- Rolls-Royce China Sales Flatline Amid Xi Austerity Drive. Rolls-Royce, the ultra-luxury car brand owned by Bayerische Motoren Werke AG (BMW), expects sales growth to slow in China this year as an austerity push by President Xi Jinping damps luxury demand. Sales volumes in the company’s second-largest market will be little changed from 2012, Paul Harris, Asia-Pacific regional director for the brand, said in Sydney yesterday. By comparison, Rolls-Royce sales rose 16 percent to 998 vehicles last year, according to estimates at research firm LMC Automotive. Slowing growth in China for the maker of the $380,000 Phantom mirrors the slide in demand this year for sorghum liquor, hand-made tea and Bordeaux wines, as economic expansion cools and the country’s new administration acts to curb spending by government officials. More high-end goods such as luxury cars and yachts may be taxed as part of reform plans this year, the China Daily reported in May, citing an official at the top economic planning agency.
- Brazil Unemployment Rate Jumps More Than Expected to 6%. Brazil’s unemployment rate rose in June to the highest since April 2012, signaling a weakening labor market after five quarters of below-forecast economic growth in Latin America’s biggest economy. The jobless rate jumped to 6 percent last month from 5.8 percent in May, according to a report today on the National Statistics agency’s website. That was higher than expected by all but 1 of 27 economists surveyed by Bloomberg, whose median forecast was for a 5.8 percent rate. The rate also rose from 5.9 percent the year before, the first rise in June since 2009.
- Brazil Rues Rousseff Growth at 24-Year Low Amid Lula Pleas. The return to power of Luiz Inacio Lula da Silva, the mentor and predecessor of Brazil President Dilma Rousseff, is gaining traction among her supporters as her party faces a 2014 election having delivered the slowest average growth in 24 years. Rousseff’s poll approval ratings have plummeted to the lowest of her term, and since mid-June she was showered with boos at a sold-out soccer game and by dozens of mayors at a public event. More than 1 million Brazilians took to the streets as the cost of living soars and economic growth forecasts drop. Protests escalated from anger over bus fare increases to discontent over corruption, the quality of public services and government spending priorities.
- Brazil Real Falls as China Factory Decline Dims Export Outlook. The currency fell for the first time in three days, depreciating 0.8 percent to 2.2316 per dollar at 10:24 a.m. in Sao Paulo. Swap rates due in January climbed one basis point, or 0.01 percentage point, to 8.75 percent, reversing declines.
- Spanish Pension Raids Spell Bad News for Bond Sales: Euro Credit. Spain’s Treasury may find one of its best customers less eager to buy its bonds as budget woes lead Prime Minister Mariano Rajoy to raid a government piggy-bank for a second year. Created in 2000 to guarantee pension payments in times of hardship, the 59.3 billion-euro ($78 billion) Fondo de Reserva was tapped for the first time in December for 7 billion euros to fund Christmas bonuses and a monthly increase for retirees. Further withdrawals will have taken an additional 4.5 billion euros by the end of this month, helping to pay for pensioners’ summer bonuses and tax refunds. “The fund isn’t in a position to accumulate assets anymore, it may even have to sell,” said Jose Antonio Herce, a partner at consultancy firm Analistas Financieros Internacionales in Madrid. “There are more and more pensions to pay and less and less money coming into the Social Security, the fund will melt quickly now that we’ve started taking money out of it.”
- EU Attacks MasterCard’s(MA) ‘Mad Campaign’ to Derail Card-Fee Curbs. MasterCard Inc. (MA:US) waged a “mad campaign” to derail caps on card fees, the European Union’s financial services commissioner said today as he unveiled plans to slash charges by 6 billion euros ($8 billion) a year. Michel Barnier said MasterCard used misleading information in its lobbying against proposals to cap interchange fees at 0.2 percent for debit card payments and 0.3 percent for credit cards. The limits target card systems also operated by Visa Europe Ltd. where banks charge each other interchange fees, or swipe fees, for handling payments.
- Europe Stocks Rise on Earnings, Euro-Area Manufacturing. European stocks rose to an almost eight-week high as data signaled Germany is leading a revival in euro-area manufacturing and companies posted results that exceeded estimates.Volvo AB (VOLVB) advanced the most in 10 months after the world’s second-largest truckmaker reported second-quarter earnings that beat forecasts. EasyJet climbed 3.7 percent after saying quarterly sales rose 11 percent on higher capacity utilization and revenue per seat. Syngenta (SYNN) AG fell 4 percent after posting first-half profit and revenue that trailed forecasts. The Stoxx Europe 600 Index added 0.6 percent to 301.1 in London, the highest close since May 30.
- Treasuries Extend Decline on Weaker-Than-Average 5-Year Auction. Treasuries extended a two-day decline after the U.S. sale of $35 billion in five-year notes was met with weaker than-average demand amid speculation the Federal Reserve will reduce its bond purchases this year. The debt’s bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.46, down from an average of 2.8 for the past 10 sales. The sale follows lower than demand at yesterday’s $35 billion auction of two-year notes. The U.S. will sell $39 billion in seven-year notes tomorrow.
- Americans Gambling on Rates With Most ARMs Since 2008. In the second year of the U.S. housing recovery, the loans that helped trigger the housing bust are making a comeback. Applications in late June rose to the highest level since 2008 after the Federal Reserve sent fixed rates surging by signaling it may curtail bond buying credited with pushing borrowing costs to the cheapest on record.
- Caterpillar(CAT) Cuts Forecast as Mining Equipment Demand Drops. Caterpillar Inc. (CAT) cut its earnings forecast and posted profit that trailed analysts’ estimates for a third straight quarter as mining-equipment sales declined on slower commodity demand from emerging markets. Earnings in 2013 will be about $6.50 a share on sales of $56 billion to $58 billion, the Peoria, Illinois-based company said today in a statement. That’s lower than analysts’ estimates and down from the company’s April projection of about $7 a share on revenue of $57 billion to $61 billion.
- WTI Falls on U.S. Crude Output Gain, China Manufacturing. WTI oil for September delivery slipped $1.89, or 1.8 percent, to $105.34 a barrel at 11:57 a.m. on the New York Mercantile Exchange. The contract traded at $106.40 before the release of the EIA report at 10:30 a.m. in Washington. The volume of all futures traded was 18 percent less than the 100-day average for the time of day.
- New York Probes Bloomberg Reporters' Access to Information. New York Attorney General Eric Schneiderman's office is looking into how much access Bloomberg LP news reporters may have had to information about the media and technology company's customers, said people familiar with the inquiries. Officials in the New York Attorney General's investor protection unit in recent weeks have queried Bloomberg about reporters' knowledge of terminal subscribers' activities, said the people. The Attorney General's office has not opened a formal investigation into the Bloomberg practices, said one of the people familiar with the probe.
- Ignore the hype, earnings stink. Commentary: Cause for concern in the ugly reports.
Zero Hedge:
Business Insider:
New York Times:
- Asian Economies Encounter Stiff Winds. “The music has stopped playing,” said Frederic Neumann, a co-head of Asian economics at HSBC, which on July 9 slashed its growth forecasts for Asia, outside of Japan, to 6.1 percent for this year and 6.5 percent next year. The bank had projected 7.2 percent growth for both years.
- Borrowers in Obama housing program re-defaulting, watchdog says. Borrowers who received help through the government's main foreclosure prevention program are re-defaulting on their mortgages at alarming rates, a federal watchdog said in a report released Wednesday. Nearly 1.2 million mortgage modifications have been completed since the Home Affordable Modification Program (HAMP) was first launched four years ago. Yet more than 306,000 borrowers have re-defaulted on their loans and more than 88,000 are at risk of following suit, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) found in its quarterly report to Congress.
Real Clear Politics:
Reuters:
- EU finance arm curbs loans to coal-fired power plants. The European Investment Bank, the EU's finance arm, said it would stop lending to most coal-fired power stations to help the 28-nation bloc reduce pollution and meet climate targets, a move that may put pressure on other lenders.
- Credit market suggests European bank shares vulnerable on earnings. European bank shares driven higher by strong earnings from U.S. lenders may be set for a fall as their own results season begins, with credit markets reflecting wariness about risks glossed over by equity investors. Forecast-beating earnings from Bank of America and Citigroup lifted shares in European banks last week. However, the market for insurance against banks defaulting on their loans shows more caution over the European sector, which is still struggling with bad debts in the euro zone periphery and regulatory costs. Thomson Reuters StarMine data shows the second-quarter earnings season is set to disappoint, relative to that in the United States. Early reports have not seen much of a bounce in the shares of those European banks that beat expectations. "The credit is a lot more cautious than equity... and European financials are a major culprit from the equity standpoint: they're running ahead of the underlying risks," Chris Parkinson, head of research at Christopher Street Capital, part of GFI Group, said.
- LG's profit falls on weak TV demand, handset costs. LG Electronics' latest quarterly report underlined challenges facing global electronics makers as weak TV demand and stiffer competition in smartphones undermine profit. The results Wednesday showed an 8 percent decline in April-June net profit to 155.5 billion won ($140 million) even as LG's revenue rose 10 percent from a year earlier to 15.2 trillion won ($13.6 billion). Operating profit fell 9 percent from a year earlier to 479 billion won.
- Market turbulence revives fears over ETF structural issues. Falling equity markets have resulted in the highest level of failed trades in the $2tn exchange-traded fund (ETF) market for nearly two years – reviving a debate about the structure and liquidity of the popular investment vehicles in times of volatility. The total value of settlement failures for 30 of the biggest ETFs surged to $3.96bn on June 26, according to an analysis of data from the US securities regulator, carried out by the Basis Point Group.
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.
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Repubblica:
- IMF Italy Chief Says Credit Crunch EU's Key Problem. EU banking union project needs to go forward quickly, Andrea Montanino, executive director of the IMF in Italy said in an interview. Banks' loans to companies and families need to be looked at and if needed banks should boost capital. The ECB should cut rates further to help recovery.
- China to Crack Down on Arbitrary School Charges. Ministry of Education bans local govts, institutions, schools to charge for school admissions, bars illegal recruitment, citing guideline jointly released by finance, education ministries, NDRC, audit office, broadcasting & publication regulator.
- China Caps Number of Singing-Competition TV Shows. State General Administration of Press, Publication, Radio, Film & TV tells satellite broadcasters to stop investing in any new singing competition shows, citing news release. Regulator seeks to prevent homogeneous TV schedules. Broadcasters must be "thrifty" with program production, avoid ostentation in line with govt's frugality campaign.
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