Today's Headlines

Bloomberg:

• Manufacturing Index Falls to Two-Year Low. Manufacturing in the U.S. almost stalled in July, threatening to deprive the two-year recovery of one of its main drivers. The Institute for Supply Management’s factory index slumped to 50.9, the lowest since July 2009, from 55.3 a month earlier, the Tempe, Arizona-based group said today. Figures less than 50 signal contraction, and the July index was lower than the most pessimistic forecast in a Bloomberg News survey. “Businesses have cut back on orders and employment because they are just not seeing the demand that they expected,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “The economy is just not picking up momentum in the second half.” The median forecast in the Bloomberg survey of 80 economists called for a decline to 54.5. Estimates ranged from 51 to 56. The U.S. ISM report showed the new orders measure dropped to 49.2 in July from 51.6, while orders waiting to be filled fell to the lowest since April 2009. The measure of production in July decreased to the lowest level since June 2009, while inventories contracted. A gauge of factory employment declined to the lowest since December 2009, while a measure of exports increased.
  
• Debt-Limit Agreement Likely to Pass, Republicans Say. Republican leaders, with no extra time before a default threatened for tomorrow, voiced optimism that Congress will pass a compromise with President Barack Obama to raise the U.S. debt limit by at least $2.1 trillion and slash federal spending by $2.4 trillion or more. The House plans to vote today on the agreement reached during a weekend of negotiations that capped a months-long struggle between Obama and Republicans over raising the $14.3 trillion debt ceiling. Senate Majority Leader Harry Reid said he expects a vote “hopefully during” today’s session. “We’re very optimistic we’re going to do well,” said Senate Republican leader Mitch McConnell, of Kentucky, emerging from a meeting where he briefed Senate Republicans on the plan. In the House, Budget Committee Chairman Paul Ryan said, “It’s a good agreement, it’s going to pass.” Both parties worked to sell the deal to their rank and file -- meeting resistance from some Democrats who fault it for failing to increase taxes and from a faction of Republicans who say it’s insufficient to rein in the debt.
• Manufacturing Weakens From China to U.K. Manufacturing indexes from Asia to the U.S. to Europe fell in July as demand weakened and the global recovery from recession lost momentum. U.K., Russian and Australian manufacturing shrank last month, while the pace of factory growth slowed in Europe and China, according to surveys today. An index of U.S. manufacturing dropped more than economists forecast to a two- year low, even after the dollar’s 7 percent drop against the euro this year. “Manufacturing is slowing and some of these readings are in recessionary territory,” said David Owen, chief European economist at Jefferies International Ltd. in London. In the U.K., a factory gauge by Markit Economics fell to 49.1, the lowest since June 2009, from 51.4, and a measure for Russia slipped to 49.8 from 50.6. Australia’s index slid to a two-year low of 43.4 from 52.9. Readings below 50 indicate contraction. Europe’s index of manufacturing growth cooled to 50.4, the slowest pace in 22 months, from 52 in June. China’s purchasing manufacturing index moderated to 50.7 from 50.9, the China Federation of Logistics and Purchasing said, as the faltering recovery in the U.S. and Europe limited demand for goods from the world’s second-largest economy.
  
• Asia's Economic 'Soft Patch' Jars With Inflation, Posing Dilemma on Rates. Asian manufacturing is cooling even as accelerating inflation puts pressure on officials to keep tightening monetary policy, adding to headwinds for the global economy after recoveries faltered in the U.S. and Europe. Manufacturing in China, Australia and Taiwan weakened in July, purchasing managers’ indexes released today showed. South Korea’s inflation quickened to the fastest pace since March, Thailand’s held above 4 percent for a fourth month and a gauge of Australian prices exceeded the central bank’s target ceiling.
• China Blames Terrorists Trained in Pakistan After Xinjiang Clashes Kill 20. Violence in western China’s Xinjiang region in the past two days left at least 20 people dead in the city of Kashgar, with police calling one of the incidents a “premeditated terrorist attack” led by militants trained in Pakistan, according to official Chinese reports. 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 building, the Kashgar government said on its website. The attackers then killed four people and injured 12 in knife attacks outside the restaurant before five of them were killed by police, the report said. Another four suspects were arrested, the official Xinhua News Agency said. An “initial police probe” showed that the leaders of the “religious extremists” involved in the attack trained in bomb- making and firearms in Pakistan at camps run by the East Turkestan Islamic Movement, Xinhua said today. “Because China has been playing the terrorism card for so long now, fewer and fewer people believe them,” Gladney said in an interview. “There is a total lack of credibility.”
• 'Gossip Girl' Couture Is Back-To-School Boon. Angela Ricci is shopping for lacy tops, ruffled skirts and floral dresses to wear when she begins her senior year of high school in Pittsburgh. One thing she won’t be buying: jeans. “I want to show a new kind of style and make a better impression,” said Ricci, 17. “I think that my generation is inspired to dress up a little more.” Teens like Ricci are following the example of television shows such as “Gossip Girl” -- in which actress Blake Lively prances to class in couture -- as they head to stores to stock up for the new school year. Retailers, stung by slowing sales growth and record cotton costs, are obliging with blouses and dresses that sell for higher prices. Spending on clothing and shoes in the back-to-school season, the second-largest sales period of the year for retailers, may rise to $28.8 billion in the U.S., up 3.6 percent from $27.8 billion a year earlier, according to the New York- based International Council of Shopping Centers. Dressy clothes would be a bright spot in a slower-growing back-to-school season. Total back-to-school purchases, including books and electronics, may increase 2.9 percent, decelerating from 5 percent growth a year earlier, the council said.
• Tepco Says Highest Radiation Yet Detected at Fukushima Dai-Ichi. Tokyo Electric Power Co., operator of Japan's crippled Fukushima Dai-Ichi nuclear plant, said it detected the highest radiation to date at the site. Geiger counters, used to detect radioactivity, registered more than 10 sieverts an hour, the highest reading the devices are able to record, Junichi Matsumoto, a general manager at the utility, said today. The measurements were taken at the base of the main ventilation stack for reactors No. 1 and No. 2.

Wall Street Journal:

• Live Blog: The U.S. Debt Battle.
  
• Skilled-Nursing Stocks Plunge On Medicare Rate Change. Nursing-home operators Sun Healthcare Group Inc. (SUNH), Skilled Healthcare Group Inc. (SKH) and Kindred Healthcare Inc. (KND) lost more than a quarter of their market value Monday after Medicare said it would reduce reimbursement rates to those facilities by 11.1% over the next fiscal year. The Centers for Medicare & Medicaid Services said the cuts, which take effect in October, are in response to unexpected increases in nursing-home payments this fiscal year after the agency tweaked coverage rates last year. The skilled-nursing industry had lobbied hard since the government released its initial proposal for an 11.3% rate cut in April. The agency's final decision--announced late Friday--will have "a devastating impact" on the companies, according to one analyst, and the industry is now looking to Congress for help. The Alliance for Quality Nursing Home Care, a lobbying group for the industry, said in a statement late Friday that the change in reimbursement rates "will dangerously destabilize the nation's second-largest health facility employer, place patients and their care at deep risk, and put tens of thousands of health jobs in immediate jeopardy." The group's president, Alan Rosenbloom, said the move "crossed the line from over-correction into real Medicare cuts." Investors had expected more modest cuts, perhaps in the range of 5% to 7%, Wells Fargo said; however, given the current budget constraints in Washington, the firm warned that Congress likely won't be rushing in to offer meaningful relief.
• Base Metals: Weak U.S. Manufacturing Cuts Into Copper Prices. Copper grazed one-week lows after downbeat U.S. manufacturing data soured trader optimism over U.S. debt deal. The most actively traded contract, for September delivery, was recently down 8.40 cents, or 1.9%, at $4.3955 a pound on the Comex division of the New York Mercantile Exchange. The contract had touched a low of $4.3795. Thinly traded August-delivery copper was down 9.40 cents, or 2.1%, at $4.3800 a pound.
• Chip Sales Fell -1.5% in June. Global chip sales fell 1.5% in June from a month earlier as weak consumer demand offset growth in corporate-replacement purchases, smartphone demand and increased spending on information-technology infrastructure.

Fox Business:

• Dems Preparing to Renew Push for Revenue Increases on Proposed Deficit Panel. Democratic officials indicated Sunday that they would revive their push for revenue increases later this year, presuming Congress can first clear away the immediate crisis over the debt ceiling.
  

CNBC.com:

• 'Band Aid' Deal May Pressure S&P to Slash US Rating. Sunday night's deal that will see the US debt ceiling raised if it passes a vote in the House is merely a "band aid" and certainly not a game changer, according to an assessment from Barclays Capital. The deal “is certainly not a game-changing breakthrough, and will keep the possibility of a near-term rating downgrade alive; it represents, in our view, just a band-aid approach on the way to more sustainable public finances,” said Julian Callow, the chief European economist at Barclays Capital in a research note on Monday. The big problem for Callow is the slowdown in the US economy, which could mean any savings are offset by significantly lower revenue. “All of the putative fiscal savings could effectively be wiped out if US GDP outturns continue to be significantly weaker than is assumed in government fiscal baseline projections,” Callow said. Like Callow, Danske Bank chief analyst Allan von Mehren believes a downgrade of US debt is now in the cards. “Lower growth will also weigh on the budget and – all else equal -- requires even higher discretionary budget cuts to reduce the deficit and get debt under control,” said Mehren in a research note. “It is not an easy decision to downgrade sovereign debt of the world’s leading reserve currency and it will require some courage to do this.” “We believe, though, that S&P’s credibility is at stake here – and given the signals it has sent we believe it will prove hard not to follow through and downgrade US debt,” Mehren said.
• Japan Readying Intervention to Reverse Yen: Nikkei.
• Debt Deal Will Add to 'New Normal' Slowness: El-Erian. The emergence of a potential debt ceiling deal in Washington might forestall default and a credit downgrade, but won't fix what ails the U.S. economy, Pimco's Mohamed El-Erian said.

Business Insider:

• Live Coverage: Democratic Press Conference Canceled, Boehner Appearance Postponed, As Vote-Counting Continues.
  
• More and More People Are Betting On An Italian Default. Credit default swaps for Italy are surging, Der Spiegel reports. Citing figures from the Depository Trust and Clearing Corp, the German publication notes that the country has the highest gross CDS volume at $306 billion, ahead of Brazil ($179 billion) and Spain ($176 billion).
• JPMorgan(JPM) Warns of an Even More Disappointing Employment Index Number This Friday.
• Central Falls Files For Bankruptcy After Union Fails to Agree to Pension Cuts.
• And Now There Is A Fake Ikea Store In China.
  

Zero Hedge:

• CBO Scores "Bipartisan" Plan at Half of S&P Required Savings; Only 2% of Total Cuts to Take Place Before Obama Reelection.

NY Post:

• Foursquare Sets Revenue Plan. Foursquare is looking to cash in on all those check-ins. The social network, which has been known for having a fast-growing footprint -- more than 10 million members have checked in more than 750 million times to about 15 million venues worldwide, and a healthy valuation, $600 million after its recent $50 million round of financing -- but very little revenue, is now ready to pump up its top line, The Post has learned.

TheStreet.com:

• Oil's Relief Rally Loses Steam. The relief rally of crude oil prices came to a halt Monday as poor manufacturing data overshadowed a debt deal by lawmakers in Washington. Brent crude futures for September delivery were shedding 70 cents to $116.04, hitting a five-day low of $114.78 earlier. They hit a month-high of $120.40 earlier Monday. West Texas Intermediate light sweet crude oil for September delivery was tumbling $1.38 to $94.32, earlier reaching to a one-month low of $93.42.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 23% 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 -19 (see trends ).

Reuters:

• United States Approves "Free" Birth Control for Women. U.S. health insurance companies must offer women free birth control and other preventive health care services under Obama administration rules released on Monday.
• Syrian Tanks Shell Hama, Heaviest Barrage of Assault-Witnesses. Syrian tanks shelled residential neighbourhoods all over Hama on Monday in the heaviest barrage of a two-day attack on the city to crush street demonstrations against President Bashar al-Assad, witnesses said. Intense shelling began after Ramadan evening prayers, concentrating on districts near the al-Bilal roundabout in the northwest of the city, the Jarajmeh district in the east and northern neighborhoods near the Omar bin al-Khattab mosque, they said. "The shells are falling once every ten seconds," one of the witnesses told Reuters by phone, and the thump of artillery and explosions could be heard in the background.

Telegraph:

• Spain Will Need a Bailout. (video)

AFP:

• Italian Stocks Plunge -3.87%. Italian stocks closed down 3.87 percent on Monday with shares in Italy's top banks leading the losses as the long-term borrowing rate on government bonds rose sharply, reflecting investor nerves. The main FTSE Mib index dropped to 17,720 points with shares in insurance company Fondiaria-SAI plummeting 9.19 percent, UBI Banca plunging 7.93 percent and Intesa Sanpaolo lost 7.86 percent. UniCredit, Italy's largest bank, dropped 4.32 percent. Business daily Il Sole 24 Ore said there had been "a new wave of sales in Milan" while financial website firstonline.info said: "The Obama effect has run out" -- referring to a debt deal in the United States. The difference between the rate on Italian and German 10-year government bonds -- a key indicator of investment risk -- rose sharply to over 350 basis points.

China Business News:

• China's banking regulator issued a notice to banks warning them of associated risks when cooperating with financing and guarantee agencies.

Grain News:

• China may impose price caps on seeds produced by foreign-owned companies to reduce their influence in the domestic market, citing a person close to the government. A joint investigation by several ministries found overseas companies are expanding into the grain seed market after dominating the flower and vegetable seed industries.