Today's Headlines

Bloomberg:

• Draghi Says ECB Will Do What's Needed To Preserve Euro: Economy. European Central Bank President Mario Draghi said policy makers will do whatever is needed to preserve the euro, suggesting they may intervene in bond markets as surging yields in Spain and Italy threaten the existence of the 17-nation currency bloc. “To the extent that the size of these sovereign premia hamper the functioning of the monetary policy transmission channel, they come within our mandate,” Draghi said in a speech at the Global Investment Conference in London today. “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” he said, adding: “believe me, it will be enough.” Financial markets surged on speculation the ECB will act to lower Spanish borrowing costs after yields on the nation’s bonds rose to levels that prompted bailouts for Greece, Portugal and Ireland. The ECB reluctantly started buying Spanish and Italian debt in August last year as part of its bond purchase program. The buying had little lasting effect and the ECB suspended the program in March. “His comments certainly suggest that ECB purchases of Spanish and Italian bonds are back on the table for discussion,” said Chris Scicluna, head of economic research at Daiwa Capital Markets Europe. “But -- just like last summer -- we would expect any new ECB bond purchases to be temporary and limited until other policies are put in place.”
• German Bailout Skeptics Criticize Draghi, Handelsblatt Says. German coalition lawmakers Frank Schaeffler and Klaus-Peter Willsch, who’ve voted against measures to bail out cash-strapped euro-region nations, criticized European Central Bank President Mario Draghi’s announcement that the bank will do whatever is needed to preserve the euro, the Handelsblatt newspaper reported. Schaeffler, a Free Democrat, said Draghi is pillaging German savings as his policies will boost inflation, according to the newspaper. Willsch, a budget-committee member from Chancellor Angela Merkel’s Christian Democratic Union, said rising prices for houses, farmland, gold, coins and classic cars in Germany reflect a flight to tangible assets as a precursor to accelerating inflation.
• Spain at 7% Stresses Inadequacies of Rescue Options: Euro Credit. Money managers with more than $800 billion are betting European policy makers can only offer Spain a temporary respite from record borrowing costs. Yields on Spain’s two-, five-, 10- and 30-year government securities climbed to euro-era highs this week amid speculation the nation will need a bailout to backstop its regions and banks. While the Organization for Economic Cooperation and Development called for the European Central Bank to buy Spanish debt, investors including AllianceBernstein Ltd. and M&G Group Plc said policy makers are hamstrung in how to rescue an economy twice the combined size of Greece, Ireland and Portugal.
• Italy Needs 10 Billion Euros in New Cuts After Yield Rises: MF. Italy may need to pass new budget cuts worth as much as 10 billion euros ($12.1 billion) this year after debt-financing costs rose more than forecast, MF reported, citing an estimate by the general accountant. The projection was submitted earlier this month to Prime Minister Mario Monti, MF said. The premier decided to wait until after a meeting of the European Central Bank next month before considering additional austerity measures, the Milan-based newspaper said.
• Greek Budget Talks Stumble as Citigroup Sees Euro Exit at 90%. Greek political leaders struggled to clinch agreement on an 11.5 billion-euro ($14 billion) package of budget cuts, as international creditors began a review of Greece’s progress that may determine its future in the euro. Prime Minister Antonis Samaras and his coalition partners, Evangelos Venizelos of Pasok and Fotis Kouvelis of Democratic Left, are to meet again on July 30 to determine the savings required to receive the funds pledged under Greece’s two rescue packages totaling 240 billion euros.
• Swaps Outlook Bleakest Since '09 as Growth Slows: Credit Markets. Investors are the most pessimistic about the outlook for corporate credit in three years as the global economy shows signs of faltering, with euro-area leaders struggling to contain the sovereign-debt crisis and U.S. unemployment stuck above 8 percent for 41 months. A three-month forecast for a benchmark credit-default swaps index in the U.S. swung negative in July, dropping to -19.1 from 15.2 at the start of April, according a survey by the International Association of Credit Portfolio Managers. The outlook for a European index fell to -30 from -9.8. Negative readings indicate expected deterioration in credit conditions.
• Goods Orders Signal Slowdown in U.S. Business Spending: Economy. A slump in June orders for equipment such as computers and machinery signals U.S. business investment will probably cool in the second half of the year and contribute less to the economic expansion. Bookings for non-defense capital goods excluding aircraft, a proxy for future corporate spending, dropped 1.4 percent, the third decrease in the past four months, according to Commerce Department data issued today in Washington. Another report showed claims for unemployment benefits declined more than forecast last week, which may have resulted from difficulty adjusting data for seasonal shutdowns of auto factories. Softening overseas demand, slowing U.S. consumer spending and gridlock in Washington over fiscal policy may prompt businesses to put off replacing old equipment, hurting profits at companies like Xerox Corp. (XRX) A report tomorrow is projected to show the world’s largest economy expanded in the second quarter at the weakest pace in a year. “Business investment has definitely shifted lower,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC in New York. The European debt crisis and fiscal cliff “will put downward pressure on orders, which will translate into weaker growth in the U.S.”
• Pending Home Sales of U.S. Homes Unexpectedly Fell 1.4% In June. Contracts to purchase previously owned homes unexpectedly dropped in June for the second time in the last three months, a sign of limited momentum in housing. The index of pending home resales decreased 1.4 percent to 99.3 after a revised 5.4 percent gain in May that was less than initially reported, figures from the National Association of Realtors showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 0.3 percent June increase. Slower job growth that’s holding down confidence and strict lending standards are restraining housing even with cheaper properties and mortgage rates at all-time lows.
• Gold Climbs on Draghi’s Euro Pledge, U.S. Stimulus Speculation. Gold rose for the second day after the European Central Bank president said policy makers will do whatever is needed to preserve the euro and amid increasing expectations of further stimulus measures in the U.S. “To the extent that the size of these sovereign premia hamper the functioning of the monetary policy transmission channel, they come within our mandate,” ECB President Mario Draghi said today. Orders for U.S. durable goods excluding the transportation category unexpectedly dropped 1.1 percent in June, the most in five months, a Commerce Department report showed, boosting speculation that the Federal Reserve will step up measures to stabilize growth. “Prices are up today because of what we heard from Draghi and as investors are getting more confident that some form of easing will be announced in U.S.,” Jeffrey Christian, the managing director at New York-based CPM Group Inc., said in a telephone interview.
• China’s Stocks Decline to Lowest Level Since March 2009. China’s stocks fell to the lowest level since March 2009 as speculation the government will maintain real-estate curbs overshadowed a State Council plan to develop the nation’s central provinces. China Vanke Co. (000002) and Poly Real Estate Group Co. paced declines among developers after the official Xinhua News Agency said China must prevent local governments from weakening real- estate controls. Hunan Valin Steel Co. (000932), part-owned by the world’s biggest mill ArcelorMittal, surged to a one-month high as the China News Service said Hunan province’s Changsha city unveiled an 829.2 billion yuan ($130 billion) investment plan. “Market sentiment is pretty weak and it will take a while for investors to reverse their pessimistic expectations about the economy,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “We’ll probably see more stimulus packages from the government going forward.” The Shanghai Composite Index (SHCOMP) dropped 0.5 percent to 2,126 at the close, erasing a 0.5 percent gain. The CSI 300 Index (SHSZ300) lost 0.5 percent to 2,347.49. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 0.3 percent in New York yesterday. The Shanghai index has fallen 14 percent from this year’s high on March 2 amid concern the economic slowdown is deepening.
• China Shipyards Falter as Vessel Glut Triggers 49% Order Slump. China has too many ships. The glut has pushed new vessel prices to eight-year lows and caused a 49 percent plunge in first-half orders at the nation’s more than 1,500 shipbuilders. It’s also tipped smaller yards into bankruptcy and hit earnings at larger players. “It is a pretty depressing environment,” said Ajay Mirchandani, a Singapore-based JPMorgan Chase & Co. analyst. “You just have too many yards and too few orders, which is hurting pricing and profitability.” Orders have tumbled as a global excess of commodity, oil and container ships has damped cargo rates and deterred owners from ordering more vessels. China Rongsheng Heavy Industries Group Holdings Ltd. (1101), the nation’s biggest shipbuilder outside state control, hasn’t announced any vessel contracts this year, while Yangzijiang Shipbuilding Holdings Ltd. (YZJ)’s backlog shrank 27 percent in the year ended March because of the slowdown. “It might take two to three years before the situation improves,” said Zhang Yao, Yangzijiang’s investor relations spokesman. “There’s definitely an adverse impact on our profits.” Guangzhou Shipyard International Co.’s first-half profit probably fell more than 50 percent, partly because the price of under-construction vessels “dropped sharply” from a year earlier, the company said this week.
• Syrian Troops Pound Rebel-Held Areas of Aleppo. Syrian troops loyal to President Bashar al-Assad are using helicopter gunships and artillery to pound rebel-held areas in Aleppo and the suburbs of Damascus, opposition groups said today. About 80 tanks are stationed outside the southern entrance to Aleppo in a sign that government forces may be preparing to storm Syria’s biggest city, Ahmed Zaidan, a member of the main opposition group, the Syrian National Council, said today in a phone interview from Bab al-Hawa, a rebel-held border post.
• Tech Industry Leads the Way in 2012 U.S. Job Cuts. (video) Bloomberg's Carol Massar reports that the tech industry is responsible for the biggest share of the nearly 107,000 job cuts announced in the United States in 2012.
• Siemens Cautions on Outlook as Earnings Fall Short. Siemens AG (SIE), Europe’s largest engineering company, said reaching its full-year earnings goal has become harder after reporting fiscal third-quarter profit and sales that fell short of analysts’ estimates. It has become “clearly more ambitious” to reach the target of 5.2 billion euros ($6.31 billion) to 5.4 billion euros in net income from continuing operations, Munich-based Siemens said today. Profit on that basis climbed to 1.23 billion euros in the three months ended June 30, from 763 million euros a year earlier. The average estimate of nine analysts surveyed by Bloomberg was 1.4 billion euros.
• Alcatel-Lucent to Cut 5,000 Jobs After Reporting Loss. Alcatel-Lucent SA (ALU) will cut 5,000 jobs after slumping to a loss, signaling Chief Executive Officer Ben Verwaayen’s effort to revive the company is losing steam and sending the stock to its lowest level since at least 1989. France’s biggest phone-equipment supplier said today it will save an extra 750 million euros ($911 million) with the cuts, equal to about 6 percent of staff.
• Dow Chemical(DOW) Profit Trails Estimates on 'Bleak' Demand. Dow Chemical Co., the largest U.S. chemical company, reported a bigger drop in second-quarter earnings and sales than analysts estimated and said the outlook for global demand for the rest of the year is “bleak.” Chairman and Chief Executive Officer Andrew Liveris is struggling to increase earnings as contracting economies in Europe and slower Chinese growth curb demand for products such as plastics used in packaging and autos. Sales fell around the world, led by a 15 percent decline in Europe, the Middle East and Africa, Dow said. Liveris plans to accelerate cost-reduction efforts to counter weaker global economies. “These are about the worst operating conditions we have seen since 2009,” Liveris, 58, said today in a telephone interview. “That gives you a fairly bleak outlook, and it’s a weak one for the rest of 2012.”
• Consumer Comfort in U.S. Falls to Lowest Level in Two Months. Consumer confidence in the U.S. fell last week to the lowest level in two months as Americans became more concerned about sluggish growth in employment. The Bloomberg Consumer Comfort Index fell to minus 38.5 in the week ended July 22 from minus 37.9 in the previous period. An index of the buying climate, one of the three components of the index, fell to minus 44.7, its lowest reading since May. The confidence of full-time workers dropped to minus 32, the lowest level since February.

Wall Street Journal:

• Bo Xilai's Wife Indicted on Homicide. Chinese officials have indicted Gu Kailai, the wife of fallen Chinese politician Bo Xilai, on the charge of intentional homicide, state media reported on Thursday. The state-run Xinhua news agency said Ms. Gu was prosecuted by officials in China's Anhui province. Xinhua also said a person named Zhang Xiaojun had been charged, without providing further identification.
• Apple(AAPL)-Amazon(AMZN) War Heats Up. Tech Giants Scramble to Take Rival Ground in Phones, Tablets and Apps. The long-simmering war between Amazon.com Inc. and Apple Inc. is starting to boil over. The two technology giants are going head to head in an increasing number of areas as they move to consolidate their positions as control points to consumers' digital lives. And their battle stands out from other tech rivalries because of the combatants' similar playbooks—from the tight control they exert over software to their secretive corporate cultures to the breadth of their customer data.
• Henninger: America's Two Economies. With Barack Obama, the competition between the private economy and the public economy is clear.
  

MarketWatch:

• New Geithner disclosures further cloud his record. Commentary: Treasury chief too timid with the big banks.

Business Insider:

• THIS IS WAR: Google(GOOG) Just Announced Plans To Be A Cable TV Provider.
• Beijing's Olympic Stadiums Are Wasting Away.
• CHART OF THE DAY: The US Garbage Indicator Is Sending An Ominous Sign For The Economy.
• Bill Gross Rains On Spain's Parade.
• GOLDMAN SACHS: These Charts Tell You Everything You Need To Know About The World Right Now.

Zero Hedge:

• Here Is Why Angela Merkel Has Not Responded To Draghi Just Yet.
• Barofsky On Geithner: "We Should See People In Handcuffs".
• A Quick Reminder On The Effectiveness Of The ECB's Bond Buying. (graphs)
• Citi On Draghi: Expect Nothing From The ECB Before The ESM Is Active (In September At The Earliest).
• Asian Contagion Strikes Again Thanks To US Drought.

Reuters:

• Santander profit halves on real estate losses. The euro zone's biggest bank, Santander (SAN.MC), said on Thursday net profit halved in the first six months of the year after it took writedowns on toxic Spanish real estate assets.
• US earnings now seen falling in Q3, first time in 3 yrs. It's ugly out there and it could get worse. Dismal U.S. corporate outlooks and worries about slower worldwide growth have pushed third-quarter earnings estimates into negative territory, which, if it came to pass, would be the first drop in three years. Third-quarter earnings of Standard & Poor's 500 companies are now expected to fall 0.1 percent from a year ago, a sharp revision from the July 1 forecast of 3.1 percent growth, Thomson Reuters data showed on Thursday. That would be the first decline in earnings since the third quarter of 2009, the data showed.

Financial Times:

• US industrials warn over Europe. The wide effects of Europe’s economic crisis were on display on Thursday as several large US manufacturers joined a growing chorus warning of slowing global growth. “World economic activity saw marked deterioration throughout the second quarter, driven primarily by Europe’s persistent recessionary conditions,” said Andrew Liveris, chief executive of Dow Chemical.

MNI:

• IMF Lagarde: US Fiscal Cliff Key Global Risk; Oil A Worry. The looming US fiscal cliff is the number one risk globally at present, followed by the Eurozone and then the threat of another oil price surge, IMF head Christine Lagarde says. Lagarde, speaking at the Global Investment Conference here, said the Eurozone is clearly at the epicentre of the crisis right now but is far from the only risk at present. "Risk number one ... is clearly the fiscal cliff in the United States of America, where the deficit and debt to GDP ratios are actually worse than in the Eurozone," she said.

La Nueva Espana:

• Francisco Alvarez-Cascos, the head of the Foro Asturias party, said EU policy on the crisis is leading Spain towards an exit form the single currency as the only "viable solution." Alvarez-Cascos, a former member of the ruling People's Party who now leads his own breakaway group, said Prime Minister Mariano Rajoy should tell European colleagues that amid a lack of union in the currency area, "the only viable solution to which they are leading Spain is to the exit from the euro," citing him. Alvarez-Cascos, the former president of the Asturias region, accused the government of "begging for measures to re-establish normality in the currency union," and called for early elections.
  

Shanghai Daily:

• Shanghai Developers Nixing Discounts. THE number of residential property projects offering price cuts may fall to the lowest in Shanghai in six months as improved sentiment among buyers helped boost developers' confidence.