Irish Banks Hooked on ECB Cure as Lenihan's Financing Fails: Euro Credit. Irish Finance Minister Brian Lenihan persuaded lawmakers two years ago to back a guarantee of the country’s financial system to give banks time to wean themselves off European Central Bank and government life support. Instead, the banks are growing more dependent on the ECB. The cost of insuring Irish government debt against default has soared to a record as bond buyers shun Irish lenders, forcing the Dublin-based parliament to debate extending a guarantee of all deposits and most bank securities as the original pledge expires today. The consequences of adding bank liabilities to Ireland’s 87 billion euros ($118 billion) of sovereign debt “are huge,” said Mike Soden, the former chief executive officer of Bank of Ireland Plc and the author of “Open Dissent,” a book on the financial crisis. The nation’s borrowing costs are surging because “the markets are much quicker than the thinking power of the Department of Finance or anybody else,” he said. The banks’ failure to find alternative funding sources in the capital markets is stoking investor concern that the state may be overwhelmed by bailout costs. The banks are “tied to the sovereign,” Lenihan said in a Sept. 22 speech to a parliamentary committee. The extra yield investors demand to hold 10-year Irish bonds over German bunds widened 394 basis points to 447 basis points since the guarantee was introduced in September 2008. Credit-default swaps linked to Irish debt rose 11 basis points yesterday to 493 basis points, compared with other so- called euro peripherals such as Greece at 817 basis points and Portugal at 446 basis points, according to CMA prices.
Federal Reserve's Lockhart Says Need for More Monetary Easing Isn't Clear. Federal Reserve Bank of Atlanta President Dennis Lockhart said policy makers haven’t reached a consensus on whether to undertake a new round of buying Treasuries, and the need for further monetary easing isn’t clear. “For me personally it is not a foregone conclusion that more accommodation is required,” he told reporters after a speech today in Sewanee, Tennessee. “I am not yet of a firm mind of what exactly that problem is, and for that reason I’m not yet committed to a particular course of action that might involve further accommodation.” Fed officials “must come to grips” in the coming weeks “with the question of whether there is anything they can do to improve the situation in the economy and, if so, what that action should be,” Lockhart said in his speech about the Federal Open Market Committee’s decision. “If in six months or 12 months the economy is operating at the low level it is today” and unemployment is 9.5 percent or higher, “I will be comfortable with taking action,” he said.
Spanish Credit Rating Set for Moody's Cut as Growth Slows, Investors Say. Spain’s top Aaa credit rating, held since 2001, probably will be cut one level by Moody’s Investors Service as the euro region’s fourth-biggest economy struggles to grow, according to investors managing about $700 billion. Five out of eight money managers surveyed predicted a one- step reduction to Aa1, with the rest forecasting a two-level cut to Aa2. The decision may come this week after Moody’s put Spain’s debt on review for a possible downgrade on June 30, saying it would conclude the analysis within three months.
California Treasurer Lockyer Calls for Ban on Muni Credit-Default Swaps. California Treasurer Bill Lockyer said he wants regulators to prohibit municipal credit-default swaps because of concern that investors may use the instruments to manipulate the market and cost state taxpayers. Lockyer, 69, said he would ban credit-default swaps, a type of derivative used to protect debt-holders against default, if he had the authority. He’s called on regulators to adopt capital-margin requirements to reduce leverage and to prohibit the speculative use of credit-default swaps -- the trading of debt-insurance contracts by investors who don’t own the securities.
Hewlett-Packard(HPQ) Forecasts Sales, Profit That Beat Estimates. Hewlett-Packard Co., the world’s largest computer maker, forecast earnings and sales for fiscal 2011 that exceeded analysts’ estimates. The company expects earnings excluding costs of $5.05 to $5.15 a share on sales of $131.5 billion to $133.5 billion, interim Chief Executive Officer Cathie Lesjak said today. Analysts had predicted sales of earnings of $5.01 and revenue of $131.7 billion, according to a Bloomberg survey.
Boeing(BA) Gets $5.3 Billion U.S. Navy Order for 124 F/A-18s. Boeing Co. received a contract today for 124 F/A-18 fighter jets valued at $5.3 billion, the Pentagon said on its website. The contract is for 66 planes of the F/A-18 variant called the Super Hornet and 58 electronic jamming aircraft called the Growler, Boeing said today in a separate statement.
Sarkozy Readies France's Biggest Budget-Deficit Reduction in Two Decades. French President Nicolas Sarkozy’s government will today propose the country’s biggest annual budget-deficit cut in two decades to calm investor concerns and protect its top credit rating. Government borrowing will fall to about 6 percent of gross domestic product next year from about 7.8 percent this year, according to recent statements by Budget Minister Francois Baroin and Finance Minister Christine Lagarde. The ministers will present details of the budget to Sarkozy’s cabinet at 10 a.m. today in Paris.Sarkozy’s tax and spending plans may still leave his country trailing its euro-area peers in repairing national finances after the financial crisis. France’s deficit may exceed that of Germany, Italy, Belgium and the Netherlands just as Sarkozy is gearing up for an election in early 2012.
Japan's Tankan Sentiment Index Climbs Least in Six Quarters. Confidence among large Japanese manufacturers rose the least since early 2009 in September, and companies forecast that pessimists will outnumber optimists by year-end, as a rising yen threatens the nation’s recovery. The Tankan index of sentiment climbed 7 points in September to 8, the Bank of Japan said in Tokyo today. The figure compares with a 15-point increase in June. Confidence is expected to fall to minus 1 in December, the report said.
Investors, Regulators Laid Path to 'Flash Crash'. As the Securities and Exchange Commission finalizes its report on the May 6 "flash crash," it is being forced to confront the fallout of its own decisions—which Wall Street sought and cheered—that ushered in an era of fast trading dispersed across dozens of venues.
Currency Wars: A Fight to Be Weaker. Tensions Grow in Foreign-Exchange Market as Countries Scramble to Tamp Down Their Money. Tensions are growing in the global currency markets as political rhetoric heats up and countries battle to protect their exporters, raising concerns about potentially damaging trade wars. At least half a dozen countries are actively trying to push down the value of their currencies, the most high-profile of which is Japan, which is attempting to halt the rise of the yen after a 14% rise since May.
Tehran Touts Its Exports of Gasoline. Iran said Tuesday it has started exporting domestically produced gasoline, drawing skepticism from oil-industry experts but representing Tehran's latest show of defiance amid international sanctions aimed at curbing its nuclear ambitions.
HP(HPQ) Boosts Profit, Sales Forecasts; Shares Rise. Hewlett-Packard on Tuesday forecast revenue and earnings for fiscal 2011 above Wall Street's expectations, as it prepares to name a new chief executive to succeed Mark Hurd.
Hugh Hendry Making Huge $2 Billion Bet On Asia's Failure. Hugh Hendry, CEO of Eclectica Asset Management, revealed a huge bet against Asia in an interview with King World News (via Zero Hedge). Hendry thinks that Asia will be the next global market to hit the skids after the subprime collapse in the U.S. and the sovereign crisis in Europe. He envisions severe problems for Japan, when currency strength will for the country to engage in another, more aggressive round of quantitative easing, debauching the country's currency. So he is making a bet worth $2 billion against Japanese credit, notably in corporations. He sees overconfidence and over reliance on the growth of China as a reason for this position. He even compared China to Starbucks, noting that they are now investing money in manufacturing the same way Starbucks did in new stores: accepting a negative marginal return on invested capital.
Trucking Volume Collapses, Falls Most Month To Month Since March 2009. (graph) Tonnage fell by 2.7% from July to August, according to the American Trucking Association.That's the biggest month over month fall since March 2009. The chief economist at the ATA, Bob Costelo, says this slowdown was expected and that it should be slowing further with the economy for the remainder of the year.
NY Times:
Guilty Plea Expected by Ex-New York Comptroller Hevesi in Corruption Case. Alan G. Hevesi, the former state comptroller, is poised to plead guilty to a felony corruption charge after a lengthy investigation into his office’s rewarding of pension investment business to firms that provided financial benefits to Mr. Hevesi and his aides, people with knowledge of the case said on Tuesday.
House Likely to Join a Call Urging China to Raise Currency. The House is expected to give the Obama administration another tool in its diplomatic pouch to pressure China to let its currency rise in value, reflecting growing concern around the country over the loss of manufacturing jobs, persistently high unemployment and a rising trade deficit.
Mineral Trade Halt Called a Threat to Japan's Economy. A halt of Chinese shipments of crucial industrial minerals to Japan poses a threat to the Japanese economy, a top Tokyo government official said Tuesday, amid a dispute over territorial sovereignty that has damaged relations between the regional rivals.
Forbes:
Chevron(CVX) Drills First Deepwater Well In North America Since BP Disaster. With no fanfare, no press release, and no incidents, Chevron has drilled the first deepwater well in North America since the Deepwater Horizon disaster. How did the oil giant get around the Obama administration’s deepwater drilling moratorium? It drilled in Canada.
Institutional Investor:
Hard Times for D.E. Shaw. Hedge fund firm D.E. Shaw & Co. laid off 150 people today, according to sources familiar with the situation. The cuts, which amount to around 10 percent of the New York–based alternative asset manager’s work force, were across the board and included partners and portfolio managers, these sources confirmed.
Politico:
Obama: Yes to 2011 Climate Bill Push.President Barack Obama is pledging to throw his full weight next year behind efforts to overhaul the nation's energy and climate change policies, though he concedes such moves might need to happen "in chunks."
Reuters:
Activist Group Has Signatures for Recall in Bell. A citizens activist group said on Tuesday it had gathered enough signatures to force a recall election in the Los Angeles suburb of Bell, where eight current and former officials are accused of misappropriating some $5.5 million in public funds.
Spanish Unions to Stage General Strike Over Cuts. Trade unions have called for a general strike across Spain on Wednesday to protest against harsh cuts the government says are needed to cut the country's budget deficit.
SMSC Q2 Beat Street; Gives Q3 EPS Below Market View. Chipmaker Standard Microsystems Corp (SMSC) posted better-than-expected second-quarter results helped by lower expenses, but gave third-quarter earnings outlook below analysts' view as it expects "muted seasonality," sending its shares down 8 percent.
Green Mountain(GMCR) Says SEC Probes Accounts, Shares Fall. Green Mountain Coffee Roasters Inc (GMCR) said U.S. regulators are conducting an inquiry into some of its revenue recognition practices and its relationship with a 'fulfillment' vendor, sending its shares down 16 percent.
Sealy Q3 Profit Misses Wall Street View. Mattress-maker Sealy Corp (ZZ) reported disappointing third-quarter results as the company was forced to cut prices for its lower end mattresses to fend off competitors amid inconsistent demand. Shares of the Trinity, North Carolina-based company were down nearly 12 percent after the bell.
Dublin to Launch Fresh Anglo Irish Bail-Out. Ireland's central bank may announce plans to inject additional capital of about 5 billion euros($6.8 billion) into Anglo Irish Bank Corp. The extra funds, to be announced on Sept. 30, will take the bailout costs for the bank to 30 billion euros, the FT said. Finance Minister Brian Lenihan will also announce plans to meet tougher capital targets, including a restructuring of part of Anglo Irish's 16 billion-euro bond debt.
Junk Buying Fuels 'Yield Chasing' Fears. Retail investors in the US have sharply increased their direct buying of junk bonds in the third quarter of the year, providing evidence of a trend of “yield chasing” that is worrying regulators. Finra, which regulates US securities firms, said the trend was a concern given the risks involved in this part of the corporate bond market.
Shell Plan Rapid North American Growth. Royal Dutch Shell is planning a rapid expansion of its North American business to raise production by 40 per cent to 1m barrels equivalent per day in 2014, including gas, Canadian oil sands and deepwater oil. The strategy, announced in Canada on Tuesday, is part of Europe’s largest oil company’s plan to meet its “aspiration” of producing 3.7m barrels per day in 2014, compared with 3.15m last year.
SkyNews:
Multi-Attack Terror Plot On European Cities. Intelligence agencies have intercepted a terror plot to launch Mumbai-style attacks on Britain and other European countries, according to Sky News sources. Sky's foreign affairs editor Tim Marshall said militants based in Pakistan were planning simultaneous strikes on London and major cities in France and Germany. He said the plan was in the advanced but not imminent stage and the plotters had been tracked by spy agencies "for some time".
The Standard:
Expert Tips 5% Fall in 'Overpriced' Hong Kong Property Market. The Hong Kong property market is overpriced and will see a 5 percent correction by the end of the year, according to David Ng Ka-Chun, researcher at Royal Bank of Scotland (Hong Kong).
21st Century Business Herald:
Some steelmakers in China have continued production and even boosted output amid government measures to curb overcapacity, citing an unidentified person at the China Iron & Steel Association.
Evening Recommendations Citigroup:
Upgraded (ENDP) to Buy, target raised to $40.
Wells Fargo:
Rated (WMS), (PENN), (WYNN) and (BYI) Outperform.
Night Trading
Asian equity indices are unch. to +.75% on average.
Asia Ex-Japan Investment Grade CDS Index 126.0 -1.0 basis point.
Asia Pacific Sovereign CDS Index 112.50 -.5 basis point.
Bloomberg consensus estimates call for a weekly crude oil inventory decline of -700,000 barrels versus a +970,000 barrel increase the prior week. Gasoline supplies are expected to rise by +350,000 barrels versus a +1,590,000 barrel gain the prior week. Distillate inventories are estimated to rise by +325,000 barrels versus a +347,000 barrel increase the prior week. Finally, Refinery Utilization is expected to fall by -.6% versus a +.2% gain the prior week.
Upcoming Splits
None of note
Other Potential Market Movers
The Fed's Rosengren speaking, Fed's Kocherlakota speaking, Fed's Plosser speaking, weekly MBA mortgage applications report, $29 Billion 7-Year Treasury Notes Auction, BofA Merrill Power/Gas Conference, Oppenheimer Industrials Conference, UBS Auto Conference, JMP Securities Financial Services Conference, Wells Fargo Consumer Conference, (KMT) Analyst Day, (CRR) Analyst Meeting and the (FDX) Analyst Meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
North American Investment Grade CDS Index 110.52 bps +1.86%
European Financial Sector CDS Index 134.11 bps +2.74%
Western Europe Sovereign Debt CDS Index 158.66 bps +1.71%
Emerging Market CDS Index 225.10 bps -.19%
2-Year Swap Spread 16.0 -2 bps
TED Spread 15.0 -1 bp
Economic Gauges:
3-Month T-Bill Yield .14% +1 bp
Yield Curve 203.0 -6 bps
China Import Iron Ore Spot $139.50/Metric Tonne unch.
Citi US Economic Surprise Index -11.70 -4.6 points.
10-Year TIPS Spread 1.82% +2 bps
Overseas Futures:
Nikkei Futures: Indicating -5 open in Japan
DAX Futures: Indicating -8 open in Germany
Portfolio:
Slightly Lower: On losses in my Tech and Ag long positions
Disclosed Trades: None
Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite recent sharp equity gains, sovereign debt worries and more weak economic data. On the positive side, Retail, Semi, Gold and Steel shares are especially strong, rising 1.0%+. Growth stocks are outperforming value shares again. On the negative side, REIT, Wireless, Ag and Coal shares are under pressure, falling more than .75%. Small-caps are underperforming. (XLF) is also a bit heavy. Weekly retail sales rose +2.6% this week, which is the slowest pace since the week of May 4. Lumber is down another -2.97% today. The Euro Financial Sector CDS Index is up again today and is very near a technical breakout, which is a major negative. The Portugal sovereign cds is rising +4.10% to 435.0 bps and is close to a new record high. The Ireland sovereign cds is continuing its recent parabolic move higher, rising another +1.30% to a record of 485.10 bps and the Spain sovereign cds is gaining +2.29% to 234.29 bps. Furthermore, key credit default swap indices continue to move higher, even as equities trend higher, which is also a large negative. I still believe equity investors will continue to ignore these worrisome moves until they start to negatively impact the euro currency. Oil continues to trade poorly given recent equity and euro strength. The 10-year yield is down another -6 bps to 2.46% and is close to its 52-week low at 2.41%. The Shanghai Composite closed slightly below its 50-day moving average again last night and continues to trade poorly. The knee-jerk selling in (AAPL) shares on false rumors could be another red flag for the broad market. Investors continue to ignore most negative news items, which could be related to end-of-the-quarter positioning, but remains a large market positive for now. I expect US stocks to trade mixed-to-lower into the close from current levels on rising sovereign debt angst, profit-taking, more shorting, China concerns and increasing financial sector pessimism.
Ireland Swaps Surge to Record on Anglo Irish Bailout Cost Wager. The cost of insuring against default on Ireland’s government debt surged to a record as Standard & Poor’s said the price of bailing out nationalized lender Anglo Irish Bank Corp. could exceed $47 billion. Credit-default swaps tied to Irish bonds jumped as much as 33 basis points to 521.5 after more than doubling in the past two months, and were at 493 basis points as of 4 p.m. in London, according to data provider CMA. Contracts on Anglo Irish rose 4 basis points from yesterday’s record high closing price to 940, implying a 56 percent probability of default within five years. Investors are speculating the ballooning cost of rescuing Dublin-based Anglo Irish will force the nation’s government to choose between fully repaying senior bondholders and tackling the region’s biggest budget deficit. “It’s a key test for the market,” said Greg Venizelos, a credit strategist at BNP Paribas SA in London. “The cost of the Anglo Irish bailout is too high for Ireland to afford without jeopardizing its fiscal position.” The speculation about Ireland weighed on sentiment in the region, driving up credit-default swaps on other governments and banks. The Markit iTraxx SovX Western Europe Index of default swaps on 15 governments rose 5 basis points to 165, according to CMA. Credit-default swaps on Portugal increased 19 basis points to 449.5, approaching the record-high closing price of 461, while Greece climbed 2.5 basis points to 818.5 and Italy was up 5.5 basis points at 202, CMA prices show. Spain added 8 basis points to 235.5. Irish two-year government notes slumped, sending yields to the highest level since Bloomberg began collating the data in 2003. The yield on Ireland’s two-year government note rose as much as 52 basis points to 4.76 percent, Bloomberg generic data show. Credit-default swaps on financial-company debt rose, with the Markit iTraxx Financial Index of 25 banks and insurers rising 3 basis points to 149 and an index of their riskier subordinated debt climbing 1 basis point to 218, according to JPMorgan Chase & Co. Gauges of corporate risk also jumped. The Markit iTraxx Crossover Index of credit-default swaps on 50 mostly junk-rated European companies climbed 6.5 basis points to 523.4, according to Markit Group Ltd.
U.S. Consumer Confidence Fell More Than Forecast. Mounting gloom over the outlook for jobs and wages caused American consumers to lose confidence in September, indicating spending will take time to recover. The Conference Board’s sentiment declined to 48.5 this month, lower than the indexmedian forecast of economists surveyed by Bloomberg News and the weakest level since February, according to figures from the New York-based private research group today. Household purchases, which account for about 70 percent of the world’s largest economy, may be constrained by a jobless rate this is projected to average more than 9 percent through 2011. Consumers “certainly are worried about jobs,” said David Sloan, a senior economist at 4Cast Inc. in New York. They “are facing considerable headwinds.” The Conference Board’s measures of present conditions and expectations for the next six months both dropped, today’s report showed. Fewer respondents thought more jobs would become available and the share of those who expected incomes to rise fell to the lowest since February.
China Rare Earth Says Japan Exports Halted on Lack of Government Permits. China Rare Earth Holdings Ltd., which exports 30 percent of its products to Japan, said shipments to the nation were halted from last week after a local branch of the Chinese trade ministry stopped issuing licenses. “We couldn’t get export licenses to Japan,” John Jiang, a sales manager in charge of exports at China Rare Earth, said by phone from Yixing, Jiangsu province. “They cited system failure.”
Dollar Is 'One Step Nearer' to Crisis on Burgeoning Debt Burden, Yu Says. The U.S. dollar is “one step nearer” to a crisis as debt levels in the world’s largest economy increase, said Yu Yongding, a former adviser to China’s central bank. Any appreciation of the dollar is “really temporary” and a devaluation of the currency is inevitable as U.S. debt rises, Yu said in a speech in Singapore today. “Such a huge amount of debt is terrible,” Yu said. “The situation will be worsening day by day. I think we are one step nearer to a U.S.-dollar crisis.”
Fewer U.S. CEOs Project Gains in Sales, Employment. Chief executive officers in the U.S. turned less optimistic in the third quarter as fewer projected sales and hiring will improve, a survey showed. The Business Roundtable’s economic outlook index fell to 86 in the July-to-September period, the first decrease since the beginning of 2009 when the gauge dropped to a record-low of minus 5, the Washington-based group said today.
Wall Street Journal:
More Americans Expect Recovery Will Take Years. The American public has arrived at the same dismal conclusion as many economists: We’re in for a long and painful economic recovery. A new survey by AlixPartners LLP, a business-advisory firm, showed a growing share of Americans think it will take years for the economy to recover to “normal times.” Some 46% said it will be 2013 or later before that happens. A smaller 36% predicted a recovery sometime before 2013.
Banks Face the Killing Yields. The financial-services industry is built for speed. But while superlow interest rates are meant to be high-octane fuel for the economy, they are gumming up financial engines. The problem for many banks, insurers and fund managers is that their cost of borrowing can't fall below zero. Yet returns from a number of businesses or products continue to decline with already near-record low bond yields. That compresses margins and threatens to make some business lines uneconomic.
Nine Dragons Paper Shares Slip as Analysts Diverge on Prospects. Nine Dragons Paper Holdings Ltd. slipped in Hong Kong trading Tuesday, a day after the company released results that led analysts to different conclusions about the outlook for the shares of China’s largest containerboard manufacturer.
Union Rejects Concessions at GM Plant in Indianapolis. A months-long battle to save a General Motors Co. stamping plant here that pitted rank-and-file UAW members against top union officials over whether autoworkers should accept pay cuts to keep jobs ended bitterly today. Addison, Ill.-based JD Norman Industries said it is dropping its effort to buy the factory after an announcement late Monday that United Auto Workers members had voted 457-96 against accepting the concessions. That means the 80-year-old plant will close next year, and the city and county will lose one of their biggest tax revenue generators. At least one state politician has charged that the vote also means more layoffs at other area auto suppliers.
Insider Likely to Replace Rahm Emanuel. President Barack Obama hasn’t yet picked a permanent replacement for chief of staff Rahm Emanuel — but he’s leaning toward someone already inside the Obama bubble rather than an outsider who would shake up the West Wing, people close to him say.
Foreign Firms: Quit Bashing Us. On the campaign trail, President Barack Obama elicits cheers when he rails against tax loopholes that he says benefit foreign companies that have operations in this country. It’s a sound bite that seems eminently fair to average voters, particularly those suffering through today’s tough economic times. But representatives of some of those firms are coming to Washington on Tuesday for a series of quiet meetings at the White House and on Capitol Hill to offer a counterargument — that the combination of tough presidential rhetoric and draconian administration policy could drive their firms away and, with them, thousands of jobs that the economy desperately needs if there is going to be a real recovery.
AP:
FBI Investigates Prominent Labor Leader Andy Stern. The FBI and the U.S. Labor Department are investigating prominent labor leader Andy Stern in their probe of corruption at the Service Employees International Union, according to two people who have been interviewed by federal agents.
Reuters:
Position Limits Keep Market Diverse - CFTC's Gensler. Position limits would guard against excessive concentration in the energy futures market, the chief U.S. futures regulator said in a speech to natural gas officials on Tuesday. Chairman Gary Gensler of the Commodity Futures Trading Commission said the financial crisis last fall showed the risk posed by "large concentrated actors on the financial stage". "I believe we should consider setting position limits to guard against excessive concentration in the energy futures market," said Gensler at a luncheon held by the Natural Gas Roundtable, a nonprofit organization. The CFTC is weighing whether to set position limits -- a maximum market share -- for oil and other energy products.
Telegraph:
OECD Calls For More Austerity in Portugal. Portugal must brace for fresh austerity to bring the budget deficit under control and stem capital flight, despite signs that political consensus is unravelling.
Handelsblatt:
Carl Heinz Daube, the head of Germany's Federal Finance Agency, said a restructuring of Greek debt could have "devastating consequences" for the German covered bond market. In a worst case scenario, interest and redemption payments of Pfandbriefe wouldn't be completely secured, Daube said. So-called haircuts on Greek debt would also have consequences for life insurers holding the bonds and may create new problems for other peripheral euro-region economies, he said.
Xinhua:
China's government will subsidize as much as 70% of the cost of essential equipment for trial solar-power projects, citing a government statement.
China yesterday started a crackdown against pornography, pirated products and "illegal publications" in preparation for the National Day holiday break that starts Oct. 1.
