Wednesday Watch

Evening Headlines
Bloomberg:

• Spanish Subsidies on the Line as Miners’ March Reaches Madrid. Secundino Menendez Fernandez, a coalminer with a sunburned face, may represent the biggest threat to Prime Minister Mariano Rajoy’s plan to balance Spain’s books. Menendez, who usually spends his days 700 meters below ground, arrives today in Madrid with about 160 fellow miners after trudging 285 miles (460 kilometers) under the blazing summer sun from the northern region of Asturias. They are protesting Rajoy’s cuts to subsidies that equated to more than 290,000 euros ($356,000) per miner last year. Union leaders aim to draw more than 100,000 protesters to a rally in the capital. The demonstration will test Rajoy’s attempt to maintain order as he pushes through the most severe budget cuts since the country returned to democracy 35 years ago. The run-up to the demonstration has been marked by violent clashes between armored police and masked pickets who blocked highways and railroads in northern Spain and shot fireworks and golf balls from improvised launchers made from metal pipes. “The miners will start to matter to investors if the protests turn violent and they block the ability of government to continue implementing reforms,” Antonio Barroso, a political analyst at Eurasia Group in London, said in a July 9 telephone interview. “The government can’t afford a huge protest that shuts down the country.”
• Spanish Banks to Take Stress Tests as Part of Rescue, Bild Says. The 14 biggest Spanish banks have to undergo a stress test as a condition for the aid from the European Financial Stability Fund, Bild reported citing a memorandum of understanding without clarifying the nature of the document. Bank restructuring plans will be set up by November on the basis of the results of the test, enabling the banks to live without aid in the medium term, the newspaper said. Banks that receive money from the rescue fund will face pay caps for their board members, the newspaper added.
• German Court Says Parliament’s Approval to ‘Be Respected’. Germany’s top court said a decision on whether to suspend legislation for the euro bloc’s permanent bailout fund and fiscal treaty could take months rather than weeks due to the complexity of the ruling. The Federal Constitutional Court in Karlsruhe heard arguments yesterday on whether to put German approval of the European Stability Mechanism and fiscal pact on hold until it rules on their legality. Both houses of parliament approved the new laws on June 29 with a two-thirds majority. German President Joachim Gauck withheld his signature due to legal challenges that were discussed at the hearing. “The legislature fundamentally holds broad leeway for discretion, which the constitutional court must respect,” court President Andreas Vosskuhle said, adding that the principle counts particularly with a two-thirds mandate. Still, “arriving at a decision is not easy in many respects.” He signaled the court may take a more deliberative approach to its initial decision, potentially further delaying the ESM from coming into force.
• Portugal Lurches Into Austerity Trap With Creditors: Euro Credit. Portugal's international creditors may soon have to ease terms of the country's bailout to prevent the plan from derailing as the government faces setbacks in attaining its deficit goals. Prime Minister Pedro Passos Coelho's struggle to meet deficit pledges were further hampered last week when about $2.5 billion of planned cuts to pensions and civil servants' holiday pay were ruled unconstitutional. With Portugal's 10-year bond yield above 10%, returning to the markets next year may be untenable, requiring more international aid despite the premier's insistence he won't seek concessions.
  
• CFTC Faces Scrutiny After $200 Million Peregrine Fund Shortfall. The top U.S. futures regulator is facing renewed scrutiny after suing Peregrine Financial Group Inc. for a customer funds shortfall nine months after MF Global Holdings Ltd. collapsed. The Commodity Futures Trading Commission filed a complaint against Peregrine in federal court in Chicago today after an industry self-regulator cited a $200 million shortfall in customer segregated funds. The National Futures Association said the brokerage’s chairman may have falsified bank records after only $5 million was found in an account that was reported to have $225 million on or about June 29. Peregrine is under investigation over the allegedly missing funds after Russell Wasendorf Jr., the firm’s chairman and chief executive officer, unsuccessfully attempted suicide. Republicans who scolded the CFTC over its handling of MF Global cited similarities to the New York brokerage’s failure. “I would have expected regulators to be particularly attentive to situations like the one at PFG in the wake of the MF Global collapse, so I’m disappointed this wasn’t discovered earlier,” Representative Randy Neugebauer, a Texas Republican who is leading an investigation of MF Global’s $1.6-billion customer-fund shortfall, said in an e-mail.
• Passport to Wind Down Materials Hedge Fund After 31% Loss. Passport Capital LLC, the $3.4 billion hedge fund founded by John Burbank, plans to wind down its materials fund after a 31 percent loss this year, according to a letter to investors obtained by Bloomberg News. The Passport Materials Fund fell 17 percent in the second quarter, the fund’s portfolio managers, James Cunningham and Sebastien Boifort, said in a letter to investors dated yesterday. The fund has taken longer than expected to exit private investments, the three largest of which are Ferrous Resources Ltd., Satimola Ltd. and Canadian Sinosun Energy Inc., the managers said. The fund lost 45 percent over one year, an annualized 13 percent over three years and 9.8 percent over five years.
• China Wants Sea Spat Off Asean Agenda as Clinton Urges Talks. China warned nations to avoid mentioning territorial disputes with the Philippines and Vietnam at a security meeting this week, rebuffing U.S. Secretary of State Hillary Clinton’s call for talks on the issue.
• Senate Democrats to Unite Behind Obama Tax-Hike Plan, Baucus Says. The top Senate tax writer predicted Democrats in the chamber will back President Barack Obama’s latest push to extend only part of the Bush-era tax cuts, calling talk of Democratic dissension “background noise.”

Wall Street Journal:

• Claw Is Out for 'Whale' Officials. J.P. Morgan Chase & Co. plans to reclaim millions of dollars in stock from executives at the center of the trading blunder that shocked Wall Street and tarnished the reputation of Chief Executive James Dimon. The nation's biggest bank is expected to claw back compensation from individuals including Ina Drew, who ran the company's Chief Investment Office, or CIO, according to people familiar with the bank's plans. Ms. Drew was a top lieutenant of Mr. Dimon's before she resigned this spring following the disclosure of the trading losses.
• Paulson Ex-Lieutenant Caught in Fund's Slide. John Paulson has lost a lot of money for investors recently—one of his largest hedge funds lost more than half of its value last year and continued its decline this year. One surprising victim of the fund manager's recent bad run: Paolo Pellegrini, a former lieutenant who helped make Mr. Paulson a multibillionaire. Mr. Pellegrini was one of the architects of Mr. Paulson's wager against subprime mortgages that netted $15 billion in 2007 for his hedge-fund firm, Paulson & Co. Mr. Pellegrini subsequently left to launch his own hedge fund, before pulling the plug nearly two years ago to focus on investing his own money.
• House Set to Vote on Health-Law Repeal. The House is expected to vote Wednesday to repeal President Barack Obama's health-care law, as Republicans continue their furious response to the Supreme Court decision to uphold the law. The House has voted 30 times previously to undo all or part of the health law, and the Senate is all but certain to ignore the House action. But GOP leaders want to reaffirm their opposition to it in advance of November's elections.
• Air Jordan and the 1%. There was a lot more income inequality on the Chicago Bulls roster after Michael Jordan's years with the team, but everyone was better off.

MarketWatch:

• China, Brazil lead Q2 slowing in emerging markets. Emerging market economies continued to show signs of weakening in the second quarter, with China and Brazil leading the slowdown, according to a new survey. The HSBC Emerging Markets Index, which is based on surveys of 21 Purchasing Managers Indexes conducted across 16 markets, eased to 53.0 in the second quarter from 53.6 in the first quarter.

Business Insider:

• Some Awful Stock Market Behavior.
• Companies Are Laying People Off At The Highest Rate In Two Years.
• INFOGRAPHIC: The LIBOR Scandal Explained.
• WATCH: Top Romney Backer Taunts Andrea Mitchell Over Obama's 'Outsourcing'.
• Firm With Money At Collapsed Brokerage PFG Launches Blistering Attack On Failure Of Regulators.
• These Police Surveillance Drones Could Be Watching You Right Now.

Zero Hedge:

• Bearish Enough To Buy? The Real Fear Index Says Not So Fast. (graph)
• PFG's Chairman Was Forging Bank Documents For Years Even As The CFTC Gave An "All Clear".
• Because Once You Drop By Bankruptcy Court, You Don't Stop: San Bernardino On Chapter 9 Deck.

CNBC:

• Italy Is More Worrying Than Spain: Pro. (video) Chief Economist, Bank of Singapore says Italy has the potential for a Greek style of political instability. He adds that Prime Minister Mario Monti's political career could be on a thin edge.
• Rate Scandal Stirs Scramble for Damages. As unemployment climbed and tax revenue fell, the city of Baltimore laid off employees and cut services in the midst of the financial crisis. Its leaders now say the city’s troubles were aggravated by bankers’ manipulation of a key interest rate linked to hundreds of millions of dollars the city had borrowed.
• China's Slowing Economy Claiming Firms' CEOs, Profits. China's slowing economy is hammering corporate profits and costing some CEOs their jobs as investors show little patience for companies that fall behind, even for a brand founded by a former Olympic star gymnast and revered sports hero.
• Big Bank Earnings Will Have Us Cringing: Bove.

NY Post:

• Dalio Hits Midyear Off -2.7%. Ray Dalio’s Bridgewater Associates, the world’s largest hedge-fund firm, with $120 billion in assets, has hit a rough patch. After leaving its rivals in the dust for the past two years with mouth-watering double-digit returns, Bridgewater is now trailing them. Its flagship fund, Pure Alpha, fell 2.7 percent in 2012’s first half. Dalio is a widely watched guru of the financial markets. But his devotion to the dollar helped drive Pure Alpha into the red, a source close to the fund told The Post.
  

MoneyNews:

• CBO: In Recession, Top 1% Had Lower Income, Higher Tax Rate. Before-tax income for the top 1 percent of U.S. households fell by 36.3 percent from 2007 to 2009 while their federal tax rate increased to 28.9 percent from 28.3 percent, said a report by the Congressional Budget Office.
  

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows Mitt Romney attracting 47% of the vote, while President Obama earns support from 44%. Five percent (5%) prefer some other candidate, and four percent (4%) are undecided.
  

Reuters:

• Hedge fund withdrawals jump to highest since '09: data. Hedge fund outflows surged to their highest level in almost three years this month, data from hedge fund administrator GlobeOp shows, in a sign investors may be losing faith in the sector after mixed performance amid choppy markets. Net outflows from hedge funds, as measured by the GlobeOp Capital Movement Index, which tracks monthly net subscriptions to and redemptions from funds managing around $187 billion in assets, were 1.17 percent of that total during the month to July 1. The withdrawals compare with net inflows in each of the previous five months and were the highest level of net outflows since October 2009, when clients pulled out 3.76 percent. The withdrawals may be an early indicator that investors, who have continued to pile into the $2 trillion hedge fund industry in recent years on hopes it can help them survive choppy markets, are reconsidering their options. Hedge funds lost an average 5.3 percent last year, according to Hedge Fund Research (HFR), after the crisis in the euro zone and worries of a global recession rattled investors and punished all but the most bearish of strategies. After achieving its best first-quarter performance since 2006 this year, the hedge fund industry lost some ground in April and May, and the average fund is now up 1.7 percent in the first six months of 2012.
• FBI warned U.S. Labor Department data might be leaked-report.
• Hhgregg sees bleak year ahead on weak TV demand. Hhgregg forecast a wider-than-expected loss for the first quarter and cut its full-year outlook, as it grapples with higher costs and shrinking demand for electronics. Shares of the appliance and electronics chain fell 22 percent after the bell. They closed at $11.54 on Tuesday on the New York Stock Exchange.
• Blackstone(BX) shedding U.S. office building assets-source.
• BofA(BAC) cutting commercial banking jobs--sources. Bank of America Corp has been cutting jobs in its commercial banking unit in recent weeks even as it tries to boost the group's business, people familiar with the situation said, reflecting the bank's broader struggles to grow in a tepid economy.
• Voxx International(VOXX) loss wider than expected, shares fall. Audio equipment maker Voxx International Corp reported a bigger-than-expected quarterly loss, hurt by a patent litigation settlement charge and expenses related to the company's acquisition of Germany's Hirschmann. Shares of the company were down 18 percent at $8.02 after the bell. They closed at $9.77 on Tuesday on the Nasdaq.

Financial Times:

• Spain pressed to inflict losses on savers. European authorities are pressing Spain to inflict billions of euros of losses on small savers by wiping out certain types of bank debt before its financial institutions are recapitalised using eurozone rescue funds. The bailout conditions for Spain’s banks would force any lender taking aid fully to write off their preferred shares and subordinated bonds, according to a draft memorandum of understanding seen by the Financial Times.

Telegraph:

• Spain vows to 'deep clean' financial sector after rescue deal. Under the deal to bailout Spain's stricken banks, the Government must come up with a roadmap of structural reforms by the end of July.
• Germans in court battle to block eurozone bailouts. The German Constitutional Court may take up to three months to rule on an injunction by private citizens and Left-wing lawmakers aimed at blocking the eurozone bailout machinery, leaving markets hanging in suspense as the eurozone debt crisis eats at confidence.

ORF TV:

• Peter Bofinger, an economic adviser to German Chancellor Angela Merkel, told Austrian broadcaster ORF it would be an "economic catastrophe" if Germany's highest court rejects the euro area's permanent bailout fund. "It would be an economic catastrophe that would probably exceed the consequences of the Lehman shock," if the Federal Constitutional Court rejects the European Stability Mechanism, Bofinger said in an interview broadcast today, referring to the collapse of Lehman Brothers Holdings Inc.. in 2008. "If such a resolution mechanism isn't legally possible, this would de facto mean the end of the euro area."

Oriental Morning Post:

• China National Building Material Co. may cut the size of its planned IPO in Shanghai to about 10b yuan, from 15b yuan previously, citing a person close to the company.

Shanghai Securities News:

• China May Slow State-Owned Company Investment Approval. The State-Owned Assets Supervision and Administration Commission may slow the pace of approving investment by central-government-owned companies for projects that are costly, risky or involve non-core businesses.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 168.50 -5.0 basis points.
  
• Asia Pacific Sovereign CDS Index 139.25 -.5 basis point.
  
• FTSE-100 futures -.65%.
  
• S&P 500 futures +.04%.
  
• NASDAQ 100 futures +.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MAR)/.42
• (ADTN)/.36
• (TXI)/-.30

Economic Releases
8:30 am EST

• The Trade Deficit for May is estimated at -$48.6B versus -$50.1B in April.

10:00 am EST

• Wholesale Inventories for May are estimated to rise +.3% versus a +.6% gain in April.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,375,000 barrels versus a -4,270,000 barrel decline the prior week. Distillate inventories are expected to rise by +625,000 barrels versus a -1,051,000 barrel decline the prior week. Gasoline inventories are estimated to rise by +500,000 barrels versus a +151,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.2% versus a -.6% decline the prior week.
  

2:00 pm EST

• Minutes of FOMC Meeting
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The weekly MBA mortgage applications report, Germany CPI, China Money Supply, Germany 30Y Bond auction, USDA crop report, 10Y T-Note auction, BOJ rate decision, UBS Energy Conference and the (CVX) Q2 Update could also impact trading today.
  

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

Stocks Falling into Final Hour on Earnings Worries, Rising Global Growth Fears, US Fiscal Cliff Concerns, Euro Weakness

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 18.88 +5.01%
  
• ISE Sentiment Index 74.0 -26.73%
  
• Total Put/Call .98 unch.
  
• NYSE Arms 2.50 +54.51%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 111.15 -.3%
  
• European Financial Sector CDS Index 277.72 -1.7%
  
• Western Europe Sovereign Debt CDS Index 281.10 -1.52%
  
• Emerging Market CDS Index 274.34 -1.79%
  
• 2-Year Swap Spread 25.75 -.25 basis point
  
• TED Spread 37.0 -1.75 basis points
  
• 3-Month EUR/USD Cross-Currency Basis Swap -57.50 +1.25 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .09% +2 basis points
  
• Yield Curve 124.0 -1 basis point
  
• China Import Iron Ore Spot $135.50/Metric Tonne unch.
  
• Citi US Economic Surprise Index -64.90 -2.3 points
  
• 10-Year TIPS Spread 2.08 +1 basis point
  

Overseas Futures:

• Nikkei Futures: Indicating -33 open in Japan
• DAX Futures: Indicating -40 open in Germany
  

Portfolio:

• Slightly Lower: On losses in my medical, tech, biotech and retail sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short, then covered some of them
  
• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Euro-Split Case Drives Krone Appeal in Binary Bet. The appeal of the Danish krone is growing as securities denominated in the Nordic nation’s currency offer a hedge against the risk of a euro-area breakup that even German assets can’t provide. “For an international investor with euro-zone exposure, buying Danish assets can be a hedge against the extreme scenario of the euro breaking up,” Ian Stannard, chief European currency strategist at Morgan Stanley in London, said in a phone interview. “In that scenario, the Danish asset may appreciate and work as a hedge against the drop in the euro-zone asset.”
  
• Euro Weakens as Investors Sell to Buy Higher-Yield Assets. The euro fell to a two-year low versus the dollar and weakened against all of its 16 most-traded peers as traders used the shared currency to fund purchases of higher-yielding assets. The 17-nation currency dropped to the weakest on record versus Australia’s dollar five days after the European Central Bank cut its key interest rate to an all-time low 0.75 percent. Mexico’s peso climbed versus the dollar on bets Europe’s crisis will ease. The pound slid against most major counterparts after Bank of England Governor Mervyn King said the U.K. economy doesn’t show “great signs” of recovering from recession. “The euro is now the main funding currency, and everyone wants to be short euro,” said Sebastian Galy, a senior foreign- exchange strategist at Societe Generale SA in New York. “The dollar is no longer the main funding currency.” A short position is a wager a currency will decline in value. The euro depreciated as much as 0.6 percent to $1.2235, the lowest since July 2010, before trading at $1.2253 at 12:07 p.m. New York time, down 0.5 percent.
• ECB Says EU Crisis Plans Risk Harming Deposit Guarantees. The European Central Bank said the European Commission’s plans to handle the failure of large lenders may threaten its independence and could damage confidence in national guarantee programs for bank deposits. ECB Vice President Vitor Constancio made the remarks during a debate on a draft law with finance ministers in Brussels today. Some ministers also raised concerns over the proposal, which Michel Barnier, the European Union’s financial services chief, has described as a “cornerstone” of the bloc’s efforts to build a so-called banking union. There is a “potential difficulty” with how Barnier’s proposal would interact with deposit-guarantee programs, Constancio said. It’s necessary to avoid “any doubts of the citizens” on the capacity of such plans to fulfill their commitments, he said.
• Investment Bankers Face Termination as Europe Fees Fall. Investment bankers in Europe are girding for a second wave of job cuts in less than a year after the euro area’s debt crisis drove fees from mergers and securities underwriting to a nine-year low. Credit Suisse Group AG (CSGN) and UBS (UBSN) AG, Switzerland’s biggest lenders, face the most pressure to boost efficiency as that country runs ahead of others in introducing tougher capital and liquidity rules to curtail risk-taking, making some businesses unviable.
• China’s Stocks Fall to 6-Month Low After Imports Trail Estimates. China’s stocks fell, dragging the benchmark index down to a six-month low, after a government report showed imports rose less than anticipated in June while export growth slowed. Shenzhen Chiwan Wharf Holdings Ltd. led a decline for port operators as a gauge of export orders showed a contraction for the first time since January, suggesting that overseas shipments may slow in coming months. Poly Real Estate Group Co. (600048), the nation’s second-biggest developer, slumped 3.7 percent after forecasting lower first-half profit.
• Dodging Bubble Means Canada Economy Loses Edge: Mortgages. Canadian Finance Minister Jim Flaherty’s efforts to avert a housing bubble are hastening the end of a six-year streak of outperforming the U.S. economy. Changes implemented yesterday include shortening the maximum length of government-insured mortgages to 25 years from 30 years to quell demand for new homes and curb record household borrowing that Flaherty said has become a greater risk to the economy than slowing growth. The rule changes make it harder for some buyers to qualify for mortgages. Ebbing demand for homes removes one more driver from the world’s 10th largest economy, said Douglas Porter, deputy chief economist at Bank of Montreal. Residential construction was the fastest expanding segment in the first quarter, responsible for almost half of Canada’s 1.9 percent growth as consumer and government spending slowed. “Basically the consumer is all tapped out, the housing market has no room to grow, we’re seeing fiscal restraint,” Porter said. “It’s very difficult to imagine Canada outpacing the U.S. economy in growth terms.”
• Oil-Tanker Glut Seen Expanding to Widest in Month on Slow Demand. A glut of supertankers in the Persian Gulf expanded to the widest in a month as demand to hire the ships slowed, a Bloomberg News survey showed. There are 23% more VLCCs available for hire over the next 30 days than there are likely cargoes, according to a Bloomberg survey of six shipbrokers and owners today. That's 1 percentage point more than last week, and the largest surplus of VLCCs in the region since June 12.
• Bullard Says Fed Would Consider More Action If Economy Worsens. Federal Reserve Bank of St. Louis President James Bullard said the U.S. central bank would consider more stimulus if the economy slows significantly. “If things slow down a lot more and the U.S. economy looked like it was going back into recession or there were risks of deflation then we would consider more action,” Bullard told reporters in London today. “But I don’t think we’re at that juncture.” Bullard added that inflation rates in the U.S. are “around target” and the situation isn’t similar to that of 2010. “I don’t think we can look at any more extension of operation twist beyond the end of this year,” Bullard added.
• Fed Reluctance May Push Yields to Lows, Misra Says: Tom Keene. Yields on benchmark 10-year Treasury notes may drop as low as 1.25 percent if the Federal Reserve is slow to provide more stimulus as the U.S. economy weakens, according to Bank of America Corp.’s Priya Misra. “Markets are obsessed with QE3 right now. They expect QE3 the next bad data print. Everyone expects the Fed to jump in. What if the Fed wants to wait?” Misra, head of U.S. rates strategy at Bank of America Merrill Lynch, said on Bloomberg Television’s “Surveillance” in an interview with Tom Keene. “If we continue to get weak data and the Fed doesn’t jump in right away, that is when markets panic.”
• Democrats to Risk Fiscal Cliff by Targeting Top Earners. Congressional Democrats have developed a get-tough strategy to try to force Republicans to go along with President Barack Obama’s call for higher taxes for the wealthiest Americans. Democrats say they are prepared to go over the so-called fiscal cliff at the end of the year if Republicans continue their opposition to more revenue from top earners, allowing the George W. Bush-era tax cuts to temporarily expire for everyone on Dec. 31 and accepting scheduled spending reductions, including for Pentagon programs favored by Republicans. Democrats who say their party blinked two years ago by not separating lower rates for the richest taxpayers from those for the middle class maintain they have the leverage to prevail this time, saying no deal on taxes and spending would be better than a bad deal.
• Libor Woes Threaten to Turn Companies Off Syndicated Loans. The scandal surrounding the London interbank offered rate is threatening to undermine confidence in syndicated loans and hasten companies’ flight to bonds. “What corporate treasurers are concerned about is the damage this Libor problem will do to market confidence,” said John Grout, the policy and technical director at the Association of Corporate Treasurers in London, which has about 4,500 members. “If people lose trust in banks and Libor, which is indexed to a huge amount of debt and derivatives instruments, market liquidity could be reduced and borrowing costs could rise for corporates.”
• CFTC Votes 4-1 to Approve Swap Definition Starting Overhaul. The U.S. Commodity Futures Trading Commission voted today to define when trades are considered swaps under the Dodd-Frank Act, a step that triggers more than a dozen rules under the 2010 financial-regulation overhaul. The agency’s commissioners voted 4-1 to approve a 600-page measure governing when interest-rate, credit, commodity and other trades involving companies including JPMorgan Chase & Co. (JPM), Barclays Plc (BARC) and Cargill Inc. should face rules to limit risk in the $648 trillion global market. The Securities and Exchange Commission unanimously approved the rule in a private vote on July 6, the agency said in a statement yesterday.
• Camp Says Health-Care Ruling Opens New World For Taxes. The U.S. Supreme Court decision upholding the 2010 health-care law’s individual insurance mandate as a tax opens a “brave new world” for Congress to impose levies, said Representative Dave Camp, chairman of the House Ways and Means Committee. Congress must consider the implications of allowing a tax on “inactivity,” such as the penalty for not having health insurance, Camp, a Michigan Republican, said at a hearing today in Washington. “Under that premise, what is there to stop future Congresses from using this taxing authority to compel a similar ‘it’s for the good of the country’ outcome?” he said. “If one refuses to purchase the goods and services the government thinks are best for the country, the act of not purchasing can now trigger a tax.”
• Applied Materials Falls After Reducing Fiscal 2012 Forecast. Applied Materials Inc. (AMAT) shares fell the most in seven months after the chipmaking-equipment provider sliced its fiscal 2012 sales and profit forecasts amid weakness in Europe, China, and the personal-computer market. For the year that ends Oct. 28, 2012, net sales won’t reach the previous outlook of $9.1 billion to $9.5 billion, the Santa Clara, California-based company said today in statement. Per- share earnings excluding some items will be less than a previous projection of 85 cents a share to 95 cents, the company said.
• Credit Suisse German Clients Homes Raided by Tax Agents, HB Says. Credit Suisse Group AG (CSGN)’s German client’s homes were searched by tax agents probing the possible use of so-called “Bermuda products” involving several billion euros to hide funds from the tax authorities, Handelsblatt reported, without saying where it got the information. Some 7,000 customers, mainly German, that used accounts in Bermuda disguised as tax-free insurance products are affected, the newspaper said, citing unidentified banking officials.

Wall Street Journal:

• Schäuble Warns Against Fund Delay. German Finance Minister Wolfgang Schäuble on Tuesday urged the country's highest court to dismiss a challenge to the constitutionality of the euro-zone's permanent bailout fund and warned of shocks to the European economy if the court were to delay its implementation.
• Videogames Reach for the Cloud. Moving Beyond PlayStation, Sony Looks to Stream Games Over the Web.
• Off the Tax Cliff He Goes. President Obama wants lower rates for GE(GE) and J.P. Morgan(JPM) than for small business. So the 2013 tax cliff is a big enough economic problem that President Obama now wants to postpone it for some taxpayers. But it isn't so big that he's willing to curb his desire to raise taxes on tens of thousands of job-creating businesses.

Fox News:

• Survey: Small Business Optimism Sinks in June. The economy and uncertain political climate are taking a toll on small business owners' optimism, making them hesitant to expand. The National Federation of Independent Business said its index of small business owners' sentiment fell 3 points in June to 91.4 after edging lower in May. The index, compiled from a survey of NFIB members, shows that business owners are concerned about the economy. The number of owners expecting business conditions to improve in six months fell 8 percentage points and the number expecting their sales to rise slid 5 percentage points. Nearly a quarter of those surveyed say their biggest problem is weak sales. Owners said they are scaling back plans to hire and to buy equipment. That's a troubling sign for the U.S. labor market, which is struggling to gain traction. "This month's survey was a real economic downer," said NFIB Chief Economist William Dunkelberg. "The economy has definitely slowed; job growth will be far short of that needed to reduce the unemployment rate." Small businesses also are hesitant to expand because of high political uncertainty, the NFIB said. With the results of the presidential and congressional elections four months away, owners don't know what to expect in terms of taxes and government regulations.

CNBC.com:

• Hypocrisy on LIBOR is Massive: Hedge Fund.
• NY Fed May Have Known About Libor Fixing in 2007. The Federal Reserve Bank of New York may have known as early as August 2007 that the setting of global benchmark interest rates was flawed. The role of the Fed is likely to raise questions about whether it and other authorities took enough action to address concerns they had about the way London Interbank Offered Rates, or Libor, were set, or whether their struggle to keep the banking system afloat through the financial crisis meant the issue took a backseat.
• When Foreclosure Supplies Fall, the Bottom Falls Out of Housing. Growing activity in the spring housing market brought new growth in home prices, but those gains are growing ever more precarious because they are dependent on low-priced, distressed properties.
• FBI Investigates Peregrine Financial. The Federal Bureau of Investigation confirmed it was involved in investigating the circumstances surrounding a $200 million shortfall in customer accounts discovered at a Chicago-based futures broker.

Business Insider:

• You Must Go To Portugal To See How Bad Things Really Are.
• Obama's 'Progressive' Tax Plan Actually Hurts The Little Guy.
• China's Shadow Banking Risks Are Spreading Through The Financial System.
• BofA(BAC): A Hard Landing In China Could Soon Become A 'High Probability Event'.
• France And Germany Are In Two Different Universes.
• The 15 Fastest-Growing Retailers In America.
• CHANOS: China's Credit Situation Is Worse Than Greece And Spain.

Zero Hedge:

• German Constitutional Court Says May Need Up To Three Months To Deliver ESM Verdict.
• Biderman Blasts The Bernanke Put And Questions QE-Hopers.
• Cummins(CMI) Going. From expectations of a 10% jump in 2012 revenues, they have cut the full year to breakeven with 2011 now.
• Poland Pulls The Plug On Imminent Euro Entry. *WEIDMANN SAYS CAN'T SOLVE EURO CRISIS WITH EVER BIGGER FUNDS *WEIDMANN BANK FINANCING (Bailout - kicking the can) COULD WORSEN WITH EURO CRISIS.

NY Post:

• Commercial slump. Ugly truth revealed in Fitch’s renewal numbers.
  

Chicago Tribune:

• China Copper Imports Fall 17.5% on Month in June. China's copper arrivals fell 17.5 percent in June from a month earlier, preliminary customs data showed on Tuesday, resuming a slowdown for much of this year due to falling demand for goods in the world's second-biggest economy. The monthly fall was broadly in line with the expectations of traders and analysts as copper demand in the world's top consumer of the metal has mostly stayed weak this year, even though imports spiked in May. "Credit in China is said to have increased in June. But so far we have not seen demand for copper pick up," a trader at a large producer of refined copper said.

markit:

• Monthly Economic Overview. Global Growth Stalling as Euro Gloom Spreads.

CNN:

• Economists Survey: Most Say Extend Bush Tax Cuts For All.
  

Reuters:

• Einhorn says Fed stimulus counterproductive. David Einhorn, founder and president of hedge fund Greenlight Capital, told CNBC on Tuesday that the U.S. Federal Reserve's economic stimulus program was counterproductive. Einhorn, known for his prescient call against Lehman Brothers, also said he still favored Apple Inc(AAPL). He said low interest rates as a result of the Fed's economic stimulus were "depressing" and kept savers from generating income. "I think it's actually counterproductive," Einhorn said of the stimulus program, adding that it lowers the standard of living and drives up food and oil prices. He said he would suggest a rise in interest rates on U.S. Treasury bonds to "a reasonable level" of 2 to 3 percent. Einhorn said Apple, which he praised at this year's Ira Sohn investing conference, was "the best big-growth company we have." "We're two, three years into the Apple investment, and the way it seems headed it's likely we'll be there for a good while longer," he said. "I think the stock is very very substantially undervalued." He said Amazon.com Inc(AMZN) was "tough on its competitors" because it does not "feel the need to make a profit." "It's very hard to compete against somebody who doesn't feel the need to make a profit," he said, adding that he is not "short" Amazon.
• Spain's savings banks to be forced to sell controlling shares in lenders -document. Spain's savings banks could be eventually forced to sell their controlling shares in commercial lenders and list some of them, according to a memorandum of understanding for an up to 100-billion-euro European aid for the Spanish banking system. "The Spanish authorities will prepare by end-November 2012 legislation clarifying the role of savings banks in their capacity as shareholders of credit institutions with a view to eventually reducing their stakes to non-controlling levels," the document obtained by Reuters said. "Moreover, authorities will provide by end-November 2012 a roadmap for the eventual listing of banks included in the stress test, which have benefited from state aid as part of the restructuring process." The document also says that holders of hybrid capital and subordinated debt in state-rescued banks will have to take a haircut on their investments in order to minimise the cost to taxpayers of the banks restructuring.
• US Gasoline Demand Down Over Last Two Weeks - MasterCard. U.S. motorists pumped fewer gallons of gasoline over the last two weeks as they faced economic uncertainty, MasterCard's SpendingPulse report showed on Tuesday. Demand over the two weeks ended on Friday was 4.1 percent lower than a year earlier, the data showed. Gasoline consumption last week, including the July 4 holiday on Wednesday, was down 3 percent from the previous week, signaling a weak summer driving season. The average price of gasoline fell 15 cents over the two-week period to $3.33 a gallon, 7 percent lower than a year earlier, MasterCard said. The four-week moving average for demand fell for the 68th consecutive week, down 3.9 percent from a year earlier.
• Brazil Stocks Fall More Than 2% on China Data. Brazil's benchmark Bovespa stock index fell more than 2 percent on Tuesday after data showed imports in China, a key purchaser of Brazilian raw materials such as iron ore, petroleum and soy, rose at only half the pace expected in June.

Telegraph:

• IMF chief Christine Lagade 'alarmed' by rising protectionism. IMF chief Christine Lagarde said signs of increased protectionism amid deteriorating global economic conditions were "alarming", and warned such measures affect everyone.
• China exports yet more excess capacity to crippled West.
• Hollande: 75% Tax Rate is 'form of patriotism'. French president says policy to raise taxes for the highest earners is "not a punishment," as Sir Mervyn King warns of the damaging effect of the euro crisis on Britain and businesses around the world.

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.01%

Sector Underperformers:

• 1) Disk Drives -4.7% 2) Semis -2.20% 3) Homebuilders -2.03%

Stocks Falling on Unusual Volume:

• AMD, MMR, DRH, CMI, FST, YELP, CRUS, YOKU, GSK, MRK, GMCR, JCP, BWLD, SAFM, MAKO, QCOR, DEST, HCII, LBTYK, SYNC, HELE, WDFC, LMNX, CVLT, ISRG, TUDO, EZCH, MCRS, OSUR, AKRX, ACIW, INFA, SHAW and BPI
  

Stocks With Unusual Put Option Activity:

• 1) WMB 2) MMR 3) MBI 4) ADSK 5) WDC
  

Stocks With Most Negative News Mentions:

• 1) FST 2) AMD 3) JEF 4) MSFT 5) NFLX
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Mid-Cap Value -.32%

Sector Outperformers:

• 1) Utilities +.33% 2) Gaming +.29% 3) Telecom +.18%

Stocks Rising on Unusual Volume:

• SNAK, CYMI, ASML, CALL, WWW and VFC
  

Stocks With Unusual Call Option Activity:

• 1) MAKO 2) OCZ 3) NIHD 4) KFT 5) BPAX
  

Stocks With Most Positive News Mentions:

• 1) KLAC 2) LMT 3) SWN 4) AMD 5) BA
  

Charts:

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

Tuesday Watch

Evening Headlines
Bloomberg:

• EU to Speed Spanish Bank Aid. European governments will jump-start as much as 100 billion euros ($123 billion) in loans to shore up Spain’s banks and may move the costs off the Spanish government’s balance sheet in an effort to shield the euro region’s fourth-largest economy from the fiscal crisis. Thirty billion euros will be lent by the end of July with the goal of eventually using the euro-area bailout fund to recapitalize banks directly instead of saddling the Spanish government with the debts, Luxembourg Prime Minister Jean-Claude Juncker said. The initial cash will “be mobilized as a contingency in case of urgent needs in the Spanish banking sector,” Juncker told reporters early today in Brussels after chairing a nine- hour meeting of euro-region finance ministers. The program “will succeed in addressing the remaining weakness in the Spanish banking sector.”
• Merkel Winning Euro-Bond Clash as German Bunds Gain: Euro Credit. Investors are declaring German Chancellor Angela Merkel the winner in her battle against euro-region bonds as a way of easing the debt crisis. Since Merkel conceded to demands of relief for Spain and Italy at a EU summit on June 29 while opposing the sale of the bonds, the debt of the euro area's remaining AAA nations have outperformed U.S. Treasuries. Yields on 19-year debt from Germany, Finland and the Netherlands, whose credit-worthiness may be diluted by common borrowing with the likes of Spain, fell by an average 34 basis points since the EU meeting. "When you look at bund yields, the current levels are a strong signal that the market isn't really buying into this euro bond story otherwise we would have seen a massive pullback in yields across the AAA countries," said Michael Leister, a rates strategist at DZ Bank AG in Frankfurt. "Demand for safety and core products is still very strong."
  
• Luxembourg’s Mersch Appointed to ECB Six-Member Executive Board. Luxembourg’s Yves Mersch, the euro region’s longest-serving central banker, was named to the European Central Bank’s Executive Board in a victory for German- style monetary rigor. Mersch, 62, was appointed by euro-area finance ministers at a meeting in Brussels yesterday, Guy Schuller, a spokesman for Luxembourg Prime Minister Jean-Claude Juncker, told Bloomberg News. He will move into the slot vacated by Spain’s Jose Manuel Gonzalez-Paramo, stripping Spain of its claim to a permanent seat on the Frankfurt-based central bank’s six-member Executive Board. Juncker chairs meetings of euro finance chiefs. After five months of wrangling, Mersch defeated a Spanish nominee, Antonio Sainz de Vicuna, head of legal services at the ECB, as well as Mitja Gaspari, former head of Slovenia’s central bank. As Luxembourg’s representative on the ECB’s wider policy- setting Governing Council, Mersch has earned a reputation as an inflation hawk. He is the only central banker in office continuously since the euro debuted in 1999. “Mersch will do his bit to reinforce the reputation of the ECB as an inflation fighter,” said Christian Schulz, senior economist at Berenberg Bank in London. “That could make markets nervous at times.”
• Tucker’s Libor Testimony May Stoke Concerns About BOE Powers. Bank of England Deputy Governor Paul Tucker’s account of his involvement in the Libor scandal stoked new criticism of the bank’s oversight failures as he struggles to stay in contention for its top job next year. Tucker told lawmakers on Parliament’s Treasury Committee yesterday that he didn’t follow up concerns about Libor rates in 2007 because it looked at the time like a “dysfunctional” market, not a “dishonest” one. Barclays Plc (BARC) was fined a record amount last month for manipulating Libor from as early as 2005. “My concern is that the BOE clearly couldn’t see the wood for the trees,” committee member Andrew Leadsom said in an interview after Tucker’s testimony in London. “The amount of talk there was about Libor, it’s slightly incredible that a central banker didn’t see it as something to investigate.”
• China’s Import Growth Misses Estimates for June. China’s imports rose less than anticipated in June while export growth slowed, adding pressure on the government to support expansion after inflation data yesterday showed demand softening. Inbound shipments increased 6.3 percent from a year earlier, the customs bureau said in a statement today in Beijing, compared with the 11 percent median estimate in a Bloomberg News survey of 32 economists. Overseas sales gained 11.3 percent. The trade surplus rose to a three-year high of $31.7 billion. The increase in exports compared with a 15.3 percent gain in May.
• Most Chinese Stocks Fall After Trade Report; Poly Real Declines. Most Chinese stocks fell after a government report showed imports rose less than anticipated in June while export growth slowed. Poly Real Estate Group Co. (600048), the nation’s second-biggest developer, declined 3.1 percent after forecasting lower first- half profits. China Southern Airlines Co. led gains for carriers after the nation’s economic planning agency said the government will lower fuel prices tomorrow. The Shanghai Composite Index (SHCOMP) slipped 0.3 percent to 2,165.40 at 10:18 a.m. local time, with seven stocks falling for every two gaining. “The macro-economy figures won’t surprise the market and will continue to be ugly due to weak demand at home and abroad,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Worries about the strength of the economy will weigh on the market and continue to drive stocks down.”
• Oil Declines From Two-Day High as Norway Orders End to Strike. Oil dropped from the highest close in two days after Norway ended a strike by energy workers that had threatened to halt production by western Europe’s largest crude exporter. Futures slipped as much as 1.1 percent in New York after the Norwegian government ordered compulsory arbitration in the dispute, preventing a lockout of platform workers that was scheduled to start at midnight yesterday. Norway pumped 1.63 million barrels of oil a day in May, or about 1.8 percent of global consumption, data from the Norwegian Petroleum Directorate show. “Traders are probably taking the premium out of oil now that they think the strike will be settled,” said David Lennox, an analyst at Fat Prophets in Sydney. “It was looking like the strike was going to deteriorate further. That risk premium is certainly coming out of crude.”
• Paulson Funds Fell in June as Rally Undercut Euro Wager. John Paulson, the billionaire hedge- fund manager seeking to reverse record losses in 2011, posted declines in all his funds last month as rising stock markets undermined his wager that Europe’s sovereign debt crisis will worsen. The losses were led by a 7.9 percent drop in his Advantage Plus Fund, according to an update to investors obtained by Bloomberg News. That leaves the fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, down 16 percent this year.
• RIM(RIMM) Customers Working on Contingency Plans. Research In Motion Ltd. (RIM) customers from GoDaddy Group Inc. to asset manager Thames River Capital UK Ltd. are preparing for the worst: the loss of the BlackBerry service their employees depend on to communicate. RIM’s stock has slumped more than 70 percent in the past year, and tumbled 19 percent on June 29 after the company posted a quarterly loss and delayed the BlackBerry 10 operating system, increasing the pressure on RIM to find a buyer or sell assets. While RIM has built infrastructure to ensure continued service, some customers are devising backup plans as RIM prepares to face shareholders at its annual meeting tomorrow.
• Komatsu Has No Plans to Buy Joy Global(JOYG) After Study, CEO Says. Komatsu Ltd. (6301), the world’s second- biggest maker of dump trucks, has no plans to bid for Joy Global Inc. (JOY) after studying the U.S. company as there are few synergies to aid its foray into underground mining equipment.
• Shipping Rally Ending as China Hoards Record Coal Heaps: Freight. Record coal stocks at power plants in China, the biggest consumer of the fuel, are threatening to reverse the rally in rates for commodity carriers and diminish returns for ship owners to the lowest in more than a decade. The utilities have 91 million metric tons in reserve and stockpiles at the largest ports come to more than 90 percent of capacity, according to the China Coal Transport & Distribution Association and SteelHome, a Shanghai-based research company. Panamax rates will drop 48 percent to an average of $5,000 a day this quarter, said Steve Rodley, managing director at Global Maritime Investments Ltd., which operates 64 ships. He correctly predicted a slump in earnings for larger Capesizes in March.

Wall Street Journal:

• Mayor Cuts Workers' Pay to Minimum Wage. Unions representing city workers in Scranton, Pa., plan to ask a county judge to hold the mayor in contempt of court after he cut the pay of almost 400 municipal employees—including himself—to the state's minimum wage, saying the city can't pay the full salaries.
• Political Spending by Unions Far Exceeds Direct Donations. Organized labor spends about four times as much on politics and lobbying as generally thought, according to a Wall Street Journal analysis, a finding that shines a light on an aspect of labor's political activity that has often been overlooked. Previous estimates have focused on labor unions' filings with federal election officials, which chronicle contributions made directly to federal candidates and union spending in support of candidates for Congress and the White House.
• Obama Intensifies Tax Fight. Obama is launching a push to extend tax cuts for the middle class, as he seeks to shift the election-year economic debate away from the dismal jobs market.
• Big Dealers Sweat as Swaps Face Reckoning. In a potential setback for large financial firms, regulators are expected to vote Tuesday on a rule requiring banks with more than $10 billion in assets to trade swaps through a central clearinghouse, according to a person familiar with the rule. The vote will be accompanied by a separate ruling on the precise definition of swaps, the financial contracts at the heart of the 2008 credit crisis. That definition will set in motion a series of other rules affecting trillions of dollars of financial contracts.
• Alcoa(AA) Pinched by Low Prices. Alcoa Inc. sank to a slight loss in the second quarter as aluminum prices fell to their lowest levels in more than two years. The Pittsburgh-based concern, viewed as a bellwether because it is typically the first major U.S. company to report quarterly results, kicked off what is expected to be a painful earnings season on Wall Street, as other companies feel the effects of global economic weakness. Already, at least 42 companies have issued profit warnings for the latest quarter.
• What's Wrong With the Federal Reserve? Business investment is held back by uncertainty about taxes and regulation. Printing dollars won't help.

MarketWatch:

• Australia business confidence weakens. Aggressive interest rate cuts by the Reserve Bank of Australia in May and June have so far failed to spark much of recovery for business, with confidence weaker in June and overall trading conditions only marginally better. National Australia Bank's business confidence index fell to -3 in June from -2 in May, while its business conditions index rose to -1 from -4 in the same period.

Business Insider:

• Police Obtain A Ridiculous Amount Of Information On Innocent Americans.

Zero Hedge:

• The Ultimate Krugman Take-Down.
• Earnings Season Preview: +9.7% 2012 EPS Growth Still Too High.
• Futures Brokerage PFG Best Freezes Accounts Following Discovery Of Accounting Irregularity.
• PFG Is Now MFG(lobal) Part 2 As $220 Million In Segregated Client Money Has Just Vaporized.

CNBC:

• As Foreclosures Ramp Up, New Roadblocks Ahead.

NY Times:

• Consumer Bureau Proposes New Mortgage Disclosure Rules. As part of a continuing overhaul of the home mortgage market, the Consumer Financial Protection Bureau on Monday issued proposed rules to bolster fairness and clarity in residential lending, including requiring a good-faith estimate of costs for homebuyers. The proposed rules have two central elements — the loan estimate and the closing disclosure — that would provide would-be homebuyers with a simple accounting of likely payments and fees to prevent costly surprises.

Washington Examiner:

• Obama has outraised Romney in the Hamptons by 38.6%. You’ll hear plenty this week about Mitt Romney raising money in the Hamptons, and so I thought it was worth putting things in perspective. According to data from the Center for Responsive Politics, Romney has reported $119,550 from the 13 zip codes that count as The Hamptons according to Wikipedia. Obama has raised $165,867.

Washington Post:

• Obama's Record on Outsourcing Jobs Draws Criticism From the Left. While White House officials say they have been waiting on Congress to act, Obama’s critics, primarily on the political left, say he has repeatedly failed in other ways to protect American jobs from being moved overseas. They point to a range of actions they say he should have taken: confronting China, reining in unfettered trade and reworking a U.S. visa program that critics say ends up sending high-tech jobs abroad.

CNN:

• Closer to a bailout? FHA's mortgage delinquencies soar. Increasingly, FHA-insured loans are falling into foreclosure or serious delinquency. And taxpayers could ultimately be on the hook for FHA's growing number of troubled mortgages. The agency's finances are already on shaky ground, and additional losses from loans going sour could prompt the need for a federal bailout, experts said. "We can't escape this one," said Joseph Gyourko, a real estate professor at the University of Pennsylvania's Wharton School. "This is an arm of the U.S. government."

Boston Herald:

• Texas Rejects 2 Pillars of Federal Health Care Overhaul. Texas turned down an expansion of Medicaid coverage and said it will not create a state-run health care insurance exchange, joining the chorus of states that are rejecting two key parts of the Obama administration’s health care overhaul.

Reuters:

• Intel(INTC) bankrolls next-gen chipmaking, buys into ASML for $4.1 billion. Intel Corp will spend more than $4 billion to buy up to 15 percent of ASML and bankroll the Dutch company's research into costly next-generation chipmaking technology, a major vote of confidence in the European firm that sent its U.S. shares soaring 6 percent.
• AMD(AMD) warns of 11 pct decline in revenue; shares slide. Chipmaker Advanced Micro Devices warned on Monday that its second-quarter revenue would be down about 11 percent from the prior quarter due to softer-than-expected sales in China and Europe and a weak consumer-buying environment, knocking its shares down 6 percent. The company had previously forecast second-quarter revenue would increase 3 percent from the first quarter, plus or minus 3 percentage points.
• Patriot Coal(PCX) files for bankruptcy protection. Patriot Coal Corp filed for bankruptcy on Monday, the first U.S. coal producer to seek court protection since prices began to plummet as electricity producers turned to cheaper natural gas. The company and nearly 100 affiliates were part of the Chapter 11 filing in the U.S. bankruptcy court in Manhattan. Patriot said it had $3.57 billion of assets and $3.07 billion of debts, and has arranged for $802 million of financing to help it continue mining and shipments during the reorganization. Coal producers' shares have plummeted as natural gas prices tumbled to the lowest in a decade this year, and the U.S. Environmental Protection Agency proposed new rules that would make it nearly impossible to build coal-fired power plants.
• WD-40(WDFC) 3rd-qtr results miss estimates. Cleaning products maker WD-40 Company's quarterly results missed Wall Street estimates, hurt by lower sales in its American segment. The company also said it expects its full-year results to be at the lower end of its outlook owing to continued uncertainty in Europe and oil price volatility. WD-40 forecast full-year earnings of $2.33 to $2.45 per share on net sales of $353.0 million to $370.0 million. "We expect Europe to come in flat at best for the full year as compared to the prior fiscal year," the company said. The company's American segment, which contributes about 50 percent of total sales, reported a 5 percent drop.
• US consumer watchdog to ban some fees for high-cost mortgages. The U.S. consumer finance watchdog proposed banning some fees and creating other new protections for people who take out high-cost mortgages. The Consumer Financial Protection Bureau said on Monday its new rule would attack abusive practices surrounding mortgages with high interest rates or high fees by blocking "balloon payments," or lump sum amounts usually due at the end of a loan, capping fees lenders can charge for late payments, and banning fees to modify loans.

Telegraph:

• ECB pledges action as southern Europe buckles. The European Central Bank has vowed to do whatever it takes to hold the euro together after the North-South gap in borrowing costs reached fresh extremes, pushing the two halves of monetary union closer to breaking point.

Economic Information Daily:

• Non-performing loans of financial institutions in the eastern Chinese province of Zhejiang are rising, citing a person from a state-owned bank.

21st Century Business Herald:

• China's Power Use Growth Slowed to About 4% in June. Growth of electricity use in China slowed to about 4% in June, from about 5% in May, citing preliminary data from local energy agencies.
• China Housing Ministry to Increase Local Accountability. China's housing ministry plans to hold local governments more accountable for easing property market curbs, citing a person close to the ministry. The government should tighten home purchase restrictions and ask local authorities to implement curbs more strictly, citing Yang Hongxu, deputy head of E-House China R&D Institute.
  

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.75% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 173.50 +1.5 basis points.
  
• Asia Pacific Sovereign CDS Index 139.75 +.75 basis piont.
  
• FTSE-100 futures +.06%.
  
• S&P 500 futures -.42%.
  
• NASDAQ 100 futures -.35%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (HITK)/.77
• (WWW)/.44
• (SHAW)/.58

Economic Releases
7:30 am EST

• The NFIB Small Business Optimism Index for June is estimated to fall to 93.3 versus 94.4 in May.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The EU Finance Ministers Meeting, German High Court ruling on ESM Agreement, Fed's Bullard speaking, weekly retail sales reports, IBD/TIPP Economic Optimism Index for July, JOLTs Job Openings report for May, 3Y T-Note auction, China Trade Balance and the (GIS) Investor Meeting could also impact trading today.
  

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