than the 48.9 print recorded in a preliminary reading that HSBC released a few days earlier. The data, based on the results of a survey compiled by Markit, confirmed a slowing growth momentum in the manufacturing sector “against the backdrop of sustained tightening and lackluster external demand,” Hongbin Qu, HSBC’s chief economist for China, said in a statement accompanying the data.
- The Dodd Frank Bill Explains How Financial Reform Is A Sham. (video)
- THE REVOLVING DOOR: 29 People Who Went From Wall Street To Washington To Wall Street. The list is super-long and filled with people from Goldman Sachs(GS).
- 300 Middle Class Families Are Sleeping In An Albuquerque Gym After Losing Their Homes And Jobs.
- Pyrrhic Victories And The Debt Ceiling by Vitaliy Katsenelson.
- The Credibility Of Japan's Nuclear Regulator Is "Shot To Pieces" After Yet Another Corruption Scandal.
NY Times:
- China Imposes Blackout on Train Wreck Coverage. After days of growing public fury over last month’s high-speed train crash and the government’s reaction, Chinese authorities have enacted a virtual news blackout on the disaster except for positive stories or information officially released by the government. The sudden order from the Communist Party’s publicity department, handed down late Friday, forced newspaper editors to frantically tear up pages of their Saturday editions, replacing investigative articles and commentaries about the accident that killed 40 people in eastern with cartoons or unrelated features. Major Internet portals removed links to news reports or videos related to the crash near Wenzhou in Zhejiang Province, in which 192 people were also injured. The government’s decision to muzzle the media followed a remarkable week of outpouring of online criticism of the government over the July 23 accident. For many in China, the train wreck has crystallized concerns about whether the government is sacrificing people’s lives and safety in pursuit of breakneck development and is cloaking its failures in secrecy or propaganda. As it did in the last major scandal over health and safety, the tainted baby formula crisis of 2008, the government has moved aggressively to shut down an outcry that, if left unchecked, could spiral into social unrest beyond its control.
- HSBC to Announce 10,000 Job Cuts. HSBC, Europe’s biggest bank, plans to announce thousands of job cuts on Monday as part of a wide-ranging cost-reduction program that started in May, a person with direct knowledge of the decision said Sunday. HSBC plans to cut about 10,000 jobs, or 3 percent of its global work force, said the person, who declined to be identified before the figures are made public.
- Optimism on Wall Street Tempered by Hurdles Ahead. “The debt ceiling is out of the way, but the current picture is far from rosy,” said Ajay Rajadhyaksha, head of United States fixed-income and securitized strategy at Barclays Capital. “Economic growth is so much weaker than many people thought just six months ago, and we are heading into a period of austerity.” Analysts and investors warned that the markets could remain turbulent in the weeks ahead. Besides sluggish economic growth, the threat of a ratings downgrade on United States debt and Europe’s continuing financial troubles loom.
- Getting Tough - But Not On Soros. 'Millionaires and billionaires," President Obama says derisively, must make more "sacrifices" and live by the same rules the rest of America lives by. But there are seven little words that will never appear on the White House teleprompter: "And that means you, too, George Soros." For all his (and his wife's) bashing of greedy Wall Street hedge-fund managers, Obama has shown nothing but love to the world's most famous hedge-fund mogul. The feeling is mutual and deep(-pocketed). Soros and his family shelled out $250,000 for Obama's inauguration, $60,000 in direct campaign contributions and untold millions more to liberal activist groups pushing the White House agenda.
Gallup:
Politico:
- John Boehner: 'It's All Spending Cuts'. Speaker John Boehner sent lawmakers a seven-page sideshow presentation in advance of their conference call which calls the debt deal a “two-step approach to hold President Obama accountable.” The blue PowerPoint slideshow says that the deal has “three main features:” it cuts government spending more than it raises the debt cap, puts in place spending cuts that “restrain(s) future spending,” and “advances the cause of a balanced budget amendment.”
The Blaze:
- Islamists Call For Shariah Law At Massive Egyptian Demonstration. (video) Ultraconservative Muslims turned out in force Friday as tens of thousands filled Cairo’s central Tahrir Square in a rally marked by a growing rift in the protest movement. In one of the largest crowds to fill the square since the popular uprising that ousted President Hosni Mubarak in February, Salafis chanted for the implementation of strict Islamic law – spurring accusations that they violated an agreement to keep the rally free from divisive issues.
Barron's:
- Made positive comments on (AMZN) and (F).
- Reiterated Buy on (ETN), target $67.
- Asian indices are +.50% to +1.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 113.50 -3.0 basis points.
- Asia Pacific Sovereign CDS Index 118.0 +.5 basis point.
- S&P 500 futures +1.28%.
- NASDAQ 100 futures +1.31%.
Earnings of Note
Company/Estimate
- (ALL)/1.58
- (HUM)/2.09
- (L)/.74
- (CNA)/.44
- (WRC)/.76
- (VNO)/1.13
- (PPS)/.42
- (BXP)/1.19
10:00 am EST
- Construction Spending for June is estimated to rise +.1% versus a -.6% decline in May0
- ISM Manufacturing for July is estimated to fall to 54.5 versus 55.3 in June.
- ISM Prices Paid for July is estimated to fall to 64.0 versus 68.0 in June.
- None of note
- None of note
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