Bloomberg:
- BRIC Bust Seen in Emerging Market Discontent With Growth. Stretched budgets and sluggish growth are putting emerging-market governments on a collision course with rising pressures from recently empowered middle classes for more spending and better services. From Jakarta to Brasilia, policy makers face the end to an era of abundant global liquidity that helped fuel the fastest expansion in three decades. In the eight weeks through July 17, investors pulled $40.3 billion from emerging-market bond and equity funds amid signs the Federal Reserve may begin reducing stimulus later this year. In 2012, $111 billion poured into these asset classes, according to EPFR Global in Cambridge, Massachusetts, which tracks money flows. The Fed’s plans didn’t trigger the slump -- after a decade of prosperity, the BRIC economies of Brazil, Russia, India and China (SHSZ300) have been slowing since 2010. Developing nations are punished more during downturns than their European counterparts because they depend on growth to mitigate social tensions, said Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development. “The needs are much more elementary and brutal,” said Gurria, a former Mexican finance secretary, in a July 19 interview in Moscow. Families live with “vermin because they don’t have cement on the floor, and when there’s a big wind it blows off the roof. This isn’t the problem the middle class in the Netherlands face.”
- Rate-Cut Ammo Running Low Challenges RBA as China Slows: Economy. Australia entered its last recession with the benchmark interest rate at 12 percent. Now, as a once-in-a-century mining-investment boom wanes, the central bank finds itself with little conventional ammunition.
- Asian Stocks Extend Two-Month High on China Growth, Fed Stimulus. Asian stocks rose, extending a two-month high, after Premier Li Keqiang said China’s economy won’t grow any slower than 7 percent and as U.S. housing data damped concerns the Federal Reserve will reduce stimulus measures. Nippon Steel & Sumitomo Metal Corp. (5401) climbed 3 percent in Tokyo after the Nikkei newspaper reported the world’s biggest steelmaker agreed to a 10 percent price increase with Toyota Motor Corp. Yanzhou Coal Mining Co., China’s fourth-largest producer of the fuel, added 3.8 percent in Hong Kong after saying its chairman and vice chairman resigned. ZTE Corp., China’s No. 2 makerof equipment for phone networks, jumped 17 percent after reporting higher first-half earnings. The MSCI Asia Pacific Index climbed 0.9 percent to 137.24 as of 12:18 p.m. in Tokyo, with almost four stocks rising for each that fell.
- Swaption Drop Signals Treasury Market Prepared for Fed Tapering. Options are signaling that the Federal Reserve can reduce its bond-purchase program without causing a spike in price swings in the Treasury market. Three-month implied volatility on 10-year interest-rate swaps dropped to a one-month low of 89.4 basis points from 122.6 basis points on July 5, which was the highest since November 2011, according to data compiled by Bloomberg. The gauge is a measure of projected yield fluctuations over the next 90 days. Half of the economists surveyed by Bloomberg say the Fed will begin trimming its $85 billion in monthly bond purchases in September.
- Fed Seen Tapering QE in September by Half of Economists Surveyed. A growing number of economists surveyed by Bloomberg News say the Federal Reserve will begin trimming its $85 billion in monthly bond purchases in September. That was the view of half of those who participated in the July 18-22 survey, up from 44 percent in last month’s poll. Even as expectations of a September taper rose, 10-year Treasury yields continued to fall last week from an almost two-year high after Fed Chairman Ben S. Bernanke said reducing bond-buying wouldn’t constitute policy-tightening.
- MillerCoors Sees Metal-Warehouse Delay Costing Buyers $3 Billion. Global aluminum costs were inflated by $3 billion in the past year through unfair rules that allow Goldman Sachs (GS) Group Inc. and other warehouse owners to slow deliveries, said a risk executive at brewer MillerCoors LLC. The practices of warehouse owners authorized to hold aluminum by the London Metal Exchange created artificial limits on available supply, leaving prices “inflated relative to the massive oversupply and record production,” Tim Weiner, a global risk manager at Chicago-based MillerCoors, said in written testimony before his appearance today at a U.S. Senate subcommittee hearing in Washington.
- Southwest(LUV) Jet’s Gear Collapses, Snarls LaGuardia Traffic. A Southwest Airlines Co. (LUV) jet’s nose gear collapsed on landing at New York’s LaGuardia airport, snarling traffic in the nation’s busiest air-travel market as flights were sent to other airports in the region. Eight of the 150 people on board the Boeing Co. (BA) 737-700 from Nashville, Tennessee, were injured today, Michelle Agnew, a spokeswoman for Dallas-based Southwest, said in a telephone interview. CNN video showed the plane sitting with its front end on the runway and the emergency evacuation slides extended.
- Housing Recovery Increasingly Prices Out First-Time Buyers. Financial Factors Keeping Lid on Initial Purchases. First-time home buyers, long a key underpinning of the housing market, are increasingly getting left behind in the real-estate recovery. Such buyers, typically couples in their late 20s or early 30s, have accounted for about 30% of home sales over the past year. They represented 40% of sales, on average, over the past 30 years, and accounted for more than 50% in 2009, when recession-era tax credits fueled the first-time market, according to data from the National Association of Realtors.
- Economic Casualties: 'Missing Households'. 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.
- SAC to Employees: Cohen Didn't Read Dell Email at Heart of SEC's Case. SAC gave employees a memo that is a detailed rebuttal to U.S. allegations that CEO Steven A. Cohen failed to take proper steps to prevent insider trading.
- As Banks Retreat, Hedge Funds Smell Profit. Private investment funds, facing diminished returns in some other areas, have piled into the business of lending to struggling companies, part of a so-called shadow-lending system that operates under different rules than commercial banks. Hedge funds D.E. Shaw Group and Oaktree Capital Management, for example, recently set up funds to lend to small and midsize businesses, including distressed ones.
- Portugal's Bond-Market Recovery Veers Off Track. If Portugal Can't Win Back Investors' Confidence, Another Bailout Could be Near. Only a few months ago, investors were betting on Portugal as Europe's next bond-market recovery story. Now, despite the apparent resolution of a political row that sparked this summer's debt selloff, the future looks more complicated.
- A Global Revenue Grab. The G-20 unveils a plan to limit international tax competition. After five years of failing to spur a robust economic recovery through spending and tax hikes, the world's richest countries have hit upon a new idea that looks a lot like the old: International coordination to raise taxes on business. The Organization for Economic Cooperation and Development on Friday presented its action plan to combat what it calls "base erosion and profit shifting," or BEPS. This is bureaucratese for not paying as much tax as government wishes you did. The plan bemoans the danger of "double non-taxation," whatever that is, and even raises the specter of "global tax chaos" if this bogeyman called BEPS isn't tamed. Don't be fooled, because this is an attempt to limit corporate global tax competition and take more cash out of the private economy.
- Will IRS scandal lead all the way to Obama? It took a mere two months and eight days for the Obama administration’s spin on the growing scandal of the IRS targeting Tea Party and conservative groups to completely collapse.
- Detroit bankruptcy raises concerns about other US cites under huge retiree debt. The recent bankruptcy filing in Detroit is raising red flags about other major U.S. cities also dealing with billions in under-funded retiree benefits, prompting the question -- who might be next? Just last week, Chicago’s credit rating was downgraded as a result of its $19 billion in under-funded pension liabilities. Moody's Investors Service called the liabilities “very large and growing" and warned that Chicago, the country’s third-largest city, faces a “tremendous strain’’ in trying to meet future funding requirements and public safety demands.
- Japan PM Abe's mandate is much smaller than it looks. Japanese Prime Minister Shinzo Abe's landslide election victory at the weekend was anything but a ringing endorsement from voters. The vast majority never voted for his coalition. Abe's mandate is much smaller than his ruling bloc's win in the upper house poll suggests: only about one in four voters gave their support. Three-quarters of the electorate either did not vote at all or backed opposition parties.
- About Those "Strong Fundamentals"... (graphs)
- HUGE PRISON BREAK IN IRAQ: 500 Escape Including Senior Al-Qaeda Members Who Were Due To Be Executed.
- Spain taps social security reserve fund to pay pensions. Spain tapped its social security reserve fund for the second time in a month on Monday, the Labour Ministry said, to help with extra summer pension payments as unemployment and retirement costs deplete government funds. The government turned to the fund for 3.5 billion euros ($4.6 billion) on July 1 then for a further 1 billion euros on Monday. Spanish pensioners receive two cheques in summer and two over the Christmas holidays.
- Brazil tries to lift fiscal credibility, markets don't buy it. Brazil announced on Monday it will freeze an additional 10 billion reais ($4.4 billion) in budgeted spending, in an effort that is unlikely to dispel investors' mistrust in the government's commitment to fiscal austerity. The new freeze, which was originally expected to reach up to 20 billion reais, is aimed at helping the central bank battle inflation, which hit a 20-month high in June. Brazil's planning ministry on Monday raised its projection for 2013 inflation to 5.7 percent from 5.2 percent previously -- closer to market expectations.
- Italy says to press ahead with divisive tax decisions. Italy's fragile coalition government said on Monday it would press on with plans to reform a hated housing levy and resolve differences over sales tax, despite earlier reports it might have to postpone decisions on the divisive issues. Disagreements over tax policy have tested the left-right coalition, which has seen its public support tick down steadily since it was formed in April.
- Texas Instruments(TXN) upbeat about revenue, chip demand. Texas Instruments Inc gave a third-quarter revenue forecast that was stronger than some analysts expected and said customers seem more confident about placing orders for chips. Orders picked up in the first half of 2013 and Chief Financial Officer Kevin March told Reuters on Monday that business continues to improve, following weak demand last year due to concerns about the global economy. Texas Instruments' book to bill ratio, a measure of orders filled, was 1.03 in the second quarter, unchanged from the prior quarter.
- Brazil firms boost hedges as currency swings, debt soars. Brazilian companies, seeking to buffer their growing foreign debt from the impact of a surging U.S. dollar, are stepping up demand for hedges known as non-deliverable forward contracts, data by Cetip SA Mercados Organizados showed on Monday.
- IWH Forecasts Eastern German Economy Will Stagnate This Year. IWH Halle institute expects the German economy to grow .7% this year, citing IWH projections. Cos. in eastern Germany less protected from recession in neighboring countries. Unfavorable demographic trend one of the reasons for stagnation in eastern Germany; more than 500,000 people emigrated from the region from 2000-2011. Economic slowdown has cut chances eastern German regions will reduce financial arrears owed to western German states.
- China Premier Says GDP Growth Bottom Line is 7%. China Premier Li Keqiang said China's "bottom line" for GDP growth is 7% and the nation can't let growth go below that, citing comments at a recent meeting with economists and businesspeople. China's economy is at a "reasonable" level as a whole, Li said. China's policy makers don't simply loosen fiscal and monetary policies or adopt short-term stimulus when downward economic pressure increases, citing Chen Yulu, a central bank adviser.
RBC:
- Rated (LRCX) Outperform, target $61.
- Asian equity indices are +.50% to +1.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 126.50 -1.5 basis points.
- Asia Pacific Sovereign CDS Index 98.25 -3.75 basis points.
- FTSE-100 futures +.20%.
- S&P 500 futures +.30%.
- NASDAQ 100 futures +39%.
Earnings of Note
Company/Estimate
- (AMTD)/.31
- (BTU)/-.05
- (APD)/1.36
- (CIT)/.91
- (TRV)/1.60
- (FRX)/.08
- (LXK)/.87
- (UTX)/1.57
- (LMT)/2.20
- (R)/1.23
- (AKS)/-.32
- (VLO)/.96
- (WEN)/.06
- (DD)/1.27
- (RF)/.21
- (MO)/.63
- (DPZ)/.56
- (UPS)/1.13
- (FCX)/.45
- (PCAR)/.74
- (ITW)/1.09
- (AVY)/.70
- (RHI)/.43
- (BCR)/1.38
- (ALTR)/.31
- (LLTC)/.42
- (AAPL)/7.30
- (JNPR)/.25
- (ILMN)/.39
- (DFS)/1.15
- (PNRA)/1.77
- (T)/.68
- (BRCM)/.69
- (NSC)/1.49
- (VMW)/.77
- (IGT)/.31
- (EA)/-.59
- (HMA)/.21
9:00 am EST
- The House Price Index for May is estimated to rise +.8% versus a +.7% gain in April.
- The Richmond Fed Manufacturing Index for July is estimated to rise to 9.0 versus 8.0 in June.
- None of note
- The Japanese Cabinet Office Monthly Economic report, Eurozone Consumer Confidence report, 2Y T-Note auction, HSBC Manufacturing PMI report, Australian inflation data and the weekly retail sales reports could also impact trading today.
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