Evening Headlines
Bloomberg:
- Euro Problems Need Fixing Before Financial Markets Lose Their Faith: View. The U.S. Congress may have narrowly avoided a government-debt disaster, but financial troubles are resurging across the Atlantic. If European leaders can’t find the political will to implement the drastic measures needed to stem their crisis, markets could soon put them in an untenable position. The market for Italian and Spanish government bonds offers an indication of how little confidence Europe’s most recent package of rescue measures has inspired. As of Wednesday, the yield on the 10-year Italian bond stood at 6.08 percent, near its highest point since the introduction of the euro. The yield was about 3.7 percentage points higher than the yield on 10-year German bonds -- a spread that suggests rising concern that Italy might default. The comparable spread on Spain’s 10-year bond was 3.9 percentage points, up from 3.2 a month earlier. Belgium’s spread hit a euro-era high of 2.1 percentage points. Investors’ jitters are dangerous, because they can become a self-fulfilling prophecy. As worries about default push up governments’ cost of borrowing, debts that were once manageable can become unsustainable. No wonder European Commission President Jose Barroso, while calling the rising yields in Italy and Spain unwarranted, voiced “deep concern” Wednesday about the market developments.
- Yen Plunges as Japan Intervenes in Markets for the First Time Since March. The yen weakened against all its major peers after Japan intervened in the foreign-exchange market for the first time since March to stem gains in the currency that threaten the nation’s economic recovery. The yen also fell on prospects the Bank of Japan will follow its Swiss counterpart in easing monetary policy at a meeting that will end one day early today. Japan last intervened on March 18, joining its Group of Seven counterparts in selling yen the day after the currency jumped to the postwar record of 76.25 per dollar. Japanese Finance Minister Yoshihiko Noda said today the intervention was unilateral. “Intervention will be more effective if it comes with monetary easing,” said Kazuo Kitazawa, the Tokyo-based director of fixed income at Credit Suisse Group AG. “I can’t say intervention is successful until the yen depreciates beyond 80 against the dollar.” The yen fell to 78.36 per dollar as of 10:46 a.m. in Tokyo from 77.06 in New York yesterday. The yen dropped to 112.19 per euro from 110.38. The dollar was at $1.4323 per euro from $1.4323.
- Birinyi, Biggs Advise Holding Stocks After S&P 500's Decline. The seven-day slide that wiped out the 2011 gain in the Standard & Poor’s 500 Index is no reason to sell stocks, according to investors including Laszlo Birinyi and Barton Biggs. Growing concern that the U.S. economy is faltering erased $1.07 trillion from American equities in less than two weeks, according to data compiled by Bloomberg.
- Oil Climbs as Stimulus Speculation Counters Economy, Gain in U.S. Supplies. Oil rose from a five-week low in New York as speculation that the Federal Reserve may start another stimulus program countered signs of a slowing economy in the world’s biggest crude-consuming nation. Crude for September delivery gained as much as 62 cents to $92.55 a barrel in electronic trading on the New York Mercantile Exchange and was at $92.42 at 10 a.m. Sydney time. The contract yesterday dropped $1.86 to $91.93, the lowest since June 27. Prices are 12 percent higher the past year.
- JPMorgan(JPM) Cuts U.S. Third-Quarter GDP Forecast to 1.5% on Consumption. JPMorgan Chase & Co. cut its forecast for U.S. economic growth in the third quarter by a percentage point to 1.5 percent, partly because of a slowdown in consumer spending, chief U.S. economist Michael Feroli wrote in a note today. Feroli also lowered the forecast for fourth-quarter growth to 2.5 percent from a prior estimate of 3 percent. The world’s largest economy will expand 2 percent in the first six months of 2012, less than a previous projection of 2.5 percent.
- Powerful China Rail Ministry May Face Breakup. China’s deadliest high-speed train crash may hasten the breakup of a ministry that runs the world’s second-largest rail network, employs more people than the U.S. government and has debts larger than Denmark’s economy. Premier Wen Jiabao has pledged more focus on safety and greater accountability following the July 23 crash that killed 40 people, endangering the Ministry of Railways’ dual grip on regulating and operating China’s trains. Dividing these roles may improve management, financial transparency and safety, said Hu Xingdou, an economics professor at the Beijing Institute of Technology. “The rail ministry has been run like an independent kingdom for years,” Hu said. “The concentration of power has caused inefficiency and mismanagement, and it’s a hotbed for corruption.”
- BofA's(BAC) Moynihan to Answer 'Skeptics' in Berkowitz Conference. Bank of America Corp. Chief Executive Officer Brian T. Moynihan plans to answer questions from "skeptics" among fund manager Bruce Berkowitz's investors after shares of the biggest U.S. lender fell to a two-year low. Berkowitz's Fairholme Capital Management LLC will hold a 90-minute conference call with Moynihan on Aug. 10, the manager said today in a statement. The event will help investors of Fairholme, with 92.6 million Bank of America shares as of March 31, understand why the firm is a core holding, Berkowitz said.
- Lehman, Hong Kong Liquidators Resolve $20 Billion of Claims.
- Buffett Can't Get Analysts to Give 'Buy' Rating After Berkshire's(BRK/A) Decline. Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) can’t get a buy recommendation from equity analysts, even as it trades in New York at the cheapest price relative to book value since March 2009. Berkshire fell this week to its lowest since June 2010 and has underperformed the Standard & Poor’s 500 Index over the last 12 months.
- Hackers in China Attack UN, Olympic Networks, Security Firms Say in Report. Hackers based in China spent five years ransacking the computer networks of the United Nations, multinational corporations, the Olympic committees of several countries and the U.S. and Canadian governments, two security companies said. In one of the largest cyberattacks discovered, more than 72 organizations were hacked by spies beginning in 2006, according to computer server logs and other evidence obtained by Santa Clara, California-based McAfee Inc. (MFE) The attack has been traced to servers in at least two of China’s major cities, Beijing and Shanghai, according to Atlanta-based Dell SecureWorks, which separately traced the same series of attacks. “Even we were surprised by the enormous diversity of the victim organizations and were taken aback by the audacity of the perpetrators,” Dimitri Alperovitch, McAfee’s vice president of threat research, said in the report. The details of the incidents, which McAfee dubbed Operation Shady RAT, are part of a mounting body of evidence linking China to sophisticated hacking operations targeted against a broad array of both government and commercial targets.
- How White House Wooed Wall Street in Debt Debate. This week's vote to avert a debt-ceiling crisis brought together a variety of uneasy political alliances. But few were as fraught with tension as the one between Wall Street and the Obama administration. Banks and the White House found themselves on the same side in recent weeks as they worked to back a compromise that would fend off a default by the U.S. government. White House Chief of Staff Bill Daley even tried to enlist the help of his former employer, J.P. Morgan Chase & Co.(JPM), as part of a final push to get a deal done in Congress, said people familiar with the situation.
- Iran Claims Progress Speeding Nuclear Program.
- Signs of Slowdown Creep Into Europe's Powerhouses. Jean-Claude Trichet no longer needs to gaze toward southern Europe and Ireland to spot signs of economic weakness. As he prepares for Thursday's European Central Bank meeting, the president can simply look out his office window in Frankfurt. The economic slowdown—once limited to Greece, Spain, Ireland, Portugal and Italy—is creeping into Germany and other powerhouses such as France and the Netherlands. Those three countries alone account for over half of euro-zone gross domestic product.
- Moody's May Cut Credit Ratings on Two Big Banks. Moody's Investors Service said it may cut its ratings on Bank of New York Mellon(BK) and JPMorgan Chase(JPM) over the next 18 months, saying the banks might get less U.S. government support in the future.
- Corzine to Replace Geithner at Treasury?
- This Nebraska Village May Be Sitting On The World's Largest Untapped Deposit Of Rare Earth Minerals.
- EFSF - Too Small? Too Big? Or Just Wrong?
- Gross US Debt Surges By $240 Billion Overnight, US Debt To GDP Hits Post World War II High 97.2%. Two things happened when the Senate voted in the "Bipartisan" plan into law yesterday: i) deferred debt on the Treasury's balance sheet finally caught up with reality, and ii) as a result of i) America's Debt/GDP just hit a post World War 2 High of 97.2%. Becasue as the Daily Treasury Statement as of last night indicates, total US marketable debt surged by $124.6 billion, while debt in intragovernmental holdings (Social Security, Government Retirement Accounts, etc), soared by $113.6 billion, for a combined one day change of $238.2 billion, the single biggest one day increase of US debt in history.
Forbes:
NY Times:
- The Manifesto of a Hedge Fund King. DealBook’s Evelyn M. Rusli and Azam Ahmed discuss Paul Singer’s latest letter to investors, and whether his views have greater significance for the world of hedge funds.
- Large Banks in Europe Struggle With Weak Bonds. Ever since the began, the risk of contagion — of problems spreading from smaller countries to bigger ones, like and — has worried government officials and investors. Now, another type of contagion is causing concern: the risk of problems spreading to big banks, especially in Italy and Spain. The growing vulnerability of the giant banks in these two countries is spurring investor fears that Europe’s latest bid to get a handle on its festering debt crisis, adopted just a few weeks ago, has come up short.
Rasmussen Reports:
- 14% Say U.S. Heading In Right Direction, Lowest Level Since November 2008. Eighty percent (80%) of voters say the country is heading down the wrong track, the highest finding since early November 2008.
- Syrian Tanks Thrust Into Hama, 45 Killed: Activist. At least 45 civilians were killed in a tank assault by Syrian President Bashar al-Assad's forces to occupy the center of Hama, an activist said on Thursday, in a sharp escalation of a military campaign aimed at ending an uprising against his rule.
- US Congress Leaders Agree On Path to Trade Deals. Congressional leaders said on Wednesday they have agreed upon a path to approve three long-delayed free trade agreements and a program to help U.S. workers who lose their jobs because of foreign competition.
- ECB to Halt Rate Hike Cycle, Faces Pressure On Bond-Buying. An economic slowdown and debt market turmoil mean the European Central Bank will probably hit 'pause' on its interest rate raising cycle for several months and may even signal on Thursday a readiness to buy bonds again.
- Dendreon(DNDN) Pulls Forecast as Provenge Falls Short. Dendreon Corp on Wednesday reported far lower-than-expected second-quarter sales of the prostate cancer vaccine Provenge and withdrew its full-year revenue forecast, sending its shares into a tailspin. The biotechnology company, whose shares fell 62 percent after hours, also plans to reduce expenses, including through job cuts, at a time when Wall Street was expecting sales to take off as manufacturing capacity for the vaccine increases.
- Walter Energy(WLT) Q2 Lags Wall Street; Shares Fall. Coal miner Walter Energy's second-quarter profit missed expectation hurt by higher costs and weather-related challenges at its Alabama and North-East British Columbia operations. Shares of the Tampa, Florida-based company were down 5 percent at $105.5 in after market trade.
- Obama Turns 50th Birthday Into Campaign Fundraiser.
- Italy 'to default' but Spain may 'just' escape'. Debt-laden Italy is likely to default, but Spain might just avoid it, according to the British think tank, the Centre for Economics and Business Research. In a report published on Thursday, the CEBR calculated that Italy's debt would rise from 128% of annual output to 150% by 2017 if bond yields stay above the current 6% and growth remains stagnant. "Even if the cost of borrowing goes back down to 4%, the growth rate is so anaemic that we see the debt-GDP ratio remaining at 123% in 2018," said Doug McWilliams, the CEBR's chief executive.
- China's southern province of Guangxi has asked companies with heavy energy consumption to halt production on certain days of the week as the region faces a power shortage of about 30%. The steel, aluminum, lead and zine makers will be affected.
- Cash in the Chinese banking system will remain "tightly balanced" as long as banks' reserve requirement ratio remains high and excess reserve ratio stays low, China Securities Journal said today in a commentary on its front page.
- China should continue to use price tools, reserve requirements, open-market operations and a more flexible yuan to manage inflation, the Financial News said in a front-page commentary. The country when using interest rates should pay more attention to the effect of international factors and the impact on consumption, according to the commentary by a writer at the central bank publication.
- China's Communist Party must directly confront corruption which is the biggest danger facing the ruling party. China must resolutely solve corruption, the editorial said.
- None of note
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 121.50 -1.5 basis points.
- Asia Pacific Sovereign CDS Index 123.0 +.75 basis point.
- S&P 500 futures +.41%.
- NASDAQ 100 futures +.38%.
Earnings of Note
Company/Estimate
- (FSS)/.08
- (CBOE)/.32
- (ATK)/1.99
- (FO)/.98
- (EP)/.24
- (TBL)/-.39
- (LEA)/1.29
- (LUV)/.20
- (TDW)/.42
- (DTV)/.85
- (CI)/1.29
- (CVS)/.64
- (DISCA)/.61
- (GM)/1.19
- (CAH)/.58
- (APA)/3.13
- (DNR)/.33
- (PCG)/1.02
- (KFT)/.58
- (LNKD)/-.01
- (FSLR)/.92
- (PBI)/.51
- (CF)/5.97
- (WMS)/.53
- (AIG)/.98
- (DLB)/.61
- (PCLN)/4.85
- (FLR)/.81
- (MCHP)/.55
- (CEC)/.32
- (ASEI)/.98
- (ZEUS)/.78
- (MHK)/.93
8:30 am EST
- Initial Jobless Claims for last week are estimated to rise to 405K versus 398K the prior week.
- Continuing Claims are estimated to fall to 3700K versus 3703K prior.
- None of note
- The ECB Rate Announcement, BoE Rate Announcement, ICSC Chain Store Sales for July, RBC Consumer Outlook Index for August, Bloomberg weekly Consumer Comfort Index, weekly Fed Balance sheet report, M1/M2 reports, weekly EIA natural gas inventory report and the (STEC) Analyst Day could also impact trading today.
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