Bull Radar

Style Outperformer:

• Small-Cap Growth (+1.09%)

Sector Outperformers:

• 1) Gold & Silver +3.29% 2) Airlines +1.69% 3) Computer Services +1.49%

Stocks Rising on Unusual Volume:

• PAAS, EXK, E, TI, COLB, TOT, NGD, TZOO, CTSH, PANL, CTXS, HPQ, NDN, PUK and SUP
  

Stocks With Unusual Call Option Activity:

• 1) SNE 2) SLM 3) SYMC 4) UCO 5) DTG
  

Stocks With Most Positive News Mentions:

• 1) AAPL 2) WLK 3) IRBT 4) GOOG 5) MANT
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Monday Watch

Weekend Headlines
Bloomberg:

• Merkel Says She'll Resist Pressure for Euro Bonds. German Chancellor Angela Merkel attempted to shut the door on common euro-area bonds as a means to solve the debt crisis, saying that she won’t let financial markets dictate policy. Joint euro bonds would require European Union treaty changes that would “take years” and might run afoul of Germany’s constitution, Merkel said. While common borrowing might arrive at some point in the “distant future,” bringing in euro bonds at this time would further undermine economic stability and so they “are not the answer right now.” “At this time -- we’re in a dramatic crisis -- euro bonds are precisely the wrong answer,” Merkel said in an interview with ZDF television in Berlin yesterday. “They lead us into a debt union, not a stability union. Each country has to take its own steps to reduce its debt.” Merkel has stepped up her opposition to euro bonds since returning from her summer vacation last week, making resistance to common European borrowing a campaign theme of Sept. 4 elections in her home state of Mecklenburg-Western Pomerania. “Politicians can’t and won’t simply run after the markets,” Merkel said in the chancellery interview, her first since returning from a three-week summer break. “The markets want to force us to do certain things. That we won’t do. Politicians have to make sure that we’re unassailable, that we can make policy for the people.” Merkel’s stance risks bringing her into conflict with the European Commission, the European Union’s executive body, which said Aug. 19 that it may present draft legislation on joint euro-area bonds after completing a feasibility report.
• Qaddafi's 42-Year Rule Crumbling: NATO. Libyan rebels said they captured two of Muammar Qaddafi’s sons as they swept through the capital Tripoli in a drive to force Qaddafi out after 42 years of near- absolute power. Qaddafi’s forces offered little resistance and celebrations broke out in the center of the city. Regime spokesman, Moussa Ibrahim said Qaddafi was ready to negotiate with Mustafa Abdel Jalil, the head of the rebel council, and asked for an immediate cease-fire. Anders Fogh Rasmussen, secretary-general of the North Atlantic Treaty Organization, which has backed the rebels with aerial bombing since March, said in an online statement that the “regime is clearly crumbling” and “the sooner Qaddafi realizes that he cannot win the battle against his own people, the better.”
• Van Rompuy Opposes Common Bonds Until Euro-Region Budgets Converge Further. European Union President Herman Van Rompuy ruled out issuing common bonds as a cure for the debt crisis, saying any joint borrowing should wait until European economies and budgets are better aligned. With three countries drawing financial aid and national debts ranging from 6.6 percent of gross domestic product in Estonia to 142.8 percent in Greece, this is the wrong time to set up a single borrowing agency, Van Rompuy, 63, said in an interview broadcast on Belgium’s RTBF radio today. “We could have euro bonds on the day when there is genuine budgetary convergence, the day when everyone is in balance or virtually in balance,” he said. Van Rompuy sided with Germany and France in damping down the euro bond debate, saying the answer to the crisis lies in executing plans like last month’s decision to give more flexibility to the bloc’s 440 billion-euro rescue fund. He urged governments to quickly ratify the plan so the fund can buy bonds in the secondary market.
  
• Schaeuble Says Common Bonds Would Create 'Inflation Community'. The euro region would become an “inflation community” if member countries decide to sell bonds jointly without unifying their fiscal policies, German Finance Minister Wolfgang Schaeuble said today. “Unless there is a single financial policy in the euro area, there won’t be a single rate of interest” on debt sold, Schaeuble said at the finance ministry in Berlin. Selling common bonds with a single interest rate would spark inflation and destabilize the currency as long as the euro area doesn’t have a single budget policy, Schaeuble said in his first public engagement since returning from a summer break.
• Spain Confident EU Won't Need to Buy Its Bonds, Salgado Says. Finance Minister Elena Salgado said she’s confident Spain’s deficit-reduction efforts will restore investor trust and end the need for European authorities to support the nation’s bonds. Even though the global slowdown threatens the country’s growth target for this year, the government’s commitment to cutting the region’s third-biggest deficit will shore up demand for its bonds, she said. “I don’t take it for granted” the euro-region’s rescue fund will have to backstop Spain’s debt when it takes over bond-buying from the European Central Bank after September. “The position of the Spanish government is to continue with the reforms and the austerity programs,” Salgado, 62, said in an interview in Madrid on Aug. 19. “We trust the markets will give us that vote of confidence so that by our own means we will be capable of stabilizing the Spanish debt market.”
• Wall Street Aristocracy Got $1.2 Trillion in Fed Secret Loans. Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits. By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret. Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress. “These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.” It wasn’t just American finance. Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG (UBSN), which got $77.2 billion. Germany’s Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees. The largest borrowers also included Dexia SA (DEXB), Belgium’s biggest bank by assets, and Societe Generale SA, based in Paris, whose bond-insurance prices have surged in the past month as investors speculated that the spreading sovereign debt crisis in Europe might increase their chances of default. The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs tallied by Bloomberg -- was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg. The balance was more than 25 times the Fed’s pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon. Denominated in $1 bills, the $1.2 trillion would fill 539 Olympic-size swimming pools.
• Hedge Funds Buying Corn to Silver to Soy as Commodities Tumble. The rout that drove commodities to a nine-month low is proving irresistible to speculators anticipating that even slowing economic growth will cause shortages of raw materials. While mounting concern about the economy wiped more than $8 trillion off the value of global equities in four weeks, Commodity Futures Trading Commission data show hedge funds and other speculators increased bullish commodity bets by 2.5 percent in the week ended Aug. 16, the most in a month. Net-long positions, or bets on higher prices, held by speculators in 18 commodities rose to more than 1 million futures and options in the week through Aug. 16, according to the CFTC in Washington.
• Deutsche Bank(DB) Says Four Employees, Securities Unit Indicted in South Korea. Four Deutsche Bank AG (DBK) employees and its South Korean brokerage face a trial at a South Korean court after they were charged by prosecutors for causing a one-day rout in stocks in November that wiped off $27 billion in value.
• Jackson Hole Bankers Reflect on QE2 Amid Pressure for Stimulus. Chairman Ben S. Bernanke has big shoes to fill this week when he speaks at the Federal Reserve’s annual symposium in Jackson Hole, Wyoming: His own.
• China Developers Turning to Informal Loans Amid Tight Credit: Credit Suisse. - Some developers are willing to take out 6-month loan from informal market at annualized rate of 36% in order to complete their projects, CS says, citing a contact in property guarantee business. - Jan. - July actual amount of funds available for investment only up 23.1% vs. 33.6% rise in property investment, CS says, citing NDRC economists. - Property developers raise most funds in informal markets. - Developers delay payment to suppliers on fund tightening. - Current strong property investment may become unsustainable this year if sales don't improve.

Wall Street Journal:

• Rebels Sweep Into Tripoli. Libyan Insurgents Push to Heart of Capital, Gadhafi Son Captured. Libyan rebels poured into Tripoli on Sunday after seizing a nearby military base, as fears of a bloody battle largely gave way to scenes of jubilant opposition fighters surging into the city's center and meeting little resistance from Col. Moammar Gadhafi's defenses.
• Live Blog: Libyan Rebels Pour Into Tripoli.
  
• My Response To Buffet and Obama by Harvey Golub.Before you ask for more tax money from me, raise the $2.2 trillion you already collect each year more fairly and spend it more wisely.
• As Investors Get Bit, States Feel Pain. State-budget officials from around the U.S. were huddled in Utah earlier this month for an annual meeting when someone glanced at a BlackBerry and announced that the Dow Jones Industrial Average had fallen 500 points. "It was one of the worst moments of the week," said Scott Pattison, executive director of the National Association of State Budget Officers.
• Foreclosure Talks Snag on Bank Liability. Efforts to reach a settlement that would end the long-running probe of foreclosure practices are snagged over whether banks will get broad legal immunity from state officials for mortgage-related claims. Federal and state officials are seeking penalties of $20 billion to $25 billion from Bank of America Corp., J.P. Morgan Chase & Co. and other financial firms under investigation since last fall. The banks are pushing hard for a deal, but they have insisted on a wide-ranging legal release from state attorneys general.
• Business Economists Split On U.S. Fiscal Tightening. Business economists are split on whether more austerity or more stimulus is the best path forward for U.S. fiscal policy, according to a new survey, highlighting the dilemma facing policy makers eager to shore up the nation’s economy and long-term fiscal position. The National Association for Business Economics said roughly 49% of the economists surveyed in late July and early August favor a more restrictive fiscal path forward over the next two years, while 37% chose the other direction, supporting more efforts to stimulate the economy through fiscal measures. More than seven in 10 economists who took part in the survey said they expect fiscal policy will be tightened regardless of whether that is the best approach.

Marketwatch.com:

• Germany Forced to Make a Choice: Us or Them? Commentary: Berlin's moment of truth: Stable money or one Europe?

CNBC:

• Stock Market Begins to Feed Economic Fear.
• China Paper Warns of Impact From Euro Crisis 'Black Death'. The "Black Death" of debt crisis across the Euro zone will hurt China by sapping demand for exports, although Beijing's relatively small holdings of euro assets will limit any damage to foreign exchange reserves, the nation's top official newspaper said on Monday. The bleak diagnosis for the euro's prospects appeared in the overseas edition of the People's Daily, the top newspaper of China's ruling Communist Party, in a commentary by a former central bank official and an economist for the state-owned China Development Bank. Although the commentary in the People's Daily does not reflect a definitive view from China's top leaders, it suggests that the euro zone's successive crises have stirred anxiety and debate in Beijing about the impact on China.
• Layoffs Sweep Wall Street, Along With Low Morale.
  

Business Insider:

• Libyan Rebels Take Tripoli, Qaddafi's Whereabouts Unknown.
• Must Read: Victor Shih and Carl Walter On The Chinese Banking System.
  

Zero Hedge:

• Goldman's(GS) Jim O'Neill: "2008 All Over Again?"
• Greece Avoids Bank Run By Last Minute Bail Out Of Proton Bank.
  

NY Times:

• Laser Advances in Nuclear Fuel Stir Terror Fear. Scientists have long sought easier ways to make the costly material known as enriched uranium — the fuel of nuclear reactors and bombs, now produced only in giant industrial plants. One idea, a half-century old, has been to do it with nothing more substantial than lasers and their rays of concentrated light. This futuristic approach has always proved too expensive and difficult for anything but laboratory experimentation. Until now.
• Large Zone Near Japanese Reactors to Be Off Limits. Broad areas around the stricken Fukushima Daiichi nuclear plant could soon be declared uninhabitable, perhaps for decades, after a government survey found radioactive contamination that far exceeded safe levels, several major media outlets said Monday.

Forbes:

• Warren Buffett Beware: Beijing Trashes Its "Garbage" Green Cars. Powerful Chinese bureaucrats are now fighting over the future of China’s green-car industry, with the National Development and Reform Commission and the Ministry of Industry and Information Technology squaring off in public.

LA Times:

• Grocery Union Vote Backs Strike at Ralphs, Vons and Albertsons. Members of a union that represents 62,000 grocery workers at Vons, Ralphs and Albertsons supermarkets in Southern California voted overwhelmingly to authorize a strike if an agreement on a new contract can't be reached.
• Advertisers Start Using Facial Recognition to Tailor Pitches. Once the stuff of science fiction and high-tech crime fighting, facial recognition technology has become one of the newest tools in marketing, even though privacy concerns abound.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 22% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-four percent (44%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -22 (see trends).

Politico:

• Will Ritzy Vacation Trip Obama Up? President Barack Obama is keeping a low profile on the isle of liberal affluence that is Martha’s Vineyard — hoping to avoid the grapes of political wrath in 2012.

USA Today:

• Stunted Corn Crop Could Lead to Higher Food Prices. Smaller-than-expected corn harvests are likely to keep corn prices elevated into next year, economists say, driving up retail food prices. That could further dampen consumer spending in an economy hobbled by high unemployment and modest wage increases.

Reuters:

• Obama Says He Will Be Judged in 2012 Over Economy. U.S. President Barack Obama said on Sunday he expects to be judged in the 2012 election over his governance of the American economy, which he said was still not growing fast enough. "For me to argue, look, we've actually made the right decisions, things would have been much worse has we not made those decisions -- that's not that satisfying if you don't have a job right now," Obama told CBS in an interview taped last week and aired during his annual vacation in Martha's Vineyard, an island near Boston. "I understand that and I expect to be judged a year from now on whether or not things have continued to get better," he said.

Financial Times:

• Senator's Leak Sparks Commodities Debate. A US senator’s public release of confidential data on energy traders has sparked debate over how much should be disclosed about commodity markets, where positions are usually a closely guarded secret. Last week Bernie Sanders, a Vermont independent, leaked and later posted on his website lists of trading positions in oil, natural gas and other commodity markets as part of a campaign to force a clampdown on commodity speculation.

Independent on Sunday:

• ICAP Plc, a UK interdealer broker, will leave the UK if the European Union endorses Franco-German plans for a tax on financial transactions, citing an interview with chief executive, Michael Spencer. Spencer added that it would be "economic suicide" if the UK agreed to the tax and said it would "destroy the city of London," the newspaper reported.

Sky News:

• The Financial Services Authority increased scrutiny of "major" Euro-Area banks operating in the U.K. on concern they may struggle to secure enough funding to meet financial obligations amid declining stock markets. The U.K. regulator has been in daily conversations with some of the largest banks. It's also seeking more detailed and more frequent information about the banks' funding and liquidity positions, the report said.

BBC:

• US Senators Call for Extradition of Lockerbie Bomber. Two US senators have demanded the extradition of the Lockerbie bomber from Libya, on the second anniversary of his release from prison in Scotland. Terminally-ill Abdelbasset al Megrahi was freed by Scottish ministers on compassionate grounds. New Jersey senators Robert Menendez and Frank Lautenberg want the rebel-led transitional Libyan government to send Megrahi to the US. Megrahi was jailed in 2001 for the plane bombing in 1988. He returned home to Tripoli following his release from Greenock Prison, after medical experts said he may only have three months to live.

Der Spiegel:

• The German Finance Ministry calculates that common euro bonds would cost Germany billions of euros as interest rates increase. Higher interest payments would cost as much as $3.6 billion in the first year and double in the second, finance ministry said. In the tenth year, the extra costs would reach 20 billion euors to 25 billion euros.

Wirtschaftswoche:

• Horst Seehofer, head of the CSU party that's in a governing coalition with German Chancellor Angela Merkel's party, said he opposes issuing common euro bonds, citing an interview with the minister. While the CSU "turned a blind eye" to bond repurchases by the European Central Bank, it won't take the next step towards the collectivization of debt, Seehofer said.

Euro am Sonntag:

• Christoph Schmidt, a member of German Chancellor Angela Merkel's council of economic advisers, rejected the idea of issuing common euro bonds because they would bring short-term relief and create long-term problems, citing an interview with the economist. The governments of countries in crisis need external pressure to help push through the correct economic measures, Schmidt said. Join euro bonds would cost Germany's taxpayers a "two-digit billion sum," Schmidt said.

Bild am Sonntag:

• Germany Economy Minister Philipp Roesler ruled out issuing euro bonds as long as the current coalition government is in power, citing an interview with the minister. Selling the bonds would lead to higher interest rates in Germany and threaten the country's economic growth, citing Roesler.

Passauer Neue Presse:

• Volker Bouffier, premier of the German state of Hesse and a member of Chancellor Angela Merkel's party, said his support of a planned financial transaction tax depends on the levy also being applied in the U.K. The tax may threaten more than 70,000 jobs in Frankfurt, which is located in Hesse, citing an interview with the lawmaker.

Handelsblatt:

• Hans-Werner Sinn, head of the Munich-based Ifo economic institute, rejected common euro bonds as a way of supporting countries in crisis. Pooling debt doesn't make the burden smaller and there is no alternative to everyone paying their own debt, Sinn wrote.

La Stampa:

• Umberto Bossi, leader of Italy's governing coalition-member Northern League party, said he won't consider any changes to the country's pension system. Bossi, speaking in Alzano Lombardo, near Bergamo, said he told Prime Minister Silvio Berlusconi in a phone call not to touch pensions and that "we'll find another way," he newspaper reported.

Le Figaro:

• French Prime Minister Francois Fillon called for national unity as the country faces the euro area's debt crisis in comments published today. "In the face of all the challenges, I call for unity and the sense of responsibility of all the parties," Fillon wrote in an editorial. Harlem Desir, the interim Socialist Party leader, rejected his call for unity. Fillon, "with his editorial, is trying to impart to the French a lesson of economy by Mr. Bankruptcy," Desir said in a statement posted on the Socialist Party's Web site today. He "is the head of a government and of a majority that have led France to bankruptcy."
  

Il Sole 24 Ore:

• European rules on carbon dioxide emissions may undermine the finances of airlines, citing Alitalia SpA CEO Rocco Sabelli. The rules may increase costs for Alitalia by as much as $115.2 million over three years starting in 2012 depending on the price of European carbon permits, Sabelli said.

Il Messaggero:

• The wealth tax included in the Italian austerity package in "madness," Emma Marcegaglia, head of employers association Confindustria, said in an interview. The plan has to be adjusted to stimulate growth, gathering resources from pensions and through an increase in VAT, Marcegaglia said, adding that a reduction in public spending is also needed.

Sydney Morning Herald:

• Gold Surges to Record High on Economic Woes. Spot gold surged 1.4 per cent to an all-time high on Monday, setting the 10th record so far this month, as fears of another US recession and euro zone's debt crisis continued to send nervous investors to the safety of bullion. Spot gold struck an all-time high above $US1878 an ounce, after staging its biggest weekly gain in two-and-a-half years last week. It recently stood at $US1871.85. US gold jumped 1.6 per cent to a record high of $US1881.90, and eased to $US1875.50.

Korea Herald:

• Korea Sovereign Risk Rises, Credit Default Swap Shows. Investors see South Korea’s bond and stock markets still highly vulnerable to external shocks despite improved economic fundamentals, data showed on Sunday. The country’s cost of insuring eight-year sovereign debt shot up to a nine-month high Friday to 122 basis points, the highest level since Nov. 30 last year when the North’s attack on Yeonpyeong Island sent the figure soaring to 129 basis points.

Asian Investor:

• Hedge Funds Under Pressure to Manage Collateral Risk. New regulatory requirements will press asset managers to reduce collateral risk, says Citi.

Kyodo News:

• Japanese economy and trade minister Banri Kaieda says coordinated yen intervention was a possible course of action this morning.

Caijing:

• The risks of China's so-called shadow banking system are controllable, China Citic Bank Corp. Vice President Cao Tong said today. Regulators should control the amount of leverage allowed in the system, Tong said. Market risk can spread quickly because shadow banks deal with commercial banks as their counterparties and base prices on the market, he said.

Sina.com:

• The sovereign debt crisis in Europe caused by the 2007 global financial meltdown is still evolving with the outlooks for sovereign debt in Japan and U.S. are also worrying, said Wu Xiaoling, a former deputy China central bank governor.
• China still has room to use quantitative tools to control inflation, Fan Gang, a former academic adviser to the country's central bank said today. The central bank could issue more bills, a tool that has not been adequately used by the bank, Fan, a former member of the People's Bank of China's monetary policy committee, said in Beijing. China must continue to sterilize the foreign-exchange inflow to control the amount of money, said Fan, now the head of the National Economic Research Institute of the China Reform Foundation.
  

Financial News:

• China should raise deposit rates and keep lending rates unchanged to eliminate current negative rates and improve inflation expectations, the Financial News newspaper said in a commentary attributed to Yang Ziqiang. The country should continue increasing banks' reserve requirements and conducting open market operations to control liquidity.

Press TV:

• Russia offered to cooperate with Iran on building new nuclear power plants in the Middle Eastern country, citing Fereydoun Abbasi, the chairman of the Iranian Atomic Energy Organization.

Weekend Recommendations
Barron's:

• Made negative comments on (SAFM).
  

Night Trading

• Asian indices are -1.25% to -.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 154.0 +.5 basis point.
• Asia Pacific Sovereign CDS Index 146.50 -4.75 basis points.
• FTSE-100 futures -.91%.
  
• S&P 500 futures -.12%.
• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (STP)/.18
• (FMCN)/.38
• (PWRD)/.61
  

Economic Releases
8:30 am EST

• The Chicago Fed National Activity Index for July is estimated to fall to -.48 versus a reading of -.46 in June.

Upcoming Splits

• (RYN) 3-for-2
  

Other Potential Market Movers

• The 2Q Mortgage Delinquencies report, 2Q MBA Mortgage Foreclosures report and the 3 & 6 Month Treasury Bill Auctions could also impact trading today.
  

BOTTOM LINE: Asian indices are lower, weighed down by industrial and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.

Weekly Outlook

U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as US tax hike worries, financial sector pessimism, rising eurozone debt angst, global growth concerns and emerging market inflation fears offset short-covering, bargain-hunting and buyout/buyback speculation. My intermediate-term trading indicators are giving mostly bearish signals and the Portfolio is 50% net long heading into the week.

Weekly Scoreboard*

Indices

• S&P 500 1,123.53 -4.69%
  
• DJIA 10,817.65 -4.0%
  
• NASDAQ 2,341.84 -6.62%
  
• Russell 2000 651.70 -6.57%
  
• Wilshire 5000 11,638.66 -5.07%
  
• Russell 1000 Growth 520.79 -5.88%
  
• Russell 1000 Value 559.34 -4.03%
  
• Morgan Stanley Consumer 675.70 -2.12%
  
• Morgan Stanley Cyclical 792.50 -10.07%
• Morgan Stanley Technology 534.16 -8.10%
  
• Transports 4,221.60 -8.67%
  
• Utilities 416.67 +1.33%
  
• MSCI Emerging Markets 40.02 -2.29%
  
• Lyxor L/S Equity Long Bias Index 970.85 +1.44%
  
• Lyxor L/S Equity Variable Bias Index 870.66 +1.07%
  
• Lyxor L/S Equity Short Bias Index 633.56 -1.94%
  

Sentiment/Internals

• NYSE Cumulative A/D Line 116,392 -2.27%
  
• Bloomberg New Highs-Lows Index -969 -411
  
• Bloomberg Crude Oil % Bulls 29.0 -29.27%
  
• CFTC Oil Net Speculative Position 131,234 -3.30%
  
• CFTC Oil Total Open Interest 1,533,021 -.73%
  
• Total Put/Call 1.31 +20.18%
  
• OEX Put/Call .83 -41.55%
  
• ISE Sentiment 70.0 -27.08%
  
• NYSE Arms 1.77 +53.91%
  
• Volatility(VIX) 43.05 +18.40%
• G7 Currency Volatility (VXY) 13.04 -3.26%
  
• Smart Money Flow Index 9,767.36 +.12%
  
• Money Mkt Mutual Fund Assets $2.631 Trillion +.40%
  
• AAII % Bulls 35.56 +6.37%
  
• AAII % Bears 39.82 -11.08%

Futures Spot Prices

• CRB Index 329.47 +.90%
  
• Crude Oil 82.26 -3.56%
  
• Reformulated Gasoline 284.12 +.86%
  
• Natural Gas 3.94 -3.09%
  
• Heating Oil 290.45 -.03%
  
• Gold 1,852.20 +5.89%
  
• Bloomberg Base Metals 235.82 -1.62%
  
• Copper 400.25 -.43%
  
• US No. 1 Heavy Melt Scrap Steel 420.0 USD/Ton unch.
  
• China Hot Rolled Domestic Steel Sheet 4,836 Yuan/Ton +.25%
  
• UBS-Bloomberg Agriculture 1,761.15 +4.35%
  

Economy

• ECRI Weekly Leading Economic Index Growth Rate -.10% -180 basis points
  
• S&P 500 EPS Estimates 1 Year Mean 96.46 +.28%
  
• Citi US Economic Surprise Index -82.50 -3.4 points
  
• Fed Fund Futures imply 36.0% chance of no change, 64.0% chance of 25 basis point cut on 8/9
• US Dollar Index 74.0 -.75%
  
• Yield Curve 187.0 -20 basis points
  
• 10-Year US Treasury Yield 2.06% -20 basis points
  
• Federal Reserve's Balance Sheet $2.842 Trillion -.51%
  
• U.S. Sovereign Debt Credit Default Swap 47.50 -9.52%
• Illinois Municipal Debt Credit Default Swap 236.0 +1.22%
  
• Western Europe Sovereign Debt Credit Default Swap Index 296.17 +.34%
• Emerging Markets Sovereign Debt CDS Index 223.33 -5.4%
• Saudi Sovereign Debt Credit Default Swap 105.20 -.20%
• Iraqi 2028 Government Bonds 89.47 +4.46%
• China Blended Corporate Spread Index 597.0 +14 basis points
  
• 10-Year TIPS Spread 2.02% -22 basis points
  
• TED Spread 30.0 +2 basis points
• 3-Month Euribor/OIS Spread 68.0 +1 basis point
  
• N. America Investment Grade Credit Default Swap Index 118.70 +3.62%
  
• Euro Financial Sector Credit Default Swap Index 212.81 +7.56%
  
• Emerging Markets Credit Default Swap Index 276.08 +.02%
  
• CMBS Super Senior AAA 10-Year Treasury Spread 281.0 +59 basis points
  
• M1 Money Supply $2.096 Trillion -.12%
  
• Business Loans 658.90 +.43%
  
• 4-Week Moving Average of Jobless Claims 402,500 -.90%
  
• Continuing Claims Unemployment Rate 2.9% unch.
  
• Average 30-Year Mortgage Rate 4.15% -17 basis points
  
• Weekly Mortgage Applications 716.40 +4.13%
  
• Bloomberg Consumer Comfort -48.3 +.8 point
  
• Weekly Retail Sales +4.80% unch.
  
• Nationwide Gas $3.58/gallon -.03/gallon
  
• U.S. Cooling Demand Next 7 Days 26.0% above normal
• Baltic Dry Index 1,462 +13.60%
  
• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 35.0 unch.
  
• Rail Freight Carloads 235,598 +.01%
  

Best Performing Style

• Large-Cap Value -4.03%

Worst Performing Style

• Small-Cap Growth -7.65%

Leading Sectors

• Gold & Silver +1.88%
  
• Tobacco +1.66%
• Utilities +1.33%
  
• Telecom -.09%
• Drugs -.64%

Lagging Sectors

• Oil Service -9.53%
• Internet -10.30%
  
• Networking -10.47%
• Alternative Energy -10.63%
  
• Computer Hardware -12.13%

Weekly High-Volume Stock Gainers (4)

• MMI, RLRN, PPDI and MKTX
  

Weekly High-Volume Stock Losers (7)

• SGK, IRBT, IVR, CHS, IDCC, BCSI and HPQ
  

Weekly Charts
ETFs

• High-Volume Gainers
• High-Volume Losers

Stocks

• High-Volume Gainers
• High-Volume Losers
  

*5-Day Change

Stocks Dropping into Final Hour on Rising Eurozone Debt Angst, Surging Food Prices, Tech/Financial Sector Pessimism, Margin Selling

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Above Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 43.48 +1.90%
  
• ISE Sentiment Index 70.0 -2.5%
  
• Total Put/Call 1.36 -8.72%
  
• NYSE Arms 1.35 -37.47%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 118.70 +2.35%
  
• European Financial Sector CDS Index 226.60 +10.08%
  
• Western Europe Sovereign Debt CDS Index 296.17 +1.25%
  
• Emerging Market CDS Index 276.11 -.48%
  
• 2-Year Swap Spread 29.0 +2 bps
  
• TED Spread 30.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 187.0 -1 bp
  
• China Import Iron Ore Spot $177.30/Metric Tonne +.11%
  
• Citi US Economic Surprise Index -82.50 +1.4 points
  
• 10-Year TIPS Spread 2.02% +6 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -51 open in Japan
• DAX Futures: Indicating -50 open in Germany

Portfolio:

• Slightly Higher: On gains in my Biotech/Retail sector longs, Index hedges and Emerging Markets shorts
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is very bearish, as the S&P 500 is falling meaningfully with good volume on global growth worries, rising Eurozone debt angst, emerging markets inflation fears, more shorting, forced margin selling, tax hike fears and tech/financial sector weakness. On the positive side, Defense, Biotech, Medical, Drug, Retail, Restaurant and Tobacco shares are up slightly or just mildly lower on the day. Lumber is rising +.95%. On the negative side, Alt Energy, Oil Service, Computer, Disk Drive, Computer Service, I-Banking, Construction, Bank shares are under significant pressure, dropping more than -2.50%. Cyclicals are very weak again today. The Transports continue to trade very poorly and tech/financial shares remain under meaningful pressure. Gold is rising +1.3%, the UBS-Bloomberg Ag Spot Index is jumping +1.72% and Oil is rising +1.0%. Rice is still near a multi-year high, rising +27.0% in about 7 weeks. The US price for a gallon of gas is unch. today at $3.59/gallon. It is up .45/gallon in about 7 months. The Germany sovereign cds is rising +1.34% to 81.0 bps, the France sovereign cds is rising +1.57% to 150.50 bps, the Greece sovereign cds is rising +3.77% to 1,977.68 bps, the Portugal sovereign cds is gaining +2.6% to 900.67 bps, the Spain sovereign cds is gaining +.75% to 364.66 bps, the Italy sovereign cds is rising +1.1% to 356.17 bps, the Israel sovereign cds is jumping +4.63% to 158.93 bps, the China sovereign cds is gaining +3.25% to 112.03 bps and the UK sovereign cds is rising +1.97% to 81.06 bps. Moreover, the European Investment Grade CDS Index is gaining +3.5% to 134.74 bps. The FRA/OIS Spread made a new 52-week high today and is rising +2.55 bps to 43.0 bps. The 3-Month Euro Basis Swap is falling -5.25 bps to -84.62 bps. Asian indices were down substantially overnight and are very near recent lows. Ukraine shares plunged -7.2% today and have collapsed -44.3% from their Feb. 21 high. French, Spanish and Italian stocks fell another -2.0% today and are back near their lows. Germany's DAX made a new 52-week low today and is now down -20.7% ytd. Gauges of investor angst are surging today, which is a positive. The UBS-Bloomberg Ag Spot Index is breaking out of a multi-month trading range and is very close to its record high, which is a huge negative. The market is very oversold again and will likely see another vigorous bounce next week, however too many investors appear to be depending on the Fed, which is a mistake, in my opinion, given recent inflation readings and the surge in food prices. I expect US stocks to trade mixed-to-lower into the close from current levels on tech/financial sector pessimism, rising eurozone debt angst, tax hike fears, more shorting, global growth worries, emerging markets inflation fears, rising food/energy prices and forced margin selling.

Today's Headlines

Bloomberg:

• Greek Notes Slide on Collateral Demands; ECB Buys Italy Debt. Greek two-year notes slumped after some of the nation’s euro-region partners said they would seek collateral in exchange for new loans, fueling concern attempts to resolve the currency union’s debt crisis will be derailed. Two-year Greek yields climbed above 37 percent for the first time in almost a month. Austria, the Netherlands, Slovenia and Slovakia said yesterday they’d aim to emulate Finland’s deal with Greece, which was criticized by Austria’s finance minister for risking the viability of a rescue. Italian two-year notes erased losses as the European Central Bank was said to be buying the securities. The collateral issue “is something that goes against the logic of the whole bailout package,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “It has the scope to result in a conflict and to topple the whole second bailout package. We’re trading off equities; we’re in a risk-off environment.” The Greek two-year yield climbed 214 basis points to 37.47 percent as of 4 p.m. in London, breaching 37 percent for the first time since July 21. The yield reached a record 40.46 percent on July 20. The 10-year yield rose 65 basis points to 16.65 percent.
• Europe Banking Shares Tumble for Third Day on Funding, Earnings Concern. European banks tumbled, led by Lloyds Banking Group Plc (LLOY) and Intesa Sanpaolo SpA (ISP), on concern firms will struggle to fund themselves and increase earnings as the region’s sovereign debt crisis strangles economic growth. Lloyds, Britain’s second-biggest government-assisted bank, fell 6.2 percent in London trading, while Intesa slid 5.9 percent in Milan. The 46-member Bloomberg Europe Banks and Financial Services Index tumbled 3 percent after dropping the most in two years yesterday. While “the chances of a genuine liquidity crisis as experienced in 2008 are reasonably remote,” lenders may face a “slower-moving, but still toxic, funding crisis,” Deutsche Bank AG (DBK) analyst Matt Spick said in a client note. Moreover, “the weight of negative earnings momentum as we head into the second half represents a major ongoing risk for the European banks,” he said. The Bloomberg European banks index tumbled 10 percent this week on signs lenders are facing tougher funding conditions. Banks’ sale of long-term debt fell behind again in July and August, which may be the weakest month on record, and that could force firms to further reduce leverage, bad news for banks and the economy, Spick said in the note.
• Financial Debt Risk Jumps to Record in Europe on Growth Concern. The cost of protecting European financial debt surged to a record on concern global economic growth is faltering and banks will struggle to fund themselves. The Markit iTraxx Financial Index of credit-default swaps linked to senior debt of 25 banks and insurers increased as much as 12 basis points to 243, a record based on closing prices, according to JPMorgan Chase & Co. and was trading at 237 basis points at 10:30 a.m. in London. The Markit iTraxx SovX Western Europe Index of swaps linked to the debt of 15 governments increased for a third day, climbing 1 basis point to 291. Contracts on Spanish government debt rose 6 basis points to 370, according to CMA. Italy swaps added 8 basis points to 362 and France was up 2 to 152. The Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings increased 11 basis points to 655.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 2 basis points to 154 basis points.
• U.S. Corporate Credit Risk Benchmark Increases to Highest Since July 2010. The cost of protecting U.S. corporate debt from default rose to the highest level in more than 13 months as concern grew that the global recovery is slowing and Europe’s debt crisis is spreading. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 1.7 basis points to a mid-price of 118.7 basis points as of 11:19 a.m. in New York, according to Markit Group Ltd. That’s the highest since July 6, 2010. Credit-default swaps on New York-based Goldman Sachs rose 4.5 basis points to 209.8, according to data provider CMA, which is owned by CME Group Inc. and compiles quoted by dealers in the privately negotiated market. Contracts on Citigroup Inc., also based in New York, climbed 4.2 basis points to 210 basis points, CMA data show.
• Gold Set for Longest Weekly Rally Since 2007. Gold rose to a record above $1,880 an ounce in New York, poised for the longest run of weekly gains since April 2007, as escalating concern that the global economy is slowing drove equities lower. The metal is set for a seventh weekly advance as worse- than-expected U.S. economic data and Europe’s debt crisis boost speculation that growth will falter. Gold for December delivery gained $27.60, or 1.5 percent, to $1,849.60 on the Comex at 10:40 a.m. in New York, after touching $1,881.40, the highest ever. Before today, prices gained 4.6 percent this week and 12 percent since July 31.
• Rising Prices May Embolden Fed Dissenters in Opposing Moves to Spur Growth. Signs that consumer prices are rising even as the U.S. economy slows may delay additional moves by Federal Reserve Chairman Ben S. Bernanke to spur growth. The Fed chairman, who is scheduled to speak at a Jackson Hole, Wyoming, conference on Aug. 26, used the annual gathering of economists last year to hint at a second round of so-called quantitative easing, in which the Fed purchased $600 billion of Treasuries from November 2010 to June. “It’s hard to say we have stagflation, but we do have inflation too high for the Fed to do QE3,” said Marc Chandler, global head of currency strategy for Brown Brothers Harriman & Co. in New York.
• Retailers Raise Prices to Offset U.S. Labor Costs. Retailers and restaurants are raising consumer prices to help compensate for higher labor costs, which increased the most in almost three years during the second quarter. Fifty-three percent of these companies with annual sales of $10 million to $500 million have lifted prices during the last 12 months, up from 32 percent a year ago, according to a quarterly survey by Barlow Research Associates. This comes as U.S. inflation excluding food and energy costs accelerated at an annual pace of 1.8 percent in July, the biggest such gain in more than a year, according to Labor Department data released yesterday. Unit labor costs for nonfarm businesses rose 1.3 percent in the quarter ended June 30 compared with a year ago, as hourly compensation rose while productivity fell, Bureau of Labor Statistics data show. “This is an early sign that even with high unemployment, labor costs are starting to pick up, giving companies an incentive to raise prices,” said Peter Newland, an economist at Barclays Capital Inc. in New York. Labor costs are the biggest component of business expenses, he said. Sixty-one percent of the 149 public and private retailers and restaurants in the Barlow survey said they plan more price increases during the next 12 months. This indicates a “significant change” in attitude from the previous year, when 41 percent had such plans, according to John Barlow, president and founder of the Minneapolis-based business. “Middle-market companies have been aggressive in increasing prices because they’re trying to protect profit margins,” he said.
• Prices of supertankers carrying about 20% of the world's oil may fall 10% to the lowest level in 8 years as slowing global growth cuts earnings, RS Platou Markets AS said. Owners are contending with a supertanker fleet that's the largest in 29 years and growing at the fastest pace in more than three decades, forcing freight rates to a 14-year low. The vessels will earn about $15,600 a day over the next two years, 40% of the level secondhand vessels need to break even, according to Platou's Frode Morkedal.
• Emerging-Market Stocks Set for Fourth Weekly Slump Amid Global Concerns. Emerging-market stocks fell for a second day, setting the benchmark index on course for its longest streak of weekly losses since May, as signs the global economy is slowing drove investor outflows from riskier assets. The MSCI Emerging Markets Index slid 2.3 percent to 972.10 at 10:07 a.m. in New York, bound for a fourth straight week of losses. Mexico’s IPC slid 0.4 percent, falling for a second day. South Korea’s Kospi Index (KOSPI) sank 6.2 percent, the biggest drop since November 2008, while Taiwan’s Taiex index plunged 3.6 percent. Emerging-market equity funds posted $2.8 billion of outflows in the week ended Aug. 17, extending the biggest withdrawals since 2008 the previous week at $7.7 billion, Citigroup Inc. analysts led by Markus Rosgen said in a report today, citing figures by EPFR Global. Analysts at Morgan Stanley cut their forecasts for stock indexes in Southeast Asia, after economists from the brokerage lowered their estimates for global economic growth.
• Syria Kills 25 Protesters After Obama Calls on Assad to Quit. Syrian security forces killed at least 25 protesters and arrested more than 300 people after U.S. President Barack Obama, in concert with European allies, called on Bashar al-Assad to step down.
• Deutsche Bank AG(DB) put-options volume surged to a record on U.S. exchanges on speculation that Germany's largest lender will extend declines after falling to a two-year low. Almost 24,000 puts to sell changed hands, 11 times the four-week average and 24 times the number of calls to buy, as of 12:18 pm EST.
  

Wall Street Journal:

• Buyout Shops Get Mauled by Market. Private equity is being pummeled. Few shares are experiencing the kind of beating that big buyout firms are enduring. Firms like Blackstone Group LP, KKR & Co., Apollo Global Management LLC and Fortress Investment Group LLC have seen their shares fall between 19% and 27% so far this month, compared with a drop of 9.5% for the Dow Jones Industrial Average. On Thursday, the carnage continued, as these stocks fell between 1.6% and 11%, while the Dow average fell 3.7%. The troubles for these shares underscore how disappointing many private-equity companies have been for investors.
• ECRI Leading Index Goes Negative. (graph) The Economic Cycle Research Institute’s weekly leading index fell again this week, and its four-week rolling average fell into negative territory for the first time since early December.

MarketWatch:

• H-P(HPQ) Hits Multiyear Low, But Other Techs Rise. H-P shares fell $5.90, or 20%, at $23.63 and traded at their lowest points since August 2005 and less than half of what it was just 18 months ago.

CNBC.com:

• Fed Needs to Be Monitoring European Banks: Dudley. The U.S. Federal Reserve is keeping an eye on European banks struggling with the continent's debt crisis because of the turbulence in financial markets, one of the central bank's most influential policymakers said on Friday.
• Foreign Banks Complain of 'Imperialist' US Tax Rule. A U.S. law meant to snuff out billions of dollars in offshore tax evasion has drawn the criticism of the world's banks and business people, who dismiss it as imperialist and "the neutron bomb of the global financial system." The unusually broad regulation, known as FATCA, or the Foreign Account Tax Compliance Act, makes the world's financial institutions something of an extension of the tax-collecting Internal Revenue Service—something no other country does for its tax regime.
• US Can Recover, 'Extreme Action' Needed in Europe: Economist. The US and European Union pose divergent threats to a global economic recovery and despite weak growth in the United States, the euro zone debt crisis is more likely to impede a recovery, Paul Donovan, deputy head of Global Economics told CNBC.

Business Insider:

• Moody's Analyst Breaks Silence: Says Ratings Agency Rotten To Core With Conflicts, Corruption, And Greed.
• Who Is Behind The 'US Day Of Rage' Against Wall Street? What, exactly, is a “US Day of Rage?” Well, on September 17th we may find out for certain, but until then, The Blaze is revealing what information does exist about this very nefarious-sounding campaign.
• Europe Is A 'Focus of Terrorist Plots'. Europe is still “a focus of terrorist plots”, according to a new security report released by the US State Department.

Zero Hedge:

• Here Is Who Is Getting Creamed On Today's Hewlett Packard(HPQ) Bloodbath... And Why It Is Just Not Paulson's Year.

New York Times:

• Number of "Green Jobs" Fails to Live Up to Promises.

MIT Technology Review:

• The Cause of Riots and the Price of Food. (graph) If we don't reverse the current trend in food prices, we've got until August 2013 before social unrest sweeps the planet, say complexity theorists.

Gallup:

• Obama Job Approval: 40% Approve, 52% Disapprove. (graph)

Reuters:

• Hedge Fund Cairn Sees France, Germany Downgrades. France's top AAA credit rating is likely to be downgraded and Germany could easily follow as the costs of bailing out weaker euro zone economies push up their own debt piles, says credit hedge fund firm Cairn Capital's chief investment strategist. London-based Cairn, which has $24.5 billion in assets under management and advice across its business, said either future contributions to the European Financial Stability Facility (EFSF) rescue fund, or France's own economic troubles, could see it lose its coveted rating. "There are very deep economic flaws in the whole euro mechanism," said Graham Neilson, citing high debt levels, weak growth, divergence between member states and the European Central Bank's focus on inflation expectations. "France is likely to be downgraded either on its own metrics but more likely as a result of potentially higher EFSF costs. The bigger the EFSF, the more France is liable (and) the worse France's credit rating the more it could be liable." France's own economics could also lead to a downgrade, said Neilson. "France's banks are three times more exposed to Italy than any other banking system in Europe and France's debt metrics and growth profiles are poor." He added that Germany was also vulnerable to a downgrade, which would likely increase its cost of borrowing and put further stress on the global economy after S&P's downgrade of the United States earlier this month. "Germany could also quite easily be downgraded if the EFSF is forced to be larger, in a scenario where France and Germany end up with debt to GDP ratios of 120-125 percent. That's not good, that's not AAA," he said, adding that was likely to be the reason the EFSF had so far not been increased in size.
• Jobless Rates Rise in Many U.S. States in July. Unemployment rates increased in more than half of the U.S. states in July as the shaky national economy took its toll on jobs, Labor Department data released on Friday showed. Unemployment rates rose in 28 states and the District of Columbia, while they fell in nine states and were unchanged in 13, according to the data.
  
• Bank Funding Costs Rise on Europe Tension. The benchmark for unsecured dollar loans between banks, three-month Libor LIBOR, rose above 30 basis points for the first time since early April.
• ECB's Stark: Risky to Keep Rates Too Low For Long. European Central Bank heavyweight Juergen Stark said leaving interest rates too low for too long was risky, highlighting reservations at the ECB about reversing policy course despite markets' recession fears.
• French PM: Euro Bonds Could Threaten French Rating. French Prime Minister Francois Fillon on Friday reiterated his country's opposition to the introduction of common euro zone bonds without further fiscal consolidation in the currency bloc, saying such a move could threaten France's AAA credit rating. "Some people are calling for the creation of European bonds ... which they present as a panacea," Fillon wrote in an editorial published in Le Figaro daily. "But they forget to say that would raise the price of French debt and could even call its credit rating into question."
• Illinois Tool Works(ITW) Reports Slowdown in Growth. Industrial conglomerate Illinois Tool Works Inc said on Friday that growth at a number of worldwide end markets slowed through the three-month period ended July 31.

Telegraph:

• Barack Obama's Martha's Vineyard Vacation Looks Like An Act Of Presidential Hara-Kiri. With 14 million Americans out of work, a volatile stock market and a historic downgrade of the country’s credit rating, President Obama is set to begin a 10-day retreat Thursday at a 28-acre Martha’s Vineyard compound called Blue Heron Farm, which costs an estimated $50,000 per week to rent. That divide — and the presumed hypocrisy of a president who has pledged not to rest “until every American looking for a job can find one,” going golfing and biking on an island playground for wealthy celebrities — has been too much for political pundits to resist.

WAZ:

• S&P's Rating Services' German Unit head Torsten Hinrichs is "skeptical" about a possible issuance of common euro-area bonds, citing an interview. "The main condition for joint euro bonds to work in the long term would be a strong political and economic integration in Europe. We are still far away from that," he said.

Tiroler Tageszeitung:

• Jean-Claude Juncker, who leads the group of euro-area finance ministers, said the countries sharing the currency must give up sovereign powers for a common "economic government" to make sense, according to an interview. "An economic government without relinquishing national competencies would be dead on arrival," Juncker was quoted as saying.

Expansion:

• Spanish Prime Minister Jose Luis Rodriguez Zapatero will bring back a wealth tax he suspected in 2008 to attempt to meet his budget deficit-reduction target, citing people familiar with the government's plans. The measure may be reinstated as early as today.

Savon Sanomat:

• No country is likely to get collateral for their loan guarantees to Greece and thus Finland probably won't participate in the Greek bailout, OP-Pohjola Group CEO Reijo Karhinen said. "For the first time I'm concerned the euro system may fail," Karhinen, who heads Finland's second-biggest banking and insurance group, said.

Kathimerini:

• Greece's 2011 budget deficit may exceed the 7.6% of GDP target given a higher-than-expected decline in economic growth and rising unemployment. Finance Minister Evangelos Venizelos informed the cabinet yesterday of the possible need to either re-discuss the deficit target with its lenders or consider further fiscal measures worth between 3 billion and 4 billion euros to achieve the original target.

Marbridge Daily:

• China's MIIT Prepares New Online Search Regulations. According to a source within China's Ministry of Industry and Information Technology (MIIT), relevant MIIT departments have drafted new regulations for the online search industry, including restrictions that would affect Chinese internet company Baidu's (Nasdaq: BIDU) paid search rankings. MIIT is currently seeking feedback on the regulations, according the source, and has no timetable set for implementation. MIIT has reportedly been assessing search engine companies since as early as 2009 in order to accelerate the development of legal oversight mechanisms, but has yet to implement any such regulations. According to the source, MIIT's next step will be to implement its new policies, which will include restrictions on paid search advertising like Baidu's.

Haaretz.com:

• Israel Air Force Bombs Targets in Gaza Following Deadly Terror Attack. Palestinian attacks on Israel continue, firing 22 Grad and Qassam rockets into south Israel over the course of Friday afternoon; IAF kills two PRC activists in strikes.