Today's Headlines

Bloomberg:

• Merkel Allies Harden Opposition to Granting ESM Bank License. German Chancellor Angela Merkel’s coalition rejected granting the permanent euro rescue fund access to European Central Bank liquidity via a banking license, as the Finance Ministry said it saw no need for any such move. The rules of the European Stability Mechanism don’t provide for refinancing through the ECB, the ministry in Berlin said today in an e-mailed response to questions. The ministry isn’t holding talks on the topic nor are secret meetings taking place on such proposals, it said. France and Italy are building support for a previously floated plan to allow the permanent backstop to wield unlimited firepower courtesy of the ECB, Germany’s Sueddeutsche Zeitung newspaper reported today, citing a European Union official it didn’t name. Leading ECB governing council members are among those who now back the idea, the newspaper said. Lawmakers from all three parties in Merkel’s coalition immediately repudiated the suggestion. It is a “dangerous attempt” to bypass the ban on the central bank financing states directly, said Hans Michelbach of the Bavarian Christian Social Union. The Free Democratic Party’s Rainer Bruederle told Die Welt newspaper such a mechanism is a “wealth-destroying weapon,” while Norbert Barthle of Merkel’s Christian Democratic Union said it won’t happen. “Those who try to circumvent their own rules through the back door lose their legitimacy in the eyes of the public,” Michelbach said in an e-mailed statement. “Financing debt by means of the printing press leads to growing inflation dangers.”
• Euro-Area Unemployment Rate Reaches Record 11.2%: Economy. The jobless rate in the euro area reached the highest on record as the festering debt crisis and deepening economic slump prompted companies to cut jobs. Unemployment in the economy of the 17 nations using the euro reached a revised 11.2 percent in May and held at that level in June, the European Union’s statistics office in Luxembourg said today. That’s the highest since the data series started in 1995. In Germany, unemployment climbed for a fourth straight month in July, a separate report showed. “Companies generally are under serious pressure to keep their labor forces as tight as possible to contain their costs in the face of the current limited demand, strong competition and worrying and uncertain growth outlook,” said Howard Archer, chief European economist at IHS Global Insight in London. “There looks to be a very real danger that the euro-zone unemployment rate could reach 12 percent in 2013.”
• Consumer Spending in U.S. Stagnates as Americans Build Up Savings: Economy. Consumer spending in the U.S. stagnated in June as labor-market weakness prompted Americans to use the biggest gain in incomes in three months to build savings. Household purchases, which make up 70 percent of the economy, were unchanged last month after a 0.1 percent decline in May, a Commerce Department report showed today in Washington. The median estimate in a Bloomberg News survey of economists called for a 0.1 percent rise. Incomes climbed 0.5 percent, lifting the saving rate to 4.4 percent, the highest in a year. “There’s been some back-tracking in the labor market so consumers are choosing to save the income rather than spend it,” said Julia Coronado, chief economist for North America at BNP Paribas in New York, who correctly projected the stagnation in purchases. “The third quarter will be pretty subdued.”
• European Stocks Drop as Earnings Trail Forecasts. European stocks fell, even as the Stoxx Europe 600 Index completed its second straight monthly rally, after companies including BP Plc and UBS AG (UBSN) posted earnings that missed forecasts and investors awaited the outcome of a two-day Federal Reserve meeting. BP led losses, dropping 4.4 percent, the most in more than ten months. UBS tumbled 5.9 percent. Anheuser-Busch InBev NV retreated 3.2 percent after reporting a decrease in beer sales. Bayer AG (BAYN) advanced after raising its sales and earnings forecasts for the year. The Stoxx 600 declined 1 percent to 261.38 at the close in London.
• Deutsche Bank to Cut 1,900 Jobs as Part of Savings Plan. Deutsche Bank AG (DBK) said it will eliminate 1,900 jobs by the end of the year, including 1,500 at the investment bank and support areas, as part of an effort to save 3 billion euros ($3.68 billion). Germany’s biggest lender, which employed 10,079 at the investment bank at the end of June, said most of the positions slated for removal at the unit will be outside Germany. The Frankfurt-based lender forecast “substantial costs” to achieve the savings without giving an exact figure in a statement to the stock exchange today.
• Coach(COH) Tumbles Most Since 2001 as North American Sales Slow. Coach Inc., the largest U.S. luxury handbag maker, tumbled the most in almost 11 years after reporting fiscal fourth-quarter revenue that trailed analysts’ estimates amid slowing sales growth in North America. Coach fell 14 percent to $50.97 at 9:58 a.m. in New York, after declining as much as 19 percent for the biggest intraday drop since Sept. 17, 2001. Sales at North American stores open at least a year advanced 1.7 percent, compared with a gain of 10 percent a year earlier. Jennifer Davis, an analyst at Lazard Capital Markets, projected an increase of 5 percent.
• Oil Falls on Speculation Fed to Forgo Stimulus. Prices dropped as much as 2 percent as a Bloomberg survey of economists showed the Fed will probably forgo a third round of large-scale asset purchases at a two-day meeting beginning today. Oil for September delivery fell $1.61, or 1.8 percent, to $88.17 a barrel at 12:17 p.m. on the New York Mercantile Exchange. Prices have climbed 3.8 percent this month.
• Best Sales Since 2007 Overshadowed by GM’s(GM) Unsold Pickups. The best year for U.S. auto sales since 2007 hasn’t been enough to boost General Motors Co. (GM)’s shares. One reason is dealership lots such as Dave Gill Chevrolet in Columbus, Ohio, that are overstocked with trucks. GM said it entered July with more than five months’ supply of full-size pickups, the most since April 2009, according to researcher Ward’s Auto. This isn’t entirely accidental: Detroit- based GM wants a stockpile to carry it through the change to a new design next year. That plan may backfire if the segment’s sales remain below those assumed at the start of the year.
• GM's(GM) Turnaround Boosts Bullish Bets to 19-Month High: Options. Options traders increased bullish wagers on General Motors(GM) to a 19-month high. The ratio of outstanding calls to buy GM versus puts to sell rose to 2.79-to-1 on July 26 and reached 2.9 on July 23, the highest level since December 2010, according to Bloomberg. GM is scheduled to report second-quarter results on Aug. 2.
• Facebook(FB) Drops to Record on Growth Concern: San Francisco Mover. Facebook Inc. (FB) dropped as much as 5.6 percent to a record intraday low, the third straight day of declines after the world’s largest social-networking service reported second-quarter results that showed slowing growth.
• Amtrak Shifts Strategy From Begging for Money to Thinking Big. Amtrak, the corporation created by Congress when private industry abandoned U.S. passenger rail, is trying to overcome its chronic lack of money with a new strategy -- thinking far beyond its means. In the past three weeks, Amtrak proposed a renovation of Washington’s Union Station that would cost at least $6.5 billion and published a $151 billion, three-decade plan for bringing 220-miles-per-hour service to its busiest route, between Washington and Boston. It’s working toward a future with bullet trains, though Congress killed President Barack Obama’s high- speed rail funding proposal last year and Republicans in the House of Representatives want to do it again this year. Amtrak, which got a $1.4 billion federal subsidy this year and needs congressional reauthorization to continue operations past September 2013, has decided it’s better to be ambitious than to continually beg for enough money to keep trains rolling. “It’s an aggressive strategy to put themselves in a better negotiating position,” said Joshua Schank, president and chief executive officer of the Eno Center for Transportation, a Washington research group. “Rather than playing defense and asking for a little bit of money so they just don’t die, they’re saying, ‘Here’s what we could accomplish if we really get some money.’”
• India Holds Key Rate, Skirting Global Easing on Inflation. India refrained from joining peers in lowering interest rates, focusing instead on curbing inflation as a power-grid shutdown exposed infrastructure deficiencies that keep prices elevated and limit policy options. The Reserve Bank of India kept the repurchase rate at 8 percent while cutting the amount of deposits banks must hold in government bonds, it said in Mumbai today. Governor Duvvuri Subbarao said after the decision the benchmark gauge of prices, which climbed 7.25 percent in June, has stayed “sticky.”
• Apple(AAPL) Rises as Bernstein Sees Stock Split, Dow Membership Ahead. Apple (AAPL) Inc. climbed the most in two months after Sanford C. Bernstein & Co. said the company is considering a stock split, which could prompt it to be added to the Dow Jones Industrial Average. Apple, the world’s largest company by market value, climbed 2.5 percent to $609.61 at 11:18 a.m. in New York, and earlier touched $611.27 for the biggest gain since May 23. The shares of the Cupertino, California-based company have risen 47 percent this year through yesterday.
• IMF Urges Brazil to Guard Against Bubbles as Interest Rates Fall. Brazil should boost supervision of its banking system to avoid against credit bubbles that could form as a result of fast credit growth and falling interest rates, the International Monetary Fund said. Credit that has doubled as a percent of gross domestic product in the last decade has helped spur economic growth but is also showing signs of straining households, the IMF said in a report today about the health of Brazil’s financial system. In prime housing markets like Sao Paulo and Rio de Janeiro, prices have jumped as much as 30 percent annually in recent years, the Washington-based lender said.
• House, Senate Leaders Agree on Stopgap Spending Bill. House and Senate leaders plan to announce agreement on a $1.047 trillion stopgap spending bill to keep the U.S. government operating for six months after Sept. 30, second-ranking Senate Democrat Dick Durbin said today.
• Postal Service to Miss $5.5 Billion Payment to U.S. Treasury. The U.S. Postal Service affirmed it won’t make a required $5.5 billion payment due tomorrow to the U.S. Treasury for future retirees’ health care, an obligation the agency said must end for it to become financially viable. The service has said for months it couldn’t afford the payment, which was initially due last September, nor a $5.6 billion payment required by Sept. 30 for this year. Postal legislation passed by the U.S. Senate on April 25 would slow the schedule for those obligations. The House hasn’t acted on a different postal measure aimed at changes to help the service cope with declining mail volume.
  

Wall Street Journal:

• Fannie, Freddie Won't Cut Loan Balances. The federal regulator for Fannie Mae and Freddie Mac FMCC -1.68% will not permit the taxpayer-supported mortgage giants to participate in an Obama administration program that reduces mortgage balances for certain troubled homeowners, the agency said on Tuesday. The Treasury Department, which had put heavy political pressure on the Federal Housing Finance Agency to permit the companies to participate in a limited program of debt forgiveness, immediately responded by questioning the regulator's assumptions and asking the agency to reconsider.
• Syrian Army Continues Aleppo Offensive. Fighting in Syria's largest city of Aleppo stretched into its 11th day on Tuesday amid growing international condemnation of the Syrian government's crackdown on a tenacious rebellion that has lasted 17 months. Meanwhile, the U.N. refugee agency said it has been unable to reach all of what it says are 200,000 people fleeing the fighting in Aleppo. The agency's spokeswoman, Melissa Fleming, told reporters that thousands of frightened residents are seeking shelter in schools, mosques and makeshift facilities.

CNBC.com:

• Twitter Rolls Out Stock Search Feature.
• Why Fewer Americans Are Starting New Businesses. America may be going out of business when it comes to starting new businesses, according to a recent report. The study—from the non-profit New America Foundation—argues the U.S. is seriously in danger of losing its entrepreneurial spirit because the number of small business created has been declining.
• Why Hedge Funds Are Going Mainstream.

Business Insider:

• The Paragraph In Deutsche Bank's(DB) Layoff Statement That Should Scare All Of Wall Street.

Zero Hedge:

• Europe's Second Scariest Chart.
• What Do PIIGS Bonds Know That Stocks Are Oblivious To?
• This Is What 670 Million People Without Power Look Like: Pictures From A Blacked Out India.

NY Post:

• High-fliers losing million$ when trading in jets. Moguls and wealthy celebrities are seeing the value of their private jets tumble as the regular pool of used jet buyers has dried up, sources tell The Post. In fact, the value of the trade-in jets has fallen by as much as 50 percent, the sources said.

Gallup:

• Economic Confidence Down Last Week, Back to January Levels. (graph)
  

Rasmussen Reports:

• Employment Index Slips to 2012 Low.

Reuters:

• DBRS Will Cut Italy Ratings by Aug. 22. Rating agency DBRS is likely to cut Italy's sovereign rating by one or more notches by August 22, a senior official at the agency said on Monday, citing a deep economic recession and rising political uncertainty as the main risk factors.
• Corn On Track for Biggest Monthly Gain in 5 Years.

Telegraph:

• Greece 'on the brink' as cash reserves dry up. Near-bankrupt Greece is fast running out of cash while it waits for its next installment of aid from international lenders, a deputy finance minister has said, sounding the alarm on the country's precarious financial position.
• UK Household incomes hit seven-year low. Household incomes fell to their lowest level in seven years in the first three months of the year, as families were hit by high inflation and smaller pay rises.

Handelsblatt:

• The ECB should aim to lower the euro exchange rate by means of interest rate cuts, to lift euro-area competitiveness and encourage investments, Oxford University economist Clemens Fuest writes in a commentary. Fuest is a member of the German Finance Ministry's group of academic advisers.
  

Les Echos:

• Belgian Foreign Minister Didier Reynders said European authorities need to intervene in the formation of the Greek government's budgets. "Greece must accept shares sovereignty," Reynders said in an interview. "A European authority should not only oversee but also take part in decisions on the budget."
  

El Pais:

• Spain will miss the deadline included in the memorandum of understanding of its banking sector bailout to present a biannual budget guideline for 2013 and 2014, citing European officials.
  

Yonhap News Agency:

• N. Korea says will build up nuclear arsenal against U.S. North Korea vowed on Tuesday to further build up its nuclear capabilities, accusing the United States of attempting to topple its communist regime.
  

Business Standard:

• Singapore GIC's Cash Rises to More Than Crisis Levels. Government of Singapore Investment Corp, managing more than $100 billion, boosted cash to levels exceeding the 2008 global financial crisis as it pared stocks and bonds, reducing its holdings in Europe. Cash allocation almost quadrupled to 11 per cent of its portfolio in the year ended March from three per cent a year earlier, GIC, as the sovereign wealth fund is known, said in its annual report. Stocks fell to 45 per cent from 49 per cent, as it pared equities in developed markets, while bonds dropped to 17 per cent from 22 per cent. GIC is reducing its investments as the MSCI World Index posted its biggest slump since the 2008 global financial crisis and market volatility reached the highest level in more than two years. Trading options have become limited for government funds seeking to preserve capital, as policy makers across the world prepare for a deeper impact from Europe's debt woes. “There are not many safe havens, so cash is king,” said Ronald Wan, a Hong Kong-based managing director at China Merchants Securities Co, which oversees about $1.5 billion. “It’s logical for everyone to cut investments and take a wait- and-see approach. The economic downturn will last for a while before we can see certainty and a swing-back in investment sentiment.” GIC’s holdings in Europe fell to 26 per cent from 28 per cent, with those in the UK unchanged at nine per cent, it said. Within Europe, GIC's assets in Portugal, Ireland, Italy, Greece and Spain made up 1.4 per cent of its portfolio, mainly held in real estate and stocks in Italy and Spain, it said.