Today's Headlines

Bloomberg: 

• Chinese Economy Facing Instability as Growth Cools, DRC Says. China’s economy may be facing a period of instability and imbalance as it transitions from high-speed growth (CNGDPYOY), a state researcher said. “Growth inertia should not be underestimated, as new growth engines and patterns have not been formed,” researcher Yu Bin said in a report by China’s Development Research Center released today in London. “Market expectations are unstable, downward pressure has increased, and existing and new structural mismatches exist. The economy has become unstable and uncertain like never before.”

• India 10-Year Bond Yield Reaches 2013 High on Tightening Concern. India’s 10-year bonds fell, pushing the yield to the highest level this year, on speculation the central bank will tighten monetary policy further to arrest a slide in the rupee. The Reserve Bank of India increased the marginal standing facility and the bank rate to 10.25 percent from 8.25 percent last week, while keeping the key repurchase rate unchanged after cutting it in May. The rupee fell by the most in two weeks yesterday and lost 7.7 percent in 2013. A weaker currency makes imports costlier and threatens to spur gains in consumer prices, which have stayed close to 10 percent for more than a year. “There are fears the central bank may reverse its policy stance as the rupee doesn’t seem to be behaving in the desired manner even after the recent measures,” said Debendra Kumar Dash, a fixed-income trader at Development Credit Bank Ltd. in Mumbai. “The bond markets are pretty jittery.” 

• Turkey Raises Rates for First Time Since 2011 on Lira Slide.

• European Stocks Retreat After U.S. Manufacturing Report. European stocks declined from a seven-week high as a measure of U.S. manufacturing unexpectedly slumped, outweighing gains by companies from Royal KPN NV to Vivendi SA on plans to sell assets. The Stoxx Europe 600 Index dropped 0.3 percent to 299.44 at the close of trading, erasing an earlier gain of as much as 0.5 percent. 

• Warren Says Banks Using Enron Commodity Model Face Risk. Banks such as JPMorgan Chase & Co. (JPM) may have adopted the model for commodity trading used by Enron Corp., adding “more and more risk” to the financial system, U.S. Senator Elizabeth Warren said.

• Congress Must Rein in Bank Commodities Units, Rosner Says. The U.S. Congress should rein in banks’ ability to own and trade raw materials or risk another financial collapse, Joshua Rosner of Graham Fisher & Co. said at a Senate subcommittee hearing today. “Historically Congress has acted when a few large firms exploited their advantage and sought to control too much,” said Rosner, a bank analyst whose New York-based firm advises clients on investments and regulation in the financial industry. If no action is taken, “we’re destined to view 2008 as the first financial crisis and not the worst.”

• Obama NLRB Picks Seen as Pro-Union as Two Republican Oust. President Barack Obama’s labor board nominees are seen as being at least as pro-union as the two forced out by Republicans last week, giving businesses little reason to expect a change in board decision-making.

• Boehner Signals Clash With White House on U.S. Debt Limit. House Speaker John Boehner signaled a clash with the White House and the Democratic-led Senate over raising the U.S. borrowing authority later this year. “We’re not going to raise the debt ceiling without real cuts in spending,” Boehner, an Ohio Republican, told reporters in Washington today.

Wall Street Journal: 

• More Americans Living in Others' Homes. The number of Americans living in someone else's home for economic reasons rose in the past year despite an improving labor market, posing a challenge for the housing market and the broader recovery. The number of so-called missing households—representing adults who would be owning or renting their own home if household formation had stayed at normal rates since the recession—has increased 4% over the past year, according to an analysis for The Wall Street Journal.

Fox News:

• Former military head says it was quickly clear terrorists behind Benghazi consulate attack.

MarketWatch:

• Stagflation: The Fed’s worst nightmare. Commentary: Easy monetary policy is now showing up in prices.

CNBC: 

• UPS(UPS) profit falls; consumers penny-pinch with cheap routes. United Parcel Service on Tuesday posted a smaller quarterly profit as customers, especially on international routes, chose slower, cheaper shipping services. 

Zero Hedge:

• SEC Revolving Door Leads To $5 Million Payday For Former Chief Enforcer.

• One-Third Of Europe's Unemployed Are Spanish. (graph)

• Richmond Fed Prints Biggest Miss In 7 Years As New Orders Collapse. (graph)

• Goldman(GS) Responds To Accusations It Manipulates The Aluminum Market.

• Spiegel Speculates On Spain Succession: Soraya Sáenz de Santamaría In, Rajoy Out.

Business Insider:

• ART CASHIN: Traders Are Talking About A Gold Conspiracy Theory And There's Evidence To Back It Up. 

• Low-Wage Jobs In America Have Soared Since The Recession.

• MAULDIN: Our Kids Are Getting Skewered By The Unintended Consequences Of Obamacare.

• Obama's Approval Rating Is Falling All Over The Place. In a new McClatchy-Marist poll, Obama's approval rating has sunk to its lowest point in nearly two years at 41%.

• Richmond Fed Index Shows Mammoth Fall In Retail Sales. From the report: Retail sales contracted this month, leaving the index at −22, twenty-three points below last month's reading. Sales of big-ticket items declined slightly, while shopper traffic dwindled. The index for big-ticket sales slipped to −5, a point lower than the June reading, while the index for shopper traffic tumbled twenty-two points to −16. Inventories declined more slowly than last month, with that index settling at −12 compared to −22. Retailers were doubtful about sales in the next six months; the expectations index dropped to −29 from June's reading of 11. Retailers reduced their number of employees this month. The index fell twelve points lower to end at −14.

• US And Russia Simultaneously Announce Intent To Arm Opposing Sides In Syria.

New York Times:

• Prices Fuel Outrage in Brazil, Home of the $30 Cheese Pizza. Shoppers here with a notion of what items cost abroad need to brace themselves when buying a Samsung Galaxy S4 phone: the same model that costs $615 in the United States is nearly double that in Brazil. An even bigger shock awaits parents needing a crib: the cheapest one at Tok & Stok costs over $440, more than six times the price of a similarly made item at Ikea in the United States. For Brazilians seething with resentment over wasteful spending by the country’s political elite, the high prices they must pay for just about everything — a large cheese pizza can cost almost $30 — only fuel their ire.

CNN:

• Investor pushes TheStreet(TST) for a sale. Private equity firm Spear Point, which holds a 2% stake in the company, wants TheStreet to hire an outside financial adviser to weigh a number of options. Spear Point, based in New Orleans, also said it will make a bid for the company, though it declined to say how much it would be willing to pay.

Reuters:

• Cisco(CSCO) to buy security software maker Sourcefire(FIRE) for $2.7 billion. 

• Flat steel sales in Brazil slump 6 pct in June -Inda. Sales of flat steel products at distribution companies in Brazil declined sharply in June from the prior month, according to the National Institute of Steel Distributors, known as Inda. Sales fell 6 percent from May to 347,800 tonnes, and 0.3 percent from the same month a year earlier, Inda added. Unwanted inventory, which reached 1.1 million tonnes in June, is now equivalent to about 3.2 months of monthly sales, Inda added. In the first six months, sales fell 1.7 percent to 2.144 million tonnes, the institute said. 

• Paccar(PCAR) posts lower profit, cuts European truck forecast. Paccar Inc reported a lower quarterly profit on Tuesday and reduced its full-year sales forecast for North America and Europe, where mixed economic signals are prompting freight carriers to postpone purchases of new vehicles. 

• Bullish on aerospace, United Tech(UTX) lifts 2013 forecast. United Technologies Corp, the world's largest maker of elevators and air conditioners, raised the bottom end of its 2013 earnings forecast on Tuesday, citing its growing confidence after a jump in aerospace orders and cost cuts. However, the conglomerate, which also makes Pratt & Whitney jet engines and Black Hawk helicopters, said revenue would be at the lower end of its forecast of $64 billion to $65 billion for this year.

• Indian central bank takes more steps to tighten liquidity, support rupee. The Reserve Bank of India on Tuesday announced further measures to tighten banking system liquidity and to stabilise the falling rupee. The RBI set the overall limit for borrowing under the daily liquidity adjustment facility (LAF) for each bank at 0.5 percent of deposits, outstanding as of the last Friday of the reporting cycle two weeks prior to the current one. The central bank also said banks need to maintain 99 percent of their daily cash reserve ratio requirements with the RBI, as against 70 percent now.

• Brazil consumer confidence hits lowest in over 4 years.

• Illinois Tool Works(ITW) posts lower profit, shaves outlook. Illinois Tool Works Inc reported a lower-than-expected profit on Tuesday and cut its full-year outlook, as strong sales to the rebounding auto industry failed to offset weak demand for its packaging, polymer, fluid and welding products from other industrial customers.

Real Clear World:

• The End of the Chinese Economic Miracle by George Friedman.

Telegraph:

• China capitulates. Once again, China has concluded that it is too dangerous to let the Ponzi Scheme collapse. First we had an article in Xinhua saying that growth below 7pc would “not be tolerated”.
  Now we have a clear statement from Premier Li Keqiang that growth must not fall below the government’s “lower limit” of 7.5pc for 2013, and 7pc thereafter. Already we hear talk of more investment on railway projects, social housing, infrastructure, green energy, sewage, broadband and G4, the tried and tested levers of fiscal stimulus. So there we are, the on-again off-again credit boom may soon be on once more, even though each extra yuan of credit now generates less than 0.2 yuan of growth compared to 0.85 before the Great Recession. It all feels like last summer when the authorities responded to the sharp slowdown (hard landing?) by cranking up stimulus. Now it looks as if Beijing has blinked yet again at the first sign of real trouble. It may take a great deal of stimulus to keep growth at Mr Li’s floor level, given China’s broken model, if it can be done at all. That will store up yet more trouble for the future, and sooner of later the future arrives. 

• Property bubble warning - prime London 'overvalued and could fall 20pc'. The UK’s most expensive properties risk a fall of up to 20pc in value if the withdrawal of America’s stimulus effort is not handled carefully, a new study warned.

Echoing fears that European policymakers remain in a state of cognitive dissonance – recognizing the need for root-and-branch overhaul of peripheral banks, but backtracking on joint liability plans – Christopher Flowers, the legendary FIG investor who now runs the £2.3 billion ($3.5 billion) private equity group JC Flowers, sounded the alarm over the negative sovereign-bank feedback loop. In a shot across the bows of market bulls, who cite the return of capital flows to weaker eurozone states, Flowers issued a stark warning: "There is a scenario where we have a Lehman-type event: we wake up some Thursday and a big country is in trouble. "And the ECB will have to decide to support banks x, y, z. And then the ECB will, in fact, decide to own bank x, y, z.


While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3211790/CurrentIssue/88924/Restructuring-Flowers-slams-Europe-over-inaction.html?copyrightInfo=true

Naftemporiki:

• Greeks Paid More 2012 Income Tax As Salaries Fell. Greeks earning salaries and pensions paid 52% more income tax on average in 2012 compared with year earlier, citing Finance Ministry data. Salaries and pensions shrank 18% on average during that period.

NHK:

• Fukushima Decontamination to Cost 5 Trillion Yen. Radiation decontamination efforts in Fukushima prefecture may cost 5.13 trillion yen, citing estimates by a group of experts at the National Institute of Advanced Industrial Science and Technology. The estimated cost is more than four times the budget the government has allocated.

Kyodo:

• Support for Japan PM Abe Falls 12 Points to 56% in July. Support for Japanese Prime Minister Shinzo Abe's cabinet drops to 56.2% from 68% in June, according to a poll conducted by Kyodo July 22 and 23.

Xinhua:

• China Bans New Government Building for 5 Years. China bans Party and government agencies from building new buildings for 5 years, citing a notice jointly issued by the Communist Party Central Committee and the State Council. Projects that have already won approval will be suspended.