Evening Headlines
Bloomberg:
- U.S. Officials Concerned Over What Follows Arab Spring. The attacks on U.S. diplomatic compounds in Egypt and Libya, where ambassador Chris Stevens and three other Americans died, have fueled growing concerns about what will replace long-standing Arab dictatorships that kept order at the expense of freedom. The Obama administration supported democratic uprisings, abandoning decades of support for Egyptian President Hosni Mubarak in the Arab world’s most populous nation and supporting the rebels who toppled Libyan dictator Muammar Qaddafi. The U.S. helped negotiate the ouster of Yemen’s unpopular pro-American leader, and now is siding with Syrian rebels trying to topple dictator Bashar al-Assad. “The structures of state influence are not what they used to be, so it’s not just American, but all embassies that are at greater risk,” John Nagl, a research fellow at the U.S. Naval Academy in Annapolis, Maryland, said in a phone interview yesterday. The fatal attack on the U.S. consulate in Benghazi and the demonstration at the American Embassy in Cairo, as well as threats of violent protests elsewhere in the region, “raise troubling questions about the whole experience of the Arab awakening and why security has gotten so far out of control,” said Michele Dunne, director of the Middle East program at the Atlantic Council, a Washington policy research institute.
- Ambassador Stevens Dies, Witness Then Casualty in Libya. John Christopher Stevens, the American ambassador to Libya killed trying to evacuate the U.S. consulate in Benghazi during an attack by Islamist protesters, was a firsthand witness to Libya’s painful transition to democracy who became one of its casualties. He was 52. Known to friends, family and colleagues as Chris, the California native was a fluent Arabic-speaking, 21-year veteran of the State Department who had postings in Damascus, Cairo and other Middle Eastern locales before his first stint in Libya from 2007 to 2009. “He found humor in the blackest of moments, always made time for a game of tennis, and enjoyed a gin and tonic at the end of a long day,” said Molly Phee, who joined the foreign service in the same class as Stevens and is deputy chief of mission in Addis Ababa, Ethiopia. His friendship over 20 years “and kindness helped revive me when I felt low,” Phee said in an e-mail.
- German Court’s Backing Bailout Fund to Test EU Resolve on Crisis. German backing for Europe’s bailout fund quickened the bargaining over a bond-buying program for Spain, testing the resolve of government leaders and the European Central Bank to conquer the debt crisis. Spain is pressing for an ECB intervention with no strings attached, while creditors led by German Chancellor Angela Merkel are reluctant to lend more money. Mario Draghi’s central bank is waiting for the two sides to commit before it wades back into the bond market. After yesterday’s “Super Wednesday” in crisis politics marked by relief over the German supreme court’s endorsement of the 500 billion-euro ($645 billion) rescue fund, the question of a credit line or full loan program for Spain is set to dominate a two-day meeting of finance ministers starting tomorrow in Nicosia, Cyprus.
- China’s Stocks Drop to One-Week Low; Industrial Shares Decline. China’s stocks fell to a one-week low after the official Xinhua News Agency said massive stimulus measures would be “detrimental” to sustainable growth, overshadowing the government’s plan to provide aid to exporters. Gansu Qilianshan Cement Group Co. (600720) and machinery maker Sany Heavy Industry Co. slid at least 1.8 percent, leading declines for infrastructure-related stocks. “Reliance on exports and investments probably isn’t a sustainable way of growth,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages about $120 million. “Investors are still worried about China’s long-term growth model.” The Shanghai Composite Index (SHCOMP) fell 0.5 percent to 2,116.14 at the 11:30 a.m. local-time break.
- Shadow Bankers Vanishing Leave China Victims Seeing Scams. To live out his retirement years, He Zhongkui was counting on steady income from an investment that promised interest payments five times higher than what he could earn in a Chinese bank. Now He, a 62-year-old former municipal official in Wenzhou who rides a rusty bicycle, is cutting back on food and gasoline, having found himself one of a growing number of victims of China’s nebulous world of shadow banking. A “friend,” who he said had been paying him 2,400 yuan ($379) a month after He gave him one-third of his 600,000-yuan life savings to invest in real estate, suddenly disappeared. So did the payments and principal.
- Alaska Governor Faults U.S. Rules on Petroleum Reserve. Alaska Governor Sean Parnell joined some oil industry officials in criticizing proposed rules issued by the U.S. Interior Department governing drilling in the National Petroleum Reserve-Alaska. Parnell said yesterday the new rules effectively withdraw millions of acres from potential drilling, and said the state would withdraw from an memorandum of understanding concerning the reserve.
- Chicago Teachers Shouldn’t Be Obstacle to School Progress. The stakes in Chicago’s school strike go well beyond the nation’s third-largest public school system. For U.S. education reform, it may be a watershed. For teachers unions, it may be a Waterloo. It was poor timing for Chicago teachers to walk out on 350,000 children Monday, the second week of the school year. (Despite union claims to the contrary, “walk out” is exactly what the teachers did, unilaterally shutting off negotiations with city.)
- Moore Capital Said to Cut Investment Jobs in Team Restructuring. Moore Capital Management LLC, the $15 billion hedge fund run by Louis Moore Bacon, cut 10 to 15 investment jobs as it restructures one of its equity teams, according to three people with knowledge of the matter. The portfolio managers and research analysts were let go on Sept. 11, said one of the people who asked not to be identified because the information is private. Patrick Clifford, a spokesman for New York-based Moore, declined to comment.
- India Potential Dims as Skidding Investment Tests Singh: Economy. India’s growth outlook is waning as the longest fall in capital-goods output since 2009 signals weaker investment, adding pressure on Prime Minister Manmohan Singh to salvage his development agenda. Capital-goods production, a gauge of corporate expenditure on factories and machinery, slid in July for a fifth straight month, the longest stretch since declines over most of 2009, a report showed yesterday. India’s economic growth potential may have fallen to 6 percent to 6.5 percent a year, below the Reserve Bank of India’s 7.5 percent estimate, JPMorgan Chase & Co. said.
- Libya Attack Sparks Crisis. U.S. Sends Marines After Ambassador, Three Other Americans Killed; 'We Couldn't Stop Them'. The killing of the U.S. ambassador to Libya and three other Americans, in one of the most brazen attacks on a U.S. diplomatic compound in a generation, sparked a security crisis in the North African country, elevated tensions across the Middle East and raised concerns about how well the U.S. can protect its diplomats abroad. The U.S. responded to the assault by dispatching two Navy destroyers, dozens of Marines, federal investigators and intelligence assets to Libya to protect Americans and help hunt the suspected religious extremists who carried out the attack late Tuesday. U.S. officials described the attack that killed Ambassador Christopher Stevens as complex and possibly premeditated.
- Full Coverage: Libya Violence.
- European Banks Keep Ties to Iran.
- Germany Balks at Bank Union. Germany is reluctant to cede control of its banking sector, which includes many small, public-sector banks with close ties to local governments. The German government wants the new regulator to concentrate only on the region's biggest banks, though it has left open the possibility of eventually expanding its authority. Berlin's position is controversial within Germany's financial community, pitting Deutsche Bank AG and other private-sector banks against the public-sector banks. Currently, all European banks are supervised by their national regulators.
- Cheney: Cairo, Benghazi and Obama Foreign Policy. In too many parts of the world, America is no longer viewed as a reliable ally or an enemy to be feared. It has certainly been a terrible 48 hours. In Libya, violent extremists killed American diplomats. In Cairo, mobs breached the walls of the U.S. Embassy, ripped down the American flag and replaced it with the al Qaeda flag. In response to the attack in Cairo, diplomats there condemned not the attackers but those who "hurt the religious feelings of Muslims." The president appeared in the Rose Garden less than 24 hours later to condemn the Libya assault and failed even to mention the attack in Egypt. The message sent to radicals throughout the region: If you assault an American embassy but don't kill anyone, the U.S. president won't complain. Though the administration's performance in the crisis was appalling, it wasn't surprising—it is the logical outcome of three-and-a-half years of Obama foreign policy.
CNBC:
- Economy 'In a Deep Hole, Crawling Along': Feldstein. The economy is doing “terribly” and may not reach 2 percent growth this year, Martin Feldstein, former Council of Economic Advisors chairman under President Reagan, told CNBC’s "Closing Bell.
Business Insider:
- China's Next Leader Xi Jinping Suffered Heart Attack.
- Why Recent Graduates Are Moving Back Home In Droves.
Zero Hedge:
- Here's Hilsenrath With What To Expect Tomorrow.
- Goldman(GS) On Spain's Tension-Inducing Arrogance.
- US Totalitarianism Loses Major Battle As Judge Permanently Blocks NDAA's Military Detention Provision.
- 72 Seconds Of Sanity On Europe. (video)
New York Daily News:
- How to send Egypt a message. The Morsi government is encouraging anti-U.S. unrest; the Obama administration must now send a clear signal back. The image of a black Al Qaeda flag flying above the United States Embassy in Cairo on Sept. 11 shocked Americans. It should have shaken the Egyptian Government as well. Egypt receives $1.5 billion annually from the U.S., and Washington is about to forgive $1 billion in the ailing state’s debt. But Egypt’s government is charting a different course. Rather than denouncing the egregious violation of U.S. sovereignty, Egypt’s ruling party, the Muslim Brotherhood, is doubling down. This Friday, the Brotherhood is slated to hold a mass demonstration just two blocks from U.S. compound in Cairo. In Egypt and the U.S., the attack is widely being attributed to an obscure anti-Islamic movie. But in fact, Al Gamaa Al Islamiyya, a U.S.-designated terrorist organization, announced weeks ago that it would protest in front of the U.S. Embassy on 9/11 to demand the release of Sheikh Omar Abdel Rahman, the blind cleric mastermind of the first World Trade Center Bombing in 1993.
- The Price Of Oil Is The New Economic Spoiler. The charts below — provided by Ruchir Sharma, Morgan Stanley Head of Emerging Markets and Global Macro — prove without a doubt that rising oil prices due to QE1 and QE2 act like rising interest rates– and stall the economy into recession.
- QE3 won't create jobs. "The Fed continues to want the economy to grow faster and specifically, to grow more jobs, but the ability of QE to do that is extraordinarily limited," she said. "We know that QE reduced interest rates, but we also know that has not led to more construction, more mortgages, more business investment, or more lending," Mann said. "Since it hasn't done any of that, it probably hasn't created jobs either." Meanwhile, banks are sitting on $1.5 trillion in excess reserves and haven't been eager to lend that money out. In fact, low interest rates make it harder for them to turn a profit on new loans.
- Daily Presidential Tracking Poll.The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows President Obama attracting support from 46% of voters nationwide, while Mitt Romney earns 45% of the vote. Four percent (4%) prefer some other candidate, and five percent (5%) are undecided.
- China says tensions with Japan likely to hurt trade. Rising tension between China and Japan over disputed islands is likely to harm their trade ties, a senior Chinese commerce official said on Thursday. Asia's two largest economies both claim islands in the East China Sea and tensions have flared since Tuesday when Tokyo announced it would purchase disputed islands from a private Japanese owner, an act that Beijing has called a violation of its sovereignty. Chinese Vice Minister of Commerce Jiang Zengwei added to the volley of warnings from Beijing. "With Japan's so-called purchase of the islands, it will be hard to avoid negative consequences for Sino-Japanese economic and trade ties," Jiang told a news briefing. China is Japan's largest trading partner.
- Bundled US car loan deals enjoy comeback. Mr Longaker, general sales manager at the dealership, says cheap financing is luring drivers to trade in their models more regularly, and even buyers with poor credit histories finally have access to loans again. “There’s no shortage of people who have suffered heartbreak over money over the last few years,” he says. “Until four or five months ago, they had no chance of financing. Now they do. And as for the best borrowers, they can now get rates as low as 2 per cent.
Telegraph:
- The euro’s demise may be the final chapter of the ERM debacle. The drama of 1992 showed why Germany cannot lead Europe out of a monetary crisis. Germany cannot be relied on to sacrifice its own national interest to that of the broader whole. Quite right too, you might reasonably argue, but the fact is that even the relatively loose arrangement of a fixed exchange rate regime, let alone the full monty of monetary union, cannot survive unless mutual obligations are recognised. Europe’s problem with the single currency is but a reflection of a much deeper and older fault line at the heart of this troubled continent: Germany is both too big and economically dominant to be easily contained, but too small, tainted by history and politically alien, to be trusted with the controls. Perceived national interest prevents Germany from offering the benighted periphery a plausible way out of depression, even though it must if the euro is to survive. Yesterday, the German Constitutional Court seemed to give a qualified thumbs up to Europe’s bail-out arrangements, so perhaps there is hope for the euro yet. However, any reading of the detail powerfully suggests otherwise. In fact, this is as close to a thumbs down as you can get without the German court immediately calling time on the whole endeavour. The flexibility needed in German policy to save monetary union is denied by the small print of the ruling. What began with the debacle of the ERM is heading for eventual nemesis in the crisis of the euro.
- China Should Act to Stop Inflation Return, BOC Chair Says. China should take measures to prevent the economic conditions of 2010 when inflation reached 6.5%, Bank of China Ltd. Chairman Xiao Gang wrote in a commentary. There is doubt as to how long the low consumer price level will last, Xiao wrote.
- PPI y/y growth may stabilize and rebound in 4Q, according to a reporter named Cao Shuishui.
- Some Chinese travel agencies have stopped offering trips to Japan as the Diaoyu Islands dispute continues.
- A Chinese sovereign debt crisis is "extremely unlikely" as the nation has sufficient assets to cover its debt, citing Li Yang, vice president of the Chinese Academy of Social Sciences and former People's Bank of China adviser. China's sovereign balance sheet faces risks of asset- liability mismatches and contingent liabilities, Li said. China should reduce government-directed economic activities and reduce contingent liabilities, he said.
Jefferies:
- Rated (RHT) Buy, target $67.
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 123.50 -7.0 basis points.
- Asia Pacific Sovereign CDS Index 102.75 -4.25 basis points.
- FTSE-100 futures -.01%.
- S&P 500 futures -.10%.
- NASDAQ 100 futures -.10%.
Earnings of Note
Company/Estimate
- (PIR)/.19
- (ALOG)/.84
8:30 am EST
- The Producer Price Index for August is estimated to rise +1.2% versus a +.3% gain in July.
- The PPI Ex Food & Energy for August is estimated to rise +.2% versus a +.4% gain in July.
- Initial Jobless Claims are estimated to rise to 370K versus 365K the prior week.
- Continuing Claims are estimated to fall to 3318K versus 3322K prior.
12:30 am EST
- The FOMC is expected to leave the benchmark fed funds rate at .25%.
2:00 pm EST
- The Monthly Budget Deficit for August is estimated to widen to -$170.0B versus -$134.1B in July.
Upcoming Splits
- None of note
Other Potential Market Movers
- The Fed's Bernanke speaking, Italian bond auction, G-20 Meeting, 30Y T-Bond auction, Moody's decision on Spain, RBC Consumer Outlook Index for September, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, Morgan Stanley Industrials/Autos Conference, (COO) analyst meeting, (WDC) analyst day and the (COV) investor meeting could also impact trading today.
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