- Euro States Should Consider Mandatory Bonds, Zeil Tells Passauer. Troubled euro-region countries such as Spain should tap their citizens’ wealth first before seeking international aid, Bavaria’s Deputy Prime Minister Martin Zeil told the Passauer Neue Presse newspaper. With private wealth in Spain amounting to four times public debt, a “repayable mandatory bond” could help stabilize public finances and should be considered before asking for German taxpayer money, the newspaper cited Zeil, who’s also the state’s economy minister, as saying. The euro region’s financial backstops should cut off funding if recipients don’t meet their obligations, even at the cost of two or more countries exiting the euro, Zeil said. That would neither lead to a collapse of the euro’s core, nor to the wider “House of Europe,” he said.
- Monti’s Bond Frustrations Mount as Italian Yields Stay High. Italian Prime Minister Mario Monti’s frustrations with the bond market are surfacing as spending cuts destroy growth without the reward of cheaper borrowing costs. Italian gross-domestic product contracted an annual 2.5 percent in the second quarter as Monti sought to appease lenders by trimming the budget and increasing taxes. Even though Monti will bring the deficit within European Union limits this year, Italy still pays 441 basis points more than Germany to borrow for 10 years, within 78 basis points of the gap when Monti took office on Nov. 16. Monti, with eight months left to serve, is campaigning to prevent a bailout on his watch. In June, the former university president joined forces with Spanish Prime Minister Mariano Rajoy, also resisting a rescue, to ease requirements on countries that request aid. “The longer Rajoy holds out the more you’re going to see bleeding in Italy,” said Mujtaba Rahman, an analyst at Eurasia Group in London. “And that’s why I think you’ll see more pressure from Monti” and others, he said.
- Banks Not Passing on ECB Rate Cut to Customers, Bild Says. Many banks aren’t passing on the European Central Bank’s interest rate cut to their customers by reducing overdraft charges, Bild reported today, citing a survey by financial consultancy FMH. Most of the 27 banks in the survey lowered the interest rates they offer on savings accounts while keeping rates on overdrafts unchanged, even though it’s cheaper for banks to borrow money following the ECB rate cut, the newspaper says, citing the survey.
- Fed Can’t Fix U.S. Economic Headwinds, Clarida Says: Tom Keene. Federal Reserve policy can’t resolve the biggest drags on the U.S. economy, said Richard Clarida, global strategic adviser at Pacific Investment Management Co. “The main challenges facing the U.S. now are not monetary,” Clarida, of Newport Beach, California-based Pimco, manager of the world’s biggest bond fund, said in a television interview on “Bloomberg Surveillance” with Tom Keene, Sara Eisen and Scarlet Fu. “We have the headwinds from the fiscal cliff, from the slowdown in China, from the turmoil in Europe. None of those are monetary-policy issues.”
- Hong Kong Cuts Growth Forecast as World Economy Falters. Growth will probably be in a range of 1 percent to 2 percent, the government said in a statement yesterday, compared with a previous forecast of 1 percent to 3 percent. Gross domestic product rose 1.1 percent from a year earlier in the second quarter, after a revised 0.7 percent gain in the first three months. The trade-reliant economy risks further deterioration this quarter after China yesterday reported a slump in July export growth to 1 percent. Expansion across Asia is slowing as U.S. consumers limit spending and Europe’s debt crisis continues, adding to the challenges for Hong Kong’s new Chief Executive Leung Chun-ying. “China’s stimulus measures have yet to revive growth and given such a difficult external environment, Hong Kong’s economic growth is still facing a lot of uncertainty,” said Raymond Yeung, a Hong Kong-based senior economist at Australia & New Zealand Banking Group Ltd. Yeung said he cut his full-year forecast for the city’s expansion to 2.4 percent from 3.4 percent yesterday.
- Japan Ratifies First Sales-Tax Increase Since 1997 in Noda Win. Japanese Prime Minister Yoshihiko Noda won parliamentary approval for his bill to raise the country’s sales tax for the first time in 15 years, a move that split his ruling party and weakened its election prospects. The opposition-controlled upper house yesterday ratified legislation to double the five percent tax by 2015 after Noda this week reaffirmed a deal with two opposition parties, pledging in return to call elections “soon.” The lower house passed the bill in June, causing more than 50 ruling Democratic Party of Japan legislators to leave.
- Meaning of weakness in Dow transports. Commentary: Transports have been lagging market for over a year.
- Struggling Euro Members Should Be Removed: Euro Architect. The euro zone should have started off with fewer members, and struggling members should be pushed out, a former European Central Bank member who helped shape the euro at its inception told CNBC.
- American and British Authorities at Odds in Libor Probe.
- School Bonds Could Trigger Fiscal Shock. Some new financial games have come to light involving a dangerous cocktail of innovation and debt. This time, it is not private households involved but public sector bodies – specifically, schools.The issue at stake revolves around some exotic bonds issued by San Diego educational authorities in recent years.
- The World's Largest Toy Supplier Plunges, And Says Things Aren't Good In The US And Europe.
- BAROFSKY: No Criminal Charges Against Goldman Tells Us Something About The 'So-Called' Financial Task Force.
- If There Were Any Doubt That Fiscal Cliff Failure Would Lead To Recession...
- 7 Reasons Why Investors Need To Pay Attention To Corn Prices.
- MORGAN STANLEY: There's One Reason Why The Bad Chinese Data Won't Trigger Immediate Stimulus.
- German Businessmen Are Already Freaking Out About Possible Hyperinflation.
- An Afghan Police Squad Invited US Special Forces Soldiers To Dinner And Killed Them.
- German Chancellor Merkel Might Not Be Able To Resist Breaking Up The Euro.
- Surveying The Landscape.
- US Corn Crop Estimate Cut 17% With Yields Forecast To Drop To 17 Year Lows.
- On Using World War 2 Flashbacks To Shame Germany Into Perpetual Bail Outs.
- Spanish Bonds Give Up 50% Of Gains In A Week (graph).
- Complete July Hedge Fund Performance Summary.
- Obama Administration Not Criticizing GM's(GM) Predatory Lending. Recent actions by General Motors regarding subprime lending reveal how much Warren -- and the Obama administration -- are willing to pull strings to pick winners and losers. The Investors Business Daily recently noted in a story that “while the administration has targeted subprime mortgage lending, it seems to have turned a blind eye to auto subprime loans." The IBD story was referring to GM, which received a $50 billion bailout. In 2008, GM vowed not to engage in subprime lending. However, as IBD noted, GM got back into making risky, subprime loans in order to increase its bottom line, which, of course, conveniently helps the Obama administration.
- Copper drops after soft China trade data.
- Brazil investors seek shelter as inflation flares up.
- Drought-hit US crops worse than feared, squeeze looms. The worst U.S. drought in more than half a century has battered the corn and soybean crops with larger losses than expected, causing domestic stockpiles to shrivel to near bare-bones levels, government data showed on Friday.
- S&P: Spain's bond spreads signal growing investor concern.
- Influential German business organization warns. An influential German business organization is warning that proposals to allow the European Central Bank to buy up bonds of struggling euro countries could seriously damage the single currency. The ZDH, which represents some 5 million skilled craftsmen, said Friday the "stabilization of the monetary union is no end, in and of itself, to be pursued with no thought to the associated economic, social and societal costs." It warns that a big bond-purchase program by the ECB could "pose a massive threat to the functioning of the monetary union." Markets have rallied on hopes the ECB will buy bonds of countries like Spain and Italy, to keep a lid on their borrowing costs. The ZDH also says national parliaments need to retain control of deciding how taxpayer money is spent.
- ECB's Coene: European Econ Clearly Evolving Negatively: Press. Europe's economy is clearly evolving in a negative direction, European Central Bank Governing Council member Luc Coene said in excerpts of an interview published Friday by Belgian daily L'Echo. "It is clear that something is happening in the world economy, as well as in the European economy, which is clearly evolving in a negative direction," Coene told the paper. Coene, who heads the Belgian National Bank, also told the paper that Belgian bank Dexia may need to be recapitalized if it cannot repay its debts. "If market conditions do not allow Dexia to reduce its losses, a recapitalization would certainly be necessary, and relatively quickly," Coene said. Coene said if market conditions persist that there is a risk this recapitalization would have to take place in the short term, rather than the long-term.
- China exports slump in July as global demand slows. (graph) China's exports slumped in July, as faltering demand from the country's two biggest foreign customers, the European Union and United States provided further evidence that the global economy is stalling.
- Germany Considers Holding EU Referendum. Chancellor Angela Merkel wants Europe to move toward an ever closer union in a bid to solve the euro crisis. But she is already pushing at the limits of what is possible under the constitution. The debate about holding a referendum on transferring power to Brussels is gathering momentum in Germany.
- The German economy faces "considerable risks" after its expansion slowed in the second quarter, citing the Economy Ministry as saying. The growth impetus from foreign trade will lesson in coming months amid a "difficult European environment," citing the report.
- Israeli Prime Minister Benjamin Netanyahu and Defense Minister Ehud Barak want to carry out an attack on Iran this fall, despite opposition in the security establishment.