- Spain Deficit Goals at Risk as Cuts Consensus Fades: Euro Credit. Quarrels over who bears the brunt of cuts worth more than 10% of Spain's annual gdp threaten Prime Minister Mariano Rajoy's plan to tackle the euro area's third-largest deficit as a second bailout looms. A seven-day rally that has driven Spain's 10-year yield to 6.2% from 6.9% may falter as squabbles between the government, regions and towns about spending and tax receipt allocations hobble deficit reduction. Spain will miss its targets for budget gaps of 6.3% of GDP this year and 4.5% in 2013 as the nation's recession worsens, according to the median forecast of 12 analysts surveyed this month by Bloomberg news. "As budget deficit targets look unachievable, the risk of a potential full bailout of the Spanish economy is still there," Jaime Becerril and Axel J. Finsterbusch, analysts at JPMorgan Chase in London, wrote. "Further measures must be taken to restore market confidence."
- Samaras Warns Return to Drachma Could End Democracy, Bild Says. Greece’s Prime Minister Antonis Samaras said a return to the drachma would cause five more years of recession in his country and the unemployment rate to exceed 40 percent, Bild-Zeitung reported, citing an interview. An exit from the euro could mean the end of democracy in Greece and lead to situation similar to the Weimar Republic, the newspaper cited him as saying in a preview of an article for tomorrow’s edition. Greece needs more time, not necessarily more money, to be able to return to economic growth, Samaras said, according to Bild. His government will cut staff in the public sector by hiring one person for every ten people retiring and implement tax and employment-law changes, he also told Bild.
- Last Man Standing Means Europe Investment Banks Resist Shrinking. Europe’s failure to resolve its sovereign-debt crisis will force investment-banking chiefs in the region to consider shuttering entire businesses rather than rely on piecemeal job reductions to revive profit. Dealmaking fees may drop 25 percent this year from 2009, when the crisis began in Greece, research firm Freeman & Co. estimates. European banks have cut about 172,000 positions since then, according to data compiled by Bloomberg, the same strategy they used after Lehman Brothers Holdings Inc. collapsed in 2008.
- Bond Sell-off Running Out of Steam, BofA(BAC) Says: Technical Analysis. The Treasury 10-year note yield's inability to breach its 200-day moving average as risk assets have climbed suggests the bond market sell-off that drove the security down for four weeks may be ending, according to Bank of America, citing analysts of trading patterns.
- Japan Swings to Trade Deficit as Europe Drags Down Exports. Japan reported a wider-than-expected trade deficit in July as Europe’s sovereign debt crisis and a slowdown in China dragged down exports and higher oil prices boosted imports. The shortfall was 517.4 billion yen ($6.5 billion), after a revised 60.3 billion yen surplus in June, the Finance Ministry said in Tokyo today. The median forecast in a Bloomberg News survey of 28 analysts was for a 270 billion yen deficit. Exports fell 8.1 percent from a year earlier, compared with an estimated 2.9 percent decline. Imports rose 2.1 percent. Shipments to the European Union fell 25 percent in July from a year earlier, the biggest decline since October 2009, while those to China slipped 12 percent, the ministry said.
- China’s Stocks Decline on Property Tax Concern, Earnings Slump. China’s stocks fell for the second time in three days as slumping earnings and speculation the government will expand a property tax overshadowed the prospect of more economic stimulus. China Vanke Co. led declines for real estate developers after the Legal Evening News reported Hubei province is proposing property tax rules. Dongfang Electric Corp., China’s second-biggest maker of power equipment, dropped the most in a week after reporting a decline in six-month net income. China Shipping Development Co., part of the nation’s second largest sea-cargo group, fell 1.3 percent after posting its first half- year loss since at least 1998.
- China Cotton Demand Seen Falling 11% on Economy’s Harsh Winter. Cotton consumption in China, the largest user, may shrink 11 percent this year as demand falters, according to Hong Kong-listed Weiqiao Textile Co. (2698), which said that commodities are piling up as the economy deteriorates. Usage may drop to 8 million metric tons this year, Zhang Hongxia, chairman of China’s largest cotton-textile maker, said in an interview. That compares with consumption of about 9 million tons in 2011, according to Zhang, who had forecast in March that 2012 demand may gain to as much as 9.5 million tons.
- Container Lines Losing Price Battle as Costs Overwhelm: Freight. The world’s container lines can’t raise freight rates fast enough to cover soaring fuel prices as persistent overcapacity works against the industry. Hapag-Lloyd AG, Europe’s fourth-biggest container company, said Aug. 14 that further increases are “crucial” if it’s to offset rising bunker costs -- the price of fuel used on ships -- and generate an operating profit this year. Still, a lack of demand forced the Hamburg-based carrier to delay a rate increase this month on routes between east Asia and northern Europe and cut a planned peak-season charge by more than half. Bunker fuel prices have jumped 19 percent to $673 a ton from this year’s low on June 22, according to data compiled by Bloomberg. At the same time, the Shanghai Containerized Freight Index -- a measure of prices for cargo leaving the world’s busiest port -- has dropped 6.2 percent since June 29 as Europe’s debt crisis drags down the global economy and stunts trade. Bunker prices will remain between $600 and $700 a ton this year, according to a forecast by ICAP Plc. Chinese export growth collapsed in July, and the world’s second-largest economy expanded at the slowest pace in three years in the quarter through June.
- Dell(DELL) Forecast Misses Estimates as PC Sales Continue Slump. Dell Inc. forecast third-quarter revenue that missed estimates and cut its full-year profit outlook as competition from tablets and an anemic global economic recovery drags down demand for personal computers. Revenue in the current quarter that ends in October will decline 2 percent to 5 percent from the prior three-month period, the Round Rock, Texas company said in a statement. That is the equivalent of $13.8 billion to $14.2 billion in sales, less than the $14.9 billion average analyst estimate, according to data compiled by Bloomberg.
- Vietnam Mogul Arrest Sparks Stock Plunge as Tensions Surface. Vietnam’s arrest of a high-profile banking tycoon triggered the largest stock market drop in almost four years amid investor concern that it signaled wider vulnerabilities in the country’s financial system.The benchmark VN Index on the Ho Chi Minh City Stock Exchange fell 2.1 percent as of 10:14 a.m. local time, extending yesterday’s 4.7 percent plunge, the biggest drop since October 2008.
- Europe Pressures Intensify. Germany's Merkel Faces Tough Choices as Greek Crisis Threatens Euro Anew. German Chancellor Angela Merkel faces one of the toughest choices of her career in the coming weeks: whether to risk the unraveling of the euro zone, or her government. After a summer lull, Greece is again Ms. Merkel's biggest headache. The Greek government, struggling with depression-like conditions that have pushed the economy to the brink, is likely to need many billions of euros of additional aid to avoid bankruptcy. If Athens doesn't get the money, it may be forced to leave the euro, an outcome that would undermine financial markets' tenuous confidence in other vulnerable southern euro members.
- White House Worked With Buyout Firm to Save Plant.
- Ties to Regions Financial Probed. Federal Prosecutors Scrutinize Executive-Search Firm's Golf Trips, Loan From Bank; Pebble Beach Getaway.
- EPA Smack-Down Number Six. A federal court cashiers another illegal Obama regulation. The Environmental Protection Agency has been waging a regulatory war on Texas—and losing in the federal courts. On Tuesday the U.S. Court of Appeals for the D.C. Circuit struck down another misguided EPA rule.
- China faces steel-production paradox. Steel prices are weakening, but Chinese steel mills are ramping up production anyway, adding to concerns of a serious price crash from analysts already worried about the sector. The latest round of industry data tracking output over a 10-day period showed Chinese steel production increased 1.1% in early August, confounding expectations for a decline in output by volume. The results prompted Nomura analysts to say in a note Tuesday said they were “very concerned,” having forecast a 5% decline in output for the output.
- China Is Entering A 'Danger Zone' [Charts].
- China Is Mass Producing 'Zombie Companies' And They're Eating Away At The Economy [CHARTS].
- Iraq Is A Big Hot Mess Since The US Pulled Out Last Year.
- China And Japan Are Playing Dangerous Geopolitical Games.
- The Spain – ECB Vaudeville Show.
- Lower Quality, Higher Beta Credit is Underperforming. (graph)
- What Happened After Europe's Last Three Currency "Unions" Collapsed.
- Why green energy startups are now 'toxic'. Investors say they won't lend money to green energy companies, especially startups, because they haven't proven they can be profitable on their own.
- Scott Powell: Year after debt downgrade, U.S. in worse shape. America’s fiscal condition has worsened due to debt that’s been growing much faster than the economy. Looking back, when Barack Obama took office in January 2009, total U.S. government debt stood at about $10 trillion. Since then, more than $5.5 trillion has been added to the national debt, which is about to hit $16 trillion. This out-of-control spending and debt is the primary reason why all three credit rating agencies, Moody's, Fitch and S&P, have negative outlooks on U.S. government debt, all but assuring further rating downgrades in the near future.
- Election 2012: Obama 45%, Romney 47%. (graph)
- Seagate Technology(STX) in deal to buy Solyndra plant-source. Seagate Technology Plc, maker of hard drives and storage devices, has reached an agreement to buy the former manufacturing plant and headquarters building of bankrupt Solyndra LLC, which was financed by a controversial government loan, a source familiar with the deal said.
- Intuit(INTU) profit misses, expects weak 1st-qtr revenue. Intuit Inc, the maker of tax-preparation software TurboTax, sees weaker first-quarter revenues as it comes off a weak tax filing season that also hurt fourth-quarter results, which missed Wall Street estimates.
- Russia warns West over Syria after Obama threats. Russia warned the West on Tuesday against unilateral action on Syria, a day after U.S. President Barack Obama threatened "enormous consequences" if his Syrian counterpart used chemical or biological arms or even moved them in a menacing way.
- S Korean household debt hits critical point. While consumers in most developed countries have deleveraged over the past four years, South Korea’s household debt pile has continued to grow and rose last year to 164 per cent of disposable income: much higher than the US figure at the beginning of the subprime mortgage crisis.
- RBS under investigation by US authorities. Royal Bank of Scotland is under investigation by US authorities for potential breaches of sanctions against Iran.
- China bubble in 'danger zone' warns Bank of Japan. China risks a repeat of Japan’s boom-bust disaster 20 years ago as exorbitant property prices combine with a demographic tipping point, a top Japanese official has warned.
- Record high cesium detected in fish in sea around Fukushima plant. Tokyo Electric Power Co. said Tuesday that it has detected a record high 25,800 becquerels per kilogram of radioactive cesium in fish sampled within a 20-kilometer range of the crippled Fukushima Daiichi nuclear power plant. The level of cesium found in greenling is 258 times that deemed safe for consumption by the Japanese government, suggesting that radioactive contamination remains serious more than a year after the nuclear crisis.
- RBA's Ellis Badly Misreads Bubble Dynamics. In December 2006, the Reserve Bank of Australia’s (RBA) Luci Ellis published a research paper arguing that the huge run-up in housing values (and bank balance sheets) was not a major concern for financial stability in the US or globally:
- North Korea's Kim Jong Un will attend a Non-Aligned Movement summit in Tehran next week, citing the summit's spokesman.
- Rated (BSFT) Underperform.
- Asian equity indices are -.75% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 146.0 +.5 basis point.
- Asia Pacific Sovereign CDS Index 122.75 -.25 basis point.
- FTSE-100 futures -.87%.
- S&P 500 futures -.30%.
- NASDAQ 100 futures -.23%.
Earnings of Note
10:00 am EST
- Existing Home Sales for July are estimated to rise to 4.51M versus 4.37M in June.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -250,000 barrels versus a -3,699,000 barrel decline the prior week. Distillate inventories are estimated to rise by +1,000,000 barrels versus a +677,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,350,000 barrels versus a -2,371,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.3% versus unch. the prior week.
2:00 pm EST
- Minutes of FOMC Meeting
- None of note
Other Potential Market Movers
- The HSBC China PMI, Fed's Evans speaking, Jean-Claude Junker's meeting with Greek leaders and the weekly MBA mortgage applications report could also impact trading today.