Today's Headlines

Bloomberg:

• Euro-Area Services, Manufacturing Grow at Slowest Pace in Almost Two Years. European services and manufacturing growth held steady in August at the slowest pace in almost two years, adding to signs the euro-region recovery is losing momentum as the sovereign debt crisis persists. A composite index based on a survey of euro-area purchasing managers in both industries held at 51.1, the same as July’s reading and the lowest since September 2009, London-based Markit Economics said today. Economists forecast a drop to 50, the median of 15 estimates in a Bloomberg News survey showed.
• Bank Risk Rises to Record in Europe as Investor Confidence Ebbs. The cost of insuring European bank debt against default rose to a record as German investor confidence fell to the lowest in more than 2 1/2 years on concern the region’s debt crisis will curb growth. The Markit iTraxx Financial Index of credit-default swaps linked to the senior debt of 25 banks and insurers increased 11.5 basis points to 261.5, according to JPMorgan Chase & Co. at 1 p.m. in London. The Markit iTraxx SovX Western Europe Index linked to 15 governments widened 12 basis points to 308.5. “Investors are worried that during times of quickly deteriorating asset prices, high volatility, and rising risks to the economic recovery, banks could be left with too little capital and a potential lack of support since governments are constrained by high indebtedness,” Christian Weber, a strategist at UniCredit SpA in Munich, wrote in a note. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months in advance, dropped to minus 37.6 from minus 15.1 in July. That’s the lowest since December 2008. Credit-default swaps on Portugal rose 93 basis points to 1,028, according to CMA. The cost of insuring Norway’s government bonds increased 3.5 basis points to 46, while Greece climbed 25 basis points to 2,025. Contracts on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings rose 27.5 basis points to 729.5, the highest since July 2009. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings increased 5.5 basis points to 172 basis points, the highest since April 2009.
• Bank of America(BAC) Credit Swaps Soar to Record, Goldman Sachs(GS) Debt Risk Jumps. The cost to protect debt issued by Bank of America Corp. (BAC) surged to the highest level on record as investor confidence in U.S. bank bonds deteriorated to the worst since May 2009. Credit-default swaps tied to Bank of America, the nation’s largest lender, soared 47 basis points to 427 as of 9:22 a.m. in New York, according to data provider CMA. Contracts on Goldman Sachs Group Inc. (GS), the fifth-biggest U.S. bank by assets, climbed 28 basis points to 283 basis points, the highest level since April 2009. Bank of America credit swaps have more than doubled from 178 basis points at the end of July, CMA data show, as concern mounts that the lender may face larger losses tied to mortgages and will need to raise additional capital. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 2.3 basis points to a mid-price of 129.1 basis points as of 10:21 a.m. in New York, Markit Group Ltd. data show. Contracts on Goldman Sachs debt soared 40 basis points yesterday, after Chief Executive Officer Lloyd Blankfein and others hired attorneys in relation to a U.S. probe of matters raised by the Senate’s Permanent Subcommittee on Investigations. The swaps have increased from 149 basis points since July 29. Credit-default swaps on Citigroup Inc. (C) climbed 29 to 260 and contracts on Morgan Stanley (MS) rose 30 to 335, CMA data show. Investor confidence in high-yield, high-risk debt plunged for a fourth day. The Markit CDX North America High Yield Index, which falls as investor confidence deteriorates, dropped 0.6 percentage point to 91.3 percent of face value, the lowest level since September 2009.
• Lilbyan Rebels Break Into Qaddafi Compound. Libyan rebels stormed Muammar Qaddafi’s compound in Tripoli after battling loyalist forces for control of the capital for a third day. Gunfire and explosions were heard from the presidential headquarters in Bab Al Aziziya after the rebels broke into the heavily fortified compound and raised their flag there, Al Arabiya television reported. NBC News broadcast live reports from inside the compound, in which gunfire could be heard as crowds of young men ran into buildings and around the grounds of the compound. Much of the gunfire was celebratory.
• FDIC 'Problem' Banks Shrink, First Time Since '06. The Federal Deposit Insurance Corp.’s list of “problem” banks fell in the second quarter for the first time since 2006 as the industry’s income improved and costs tied to bad loans eased. The confidential list of banks deemed at greater risk of collapse shrank by 23 firms to 865, the FDIC said today in its Quarterly Banking Profile. The last time that happened was the third quarter of 2006 before the credit crisis began, the agency said. Net income rose 38 percent to $28.8 billion from a year earlier, the eighth consecutive quarterly improvement, boosted by a seventh straight drop in provisions for bad loans.
• Gold Declines From Record Above $1,910. Gold dropped for the first time in seven sessions as some investors sold the metal after signs of slowing growth spurred a rally to a record $1,917.90 an ounce. Gold futures for December delivery fell $33.30, or 1.8 percent, to $1,858.60 at 12:58 p.m. on the Comex in New York. The metal for immediate delivery declined as much as 2.5 percent after touching a record $1,913.50 in London.
• July New-Home Sales Fall to Five-Month Low. Sales of new U.S. homes declined more than projected in July to the lowest level in five months, indicating the industry is struggling to stabilize two years into the economic recovery. Purchases fell 0.7 percent to a 298,000 annual pace after a 300,000 rate in June that was slower than previously estimated, figures from the Commerce Department showed today in Washington. The median projection in a Bloomberg News survey of economists called for a 310,000 rate in July.

Wall Street Journal:

• Earthquake Shakes U.S. East Coast.
  
• Greek Tourism Workers Stage Strike, Protest Over Cutbacks. Greek tourism workers walked off the job Tuesday in a 24-hour strike over government pension cuts, as dozens demonstrated outside three luxury hotels in the Greek capital to protest the cutbacks.
• Beijing Communist Party Chief Issues Veiled Warning to Weibo. Beijing's Communist Party chief issued a veiled warning to Chinese Internet portal Sina over its Weibo microblogging service after a visit to the company's headquarters, a sign of the government's growing anxiety over Weibo's explosive growth and spreading influence that threatens the government's media controls. Internet companies should "step up the application and management of new technology, and absolutely put an end to the fake and misleading information," Liu Qi, secretary of the Beijing Municipal Party Committee and a member of the Party's powerful Politburo, told company executives during Monday's visit according to state media.

Business Insider:

• Greenspan: "The Euro Is Breaking Down". Some dramatic comments from former Federal Reserve Chairman Alan Greenspan. "The euro is breaking down and the process of its breaking down is creating very considerable difficulties in the European banking system,” Greenspan said today, according to Bloomberg.
• 5.9 Magnitude Earthquake Shakes The East Coast, Centered Near DC.
• PETA Takes Its Sex-Crazed Marketing To The Next Level By Launching Porn Site.
• National Debt Has Increased Under Obama Faster Than Any Other President in History. An analysis by CBS News shows that the national debt has skyrocketed under President Barack Obama — increasing more than $4 trillion during his presidency. On average, the national debt increased $4.247 billion during each day Obama has been in office.
  

Zero Hedge:

• 7 Charts Showing The Lock Out Of European Capital Markets and The Surge In Counterparty Risk.
• Pershing Square Loses -6.7% In First 2 Weeks of August, Down -11% For The Year.
  

AppleInsider:

• Apple(AAPL) Struggles to Meet 13-Inch MacBook Air Demand Trigger Price Gouging.

Institutional Investor:

• Many Hedge Funds Weathered S&P Downgrade Storm. The first broad report of how hedge funds fared during the recent market decline is beginning to emerge. And so far it looks like a number of high-profile managers did a pretty good job of protecting their investors. This is especially true among the largest macro, multi-strategy and systematic traders.

Gallup:

• Obama Job Approval: 38% Approve, 54% Disapprove. (graph)

Reuters:

• Exclusive - Apple(AAPL) Suppliers Building Cheaper, 8GB iPhone 4 - Sources. Asian suppliers to Apple Inc have begun manufacturing a lower-priced version of its hot-selling iPhone 4 with a smaller 8 gigabyte flash drive, according to two people with knowledge of the matter.

Der Spiegel:

• Merkel Seeks to Forestall a Conservative Revolt. Chancellor Angela Merkel will meet conservative parliamentarians on Tuesday evening to try to allay their concerns about her management of the euro crisis. Many are unhappy about the EU deal to increase the scope of the bailout fund -- and are dissatisfied with Merkel's leadership style.

Handelsblatt:

• The German DIHK chamber of industry and commerce is against joint euro bonds as a solution for the current crisis in Europe, citing an interview with the DIHK head Hans Heinrich Driftmann. He considers euro bonds to be "absolutely counterproductive" at this point in time, the newspaper reported. Common euro-area bonds would be the equivalent of inviting countries to continue doing as before, Driftmann said. Countries need incentives "to regain their footing by their own efforts," he said.