- Junk Yield Premiums Surge as Downgrades Flag Risk: China Credit. The extra borrowing cost for China's riskiest companies is climbing at the fastest pace in 18 months as record credit-rating downgrades heighten concern the nation will experience its first bond default. The yield gap on three-year AA- notes over AAA debt jumped 16 basis points last month to 143 on July 31, the most since January 2012, Chinabond indexes show.
- Goldman(GS) Loses Top Brazil Executives as Growth Plan Halted. Goldman Sachs Group Inc. (GS), the U.S. bank that announced plans in April to hire 50 people in Brazil, has reversed course after the economy expanded less than analysts estimated and top executives left the company. “The outlook for the economy and equity and merger-and-acquisition deal volumes are worse than we expected,” Michael DuVally, a spokesman for the New York-based bank, said in an interview on Aug. 2.
- Euro-Area July Services Output Contracts Less Than Estimated. An index of activity in the services industry based on a survey of purchasing managers rose to 49.8 from 48.3 in June, London-based Markit Economics said in a report today. That’s above an initial estimate of 49.6 on July 24.
- HSBC Falls After Earnings as Gulliver Says Markets Slow. HSBC Holdings Plc (HSBA), Europe’s largest bank, slid in London trading after its earnings missed analysts’ estimates and Chief Executive Officer Stuart Gulliver said the lender’s fast-growing emerging markets are slowing. The shares fell 4.3 percent, the steepest daily decline since November 2011. HSBC, which operates in about 80 countries, said the mainland Chinese market slowed unexpectedly in the first quarter of 2013, while Latin American growth eased in the first half on weak consumer consumption. HSBC also faces a potentially “highly damaging impact” from planned European Union restrictions on bonuses, the bank said today.
- EU Bank Calculations of Capital Vary Widely, EBA Says. The European Union’s top banking regulator said it found inconsistencies in the way lenders calculate how much capital to hold on their balance sheets against potential losses, adding to the clamor from global supervisors to increase transparency.
- European Stocks Rise for Sixth Day as Lloyds Climbs. European stocks rose for a sixth day, the longest winning streak this year, as services output shrank at a slower pace than initially forecast, outweighing worse-than-estimated earnings from HSBC Holdings Plc. Lloyds Banking Group Plc climbed 2.7 percent on a report it will pay as much as 70 percent of profit as dividend. Thomas Cook Group Plc, Mediaset SpA and Drax (DRX) Group Plc advanced more than 2.5 percent as analysts upgraded the shares. HSBC, Europe’s largest bank, sank the most in 20 months. PostNL NV, the biggest Dutch postal operator, plunged the most in six months after sales missed estimates. The Stoxx Europe 600 Index rose 0.2 percent to 304.74 at the close, paring an earlier gain of as much as 0.6 percent.
- Fed Should Reverse Commodity Policy, CFTC’s Chilton Says. The Federal Reserve should reverse a decade-old ruling that lets banks trade physical commodities, Commodity Futures Trading Commission member Bart Chilton said. “I don’t want a bank owning an electric service, or cotton, corn or feedlots,” Chilton, a Democrat, said in remarks prepared for delivery today at a conference of U.S. cotton growers in Lake Tahoe, California. “I don’t want banks owning warehouses, whether they have aluminum, gold, silver or anything else in them.” The Fed “can and should reverse” the policy, he said.
- Commodities Revenue of Top 10 Banks Fell 25% in First Half. Commodities revenue at the 10 largest investment banks fell 25 percent in the first half, putting those units on pace for the worst annual performance in more than five years, according to analytics company Coalition Ltd. Revenue fell to about $2.7 billion in the first six months from $3.6 billion in the same period of 2012, Coalition said today in an e-mail. Last year’s total of $6 billion was down 24 percent from 2011 and was less than half that of 2008, when oil prices climbed to a record.
- Copper Falls as Chinese Service Stagnation Fuels Demand Concern. Copper fell in New York after three sessions of gains as a stagnant index of service industries in China stoked concern about the outlook for demand in the world’s largest consumer of the metal. A measure of Chinese service industries released today by HSBC Holdings Plc and Markit Economics was unchanged in July. A manufacturing index for the nation published Aug. 1 by HSBC and Markit fell from June. Factory shutdowns for summer holidays curbed demand, according to RBC Capital Markets Ltd. “Base metals are mixed and directionless as the painful reality of the August slowdown is upon us,” RBC said. Copper for delivery in September slid 0.6 percent to $3.153 a pound by 7:51 a.m. on the Comex in New York. Copper for delivery in three months fell 0.6 percent to $6,962 a metric ton on the London Metal Exchange.
- Port Hedland Iron Ore Exports Drop as Shipments to China Decline. Iron ore shipments from Australia's Port Hedland, the world's biggest bulk terminal, declined for a second month in July as exports to China fell. Exports totaled 26.6 million metric tons from 27.7 million tons in June, data on the Port Hedland Port Authority's website showed. Shipments to China, the biggest buyer, were 20.4 million tons from 22.9 million tons in June, according to Bloomberg calculations. Total shipments averaged 858,482 tons a day last month compared with 924,823 tons a day in June, according to Bloomberg calculations.
- Assad Says Syria Crisis Will Be Resolved on the Battlefield. Syria’s President Bashar al-Assad said the nation’s two-year civil war that has claimed more than 100,000 lives can only be decided on the battlefield. “All routes have been tried and there is only one option left, which is to defend ourselves and our country with our own hands, and in this case everybody looks naturally to the armed forces,” Assad said yesterday at a banquet with social and political figures, according to official news agency Sana.
- Iran Seen Trying New Path to a Bomb. U.S., European Officials Say Tehran Could Start Making Weapons-Grade Plutonium by Next Summer.
- IMF Urges Japan to Bring Red Ink Under Control. Fund Hardens Rhetoric, Saying It's Crucial to Move Ahead With Consumption Tax.
- Army won’t suspend contracts with Al Qaeda-tied companies, citing 'due process rights'. In a scathing passage of his latest report to Congress, Special Inspector General John Sopko said his office has urged the Army to suspend or debar 43 contractors over concerns about ties to the Afghanistan insurgency, "including supporters of the Taliban, the Haqqani network and al Qaeda." Sopko wrote that the Army "rejected" every single case.
- GOP leader threatens to cut CNN, NBC from primary debates over Clinton specials. The head of the Republican Party threatened Monday to cut out CNN and NBC from the GOP presidential primary debates if the networks do not shelve their plans to air lengthy features on Hillary Clinton -- who is widely expected to be a Democratic candidate in the 2016 election. Republican National Committee Chairman Reince Priebus accused both networks of trying to put "a thumb on the scales" of the 2016 race with programming he claimed would be tantamount to an "in-kind donation" to the Clinton campaign. Last month, CNN Films announced it was producing a documentary on Clinton to premiere next year, first in theaters and then on CNN. NBC also announced a four-hour "Hillary" miniseries starring Diane Lane, on the life of the former secretary of state and first lady. Priebus' statement on Monday marked the most aggressive challenge yet to those plans.
- IDC cuts forecast for global IT spending for 2013. Market-research firm International Data Corp. cut its global information-technology-spending growth forecast for this year due to the economic slowdown in China. IDC expects global IT spending to grow 4.6% to $2 trillion this year, down from its previous forecast for an increase of 4.9% and below growth of 5.6% for 2012. Including telecom services, IT spending is forecast to increase 3.8% to $3.6 trillion.
- US self-reported spending flat since May: Gallup. U.S. consumer spending has remained largely flat for the last three months, Gallup reported on Monday, despite other indicators that suggest consumers keep spending at a brisk clip. The polling agency found that "self-reported" daily consumer spending was $89 in July, unchanged from the $90 of June and May. Based on a series of tracking interviews with more than 14,000 Americans during July, Gallup said that flat spending was perceptible across income levels.
- Non-Manufacturing ISM Follows Manufacturing Surge Higher: Biggest One Month Move Since April 2009. (graph)
CNN:
- Your TV Might Be Watching You. Today's high-end televisions are almost all equipped with "smart" PC-like features, including Internet connectivity, apps, microphones and cameras. But a recently discovered security hole in some Samsung Smart TVs shows that many of those bells and whistles aren't ready for prime time. The flaws in Samsung Smart TVs, which have now been patched, enabled hackers to remotely turn on the TVs' built-in cameras without leaving any trace of it on the screen. While you're watching TV, a hacker anywhere around the world could have been watching you. Hackers also could have easily rerouted an unsuspecting user to a malicious website to steal bank account information.
Reuters:
- Exclusive: U.S. directs agents to cover up program used to investigate Americans. A secretive U.S. Drug Enforcement Administration unit is funneling information from intelligence intercepts, wiretaps, informants and a massive database of telephone records to authorities across the nation to help them launch criminal investigations of Americans. Although these cases rarely involve national security issues, documents reviewed by Reuters show that law enforcement agents have been directed to conceal how such investigations truly begin - not only from defense lawyers but also sometimes from prosecutors and judges. The undated documents show that federal agents are trained to "recreate" the investigative trail to effectively cover up where the information originated, a practice that some experts say violates a defendant's Constitutional right to a fair trial. If defendants don't know how an investigation began, they cannot know to ask to review potential sources of exculpatory evidence - information that could reveal entrapment, mistakes or biased witnesses.
- Ackman's Pershing Square lost 2.2 pct in July -source. It was a tough July for hedge fund manager William Ackman, whose $12 billion Pershing Square Capital Management lost 2.2 percent during the month, according to an investor. The fund got hit hard by its short position in nutritional supplements company Herbalife Ltd, which saw its share price rise more than 40 percent last month. Ackman's fund has invested $1 billion on a bearish bet that Herbalife will be unmasked by regulators as a pyramid scheme. A long position in retailer J.C. Penney Co Inc also hurt the fund as the stock slid about 17 percent in July. Pershing Square remains up 3.8 percent year to date, according to the investor.
- Debt-fuelled consumers and expensive houses drive British recovery. Britain's economic recovery is gaining pace, but its apparent reliance on consumer borrowing and expectations of higher house prices may offer a shaky foundation for lasting growth.
- Euro zone retail sales back in decline in June. Retail sales in the euro zone fell across the board for the first time in three months in June, official data showed on Monday, highlighting the drag of depressed household spending on the bloc's fragile recovery. For the bloc as a whole the volume of retail trade fell broadly in line with expectations by 0.5 percent on the month. Shoppers in the euro zone spent more on automotive fuel in June, but it was not enough to offset a 0.6 percent drop in spending on food, drinks and tobacco and a 0.2 percent decrease in purchases of non-food items such as electronics, clothing and else.
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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- Bank of Italy governor is concerned govt turmoil may raise borrowing costs and make it harder to enact legislation to stimulate economy.
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