Today's Headlines

Bloomberg:

• Germany ESM Risks Are Limited, Schaeuble Tells Mittelbayerische. Germany’s financial risks from participation in the European Stability Mechanism are limited to 190 billion euros ($232 billion), Finance Minister Wolfgang Schaeuble said in an interview with Mittelbayerische Zeitung. Reports of an agreement on shared liability for banks in the European Union at a euro region leaders’ meeting on June 29 are untrue, the newspaper cited Schaeuble as saying on its Internet site. Schaeuble told the newspaper he’s “confident” that Germany’s highest court will reject legal motions to stop the ESM, the euro region’s future financial backstop.
• European Equity Protection at Record Low Versus Bonds: Options. Investors are paying the least ever to protect against losses in European stocks relative to corporate bonds, a sign to Standard Life Plc, Exane BNP Paribas and JPMorgan that equity volatility will increase. The VStoxx Index tumbled 12% to 22.6 last week, the cheapest since April 3. That's the lowest ever compared with the Markit iTraxx Europe Index, according to Bloomberg. Equity volatility is too inexpensive given the global economic slowdown and the deepening European debt crisis, according to Standard Life's Frances Hudson and Pierre-Olivier Beffy, chief economist at Exane in Paris.
• Bank Senior Bond Risk Rises Amid Reports ECB Is Banking Bail-Ins. The cost of insuring against default on senior bank bonds rose after the European Central Bank was said to drop its opposition to holders of the securities taking losses in bailouts. The Markit iTraxx Senior Financial Index of credit default swaps on 25 banks and insurers increased seven basis points to 280 at 1:44 p.m. in London, the highest since July 9, data compiled by Bloomberg show. The ECB backed imposing losses on senior bondholders of the most troubled Spanish banks at a July 9 meeting, a position rejected by euro-area finance ministers, said an official with knowledge of the ECB’s thinking. Credit-default swaps on Banco Santander SA (SAN), which isn’t calling for capital under Spain’s bank bailout, rose nine basis points to 434 basis points, Bloomberg data show. Swaps on Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s second-biggest bank, climbed eight basis points to 456 basis points, the highest since July 12. “The fact it was even considered is bad news for euro- region banks,” said Ramon Nieto, a fund manager at Geroa EPSV Fondos, which oversees 1.1 billion euros of assets in San Sebastian, Spain.
• German Court Won't Rule On Bailout Fund For 8 Weeks. Germany’s top court will take more than eight weeks to decide whether to suspend the euro-area’s permanent bailout fund, leaving Europe’s anti-crisis coffer less than half full to respond to the debt crisis. The Federal Constitutional Court in Karlsruhe will issue a ruling on bids to halt Germany’s participation in the European Stability Mechanism and the fiscal pact on Sept. 12, it said today in an e-mailed statement. That’s more than two months after it held a hearing on the measures.
• London House Prices Plunge as Supply Rise Adds to Lull: Economy. London home sellers cut prices by a record for the month of July as an increase in supply added to pressure on the property market during the traditional summer lull, Rightmove Plc (RMV) said. Asking prices dropped 3.6 percent from June to an average 460,304 pounds ($715,600), the operator of Britain’s biggest property website said in an e-mailed report today. Across England and Wales, values fell 1.7 percent to 242,097 pounds.
• IMF Cuts Global Outlook as EU Ensnares Emerging Economies. The International Monetary Fund cut its 2013 global growth forecast as Europe’s debt crisis prolongs Spain’s recession and slows expansions in emerging markets from China to India. Growth worldwide will be 3.9 percent next year, less than the 4.1 percent estimate in April, the fund predicted in an update of its World Economic Outlook. Spain’s economy will contract 0.6 percent instead of a prior forecast for 0.1 percent growth, and India’s projection for next year was reduced 0.7 percentage point to a 6.5 percent expansion, it said. “In the past three months, the global recovery, which was not strong to start with, has shown signs of further weakness,” the Washington-based IMF said in the report. “Downside risks continue to loom large, importantly reflecting risks of delayed or insufficient policy action.”
• Retail Purchases In U.S. Unexpectedly Decrease -.5%. Retail sales in the U.S. unexpectedly fell for a third month in June as limited employment gains took a toll on consumers. The 0.5 percent drop followed a 0.2 percent decrease in May, Commerce Department figures showed today in Washington. The decline exceeded the most pessimistic forecast in a Bloomberg News survey that called for a median 0.2 percent gain in sales. Other reports today showed manufacturing in the New York region picked up this month and U.S. inventories increased in May. Stocks fell as the retail sales report prompted economists at Morgan Stanley, Goldman Sachs Group Inc. and Credit Suisse to lower their forecasts for economic growth in the second quarter. A cooling job market is sapping the household spending that makes up 70 percent of the economy, curbing sales at retailers such as Target Corp. (TGT) and Macy’s Inc. (M) “Weak spending growth and weak employment are reinforcing one another in a disconcerting negative feedback loop,” said Jay Feldman, a director of U.S. economics at Credit Suisse in New York, who cut his tracking estimate for second-quarter economic growth to 1.6 percent from 2 percent.
• Worst-in-Generation Drought Dims U.S. Farm Economy Hopes. A worst-in-a-generation drought from Indiana to Arkansas to California is damaging crops and rural economies and threatening to drive food prices to record levels. Agriculture, though a small part of the $15.5 trillion U.S. economy, had been one of the most resilient industries in the past three years as the country struggled to recover from the recession. “It might be a $50 billion event for the economy as it blends into everything over the next four quarters,” said Michael Swanson, agricultural economist at Wells Fargo & Co. (WFC) in Minneapolis, the largest commercial agriculture lender. “Instead of retreating from record highs, food prices will advance.”
• Treasury 5-Year Note Yield Drops to Record as Retail Sales Fall. Treasury five-year note yields fell to record lows as an unexpected decline in retail sales for a third straight month raised concern the economic recovery is stalling and drove investors to the refuge of government debt. Investors seeking the safest assets amid concern global growth is faltering and Europe’s sovereign-debt crisis is worsening also drove yields to all-time lows in the U.K., Canada, France, Germany and the Netherlands. Treasuries gained earlier after Germany’s top court said it will take more than eight weeks to rule on the euro-area’s bailout fund. Federal Reserve Chairman Ben S. Bernanke is scheduled to testify in Washington tomorrow amid speculation he will call for more economic stimulus.
• JPMorgan Blaming Traders for Bad Marks Baffles Ex-Employees. JPMorgan Chase & Co.’s assertion that traders at its London chief investment office may have intentionally mismarked trades, masking losses that total at least $5.8 billion, makes little sense, according to former executives with direct knowledge of the unit’s operation.
• Gilead Wins U.S. Approval for First HIV Prevention Pill. Gilead Sciences Inc. (GILD) won U.S. approval to market its HIV treatment Truvada to prevent the virus that causes AIDS in healthy people who are at high-risk of contracting the disease.
• Egypt Court to Rule on Constitution as Army Warns Islamists. An Egyptian court is set to hear a challenge to the panel charged with writing a new constitution, as the country’s army chief issued a warning to its elected Islamist leaders that may deepen the standoff between them. Field Marshal Mohamed Hussein Tantawi said yesterday that the military would not allow a “certain group” to dominate the political landscape, according to the state-run Middle East News Agency. The comment, at a ceremony in the city of Ismailiya, was interpreted as directed against the Muslim Brotherhood, from whose ranks newly elected President Mohamed Mursi was drawn.
• China's Car Dealers Will Boost Discounts On Inventory, NDRC Says. China’s automobile dealers will increase incentives and discounts as they struggle with a worsening glut in the world’s biggest vehicle market, according to the nation’s top economic planner. Average retail vehicle prices fell 1.2 percent in June from a year earlier, with those for passenger vehicles dropping 1.9 percent, said Cheng Xiaodong, head of a unit that monitors auto prices at the National Development and Reform Commission. In May, passenger-vehicle prices slumped the most in about two years because of overstocking. “The oversupply situation persists,” Cheng said in an e- mailed statement today. “Facing slugging demand and rising inventory, dealers will increase discounts and incentive offerings in the coming months.”
• Traxis Partners Founder Barton Biggs Dies at Age 79. Barton Biggs, the money manager whose attention to emerging markets during a 30-year career at Morgan Stanley made him one of the first global investment strategists, has died. He was 79.
• Par Pharmaceutical Agrees to be Bought by TPG. Par Pharmaceutical Cos. (PRX), a maker of generic drugs, agreed to be acquired for $1.9 billion by TPG Capital as the private-equity firm looks to gain from efforts to curtail health-care costs. Par stockholders will receive $50 a share in cash, the Woodcliff Lake, New Jersey-based company said in a statement today.
• Microsoft(MSFT) Joints Intel(INTC) Facing Slower Growth as China Stalls: Tech. Intel Corp. (INTC) and Microsoft Corp. (MSFT), whose products run at least 80 percent of the world’s personal computers, are set to report lackluster sales growth as China’s slowing economy exacerbates stalling demand for PCs. Intel, the largest maker of microprocessors, and Microsoft, the No. 1 software company, will report quarterly earnings this week. Analysts project both will say sales rose 5 percent or less from a year earlier, as consumers choose tablet computers and smartphones over PCs or hold off on purchases altogether.

Wall Street Journal:

• ECB Change of Heart Rumbles Spanish Bank Debt. Reports that the European Central Bank pushed for senior bondholders to shoulder losses in the Spanish bank recapitalization plan propelled investors to insure against potential losses on bonds issued by the country's banks Monday. The cost of insuring against default on bonds issued by Banco de Sabadell SAB.MC -1.99% (SAB.MC), Banco Popular de Espana (POP.MC) and Bankinter BKT.MC -2.70% (BKT.MC) pushed higher after the Wall Street Journal reported that the ECB advocated imposing losses on the senior bonds of Spanish banks that seek financial help. Finance ministers from the euro area chose not to follow the ECB's advice when they agreed to the Spanish plan July 9. "That they are now not only considering but advocating it, that is potentially quite worrying for the asset class," Mr. Barry said. "There's a lot of uncertainty so we could see some weakness in the months ahead." Reflecting the heightened nerves, credit default swap spreads on Spanish banks likely to seek bailout cash were all wider--Banco de Sabadell CDS swung 38 basis points wider to 810 basis points. Banco Popular de Espana's CDS widened 20 basis points to 727 basis points, while Bankinter's CDS pushed 5 basis points wider to 665 basis points, according to data provider Markit. "We are seeing demand for protection on Spanish banks," a CDS trader said. "There is a weaker tone across the board, but the market is not too liquid, everyone is still digesting [the news]."
• The Scandal Behind the Financial Scandals.
• WTO: China Discriminates Against U.S. Credit Cards. A World Trade Organization panel has determined that China's tight control over credit- and debit-card transactions discriminates against U.S. card companies, a decision the card issuers hope will lead to new business opportunities in China's fast-growing payments market.

CNBC.com:

• Fewer US Companies Planning to Hire; Europe Looms. Only 23 percent of the firms polled in June plan to add to staff in the next six months, the National Association for Business Economics said on Monday. NABE's prior survey, conducted in late March and early April, had shown 39 percent of companies planning to add workers.
• Drop in New York Sales Tax Revenue Signals Slow Growth. New York City's sales tax collections grew 2.79 percent in the second quarter from a year ago, according to the New York State Department of Taxation and Finance. That is less than half the 7.7 percent rise seen in the 2011 second quarter versus the 2010 second quarter. The latest result looks particularly dismal when compared with the 24.73 percent increase seen in the second quarter of 2010 over the same 2009 quarter.
• JPMorgan(JPM) Has Bigger Worry Than ‘London Whale’: Bove. JPMorgan has put its "London Whale" trading losses behind it, but the question now is how much money the bank can make from its regular operations, Dick Bove, Rochdale Securities bank analyst, told CNBC’s “Squawk Box” on Monday.

Business Insider:

• 36 Percent Of Fukushima Children Have Abnormal Growths From Radiation Exposure.
• Mexican Drug Cartels Have Infiltrated All Of These US Cities.
• The Ultimate, Worst-Case, Fiscal Cliff Nightmare Scenario.

Zero Hedge:

• European Bank Spreads Jump To Worst Of Year. (graph)
• The Problem In A Nutshell: Annualized GDP Growth Of 1%; Annualized US Debt Growth of 21%. (graph)
• IMF Says Japan And Spain Are Done, "Debt Ratio Will Never Stabilize".
• The 4 Most Disconcerting Charts For European Equity Holders.
• US Ship Mistakenly Fires On Friendly Boat Off Dubai, As Russia Condemns Saudi Treatment Of Religious Protesters.

Reuters:

• The downward pressures are so strong that the slowdown in China's economy may extend beyond the third quarter, citing Chen Dongqi, deputy head of the National Development and Reform Commission's macroeconomic research institute.
  

Telegraph:

• IMF slashes UK growth forecasts. Britain’s growth prospects have dropped sharply over the past three months, according to the International Monetary Fund as the eurozone crisis weighs on recovery.

The Independent:

• David Blanchflower: UK Economy Still Has Further to Fall. It seems unlikely any announcement will have any effect on the economy much before 2015.

Frankfurter Allgemeine Zeitung:

• Solar energy subsidies will cost Germany more than $134.5 billion euros, citing a study from the Essen-based RWI Institute. Cost of 100 billion euros were reached at the beginning of 2012 and Germany will face costs until 2030.
  

Xinhua:

• China Jan.-June FDI Falls 3% on Year to About $59.1B, Citing Vice Commerce Minister Wang Chao. Jan.-May FDI fell 1.9% to $47.1B, according to a statement posted on the ministry's website from June 15.
• China shouldn't blindly expand investment as it seeks to avoid a slowing economy, citing members from the Chinese People's Political Consultative Conference.
  

Shanghai Daily:

• Shanghai trade volume dips in H1. SHANGHAI'S trade volume declined 2.4 percent in the first half from a year earlier due to weak overseas demand and a decrease in the number of textile companies.
  

Shanghai Securities News:

• China State Council Probing Rebound in Home Prices. China's State Council is organizing several research groups to conduct a survey on the country's property market, citing people familiar with the situation. The groups are probing the reason for rebounding home prices. The groups will give advice on policy measures to counter further price rises, according to the report.

Bear Radar

Style Underperformer:

• Mid-Cap Value -.61%

Sector Underperformers:

• 1) Coal -2.85% 2) Networking -2.02% 3) Steel -1.44%

Stocks Falling on Unusual Volume:

• JPM, VECO, BKH, BCS, TE, WWD, WOOF, SSH, MWIV, MRTN, PNRA, HTLD, ALGN, INFY, ANDE, SUSS, CSTR, BMRN, IDXX, DECK, SAFM, ALTR, COLM, SHOO, DMD, MJN and GDI
  

Stocks With Unusual Put Option Activity:

• 1) EWJ 2) IGT 3) CNX 4) SNE 5) TJX
  

Stocks With Most Negative News Mentions:

• 1) THI 2) BID 3) SNDK 4) ACI 5) AMD
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.15%

Sector Outperformers:

• 1) Biotech +.47% 2) Airlines +.44% 3) Banks +.33%

Stocks Rising on Unusual Volume:

• PRX, ALNY, V, MA, NCR, HGSI, JCOM and DNKN
  

Stocks With Unusual Call Option Activity:

• 1) GCI 2) SWY 3) FDO 4) DNKN 5) CIT
  

Stocks With Most Positive News Mentions:

• 1) NNN 2) BA 3) RTN 4) APC 5) FWLT
  

Charts:

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

Monday Watch

Weekend Headlines
Bloomberg:

• Merkel Gives No Ground on Demands for Oversight in Debt Crisis. Chancellor Angela Merkel gave no ground on Germany’s demands for more central control over euro member states in return for joint burden-sharing as the region struggles to contain the debt crisis. The German leader said yesterday she hadn’t softened her stance at last month’s summit in Brussels and that a so-called banking union involving a bloc-wide financial overseer will have to include joint oversight on a “new level.” She chided member states who had sought to slow moves toward greater central control “since the first summit” in the 2 1/2-year-old crisis. “All of these attempts will have no chance with me or with Germany,” Merkel said in an interview with broadcaster ZDF in Berlin. Two weeks after a European Union summit aimed at bridging differences over crisis resolution, euro leaders are still squabbling over details of how to lift the bloc out of the turmoil. Merkel hardened Germany’s position that any attempt to share burdens in Europe -- such as jointly issued euro bonds or common banking bodies -- must first be met with greater cooperation and a handover of some sovereignty to Brussels. Diverging rates and capital outflows within the 17-member monetary union signal that the single currency is “slowly unraveling,” Stephen Gallo, senior foreign-exchange strategist at Credit Agricole SA in London, told Bloomberg Television’s “The Pulse” in a July 13 interview. “The whole project is unraveling, that’s what’s essentially happening now,” Gallo said.
• Aiding Italy on Borrowing Costs Isn’t Justified, Weidmann Says. Italy’s borrowing costs don’t justify asking the euro area’s rescue fund for help, Bundesbank President Jens Weidmann said. “Of course I can understand why a country would want to lower its refinancing costs,” Weidmann said in an interview with Boersen-Zeitung e-mailed to Bloomberg News by the German central bank he heads. “But because of the last-resort aspect of financial aid in the currency union, that alone can’t be a justification for granting it.” “If Italy stays the course on reforms, it’s on a good path,” Weidmann told the German newspaper. Asked whether the euro area’s third-largest economy needs to tap the planned European Stability Mechanism, he said, “No, I don’t see Italy in that situation.” The European Central Bank Governing Council member’s comments indicate German reluctance to allow the government-run bailout funds to buy Italian bonds to insulate that country from the debt crisis. Italian Prime Minister Mario Monti has sought a “debt shield” against spillover from the crisis at Spain’s banks, which are getting as much as 100 billion euros ($122 billion) in rescue loans. The European bailout for Spanish banks would be more effective if aid conditions extended to the country’s economy, Weidmann said. He cited high unemployment and problems in Spain’s regions as signaling a “considerable need” for further action, according to the interview.
• Weidmann Says Weaker Outlook, Cheaper Oil Justify Rate Cut. The worsening of the euro area’s economic prospects and the decline in oil prices justify this month’s interest-rate cut by the European Central Bank, Bundesbank President Jens Weidmann, who is also an ECB Governing Council member, was cited as saying in an interview published today in Het Financieele Dagblad. The outcome of the last summit of European leaders left room for interpretation and was damaging because it gave the impression the meeting was about only a collective-liability arrangement for banks, the Amsterdam-based newspaper cited Weidmann as saying. Euro-area nations “should discuss giving up sovereignty with the same openness as the question of how to resolve the debt problem collectively,” he told the paper.
• Greeks Favor Renegotiation of Loan Even at Risk of Euro Exit. Almost three-quarters of Greeks want Antonis Samaras’s coalition government to insist on a renegotiation of the terms of the country’s international loan agreement, an MRB poll showed. Of 1,011 people surveyed, 74 percent said the coalition should insist on discussing the terms, even if such talks lead to the prospect of Greece leaving the euro area, according to the poll in the Sunday edition of the Athens-based Real News newspaper and pre-released today. That compared with 15.5 percent who said the government should accept the current terms of Greece’s bailout without any talks, according to the poll. Samaras, the leader of the New Democracy party, formed a coalition government with the socialist Pasok party and Democratic Left after an election on June 17. The vote followed an inconclusive May 6 election that underlined concern Greece might have to abandon the euro. Of those surveyed, 61 percent said it’s unlikely that the government will be able to renegotiate changes to the loan agreement that are favorable for Greece and its people, while 34 percent said Greece’s international lenders will agree to talks to change some terms of the deal, the poll showed.
• Regling Says States Could Avoid Bank-Rescue Liability, Welt Says. Klaus Regling, who heads the euro area’s bailout funds in the debt crisis, said governments could avoid liability for bank rescues under proposals for a regional bank supervisor, Welt am Sonntag reported, citing an interview. If the European Central Bank is cleared to act as a bank regulator in the euro area, banks can receive rescue loans without going through governments, meaning states wouldn’t be on the hook for the credits, the Berlin-based newspaper quoted Regling as saying. That contradicts German Finance Minister Wolfgang Schaeuble, who said on July 9 that he expects governments to guarantee rescue loans even if they go directly to banks, Welt am Sonntag said.
• Germany's Stark Opposes ECB as Bank Supervisor, Wiwo Says. Former European Central Bank Executive Board member Juergen Stark said the ECB would risk the independence of its monetary policy if it became Europe’s bank regulator, Wirtschaftswoche reported, citing an interview to be published tomorrow. The euro area’s central bank would face conflicts of interest, for instance if a liquidity crisis at a major bank influenced ECB interest-rate decisions, the magazine quoted Stark as saying, in a summary of his comments e-mailed by the magazine today. While Stark backs creating a European banking regulator, he doesn’t want the ECB to take on the task, according to the report.
• Spain Risks Market Lockout as Lifeline Yields Climb: Euro Credit. Spanish notes have delivered the world's worst returns on securities repayable in five years or less for the past three months, jeopardizing the nation's last line of defense against being locked out of capital markets. With every Spanish bond maturing after 2017 yielding more than 6%, the nation has relied on shorter-dated sales for more than 80% of its borrowing since June 1, compared with 60% for Germany and 66% for Italy.
  
• France’s Hollande Says Peugeot Job Cuts Are Not Acceptable. PSA Peugeot Citroen (UG)’s decision to close a factory and cut an additional 8,000 jobs is unacceptable, President Francois Hollande said, pledging to lean on Europe’s second-biggest carmaker to renegotiate the plan. Peugeot said two days ago that it will cut a total of 14,000 jobs and shut an auto plant in France for the first time in two decades to stem widening operating losses. “The plan in the current state is not acceptable,” Hollande said today on national television. Hollande was elected in May, promising to prevent a “parade of firings” after the election. Peugeot’s shares plunged 7.7 percent yesterday on concern that the government may amend Peugeot’s decision to reduce costs and trim production capacity, but there isn’t much wiggle room to do so, said Antonio Barroso, an analyst at Eurasia Group in London. “The range of options is limited,” Barroso said. “The Peugeot crisis is a powerful reminder of one of the most important problems facing France, which is lack of competitiveness.”
• CDU’s Kauder Rules Out German Tax Increase, Welt am Sonntag Says. Volker Kauder, the parliamentary leader of Chancellor Angela Merkel’s Christian Democrats, said his party bloc won’t raise German taxes to pay for euro-area sovereign rescues, Welt am Sonntag said, citing an interview. Kauder was reacting to a proposal by the Berlin-based DIW economic institute to boost revenue with a levy on individual personal wealth of more than 250,000 euros ($306,000), including the possibility of forcing taxpayers to buy German government bonds, the newspaper said today.
• Spain is considering changing tax rules to impose higher levies on "the incomes of people and companies that pollute the most." The government is studying "a series of tax changes," Budget Ministry says in a statement late yesterday.
• Spain Publishes Breakdown of 65 Billion Euro Budget Cuts.
• Italy’s Solar Rules May Lead to Investment Cuts, Repubblica Says. Italy’s new solar-power policy may prompt renewable-energy companies to reduce investments in the country, la Repubblica reported, citing an interview with Piero Manzoni, chief executive officer of Falck Renewables SpA. (FKR) The new rules, which include subsidy cuts for future projects, introduce a number of bureaucratic obstacles penalizing the industry, Repubblica cited Manzoni as saying. The legislation, which will take effect Aug. 27, may push Falck and other companies to invest elsewhere, he said, according to the Rome-based newspaper.
• China’s Stocks Fall Most in Week on Earnings Concern. Earnings have been quite bad so don’t expect the market to be up in the near term,” said Chen Liqiu, a strategist at Jianghai Securities Co. in Shanghai. “I doubt the other companies will release better-than-expected earnings. There’s still hopes for policy loosening but the next rate cut may only come in August at the earliest.” The Shanghai Composite Index (SHCOMP) fell 1.2 percent to 2,159.69 at the 11:30 a.m. local-time break. The CSI 300 Index (SHSZ300) retreated 1.4 percent to 2,416.77, led by telecom and consumer discretionary companies. The Shenzhen Composite slid 2.3 percent.
• JPMorgan’s(JPM) Bungled Trades May Saddle Bank With $7.5 Billion Loss. Botched trades by a JPMorgan Chase & Co. unit that Jamie Dimon had pushed to boost profit were masked by weak internal controls and may ultimately saddle the bank with a $7.5 billion loss. JPMorgan’s chief investment office has lost $5.8 billion on the trades so far, and that figure may climb by $1.7 billion in a worst-case scenario, Dimon, the bank’s chairman and chief executive officer, said yesterday. Net income fell 9 percent to $4.96 billion in the second quarter, the bank said. It restated first-quarter results to reduce profit by $459 million after a review of the unit found employees may have hid souring bets.
• Wilbur Ross Says U.S. Coal Is Facing Years of Headwinds. A combination of cheaper natural gas, environmental regulations and a mild winter has spurred the closure of mines and the loss of thousands of mining jobs in the U.S. Domestic demand is at a 24-year low and the fuel has lost its status as the leading source of electricity, with gas accounting for the same share for the first time in at least four decades.
• Syria’s Bloodiest Massacre Raises Calls for Action Against Assad. The bloodiest massacre in Syria’s 17-month conflict along with the suspected movement of chemical weapons adds pressure on the United Nations Security Council to punish a regime that Russia has so far shielded. The opposition Syrian National Council said as many as 305 people were killed in a July 12 assault on the Sunni Muslim village of Tremseh in Hama province. Separately, the Wall Street Journal cited unidentified U.S. officials as saying they are concerned about evidence that the Syrian government was moving some chemical weapons from storage sites for unknown reasons.
• Libor Probe May Yield U.S. Charges by September. Libor investigations on both sides of the Atlantic intensified as Barclays Plc (BARC) traders could face possible U.S. charges by September and British lawmakers may use hearings this week to expand their inquiry to other banks tied to the global financial scandal. Barclays traders involved in allegedly manipulating Libor rates between 2005 and 2007 may be charged by U.S. prosecutors before the Labor Day holiday on Sept. 3, said a person familiar with the Justice Department investigation in Washington.
• Attacks on Romney Are ‘Chicago-Style Politics,’ Adviser Says. Attacks on Republican presidential candidate Mitt Romney over his role at Bain Capital Partners LLC after he assumed management of the 2002 Olympics are “classic Chicago-style politics,” senior Romney adviser Ed Gillespie said. “He was not involved in the management, was not involved in the day-to-day decisions -- he wouldn’t have had time,” Gillespie said today on CNN’s “State of the Union” program. “He left a life he loved to go to Salt Lake City to save the Olympics for a country he loves more” and took a “leave of absence” from the firm. Senator Kelly Ayotte, a Republican from New Hampshire, said on the ABC show that Obama campaign attacks on Bain Capital and Romney’s tax returns show that Obama is “just a small politician and running on small-ball politics at a time when our country is facing grave, grave challenges.”
• Fed Draws Lawmaker Scrutiny After Release of Libor Papers. The Federal Reserve Bank of New York is drawing more scrutiny from lawmakers critical of its record as a bank supervisor after releasing documents showing it was aware Barclays Plc (BARC) underreported London interbank offered rates in 2008. The New York Fed knew “some banks” were potentially understating submissions for Libor as early as 2007, according to a statement posted on its website yesterday. A Barclays employee told a New York Fed staff member in April 2008 that the U.K.’s second-largest lender was underreporting its rate to avoid a “stigma,” the Fed bank said.
• ZTE Falls Most Since 2008 as Net May Drop 80%: Hong Kong Mover. ZTE Corp. (000063), China’s second-biggest maker of telecommunications equipment, fell the most in more than three years in Hong Kong trading after the company said first-half profit may have declined as much as 80 percent. ZTE fell 16 percent to HK$10.52 as of 10 a.m., headed for the biggest drop since Oct. 27, 2008. The equipment maker’s Shenzhen-traded shares declined by the daily limit of 10 percent to 11.72 yuan.

Barron's:

• Hyatt(H) CEO Sees 'Pronounced' Slowdown in China. China's economy may be slowing in a "pronounced way" as retailers, manufacturers and real-estate developers all voice concern, Hyatt Hotels Chief Executive Office Mark Hoplamazian said in an interview.
  

Wall Street Journal:

• Europe's Bank Shifts View on Bond Losses. ECB Chief Draghi Pushed for Senior Creditors of Spain's Weakest Banks to Share Burden; Euro-Zone Ministers Resisted. The European Central Bank, in a sharp turnaround, advocated imposing losses on holders of senior bonds issued by the most severely damaged Spanish savings banks—though finance ministers have for now rejected the approach, according to people familiar with discussions. The ECB's new position was made clear by its president, Mario Draghi, at a meeting of euro-zone finance ministers discussing a rescue for Spain's struggling local lenders in Brussels the evening of July 9.
• Accounting Panel Expresses 'Regret' Over U.S. Stance. The London-based authorities that oversee global accounting rules said Sunday they "regret" that the U.S. hasn't made a stronger move toward switching to the global system. The International Accounting Standards Board has been pressing the U.S. to switch from its own set of accounting rules to International Financial Reporting Standards, or IFRS.
• 'Paranoia' in Futures Industry After Peregrine Collapse. Hours after news flashed last week that futures brokerage Peregrine Financial Group Inc. was imploding, Greg Sabatello's phone was jammed with customers questioning the safety of their money in his $70 million electronic-brokerage firm, TransAct Futures in Chicago. Mr. Sabatello, president of TransAct, told clients their money was safe, but some didn't take his word for it. Instead, they asked for some of their money back, to make sure it was there, he said.
• Surveillance Tools at Issue in Lawsuit. The American Civil Liberties Union will be in federal court Tuesday as it seeks to force the U.S. Department of Justice and other federal agencies to detail how often they use surveillance tools that capture the email addresses contacted, phone numbers called and websites visited by a person. Such tools are known as pen register and trace-and-track technology, and while the government believes they're critical for law enforcement, privacy advocates are concerned about the lack of transparency on how often the searches are used.
• Tax Break Nears End For Online Shoppers. Republican governors, eager for new revenue to ease budget strains, are dropping their longtime opposition to imposing sales taxes on online purchases, a significant political shift that could soon bring an end to tax-free sales on the Internet.
• Airbus, Boeing Walk a Fine Line on Jetliner Production. For Airbus and Boeing Co., managing production lines means walking an increasingly fine line between generating cash and stoking an airplane glut. The two giants of commercial aviation are delivering jetliners in record numbers and continuing to increase output despite uncertainties about the global economy. Airlines are hungry for new fuel-efficient planes to replace gas-guzzling old models and to expand operations in markets with economic growth. But some industry officials—particularly financiers who fund all those airplane purchases—worry that a thirst for cash at Boeing and Airbus is driving production as much as airlines' requirements.
• Card Pact's Foes Arm for Battle. A trade association representing some 3,700 convenience stores and other companies has hired a longtime legal foe of Visa Inc. and MasterCard Inc. to help challenge last week's $6.6 billion lawsuit settlement between the credit-card industry and merchants.
• Glaxo Nears Deal on Human Genome. GlaxoSmithKline PLC is nearing an agreement to buy Human Genome Sciences Inc. for as much as $3 billion, dropping its monthslong hostile pursuit of the U.S. biotechnology company for a negotiated deal that could be announced as early as Monday, people familiar with the matter said.
• North Korea Relieves Top General. State Media Says Influential Official Who Guided Transition Was Removed From Posts Due to Illness.
• The Tax Cliff Is a Growth Killer. No matter what happens from now on, 2013 will be a very tough year.

Business Insider:

• China's Catastrophic Deleveraging Has Begun.
• THE MOST IMPORTANT CHARTS IN THE WORLD.
• Troika Report On The 'Awful' Situation In Greece Leaks Early.
• Could This Device Change Television Forever?

Zero Hedge:

• Is Keynesianism Running Dry?
• Merkel Majority Fades As Internal Revolt May Signal 'Referendum'.
• President Obama: "If You've Got A Business - You Didn't Build That. Somebody Else Made That Happen".
• The Politicians Have To Stop Doing What They Have Done Since WWII Or "The Markets Will Do It For Them".
• After Creating Dollar Exclusion Zones In Asia And South America, China Set To Corner Africa Next.

CNBC:

• Consumers Leaving Less in Vegas: Las Vegas Sands President.

Wall Street All-Stars:

• Indicator Update: Get Ready for a Three-Ring Circus. More people are visiting the Las Vegas strip, but they’re not spending as much as they used to, Michael Leven, Las Vegas Sands president & COO, told CNBC’s “Squawk Box” Friday.

LA Times:

• Virtual fitting rooms changing the clothes shopping experience. High-tech sizing machines scan customers and offer a list of recommended clothing, eliminating returns and providing manufacturers with real-world data.

NY Times:

• Vast F.D.A. Effort Tracked E-Mails of Its Scientists. A wide-ranging surveillance operation by the Food and Drug Administration against a group of its own scientists used an enemies list of sorts as it secretly captured thousands of e-mails that the disgruntled scientists sent privately to members of Congress, lawyers, labor officials, journalists and even President Obama, previously undisclosed records show.

USA Today:

• Egan-Jones CEO sees rising debt as biggest eurozone problem.

Reuters:

• Italy's Berlusconi to run in 2013 - party official. Former Italian Prime Minister Silvio Berlusconi will return to frontline politics as the centre-right candidate in next year's general election, a senior official in his PDL party was quoted as saying on Thursday. "Yes, Berlusconi is the candidate for premier," Fabrizio Cicchito, PDL parliamentary leader told Italian news agencies after a meeting of the party leadership at Berlusconi's Rome residence. He said the return of Berlusconi, the undisputed master of a party built up entirely around himself, meant there would be no primaries to find a candidate, as had been originally expected.

Financial Times:

• Europe’s banks face tougher demands. The head of Europe’s top banking regulator has raised the bar for lenders’ capital requirements, insisting that the 9 per cent capital ratio they had to hit as a “temporary buffer” by June is to become permanent.

The Telegraph:

• Citigroup(C) "must be ready for any eventuality" on the euro and the region's debt crisis, CEO Vikram Pandit said in an interview.
• Eurozone rescue without growth means Finland could be first to leave.
• China's economic woes could continue for 'some time'. China's economic woes could continue for "some time," premier Wen Jiabao has warned, raising fears that the world's second largest economy is headed for a hard landing.

Sky News:

• Exclusive: Barclays Implicates Libor Rivals. Sky News' City Editor obtains a memo sent to staff at Barclays hinting that other banks will end up being fined for rate-fixing.

BBC:

• First Miami-Cuba cargo ship in 50 years reaches Havana.

MailOnline:

• Doctors and nurses may see their salaries slashed and then be forced to work longer hours. Thousands of doctors and nurses could be forced to take drastic pay cuts and work longer hours under NHS plans to save money. Managers from 19 hospital trusts in England have drawn up measures that would also see employees losing some of their holiday and not being paid for overtime. But experts warn such proposals could lead to many frontline workers quitting their jobs, which could put patient care at risk.
  

Commercial Times:

• Taiwan May Cut Economic Growth Forecast This Month. A reduction in the economic growth estimate would be the seventh cut this year.
  

IBNLive:

• Obama slams India's economic policy. (video) US President Barack Obama said that India is limiting foreign investment in too many sectors like retail.

Ming Pao Daily:

• More than 2,000 Hong Kong manufacturers in the Pearl River Delta may shut their businesses this year as export orders decline, citing Stanley Lau, deputy chairman of the Federation of Hong Kong Industries. Some Hong Kong manufacturers' export orders have fallen 30% from last year, the report said.
  

China Daily:

• Tight grip leads to sharp declines in land sales revenues. China posted significant declines in land sales revenues in the first half of this year as the government vowed not to relax its tightening over the property sector, according to data from the Ministry of Finance (MOF) on Saturday. Nationwide, revenues from land sales tumbled 27.5 percent year on year to reach 1.14 trillion yuan ($180.24 billion) in the first six months, MOF data showed.

China Securities Journal:

• China's southern city of Zhuhai denied that it was planning to loosen restrictions on property and will keep the central government property controls, citing Xie Yiwei, an official from the city's housing bureau.

China Business News:

• China's airlines had a combined profit of almost 4bln yuan in 1H, a decline of about 70% from a year earlier, citing statistics from the airlines regulator. Cargo turnover rose 4.9% in 1H from year earlier, the report said.
  

Weekend Recommendations

Barron's:

• Made positive comments on (JAKK), (DVN), (LINTA), (UTX) and (NCR).
• Made negative comments on (AMZN).
  

Night Trading

• Asian indices are -.75% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 163.50 -4.5 basis points.
• Asia Pacific Sovereign CDS Index 134.0 -4.0 basis points.
• FTSE-100 futures +.15%.
  
• S&P 500 futures -.25%.
• NASDAQ 100 futures -.21%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GCI)/.53
• (C)/.89
• (JBHT)/.66
• (BRO)/.31
• (CTAS)/.60
• (PKG)/.45
  

Economic Releases
8:30 am EST

• Empire Manufacturing for July is estimated to rise to 4.0 versus 2.29 in June.
• Advance Retail Sales for June are estimated to rise +.2% versus a -.2% decline in May.
• Retail Sales Less Autos for June are estimated unch. versus a -.4% decline in May.
• Retail Sales Ex Auto & Gas for June are estimated to rise +.2% versus a -.1% decline in May.

10:00 am EST

• Business Inventories for May are estimated to rise +.2% versus a +.4% gain in April.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's George speaking and Eurozone inflation data could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and consumer 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 week.

Weekly Outlook

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

BOTTOM LINE: I expect US stocks to finish the week modestly lower on Eurozone debt angst, rising global growth fears, more shorting, profit taking, financial/tech sector weakness, US "fiscal cliff" concerns and earnings worries. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Market Week in Review

S&P 500 1,356.78 +.15%*



The Weekly Wrap by Briefing.com.

*5-Day Change