Evening Headlines
Bloomberg:
- Slovenia Heads for Sixth Euro-Area Bailout Request to Aid Banks. Slovenia is headed toward becoming the sixth euro-area nation to seek a bailout as faltering banks strain the finances of the first post-communist nation to adopt the common currency, said economists from London to Warsaw. The nation, which adopted the euro in 2007, is assessing the fiscal burden of covering the liabilities of its financial industry after Nova Ljubljanska Banka d.d., the largest bank, got a capital boost. Premier Janez Jansa, who said on June 27 that Slovenia risks a “Greek scenario,” told reporters two days later in Brussels the government is “doing everything to find a solution” and avoid the need for assistance. “It’s increasingly likely that Slovenia will be the next small economy asking for a European Union bailout, which would be focused on the banking sector,” Michal Dybula, an economist at BNP Paribas SA (BNP) in Warsaw, said by phone.
- Denmark Says EU-Wide Regulator Hampers Bubble Fighting. Denmark is unwilling to sign up to a European banking authority and warns such a model could rob national regulators of the tools they need to prevent asset bubbles from forming in local markets. “It is very important that there are macro-prudential tools for each member state in order to make sure that you do not build up housing bubbles and other things,” Danish Economy Minister Margrethe Vestager said in an interview in Oslo yesterday. “Tools so that you can calibrate the risk weights in your banking system.” Denmark’s lenders have yet to emerge from a regional banking crisis triggered by a burst housing bubble more than four years ago. The country’s financial regulator has told banks to comply with stricter writedown standards after finding a number of lenders understated their impairment risk. Thanks to “first-hand experience, I have some reluctance in having a really thorough European authority, if that would mean that you would dismantle all national tools or national authorities in that respect,” Vestager said.
- Spain's Waning Reserve Fund Risks Undermining Bonds: Euro Credit. Spain's social security system risks falling deeper into deficit this year, eroding the ability of its 67 billion-euro pension-reserve fund to prop up the Spanish bond market. The reserve account has almost doubled its holding of Spanish debt since 2008 as declining demand for the country's bonds led the fund to start replacing German, French and Dutch securities with national debt. As the welfare system posts a loss, the fund's ability to soak up new issues will diminish, adding to pressure on 10-year Spanish bonds, which yielded 486 basis points more than German Bunds yesterday. The reserve fund's assets, built up since 2000, is equivalent to about 11% of the central government's estimated outstanding debt for this year, and more than 75% of the planned bond issuance for 2012. Its waning firepower comes as foreign investors shun Spanish bonds and as domestic banks, which had been picking up the slack, begin to reduce their holdings.
- Regulators Grappling With Libor Probe Said to Seek More Time. Barclays Plc (BARC)’s settlement of about $451 million with U.S. and U.K. regulators last week offered the first glimpse of what banks may have to pay to resolve a global probe of interest-rate manipulation. The question now is who’s next. The two-year investigation, which involves regulators on three continents, has touched as many as 18 financial institutions that help set London and Tokyo interbank offered rates for dollars, euros and yen. That number includes as many as 12 firms that have fired or suspended traders in connection with related internal probes of whether their employees tried to manipulate the rates known as Libor and Tibor.
- BRICs Biggest Currency Depreciation Since 1998 to Worsen. The largest emerging markets, whose economies grew more than four-fold in the past decade, are making losers out of everyone from central bankers to Procter & Gamble Co. (PG) as their currencies post the biggest declines since at least 1998. For the first time in 13 years, the real, ruble and rupee are weakening the most among developing-nation currencies, while the yuan has depreciated more than in any other period since its 1994 devaluation. P&G, the world’s largest consumer-goods maker, cut its profit forecast for the second time in two months last week in part because of currency losses. Brazil’s Fibria Celulose SA (FIBR3), the biggest pulp producer, asked banks to loosen restrictions on dollar loans as the real hit a three-year low. Investors are fleeing the four biggest emerging markets, known as the BRICs, after Brazil’s consumer default rate rose to the highest level since 2009, prices for Russian oil exports fell to an 18-month low, India’s budget deficit widened and Chinese home prices slumped. Investors are bracing for more losses as economic growth slows. “I am quite bearish,” Stephen Jen, a managing partner at hedge fund SLJ Macro Partners LLP and a former economist at the International Monetary Fund, said in a phone interview from London. “When the global economy and capital flow slow down, it’s going to expose a lot of problems in these countries and make people stop and ask questions. A run on the currency could be particularly ugly.”
- Microsoft(MSFT) Writing Down $6.2 Billion After AQuantive Sputters. Microsoft Corp. is taking a $6.2 billion writedown for almost the entire amount it paid for Internet-advertising company AQuantive Inc., signaling that its online division will perform worse than the company projected. The non-cash charge means the company will probably post a loss for the quarter, which ended in June. Before the statement, analysts had predicted that Microsoft would report profit of $5.3 billion in the period, data compiled by Bloomberg show.
Wall Street Journal:
- Bond Rift Divides Merkel Coalition. The increasingly radical measures needed to tame the euro-zone debt crisis are leading to a growing rift within German Chancellor Angela Merkel's governing coalition. Ms. Merkel's junior partner, the pro-business Free Democratic Party, is angry about the mounting hints in Berlin that Germany might ultimately agree to collective debt issuance by euro-zone governments, known as euro bonds. In recent days, FDP leaders have criticized Finance Minister Wolfgang Schäuble for suggesting repeatedly that Germany might be open to euro bonds once it has won other European countries' binding agreement to centralized controls over taxation and spending.
- Wall Street Is Still Giving to President. President Barack Obama called Wall Street executives "fat cats,'' criticized their bonuses and tried to raise their taxes. The financial-services industry, in turn, has directed a stream of complaints toward the administration, fueling perceptions of a rift between the president and a key 2008 donor group. But, defying expectations, the securities and investment industry has remained an important part of the Obama fundraising effort. Mr. Obama and the Democratic National Committee raised more than $14 million from the securities and investment industry through the end of April, according to the nonpartisan Center for Responsive Politics.
- Gadhafi-Era Spy Tactics Quietly Restarted in Libya. Libya's caretaker government has quietly reactivated some of the interception equipment that fallen dictator Moammar Gadhafi once used to spy on his opponents. The surveillance equipment has been used in recent months to track the phone calls and online communications of Gadhafi loyalists, according to two government officials and a security official. Two officials say they have seen dozens of phone or Internet-chat transcripts detailing conversations between Gadhafi supporters. One person said he reviewed the transcript of at least one phone call between Saadi Gadhafi, the exiled son of the former dictator, and one of his followers inside Libya.
- In India, Subsidies Upend Car Sales. Auto Makers Scramble to Revamp Production Plans as Rising Gasoline Prices Shift Buyer Preferences. India's auto industry was one of the high-profile success stories of the country's recent boom years, attracting auto makers from around the world eager to supply a fast-growing middle class.
- McGurn: Chief Justice Roberts Taxes Credibility. Did the umpire change his call because of the crowd?
- Obama's Iran Loopholes. All 20 of Iran's major trading partners have sanction exemptions.
- Keith Hennessey: A Strategy to Undo ObamaCare. To push through key parts of the Affordable Care Act, Democrats used the 'reconciliation' process. A Republican president, House and Senate can use reconciliation to repeal them.
- Dealing with a double whammy in China. Commentary: Serious systemic flaws are now being laid bare. By most measures China’s economy has slowed quickly since the last quarter of 2011. Electricity production, the National Bureau of Statistics reports, grew 1.7% in April and May from last year. Over the past decade the annual growth rate was 12%. Also in April and May, the railroad ton-kilometer figure grew by 1.3% compared to the same months last year, down from the 6% growth seen from 2005 to 2011.
- Byron Wien: I Spoke To The Smartest Man In Europe, And What He Had To Say Was Terrifying.
- The US Government Keeps Raising Its 'Secret Keeping' Budget.
- Twitter Reports 679 US Government User Information Requests In The First Half Of 2012, Folding On 75% Of Them.
- HFT Parasites Are Killing The Market Host.
- Global Growth Outlook Weakens. (graph)
NY Times:
- Ex-Brokers Say JPMorgan Favored Selling Bank’s Own Funds Over Others. Facing a slump after the financial crisis, JPMorgan Chase turned to ordinary investors to make up for the lost profit. But as the bank became one of the nation’s largest mutual fund managers, some current and former brokers say it emphasized its sales over clients’ needs.
- Online poker CEO arrested for $430 million Ponzi scheme. Federal law enforcement officials arrested Raymond Bitar, chief executive officer of online poker site Full Tilt Poker, on Monday in connection with a $430 million Ponzi scheme his site was accused of running last year.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows Mitt Romney attracting 46% of the vote, while President Obama earns 44%. Four percent (4%) prefer some other candidate, and five percent (5%) are undecided.
- California lawmakers approve foreclosure-protection law. California legislators on Monday approved a sweeping bill aimed at stopping abusive practices by mortgage lenders and helping homeowners avoid foreclosure. The legislation, among the most ambitious of its type in the nation, would bar banks from moving ahead with foreclosures while still negotiating with homeowners over loan modifications, a practice known as "dual-tracking." It would also allow lawsuits against banks for so-called "robo-signing," in which foreclosure documents are signed en masse without review.
- US munis face $2 trillion in unfunded pension costs. U.S. states and localities have run up more than $2 trillion of unfunded pension liabilities, Moody's Investors Service said on Monday, citing data on plans offered by 8,500 local governments and over 14,000 individual entities. The Wall Street credit agency said that according to its estimate, the total liabilities for fiscal 2010 were more than three times the amount reported by local governments.
- Barclays libor scandal: lock 'em up - it's the only way of dealing with abuse like this. Virtually all financial scandals follow the same pattern. First there is the initial exposure of wrong doing, then comes the mitigating claim that it was common practice and everyone was up to it, and finally it emerges that the regulators knew all along but failed to act.
- Britain's AAA rating at risk, M&G warns. Britain may lose its treasured AAA credit rating because the Government is failing to cut spending sufficiently, a senior fund manager has warned.
- Eurozone joblessness among young rises. More than one in three young Italians are out of work after the youth unemployment rate hit a record 36.2pc in May.
- China Big 4 Banks Lent Less Than 190 Bln Yuan in June. Industrial and Commercial Bank of China Ltd., China Construction Bank Corp., Bank of China Ltd. and Agricultural Bank of China Ltd. lent less than 190b yuan as of June 29, compared with 200b-250b yuan in May, citing data.
- None of note
- Asian equity indices are -.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 170.0 unch.
- Asia Pacific Sovereign CDS Index 142.25 -3.25 basis points.
- FTSE-100 futures +.39%.
- S&P 500 futures +.07%.
- NASDAQ 100 futures +.17%.
Earnings of Note
Company/Estimate
- None of note
10:00 am EST
- Factory Orders for May are estimated to rise +.1% versus a -.6% decline in April.
- Total Vehicles Sales for June are estimated to rise to 13.9M versus 13.73M in May.
Upcoming Splits
- None of note
Other Potential Market Movers
- The weekly retail sales reports, ISM New York for June, RBA rate decision and the China HSBC Services PMI could also impact trading today.
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