Bloomberg:
- Abe Threatens Ministries With Power Shift Rivaling MacArthur Era. The bureaucracy that oversaw Japan’s postwar economic boom and a two-decade stagnation faces the biggest threat to its power since the U.S. occupation as Prime Minister Shinzo Abe seeks to seize control of ministries’ most senior appointments. Chief Cabinet Secretary Yoshihide Suga, 64, is leading the initiative, years after he got an education in civil servants’ sway when they frustrated his move as internal affairs minister to shift revenue between regions. The proposal in debate in the ruling Liberal Democratic Party would give the Cabinet Secretariat oversight of top bureaucrats’ promotions.
- Australia Business Sentiment Slumps as Budget Blowout Confirmed. Australian business confidence slumped to an eight-month low and Treasury confirmed a blow out in the fiscal deficit, complicating Prime Minister Kevin Rudd’s bid for re-election based on an economic management pitch. The confidence index for July fell to minus 3, according to a National Australia Bank Ltd. survey released today of more than 400 companies taken July 25-31. Sentiment remained “extremely poor” in the key mining industry as interest-rate cuts and a weaker currency failed to encourage companies, NAB Chief Economist Alan Oster said. Treasury, in its pre-election economic and fiscal outlook released today, predicted a budget deficit of A$30.1 billion ($27.4 billion) in the year to June 30 as the economy slows and unemployment rises. It said mining investment is likely to peak at a lower level because of “increased uncertainty about global growth prospects, particularly in China and India.”
- India Plans Import Curbs to Steady Rupee as Factory Output Drops. India plans curbs on some imports to pare a record current-account deficit and another push for capital inflows to stem the rupee’s slide, as a drop in factory output underscores the risks facing Asia’s No. 3 economy. The nation intends to compress imports of gold, silver and some non-essential items, as well as demand for crude oil, Finance Minister Palaniappan Chidambaram said in parliament in New Delhi yesterday. Industrial production fell 2.2 percent in June from a year earlier, while consumer prices rose 9.64 percent year-on-year in July, government reports showed.
- Asia Stocks Rise for Fourth Day as Japan’s Topix Advances. Asian stocks rose for a fourth day as Japanese shares gained after the yen weakened as a report showed machinery orders beat estimates and amid a report Prime Minister Shinzo Abe is considering a corporate-tax cut. Honda Motor Co., which gets 83 percent of sales from overseas, increased 1.2 percent, pacing gains among Japanese exporters. Sony Financial Holdings Inc., the financial services unit of electronics maker Sony Corp., jumped 3.3 percent in Tokyo after proposing a higher dividend. Newcrest Mining Ltd. slipped 3.1 percent as Australia’s biggest gold producer reported a wider-than-expected loss. The MSCI Asia Pacific Index added 0.2 percent to 134.37 as of 10:48 a.m. in Tokyo, with about three shares rising for each that fell.
- Rubber Retreats After Touching Highest in More Than Two Months. Rubber fell as some investors sold the commodity used to make tires after prices touched the highest level since May 29 and as stockpiles in China, the biggest user, remained near the highest level in three years. Rubber for delivery in January on the Tokyo Commodity Exchange fell as much as 1.7 percent to 260.8 yen a kilogram ($2,683 a metric ton) and was at 264.4 yen at 11:26 a.m. The most-active contract has lost 13 percent this year.
- Iron Ore Gluts Seen Through 2017 on Record Supply: Commodities. The seaborne iron ore market is poised for at least four years of expanding gluts as producers from Rio Tinto Group to Vale SA increase supply to a record just as growth in China drops to the slowest pace in a generation. The surplus will reach 82 million metric tons in 2014, the most since at least 2008, and the glut will keep growing through 2017, according to Goldman Sachs Group Inc. Australia will account for about 66 percent of the supply gains next year, Morgan Stanley says. Iron ore will average $115 a ton in 2014, 17 percent less than now and the least since 2009, according to the median of 10 analyst estimates compiled by Bloomberg.
- Italy Banks Buying Sovereign Debt Curb Lending: Chart of the Day. Italian banks are increasingly using liquidity to buy more profitable sovereign debt, reducing loans to companies and households, as Italy's longest recession in 20 years makes lending more risky. Italian banks increased their holdings of the country's debt by almost 100 billion euros in the 12 months ended June 30 to a record 402 billion euros. In the same period, loans decreased by 55 billion euros, or 3.3%, to 1.63 trillion euros. "There's a crowding-out effect," said Carlo Alberto Carnevale Maffe, professor of business strategy at Milan's Bocconi University. "The public debt is soaking up resources from the private sector, offering higher yields on capital and a lower investment risk, at a time in which companies and families are struggling to repay their debt."
- Blackstone(BX) Said to Acquire GE Apartments for $2.7 Billion. Blackstone Group LP, the largest manager of private-equity real estate funds, agreed to buy 80 U.S. apartment properties from General Electric Co. for about $2.7 billion, a person with knowledge of the deal said. The firm is acquiring the properties from the conglomerate’s GE Capital unit, said the person, who asked not to be identified because the transaction isn’t public. GE has been paring its real estate holdings as part of a strategy to shrink its finance division.
- Fed's Yellen Says Stance on Banks Hardened. Contender for Fed Chairman Says Crisis Made Her Rethink Views on Regulation. Janet Yellen, a top contender to lead the Federal Reserve, has evolved—in her own words—from a slightly "docile" regional bank regulator into a proponent of hard and clear rules designed to make banks less risky. The change was prompted by her six years as president of the Federal Reserve Bank of San Francisco during a torrid period in financial history. As part of that job, which she held through 2010, Ms. Yellen oversaw scores of banks, some of which failed as the housing market collapsed. An examination of her record suggests she pre-emptively warned colleagues about problems in the real-estate market but didn't take aggressive action to address them. While some bankers overseen by Ms. Yellen describe her as a determined regulator, critics note that she had a front-row seat for some of the turbulence that sent the economy into a tailspin and could have done more to prevent rampant real-estate speculation.
- Fidelity Boosts Hedge-Fund Offerings for Retail Clients. Fidelity has invested about $1 billion in Blackstone Group LPBX -0.35%’s first mutual fund, which launched last week and gives money to 11 hedge-fund firms to invest. Those firms include Cerberus Capital Management LP and Two Sigma Advisers LLC, and Blackstone itself can invest some of the fund’s assets.
- Judge Rules NYPD Stop-and-Frisk Practice Violates Rights. Outside Monitor Is Ordered to Oversee Changes to the Legally Challenged Practice.
- Mexico Moves to Overhaul Oil Industry. Bill to End State Monopoly Would Open Vast Offshore Fields to Energy Giants.
- Cairo Sit-Ins Swell, Protesters Gird. Extension of Morsi's Detention Could Buy Time, Official Says; Day Passes Without Crackdown. Two central Cairo protest sites swelled in size on the day Egypt's government said it could begin cracking down on Muslim Brotherhood sit-ins there, with new arrivals setting up tents and others donning helmets and building makeshift battlements. As of Monday evening, police hadn't erected their promised blockade of Nahda and Raba'a al Adiwiya squares, deferring the fears of many Egyptians that a government move against supporters of ousted President Mohammed Morsi would unleash a wave of violence.
- David J. Bobb: Howard Zinn and the Art of Anti-Americanism. Hollywood and the academic left have made the late Marxist historian more influential than ever. Upon the death of the Marxist-inspired historian Howard Zinn in 2010, eulogies rang out from coast to coast calling him a heroic champion of the unsung masses. In Indiana, then-Gov. Mitch Daniels refused to join the chorus and instead sent emails to his staff wondering if the historian's "execrable" books were being force-fed to Hoosier students. The recent revelation of these emails provoked an angry backlash.
- California Gov. Brown signs transgender-student bill. California Gov. Jerry Brown signed a controversial bill into law Monday afternoon allowing the state’s transgender public school students to choose which bathrooms they use and whether they participate in boy or girl sports. The law would cover the state’s 6.2 million elementary and high school kids in public schools. Opponents of the bill say allowing students of one gender to use facilities intended for the other could invade the other students' privacy. Randy Thomasson, of savecalifornia.com, says the law would “damage” kids. "This radical bill warps the gender expectations of children by forcing all California public schools to permit biological boys in girls restrooms, showers, clubs and on girls sports teams and biological girls in boys restrooms, showers, clubs and sports teams," Thomasson said. "This is insanity."
- Proposed new federal rule could put 'big brother' in your driver's seat. A proposed federal rule that would require black boxes or event data recorders (EDRs) in every U.S. automobile may mean “Big Brother” could be in your passenger seat for every drive. The National Highway Traffic Safety Administration rule requires all light passenger vehicles be equipped with an EDR by Sep.1, 2014. Ninety-six percent of new cars already have them - measuring such inputs as speed, lateral acceleration, pedal effort, seat belt use, wheel spin, steering wheel turn and direction.
- Revisiting China’s property bubble: Andy Xie. The market is speculating that the central government is about to loosen up financing for the property sector. What this really means is that the banks may increase lending to developers for land purchases. Property developers are beholden to local governments. If they get loans, they will buy land to boost local government revenues. Essentially, bank loans would turn into local government revenue. When the local governments spend the money, it becomes a form of fiscal stimulus.
- JCPenney and Ackman could reach deal tonight: Source. J.C. Penney and hedge fund Pershing Square's Bill Ackman are in talks to resolve their dispute over the leadership of the U.S. retailer, a source familiar with the situation said Monday.
- Inside China's Real Estate Bubble. (video)
New York Times:
- In One Bundle of Mortgages, the Subprime Crisis Reverberates. A subprime deal came back to haunt Fabrice Tourre, a former Goldman Sachs trader, when a federal jury in Manhattan found him liable for civil securities fraud. He is not the only one feeling the pain of a subprime transaction six years on. Hundreds of thousands of subprime borrowers are still struggling. Some of their mortgages ended up in another Goldman deal that was done at the same time as Mr. Tourre was working on his own financial alchemy.
- New Laws and Rising Costs Create a Surge of Supersizing Hospitals. Hospitals across the nation are being swept up in the biggest wave of mergers since the 1990s, a development that is creating giant hospital systems that could one day dominate American health care and drive up costs.
- Japan June core machinery orders fall 2.7 pct mth/mth. Japan's core machinery orders fell 2.7 percent in June from the previous month, government data showed on Tuesday, a sign that the government's reflationary policies have yet to encourage companies to boost capital spending. The fall in core orders, which excludes those of ships and electric power utilities, compared with economists' median projection for a 7.2 percent decline and followed a 10.5 percent jump in the previous month, the Cabinet Office data showed.
- Yum's(YUM) July China restaurant sales drop more than expected. KFC parent Yum Brands Inc on Monday reported a steeper-than-expected 13 percent drop in July sales at established restaurants in China after back-to-back blows from a food safety scare and a bird flu outbreak in its most important market. The Chinese sales fall was something of a setback for Louisville, Kentucky-based Yum, which in recent months had seen same-restaurant sales declines ease. Shares in Yum fell $2.86, or 3.8 percent, to $71.61 in after-hours trading.
- Swaps clients plan US bank exodus. US banks are at risk of losing overseas swaps market share as European clients have begun making every effort to avoid getting caught up in costly cross-border derivatives rules that were finalised by the CFTC last month, and come into effect this October.
- CFTC subpoenas Glencore in metals warehousing inquiry -source. Glencore and its metals warehousing business Pacorini have received subpoenas from the U.S. Commodity Futures Trading Commission on Monday, a source familiar with the matter said.
- So you think Europe's debt crisis is finally over? Time to think again. One of the factors underpinning renewed confidence in the UK economy is the belief that the crisis in Europe is now essentially over.
- China Can Reach GDP, Income Goal With 6.9%-7.1% Growth. China can reach its goal of doubling the 2010 GDP and per capita income growth by 2020 if the average economic growth rate is 6.9% to 7.1% over the next 8 years, Sun Lin, a researcher with the Party School of the Central Committee of the Chinese Communist Party, wrote in a commentary.
- China Audits New Forms of Local Govt Debt: China's latest audit of local debt to include new forms of borrowing including finance leasing, Build Transfer and payment on deferred terms, citing people who are involved in the national audit.
- China's Banks Must Prevent Risks From Property Loans. China's large banks "must" increase their ability to prevent and control risks from their lending to the property sector, Financial News says in a commentary by reporter Zhang Modong. The large banks must adjust their credit policies for the property sector, the article said. China's property prices will be under control as the current policies will be strengthened, the article said.
- China Researcher Sees Rate Cut Chance Slight. Possibility of interest rate cut in the near term is "relatively slight," citing Liu Yuhui, a researcher at the Chinese Academy of Social Sciences. China's monetary policy in the short term will limit areas of lending and ensure that funds go to the real economy such as small cos., Liu said.
- None of note
- Asian equity indices are unch. to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 140.50 -1.5 basis points.
- Asia Pacific Sovereign CDS Index 108.75 -1.5 basis points.
- FTSE-100 futures +.24%.
- S&P 500 futures +.09%.
- NASDAQ 100 futures +.12%.
Earnings of Note
Company/Estimate
- (CREE)/.37
- (JDSU)/.13
- (XONE)/-.06
- (FLO)/.23
7:30 am EST
- The NFIB Small Business Optimism Index for July is estimated to rise to 94.5 versus 93.5 in June.
- The Import Price Index for July is estimated to rise +.8% versus a -.2% decline in June.
- Advance Retail Sales for July are estimated to rise +.3% versus a +.4% gain in June.
- Retail Sales Ex Autos for July are estimated to rise +.4% versus unch. in June.
- Retail Sales Ex Autos and Gas for July are estimated to rise +.4% versus a -.1% decline in June.
- Business Inventories for June are estimated to rise +.2% versus a +.1% gain in May.
- (COG) 2-for-1
- (CSWC) 4-for-1
- The Fed's Lockhart speaking, Eurozone Industrial Production data, Germany ZEW Index, Germany CPI, weekly retail sales reports, Oppenheimer Tech/Internet/Communications Conference and the Wedbush Life Sciences Conference could also impact trading today.
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