Bloomberg:
- India Fighting Worst Crisis Since ’91 Limits Capital Flows. India increased efforts to stem the rupee’s plunge and stop capital outflows that are pushing the economy towards its biggest crisis in more than two decades. The Reserve Bank of India, whose Governor Duvvuri Subbarao steps down next month, cut the amount local companies can invest overseas without seeking approval to 100 percent of their net worth, from 400 percent, according to a statement late yesterday. Residents can remit $75,000 a year versus the previous $200,000 limit. Rupee forwards rose for the first time in three days.
- Asian Stocks Fall Amid Mixed Earnings, Fed Concern. Asian stocks fell, snapping the regional benchmark’s longest winning streak in six weeks, amid mixed corporate earnings across the region and after economists predicted the Federal Reserve will reduce stimulus next month. Sony Corp., an electronics maker that gets about 68 percent of sales from overseas, slid 1.6 percent, pacing declines among Japanese exporters as the yen rose. Thai Beverage Pcl (THBEV), the brewer controlled by billionaire Charoen Sirivadhanabhakdi, sank 6.1 percent in Singapore after posting lower sales and profit. Li & Fung Ltd. jumped 13 percent after saying business is recovering, leading an advance in Hong Kong’s Hang Seng Index, which briefly erased losses for the year. The MSCI Asia Pacific Index dropped 0.4 percent to 135.51 as of 11:49 a.m. in Tokyo, with five shares falling for every two that rose.
- WTI Rises for Fifth Day on Egypt Crackdown, U.S. Oil Stockpiles. West Texas Intermediate rose for a fifth day as worsening violence in Egypt fanned concern over Middle East oil supplies and U.S. crude stockpiles declined for a second week. Futures climbed as much as 0.5 percent in New York, extending the longest rising streak since April. Crude inventories fell by 2.8 million barrels last week, Energy Information Administration data showed, almost double a median 1.5 million drop forecast by analysts in a Bloomberg News survey. Egypt declared a state of emergency and hundreds were killed after security forces broke up sit-ins by protesters.
- Rubber Retreats From 11-Week High as Stronger Yen Cuts Appeal. Rubber fell from an 11-week high as the Japanese currency strengthened after a U.S. Federal Reserve official cautioned against excessive optimism over the economy. Rubber for delivery in January on the Tokyo Commodity Exchange declined as much as 1.1 percent to 263.1 yen a kilogram ($2,693 a metric ton) and was at 265 yen at 11:25 a.m. Futures settled at 265.9 yen yesterday, the highest close for a most-active contract since May 29. Rubber has lost to 13 percent this year.
- European Recovery Means Little for Jobless Generation. Francisco Justicia Carrasco has been sending off 50 resumes every Monday for more than three years. He doesn’t expect a job for a long time to come yet. “The situation is screwed up,” said the 28-year-old who lives in Ripollet, close to Barcelona, and has worked in a range of jobs from shop cashier to packaging over the past decade. “I don’t see any improvement at all from last year or even the year before.”
- Henkel CEO Sees No Short-Term Catalyst for Europe Rebound. Henkel AG Chief Executive Officer Kasper Rorsted, whose company makes products from Right Guard deodorant to Loctite adhesives, said he sees no short-term catalyst for improvement in Europe’s economy. “The only economy that gives us worries is the European economy,” with the region’s 28 million unemployed, he said yesterday in an interview at Bloomberg headquarters in New York.
- U.S. Re-Evaluating Egypt Assistance After Protest Crackdown. The Obama administration is considering canceling planned military exercises with Egypt and is re-evaluating other aid following the violent crackdown on protesters by the country’s military-backed government, according to a U.S. official. The U.S. and Egypt are scheduled to start the “Bright Star” exercises next month. Other military assistance already in the pipeline may also be held up to put pressure on Egypt’s interim government, said the official, who asked for anonymity to discuss internal deliberations.
- Who Will be the Next Fed Chair? (video)
- Cisco(CSCO) Cutting Jobs as Revenue Forecast Misses Estimates. Cisco Systems Inc. (CSCO), the biggest maker of networking equipment, said it’s cutting about 5 percent of its workforce after issuing a fiscal first-quarter sales forecast that missed most analysts’ estimates. Cisco is eliminating 4,000 jobs as weaker sales in Japan, China and Europe weigh on revenue growth, Chief Executive Officer John Chambers said on a conference call today. Revenue for the current quarter through October will be $12.2 billion to $12.5 billion, the San Jose, California-based company said in a statement. Analysts on average were projecting sales of $12.5 billion for the current period. Chambers is grappling with concerns that Cisco’s growth rate may slow as companies and network operators postpone costly overhauls of their networks. The results suggest the CEO is struggling to deliver on his turnaround plan for the company, said Bill Kreher, an analyst at Edward Jones & Co. in St. Louis, Missouri. “The guidance is below the long-term plan, which can be concerning,” said Kreher, who has a hold rating on Cisco shares. “Cisco has eliminated low-hanging fruit and has effectively managed their costs, but looking forward the company must continually find ways to generate new sources of revenue.” Cisco fell as much as 11 percent in extended trading.
- Paulson Cuts SPDR Gold(GLD) Stake 53% as Soros Sells Out. Billionaire John Paulson, the biggest investor in the SPDR Gold Trust, reduced his holdings by 53 percent as the metal plunged into a bear market. George Soros sold his entire position. Paulson & Co. reduced its stake to 10.2 million shares in the three months ended June 30 from 21.8 million at the end of the first quarter, and Soros Fund Management LLC sold its 530,900 shares, Securities and Exchange Commission filings showed today. The SPDR fund is the world’s largest exchange-traded product backed by gold.
- Hundreds Dead in Egypt Crackdown. Security Forces' Efforts to Clear Cairo Sit-Ins Sparks Violence; At Least 278 People Killed Across Egypt. Egypt's military regime, aided by snipers and bulldozers, swept the streets of Islamist protesters—setting off a day of violence that left more than 278 people dead, the government fractured and ties with its international partners in tatters. Muslim Brotherhood sympathizers stormed police stations, burned down churches and battled with government supporters in several neighborhoods, after police sweeps left scores of protesters dead at two Cairo squares. The raid ended more than a month of sit-ins by thousands of Brotherhood supporters—sometimes joined by families, and daring the government to disperse them—who demanded the reinstatement of ousted President Mohammed Morsi.
- Violence Draws Censure and Silence. International reaction to the Egyptian military's crackdown against protest camps Wednesday morning was swift and strident, with Turkish leaders who are ideologically close to the ousted President Mohammed Morsi calling the move a "massacre" and regional diplomats saying the escalating violence was worrisome for Middle East stability.
- Chinese Banks Feel Strains After Long Credit Binge. Rapid Loan Growth Has Led to Serious Debt Problems at Local Governments. A cornerstone of China's financial edifice is beginning to show some cracks. The country's banking sector, a key part of a financial system that has powered China through three decades of breakneck expansion, is feeling the strain of years of rapid credit growth. Bank-fueled lending to state enterprises and local governments has led to overcapacity; serious debt problems for local governments, companies and lenders alike; and numerous white-elephant projects, from nearly empty malls and resorts to bridges to nowhere. Chinese banks now are trying to strengthen their balance sheets ahead of an expected rise in bad loans coupled with slower earnings growth. Raising capital will likely be expensive for the banks because investors, who have sold off shares of banks, are worried about their deteriorating health and China's slowing growth. "The problem [banks] face is that market sentiment is very bad," says Mark Mobius, executive chairman of Templeton Emerging Markets Group, a part of Franklin Templeton Investments, who manages more than $50 billion of emerging-market equities
- Many Health Insurers to Limit Choices of Doctors, Hospitals. Main Reason Behind These Limited Plans: Cost. This fall, Indiana's new online health-insurance marketplace will present some tough choices for consumers like John Nowak, who will be able to pick a plan from his current insurer—or go for one that includes his primary-care doctor. That is because Mr. Nowak's current insurer won't include Indiana's biggest health-care provider, 19-hospital Indiana University Health, in the plans it sells on the consumer exchange. If Mr. Nowak buys a new exchange plan from WellPoint Inc.'s WLP -0.41% Anthem Blue Cross and Blue Shield, he will generally have to pay the cost out of his own pocket if he sees the system's doctors, because they aren't in the network.
- Two Charged in J.P. Morgan(JPM) 'Whale' Trades. Prosecutors Allege Colleagues of Trader Attempted to Hide Losses; Trader Himself Isn't Charged.
- DOJ, FBI admit they inflated claims about mortgage fraud crackdown last year. The Justice Department and FBI have quietly acknowledged they grossly overstated the scope of a mortgage fraud crackdown, which the administration heralded with much fanfare a few weeks before last year's presidential election. According to a memo circulated by the FBI and a correction posted online by the Justice Department, the number of defendants, the number of victims and the size of the losses are, in reality, a fraction of what officials claimed last October.
- Summertime Blues: Polls show ObamaCare support eroding amid roll-out problems. As problems continue to pile up over the implementation of the Affordable Care Act, summertime polls from Fox News, Gallup and Rasmussen signal that growing confusion over the complexities of the law, how it will be rolled out and how much it will cost is eroding public support. A majority of Americans say they believe the new health care law will increase their medical costs and taxes, according to an Aug. 8 Fox News poll. The survey found 57 percent of those polled felt the way ObamaCare was being rolled out was "a joke." Overall, 63 percent of voters believe that the 2010 health care law needs to be changed. That number is up from 58 percent of those asked the question in July 2012.
- US Consumer Bankruptcies Jump By Most In Three Years; Third-Party Collections At All Time High. (graph)
- Santelli Slams Liesman: "There's A Difference Between Real-Life Inflation And The Government's". (video)
New York Times:
- How Hard Is It to Value Derivatives? See the Details of the JPMorgan(JPM) Case. On Wall Street, bets worth hundreds of billions of dollars are valued using a considerable amount of guesswork. The dangers of that approach were revealed on Wednesday in the government’s criminal complaints against two former JPMorgan Chase traders.
Reuters:
- Cayman Islands, U.S. reach pact to fight tax evasion. The United States has cut a deal with the Cayman Islands that will smooth implementation in the Caribbean island nation of a new U.S. anti-tax evasion law, while pressuring other low-tax and no-tax countries to follow suit. Criticized by President Barack Obama and others as a tax haven, the Cayman Islands said it has agreed to cooperate with the Foreign Account Tax Compliance Act (FATCA), enacted in 2010 and set to take effect in July 2014.
- Japan govt spokesman: No truth PM Abe instructed corp tax cut. Japan's Chief Cabinet Secretary Yoshihide Suga said on Thursday there is no truth to a report that Prime Minister Shinzo Abe instructed ministers to consider cutting the country's corporate tax rate. The issue will be decided after taking into account various views from the business sector, Suga told a regular news conference. Citing government sources, the Nikkei newspaper reported on Tuesday that Abe could consider lowering the corporate tax rate to foster an economic recovery.
- U.S. puts non-performing $50 mln green-tech loan up for auction. The U.S. Department of Energy will put up for auction this week a $50 million loan awarded to the now-closed Vehicle Production Group LLC, an unusual move by the DOE that may give U.S. taxpayers a chance to recoup a portion of their investment.
- NetApp(NTAP) forecasts lackluster second-quarter, shares down. Data storage equipment maker NetApp Inc forecast current-quarter results largely below expectations, sending its shares down 4 percent in extended trading. The company forecast second-quarter adjusted earnings of 60 to 65 cents per share, while analysts on average were looking for 63 cents. The company expects revenue to be between $1.56 billion and $1.66 billion, largely below the $1.63 billion Wall Street had estimated according to Thomson Reuters I/B/E/S. Shares down 4 pct after market.
Financial Times:
Telegraph:- Indian Industrial Companies' Debt Rising as Economy Slows. Combined gross debt of 10 most indebted industrial conglomerates rose 15% in latest financial year, citing Credit Suisse research. Debt increased at 9 of the 10 cos. studied. The stagnation in the nation’s industrial sector was driven home again on Monday, as shares in state-run Bharat Heavy Electricals plunged 19 per cent, after the country’s largest power equipment manufacturer by sales released unexpectedly weak earnings. The group’s figures are only the latest in a series of disappointing results from companies providing capital goods to India’s power and infrastructure sectors, as well as those supplying other struggling heavy industries, such as steel and car making.
- Bank warned that Help to Buy may be stoking housing bubble. The Bank of England has been warned that the Government’s subsidised mortgage scheme has already started to drive up house prices due to a shortage of properties for sale.
- Spanish youth look abroad for jobs. In Spain the news that Europe's longest-ever recession had come to an end was met with some scepticism by the man on the street.
- China Xiamen Bans Govt Debt If Exceeds Fiscal Ability. Xiamen city in the eastern Chinese province of Fujian starts new rules this month to regulate local governments' borrowing in order to prevent risks, citing the city's fiscal bureau. Govts' debt will not be approved if the source for repayment is not clear, funds of the debt are used for projects banned by the government, the borrowing is more than governments' fiscal capability, citing the rules.
- China Should Speed Up Fiscal, Tax Reform. China should speed up fiscal, tax reform to reduce local governments' dependence on land sale revenues, says a front-page commentary written by reporter Gu Xin. China should also allow local governments to see bonds in order to guard against the growth of "hidden" debt, the commentary said.
- China May Announce Long-Term Property Controls. China may this year announce property control policies that have long-term effects, citing Zhu Zhongyi, vice chairman of the China Real Estate Association. Zhu made the comments at a real estate forum in Hainan province's Boao. The nation will use more tax, credit and other economic measures to control the property market, the report said, citing Zhu.
- None of note
- Asian equity indices are -1.0% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 136.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 108.0 +.75 basis point.
- FTSE-100 futures -.30%.
- S&P 500 futures -.08%.
- NASDAQ 100 futures -.35%.
Earnings of Note
Company/Estimate
- (WMT)/1.25
- (KSS)/1.04
- (EL)/.21
- (DELL)/.24
- (JWN)/.88
- (AMAT)/.19
- (BYI)/.94
- (AZPN)/.08
- (BGG)/.19
- (RRGB)/.66
8:30 am EST
- Initial Jobless Claims are estimated to rise to 335K versus 333K the prior week.
- Continuing Claims are estimated to fall to 3000K versus 3018K prior.
- Empire Manufacturing for August is estimated to rise to 10.0 versus 9.46 in July.
- The Consumer Price Index for July is estimated to rise +.2% versus a +.5% gain in June.
- The CPI Ex Food and Energy for July is estimated to rise +.2% versus a +.2% gain in June.
- Net Long-Term TIC Flows for June are estimated at -$17.5B versus -$27.2B in May.
- Industrial Production for July is estimated to rise +.3% versus a +.3% gain in June.
- Capacity Utilization for July is estimated to rise to 77.9% versus 77.8% in June.
- Manufacturing Production for July is estimated to rise +.2% versus a +.3% gain in June.
- The NAHB Housing Market Index for August is estimated at 57.0 versus 57.0 in July.
- The Philly Fed for August is estimated to fall to 15.0 versus 19.8 in July.
- None of note
- The Fed's Bullard speaking, UK retail sales reports, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index and the (F) analyst meeting could also impact trading today.
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