Today's Headlines

Bloomberg: 

• France Loses Top Credit Rating as Fitch Cites Lack of Growth. France lost its top credit rating at Fitch Ratings, which highlighted concern about lack of growth and the buildup of debt in Europe’s second-largest economy. France was cut by one step to AA+ from AAA, Fitch said today, joining Moody’s Investors Service and Standard & Poor’s in removing France from the shrinking club of top-rated governments. The outlook is stable. Budget risks “lie mainly to the downside, owing to the uncertain growth outlook and the ongoing euro zone crisis, even assuming no wavering in commitment to fiscal consolidation,” Fitch said in a statement.

• Portuguese Bonds Tumble Amid Political Upheaval as Bunds Rally. Portugal’s bonds fell, with 10-year bonds heading for the longest stretch of weekly declines since at least 1997, amid concern a political dispute will result in new elections and endanger the nation’s financial-aid program. Ten-year Portuguese yields climbed toward the highest since November after the nation’s debt agency said it would sell bonds regularly should market conditions be conducive. German, French and Dutch bonds advanced after European Central Bank Executive Board member Vitor Constancio said euro-region monetary policy would stay accommodative. Ireland’s 10-year yields dropped the most in a week after Standard & Poor’s raised its outlook for the nation’s debt rating to positive. “Portugal is being sold on the back of the political commentary,” said Marc Ostwald, a strategist at Monument Securities Ltd. in London. “There doesn’t seem to be a lot of common ground between the parties and with a small bond market like Portugal, the move gets exaggerated.” Portuguese 10-year yield climbed 61 basis points, or 0.61 percentage point, to 7.51 percent at 4:54 p.m. London time, after rising to 8.11 percent on July 3, the highest level since Nov. 21.

• Portugal Credit-Default Swaps Soar to Highest Since November. The cost of insuring Portuguese government debt rose as much as 75 basis points to 562.

• China Squeezes Shadow Banking as Li Grapples With Cooling Growth. China made progress in curbing shadow banking in June and slowed money-supply growth, as Premier Li Keqiang seeks to rein in the credit boom that poses risks for the nation’s financial system. Data for aggregate financing, the broadest measure of credit, showed new yuan loans played the biggest role since September 2011, with non-traditional sources of finance less prominent. M2 money supply rose 14 percent, down from 15.8 percent the previous month, People’s Bank of China numbers showed in Beijing yesterday.

• India Factory-Output Unexpectedly Dips as Inflation Quickens. India’s industrial output contracted unexpectedly in May, adding pressure for more government steps to revive the economy as a sliding rupee curbs scope for further interest-rate cuts. Production at factories, utilities and mines declined 1.6 percent from a year earlier after a revised 1.9 percent climb in April, the Central Statistical Office said in New Delhi today. The median of 31 estimates in a Bloomberg News survey was for a 1.4 percent gain. Another report showed consumer-price inflation accelerated to 9.87 percent in June. The rupee’s plunge to a record low against the dollar this year threatens to stoke inflation and prompted the Reserve Bank of India to leave borrowing costs unchanged last month, snapping a run of three reductions.

• Treasuries Drop With Stocks as Plosser Calls for QE End. Treasuries erased early gains as Federal Reserve Bank of Philadelphia President Charles Plosser said the central bank should begin tapering its bond purchases in September. U.S. stocks turned lower and the dollar gained. Ten-year U.S. yields rose less than one basis point to 2.58 percent at 11:57 a.m. in New York after losing as much as five points earlier. The Standard & Poor’s 500 Index (SPA) retreated 0.1 percent after jumping to a record yesterday. The Bloomberg Dollar Index added 0.4 percent after sliding for two days. Portugal’s bonds and stocks slid on concern political turmoil will threaten the nation’s bailout. The Shanghai Composite Index lost 1.6 percent amid concern the government will tolerate slower growth. Treasuries and stocks turned lower after Plosser, who has opposed the Fed’s current round of asset purchases, said the central bank should begin tapering its $85 billion in monthly bond buying in September and end the unorthodox policy by year-end. “I don’t want to do it all at once, but I think we should begin to taper very soon and hopefully end it by the end of this year,” Plosser said today in an interview in Jackson Hole, Wyoming. “That would be a healthy thing for the economy. We can do it gradually.”

• UPS(UPS) Cuts 2013 Earnings Forecast on U.S. Economic Slowdown. United Parcel Service Inc. (UPS), the world’s biggest package delivery company, cut its 2013 earnings forecast, saying a slowing U.S. economy hurt second-quarter profit and revenue. The stock dropped the most since 2011. Adjusted earnings fell to $1.13 a share in the second quarter, marking the first drop in more than three years and missing analysts’ estimate of $1.20, according to data compiled by Bloomberg. Profit for the year will increase as little as 3 percent, Atlanta-based UPS said in a statement today. UPS fell 5.7 percent to $86.27 at 9:46 a.m. in New York, after declining as much as 5.8 percent for the biggest intraday drop since August 2011.

• Copper May Decline 13% on Death Cross Signal: Technical Analysis. Copper in London may extend losses by 13 percent over the next two months to the lowest level since 2010 after moving averages formed a death cross, according to technical analysis by Trading Central SA. Copper for delivery in three months on the London Metal Exchange may drop to $6,050 a metric ton, said Ludwig Garric, head of Commodity Research at the Paris-based company, who correctly predicted the rally in soybeans to a record last year.

Wall Street Journal: 

• Snowden to Seek Asylum in Russia for Now. Leaker to Seek Political Asylum There Until He Can Travel to Latin America. The fugitive former U.S. government contractor Edward Snowden said Friday that he would seek political asylum in Russia until he could find a way to travel to one of several Latin American countries that have offered him safe harbor.

• Pensions Sue Banks Over Credit-Default Swaps. Lawsuit Alleges Big Lenders Conspired to Fix Pricing, Control Market Access. Big banks are facing new allegations they conspired to control pricing and access in the lucrative credit-derivatives markets. Four Danish pension funds filed a complaint Thursday in U.S. District Court for the Northern District of Illinois, alleging antitrust violations and saying the banks "unreasonably restrained competition" in the $25 trillion credit-default-swaps market.

• China Orders Banks to Register Wealth Management Products. China's banking regulator tightens supervision over fast-growing segment. China's banking regulator has taken further steps to tighten its oversight of wealth management products by asking banks to register these products before selling them to the public, according to a document seen by The Wall Street Journal on Friday.
  The new rule would give the regulator increased information on these high-yield products, though it could slow the speed at which they come to market, a local banker who received the document said.

• BlackBerry(BBRY)ni ww Z10 Prices Drop to $49 Amid Weak Sales. AT&T and Best Buy have started discounting the BlackBerry Z10 smartphone to $49 from $199, amid weak sales of the recently-launched device. 

MarketWatch:

• The looming threat to the housing recovery. Have the financial markets been taking too many painkillers?

Zero Hedge: 

• European Peripheral Bonds Plunge Most In A Year As Portugal Risk Flares. (graphs)

• PPI At 2.5% Has Biggest Annual Jump Since March 2012 On Soaring Energy Prices.(graphs)

• Gas Prices Have Biggest Daily Jump In 6 Months. (graphs)

• Consumer Confidence Misses For First Time In 2013. (graph)

• JPMorgan(JPM) Slashes Q2 GDP By Half To 1%.

• Boeing(BA) Craters On Another Burning Dreamliner; Deadly Train Crash In Paris. (graph)

• French-Owned Fitch Downgrades FrAAAnce To AA+. (full statement)

Business Insider: 

• Homeland Security Secretary Janet Napolitano Is Leaving The Department.

• Chief Economist: European Central Bank 'In Danger Of Overload'.

• Forget Bernanke, Here's The Real Reason Emerging Market Currencies Have Been Getting Crushed.

LA Times:

• Stretched car loans gain traction with buyers. A record number of car buyers are taking out loans of six, eight or even 10 years in an era when cars last longer and have better warranties.

Reuters: 

• EMERGING MARKETS-Brazil stocks fall on China concerns, activity data.

• Wells Fargo(WFC) benefits from housing market, but clouds loom. Wells Fargo & Co, the biggest U.S. mortgage lender, posted a higher-than-expected 20 percent rise in quarterly profit on Friday as it set aside less money to cover bad loans and earned more from its mortgage business. 

• Copper falls on firmer dollar, China GDP data eyed. 

• Banks jolted as regulators seek to crack down on leverage. New demands from regulators to force banks to keep a lid on risk-taking after the financial crisis have re-ignited a debate over how best to strengthen the industry without stifling lending or alienating investors.

Financial Times:

• Jamie Dimon cautions on JPMorgan(JPM) loan profits. Jamie Dimon, chief executive of JPMorgan Chase, warned of a “dramatic reduction” in future mortgage profits from higher interest rates and complained international rivals would benefit from tough US capital rules, although the bank comfortably beat earnings estimates for the second quarter.

Telegraph:

• Portugal asks troika to postpone audit. Portugal has called on its international creditors to postpone their assessment of the heavily indebted country's accounts from July 15 to the end of August, amid a political crisis.