Today's Headlines

Bloomberg:

• Draghi Says Officials Agree on ECB Unlimited Bond-Buying. European Central Bank President Mario Draghi said policy makers agreed to an unlimited bond- purchase program to regain control of interest rates in the euro area and fight speculation of a currency breakup. The program “will enable us to address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro,” Draghi said at a press conference in Frankfurt after the ECB held its benchmark rate at a record low of 0.75 percent. “Under appropriate conditions, we will have a fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability in the euro area.” “Governments must stand ready to activate the EFSF/ESM in the bond market when exceptional financial-market circumstances and risks to financial stability exist -- with strict and effective conditionality,” Draghi said. The ECB reserves the right to terminate bond purchases if governments don’t fulfil their part of the bargain, he added.
• Weidmann Says ECB Bond Plan 'Tantamount' to State Financing. Bundesbank President Jens Weidmann criticized the European Central Bank’s bond-buying plan, saying it is “tantamount to financing governments by printing banknotes.” “Monetary policy risks being subjugated to fiscal policy,” Weidmann said in a statement issued by the Frankfurt- based Bundesbank today. “The intervention purchases must not be permitted to jeopardize the capability of monetary policy to safeguard price stability in the euro area.” While Weidmann represents Germany, the euro area’s largest economy, he was the only objector on the ECB’s 23-member council, where each national central bank governor has one vote. The Bundesbank, which is required to carry out ECB policy decisions, didn’t say it would stand in the way of bond purchases. “If the adopted bond-purchasing program leads to member states postponing the necessary reforms, this will further undermine confidence in the political leaders’ crisis-resolution capability,” Weidmann said. “The announced interventions in the government bond market carry the additional danger that the central bank may ultimately redistribute considerable risks among various countries’ taxpayers,” Weidmann said. “Such risk-sharing, however, can be legitimately authorized solely by democratically elected parliaments and governments.”
• CSU's Michelbach Says ECB Is Buying Potential Future Inflation. The ECB's main task of ensuring price stability is increasingly taking a back seat, Hans Michelbach, a lawmaker from Merkel coalition partner CSU said. The ECB shouldn't become a bad bank for indebted nations, he said. The pressure on indebted nations will only ease if reforms lead to the consolidation of national finances.
• Euro Region’s Contraction Led by Consumers, Investment: Economy. Europe’s economy was pushed into a contraction in the second quarter as consumers cut spending and corporate investment slumped. Gross domestic product in the 17-member euro area fell 0.2 percent from the first quarter, the European Union’s statistics office said, confirming an initial estimate published on Aug. 14. Gross fixed capital formation dropped 0.8 percent from the previous three months, when it fell 1.3 percent, while consumer spending was down 0.2 percent. Government-spending growth slowed to 0.1 percent from 0.2 percent. The Organization for Economic Cooperation and Development called today on officials to do more to tackle the region’s debt crisis, which will continue to weigh on growth and confidence. “The slowdown will persist if leaders fail to address the main cause of this deterioration, which is the continuing crisis in the euro area,” said OECD Chief Economist Pier Carlo Padoan. “Resolving the euro area’s banking, fiscal and competitiveness problems is still the key to recovery.”
• French Unemployment Jumps, Increasing Pressure For Growth Push. French unemployment rose to a 13-year high in the second quarter as companies cut staff to cope with a stalled economy, adding pressure on President Francois Hollande to fulfil a campaign pledge to revive growth. The jobless rate based on International Labor Organization standards climbed to 10.2 percent of the population from 10 percent in the previous three months, national statistics office Insee in Paris said today. With neighboring Spain and Italy in recession, the French economy has failed to expand for three quarters, and companies from PSA Peugeot Citroen (UG) to Air France-KLM Group are eliminating thousands of jobs. Labor Minister Michel Sapin said this week that jobless claims have already surpassed 3 million, a level last reached in August 1999, and will increase further. “The increase in unemployment in France since the spring of 2011 is very worrying,” Natixis economists Patrick Artus and Jean-Christophe Caffet said in a note to clients before the release of the latest numbers. “The labor market hasn’t stopped deteriorating.”
• China’s Goal of 10% Trade Growth Drifts Out of Reach. Chinese toy merchant Pan Junping says this is usually among his busiest times as customers in the U.S. and Europe load up on orders for Christmas. This year, he’s quieter than ever. “The situation is possibly worse than 2009, and confidence is zero,” said Pan, 39, who’s frozen salaries and expects a 30 percent decline in annual sales for his trading company in Yiwu city, in the eastern province of Zhejiang. “It’s not busy at all.” A report due Sept. 10 may show a 2.9 percent gain in exports in August from a year earlier, down from an average 18 percent growth over the past two years, based on the median estimate in a Bloomberg News survey.
• Volume Seen Falling Most Since 1988 After August Slump: Options. U.S. options trading is poised for the biggest annual drop since 1988 as easing monetary policies worldwide reduced demand for protection against stock losses. The number of option contracts changing hands fell 13% to 2.7 billion during the first eight months of 2012, including a 43% slump in August, according to data compiled by Chicago-based Options Clearing Corp. Should the pace continue, that would end nine consecutive years of rising volume and mark the second-biggest drop since OCC data began in 1973. "There are few participants who believe downside protection in any great magnitude is needed right now," Randy Frederick, managing director for active trading and derivatives at Charles Schwab in Austin, said in a phone interview.
  
• Oil Surges on Bigger-Than-Expected Supply Drop. Oil futures maintained gains after a U.S. government report showed a bigger-than-expected decline in inventories. Supplies fell 7.43 million barrels to 357.1 million barrels last week, the Energy Department said today. Inventories were forecast to decline 4.95 million barrels, according to the median of 12 analyst estimates in a Bloomberg survey. Crude oil for October delivery advanced $1.76, or 1.8 percent, to $97.12 a barrel at 11:06 a.m. on the New York Mercantile Exchange.
• Services In U.S. Expanded More Than Forecast In August. Service industries in the U.S. expanded in August at a faster pace than forecast, offering support to an economy that lost momentum in the first half of the year. The Institute for Supply Management’s non-manufacturing index climbed to a three-month high of 53.7 from 52.6 in July, the Tempe, Arizona-based group said today. Readings above 50 signal expansion, and economists projected 52.5 for August, according to the median estimate in a Bloomberg survey.
• Consumer Comfort Gauge Signal Severe Discontent For Fifth Consecutive Week. Consumer confidence in the U.S. was little changed last week, hovering near an eight-month low, as Americans struggled with rising gasoline prices and elevated unemployment. The Bloomberg Consumer Comfort Index was at minus 46.5 in the period ended Sept. 2 compared with minus 47.3 in the prior week. It was the fifth consecutive week the index has registered a reading lower than minus 40, a level typically associated with severe economic discontent. A ninth consecutive weekly advance brought gasoline prices to the highest level in four months, giving households reason to be concerned about their finances. The dreary views are prompting retailers and manufacturers such as General Motors Co. (GM) to use promotions to entice customers. “Despite very aggressive discounting from retailers and General Motors that have bolstered retail sales, households remain quite pessimistic on the state of the economy and their own personal finances,” said Joseph Brusuelas, a senior economist with Bloomberg LP in New York. The personal finances gauge dropped to minus 13.5 last week from minus 12.7. The number of consumers who say their budgets were in “poor” shape, the most negative rating, climbed to 23 percent, its highest since November. The average cost of a gallon of regular gasoline climbed to $3.83 last week, up 50 cents since July 1 and the highest since late April, according to figures from AAA, the largest U.S. auto group. The Comfort Index for Women fell to -50.7, while the Comfort Index for Men rose to -43.7.
• Women Failing to Get Hired in U.S. Cost-conscious households are one reason employment in the childcare industry has dropped 1.8 percent since the recession ended June 2009, even as total U.S. payrolls increased 2.1 percent. Jobs in the sector hover at levels of five years ago as unemployed parents watch their children at home, states cut childcare subsidies and the birth rate is at a 12-year low. The industry’s challenges reflect those facing the U.S. labor market, which has seen 42 consecutive months of unemployment above 8 percent and disproportionate joblessness among women. As of June 2012, men have regained 46.2 percent of the jobs they lost since the start of the recession, compared to 38.7 percent for women, according to the Institute for Women’s Policy Research, in Washington D.C., which analyzes payroll data.
• ADP Says U.S. Companies Added 201,000 Workers in August. The 201,000 increase in employment, the biggest gain in five months, followed July’s revised 173,000 rise, Roseland, New Jersey-based ADP Employer Services said today. The median forecast of 41 economists surveyed by Bloomberg called for an advance of 140,000.
• Gold Rises to Highest Since March as Euro Advances on ECB. Gold futures rose to the highest since March as European Central Bank President Mario Draghi said policy makers agreed to an unlimited bond-purchase program to help stabilize the region, boosting demand for the metal as a store of value. Gold futures for December delivery gained 0.6 percent to $1,703.50 an ounce at 9:59 a.m. on the Comex in New York, after earlier jumping to $1,716.90, the highest for a most-active contract since March 12. Gold will be at $1,840 by the end of 2012, Jeffrey Currie, head of commodities research at Goldman Sachs Group Inc., said in a Bloomberg Television interview today.
• JPMorgan(JPM) Said to Face Escalating Senate Probe of CIO Loss. JPMorgan Chase & Co.’s (JPM) wrong-way bets on derivatives are the focus of an escalating probe by a U.S. Senate panel led by Carl Levin that has grilled executives from banks including Goldman Sachs Group Inc. and HSBC Holdings Plc, three people briefed on the inquiry said. Levin’s Permanent Subcommittee on Investigations is seeking testimony from people who worked in or helped lead JPMorgan’s chief investment office, according to the people, who declined to be identified because the inquiry isn’t public. The unit’s London staff lost at least $5.8 billion this year on the botched bets, which were large enough to shift markets.

Wall Street Journal:

• Democrats Hint at Showdown With GOP After Election. Top White House and Senate officials at the Democratic National Convention in Charlotte, N.C., offered new clues Thursday about their strategy heading into the lame-duck session of Congress after the November election, suggesting they plan on a showdown with Republicans over tax and spending policy.
• The President's Fountain of Youth Is Drying Up. In 2008 young voters chose Obama over McCain by 66% to 32%. Today he leads Romney by 49% to 41%.

CNBC.com:

• Amazon(AMZN) Introduces New Kindle And Bigger Version of the Fire.

Business Insider:

• Germany's Press Goes Berzerk With Headlines After Draghi.
• Here's How Angela Merkel Is Being Greeted In Spain.
• BofA(BAC): More Bad Than Good Came Out Of Today's ECB Announcement.

Zero Hedge:

• Bundesbank Replies To The ECB.
• Spiegel: "It's Time To Ask The People What They Think".
• Santelli And Grant Explain The ECB Reality.
• A Gentle Reminder Of The Effectiveness Of Prior ECB Bond Buying. (graph)
  

TheStreet.com:

• US Auto Sales on Road to Next Subprime Bubble. Experian Automotive, a unit of Experian, the credit-rating firm, reported Tuesday that "loans in the nonprime, subprime and deep-subprime risk tiers accounted for more than one in four new-vehicle loans in [the second quarter] of 2012." That was a 14% increase from the same period a year earlier, and it actually exceeded the rate in the second quarter of 2007, before the financial crisis made lenders tighten their standards.

Reuters:

• Copper ends lower as market digests ECB plan.
• Monetary tools can't solve fiscal crisis-German FinMin. The euro zone must avoid using monetary policy to tackle its fiscal problems, German Finance Minister Wolfgang Schaeuble said on Thursday, shortly after the European Central Bank announced plans to buy the debt of struggling governments. "If we start wanting to resolve the problems of financial policy through the more convenient means of monetary policy, we will have a problem," Schaeuble said at an award ceremony in honour of ECB president Mario Draghi. "Central banks are autonomous so that the more convenient path of printing money is barred to politicians," he added.
• Football blitzes Bill Clinton speech in TV match-up. Some 21 million Americans watched the National Football League's season kickoff game on NBC between the Dallas Cowboys and the New York Giants on Wednesday night, dwarfing the 7.5 million who watched Clinton's lengthy, humorous and detail-heavy address on the ABC and CBS networks, according to Nielsen data.
• Spain's Rajoy plays waiting game on bailout. Spain's Prime Minister Mariano Rajoy showed no rush on Thursday to seek a bailout that would come with bitter conditions for his recession-gripped country under a new European Central Bank plan to bring relief to struggling euro zone members.
• UK tells banks to cut exposure to euro breakup risk. Britain's top banks have tens of billions of euros in exposure to the risk of countries leaving the euro or the currency union breaking up entirely, despite intense pressure from the UK financial regulator to tackle the problem. This "redenomination risk" is evident at Santander UK, Royal Bank of Scotland and Barclays, although much of it has been hedged, according to data published by the banks in response to the regulator's demands.

Telegraph:

• Cheap ECB cash could prove to be the worst form of bailout.

POP TV:

• Slovenian Banks' Bad Loans Soar to $3.4 Billion. Bad loans at two of Slovenia's biggest banks, Nova Ljubljanska Banka d.d. and Nova Kreditna Banka Maribor d.d. soared to 2.7 billion euros ($3.4 billion), citing a leaked a report by the country's central bank.