Today's Headlines

Bloomberg:

• Preusser Says Italy Was Loser at Euro Summit, Boersen Reports. Ralf Preusser, who heads European rates research at Bank of America Merrill Lynch, said Italy was “the big loser” at the euro summit last month, Boersen-Zeitung reported, citing an interview. Italy’s main difficulty is its debt burden, at 120 percent of gross domestic product, not its banking system, as in Spain, the newspaper cited Preusser as saying. He said the European Union’s decision on a banking union therefore benefits Italy little and the country’s goal of joint euro-area bonds didn’t materialize, Boersen reported.
• German Referendum Needed to Fix Euro, Bofinger Tell Standard. Peter Bofinger, an economic adviser to German Chancellor Angela Merkel, said Germany will probably need a referendum before politicians fix the structural defects of Europe’s currency, Vienna’s Der Standard newspaper reported, citing an interview. While the German judicial system weighs the legality of the European Stability Mechanism “the best way in Germany would be to hold a referendum,” he told the newspaper. “The problem we have now is not a problem of constitutional politics but that, for two years now, small-scale solutions have been tried to solve a systemic crisis,” Bofinger said.
• Italian Investors Feud Over Biggest Builder Impregilo. The fate of Impregilo SpA (IPG), Italy’s biggest construction contractor with projects from Brazilian highways to the Panama Canal, was postponed until July 17 after the company’s two biggest investors clashed at a shareholder meeting today.
• Peugeot To Shut Plant To Raise Job Cuts To 14,000 Posts. PSA Peugeot Citroen (UG), Europe’s second-biggest carmaker, will shut the first auto factory in France in 20 years and reduce its workforce by 6.7 percent in an effort to stem widening operating losses. The automaker will cut a total of 14,000 jobs, with 8,000 additional positions being eliminated on top of the 6,000 posts already announced last year, Chief Executive Officer Philippe Varin said today at a press conference in Paris.
• ECB Says Overnight Deposits Fall to Lowest in Seven Months. The European Central Bank said overnight deposits from financial institutions dropped by more than half to the lowest level in almost seven months after policy makers stopped paying interest for the funds. Banks in the 17-nation euro region parked 324.9 billion euros ($397.2 billion) at the ECB yesterday, down from 808.5 billion euros the previous day, the Frankfurt-based institution said. That’s the least since Dec. 21.
• Sany Heavy Cut Excavator Sales Goal on Weak China Demand. Sany Heavy Industry Co. (600031), China’s biggest maker of excavators, lowered annual unit-sales forecast as slowing economic growth and government’s curbs on property market sap demand. Excavator sales may increase 10 percent this year, slower than a previous target of 40 percent, Vice Chairman Xiang Wenbo said in a July 11 interview in Changsha, Hunan province, where the company is based. Sany will still outperform the industry that may see a contraction in demand, he said. “At the beginning of this year, we estimated the whole market to grow slightly. Now it seems we were too optimistic,” Xiang said. Nationwide excavator sales plunged about 38 percent in the first six months, according to data from consultancy China Construction Machinery Business Online. Komatsu Ltd. (6301)’s sales of excavators in the country fell more than half in the quarter ended in June from a year earlier, its Chief Executive Officer Kunio Noji said last week. Domestic and overseas suppliers of mining equipment may have accumulated inventories of more than six months, he said.
• Americans in Poll Say Obama’s Health-Care Law Amounts to Tax. A majority of U.S. voters consider Barack Obama’s health-care law to be a tax increase, leaving the president to defend an election-year vow not to raise levies on the middle class, according to a Quinnipiac University poll. By a margin of 55 percent to 36 percent, respondents said the Patient Protection and Affordable Care Act amounts to a tax increase. Participants were less sure of what they thought about the future of the law, saying 48 percent to 45 percent that the U.S. Supreme Court was right to uphold it, while also saying 49 percent to 43 percent that Congress should repeal it. Voters’ view of the law as a tax might pose a problem for Obama as he takes on former Massachusetts Governor Mitt Romney in the November presidential election, said Peter Brown, assistant director of the Hamden, Connecticut-based Quinnipiac University Polling Institute. “Obama has worked mightily to avoid the ‘T’ word,” Brown said in an e-mailed statement accompanying the poll, conducted July 1-8. The main question is whether Republicans can convince voters that the health-care law “breaks his promise not to raise taxes on those who make less than $250,000,” Brown said.
• An "overall stagnating economic recovery" is likely to slow the US housing market during the second half of the year, Corelogic Chief Economist Market Fleming said.
• Consumer Comfort In U.S. Stagnates Amid Unemployment. Consumer confidence stagnated last week as scant improvement in the labor market left Americans more discouraged about the economy. The Bloomberg Consumer Comfort Index held at minus 37.5 in the week ended July 8. Some 86 percent of those surveyed said the economy was in bad shape, 21 percentage points higher than the average since 1985. “Consumers remain generally downbeat about the economy and expectations for the future,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Given slower job growth and the recent stabilization of oil and gasoline prices near current levels, there is little impetus to support an improvement in overall sentiment in the near term.”
• Jobless Claims in U.S. Drop on Fewer Auto Shutdowns. Fewer Americans than forecast filed first-time claims for unemployment insurance payments last week, reflecting the volatility of applications during the annual auto-plant retooling period. Applications for jobless benefits decreased by 26,000 in the week ended July 7 to 350,000, the fewest since March 2008, Labor Department figures showed today. Economists forecast 372,000 claims, according to the median estimate in a Bloomberg News survey. Last week’s distortion is likely to unwind slowly over coming weeks, a Labor Department spokesman said as the data was released to the press.
• JPMorgan(JPM) Puts Cheapest in Two Years After Shares Plunge: Options. Bearish options on JPMorgan are the cheapest in two years on speculation the shares already reflect the bank's multibillion-dollar trading loss. Puts protecting against a 10% drop in the NY-based lender cost 1.15 times more than calls betting on a 10% gain, according to data on 30-day options compiled by Bloomberg. The price relationship known as skew is at the lowest level since January 2010.
• Bank of America(BAC) Cuts Earnings Forecast for S&P 500 in 2012, 2013. Bank of America Corp. cut its earnings estimates for the Standard & Poor’s 500 Index for 2012 and 2013, citing concern that lower commodity prices and slower global growth will weigh on corporate profits. Strategists for the Charlotte, North Carolina-based bank reduced earnings forecasts for S&P 500 (SPX) companies by 1.4 percent for this year and next year. Strategists Dan Suzuki, Savita Subramanian and Jill Carey now project income of $102 per share for 2012 and $109 for 2013, implying growth of 4 percent and 7 percent, respectively, according to a note to clients today. “Although the bottom-up consensus forecasts have continued to drift lower since last summer, they still appear too optimistic,” the strategists wrote in a note today. “The recent weakness in earnings revision and guidance trends may be a sign that consensus expectations are in the early stages of being reset lower.”
• Wells Fargo(WFC) Said to Settle Loan Probe for $125 Million. Wells Fargo & Co. (WFC), the largest U.S. mortgage lender, will pay $125 million to settle federal claims it violated fair-lending laws, according to a person with direct knowledge of the agreement. The case relates to independent mortgage brokers who worked with the bank, said a person with knowledge of the inquiry who requested anonymity because the accord hasn’t been made public. The deal may be announced as early as today.

Wall Street Journal:

• Cartier CEO Sees Slowdown in Chinese Demand. Cartier, the luxury watch and jewelry brand owned by Cia. Financière Richemont SA, is seeing slowing demand for its high-end watches in China, the driver behind the recent boom in luxury watches, its chief executive said Wednesday. "After a phenomenal year last year, there's been a bit of a slowdown in mainland China," Cartier CEO Bernard Fornas said in an interview at the company's factory at La Chaux-De-Fonds.
• Chinese Luxury Appetite Wanes. Chow Tai Fook, Burberry See Slower Growth as Affluent Buy Fewer Watches, Handbags. China's voracious appetite for luxury goods is starting to wane as wealthy buyers succumb to nervousness about the country's slowing economy and the government cracks down on corruption that often takes the form of pricey gifts. Sales of everything from gold watches to leather handbags are declining, although they are still robust by global standards. Nevertheless, the downturn is a blow to the world's luxury-brand companies, who once considered the Chinese market to be immune to the economic malaise afflicting their business in Europe and the U.S.
• India Considers 21% Import Tax on Some Power Gear. India is considering a 21% import tax on power generating equipment for large projects to protect local manufacturers from cheaper equipment from China, two senior government officials said Thursday.
  

Dow Jones:

• ECB Knot: Nothing to Stop ECB Cutting Rates Below 0.75% - Report.

MarketWatch:

• Defensive stocks trade near 52-week highs. Investors took shelter in defensive stock sectors Thursday, boosting some stocks near or past their 52-week highs, as the broader market risked heading toward a sixth day of losses.
• China Slams the Brakes on GM's(GM) Accelerating Car Sales. New government rules could put a damper on the General's success.

CNBC.com:

• Home Prices May Hit Roadblock Soon. The recent growth in U.S. home prices may hit a roadblock in the coming months, thanks to a new supply of distressed properties hitting the market. Banks are moving more delinquent loans through the pipeline at a faster pace, according to a new report released Thursday by foreclosure sale website RealtyTrac. The number of homes starting the foreclosure process for the first time grew for the second month in a row on an annual basis.
• Investors Warn EU Hedge Fund Rules Could Hit Other Funds. Leading fund management firms have warned the European Commission's head of financial regulation that new rules aimed at tightening practice at hedge funds could damage the rest of the industry's ability to operate effectively. Twenty investors, including Allianz, BlackRock, Fidelity and Schroders, have written to Michel Barnier, the Commissioner in charge of financial regulation, stating proposed reforms risk hampering Europe's single market in investment funds.
• Debate Rages Over Benefits of Fiscal Austerity. The Spanish government’s new package of tax increases and spending cuts throws a spotlight on an increasingly contentious debate about whether fiscal austerity in Europe is further damaging the patient’s health rather than leading to recovery.
• Poll: The Rich Deserve Their Wealth. A new survey from GlobeScan shows that 58 percent of Americans agree with the statement that “the rich deserve their wealth.” That’s actually higher than it was in 2008, before the economic crisis, Wall Street bailouts and the Occupy movement. Americans remain among the most wealth-friendly in the world, ranking third when it comes to their votes on the deserving rich (only Australia and Canada are higher). An earlier Gallup poll showed that the number of Americans who want inequality to be “fixed” has declined since 1998. In 1998, 52 percent of Americans wanted the gap between rich and poor to be fixed. Today 48 percent say so.

Business Insider:

• Here's The Chart That Will Get Obama Fired...
• UH-OH! Warren Buffett Seems More Bearish Than Usual.
• More Cracks Appear In The Chinese Banking System.

Zero Hedge:

• Euro Strength? A Mystery No More.
• Europe's Equities Catch-Down To Credit.
• Five Things I’ve Learned On The Ground In Portugal.
• NYSE Short Interest Plunges By Most Since January, As Equity Outflows Hit One Month High. (graphs)
• US June Deficit: $60 Billion, $17 Billion Worse Than Prior Year. (graph)
• Here Come The Libor Liability Estimates.
  

New York Times:

• Orders at Air Show Decline for Top Aircraft Companies. Boeing and Airbus announced a final flurry of orders at a major aerospace trade show here Thursday, but the world’s two biggest aircraft manufacturers are heading home with around $54 billion in deals — just over half what they drew last year.
  

Reuters:

• Copper slips ahead of China GDP data, growth concerns.
• U.S. expands sanctions on Iran, blacklists firms and persons. The United States ratcheted up its sanctions against Iran on Thursday, blacklisting a number of firms and individuals for contributing to what it says is an effort to acquire nuclear weapons. The U.S. Treasury said it was also identifying a number of "front companies and banks" linked to nuclear proliferation, an attempt to make it harder to evade existing sanctions.

Telegraph:

• Italy statisticians 'too squeezed to track recession'. Italy's official statisticians are threatening to down calculators and stop reporting on its stricken economy – as they fall victim to the recession they are paid to track.

Xinhua:

• Rising medical costs caused by smoking and Chin's aging population may "cripple" the nation's social-security system in two decades, citing Liang Xiaofeng, deputy director of the Chinese Center for Disease Control and Prevention. Tobacco-related deaths in China have been increasing over the past decade and will peak between 2025 and 2030. China will overtake Japan as the world's most-aged society at the same time, the report said.

Securities Daily:

• China will launch its first trading platform for rare earths on August 8, citing Zhang Rihui, the board secretary of Baotou Steel Rare-Earth Hi-Tech Co., one of the creators of the platform.

Bear Radar

Style Underperformer:

• Small-Cap Value -1.22%

Sector Underperformers:

• 1) Computer Hardware -2.01% 2) I-Banking -1.84% 3) Steel -1.83%

Stocks Falling on Unusual Volume:

• INFY, TSU, TI, IVN, BSFT, GNC, AVP, GSK, IMGN, MAPP, ADTN, HCII, AEIS, ADES, EZCH, ASML, RUSHA, NILE, ASPS, TRAK, VRSN, WAFD, DISCK, FMCN, MCRS, HTHT, SYNT, IRF, KR, POST, PGR, HOT, MAR and SWY
  

Stocks With Unusual Put Option Activity:

• 1) DISH 2) UUP 3) SNE 4) MAR 5) RVBD
  

Stocks With Most Negative News Mentions:

• 1) FDX 2) AGU 3) GS 4) F 5) BAC
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value -1.01%

Sector Outperformers:

• 1) Homebuilders +.46% 2) Restaurants +.09% 3) Drugs -.13%

Stocks Rising on Unusual Volume:

• TXI, PG, SSH, AFFY, FAST, VHC, MBI, PSSI, AZO and MRK
  

Stocks With Unusual Call Option Activity:

• 1) SVU 2) GDXJ 3) FAST 4) GCI 5) CTL
  

Stocks With Most Positive News Mentions:

• 1) CVX 2) LMT 3) WAG 4) PGR 5) FAST
  

Charts:

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

Thursday Watch

Evening Headlines
Bloomberg:

• EU Trials New Crisis Model in Spain Trading Budget Cuts for Time. European leaders are testing the latest version of their debt crisis strategy in Spain, granting Prime Minister Mariano Rajoy more time to reduce the budget deficit in exchange for deeper spending cuts. Rajoy yesterday announced 65 billion euros ($80 billion) of austerity measures in a renewed effort to meet European Union budget targets after he was granted a one-year extension on the deadline to meet EU limits. Europe’s concession to recession-wracked Spain has raised expectations in Ireland and Portugal that they can win more time to rein in their budget deficits after Germany’s hardball tactics in Greece spurred a rebellion against bailout politics there.
• Germany May Turn to Labor Programs as Crisis Worsens, Union Says. Germany’s industrial workforce is bracing for a global slowdown by mulling some measures last used during the financial crisis to save jobs, said Berthold Huber, chairman of Europe’s largest manufacturing union. “The experience from 2008 has taught us that an economy can slump within the shortest period of time and as a union, we need to be prepared for that,” Huber, chairman of IG Metall, said in an interview in Frankfurt on July 4. “For such an event, we need crisis measures. Germany won’t be able to fully decouple from an economic downward trend in Europe.”
• Spain Targets First Cash From Renewables With Energy Tax. Mariano Rajoy’s pledge to tax utilities and power consumers signals Spain is planning to raise cash from renewable energy for the first time, a blow to an industry already struggling with subsidy cuts. The prime minister told Parliament yesterday he’d impose a levy to spread the expense of closing a gap between costs and revenue in the country’s electricity business, which has racked up debts of 25 billion euros ($31 billion). Details may be announced as early as tomorrow after the weekly Cabinet meeting.
• Singapore GDP Growth Probably Slowed as Europe Crisis Hurt Asia. Singapore’s economic growth probably slowed last quarter as the European debt crisis constrained exports while elevated inflation prompted the central bank to tighten policy. Gross domestic product rose an annualized 1 percent in the three months through June from the previous quarter, less than the 10 percent pace in the period through March, according to the median of 14 estimates in a Bloomberg News survey. The report is due tomorrow.
• Bank of Korea Unexpectedly Cuts Benchmark Interest Rate. The Bank of Korea unexpectedly cut borrowing costs for the first time in more than three years, joining an international push for monetary stimulus as Europe’s debt crisis threatens to undermine global growth. Governor Kim Choong Soo and his board lowered the benchmark seven-day repurchase rate to 3 percent, the first cut since February 2009, the central bank said in a statement in Seoul today. Two of 16 economists surveyed by Bloomberg News predicted the move while the rest forecast no change. “What we’re seeing is a global policy response from Europe to China and now Korea to stave off a deep recession,” said Kong Dong Rak, a fixed-income analyst at Taurus Investment & Securities Co. in Seoul. “Bond market players are shocked by the sudden reversal of the monetary policy stance.”
• Australian Employers Reduce Payrolls in June, Jobless Rate Rises. Australian employers unexpectedly cut payrolls in June, the first reduction in four months, and the unemployment rate rose as evidence mounts that Europe’s turmoil is discouraging hiring. The local currency fell. The number of people employed fell by 27,000, almost erasing a revised 27,800 gain in May, the statistics bureau said in Sydney today. That compares with the median estimate for no change in employment in a Bloomberg News survey of 25 economists. The jobless rate rose for a second month, to 5.2 percent from 5.1 percent.
• China’s Economy Needs Spending Power, Not Steel Factories. China has produced a tattoo beat of disquieting news since March, when Premier Wen Jiabao lowered the government’s growth target for 2012 to 7.5 percent, down from the 8 percent target in place since 2005. Real estate prices, trade growth, construction and luxury watch sales are all declining. The government has issued stern edicts for officials to cut back on flashy cars, banquets and other perks.
• Infosys Net Income Misses Estimates as Clients Curb Spending. Infosys Ltd. (INFO), India’s second-largest software exporter, reported first-quarter profit that missed analysts’ estimates as customers cut information-technology spending amid economic uncertainty. Net income rose to 22.9 billion rupees ($412 million), or 40.06 rupees a share, in the three months ended in June, from 17.2 billion rupees, or 30.14 rupees, a year earlier, Bangalore- based Infosys said today. That compares with the 24.2 billion rupee median of 31 analyst estimates compiled by Bloomberg.
• Syria Faces UN Sanctions Push as Ally Russia Resists. Syria would face United Nations sanctions under a Security Council resolution drafted by Western powers seeking to overcome Russian resistance to measures that would hasten the fall of President Bashar al-Assad. The move came after Kofi Annan, the UN’s special envoy to Syria, yesterday asked the UN’s decision-making body via video link from Geneva to “send a message to all that there will be consequences for noncompliance” with his peace efforts.
• Telefonica(TEF) Latin America Luster Fades on Brazil Slowdown. Telefonica SA (TEF)’s days of guaranteed earnings expansion in Latin America may be over, leaving Chief Executive Officer Cesar Alierta with few growth markets as he tries to sell a stake in the assets to repay debt. Revenue growth from the 15 countries including Brazil and Peru is poised to slow to 2.7 percent in 2013 from 12 percent last year, according to an estimate by Sanford C. Bernstein. Telefonica Brasil SA, which made almost half of Telefonica’s 29 billion euros ($35.5 billion) in Latin American sales last year, may see its 2012 profit margins drop to the lowest level since at least 2004, Banco de Sabadell analysts predict.
• Peregrine Customers’ Claims Priced at 25 Cents on Dollar. Customers’ claims on Peregrine Financial Group Inc., whose founder “misappropriated” more than $200 million of their money according to regulators, may fetch less than a quarter of their value in the wake of the firm’s bankruptcy, a trader said. Quotes of 22 cents on the dollar to 25 cents were given today to half a dozen Peregrine customers who called CRT Capital Group LLC, which buys and sells distressed debt, said Joseph Sarachek, managing director of claims trading.

Wall Street Journal:

• Egyptian Leader's Visit Sends Signal to Saudis. Egypt's Mohammed Morsi made the first foreign visit of his presidency to Saudi Arabia in what political observers called an apparent effort to offer assurances about his aims as the most visible symbol of the rise of political Islam in the region. The visit by Mr. Morsi, who won the presidency as the candidate of Egypt's Muslim Brotherhood, takes him to a security-minded monarchy wary that homegrown Islamist movements will take encouragement from the political rise of Islamist blocs in countries transformed by Arab Spring uprisings.
• President Presses Democrats to Support Tax-Hike Plan. President Barack Obama used a White House meeting Wednesday to rally Democratic leaders behind his proposal to raise taxes on families with adjusted gross income above $250,000, an issue that people in both parties see as working to their advantage. Still, a coming Senate vote puts political pressure on vulnerable Democrats who have been wary about the proposal's reach.
• Europe's Woes Slow Renault. Renault SA lowered its sales-growth target for 2012 as the sputtering European economy offset growth elsewhere. Renault said it sold 1.33 million cars and light commercial vehicles in the first half of the year, down 3.3% from the same period last year. Sales in Europe fell 15% as the economic turmoil sapped demand, even as sales outside the region rose 14%. As a result, Renault said it no longer expects 3% to 4% growth in automobile sales in 2012, and may not be able to match its 2011 sales.
• GOP House Moves to Repeal Health Law in Symbolic Vote. The House voted on Wednesday to repeal President Barack Obama's health-care law, a symbolic act in the wake of the Supreme Court's recent ruling upholding the legislation. The 244-185 vote was largely along party lines, with five Democrats joining all Republicans in voting to undo Mr. Obama's much-debated program.
• Italy Faces 'War' in Economic Revamp, Monti Warns. Prime Minister Mario Monti said Italy faced a "war" at home and abroad as his government pushes to revamp the euro-zone's third-biggest economy and extricate it from the region's debt crisis. The premiere's remarks at a banking conference in Rome came as allies of the premier's predecessor, Silvio Berlusconi, began clamoring for the controversial billionaire to run for office in the next election. That prospect is likely to unnerve investors and EU authorities who pushed for Mr. Berlusconi's ouster in November.
• Deeper Slowdown Suspected in China. Official data due this week are expected to show growth in China slowing to its lowest rate since the global financial crisis. But some economists say they are turning up evidence that the true picture could be even worse.

MarketWatch:

• Hong Kong stocks fall sharply ahead of data.

Business Insider:

• Too Bad We Didn't Learn From MF Global, Because It's Happening Again.
• Anti-Austerity Protests In Spain Got So Bad Today That Police Had To Begin Firing Rubber Bullets.
• A Whole Bunch Of Cities And Counties Are Now Seeing Their Finances Collapse.

Zero Hedge:

• "The Use Of Temps Is Outpacing Outright New Hirings By A 10-To-1 Ratio".
• US Attorneys General Jump On The Lieborgate Bandwagon; 900,000+ Lawsuits To Follow, And What Happens Next.

CNBC:

• New York Fed to Release Libor Documents Friday, Official Says.

NY Times:

• JPMorgan(JPM) Pushed Sales of Its Funds Even at Clients’ Expense, Brokers Say. Regulators are examining JPMorgan Chase’s sales tactics, after claims that the nation’s largest bank pushed its own mutual funds over competitors’ investments. Authorities are responding to current and former JPMorgan financial advisers who said they had felt pressure to sell the bank’s products even when cheaper or better performing options were available.Several brokers told The New York Times that they had been encouraged to favor JPMorgan funds, and they described a broader culture that emphasized sales over client needs.
• Shake-Up at New York Fed Is Said to Cloud View of JPMorgan’s Risk. After the financial crisis, regulators vowed to overhaul supervision of the nation’s largest banks. As part of that effort, the Federal Reserve Bank of New York in mid-2011 replaced virtually all of its roughly 40 examiners at JPMorgan Chase to bolster the team’s expertise and prevent regulators from forming cozy ties with executives, according to several current and former government officials who spoke on the condition of anonymity. But those changes left the New York Fed’s front-line examiners without deep knowledge of JPMorgan’s operations for a brief yet critical time, said those people, who spoke on the condition of anonymity because there is a federal investigation of the bank.
• Fear of Year-End Fiscal Stalemate May Be Having Effect Now. With the economy having slowed in recent weeks, business leaders and policy makers are growing concerned that the tax increases and government spending cuts set to take effect at year’s end have already begun to cause companies to hold back on hiring and investments.

CNN:

• Investor flight out of stocks continues. Investors continued to flee the stock market last week, as they digested a deal by eurozone political leaders to stabilize credit markets and strengthen the region's banking system, and received further evidence of a U.S. economic slowdown. U.S. stock mutual funds lost $3.1 billion during the week ended July 3, according to the Investment Company Institute. Investors have now withdrawn money from the stock market for 19 of the past 20 weeks.

Financial Review:

• Fed's Man in Dallas Says 'No' to QE3. A US Federal Reserve president has warned against a third round of quantitative easing, suggesting it will encourage riskier investment, allow Congress to dodge the hard decisions on America’s gaping budget deficit and produce more financial ­disruption when the central bank eventually tries to take the cash back. Richard Fisher, the president of the Federal Reserve Bank of Dallas, said the challenge was to generate jobs from the money already created by $US2.7 trillion of Fed bond purchases. The Fed’s Open Market Committee, which sets US monetary ­policy, meets next on July 31.

Reuters:

• Supervalu(SVU) Profit Falls, Suspends Dividend. Grocery store operator Supervalu Inc suspended its dividend and took other measures to fund aggressive price cuts to try to win back customers, while also launching a reviewing strategic alternatives. The company, which has seen customers flee in recent years for lower prices at Wal-Mart Stores Inc, also on Wednesday said that profit fell 45 percent in the quarter ended June 16. Supervalu shares fell 24.3 percent to $4 in extended trading Wednesday afternoon.
• Brazil cuts rate for 8th time as recovery falters. Brazil cut its benchmark interest rate to a record-low 8 percent on Wednesday as policymakers scramble to revive an economy that has failed for nearly a year to respond to a barrage of stimulus measures. The central bank's monetary policy board, known as Copom, unanimously decided to lower the so-called Selic rate by half a percentage point, as expected. It was the eighth consecutive cut since last August, when the Selic stood at 12.5 percent.
• Marriott(MAR) sees weakness in international markets. Hotel operator Marriott International Inc reported a higher quarterly profit but said it was seeing weakness in some international markets. The company, which owns the Ritz-Carlton, Residence Inn and Courtyard by Marriott brands, slightly lowered its fee revenue outlook for the full year citing weak overseas demand. Marriott also cut its forecast for revenue per available room (revPAR) from the international markets but raised its full-year earnings forecast.
• Callaway Golf(ELY) to cut workforce by 12%. Callaway Golf Co, grappling with weak demand for golf equipment, plans to cut 12 percent of its workforce to reduce costs. Callaway said the job cuts would impact all regions and levels of organization and that the cost-cutting initiative would sharpen its focus on its core brands, Callaway and Odyssey.
• Global PC shipments flat in 2nd qtr - Gartner. Global PC shipments were flat in the second quarter, as economic uncertainty and a booming market for smartphones and tablets constrained growth, research firm Gartner Inc said. Worldwide PC shipments totaled 87.5 million units in the second quarter, down 0.1 percent from a year earlier, the industry research firm said. Gartner estimates Hewlett-Packard Co's shipments fell 12.1 percent, while those of Dell Inc slipped 11.5 percent in the quarter.

Financial Times:

• Banks face swaps threat after cut ratings. Sovereigns, banks, deals – the whole financial system relies on ratings provided by Moody’s, Standard & Poor’s and Fitch. So when Moody’s downgraded 15 of the world’s biggest banks last month, many financial institutions and investors were focused on the wider impact a rating drop would have on the derivatives swaps agreements at the heart of many structured finance deals.
• Global miners stage ‘retreat to the core'. Global mining groups, such as BHP Billiton, Vale and Anglo American, are pruning their expansive portfolios, as calls from shareholders for greater focus and spending discipline prompt them to shed non-core assets.

Telegraph:

• Proud Spain again humbles itself to the euro’s demands. With one in four Spanish workers out of a job, output contracting by the day and Asturian miners marching through the capital, the Spanish prime minister, Mariano Rajoy, has determined to push through a further €65bn (£51bn) of austerity measures, as if deliberately set on a strategy of economic death by a thousand cuts.

Market News Intl:

• China Has Little Room for Rate, Reserve Cuts, Yu Bin Says. China has relatively little room to cut interest rates and the reserve requirement ratio, citing government economist Yu Bin. Deflation is unlikely this year, he said. 2Q economic data isn't "very ugly," Yu said. China doesn't need a massive stimulus as 1H GDP is within the expected range, he said.
  

Economic Information Daily:

• China 2Q employment demand fell "a little" from 1Q, citing the Ministry of Human Resources and Social Security. Pressure on employment during the second half of the year may increase, citing analysts.

China News Service:

• The southern Chinese province of Guangdong has experienced larger-than-expected downward pressure on its economy this year, citing governor Zhu Xiaodan. Downward pressure hasn't eased in the second half of the year, Zhu said.

Evening Recommendations
Piper Jaffray:

• Rated (DNKN) Overweight, target $39.

Night Trading

• Asian equity indices are -1.5% to -.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 163.0 -5.5 basis points.
  
• Asia Pacific Sovereign CDS Index 136.5 -2.75 basis points.
  
• FTSE-100 futures -.31%.
  
• S&P 500 futures -.27%.
  
• NASDAQ 100 futures -.19%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FAST)/.37
• (OZRK)/.52
• (CBSH)/.72
• (PGR)/.72
• (RECN)/.15
  

Economic Releases
8:30 am EST

• The Import Price Index for June is estimated to fall -1.8% versus a -1.0% decline in May.
• Initial Jobless Claims are estimated to fall to 370K versus 374K the prior week.
• Continuing Claims are estimated to fall to 3300K versus 3306K prior.
  

2:00 pm EST

• The Monthly Budget Deficit for June is estimated to widen to -$60.0B versus -$43.1B in May.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Williams speaking, 30Y T-Bond auction, China Industrial Production/Fixed Asset Investment reports, China GDP, Greece Unemployment Rate, UK 10Y Bond auction, Australia Unemployment Rate, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index and the JMP Securities Healthcare Conference could also impact trading today.
  

BOTTOM LINE: Asian indices are lower, weighed down by technology and industrial 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 Slightly Lower into Final Hour on Earnings Worries, US "Fiscal Cliff" Concerns, FOMC Commentary, Rising Global Growth Fears

Broad Market Tone:

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

Equity Investor Angst:

• VIX 18.67 -.27%
  
• ISE Sentiment Index 56.0 +5.66%
  
• Total Put/Call .95 -13.64%
  
• NYSE Arms .98 -57.10%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 111.99 +.47%
  
• European Financial Sector CDS Index 279.57 +.59%
  
• Western Europe Sovereign Debt CDS Index 276.75 -1.78%
  
• Emerging Market CDS Index 267.49 -2.42%
  
• 2-Year Swap Spread 23.50 -2.25 basis points
  
• TED Spread 36.50 -.5 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -54.50 +3.0 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .09% unch.
  
• Yield Curve 125.0 +1 basis point
  
• China Import Iron Ore Spot $134.0/Metric Tonne -1.11%
  
• Citi US Economic Surprise Index -64.50 +.4 point
  
• 10-Year TIPS Spread 2.08 unch.
  

Overseas Futures:

• Nikkei Futures: Indicating +9 open in Japan
• DAX Futures: Indicating -7 open in Germany
  

Portfolio:

• Slightly Lower: On losses in my 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

BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades off session lows, after testing its 50-day moving average, on disappointing FOMC commentary, eurozone debt angst, tech/consumer discretionary weakness, US "fiscal cliff" worries, rising energy prices, earnings concerns and rising global growth fears. On the positive side, Energy, Oil Service and Airlines shares are especially strong, rising more than +1.0%. Energy and financial shares have substantially outperformed throughout the day. Copper is gaining +.8% and the UBS-Bloomberg Ag Spot Index is down -.4%. The Germany sovereign cds is falling -6.0% to 91.16 bps, the Spain sovereign cds is down -2.2% to 558.90 bps, the Italy sovereign cds is down -2.2% to 496.55 bps, the UK sovereign cds is down -3.0% to 67.45 bps, the Saudi sovereign cds is down -6.6% to 115.82 bps and the Brazil sovereign cds is down -3.8% to 148.85 bps. On the negative side, Disk Drive, Networking, Biotech, Homebuilding, Retail and Education shares are under pressure, falling more than -1.25%. Cyclicals are underperforming again. Tech and consumer discretionary shares are heavy. Oil is rising +2.8%, Lumber is -.25% and Gold is up +.6%. The Citi Latin America Economic Surprise Index is falling another -12.5 points today to -33.7, which is the lowest since early-Aug. of last year. Major Asian indices were mixed overnight as a +.5% gain in China was offset by a -.7% loss in India. Major European indices are mixed as a +.8% gain in Spain(still down -5.4% in 5 days) is being offset by a -.5% loss in France. The Bloomberg European Bank/Financial Services Index is rising +.4%. Brazil is flat on the day. The Ireland sovereign cds is rising +.75% to 540.47 bps and the Japan sovereign cds is gaining +1.96% to 97.32 bps. US weekly retail sales have decelerated to a sluggish rate at +2.2%, which is the slowest since the week of April 5th of last year. US Trucking Traffic continues to soften. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak. Moreover, the Citi US Economic Surprise Index has fallen back to late-Aug. levels. Lumber is -4.0% since its March 1st high despite improving sentiment towards homebuilders and the broad equity rally ytd. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season. The Baltic Dry Index has plunged around -50.0% from its Oct. 14th high and is now down around -35.0% ytd. China Iron Ore Spot has plunged -26.0% since Sept. 7th of last year. Shanghai Copper Inventories have risen +140.0% ytd. Oil tanker rates have plunged recently, with the benchmark Middle East-to-US voyage down to 25.0 industry-standard worldscale points, which is the lowest since Oct. 2009. The CRB Commodities Index is now technically in a bear market, having declined -21.0% since May 2nd of last year. Spanish and Italian yields are back in the danger zone. Copper, oil and the euro are seeing mild bounces today on global central bank stimulus hopes. The 10Y T-Note continues to trade too well, which remains a red flag. I still believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. Key gauges of credit angst remain technically strong. The Citi Eurozone Economic Surprise Index is at -74.60 points, which is near the lowest since mid-Sept. of last year. Massive tax hikes and spending cuts are still yet to hit in several key eurozone countries that are already in recession. A lack of competitiveness remains unaddressed. Moreover, the “solutions” for the European debt crisis I still hear being bandied about are only bigger kick-the-cans that if implemented will eventually lead to an even bigger catastrophe as Germany is engulfed, in my opinion. The European debt crisis is also really beginning to bite emerging market economies now, which will further pressure exports from the region and further raise the odds of more sovereign/bank downgrades. I continue to believe the bar for additional QE is likely higher than the Fed is letting on. Uncertainty surrounding the effects on business of Obamacare, the "US fiscal cliff " and election outcome uncertainty will likely become more and more of a focus for investors as the year progresses. Finally, the upcoming earnings season could prove more challenging than usual for big multi-nationals given US dollar strength and the precipitous declines in some key parts of the global economy during the quarter. Stocks that miss earnings estimates are being severely punished despite the obvious headwinds. The average stock, as measured by the Value Line Geometric Index, is underperforming the S&P 500 today. I still believe there is too much uncertainty on the horizon to conclude a durable stock market low is in place. For this year's equity advance to regain traction, I would expect to see a resumption in European credit gauge improvement, a subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices, a US "fiscal cliff" solution and higher-quality stock market leadership. I expect US stocks to trade mixed-to-lower into the close from current levels on eurozone debt angst, earnings worries, disappointing FOMC commentary, rising global growth fears, more shorting, tech/consumer discretionary weakness and US "fiscal cliff" concerns.

Today's Headlines

Bloomberg:

• Rajoy Outlines Budget Cuts as Protests Hit Madrid. Spanish Prime Minister Mariano Rajoy rolled back social-welfare protections and raised taxes to clinch emergency aid and pacify investors as anti-austerity protesters marched in the capital. Rajoy announced cuts in unemployment benefits and public wages, signaled reductions in pensions and raised sales taxes as part of a 65 billion-euro ($80 billion) package of deficit cuts, risking a deeper recession. As striking miners clamored for aid to keep their industry alive in a march along Madrid’s main boulevard, Rajoy trimmed union funding by 20 percent. Spain’s desperation for foreign capital to sustain public services and keep its banks afloat has ripped control of policy from the government, leaving officials to implement the diktats of markets and the European Union. Preventing a meltdown in the fourth-biggest euro economy is key for policy makers to limit risks to the 17-nation currency union. “We have very little room to choose,” Rajoy told the national parliament in Madrid. “I pledged to cut taxes and now I’m raising them. But the circumstances have changed and I have to adapt to them.”
• Berlusconi Will Probably Run Again in 2013, Party Official Says. Former Italian Prime Minister Silvio Berlusconi will probably lead his People of Liberty party into the next elections due by April 2013, the party’s Secretary General Angelino Alfano said. “We are all asking him to run and I believe in the end, he will decide to lead the party,” Alfano said in an interview in Rome today with Sky TG24 television.
• Burberry Slowdown Spurs Luxury Goods Wobble. Burberry Group Plc (BRBY) led luxury-goods stocks lower after reporting sales that missed analysts’ estimates for a second straight quarter, fueling concern that Europe’s debt crisis and slowing growth in China are finally taking a toll on high-end demand. Burberry, the U.K.’s largest luxury company, fell as much as 6.9 percent in London trading, sliding to the lowest price since Jan. 3. Cie. Financiere Richemont SA (CFR), the maker of Cartier jewelry, dropped as much as 2.1 percent, while LVMH Moet Hennessy Louis Vuitton SA (MC) slid as much as 3 percent. “There is a slowdown in the broader global economy and as luxury is cyclical, this slowdown is starting to appear in the luxury-goods quarterly reports,” Luca Solca, global head of European equities at CA Cheuvreux, said today in an interview with Bloomberg Television.
• A Few FOMC Members Said More Stimulus Probably Would Be Needed. A few Federal Reserve policy makers said the central bank will probably need to take further action to boost the labor market and meet its inflation target, according to minutes of their June meeting. “A few members expressed the view that further policy stimulus likely would be necessary to promote satisfactory growth in employment and to ensure that the inflation rate would be at the Committee’s goal,” according to the record of the Federal Open Market Committee’s June 19-20 gathering released today in Washington. The minutes show two participants said additional bond purchases are appropriate, while two others said they would be warranted in the absence of “satisfactory progress” in cutting unemployment or if downside risks increase. FOMC members also said strains in global markets stemming from Europe’s debt crisis had increased since their April meeting, and that “U.S. fiscal policy would be more contractionary than anticipated.”
• Iraq Crude Production Overtakes Iran as OPEC Trims Output. Iraq’s crude production overtook Iran’s last month for the first time in more than two decades as Iran led a decline in OPEC output ahead of a European Union ban on purchases from the nation, according to the producer group. Iraq pumped 2.984 million barrels a day in June, outpacing Iran’s 2.963 million, the Organization of Petroleum Exporting Countries’ Vienna-based secretariat said today in its Monthly Oil Market Report. That’s the first time Iraq’s output has exceeded Iran’s since 1988, when the countries ended their eight-year war, statistics compiled by BP Plc (BP/) show.
• Industry Suppliers-Box Makers May Show Slow U.S. Growth. Investors may see more signs of slowing U.S. manufacturing growth when makers of corrugated boxes and distributors of supplies report quarterly earnings this month. W.W. Grainger Inc. (GWW) and Packaging Corp. of America are among companies that offer “good insight into industrial America,” said Tim Ghriskey, who oversees about $2 billion as chief investment officer of Solaris Group, based in Bedford Hills, New York. Data from these businesses can be particularly useful in verifying or contradicting the pace of activity measured by the government and third-party groups, he said.

Wall Street Journal:

• Spain Bank Sub Bondholders Try to Sell. Investors left holding positions in Spanish subordinated bonds were trying to sell them Wednesday after the Spanish government hinted these type of instruments might be forced to take losses. Late Tuesday it emerged that investors holding any equity or hybrid capital instruments issued by Spanish banks that might need a euro-zone bailout could see their investments completely wiped out. Conservative-type bondholders—like banks, funds and Asian investors—were left trying to exit their positions in weaker Spanish banks, but with few investors interested in buying they were finding it hard to sell, bond traders said. The bond prices didn't collapse on the news, with these bonds having been dumped by investors for some time, as the precedent set by Irish banks in 2010 made investors more aware of the risk associated with subordinated debt. However, "unlike in Ireland, the move to force losses on junior bondholders is a significantly more contentious issue in Spain where retail customers make up a large proportion of the investor base," said Daiwa Capital Markets credit analyst Michael Symonds. Bondholders at Spain's larger banks—Banco Santander SA, SAN.MC +1.86% Banco Bilbao Vizcaya Argentaria SA BBVA.MC +2.48% and CaixaBank SA CABK.MC +0.94% —won't likely be affected by the change as they aren't likely to take part in the bailout. But smaller banks will be impacted, with trading on their bonds over the past months evidence of these concerns. "Expect subordinated peripheral debt to trade lower as there had been some expectations that it would be treated with compassion because of the retail bias," said Investec fixed-income analysts Elisabeth Afseth and Brian Barry in a note.
• Fed Official Doubts Euro Fix. Financial markets are pulling the euro zone apart and the chances of finding a solution to the currency union's debt crisis appear distant, a U.S. central banker said Tuesday. James Bullard, president of the Federal Reserve Bank of St. Louis, said in an interview that during a roughly week-long trip to Europe he has reassessed the odds of whether euro-zone policy makers can reach a conclusive settlement to end a crisis that's hurting U.S. and global economic growth.

CNBC.com:

• Why Millions of Americans Still Can't Refinance Their Mortgage. Mortgage rates hit new lows and applications to refinance fell for the third straight week. It defies logic, unless of course you operate in today’s tight mortgage market.
• Dimon Should Be Included in JPM(JPM) Clawbacks. (video)
  

Business Insider:

• San Bernardino Is The Third California City To Go Bankrupt In Two Weeks.
• Karl Rove's Super PAC Hammers Barack Obama's Economic 'War On Women'. (video)
• Reuters: CEO Of Collapsed Brokerage Forged Signatures And Fabricated Bank Balances.
• How Long Until The Market Decides That Spain Is Killing Itself?

Zero Hedge:

• The World Of LI(E)BOR And Worst Case Lawsuits.
• Goldman(GS) Cuts US Q2 GDP Two Times In Two Hours.
• Desperate Acts Of Government Continued - Europe Edition.

NewsBusters:

• Romney Gets Standing Ovation From NAACP, But CNN Calls Reception 'Very Negative'.

The Hill:

• Reid Rejects GOP Request to Vote on Obama's Tax Plan. Senate Majority Leader Harry Reid (D-Nev.) on Wednesday rejected a Republican request to vote on President Obama’s income tax plan amid defections within his caucus on tax policy. Sen. Orrin Hatch (Utah), the senior Republican on the Finance Committee, accused Democrats of filibustering the president’s tax plan. “They are filibustering their own bill. So what does that tell us? Here’s what it tells us. It tells us that the president’s tax increase plan is not just an economic disaster; it is a political loser,” Hatch said. Senate Democratic leaders are worried about potential defections within their caucus on taxes. At least seven Democratic senators have declined to rule out supporting a temporary extension of the Bush-era income tax rates. Several Senate Democrats running for reelection and Democratic Senate candidates have balked at Obama’s proposal to extend income tax rates only for families earning below $250,000.

Reuters:

• Adtran(ADTN) sees weak third quarter revenue; shares plunge. Network gear maker Adtran Inc said it expects the slowing economy to hurt third-quarter revenue, sending its shares down to a two-year low. The company, which reported lower-than-expected second-quarter revenue on Tuesday, said it expects third-quarter revenue to be flat to slightly up on a sequential basis. "During the quarter it has become apparent that customer sentiment in the current environment from an economic and regulatory perspective has deteriorated," a company executive said on a post-earnings call on Wednesday.
• Huge demand for 10-year notes at record low yields.
• EU watchdog warns banks still face major challenges. The European Banking Authority said there remained significant challenges ahead for Europe's banks having just cleared the first hurdle to bolster their capital buffers. The EBA said that 27 banks had hiked their combined capital by 94.4 billion euros ($115.7 billion) to meet the expectations of the watchdog and fill a 76 billion euro shortfall to help make them strong enough to withstand the euro zone debt crisis. Europe's banking watchdog had given banks until the end of June to hold core Tier 1 capital of 9 percent of risk weighted assets as part of efforts to restore confidence in the sector. EBA Chairman Andrea Enria said the recapitalisation had been a "necessary and important step" but cautioned that banks had a long way to go to recover from the financial crisis and comply with new global regulations.
• France, Germany raid Swiss banks, clients on tax. German tax authorities have launched raids into Credit Suisse clients and French officials searched the homes of UBS employees, part of crackdowns on foreigners suspected of evading taxes through the two largest Swiss banks. Switzerland's strict banking secrecy rules, which have helped build a $2 trillion offshore financial sector, have infuriated cash-strapped governments elsewhere as they try to stop tax evasion by wealthy citizens. Roughly 5,000 German clients of Credit Suisse are being probed on suspicion of tax evasion and some had their homes searched, a source at the bank said on Wednesday, as European tax officials broaden their investigation to clients from banks.
• Spain tourism body, carmakers warn over VAT hike. The tourism sector would lose around 2 billion euros ($2.45 billion), an industry body said, while car manufacturers estimated they would sell between 20,000 and 25,000 fewer vehicles in the next five months. A sharp rise in Spain's sales tax rates will cost billions of euros in lost earnings and thousands of jobs, representatives of key industries said on Wednesday, complicating the country's efforts to pull itself clear of recession. Prime Minister Mariano Rajoy announced the value added tax hikes on Wednesday as part of a scaled-up austerity programme imposed under pressure from European partners and designed to slash 65 billion euros from the public deficit by 2014. General VAT was raised to 21 percent from 18 percent and the reduced rate for the leisure industry to 10 per cent from 8 percent.
• Brazil retail sales fall unexpectedly in May.

Telegraph:

• Merkel breaks German law on ESM rescue. You can see why Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble are back-pedalling so frantically over the EU summit deal. While Mrs Merkel seemingly agreed to let the European Stability Mechanism (bail-out fund) rescue banks directly – starting with Spain – she did not have the authority from the Bundestag to do so. Indeed, she violated a categorical prohibition by the budget committee or Haushaltsausschuss.
• Spain's Day of Pain: In Pictures.
  

yle Uutiset:

• Finnish Prime Minister Katainen Says Euro Crisis "Very Dangerous". Prime Minister Jyrki Katainen says the current euro crisis is just as serious as that in 2010 when the Greek economy came close to collapse. In an interview given to the newspaper Helsingin Sanomat Wednesday, the premier noted the current strained relationship between southern and northern euro states was unprecedented.

Les Echos:

• European bank recapitalizations have cost the equivalent of 4% to 5% of gdp and guarantees are about 10% of gdp, European Union Competition Commissioner Joaquin Almunia said.
  

Cinco Dias:

• Spain is considering increasing the reduced rate of value-added tax, which applies to restaurants, hotels and bars, to 10% from 8%.
  

O Estado de Sao Paulo:

• The Brazilian government plans to reduce economic growth forecast for this year to 2.7% to 3% from 4.5%. The new estimate is likely to be officially announced July 20th.

The Times of India:

• US Breaks Ranks, Pushes Global Cap-and-Trade Scheme. In what could make the trade battle over EU's carbon tax on aviation more complicated for India, the US has suggested that countries adopt a global carbon tax system under the International Civil Aviation Organization (ICAO) and adopt a worldwide cap-and-trade regime. It had earlier decided along with the BASIC group — China, Brazil, South Africa and India — Russia and 20 other countries to oppose the EU move with counter-measures. The US has asked for a meeting of 16 countries on the issue in Washington at the end of July where India too is invited. The US has softened its opposition to the EU tax directive, stepping away from countries like India and China on the issue. A global carbon tax regime on aviation would mean escalation of flying costs across the world and not just for travelers to the EU.