Evening Headlines
Bloomberg:
- Euro Set for Weekly Loss Before Spanish, German Factory Output. The euro headed for its biggest weekly decline in more than six months amid signs the region’s debt crisis is weighing on economic growth. The 17-nation currency held a two-day decline against the yen before data today forecast to show industrial production in Germany and Spain declined. The European Central Bank and the People’s Bank of China cut their benchmark borrowing costs yesterday, while the Bank of England expanded the size of its asset-purchase program. “The economic fundamentals surrounding the euro area look dire,” said Takuya Kawabata, researcher at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency- margin company. “We can’t expect any economic indicators that can bolster the euro.” The euro was little changed at $1.2394 as of 8:38 a.m. in Tokyo from $1.2392 yesterday, when it touched $1.2364, the lowest since June 1. The shared currency is poised for a 2.2 percent drop this week, the sharpest decline since the five-days ended Dec. 16. Europe’s currency was at 99.05 yen from 99.03, set for a 2 percent weekly drop. The greenback bought 79.92 yen from 79.92 yen. Japan’s currency fetched 82.20 per Australian dollar from 82.22 yesterday when it reached 82.36, the weakest since May 4. German industrial output probably declined 1.2 percent in May from a year ago, according to economists surveyed by Bloomberg News before the Economy Ministry in Berlin releases its figures. A separate survey indicated Spanish production at factories, refineries and mines adjusted for the number of working days fell 8.1 percent from a year earlier. The National Statistics Institute is due to issue the data in Madrid.
- Fire Drills for a Euro Meltdown. It’s 9 a.m. on a Friday in June, and for an emergency response drill at Legg Mason’s Baltimore headquarters, Greece has just abandoned the euro. Gathered around a conference room table, with team members from offices in London, New York, and elsewhere joining by video, 15 employees are given eight hours before markets open in Asia to assess issues such as whether they can execute trades, the status of the firm’s investments, and how workers in European offices will be paid. Almost four years after the bankruptcy of Lehman Brothers Holdings froze the financial markets, asset managers Legg Mason, State Street (STT), Vanguard Group, and others are drawing lessons from that crisis to prepare for a worst-case scenario in Europe. They’re assembling special teams and testing information technology systems to avoid being blindsided by the disintegration of the euro, however remote—or imminent—that possibility might appear.
- Spain Rescue Seen Worse Than Cure as Hospitals Make Cuts. Patients and hospitals across Spain are wrestling with the same dilemma. Even as old debts get paid off -- the country’s 17 regions ran up some 12 billion euros in unpaid health bills through last year -- new ones are piling up. As a result, the need to break the cycle with spending cuts threatens to redefine the very notion of Europe’s tradition of socialized medicine: how best to treat patients, not how to make ends meet. “As long as it is state-funded, the health system will always run a deficit,” said Miguel Llorens, financial director for Hospital Provincial de Castellon.
- Made-in-London Scandals Risk City’s Reputation as Finance Center. London risks losing its status as the world’s top financial center as the $360 trillion interest-rate fixing probe follows a series of market abuses by banks that eroded trust in a city already shrinking faster than rivals. JPMorgan Chase & Co. (JPM)’s trading loss of at least $2 billion, the alleged $2.3 billion fraud at UBS AG (UBSN) and the investigation of at least a dozen banks including Barclays Plc (BARC) for rigging global interest rates all happened in London in the last year. The effect is taking a toll on the capital of a country enduring its first double-dip recession since the 1970s, which fired more financial-services workers than any other country in 2011 and again this year.
- Barclays Corrupts Libor and Maybe a Lot More. If Barclays Plc (BARC) would lie about its borrowing costs, what else would it lie about? That question gets to the heart of the damage Barclays did to itself by submitting false numbers for years to the British Bankers’ Association as part of the surveys used to set the London interbank offered rate, the benchmark for $360 trillion of financial instruments globally. The most important asset any bank has is trust -- especially when it comes to the figures on its own financial statements. Whatever credibility Barclays had, it’s been poured down the drain like last night’s suds.
- Top Won Forecaster Sees 5% Loss as Europe Crisis Damps Exports. South Korea’s won will post its worst quarter in a year as Europe’s financial crisis saps demand for exports, according to Credit Suisse Group AG, the top forecaster. The currency will fall 5.4 percent to 1,200 per dollar in three months, the weakest level since October, Ray Farris, the Singapore-based head of Asia Pacific fixed-income strategy, said in a July 4 interview. The second-largest Swiss bank had the closest estimates in the last six quarters as measured by Bloomberg Rankings. The projection is more bearish than the 1,170 median estimate in a Bloomberg survey of 27 analysts.
- Seagate(STX) Fourth-Quarter Sales, Gross Margin Miss Forecasts. Seagate Technology Plc (STX) said fiscal fourth-quarter sales and profit margin would miss the company’s previous forecast, citing reduced hard-drive shipments and a “supplier quality issue” that affected some products. Shares of Dublin-based Seagate fell as much as 6.6 percent to $23.43 in late trading, after being little changed at $25.08 at the close in New York. Seagate, the world’s largest maker (STX) of computer disk drives, expects to report fiscal fourth-quarter sales of $4.5 billion and gross margin, excluding certain items, of 33.6 percent -- lower than its previous forecast for sales of at least $5 billion and gross margin of 34.5 percent. The average estimate (STX) of analysts surveyed by Bloomberg was for $4.88 billion in sales and 34.7 percent gross margin.
- Amazon(AMZN) Said to Plan Smartphone to Vie With Apple(AAPL). Amazon.com Inc. (AMZN) is developing a smartphone that would vie with Apple Inc. (AAPL)’s iPhone and handheld devices that run Google Inc. (GOOG)’s Android operating system, two people with knowledge of the matter said.
- Pentagon Freeing $1.1 Billion Withheld From Pakistan. The Pentagon is preparing to release about $1.1 billion withheld from Pakistan’s military after that nation agreed this week to reopen supply routes into Afghanistan. The withheld dollars are part of the U.S. Coalition Support Fund to reimburse Pakistan for its support of U.S. counter- insurgency operations, Pentagon spokesman Navy Captain John Kirby told reporters today. Payments were suspended last year amid increased U.S.- Pakistan tensions even before Pakistan closed the land routes into Afghanistan in November as a result of an accidental U.S. attack that killed 24 Pakistani soldiers. Pakistan, which had demanded a U.S. apology for the deaths, agreed to reopen the lines after Secretary of State Hillary Clinton said “we are sorry” in a statement on June 3.
- China Busts Traffickers After Babies Auctioned Off for $7,800. Chinese police broke up child- trafficking rings in 15 provinces and arrested more than 800 people after babies were auctioned off to the highest bidder for up to 50,000 yuan ($7,800). Footage aired on Chinese television today showed a police officer involved in the raids wresting a child away from a woman who had allegedly bought it. Suspects and other rescued children were also shown being taken away by police. The July 2 raids involved 10,000 police and resulted in 181 children being freed and 802 arrests, the Ministry of Public Security said in a statement on its website yesterday. China’s one-child policy and a tradition of favoring boys have been cited as contributing to the nation’s trafficking problems.
- Quants Post Worst Month Since October as Winton Slumps 3.2%. Hedge funds that use quantitative strategies executed by computers suffered their biggest losses last month since October after being whipsawed by Europe’s sovereign debt crisis. The Newedge CTA Index, which tracks some of the largest systematic funds, lost 3.1 percent in June, erasing this year’s gains. David Harding’s $10.2 billion Winton Futures Fund Ltd. slumped 3.2 percent, extending this year’s loss to 4.1 percent, according to a person familiar with the performance. Man Group Plc (EMG)’s AHL Diversified fund lost 3.4 percent, while the Bluecrest BlueTrend Fund dropped 5.4 percent in June, an investor said.
Wall Street Journal:
- Traders' Messages Provide Grist for Investigators. Regulators probing the manipulation of key interest rates are zeroing in on a pile of potentially incriminating messages from traders at banks under investigation, according to people familiar with the investigation.
- Delay Seen (Again) For New Rules on Accounting. A long-awaited U.S. decision on whether to switch to global accounting standards—a holy grail for many companies with overseas operations—is likely to be delayed until next year. After weighing the issue for nearly 2½ years, the Securities and Exchange Commission's staff expects to issue a final report within weeks on International Financial Reporting Standards, the accounting rules adopted by most other countries.
- China's New Man in Hong Kong. Deng's promise of 'one country, two systems' may be in jeopardy.
- The Next Imminent Bailout: Eminent Domain.
- Barclays(BCS) Wins Euromoney's Best Global Debt, Best Investment Bank, And Best Global Flow House Of The Year Awards.
- 80% of the World's Industrial Activity is Now Contracting.
- China’s Surprise Rate Cut Signals More Trouble Ahead. China’s unexpected cut in interest rates – the second in less than a month – suggests that the world’s second-biggest economy is in worse shape than it appears and the government is getting worried about growth prospects ahead of the release of key economic data next week.
- Anxiety Mounts as US Economy Limps Into 2nd Half. A slew of weak U.S. economic data is casting doubts over expectations of a pick-up in growth in the second half of the year. From manufacturing to job growth to consumer spending, the numbers have been grim, and economists are wondering whether they need to dial down forecasts for the remainder of the year. "Our sense was that of a gradual improvement. Now the sense is of muddling along at a low level of activity," said Adolfo Laurenti, deputy chief economist at Mesirow Financial in Chicago. "We went from seeing progress, though gradual and very uneven, to not seeing progress at all."
- Italy to Cut Spending, Jobs Despite Union Threats. Italy's cabinet met on Thursday to approve emergency legislation to reduce state spending and cut public sector jobs, setting up a showdown with unions who have threatened a nationwide general strike.
IBD:
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows Mitt Romney attracting 47% of the vote, while President Obama earns 44%. Four percent (4%) prefer some other candidate, and five percent (5%) are undecided.
- Hedge funds fail to wow in first half. Hedge funds have little to brag about halfway through 2012, with some of the biggest names reporting only small returns and trailing the benchmark U.S. stock index. Paul Tudor Jones' flagship fund is up 1.59 percent through the third week in June, David Einhorn's biggest portfolio is up 3.7 percent in the first half, while Daniel Loeb told investors that his largest fund rose 3.9 percent during the first six months of 2012, investors in their funds said. Compared with a year ago when many hedge funds were losing money, these returns might sound like something to cheer, especially since they beat the benchmark HFRX Global Index's 1.22 percent gain. But they pale measured against the 8 percent rise in the Standard & Poor's 500 stock index during the first half, with the $2.1 trillion industry failing to wow at a time that public pension funds are increasingly turning to hedge funds to shore up ailing returns.
- Japan's Azumi: govt could run out of cash by Oct. Japan's government could run out of money to fund this fiscal year's budget by the end of October, the finance minister said, as a standoff in parliament over a deficit financing bill threatens to wreak havoc with the country's finances.
- California high-speed rail plan faces tough vote in Senate. The California state Assembly on Thursday approved an $8 billion high-speed rail financing plan that likely will face a tougher vote in the Senate over the system's projected $68 billion cost and concerns about its management.
- Judge orders JPMorgan(JPM) to explain withholding emails. A U.S. judge has ordered JPMorgan Chase & Co to explain why the court should not force the bank to turn over 25 internal emails demanded as part of an investigation into whether it manipulated electricity markets in California and the Midwest. The Federal Energy Regulatory Commission (FERC) filed a petition in federal court in Washington on Monday asking the court to order the bank to show cause as to why it would not comply with a subpoena issued by the commission as part of its investigation into the bank's power trading. On Thursday, U.S. District Judge Colleen Kollar-Kotelly gave the bank until July 13 to submit an explanation as to why the court should not enforce FERC's subpoenas. JPMorgan has asserted the emails are protected by the attorney-client privilege.
- Informatica(INFA) estimates weak quarter, shares slump. Data-integration software maker Informatica Corp estimated second-quarter results below analysts' expectations, a s customers delayed contracts and deal sizes shrank on challenging business conditions in Europe, sending its shares down more than 26 percent after the bell. Uncertainty in Europe, the company's second-largest market that brought in a quarter of its revenue last year, has hurt two of his top segments - financial services and public sector. Revenue for 2011 was $784 million. "Clearly, we did not adapt as rapidly as we should have to the changing macroeconomic environment, especially in Europe," Chief Executive Sohaib Abbasi said. The company expects adjusted earnings of 27 cents to 28 cents per share on revenue of $188 million to $190 million. Analysts on average were expecting earnings of 37 cents on revenue of $217.2 million, according to Thomson Reuters I/B/E/S. Informatica shares, which closed at $43.37 on the Nasdaq, were trading at $31.80 after the bell.
- Institutional investors rush to equity funds-Lipper.
- Setback for GE’s(GE) solar power strategy. General Electric has suffered a significant setback to its ambitions to develop a multibillion-dollar solar power business, delaying for at least 18 months the panel manufacturing plant the US industrial group had planned to build in Colorado. Construction has been halted at the factory, which was announced in a highly publicised launch less than nine months ago.
- Iraq warns over al-Qaeda flux to Syria. Al-Qaeda fighters are crossing from Iraq to Syria to carry out attacks there, Iraq’s foreign minister said on Thursday, as Syrian activists accused regime loyalists of committing atrocities in an opposition stronghold just outside Damascus.
- Slowing emerging markets face debt hangover. China’s latest interest rate cut shows Beijing’s willingness to contribute to global efforts to ease credit in response to the slowdown induced by the eurozone crisis – just as it did four years ago after Lehman Brothers collapsed. Unfortunately, its results are unlikely to have the same impact as in 2008-9.
Bild:
- Germany has halted a plan to send as many as 165 tax officials to Greece to bolster tax collection, citing people in the Finance Ministry and government. Greek officials weren't interested in help from Germany and saw it as meddling.
- The Chinese banking system is facing growing pressure from rising non-performing loans and expected profit declines in 1H caused by the economic slowdown and narrowing net interest margins, citing Xiao Gang, chairman of Bank of China Ltd.
- None of note
- Asian equity indices are -.75% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 167.0 +2.5 basis points.
- Asia Pacific Sovereign CDS Index 135.50 +.75 basis piont.
- FTSE-100 futures -.35%.
- S&P 500 futures -.15%.
- NASDAQ 100 futures -.21%.
Earnings of Note
Company/Estimate
- None of note
8:30 am EST
- The Change in Non-Farm Payrolls for June is estimated to rise to 100K versus 69K in May.
- The Unemployment Rate for June is estimated at 8.2% versus 8.2% in May.
- Avg Hourly Earnings for June are estimated to rise +.2% versus a +.1% gain in May
Upcoming Splits
- None of note
Other Potential Market Movers
- The Bank of Italy Balance Sheet report could also impact trading today.
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