Today's Headlines

Bloomberg:

• European Stocks Rise on Euro Support Pledge. European stocks rose to their highest level since April amid optimism the European Central Bank will win support from policy makers for a plan to ease the euro area’s debt crisis. Air France-KLM Group (AF) surged 19 percent after it posted a narrower second-quarter loss. Evraz (EVR) Plc and Fiat SpA (F) climbed more than 4.5 percent, leading rallies by gauges of commodity producers and automakers. JCDecaux SA (DEC) plunged 6.9 percent as it reported a 13 percent drop in first-half profit.
• German Banks’ Net Loans to Weak Euro-Area Nations Drops, FT Says. Net lending by German banks to Greece, Ireland, Portugal, Italy and Spain fell by 55 billion euros ($68 billion) to 241 billion euros in the first five months of the year, the Financial Times reported, citing an analysis of Bundesbank figures by Morgan Stanley. The total now is the lowest since 2005, the newspaper said.
• European Bank Regulator Imperiled By German Zombie Banks. Germany’s regulator balked last year when the European Banking Authority conducted stress tests on financial firms, objecting to the agency’s definition of capital and allowing one state-owned lender to withhold some results. The refusal to go along with the European Union regulator reflects an aversion by governments to ceding control to a central authority that may doom talks about creating a banking union and thwart plans to shift the burden of bailing out Spanish and Irish lenders to other euro-area nations. “Germany didn’t let the EBA dictate any terms to its troubled banks, why would it now hand over controls to a new regulator?” said Nicholas Spiro, managing director of Spiro Sovereign Strategy Ltd., a London consulting firm specializing in sovereign-credit risk. “The prospects of a new central authority are shaky at best.”
• Euro-Area Economic Confidence Drops More Than Forecast. Economic confidence in the euro area fell more than economists forecast to the lowest in almost three years in July, suggesting the economy’s slump extended into the third quarter as governments struggled to tame the debt crisis. An index of executive and consumer sentiment in 17-nation euro area dropped to 87.9 from 89.9 in June, the European Commission in Brussels said today. That’s the lowest since September 2009. Economists had forecast a drop to 88.9, the median of 26 estimates in a Bloomberg News survey showed.
• India Inflation Is Major Challenge as Growth Slows, RBI Says. Indian inflation is a major challenge for monetary policy even as economic expansion remains weak, the Reserve Bank of India said. Threats to the economy “have been amplified by decelerating global trade and domestic supply constraints,” the central bank said today ahead of its rate decision in Mumbai tomorrow. At the same time, “persistent inflation limits the space for monetary policy to revive growth.” Governor Duvvuri Subbarao faces inflation above 7 percent even with expansion at a nine-year low, curbing his scope to join a stimulus drive extending from China to Europe.
• China's Stocks Decline to March 2009 Low on Earnings Concerns. China’s stocks fell, dragging the benchmark index down to the lowest level since March 2009, as concern earnings growth is slowing overshadowed speculation European policy makers will take action to ease the debt crisis. China Cosco Holdings Co. (601919), the nation’s largest publicly traded shipping company, slumped to a record low after saying it expects its first-half loss to widen from a year ago. China Life Insurance Co. sank to the lowest in four weeks on speculation flood claims in Beijing will hurt profits. A gauge of B shares slid to a two-year low on concern more companies face delisting. The Shanghai Composite Index (SHCOMP) fell 0.9 percent to 2,109.91 at the close.
• China Keeps Buying Iran's Oil as U.S. and EU Intensify Sanctions. Oil tankers able to haul at least 20 million barrels of Iranian crude signaled for China in July, highlighting one of the challenges the U.S. and Europe face as they pressure the Persian Gulf state over its nuclear program. At least 10 very large crude carriers controlled by Tehran- based NITC signaled for ports in the world’s largest energy consuming nation this month, according to IHS Inc. (IHS) data compiled by Bloomberg. Each has the capacity to carry about 2 million barrels. Six signaled they were sailing to China today, adding to four that did so July 3, marking the largest monthly tally since Bloomberg began compiling snapshots of the company’s fleet in April. The latest delivery will be Aug. 20.
• July Cargoes on Panamax Ships Slump as China Coal Demand Falls. The number of cargoes booked on Panamax bulk carriers, the largest to transit the Panama Canal, slumped 33 percent in July amid slowing Chinese imports of thermal coal, used for power stations, Morgan Stanley said. There were 151 new cargoes reported for Panamax ships in July, compared with 224 for the same period 12 months ago and 174 in each of the previous two months, according to an e-mailed report today from Morgan Stanley analysts including New York- based Fotis Giannakoulis. Monthly bookings, known as fixtures in the industry, gained for the larger Capesize vessels in July compared with the previous two months, even as rates to hire the ships slumped. “Panamax fixtures continue to decline as China’s thermal coal demand is softening,” the U.S. investment bank said in the report, citing a slowing economy and growing hydropower output. “The weakness of the freight market is rapidly moving towards the smaller vessels that until recently seemed decoupled.” The Baltic Dry Index, a measure of commodity freight costs for four vessel sizes, dropped 1.9 percent to 915, the lowest since June 14, according to the Baltic Exchange.
• Subprime Auto ABS Grows as Lenders Chase Margins: Credit Markets. Sales of bonds tied to payments on subprime car loans are accelerating at the fastest pace in five years as investors seek high yields amid speculation the Federal Reserve will keep interest rates at record lows until mid-2015. Led by Santander Consumer USA, issuance of $10 billion this year in asset-backed debt linked to vehicle loans to borrowers with spotty credit records compares with $8.2 billion in the same period of 2011, according to Barclays Plc.
• Copper Drops on Economic Concerns Before Central Bankers Meet. Copper fell for the first time in four sessions as investors awaited signals from central banks this week on bolstering the faltering global economy. European Central Bank President Mario Draghi is attempting to build consensus for a plan to ease euro-area borrowing costs amid the region’s debt crisis. Federal Reserve policy makers meet before a U.S. employment report that may show the pace of hiring in July failed to reduce the jobless rate. “A lot of people are taking a wait-and-see attitude ahead of the meetings and the payrolls report,” Adam Klopfenstein, a market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “Copper will rally if we get an agreement out of Europe, but the market needs to see it. The table is set, but they’re waiting for the meal to be served.” Copper futures for September delivery declined 0.3 percent to settle at $3.416 a pound at 1:14 p.m. on the Comex in New York.
• Colorado Shooting Suspect Charged With 24 Murder Counts. James Holmes, the suspect in a mass shooting at a Colorado movie theater earlier this month, was charged with 24 counts of first degree murder and 116 counts of attempted first degree murder at a state court hearing in Centennial, a Denver suburb. First degree murder can be punishable by death under Colorado law, and multiple counts can be tied to individual murders, depending on state statute. Twelve people died and at least 58 were injured when theatergoers were attacked July 20 during a midnight showing of the Batman movie “The Dark Knight Rises.”
  
• India Restores Power to 360 Million People After Grid Collapse. India resumed power supplies to most of the 360 million people plunged into darkness by the worst grid failure in a decade, an outage that shut transport networks, triggered commuter chaos and halted water supplies. “Power supply has been restored to all states and the situation is near normal now,” Power Grid Corp. of India Ltd.’s projects director I.S. Jha said by phone. “We will have complete normalcy once thermal plants resume complete generation.” Jha said Power Grid had bought power from the eastern and western regions to reconnect services.

CNBC.com:

• CB & I(CBI) to Buy Shaw Group(SHAW) for $3 Billion. Engineering company Chicago Bridge & Iron said Monday it will buy Shaw Group for about $3 billion in cash and stock to create a big engineering and construction company focused on the energy industry. Netherlands-based CB&I offered $46 per share — $41 in cash and $5 in stock — a premium of 72 percent to Shaw's closing price on Friday, the companies said.
• Spain Recession Deepens, New Austerity to Take Effect. Spain slid deeper into recession in the second quarter as a tough new round of austerity to head off the budget crisis that threatens the euro took effect both on overall demand and the price consumers have to pay for goods.
• Monetary Policy Role in EU Debt Crisis Limited: Zoellick. As markets eagerly await a decision from the European Central Bank (ECB), which holds its policy meeting on Thursday, Robert Zoellick, former president of the World Bank, warned that monetary easing will do little to solve the region’s debt crisis.
• Is Thriftiness From the Rich Hurting the Economy?
• Big Banks Are Getting Tough With Hedge-Fund Clients. Major banks face growing pressure to extract more money from, or even sever ties with, unprofitable hedge-fund clients as they cut costs in the face of tough trading conditions and try to refocus on the biggest managers.

Business Insider:

• MORGAN STANLEY: Here's Our Grim Outlook For Europe's Key Economies.

Zero Hedge:

• Moody's: "The ECB Can Do No More Than Buy Time".
• Dallas Fed Plunges Most In Over 7 Years To 10 Month Low; With Biggest Miss In 14 Months. (graph)
• The Unbearable 'Factual' Lightness Of The Chinese Economy.
• EU Ombudsman To Probe Mario Draghi's Conflicts Of Interest.

Rasmussen Reports:

• 55% Favor Repeal of Health Care Law. A new Rasmussen Reports national telephone survey finds that 55% of Likely U.S. Voters at least somewhat favor repeal of the health care law, including 41% who Strongly Favor repeal. Thirty-nine percent (39%) oppose repeal, with 30% who are Strongly Opposed.
  

Reuters:

• German coalition member urges "unusual" legal action vs ECB. A member of Chancellor Angela Merkel's junior coalition partner said the German government should consider the "unusual step" of taking legal action against the European Central Bank over bond purchases. Joerg-Uwe Hahn, a regional leader of the pro-business Free Democrats (FDP), is an outsider in his party and often critical of its leaders but his comments highlight growing German unease about the costs of fighting the euro zone debt crisis. "The European treaties allow member states to sue the ECB," Hahn, a member of the ruling centre-right coalition in the state of Hesse, told Monday's edition of Die Welt newspaper, adding that Berlin should consider opening a lawsuit against the bank via the European Court of Justice.
• Fitch cuts Naples ratings, outlook negative.
• Suntech(STP) sees possible fraud; shares plunge to new lows. Suntech Power Holdings Co Ltd said on Monday that its partner in a solar development fund might have defrauded it with a bogus collateral pledge of hundreds of millions of euros of German bonds, sending its shares to all-time lows. "We now suspect that the German government bonds may not have existed and Suntech may have been a victim of fraud," Chief Executive Officer Zhengrong Shi said on a conference call. Shares of China-based Suntech shares fell more than 15 percent to $1.33 on the New York Stock Exchange as investors feared the world's largest maker of solar panels would have try to tap debt markets to raise more than $500 million to refinance a bond obligation due next year.

Financial Times:

• European Political Unity Isn't a Crisis Tool, Issing Says in FT. A European political union, which implies the end of the nation-state, is impossible to achieve in the space of a few years, and cannot be a means of managing the current crisis, said Otmar Issing, a former chief economist of Germany's Bundesbank and of the European Central Bank. Writing in the FT, Issing said promising future political integration against requests for more money now is not a credible strategy; on the contrary, it would damage the idea of political union. Euro-area bonds, which would bring higher interest rates for government bonds in countries with hitherto sound financial reputations, imply the transfer of taxpayers' money in violation of the principle that there shall be no taxation without representation, and that is true of all forms of debt mutualization, Issing said. Measures that implicitly pre-empt the establishment of political union would involve huge financial risks for a few countries and undermine any identification of the people with the European idea, he said. The only alternative to the collapse of the eurozone lies in the principle of "no bailout," which means every country is responsible for its policies; financial help must be conditional and be extended at interest rates that don't weaken the will to reform, he concluded.
• Jobless generation puts brakes on US. The share of American 18- to 24-year-olds who were employed fell to 54 per cent last year, the lowest since the labour department began tracking data in 1948, according to the Pew Research Center. The share who are in college has risen, but the researchers say this only partly explains the drop. The jobless rate for Americans age 16 to 24 is above 16 per cent, more than twice the national rate.

Die Welt:

• German Chancellor Angela Merkel has shifted the onus of healing the debt crisis to the ECB, shirking responsibility for devising effective political policy, a lead of the country's main opposition party said in an interview. Social Democratic Party floor chief Frank-Walter Steinmeier said ECB President Mario Draghi took his cue to "do whatever if takes" to preserve the euro, a comment uttered on July 6, from a "signal" given by Merkel and other euro-area leaders when they met at a summit at the end of June. Merkel wanted to "palm off" taming the crisis onto the ECB, Steinmeier said.
  

YLE:

• Finland's Chancellor of Justice will examine whether the parliament's approval of the European Stability Mechanism took place legally.
  

Caixin:

• China 2012 property development investment growth may not reach 15%, citing Deng Yusong, a researcher at the State Council's Development Research Center. 3Q property development investment growth may continue to fall, citing Deng.