Weekend Headlines
Bloomberg:
- Treasuries Advance as Group of 20 Vows to Cut Budget Deficits. Treasuries rose, pushing two-year yields down to match the lowest level this year, after Group of 20 leaders endorsed targets to cut their budget deficits. U.S. government securities extended gains from last week after the G-20 said advanced economies will aim to halve deficits by 2013, curbing record debt sales. Economists say a U.S. report this week will show the nation lost jobs this month, boosting demand for the relative safety of debt. “The G-20 communiqué is good news for the bond market,” said Yasutoshi Nagai, chief economist in Tokyo at Daiwa Securities Capital Markets Co., a unit of Japan’s second-largest brokerage. “I’m pessimistic on the outlook for the U.S. economy.”
- Bond Distress Rises as Goldman(GS), JPMorgan(JPM) Vary on Defaults: Credit Markets. The percentage of corporate bonds considered in distress is at the highest in six months, a sign debt investors expect the economy to slow and defaults to rise. The number of speculative-grade companies worldwide with yields at least 10 percentage points more than government bonds climbed to 399 this month, or 16.7 percent of the total, the highest share since December, according to Bank of America Merrill Lynch index data. The ratio compares with 9.2 percent on April 30, which was the lowest since November 2007. Junk bond sales slumped to a 15-month low in June amid concern government efforts to control spiraling budget deficits will hamper global growth and drive up borrowing costs for the neediest borrowers. The 2010 default rate in the U.S. may jump as high as 6 percent by year-end from 1.3 percent currently, according to analysts at Goldman Sachs Group Inc. “The default driver will be a reversal of easy refinancing conditions,” said Charles Himmelberg, the chief credit strategist at Goldman Sachs in New York.
- Commodity-shipping costs, which have dropped for 21 straight days, may fall as much as 20% in the third quarter because of an expanding fleet of dry-bulk vessels and slowing Chinese demand for iron ore, according to Mirae Asset Securities Co. Total capacity increased 7.2% in the first five months of the year, according to Clarkson Plc, the world's largest shipbroker. The global bulk fleet may expand 14% this year, as shipping lines move ahead with deliveries delayed during the credit crisis and global economic slump, according to Woori Investment & Securities Co.
- G-8 Leaders Expect Israel May Act on Iran Nuclear Program, Berlusconi Says. Group of Eight leaders expect Israel may decide to take action against Iran out of concern that the country is building nuclear weapons, Italian Prime Minister Silvio Berlusconi said. Since “Iran is not guaranteeing a peaceful production of nuclear power, the members of the G-8 are worried, and believe absolutely that Israel will probably react preemptively,” Berlusconi told reporters today in Huntsville, Ontario, after a two-day meeting with other G-8 leaders. He didn’t elaborate.
- Chinese Exports May Suffer on Yuan Flexibility, Debt Crisis, Official Says. China’s pledge for a more flexible yuan will slow the nation’s exports this year, adding to difficulties that include the European debt crisis and rising costs, a Chinese government official said. “I’m not optimistic about the exports this year,” Yu Jianhua, a Ministry of Commerce director general, told reporters at the Group of 20 meetings in Toronto yesterday. “It’s essential for exporters to cut cost and keep their share in the world trade market.”
- Iran Has Enough Enriched Uranium for Two Weapons, Panetta Says. Central Intelligence Agency Director Leon Panetta said today that the U.S. believes Iran has enough low-enriched uranium to produce two nuclear weapons that could be ready for delivery within two years.
- Wall Street Hiring Increases Most Since 2008 as Guaranteed Bonuses Return.
- Banking Bill Invites the Next Global Meltdown: Roy C. Smith.
- States Weigh Big Claims Against BP(BP). Gulf Coast states are gearing up to follow shrimpers and hotel owners in seeking payouts from BP PLC for lost revenue and other damages stemming from the Gulf of Mexico oil spill. The demands could far exceed the $305 million BP has already given the states of Louisiana, Mississippi, Alabama and Florida to help pay cleanup costs, promote tourism and begin building sand berms off the coast of Louisiana, state officials say. Lawyers advising the states said they would eventually seek multi-billion dollar payouts, but it was still too early to give a tally.
- Bucyrus(BUCY) International Fears Loss of India Order. Bucyrus International Inc. said it may lose a $310 million order for mining machinery from a subsidiary of Reliance Power Ltd. of India because of a decision by the U.S. Export-Import Bank against providing loan guarantees for the project. The decision is equivalent to "throwing 1,000 jobs in the ditch," Tim Sullivan, chief executive of the South Milwaukee, Wis., maker of mining equipment, said.
- Chinese Funds Venture Into U.S. Market. Chinese investment funds are tiptoeing into the U.S. stock market, raising their holdings of U.S. companies as they seek diversification from their volatile home market and see better prospects in the U.S. than elsewhere in the world. Securities filings show that Chinese funds that cater to individual investors have been allocating a larger share of their investments to the U.S. market in recent months. New entrants are also rolling out U.S.-focused investment products.
- Corruption Suspected in Airlift of Billions in Cash From Kabul. More than $3 billion in cash has been openly flown out of Kabul International Airport in the past three years, a sum so large that U.S. investigators believe top Afghan officials and their associates are sending billions of diverted U.S. aid and logistics dollars and drug money to financial safe havens abroad.
- Triumph of the Regulators. The Dodd-Frank financial reform bill doubles down on the same system that failed. President Obama hailed the financial bill that House-Senate negotiators finally vouchsafed at 5:40 a.m. Friday, and no wonder. The bill represents the triumph of the very regulators and Congressmen who did so much to foment the financial panic, giving them vast new discretion over every corner of American financial markets.
- Gillard May Move to Slow Australian Population Growth. Julia Gillard, who last week replaced Kevin Rudd as Australian prime minister, may move to slow Australia’s population growth amid concerns about failing infrastructure and the nation’s environment. “The change of direction is to put front and center the sustainability issues,” Gillard said in an interview with the Nine television network today “There are environmental issues about water and about soil. But there are also sustainability issues about planning, about services.”
- Obama Discovers One More Crisis for a Toxic Tax: Kevinn Hassett.
- Vancouver's Real Estate Bubble Trouble.
- The Next Crisis: Public Pension Funds. Ever since the Wall Street crash, there has been a bull market in hits for “public pensions” and “crisis.” Horror stories abound, like the one in Yonkers, where policemen in their 40s are retiring on $100,000 pensions (more than their top salaries), or in California, where payments to Calpers, the biggest state pension fund, have soared while financing for higher education has been cut. Then there is New York City, where annual pension contributions (up sixfold in a decade) would be enough to finance entire new police and fire departments. Chicken Little pension stories have always been a staple of the political right, but in California, David Crane, the special adviser to Gov. , says it is time for liberals to rally to the cause. “I have a special word for my fellow Democrats,” Crane told a public hearing. “One cannot both be a progressive and be opposed to pension reform.” The budgetary math is irrefutable: generous pensions end up draining money from schools, social services and other programs that progressives naturally applaud. In California, which is in a $19 billion budget hole, Calpers is forcing hard-pressed localities to cough up an extra $700 million in contributions. New York State, more creatively, has suggested that municipalities simply borrow from the state pension fund the money they owe to that very fund. Such transparent maneuvers will not conceal the obvious: for years, localities and states have been skimping on what they owe. Public pension funds are now massively short of the money to pay future claims — depending on how their liabilities are valued, the deficit ranges from $1 trillion to $3 trillion.
- Spain's Debt Maturity Wave Hits Next Month And It's Already Obvious They Don't Have Enough Cash.
- Bloomberg Wants Comcast(CMCSA) to be Forced to Sell CNBC.
LA Times:
NYDailyNews.com:
- Two Census Bureau Managers Fired for Creating at Least 10,000 Bogus Questionnaires to Meet Deadlines. Two Census Bureau managers from a Brooklyn field office were fired after their bosses found they faked household surveys to meet deadlines, the Daily News learned. Instead of pounding the pavement and knocking on doors, the corner-cutting people-counters mined the phone book and Internet to make up answers to questionnaires, regional director Tony Farthing said. The managers - turned in by whistleblower employees - were caught last week. Now, at least 10,000 surveys need to be done or redone, officials said.
- Police in Standoff With G20 Protesters. Toronto police clashed with protesters for a second straight day on Sunday, with a final standoff played out in the downtown core near the just-finished G20 summit of world leaders. Police said that overall 605 protesters had been arrested by late afternoon. The running tally did not include the dozens seen detained by a Reuters witness just blocks away from where the Group of 20 leaders wrapped up talks focused on fixing the ills of the global economy.
- Peter Orszag resigned from his pot of White House budget director this week after he failed to convince the administration that more aggressive cuts were needed to reduce the fiscal deficit. Orszag had become frustrated by the government's wariness of longer-term budget restraint, citing people in and outside the White House.
- UK's Osborne Tries to Put the Brakes on Banking Reform. George Osborne is to push for a delay in global banking reform to get a deal on levels of liquidity and capital needed by banks so that multi-billion taxpayer funded bail-outs are not needed again. The Chancellor will argue at the G20 meeting today that banks should be given a longer transition period to put in place the new Basel III rules, possibly pushing the impact of the reforms out to 2018. He will also say that the Government will only agree to a delay if the terms of the new rules can be agreed by the next G20 meeting in South Korea in November.
- UK banks told to boost funds by £130bn. Britain's banks will have to permanently bolster their balance sheets by as much as £130bn – equivalent to £5,200 for every household in Britain – under new rules agreed by world leaders.
- China's gross domestic product growth may drop below 8% in the fourth quarter of the year if the global economy experiences a double-dip recession, citing Frank Gong, JPMorgan Chase's(JPM) China strategist.
- China's exports after June or July may feel the effect of the European debt crisis, Zhao Jinping, a researcher at State Council's development and research center, said. Zhang Yansheng, a researcher at the National Development and Reform Commission, said he was not optimistic about the nation's imports and exports this year, according to the report.
Barron's:
- Made positive comments on (NYX), (BMY), (MRK), (PFE), (LLY), (WYNN), (GS), (RTP), (YUM) and (BWA).
- Made negative comments on (AUXL) and (RIMM).
- Asian indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 133.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 133.25 +2.25 basis points.
- S&P 500 futures +.18%.
- NASDAQ 100 futures +.19%.
Earnings of Note
Company/Estimate
- (BKS)/-.81
- (MU).43
- (SMSC)/.27
8:30 am EST
- Personal Income for May is estimated to rise +.5% versus a +.4% gain in April.
- Personal Spending for May is estimated to rise +.1% versus unch. in April.
- The PCE Core for May is estimated to rise +.1% versus a +.1% gain in April.
- None of note
- The Fed's Warsh speaking, Chicago Fed National Activity Index, Dallas Fed Manufacturing Activity Index, (ABMD) Analyst Meeting and the (SI) Capital Market Day could also impact trading today.
