Today's Headlines

Bloomberg:

• China Ships Ply Disputed Waters as Japan Mulls Marine Forces. Ships from China’s new coast guard confronted Japanese vessels in disputed waters as Japan’s Defense Ministry said the country should bolster marine forces and consider a first-strike capability to deal with threats. Four Chinese vessels ordered Japanese ships to leave waters around disputed islands known as Diaoyu in China and Senkaku in Japan, China’s State Oceanic Administration said on its website. China’s strengthened coast guard began operations on July 22, and the action appeared to mark an escalation as previous maneuvers generally involved three vessels.

• Yen Strengthens Amid Increase in Demand for Refuge; Rand Slides. The yen strengthened against all of its 16 most-traded peers as investors sought safety amid a drop in Asian stocks after disappointing Japanese corporate earnings. The Bloomberg Dollar Index headed for a five-day decline amid bets the Federal Reserve won’t signal a change next week in monetary stimulus. Japanese government 10-year bonds, which are sensitive to inflation, rose even as data showed consumer prices gained the most since 2008. The Japan-U.S. yield gap was little changed. South Africa’s rand slid as China ordered cuts in excess production capacity, dimming export prospects.

• Russia Sees Risks Emerging as Foreigners Amass State Debt. Russia’s financial industry faces risks from surging demand for domestic ruble bonds as investors plow into the securities, competing with local banks for the assets used as refinancing collateral, the central bank said. Non-resident holdings of ruble-denominated sovereign notes, known as OFZs, are now approaching the emerging-market average of 30 percent, compared with 21 percent on Feb. 1 and 7 percent on July 1, 2012, the Moscow-based regulator said in a report today. Bank Rossii and the Finance Ministry plan to start monitoring foreign ownership of OFZs to reduce risks.

• Brazil’s Batista Loses Billionaire Status as Debts Mount. Eike Batista, ranked as the world’s eighth-richest person last year, ceased to be a billionaire after Mubadala Development Co. converted an investment in his companies into debt, further eroding the value of his assets. 

• Clearing Next Greek Payment Leads to Talk of 2014 Options. No sooner did European creditors plug one hole in Greece’s finances than they started fretting over the next as the 3 1/2-year tussle between the Athens government and its rescuers looked set to drag into 2014. Euro-area governments today cleared the release of 2.5 billion euros ($3.3 billion), part of 5.8 billion euros in funding to tide Greece past Germany’s Sept. 22 elections that will determine the course of the crisis management. Less than two hours later, a European Union official was discussing how to fill a 3.8 billion-euro gap expected in 2014.

• European Stocks Slide for First Week in Five on Earnings. European stocks declined for the first week in five as worse-than-estimated earnings from BASF SE and ABB Ltd. raised concern the economic recovery is faltering. BASF and ABB each fell more than 4.5 percent. Sulzer (SUN) AG slumped 19 percent as it planned to sell a unit. Siemens AG (SIE) and Metso Oyj (MEO1V) both declined at least 4.5 percent after cutting their forecasts. Banco Bilbao Vizcaya Argentaria SA (BBVA) and Banco Santander SA rose as the pace of recession in Spain slowed. The Stoxx Europe 600 Index slid 0.3 percent to 298.91 this past week.

• Rubber Declines for Second Day as Yen Gains Before Fed Meeting. Rubber fell for a second day as Japan’s currency strengthened on speculation the Federal Reserve will maintain bond purchases, cutting the appeal of yen-denominated contracts. The most-active contract lost as much as 2.2 percent to 250.2 yen a kilogram ($2,529 a metric ton) on the Tokyo Commodity Exchange and traded at 252.1 yen at 1:06 p.m. local time. The price has gained 0.2 percent this week, bringing this year’s loss to 17 percent.

• IMF Sees Market Volatility Risk in Fed’s Exit From Record Easing. The International Monetary Fund cautioned that the U.S. Federal Reserve’s exit from unprecedented asset purchases could spur market reactions causing “excessive” interest-rate volatility. That would have “adverse global implications,” the fund’s board of directors said today in a statement, part of an annual review of the world’s largest economy. “Effective communication on the exit strategy and a careful calibration of its timing will be critical for reducing these risks,” the Washington-based fund said.

• VIX Contracts Retreat to Five-Year Low as Stocks Surge: Options. The cost of options protecting against U.S. stock swings fell to a five-year low, a sign to Russell Investments and Credit Suisse Group AG that investors are too confident in more equity gains after this year's rally. Implied volatility for options on the Chicago Board Options Exchange Volatility Index has dropped 37% to 48.4 from a peak on June 20, according to data complied by Bloomberg on three-month contracts with an exercise price near the gauge. It reached 44.8 last week, the lowest since May 2008.

• Obama Said Not Ready to Decide on Fed Chief for Several Weeks. President Barack Obama won’t announce a replacement for Federal Reserve Chairman Ben S. Bernanke at least until September, according to an administration official. Obama hasn’t made a decision on naming the next Fed chief, according to the official, who asked for anonymity to discuss internal planning. 

• Wiretap Evidence Included in SAC Capital Case, U.S. Says.

Wall Street Journal:

• Egyptians Gather for Rival Protests. Mass protests planned; ousted president Morsi ordered held for 15 days and interrogated. Egyptians braced for a bloody confrontation between hundreds of thousands of rival protesters on Friday as prosecutors ramped up criminal accusations against ousted President Mohammed Morsi. Tens of thousands of pro- and anti-Morsi protesters had already filled squares throughout the nation by late Friday afternoon. By early evening, 24 people had been injured in fighting between the two sides in cities throughout the country, according to Egyptian state media. Friday's early taste of violence augured worse clashes after nightfall, after most people in this Muslim-majority country break their daylong Ramadan fast. The Brotherhood has organized as many as 34 protests in Egypt's capital alone and many more in rural governorates. 

• Barclays(BCS) Sets Plans to Raise Capital. Convertible-Bond Sale, Possible New Stock Sale, Likely to Be Announced Next Week. Barclays is putting the finishing touches on a plan to boost its capital levels that will likely involve the bank issuing billions of pounds worth of new securities, according to people familiar with the matter.

• Obama, House GOP Gear Up for Fall Budget Battle. One of the few facts in the budget wars in Washington to which both sides generally subscribe is that future deficits are being driven by spending on federal benefits, particularly health, not on the roughly one-third of domestic and defense spending that’s subject to annual appropriation by Congress. Now Congress and the president are heading to a showdown over spending — over that already-shrinking third, which covers everything from bullets for the Army to bureaucrats in the Agriculture Department.

• What Company Earnings Are Telling Us About the Global Economy.

Fox News:

• Uh Ho: Obama Says Vietnamese Dictator Inspired by Founding Fathers. It may come as some unwelcome news to the families of the nearly 60,000 Americans who died in the Vietnam War that the whole thing was just a misunderstanding. That was the impression President Obama gave on Thursday when he spoke to the press after his meeting with Vietnamese President Truong Tan Sang.

CNBC:

• Buying banks can be 'dangerous investing': Bove. Analyst Dick Bove is one of the market's biggest advocates for bank stocks, but he is worried that investors may be getting a little too enthusiastic.

Zero Hedge:

• Japan Food And Energy Prices Rise; All Others Drop. (graph)

• The ABCs Of The 'Little Red Riding Hood Market'.

• Consumer Confidence Surges To Six Year High. (graph)

• Drone Technology Gets Energized.

• A Warning About The Dangers Of Central Planning And Moral Hazard By... Ben Bernanke.

Business Insider:

• Chinese Policymakers Are Being Sent To A Mao Bootcamp Where They're Being Re-educated With Communist Party Ideals.

• Here's The Real Reason Why Wall Street Is Freaked Out About The Insider Trading Charges Against SAC Capital.

Washington Post:

• Detroit: Liberalism Can't Go on Forever.

NY Post:

• EXCLUSIVE: Fed-up Silda Spitzer plans to divorce Eliot after election. Silda Spitzer is privately telling friends she plans to divorce her hooker-loving husband, Eliot Spitzer, Page Six can exclusively reveal. Multiple sources tell us long-suffering Silda — who, he last night admitted, will not be joining him on the campaign trail — “has had enough” and plans to start divorce proceedings after his run for New York City comptroller is over.

Reuters:

• METALS-Copper falls as concerns over China's growth weigh. Copper fell for a second straight day on Friday, as concerns about growth in top consumer China weighed on the outlook for industrial metals demand, but a weak dollar prevented further losses. Three-month copper on the London Metal Exchange, untraded at the close, was last bid at $6,870 a tonne from a last bid of $7,010 on Thursday.

• Brazil's Embraer sees weakening demand for bigger business jets. Brazilian planemaker Embraer SA has seen early signs of weakening demand for its Legacy 650 business jets in the "super mid-size" segment, Chief Executive Frederico Curado told analysts on a Friday conference call. As a result, Embraer's business jet unit is on track to hit the lower end of its 2013 delivery and revenue targets, he said. 

• General Electric(GE) to cut 600 jobs in France-union. General Electric is to cut 600 jobs in France, mostly at its finance arm, a union official said on Friday, as it seeks to cut back on the division's activities in the wake of the banking crisis.

Financial Times:

• US presses banks for multibillion payments over mortgage securities. Bank of America, JPMorgan Chase and Royal Bank of Scotland are being pressed for multibillion-dollar payments to the US government over toxic mortgage-backed securities, according to people familiar with negotiations. The Federal Housing Finance Agency, the US housing regulator, sued 18 international financial groups in 2011, alleging they broke federal securities laws in selling $200bn of mortgage-backed securities and demanding compensation for billions of dollars of losses.

@Market_Time:

• France's CAC Index and EPS - hard times. (graph)

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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Decanter.com:

• Brazil's Economic Slowdown Hampering Wine Imports. Brazil's economic slowdown is hitting middle-class spending power and curtailing demand for wine after annual imports tripled in the past 10 years, citing analysts from Rabobank.