- Spain’s Bonds Drop as German Note Yield Falls Below Zero. Spanish bonds slumped, pushing 10- year yields above 7 percent for only the fifth day since the euro was created, amid concern politicians and central banks aren’t doing enough to prevent the region’s woes from deepening. German two-year notes rose, sending yields to less than zero, as investors sought the highest-rated securities after the European Central Bank refrained from announcing extra measures to stem the crisis yesterday. Austrian, Dutch, Belgian and French note yields fell to records on demand for greater returns than those from German securities. A negative rate means investors who hold the debt to maturity will receive less than they paid to buy them. “There are still a lot of questions that remain unanswered about the debt crisis, and we are cautious about peripheral bonds,” said John Stopford, head of fixed income at Investec Asset Management in London, which oversees $98 billion. “The market was disappointed that the ECB didn’t do more. Investors are also nervous about the macro picture. The risk is that they will continue to reduce exposure to peripheral bonds.” Spain’s 10-year yield rose 17 basis points, or 0.17 percentage point, to 6.95 percent at 4:40 p.m. London time, after climbing to 7.04 percent, the highest since June 20. The 5.85 percent bond due in January 2022 fell 1.105, or 11.05 euros per 1,000-euro ($1,230) face amount, to 92.485. The yield jumped 62 basis points this week, the most since the five days through June 15.
- Monti Cabinet Backs Spending-Cut Package to Replace Tax Increase. Italian Prime Minister Mario Monti replaced a looming sales-tax increase with a package of spending cuts, seeking to counter rising anger over the government’s demand for revenue. Monti’s Cabinet approved 26 billion euros ($32 billion) of spending cuts over the next three years to delay for at least a year an increase in the value-added tax rate to 23 from 21, the prime minister’s office said in an e-mailed statement after a seven-hour meeting in Rome that ended at 1 a.m. “This is the typical ’Italian-style’ reform that offloads the biggest chunk of the planned cuts onto the next government,” said Alberto Mingardi, head of the pro-free market Bruno Leoni research center in Turin. “The VAT increase is put back to July next year when this government won’t be in power anymore”
- Greek Six-Month Public Revenue Drops 1.5%, Kathimerini Says. Greece’s public revenue in the first six months of the year was about 1 billion euros ($1.2 billion) less than its budget target for the period after it dropped 1.5 percent compared with the year earlier, Kathimerini reported, without saying how it got the information. Net revenue increased 1 percent in June compared with the same month in 2011, while total revenue for the month, which is before tax refunds, declined 0.5 percent from June 2011, the Athens-based newspaper said.
- Lagarde Says IMF to Cut Growth Outlook as Global Economy Weakens. The International Monetary Fund will reduce its estimate for global growth this year on weakness in investment, jobs and manufacturing in Europe, the U.S., Brazil, India and China, Managing Director Christine Lagarde said. “The global growth outlook will be somewhat less than we anticipated just three months ago,” Lagarde said in a speech in Tokyo today. “And even that lower projection will depend on the right policy actions being taken.” The new outlook will be announced in 10 days, after an April estimate of 3.5 percent, she said.
- Spain Bank Aid To Be Channeled Through Government, EU Aide Says. Europe won’t obtain the powers to recapitalize banks directly in time for the injection of as much as 100 billion euros ($123 billion) into Spain’s financial system by mid-2013, a European official said. Spain’s bank-aid program, to be endorsed by European finance ministers next week, will channel the money via a Spanish state agency, the official told reporters in Brussels today on condition of anonymity. No formal decisions will come at the July 9 meeting, which will also offer a first glimpse of Greece’s plea for a relaxation of its bailout terms and take up Cyprus’s call for banking aid, the official said.
- JPMorgan(JPM), Goldman(GS) Shut Europe Money Funds After ECB Cut. JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS) and BlackRock Inc. (BLK) closed European money market funds to new investments after the European Central Bank lowered deposit rates to zero. JPMorgan, the world’s biggest provider of money-market funds, won’t accept new cash in five euro-denominated money- market and liquidity funds because the rate cut may result in losses for investors, the company said in a notice to shareholders. Goldman Sachs won’t accept new money in its GS Euro Government Liquid Reserves Fund, and BlackRock, the world’s largest asset manager, is restricting deposits in two European funds.
- U.S. Payroll Growth Trails Forecasts as Labor-Market Outlook Dims: Economy. American employers added fewer workers to payrolls than forecast in June and the jobless rate stayed at 8.2 percent as the economic outlook dimmed. The 80,000 gain in employment followed a 77,000 increase in May, Labor Department figures showed today in Washington. Economists projected a 100,000 rise, according to the median estimate in a Bloomberg News survey. Growth in private payrolls was the weakest in 10 months. Stocks fell on concern hiring has shifted into a lower gear, restricting consumer spending and leaving the economy more vulnerable to a global slowdown. The figures underscore concern among some Federal Reserve policy makers that growth isn’t fast enough to lower unemployment stuck above 8 percent since February 2009. “The job market is soft,” said David Resler, chief economic adviser at Nomura Securities International Inc., who correctly forecast the payrolls gain. “I’d characterize our reaction as much the same way the Fed will react -- not surprised but disappointed. It’s just not the kind of growth we need to see at this stage in the business cycle.” Private payrolls increased 84,000 in June after a revised gain of 105,000 that was larger than initially reported. They were projected to advance by 106,000 in June, the survey showed. The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- increased to 14.9 percent from 14.8 percent. Joblessness has exceeded 8 percent since February 2009, the longest such stretch since monthly records began in 1948. Employment at service providers increased 67,000 in June after a 98,000 gain, today’s report showed. Construction companies added 2,000 workers, while retailers cut 5,400 jobs. Uncertainty about the U.S. government’s fiscal outlook may still be hampering hiring plans. Congress has yet to resolve the so-called fiscal cliff, which represents more than $600 billion in higher taxes and reductions in defense and other government programs in 2013 that will take place without action. In a bright spot for workers, average hourly earnings rose to $23.50 from $23.44 in the prior month, today’s report showed. The average work week climbed six minutes to 34.5 hours. The number of temporary workers increased 25,200 in June after an 18,600 rise.
- Commodities Fall Most in Two Weeks on U.S., Europe Economic Woes. Commodities fell the most in two weeks as signs of a faltering U.S. economy and escalating debt woes in Europe signaled less demand for energy and metals. The Standard & Poor’s GSCI Spot Index (MXWD) of 24 raw materials declined 2.2 percent to 606.48 at 11:52 a.m. in New York. A close at that level would mark the biggest decline since June 21. Crude oil and gold dropped the most in a week, and industrial metals including lead, aluminum and copper slumped. Through yesterday, the GSCI index dropped 3.8 percent this year, led by declines in cotton, coffee and oil.
- Credit Swaps in U.S. Climb as Payrolls Rise Less Than Forecast. A gauge of U.S. corporate debt risk rose for a second day after U.S. employment increased less than forecast, fueling concerns that labor-market growth is cooling. The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark used to hedge against losses on corporate debt or to speculate on creditworthiness, increased 2.8 basis points to a mid-price of 111.7 basis points at 9:12 a.m. in New York, according to prices compiled by Bloomberg.
- Software sell-off hits techs; Seagate(STX) slips. Informatica(INFA) warning hits Teradata(TDC), VMWare(VMW), Citrix(CTXS) and Red Hat(RHT).
- Exclusive: Germany pushes Libor probe of Deutsche Bank(DB) - sources. German markets regulator BaFin is conducting a special probe of Deutsche Bank as part of a wider investigation into possible manipulation of the London Inter Bank Offered Rate (Libor), two people familiar with the matter said on Friday. The German regulator declined to comment specifically on whether it was probing Deutsche Bank, but said it was in looking into suspected manipulation of Libor rates by banks. "We are making use of our entire spectrum of regulatory instruments, so far as this is necessary," a spokesman said. Deutsche Bank shares extended losses after the news and traded 4.3 percent lower at 1523 GMT.
- Berkshire(BRK/A) Buys GM(GM) Before Plunge. Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) acquired its largest stake in General Motors Co. (GM) before the automaker slumped 16 percent, as the billionaire chairman hands more responsibility to deputy stock pickers. Berkshire accumulated about 8.47 million shares of GM through Feb. 3 at an average price of $24.35, according to National Association of Insurance Commissioners data compiled by Bloomberg. The automaker closed at $20.54 yesterday in New York. Omaha, Nebraska-based Berkshire’s full stake was reported in a separate regulatory filing in May that didn’t disclose the purchase price or date.
- Banks' Debt Lifeline for Spain Starts to Fray. Domestic banks that have backed Spain's debt auctions with heavy buying could be reaching a limit for absorbing sovereign bonds, say financial analysts and two market makers, undermining the country's efforts to stave off a full-blown bailout.
- Is Italy Living on Borrowed Time and Money? Italy is back in the spotlight as the focus for market concerns once again, with bond yields higher than Ireland’s and increasing concern about the political situation in the euro zone’s third-largest economy.
- TOP OHIO DONOR: 'It Wasn't Like This Under Clinton'.
- Reports Of 'VIP' Subway Carriages Have China Freaking Out About A Growing Wealth Gap.
- The Real-World Middle Class Tax Rate: 75%.
- NOMURA: Italy Is Quietly Getting A Whole Lot Worse.
- Here's What The World's Biggest Companies Are Telling Us About The Economy.
- CHART OF THE DAY: THE SCARIEST JOBS CHART EVER.
- A Growing Number Of Americans Hate Their Job [Charts].
- The Black Teen Unemployment Rate Is Staggering.
- 10 Signs Of Economic Trouble That China's Official Data Won't Show.
- SOCGEN: The News Cycle Is Screaming Trouble Ahead. (graph)
- EURUSD Slides To 2 Year Low As Reality Supercedes Hope.
- FX Market Sees NEW QE Probability At 25%, Down 50% From Week Ago.
- GM(GM) Finds Creative New Ways To "Stuff Channels", Get Backdoor Taxpayer Bailouts.
- 4 Scary Charts.
- Are Auto Loans the Next Subprime Market to Worry About? Across the country, banks and other lenders are still being stingy in providing credit to ordinary consumers. Only the most financially stable of Americans can secure mortgages. Small businesses are having trouble getting loans. Credit card access is restricted. But there’s one notable exception, an area where lending has been surging: Autos. Millions of Americans have found that it’s becoming surprisingly easy to borrow money to buy a car. New bank loans for autos totaled $47.5 billion in the first quarter of 2012, higher than at any point in the past seven years, according to Equifax. Interest rates are getting cheaper by the month. And even Americans with relatively poor finances can get auto loans: The average person financing a new car purchase had a credit score of 760, down six points from the previous quarter, according to new data from Experian. For a used car, the average credit score was down to 659. “The spigots are being opened,” said Peter McNally, an analyst at Moody’s. “The finance companies are really stepping in to fill a need.”
- 31% Give Obama Positive Marks on Handling Economic Issues. The economy has been the most important issue to voters for years, but ratings for the president’s performance in that area are at their lowest level since last November. A new Rasmussen Reports national telephone survey shows just 31% of Likely Voters believe President Obama is doing a good or excellent job handling economic issues, including 12% who say he is doing an excellent job. Forty-eight percent (48%) believe Obama is doing a poor job in this area.
- EURO DEBT SUPPLY-Little respite seen for Italy's funding costs. Italy is unlikely to have difficulty raising funds next week but can't expect much of a respite from high borrowing costs given the swift fading of euphoria over euro zone leaders' efforts to stem the bloc's debt crisis. Italian and Spanish bond yields have marched higher again this week, closing in on levels seen before officials agreed last Friday to help these two major economies by allowing the bloc's bailout funds to buy bonds from the market and to directly recapitalise Spain's ailing banks. Scant detail on how the plans will be implemented and opposition from Finland have dampened initial bullishness and investors are again demanding at least four times more in returns to hold 10-year Italian and Spanish bonds rather than benchmark German Bunds.
- Copper Extends Losses After Weak U.S. Job Data. Copper extended losses on Friday under the weight of a stronger dollar after data from the United States showed the job market in the world's biggest economy was not recovering quickly enough, which added to worries about a severe slowdown in China. Benchmark copper on the London Metal Exchange, untraded at the close, was last bid at $7,530 per tonne versus $7,695 at Thursday's close. It fell 2 percent this week.
- ECB's Coeure dashes bond buying expectations. European Central Bank executive board member Benoit Coeure on Friday dashed the prospect of the ECB buying government bonds to calm financial markets, saying it was up to the euro zone's ESM rescue fund to do so if needed. He was speaking as Spanish government bond yields returned to levels seen before a European Union summit last week which provided brief relief to Spain. "The governments set up a mechanism which is the European Stability Mechanism and last week they confirmed that the ESM could intervene on the secondary market," Coeure told a financial conference in Aix-en-Provence, southern France. "It would be a paradox if the central bank intervened in the place of the governments," he added.
- Canada's Ivey PMI index unexpectedly falls in June. The pace of purchasing activity in the Canadian economy fell to its lowest level in almost a year in June, according to Ivey Purchasing Managers Index data released on Friday. The data showed the seasonally adjusted index fell to 49.0 in June from 60.5 in May. Analysts polled by Reuters had forecast a reading of 55.8. The index was last below the 50 level in July 2011, when it was 46.8.
- Peugeot sales drop 13 pct on European slump. Sales at struggling PSA Peugeot Citroen slumped in the first half of the year, hit by "crisis" in its austerity-stricken core European markets and a misfiring tilt at upmarket rivals. The French car maker was forced to deny a press report it was seeking an emergency government loan as it posted a 15-percent drop in European sales versus the same period last year. Deliveries of cars and vans in Latin America slid 21 percent while it failed to match the pace of expansion in China of other western manufacturers.
- Lord please save us from the coming tsunami of libor litigation.
- Bank of England warns UK banks need more capital. Britain's banks do not have enough capital to withstand an escalation in the eurozone crisis, the Bank of England has warned.
- Spain back in the dangerzone as politicians wrangle. Spanish and Italian borrowing costs soared back into the danger zone as traders bet that the policy action by central banks was inadequate defence against the continued political and financial chaos in the eurozone.
- Finland could leave the eurozone rather than pay other nations' debts, says Jutta Urpilainen. Finland would consider leaving the eurozone rather than paying the debts of other countries in the currency bloc, Finnish Finance Minister Jutta Urpilainen has said.
- Portuguese court blocks key part of austerity plan. The Portuguese government might extend a pay cut for civil servants to others after a court blocked a key part of its deficit-cutting programme by saying it was unconstitutional.
- Spain Domestic Tourism Bookings Down 30%. Bookings by Spaniards to take holidays in the country are down 30% from a year ago, citing Juan Molas, president of Spanish tourism group CEHAT. Tourism represents 11% of gdp. The sector employs 2.5 million people.
- Greece's main opposition Syriza party is against the country's state asset sales and will take legal action if the government moves ahead with the plans, Syriza lawmaker Dimitris Stratoulis said today. "We are against this and consider it the biggest economic and political scandal in the country after the signing of the bailouts," Stratoulis said, according to a video of his comments. Stratoulis said if Syriza becomes Greece's next government it will "even send to jail those who sell off the country's assets for peanuts" and that all state companies and infrastructure are of strategic importance to Greece.
- Greek Prime Minister Antonis Samaras will announce a cut in sales tax for cafes, bars and restaurants and an increase in the threshold for paying income tax to 8,000 euros from 5,000 euros in his legislative program today, citing comments by Nikos Tsoukalis, parliamentary spokesman for the Democratic Left, one of the parties in the coalition government.