Evening Headlines
Bloomberg:
- Italians Say Goodbye to Ferraris as La Dolce Vita Expires. A crackdown on luxury goods combined with budget cuts that have pushed Italy deeper into its fourth recession since 2001 are souring demand for sporty cars and other symbols of the country’s carefree lifestyle. The number of secondhand high- performance cars exported from Italy nearly tripled to 13,633 vehicles in the first five months of 2012, from 4,923 a year earlier, according to auto industry group Unrae.
- Draghi Bond Plan Fails to Entice Scottish Money Men: Euro Credit. European Central Bank President Mario Draghi's pledge to resume sovereign bond purchases has done little to convince Edinburgh's two biggest money managers that it's time to buy Italian and Spanish debt. "Once the dust settles it may be that what is announced by the ECB isn't the breakthrough that we would be looking for," said Jack Kelly, who's responsible for about 6 billion euros of government bonds as investment director at Standard Life Investments, the biggest money manager in the Scottish capital.
- China Stocks Drop for Third Day on Profit Concerns; Citic Slides. China’s stocks fell, sending the benchmark index lower for a third day, on concern the nation’s slowing economy is hurting corporate earnings. Citic Securities Co., the nation’s biggest listed brokerage, dropped 3 percent, adding to yesterday’s 9.1 percent slide, after the Securities Times reported the company denied speculation that it had “huge” losses on its overseas investments. China Merchants Securities Co. slid to the lowest since January after reporting lower first-half profit. Suning Appliance Co., the biggest home appliance retailer by market value, tumbled 8.4 percent after its board approved a bond sale. “The first-half earnings reports are showing companies are in the process of clearing inventories, which is the worst thing for corporate earnings,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. The Shanghai Composite Index (SHCOMP) dropped 0.6 percent to 2,122.80 at 10:44 a.m. local time, heading for the lowest level since Aug. 2.
- Rubber for January delivery declined 1.5% to 210.6 yen a kilogram on the Tokyo Commodity Exchange at 9:01 am local time, the lowest level since October 2009.
- Currency Flows Reversing China to Colombia as Trade Slows. Just three months after the biggest developing economies sold dollars to support their currencies, policy makers from Colombia to China are moving to weaken exchange rates and revive exports as the International Monetary Fund forecasts the slowest trade growth in three years. Colombian Finance Minister Juan Carlos Echeverry urged the central bank on Aug. 3 to boost minimum dollar purchases from $20 million a day, saying the country needs “more ammunition” to drive down the peso in the global “currency war.” The Philippines banned foreign funds from deposit accounts and unexpectedly cut interest rates in July as the peso hit a four- year high. In China, authorities lowered the yuan reference rate to the weakest since November, which according to Citigroup Inc. will create “headwinds” for other Asian currencies.
- Groupon(GRPN) Sales Miss Estimates as Online Deal Demand Dims. Groupon Inc. shares tumbled in late trading after the largest daily-deal website reported second- quarter revenue that missed estimates as economic weakness in Europe curbed international sales of online coupons. Groupon shares fell as much as 21 percent to $5.95 in extended trading following the report.
- California’s Revenue Falls 10.1% Below Forecast, Chiang Says. California tax revenue trailed forecasts in July by $475 million, or 10.1 percent below assumptions in Governor Jerry Brown’s budget, the state controller’s office said. Controller John Chiang, in a monthly update, attributed most of the shortfall to lower-than-expected sales-tax receipts. Sales levies in the most populous state were $295 million, or 33.5 percent below the forecast in Brown’s budget. “July’s sales-tax performance is harder to explain as it is unclear whether consumer activity has slowed or if this is an issue of timing,” Chiang’s office said in the update posted on the controller’s website.
- Obama Lawyers Urge High Court to Back Affirmative Action. The Obama administration urged the U.S. Supreme Court to reaffirm the legality of race-based college admissions, as the justices prepare to review the affirmative action programs that have become fixtures at the nation’s top universities. The high court will hear arguments Oct. 10 on a white woman’s contention that she suffered racial discrimination when the University of Texas rejected her application for admission. The case has broad implications for selective universities, almost all of which use race as an admissions factor to diversify their student bodies.
- Subbarao Says India Lacks Scope for Stimulus to Counter a Crisis. India has no space for economic stimulus to respond to a future crisis partly because it faces elevated inflation, central bank Governor Duvvuri Subbarao said. “Inflation is high, oil prices though they have come off $100 a barrel are at elevated levels, the external sector is under stress,” Subbarao said in a speech in the southern Indian state of Kerala yesterday. “There is just no space for fiscal or monetary response.”
- Peregrine Chief Russell Wasendorf Indicted on 31 Counts. Russell R. Wasendorf Sr., chief executive officer of the collapsed commodity firm Peregrine Financial Group Inc., was indicted by a federal grand jury on 31 counts of making false statements to regulators.
- Syria's Russian Connection. Regime Attempts to Sidestep Sanctions by Using Foreign Banks in Oil Sales.
- A Green Light for Car Loans. Banks, Finance Firms Boost Auto Lending; Fed Survey Finds Easier Standards. Banks and investors are still wary of lending to Americans purchasing houses and almost everything else, but they are lending people money to buy cars—even to borrowers who must stretch to make their payments.
- Trans-Atlantic Tensions Increase. The special relationship between financial authorities in the U.S. and U.K. is going through a rough patch. Trans-Atlantic regulatory sniping broke out last week for the second time in a month, after the New York State Department of Financial Services alleged that U.K. bank Standard Chartered PLC broke U.S. money-laundering laws. The allegations, which were denied by the bank, led the normally reserved Bank of England governor Mervyn King to chastise U.S. regulators. Settlement discussions between Standard Chartered, the New York Department of Financial Services and other U.S. regulators continued Monday.
- Germany's Wealth Grab. The impulse to soak the rich isn't exclusively French. François Hollande has earned his reputation as archenemy of Europe's wealthy, but don't imagine that the impulse to soak the rich is exclusively Gallic. Lawmakers in Germany's opposition parties are calling for a 1% tax on wealth and assets exceeding €2 million. The Social Democrat-Green proposal would add €11.5 billion to coffers annually, according to calculations by the influential German Institute for Economic Research, or DIW. If you think that's onerous, consider that last month the same think-tank published a report advocating a one-off levy of 10% on all wealth exceeding €250,000.
- The Solar-Painted Desert. Interior gives an environmental pass to its business friends. Who says President Obama isn't pro-business? The trick is being a business he likes. Several weeks ago in a remarkable but little-noticed policy directive, the Interior Department announced that it will allow construction permitting on 285,000 acres of public land in Arizona, California, Colorado, Nevada, New Mexico and Utah for solar energy projects. Even more remarkable, Interior said that energy firms can petition Interior to build solar installations "on approximately 19 million acres"—a larger land mass than Connecticut, Massachusetts, New Hampshire and Vermont combined.
MarketWatch:
- The only way out for China: Andy Xie. Problems only going to get worse as long as government interferes. China’s business conditions continue to deteriorate. Cement, coal and steel prices are still falling. Overcapacity is severe in most industries. Local governments pressure loss-making enterprises to continue production to sustain local gross domestic product. Hence, commodity prices are falling below total costs. Soon the prices may fall below variable costs.
Business Insider:
- Democrats Are Now Officially Freaking Out About Paul Ryan. In the first official sign that the Democratic Party is starting to worry about Paul Ryan's selection as vice president, the Democratic Congressional Campaign Committee sent out a fundraising email Monday urging donations in light of the supersized crowds, which reportedly reached as many as 15,000 in North Carolina. The email, from DCCC field director Brynne Craig, is entitled "disturbing report" and cites a Wall Street Journal piece of the crowd sizes (emphasis added):
- MORGAN STANLEY(MS): The Odds Of A Surprise Fed Move Are Like The Odds Of NASA Finding Extraterrestrial Life.
- The NOAA Is Shopping For 46,000 Rounds Of Ammunition.
- UBS: The Dollar Is Likely To Remain The World's Reserve Currency For The Next 50 Years.
- Why Global Macro Hedge Funds Are Getting Slammed These Days.
Zero Hedge:
- Deep Fried Black Swan Lands As China Admits It Has A Food Inflation Problem, Releases Corn, Rice From Reserves.
- Alan Simpson Confirms Reality: "All The Things You Love Will Not Come To Pass". (video) Conjuring images of Jack Nicholson in 'A Few Good Men', Alan Simpson laid out the sad and terrible truth that none of us or our politicians can handle in a very direct and sincere interview with Bloomberg TV's Deirdre Bolton. "Medicare costs stand to squeeze out the rest of domestic government spending," Simpson said, "it is on automatic pilot. It will use up every resource in the government." Simpson also said that the current path of debt, deficit and interest is “totally unsustainable” confirming once again the facade that his 18 years in Washington proved to him that he "never saw any projection of any economist ever come true."
- Why More States May See Gas Prices Above $4. Refining issues and higher crude prices have lit a fire under gasoline prices and could push them above $4 a gallon in more parts of the U.S. in the next few weeks.
- India's Inflation Likely Edged Higher in July. India is expected to report on Tuesday that headline wholesale price index inflation edged higher in July to an annual 7.37 percent from 7.25 percent in June, according to a Reuters poll of economists.
- Euro Zone Output Expected to Shrink in Second Quarter. Euro zone output is seen declining in the second quarter when the European Union releases data on Tuesday, as the debt crisis hurts confidence, making businesses reluctant to invest and consumers worried about spending. Gross domestic product (GDP) in the zone likely shrank 0.2 percent from the first quarter of the year, according to an average of estimates of 55 economists polled by Reuters. The most pessimistic forecast a contraction of 0.7 percent.
IBD:
- Yes, Obamacare Cuts Medicare More Than A President Romney Would. You wouldn’t know it from listening to the Obama campaign, but there’s only one Presidential candidate in 2012 who has cut Medicare: Barack Obama, whose Affordable Care Act cuts Medicare by $716 billion from 2013-2022. Today, the Romney campaign reiterated its pledge to repeal Obamacare, and promised to “restore the funding to Medicare [and] ensure that no changes are made to the program for those 55 and older.”
- Bank fees are on the rise. Watch out for rising bank fees. Checking accounts have been getting more expensive, as banks hike monthly costs, ATM charges and overdraft fees, according to a survey of more than 100 banks released Monday by bank comparison website MoneyRates.com.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows Mitt Romney attracting support from 47% of voters nationwide, while President Obama earns the vote from 44%. Four percent (4%) prefer some other candidate, and four percent (4%) are undecided.
- U.S. Treasury increases auto bailout cost estimate. The U.S. Treasury Department has said the auto industry bailout will cost taxpayers $3.4 billion more than previously thought. Treasury now estimates the 2009 bailout will eventually cost the government $25.1 billion, according to a report sent to Congress on Friday. That is up from the last quarterly estimate of $21.7 billion.
- World shipping crisis threatens German dominance as Greeks win long game. Germany’s shipping industry faces a wave of bankruptcies over coming months as funding dries up and deepening economic woes across the world cause a sharp contraction in container trade.
- Time to stop the EU navel-gazing. Whilst the Coalition continues to maintain that its policies are sustaining the economy, but our GDP tumbles, this is the time to examine this inherent contradiction between claims and performance.
- Australia's Sub Prime Mortgage Scandal Grows. Claims that Australia’s banking sector is conservative, safe and secure have taken a bath in recent days as evidence has emerged of Australia’s own sub-prime lending scandal.
- China should focus investment in less developed central and western regions, Yi Xianrong, a researcher with the Institute of Finance and Banking under the Chinese Academy of Social Sciences, writes in a commentary. The investments may bring "huge" financial and bank risks as some local governments may seek to expand investment only out of self-interest, Yi writes.
- China Should Improve Risk Controls for Growth. Effectively preventing and solving financial risks will help the "stable and relatively fast" development of the economy, according to a front page commentary.
- China's slowing econ0omy won't stall stricter property market controls. Stopping a home price rebound will be the government's main goal in 2H.
- None of note
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 151.50 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 125.75 +.75 basis point.
- FTSE-100 futures +.39%.
- S&P 500 futures +.07%.
- NASDAQ 100 futures +.23%.
Earnings of Note
Company/Estimate
- (HD)/.97
- (DKS)/.64
- (EL)/.16
- (SKS)/-.09
- (TJX)/.55
- (JDSU)/.12
8:30 am EST
- The NFIB Small Business Optimism Index for July is estimated to rise to 91.6 versus 91.4 in June.
- The Producer Price Index for July is estimated to rise +.2% versus a +.1% gain in June.
- The PPI Ex Food & Energy for July is estimated to rise +.2% versus a +.2% gain in June.
- Advance Retail Sales for July are estimated to rise +.3% versus a -.5% decline in June.
- Retail Sales Less Autos for July are estimated to rise +.4% versus a -.4% decline in June.
- Retail Sales Ex Autos & Gas for July are estimated to rise +.5% versus a -.2% decline in June.
10:00 am EST
- Business Inventories for June are estimated to rise +.2% versus a +.3% gain in May.
Upcoming Splits
- None of note
Other Potential Market Movers
- The Eurozone GDP report, Eurozone Industrial Production report, Germany ZEW Survey, UK Inflation report, IBD/TIPP Economic Optimism Index for August, weekly retail sales reports, Canaccord Genuity Growth Conference, Oppenheimer Tech/Internet/Communications Conference and the Raymond James Bank Conference could also impact trading today.
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