Today's Headlines

Bloomberg:

• Draghi Told Lawmakers ECB Must Buy Bonds for Euro’s Survival. European Central Bank President Mario Draghi said the bank’s primary mandate compels it to intervene in bond markets to wrest back control of interest rates and ensure the euro’s survival. Mounting his strongest case yet for ECB bond purchases, Draghi told lawmakers in a closed-door session at the European Parliament in Brussels yesterday that the bank has lost control of borrowing costs in the 17-nation monetary union. Bloomberg News obtained a recording of his comments, some of which were published by Italian news agency AGI yesterday. “We cannot pursue price stability now with a fragmented euro area because changes in interest rates affect only one country, or two countries at most,” Draghi said. “They have no importance whatsoever in the rest of the euro area.” ECB bond purchases are therefore “a way to comply with our primary mandate,” he said, adding: “Frankly, all this also has to do very much with the continuing existence of the euro.”
• European Stocks Decline on U.S. Manufacturing Report. European stocks retreated the most in two weeks as a report showed that U.S. manufacturing unexpectedly contracted in August. Vodafone Group Plc (VOD) fell 2.6 percent after Sanford C. Bernstein & Co. downgraded the world’s second-largest mobile- phone operator. Royal Ahold NV rose 2.5 percent after saying it may sell its 60 percent stake in Scandinavian retailer ICA, possibly through an initial public offering. The Stoxx Europe 600 Index slid 1.1 percent to 265.43 at the close of trading, its biggest drop since Aug. 22.
• Merkel Swings Into 2013 Election Mode Evoking Crisis, China. German Chancellor Angela Merkel swung into campaign mode with a message of cutting debt, bolstering energy security and a jab at her Social Democratic challengers. Merkel used separate events in the south and west of the country yesterday to hone her stump speech one year out from federal elections that she has said will be fought on the euro- area crisis that spread from Greece and on Germany’s shift away from nuclear power to renewable energies. Due in the fall of 2013, the vote will determine whether Germany’s first woman chancellor and its first from the former communist east secures a third term. “We got used to living beyond our means and to running up debts,” Merkel told a meeting of her Christian Democratic Union party in the western Ruhr Valley city of Recklinghausen. “This has brought us into dependency on financial markets. We will only get out of this dependency if we start thinking more about how we spend less than we take in.”
• Emerging Market Stocks Decline on China, Europe Concerns. Emerging-market stocks fell for the first time in three days as Goldman Sachs Group Inc. cut Chinese earnings estimates and a report showed contraction in U.S. manufacturing for a third straight month. The MSCI Emerging Markets Index (MXEF) slipped 0.6 percent to 947.53 by 11:17 a.m. in New York. Brazil’s Bovespa stock index (VXEEM) declined to a one-month low, with telecommunications company Oi SA and steelmaker Cia. Siderurgica Nacional SA leading the losses. China Merchants Bank Co. dropped for a fifth day in Hong Kong, while the Shanghai Composite Index closed at its lowest level since February 2009. Hyundai Motor Co. (005380) and Kia Motors Corp. (000270) retreated more than 2 percent in Seoul.
• China’s Stocks Fall on Growth, Earnings Concerns. Chinese stocks fell, dragging the benchmark index to the lowest level since February 2009, as Societe Generale SA predicted a weaker growth outlook and Goldman Sachs Group Inc. cut its estimates for Chinese earnings. China Construction Bank Corp. (939) sank the most in ten weeks as Credit Suisse Group AG warned of softening loan demand and lower net interest margins at lenders. The Shanghai Composite Index (SHCOMP) closed 0.8 percent lower at 2,043.65, the lowest level since Feb. 2, 2009
• Home Sales Double in Beijing on Rate Cuts, Centaline Says. Beijing home sales in August surged 110 percent from a year earlier driven by first-home buyers after the central bank cut interest rates and signs of a price rebound damped expectations for cheaper housing.
• U.S. Banks Still Battling Excessive Non-Performing Loans: Mizuho. Two key indicators of banking health in U.S., non-performing loan balances and coverage ratios, still show signs of stress, and this will weigh on the economy, writes Mizuho chief economist Steven Ricchiuto in a client note. Based on FDIC data, non-performing loans still at 4% of total assets, about 2% higher than typical. Coverage ratio still stuck at recessionary levels at just above 1.5%, FDIC data show. Historically, economy likely to remain stuck in "jobless recovery" until the coverage ratio and NPL balances converge. Convergence could take another 2-3 years, they said.
• Manufacturing in U.S. Shrank in August for Third Month. U.S. manufacturing shrank for a third month in August in the longest decline since the recession ended in 2009, threatening to deprive the world’s largest economy of a driver of growth. The Institute for Supply Management’s factory index fell to 49.6 last month, the lowest since July 2009, from 49.8 in July, the Tempe, Arizona-based group said today. Economists in the Bloomberg survey projected an August reading of 50, which is the dividing line between expansion and contraction. Measures of orders and production dropped to three-year lows. The group’s production index decreased to 47.2, the weakest since May 2009. The new orders measure fell to 47.1, while the employment index dropped to 51.6, the lowest since November 2009. The measure of orders waiting to be filled fell to 42.5 from 43. The inventory index rose to 53 from 49.
• Egypt Has ‘No Objection’ to Importing Iranian Oil, Ahram Says. Egypt has “no objection” to importing and refining Iranian oil, the state-run Al-Ahram reported, citing Oil Minister Osama Kamal. Kamal said he believed that President Mohamed Mursi’s recent visit to Iran would open doors for economic cooperation between the two countries, the Cairo-based daily reported.
• Apple(AAPL) Announces Sept. 12 Event As New iPhone Anticipated. Apple Inc. (AAPL) sent out invitations to a Sept. 12 product event in San Francisco, where the company is expected to unveil a redesigned iPhone.
• Food-Stamp Use Climbs to Record, Reviving Campaign Issue. Food-stamp use reached a record 46.7 million people in June, the government said, as Democrats prepare to nominate President Barack Obama for a second term with the economy as a chief issue in the campaign. Participation was up 0.4 percent from May and 3.3 percent higher than a year earlier and has remained greater than 46 million all year as the unemployment rate stayed higher than 8 percent. New jobless numbers will be released Sept. 7. “Too many middle-class families who have fallen on hard times are still struggling,” Agriculture Secretary Tom Vilsack said in an e-mailed statement today. “Our goal is to get these families the temporary assistance they need so they are able to get through these tough times and back on their feet as soon as possible.” Food-stamp spending, which has more than doubled in four years to a record $75.7 billion in the fiscal year ended Sept. 30, 2011, is the USDA’s biggest annual expense.
• Amazon(AMZN) Rivals Netflix(NFLX) in Epix Deal Adding Movies to Prime. Amazon.com Inc. reached a deal with pay-television channel Epix to add movies such as “The Hunger Games” to the roster of films available through Amazon Prime Instant Video, ratcheting up competition with Netflix Inc. (NFLX).
• Oil Falls on U.S., European Manufacturing Data. Oil fell as U.S. and euro-area manufacturing contracted in August, raising concern that slower economic growth will reduce demand. Prices fell as much as 1.5 percent after the Institute for Supply Management’s U.S. factory index declined more than analysts forecast. In the euro area, manufacturing slipped more than initially estimated, London-based Markit Economics reported yesterday.

Wall Street Journal:

• Gold Bugs Loving QE3 Chatter.
• In Europe, Signs of a Jobless Generation.
• Moody's: U.S. Banking Outlook Negative Despite Stronger Banks.

CNBC.com:

• Spain's Capital Flight Now Worse Than Asian Financial Crisis. The flight of capital from Spain is now worse than what Indonesia, one of the hardest hit countries during the Asian financial crisis, experienced in the late 1990s, according to analysis by Nomura.

Business Insider:

• The Scale Of Conflict In Aleppo, Syria Will Blow Your Mind. You wouldn't know it from the lack of media attention, but a major city is being destroyed in Syria.The country's largest city, Aleppo, has been under siege for over a month. It has emerged as the key stronghold in the rebellion against President Bashar al-Assad, whose forces continue to intensify their aerial bombardment of the city. With nearly 3 million people in the city, this is a bigger siege than Leningrad.
• Why Facebook(FB) Is Tanking: Morgan Stanley(MS) Cut Its Facebook Forecast.
• Why Asking For Higher Tax Rates Is Just Plain Stupid.
• Overexposed SEAL Team 6 Has Been 'Likely Benched,' Says An Insider.
• BIG MISS: Construction Spending Falls 0.9%.

Zero Hedge:

• Weak Indian Monsoon Dries Up Centrally-Planned Liquidity Expectations.
• The One Chart To Explain Why ECB's Short-Dated Bond Buying Program Will Fail.
• As The Iron Anvil Falls, Will Australia Be Stuck Below It?
• Nomura: "Spain Will Need Full-Blown Bailout".

Washington Post:

• Pickups drive US auto sales as GM, Ford recover from poor July.

Gallup:

• Americans' Economic Confidence in August Ties 2012 Low. (graph)
  

Rasmussen Reports:

• Rasmussen Employment Index Falls to Ten Month Low. The Rasmussen Employment Index fell nine points in August to 72.0, the lowest level of confidence since October 2011. Worker confidence in the labor market is now roughly the same as it was in the month following the Wall Street meltdown in the fall of 2008.

The Blaze:

• 2012 Dem Platform Drops Language Committing to Keeping Jerusalem the Capital of Israel.

Reuters:

• Baltic index drops as panamax rates weaken. The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry commodities, fell on Tuesday as rates for panamax vessels continued to slip. The main index, which factors in the average daily earnings of capesize, panamax, supramax and handysize dry bulk transport vessels, fell 5 points or 0.72 percent to 693 points. The overall index, which gauges the cost of shipping commodities such as iron ore, cement, grain, coal and fertiliser, has fallen about 60 percent this year.
• Struggling Charlotte awkward setting for Obama, Democrats. It's what campaign strategists might call an "optics" problem: A president asking for another term before an adoring crowd in a state where the unemployment rate hovers around 10 percent four years after the U.S. financial crisis battered its big banks and manufacturers.
• Halliburton(HAL) sees drop in N.American revenue in 3rd qtr. Halliburton Co, the largest oilfield services provider in the United States, said a decline in North American drilling would lower revenue in the region in the third quarter from the second quarter. U.S. benchmark natural gas prices, despite pulling away from decade lows, are still down more than 25 percent from last year. So the number of rigs working has steadily dropped across North America, dampening services companies' pricing power.
• Hedge fund manager Einhorn scores 4.2 percent gain August.

Telegraph:

• Asian exports crumble. (graph)

Irish Independent:

• Global Crisis Moves East as China Suffers Rapid Downturn. CHINA’S industrial output is contracting at the fastest pace since the depths of the global financial crisis, with knock-on effects spreading across the Far East. “It just keeps getting worse,” said Alistair Thornton and Xianfang Ren from IHS Global Insight. “The government has underestimated the pace of the slowdown and is behind the curve.” Evidence of a hard landing over the summer is becoming clearer. Rail volumes fell 8.2pc in July from a year before. The Japanese group Komatsu said its exports of hydraulic excavators to China – a proxy gauge for Chinese construction – fell 48pc in August from a year before. The twin effect of China’s downturn and Europe’s double-dip recession has turned into a full-blown shock for much of Asia. Hong Kong and Singapore both contracted in the second quarter and are probably in technical recession. South Korea’s exports fell 6.2pc in August, with car sales down 18.2pc. India’s exports fell 14.8pc in July, an extra blow as it grapples with its own post-boom hangover. “The coming days ahead are tough,” said Indian commerce secretary S R Rao. Stephen Jen from SLJ Macro Patrners said we are starting to see Phase III of the global crisis as “the eye of the storm moves East”, with China and emerging markets succumbing at last to the effects of debt leverage. Mr Jen said markets have already discounted any likely trouble in Europe and America, but have yet to “price” the mounting risks in Asia correctly. “There seems to be a big gap between the prevalent view on China, and what is likely to happen: the sanguine consensus view that China can do no wrong will likely be proven to be incorrect,” he said.

Ansa:

• Fiat CEO pessimistic about European market picking up. The European automobile market "unfortunately is in a phase of severe contraction" that "reflects economic conditions - one will have to wait a long time for a trend reversal," Marchionne said on a visit to the new Fiat plant in Kragujevac, where he met with Serbia's new president, Tomislav Nikolic. "I am still pessimistic about 2012-2013. We'll have to see in 2014," Marchionne added. Fiat reported a slump in sales on the sluggish European market of 20% in August and July. Marchionne said in July that the carmaker may have to close one of its plants in Italy if weak demand on the European auto market continues.