Today's Headlines

Bloomberg:

• Euro Bailout Bid Gets Vote of No-Confidence as Markets Drop. European policy makers received another vote of no-confidence in their efforts to stem economic turmoil as the euro fell to its lowest in more than two years following final approval for a bailout of Spanish banks. The decision by euro finance chiefs failed to offset trouble elsewhere. Spanish Prime Minister Mariano Rajoy forecast a second year of recession and Valencia became the first state to say it would seek a rescue from the central government. Italian Prime Minister Mario Monti blamed unrest in Spain for surging borrowing costs, and an ally of German Chancellor Angela Merkel endorsed the prospect of Greece exiting the euro. “We’re looking at a situation when people are realizing we’re at a point of debt restructuring and repudiation,” Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London, said in an interview today. “It’s cold-hearted reality. The great blag and bluff of the euro zone has always managed to kick the can down the road, but it is no longer a viable strategy. We’re getting to a crunch point.”
• Spain Bonds Slide as Valencia Aid Request Deepens Crisis. Spain’s bonds fell, sending five- and 30-year yields to euro-era records, as the region of Valencia prepared to seek a rescue, deepening concern policy makers are failing to find solutions to the debt crisis. The nation’s 10-year bonds fell for a seventh day, increasing the extra yield investors demand to hold the securities instead of German bunds to the most on record, as Spain also cut its growth forecast. The Italian-German yield gap reached the most since January and Germany’s two-year yields fell to a record. Belgian and French 10-year bond yields declined to all-time lows as investors sought higher-yielding alternatives to benchmark German debt. “Valencia’s request for assistance underlines fears as to the central government’s ability to bring wayward regions to heel,” said Richard McGuire, senior fixed-income strategist at Rabobank International in London. “That puts Spain under a considerable degree of pressure.” Spanish five-year yields jumped 47 basis points, or 0.47 percentage point, to 6.88 percent at 5:21 p.m. London time, after touching 6.903, the most since the euro started in 1999. The 4.25 percent note due in October 2016 dropped 1.595, or 15.95 euros per 1,000-euro ($1,216) face amount, to 90.535. The euro fell to its lowest level since 2000 versus the yen and reached a two-year low against the dollar. The 10-year yield rose 26 basis points to 7.27 percent, having jumped 61 basis points this week. Spain faces a “death spiral” as higher yields push up borrowing costs, and that adds to concern the nation won’t be able to services its debt, McGuire said.
• Merkel Partner CSU Would Back Greek Euro Exit, Rheinische Says. German Chancellor Angela Merkel's Christian Social Union allies would reject Greece's effort to east the terms of its bailout, the party's floor leader in the federal parliament said in an interview. Bending the conditions for Greece "would be a fatal signal to other crisis-plagued states," Gerda Hasselfeldt was cited as saying. "They would then also demand to renegotiate" rescue accords, she said. "What's clear for us in the CSU is that we cannot support any move to renegotiate the substance or timeframe for those conditions." "If a country is not in a position to fulfill its obligations or is unwilling to, then it must leave the euro zone.
• Spain Insists $15 Billion Aid for Regions Won’t Swell Debt. Spain’s plan to offer cash-strapped regional administrations emergency loans leaves the Treasury with 12 billion euros ($15 billion) of additional funding needs that the government says won’t affect its borrowing plans. The central government will tap the lottery for part of the 18 billion-euro fund for regions, leaving 12 billion euros for the Treasury to finance. While Economy Minister Luis de Guindos said yesterday that the plan won’t affect the nation’s borrowing program, economists including Jose Carlos Diez at Intermoney SA say it will be hard to sustain without selling more debt. “Where will it come from?” said Diez, chief economist at the Madrid-based brokerage, which is Spain’s biggest bond trader. “In the end it has to add to their financing needs.”
• Europe’s $180 Billion of Maturities Lifts Swaps: Credit Markets. Speculative-grade corporate debt in Europe is the most expensive to insure against losses in 1 1/2 years relative to sovereign bonds as companies need to refinance as much as $180 billion of debt by 2014. An index of credit-default swaps on junk-rated European companies exceeds one for government bonds by 2.44 times, up from 1.65 in March, according to data compiled by Bloomberg. Finnish mobile-phone manufacturer Nokia Oyj (NOK1V) led the increase among European non-financial companies, with a 136 percent jump in the last three months, followed by Rome-based toll-highway operator Atlantia SpA (ATL), whose swaps climbed 72 percent. Borrowers in Europe, the Middle East and Africa face $84 billion of junk-rated debt maturing next year and $96 billion in 2014, compared with 2011’s record bond sales of $70 billion, Moody’s Investors Service said. Their ability to service debt is being hurt by the worsening economic outlook, with the International Monetary Fund forecasting July 16 that output will shrink 0.3 percent in the euro area this year. “The problems now are for peripheral corporates,” said Nicolo Bocchin, a money manager at Aletti Gestielle SGR SpA in Milan. “It is very difficult to access the market.”
• S&P 500 Puts Fall at Fastest Since '09 on Stimulus Bets: Options. The cost of protecting against U.S. equity losses is dropping at the fastest pace in more than three years, pushed lower by speculation the Fed will stimulate the economy as concern about Europe recedes. Puts with an exercise level 10% below the S&P 500 Index cost 8.73 points more than calls 10% above on July 18, the lowest since May 2011, according to Bloomberg. The price relationship known as skew shrunk 32% since its June 15 high, the biggest decline since March 2009 over comparable periods.
  
• Credit Swaps in U.S. Rise as Spain Bank Bailout Terms Finalized. A benchmark gauge of U.S. corporate debt risk rose for the first time in four days as euro-area finance ministers gave final approval to a bank bailout for Spain of as much as 100 billion euros ($122 billion). The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark used to hedge against losses on corporate debt or to speculate on creditworthiness, increased 2.6 basis points to a mid-price of 110.7 basis points at 8:41 a.m. in New York, according to prices compiled by Bloomberg.
• Treasury 5-Year Yields Fall to Record on Spain's Debt Crisis. Treasuries rose, with five-year yields falling to record lows, as Spain said its recession will extend into next year after getting approval for a bank bailout, pushing investors into the safety of government debt. The yield on the U.S. 10-year note traded almost at a record low as the region of Valencia in Spain prepared to seek a rescue from the central government as European finance ministers approved a $122 billion bank rescue plan. Yields on Spain’s bonds earlier climbed to record highs over German bunds as Italian bond yields rose to a six-month high over comparable bunds. “Everybody still views the U.S. Treasury market as the safe haven,” said David Coard, head of fixed-income trading in New York at Williams Capital Group, a brokerage for institutional investors. Yields “could be driven even lower. It’s what’s going on in Europe again, it’s this fear.”
• Brazil Inflation Unexpectedly Jumps, Ending Downward Trend. Brazil’s inflation unexpectedly accelerated this month, reinforcing investors’ bets that the central bank will soon end a cycle of interest rate cuts that has taken borrowing costs to a record low. Consumer prices as measured by the IPCA-15 price index rose 0.33 percent in the month through July 13, exceeding all 42 analyst estimates in a Bloomberg survey whose median forecast was for a 0.18 percent increase. The annual inflation rate accelerated for the first time in 10 months to 5.24 percent, the national statistics agency said in Rio de Janeiro today.
• Palo Alto Surges in Public Debut; Fender Withdraws IPO. Palo Alto Networks Inc. and Kayak Software Corp. (KYAK) jumped in their trading debuts after raising more than planned in initial public offerings, bolstering the revival in technology IPOs. Palo Alto climbed 32 percent to $55.63 at 12:52 p.m. in New York, while Kayak rose 27 percent to $32.91. Palo Alto sold 6.2 million shares at $42 each yesterday, generating more than $260 million, while Kayak sold 3.5 million shares at $26 each to raise $91 million. Both priced their sales above the proposed ranges.
• Syria Rebels Fight for Control of Border Crossings. Syrian rebels fought for control of some of the country’s border crossings as the government held funerals in the capital for top security officials killed in a bomb attack two days ago. At the United Nations in New York, Russia and China blocked a proposal to sanction President Bashar al-Assad’s government. A Russian diplomat said Assad has accepted the need to cede power in a “civilized manner.”

Wall Street Journal:

• 12 Killed in Colorado Theater Shooting. A gunman in a crowded Colorado movie theater that was screening the latest Batman movie opened fire shortly after midnight, killing at least 12 people and wounding more than three dozen others. Law-enforcement officials familiar with the matter identified the suspect as James Holmes, 24 years old, of Aurora, just east of Denver. He has no criminal record and doesn't appear to have links to extremist or terrorist groups, according to two officials familiar with the investigation.
• Live: Streaming Updates on the Shooting.
• State Data Highlight Limp Job Market. The labor market continued to limp along across most of the country after a winter of solid growth, according state-by-state data on unemployment. The national unemployment rate stood at 8.2% in June, the same as the prior month, the Labor Department said earlier this month. Friday, the agency released further details showing that the jobless rate rose in more than half the states, dropped in 11 states and Washington, D.C., and held steady in a dozen states.
• China to Probe U.S., South Korea Solar Products. China's Commerce Ministry said Friday that it is investigating possible solar equipment subsidies by the U.S. and South Korea and their impact on Chinese manufacturers, widening a trade spat at a time of oversupply and weakening demand for solar power equipment.
• Uproar Over LIBOR Reaches Germany. German banks are caught in the cross hairs of the global investigations into rate manipulations. Deutsche Bank AG and the now-defunct WestLB AG were both given positions on the panel that created the London interbank offered rate, or Libor, considered a prestigious posting at the time for a foreign bank.

CNBC.com:

• Police: 'Sophisticated' booby traps in Colorado shooting suspect's apartment. The area around the apartment of mass movie theater shooting suspect James Holmes in suburban Denver was evacuated Friday and police were trying to determine how to disarm booby traps made of what Aurora police said appeared to be "very sophisticated" explosives or flammable materials.
• Now It's the Big Banks That Are Getting Foreclosed On.
• Sell Spain Before Troika Comes to Town: S&P. Anyone holding Spanish stocks should sell before Madrid is forced to go cap in hand to the European Union and International Monetary Fund, according to analysts at S&P Capital IQ.
• Extreme Heat, Drought to Bake Crops Through August.
• Strike Threats Loom Over Olympics. Strikes by train drivers and passport officials threaten major disruptions to the London Olympics, prompting the government to warn unions that they risked public anger if the industrial action went ahead.

Business Insider:

• Tragic Pictures From The Denver Shooting Aftermath.
• Hezbollah Website Offers This Infographic On How To Close The Strait Of Hormuz.
• Recession Evidence Mounting.
  

Zero Hedge:

• The Hedge Fund Trail In Liborgate Gets Hotter: Mega Fund Brevan Howard Next?
• ECB Says Greek Bonds No Longer Eligible As Collateral, Leaves Greece With Under €65bn Of ELA Borrowing Capacity.
• Spanish Stocks Plunge Most In 12 Months As Egan-Jones Cuts Spain To CCC+.
• Peak Complacency And Peak Leverage. (graphs)
  

NY Post:

• Funding for Startups Down 12% in Second Quarter.
  

Rasmussen Reports:

• Confidence in Housing Values Falls to Lows for the Year.
  

Reuters:

• EXCLUSIVE - New York police link nine 2012 plots to Iran, proxies. New York police believe Iranian Revolutionary Guards or their proxies have been involved so far this year in nine plots against Israeli or Jewish targets around the world, according to restricted police documents obtained by Reuters. Reports prepared this week by intelligence analysts for the New York Police Department (NYPD) say three plots were foiled in January, three in February and another three since late June. Iran has repeatedly denied supporting militant attacks abroad. The documents, labelled "Law Enforcement Sensitive," said that this week's suicide bomb attack in Bulgaria was the second plot to be unmasked there this year. The reports detail two plots in Bangkok and one each in New Delhi, Tbilisi, Baku, Mombasa and Cyprus. Each plot was attributed to Iran or its Lebanese Hezbollah militant allies, said the reports, which were produced following the bombing in Burgas, Bulgaria of a bus carrying Israeli tourists.
• Copper tumbles over 2 pct on Spanish fears, China.
• Libor rate-fixing amplified CDO losses, experts say. The manipulation of Libor rates increased losses for investors saddled with toxic assets in the financial crisis, say lawyers and analysts evaluating the prospects for litigation over the scandal.
• Global oilfield growth lifts Schlumberger(SLB), Baker Hughes(BHI). Schlumberger Ltd and Baker Hughes Inc, the No. 1 and No. 3 oilfield service companies, posted higher-than-expected profits as revenue piled up outside North America despite dark clouds looming over the world economy.

Telegraph:

• Spain won't grow until 2014 as eurozone agrees bank bailout. Spain's stock market suffered its largest one-day fall in two years after the country revealed it will not return to growth until 2014 and will have to pay an extra €9.1bn next year just to service its debt.
• Fitch slashes credit ratings of Japan's biggest banks. Fitch has cut the credit rating of three of Japan's biggest banks over concerns about Tokyo's ability to support the financial sector, after the nation's sovereign debt rating was also cut.
• Spanish protests over new austerity measures. (pics)
• Italy's economic crisis risks sparking 'civil war' in Sicily. The misery caused by Italy's financial crisis could spark a "civil war" in the southern island of Sicily, the mayor of regional capital Palermo said on Friday.

Handelsblatt:

• German tax revenue increased 4.4% in 1H and 7.5% in June while 1H government spending fell 1.5% as interest payments and spending on jobless benefits declined, citing the Finance Ministry.
  

IMF:

• The withdrawal of funding by western lenders in eastern Europe remains a "headwind" to economic growth in the region and it threatens external funding and financial stability should the euro-region debt crisis worsen, the Vienna Initiative group said in a report today. The relief from the ECB's longer-term refinancing operations is wearing off and deleveraging pressures remain "substantial" in several countries, according to the reported distributed by the IMF.
  

Jyllands-Posten:

• Danish Bailout Inflicts Fresh Losses on 20-30 Banks, JP Says. More lenders may fail as Denmark's wind-down agency shuts down clients accounts in property portfolio from FIH Erhvervsbank, inflicting fresh losses on 20-30 banks, citing the independent banking portal Mybanker.
  

ThDailyStar:

• More than 30,000 Syrians Cross Into Lebanon in 48 Hours. More than 30,000 Syrians have streamed across the Masnaa border in the last 48 hours, according to a source in Lebanon’s General Security, in the wake of the surge in fighting in and around Damascus. Four lines of cars waiting to enter Lebanon were backed up for nearly a kilometer behind the Customs and General Security offices at Masnaa Thursday afternoon.
  

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.60%

Sector Underperformers:

• 1) Restaurants -3.60% 2) Steel -3.01% 3) I-Banks -2.63%

Stocks Falling on Unusual Volume:

• DB, TEF, N, TI, UBS, E, MDR, NCR, SFUN, CLB, ELP, CPHD, ACTG, VVUS, MATW, HUBG, PNRA, ISRG, UFPI, IDXX, WFM, ECHO, TZOO, MLNX, BWLD, SYNC, HSTM, TXRH, BPOP, INFI, RGC, LH, PBCT, VHC, MNST, DNKN, CY, MAN, CMG and GORO
  

Stocks With Unusual Put Option Activity:

• 1) EWG 2) CMG 3) PNRA 4) MNST 5) HTZ
  

Stocks With Most Negative News Mentions:

• 1) JCI 2) F 3) AMD 4) BAC 5) UPS
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value -.62%

Sector Outperformers:

• 1) Homebuilders +1.89% 2) Oil Service +1.78% 3) Utilities +.36%

Stocks Rising on Unusual Volume:

• BHI, SLM, SPN, GOOG, MGLN, SNDK, ATHN, ALGN, ROVI, ONXX, GDI and GGC
  

Stocks With Unusual Call Option Activity:

• 1) BHI 2) CMG 3) SNDK 4) WFM 5) LSI
  

Stocks With Most Positive News Mentions:

• 1) PFE 2) LMT 3) PEP 4) ONXX 5)
  

Charts:

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

Friday Watch

Evening Headlines
Bloomberg:

• Syria’s Collapse Would Reverberate Throughout the Mideast. The assassination of three Syrian military leaders loyal to President Bashar al-Assad may hasten the end of his family’s four-decade rule, an upheaval that would affect the security and influence of Israel, Iran, Saudi Arabia, Jordan, Lebanon and other neighboring states. Nabil el-Arabi, secretary-general of the Arab League, expressed anxiety among Syria’s neighbors over the regional fallout from the crisis when he warned July 18 of “a collapse in the situation not only in Syria, but for the whole region.” If Assad’s regime is toppled, the ensuing power struggle might bring with it revenge killings by or against his minority Shiite Alawite sect, which controls the military and the economy, said Aaron David Miller, a fellow at the Woodrow Wilson International Center for Scholars in Washington. Instability and sectarian violence could bleed into neighboring states such as Jordan, Lebanon, and Iraq. Already, 125,000 Syrian refugees have fled the violence to neighboring states, with the greatest number to camps in Turkey, the U.S. State Department said yesterday. No one knows whether the bombing July 18 inside a heavily guarded military compound in the capital of Damascus is the beginning of the end for the Assad family’s authoritarian regime, or what new government or chaos might follow it.
• Yields Below Zero No Bar to Buyers Craving Safety: Euro Credit. Negative yields on European government securities, paced by a record of minus .074 percent on German two-year notes, aren't deterring investors seeking the safety of debt with the best perceived creditworthiness. "It's not return on capital, it's return of capital," said Peter Allwright, who helps manage about $4 billion as the head of absolute rates and currency at RWC Partners Ltd. in London. "We are in a horrible deflationary and deleveraging world. In euros, we only want to hold Germany as it's the best and the most liquid."
• Euro Falls Versus Most Major Peers Before Confidence Data. The euro slid versus most of its major peers before data that economists say will show consumer confidence remained weak and manufacturing continued to shrink in the 17-nation region. Europe’s common currency was 0.2 percent from the lowest level in more than three years versus the British pound after Spain’s borrowing costs surged at an auction yesterday, rekindling concern the region’s debt crisis is deepening. The dollar maintained a five-day slide against the Australian currency after stocks rose globally, sapping demand for lower- yielding assets. “There are a number of issues with the European economy. It is pretty clearly in quite an acute contraction,” said Andrew Salter, a currency strategist in Sydney at Australia & New Zealand Banking Group Ltd. (ANZ) “The euro is going to remain a weak currency.”
• China Stocks Fall, Extending Slump to 5th Week on Property Curbs. China’s stocks fell, sending the benchmark index towards a fifth week of declines, after the government said it won’t relax property controls and the nation’s two largest-listed brokerages posted profit declines. China Vanke Co. slid to a two-week low, leading developers lower, after the government said it will seek to keep a “firm grip” on the real estate market to prevent a rebound in housing prices. Citic Securities Co. and Haitong Securities Co. retreated after estimating falling profits in the first half of this year. Hisense Electric Co., China’s biggest manufacturer of flat-panel televisions, slumped 4.1 percent after Citic Securities reduced its earnings forecast. The Shanghai Composite Index (SHCOMP) slid 0.4 percent to 2,175.75 at the 11:30 a.m. local-time break, adding to a 0.5 percent drop this week. The Shanghai Composite has fallen 12 percent from this year’s high recorded on March 2 amid concern an economic slowdown is deepening.
• China Profits Sinking May Pressure Wen to Reduce Taxes: Economy. Profit declines for hundreds of Chinese companies in the first half may increase pressure on the government to reduce corporate taxes as part of efforts to stem the economy’s slowdown. Net income declined from a year earlier for more than half of 760 listed companies to report results, worse than in the first six months of 2009, Societe Generale SA said yesterday. Credit Agricole CIB sees tax cuts as a likely policy tool.
• New York City Jobless Rate Climbs to 10%. New York City’s seasonally adjusted unemployment rate jumped to 10 percent in June, matching a post- recession peak reached in the six months through February 2010, the state Labor Department said. The rate climbed from 9.7 percent in May.
• Crop Traders Extend Bullish Streak on U.S. Drought: Commodities. Corn and soybean traders are bullish for a 13th consecutive week on mounting concern that yields will keep dropping amid the worst U.S. drought in a half century. Twenty analysts surveyed by Bloomberg expect soybeans to climb next week, after reaching a record yesterday. A further five were bearish and three neutral. Nineteen predicted gains in corn, five saw a decline and three anticipated little change. Hedge funds are holding the biggest bet on rising soybeans since the beginning of May and the largest wager on corn since April, U.S. Commodity Futures Trading Commission data show.
• Weakest Monsoon Since 2009 to Shrink India Rice Harvest. The rice harvest in India, the world’s second-biggest producer, is set to drop from an all-time high as the weakest monsoon in three years slows planting, potentially boosting global prices. “It will be difficult to match last year’s record rice production,” said Samarendu Mohanty, a senior economist at the International Rice Research Institute in Manila. Output was 104.3 million tons in the year ended June 30. A 22 percent shortfall in monsoon rains delayed sowing of crops from rice to cotton, stoking a rally in commodity prices and threatening to accelerate India’s inflation that exceeded 7 percent for a fifth straight month in June. Dry weather from the U.S. to Australia has parched fields, pushing up corn, wheat and soybean prices on concern global supplies will be curbed. Costly rice, staple for half the world, may increase global food prices forecast by the United Nations to advance this month. “The whole grains complex of wheat, corns, soybeans are forcing rice prices higher as well,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity- markets newsletter in Sydney. “Indian production is very important for the market.”
• Palo Alto Raises $260.4 Million, Pricing IPO Above Range. Palo Alto Networks Inc. and Kayak Software Corp. (KYAK) raised a combined $351.4 million, pricing their initial public offerings above the proposed ranges and tapping renewed investor demand for technology shares. Palo Alto, a maker of Internet firewalls, raised $260.4 million selling 6.2 million shares at $42 apiece, it said in a statement today, after offering the shares for $38 to $40. Kayak, an online travel company, raised $91 million selling 3.5 million shares at $26 apiece, a dollar more than the top end of the marketed range, according to a company statement.
• Carson Block Targets New Oriental(EDU). (video) New Oriental Education & Technology Group is trying to downplay its franchise operations, Carson Block, the founder of research company Muddy Waters LLC, said in an interview with Bloomberg TV today.
• Congratulations, Canada, On Your Ongoing Housing Bubble, (graph)
• Investors Whipsawed by Hourly Price Swings in IBM(IBM), Coca-Cola(KO). Investors in three of the biggest Dow Jones Industrial Average (INDU) stocks were whipsawed by price swings that repeated every hour yesterday, fueling speculation the moves were a consequence of computerized trading. Shares of International Business Machines Corp. (IBM), McDonald’s Corp. (MCD) and Coca-Cola Co. (KO) swung between successive lows and highs in intervals that began near the top and bottom of each hour, data compiled by Bloomberg show. While only IBM finished more than 1 percent higher, the intraday patterns weren’t accompanied by any breaking news in the three companies where $3.42 billion worth of shares changed hands.
• Google(GOOG) Surges on Motorola Deal, Ad Growth. Google Inc. owner of the world’s most popular search engine, said second-quarter revenue surged 35 percent, helped by its acquisition of Motorola Mobility Holdings and as more users clicked on advertisements.

Wall Street Journal:

• Greeks Brace for More Pain on Wages.
• Syrians Flee Capital as Regime Hits Back. Battles With Rebels Intensify; Russia, China Veto U.N. Effort. Syrian soldiers unleashed an attack in Damascus that drove thousands of refugees from the city, while state media showed President Bashar al-Assad swearing in a new defense minister, in a show of force a day after a rebel bomb struck the regime's core. On the fifth day of fighting in the Syrian capital, witnesses reported government artillery and mortar attacks on several neighborhoods, suggesting the government intended to use significant force to silence the rebellion there, even as rebels claimed important gains elsewhere in the country.
• Religious Tensions Erupt in Russian Republic. The top Muslim cleric in Russia's Tatarstan republic was wounded by a car bomb and another senior cleric there was shot and killed in separate attacks that investigators called possible reprisals for their clampdown on radical Islamists. Thursday's violence, which shook a largely Muslim region often touted as a showcase of religious tolerance, followed more than a year of friction between its moderate Islamic clerical leadership and increasingly assertive groups practicing a puritanical version of Islam known as Salafism. "It is a serious signal," President Vladimir Putin declared.
• Bulgaria Blames Suicide Bomber. Suspect in Attackon Israeli Tourists Seen on Video, Officials Say; Israel Reiterates Iran Link, as Tehran Denies Involvement. A deadly attack targeting Israeli tourists in a Bulgarian resort city was the work of a suicide bomber dressed as a vacationer, authorities said Thursday. Bulgarian investigators released images of the man they believe triggered the blast that were recorded by security cameras before the attack. The footage showed a man in a blue T-shirt, plaid shorts and sneakers, wearing a large back pack and carrying what appears to be another, smaller bag.
• Euro Crisis Hits Emerging-Markets. Lending conditions in emerging economies deteriorated in recent months as the deepening crisis in the euro zone weighed on banks around the world, according to an industry survey to be released Friday. The Institute of International Finance, a global association of big banks, found that credit standards grew tighter in emerging-market banks around the world, while bad loans increased in the second quarter from the previous quarter. The results suggest trouble ahead for emerging economies that had been a bright spot in the global recovery, with banks in Asia and Latin America showing deeper caution.
• U.S. Says Iran Plans to Disrupt Oil Trade. Officials Cite New Intelligence Pointing to Potential Attacks on Platforms, Tankers in Region; Tehran Is 'Very Unpredictable'

Business Insider:

• SocGen's Awesome Presentation On The Slowing State Of The Chinese Economy.
  
• Whooping Cough Is At It's Highest Level In The US Since 1959.
• BREAKING: 'The Dark Knight Rises' Ticket Sales Are Outpacing 'The Avengers'.
• There Are Now 250 Million Google+ Users.
• CONFIRMED: 36 Percent Of Fukushima Kids Have Abnormal Thyroid Growths And Doctors Have Been Left In The Dark.

Zero Hedge:

• This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied - The Sequel.
• Europe's Fundamental Flaw Resurfaces.
• Deja Food: Will Social Unrest Surge As Corn Prices Soar?
• Ray Dalio's Bridgewater On The "Self Re-Inforcing Global Decline". He believes the common-wisdom - that the Germans and the ECB will save the day - is misplaced.

CNBC:

• Why Gasoline Prices Could Keep Moving Higher.

IBD:

• HMS Holdings(HMSY) Helps Hold The Line On Health Care Waste.

Rasmussen Reports:

• Among Uncommitted Voters, Obama Job Approval Is At 29%.

Reuters:

• Sheila Bair urges prompt reforms for money market funds. If the Securities and Exchange Commission does not beef up its oversight of money market funds, a council of regulators should take the reins, former U.S. bank regulator Sheila Bair said on Thursday.
• Exclusive: Ex-Goldman(GS) mortgage chief plans foreclosed home fund. Former Goldman Sachs Group Inc. executive Donald Mullen, one of the architects of the subprime mortgage trade, is trying to raise at least $500 million for a fund that will buy foreclosed homes with an eye toward renting them out. Several sources said Goldman Sachs is serving as the placement agent for the fund and will market it to wealthy investors, including some of its own clients.
• Exclusive: Banks in Libor probe consider group settlement-sources. A group of banks being investigated in an interest-rate rigging scandal are looking to pursue a group settlement with regulators rather than face a Barclays-style backlash by going it alone, people familiar with the banks' thinking said. Such discussions are preliminary, and it is unclear if regulators will enter these talks, aimed at resolving allegations that banks attempted to manipulate the London interbank offered rate, or Libor, a benchmark that underpins hundreds of trillions of dollars in contracts.
• SEC extends review period on JPM's copper ETF plan. The U.S. Securities and Exchange Commission has extended the consultation period on JP Morgan Chase & Co's controversial plan for an exchanged-traded fund (ETF) physically backed by copper amid mounting opposition from U.S. consumers of the metal.
• U.S. banks haunted by mortgage demons that won't go away. Lenders like Bank of America Corp and Wells Fargo & Co say they are facing mounting pressure to buy back bad mortgages they sold to investors, signaling that banks' home-loan headaches could continue for years.
• Intuitive(ISRG) profit tops estimates; Europe declines seen. Intuitive Surgical Inc on Thursday cautioned that challenging economic conditions in Europe and declines in U.S. prostate surgeries were likely to persist, and its shares fell more than 5 percent.
• Chipotle(CMG) restaurant sales miss estimate, shares tumble. Chipotle Mexican Grill Inc on Thursday said the sluggish U.S. economy slowed growth in sales at established restaurants during the second quarter, sending its shares down more than 6 percent.
• Microsoft(MSFT) posts quarterly loss but beats Wall Street. Microsoft Corp reported its first quarterly loss as a public company on Thursday as it took a previously announced hit for writing down the value of its ailing online unit, but held up better than expected in the face of stagnant computer sales.

Telegraph:

• Worst drought since 1956 threatens world food crisis. America's worst drought in more than half a century is threatening the world with a fresh food crisis.
• Spanish debt crisis returns as Germany nears bailout fatigue. Spanish borrowing costs have surged to euro-era highs despite draconian fiscal cuts and backing from the German parliament for the country’s €100bn (£78bn) bank rescue package. Yields on five-year bonds jumped to a fresh crisis peak of 6.46pc at a closely-watched auction as hopes fade for fresh stimulus from the European Central Bank and direct recapitalisation of Spanish banks by the EU bailout find, the European Stability Mechanism (ESM). “Demand for Spanish paper is collapsing, even for shorter-dated debt which is very worrying and raises the spectre of Spain losing market access,” said Nicholas Spiro from Spiro Sovereign Strategy. Marchel Alexandrovich from Jefferies Fixed Income said the markets are already bracing for second bigger rescue of around €400bn. “A few more weeks like this and Madrid is going to decide to it has nothing more to lose and call for a full sovereign bail-out,” he said. “Then we will find out if there really is any money in the EU kitty. “If the ECB goes on holiday without doing anything more, this is going to snowball. We’re way past point where any country can deliver fiscal measures on its own. People are not going to buy Spanish and Italian debt right now whatever ever they do. There has to be a circuit breaker.”

Capital.gr:

• Union Says Greece to Slash Benefits to Retired Workers. Greece's public sector umbrella union Adedy said Thursday the government plans to slash lump sums paid to retired civil servants by more than 20% in a bid to reduce the state funding needs of pension funds. After meeting with Greek Labor and Social Security Minister Yiannis Vroutsis, Adedy cited the minister as telling them that Greece's coalition government plans to slash the payments by 22.7% after having already reduced the amount by 20%. "The government's decision to move ahead with a new drastic reduction to the social security and pension rights of those working in the state is a cause of war," Adedy said in a statement.

Chosun Ilbo:

• N.Korean Army Chief 'Refused to Go Quietly'. A gunbattle broke out when the North Korean regime removed army chief Ri Yong-ho from office, leaving 20 to 30 soldiers dead, according to unconfirmed intelligence reports. Some intelligence analysts believe Ri, who has not been seen since his abrupt sacking earlier this week, was injured or killed in the confrontation.

China Daily:

• China will not relax property control policies. China will continue to maintain a firm grip of its real estate market and consolidate previous achievements in bringing down home prices so as to prevent them from rebounding, according to an urgent government notice released Thursday. "Local authorities must strictly implement the nation's property control policies. They should not relax the control and relevant requirements unauthorized," according to the notice. "Those that have loosened up controls must set straight the policies," said the notice, which was jointly released by the Ministry of Land Resources (MLR) and the Ministry of Housing and Urban-Rural Development. It also ordered local authorities to step up efforts in monitoring land pieces left idle even though they were sold.

China Securities Journal:

• China may tighten approvals for local solar photovoltaic projects to curb blind installations, citing a person familiar with the matter.

Shanghai Securities News:

• China's central bank offering a larger amount of reverse repurchase agreements may mean that the PBOC may cut lenders' reserve requirement ratio at a later date, citing people familiar with the situation.
• China is wasting the large amount of capital accumulated from the nation's high savings rate by not allocating them at the most suitable places, citing Guo Shuqing, China Securities Regulatory Commission's chairman.
  

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -1.0% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 161.0 -2.0 basis points.
  
• Asia Pacific Sovereign CDS Index 133.25 -1.75 basis points.
  
• FTSE-100 futures -.12%.
  
• S&P 500 futures -.27%.
  
• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AEP)/.71
• (BHI)/.78
• (GE)/.37
• (IR)/.91
• (MAN)/.72
• (SLB)/1.00
• (STI)/.45
• (VOD)/.04
• (IDXX)/.90
  

Economic Releases

• None of note

Upcoming Splits

• (CME) 5-for-1
  

Other Potential Market Movers

• The EU Finance Ministers Meeting could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and real estate 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 Rising Slightly into Final Hour on Tech Sector Strength, Short-Covering, Technical Buying

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Mixed
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 15.94 -1.35%
  
• ISE Sentiment Index 129.0 +59.26%
  
• Total Put/Call .83 -3.49%
  
• NYSE Arms .99 -1.12%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 108.17 -.15%
  
• European Financial Sector CDS Index 271.59 bps +.87%
  
• Western Europe Sovereign Debt CDS Index 262.14 -.62%
  
• Emerging Market CDS Index 251.77 -1.21%
  
• 2-Year Swap Spread 23.75 unch.
  
• TED Spread 37.75 +1.0 basis point
  
• 3-Month EUR/USD Cross-Currency Basis Swap -44.5 +1.25 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .08% -1 basis point
  
• Yield Curve 130.0 +3 basis point
  
• China Import Iron Ore Spot $128.30/Metric Tonne -2.10%
  
• Citi US Economic Surprise Index -65.30 -4.2 points
  
• 10-Year TIPS Spread 2.11 +3 basis points
  

Overseas Futures:

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

Portfolio:

• Higher: On gains in my Retail and Tech sector longs
  
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added them back
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher, despite eurozone debt angst, more financial/homebuilding sector weakness, rising food/energy prices, US "fiscal cliff" worries, earnings concerns and rising global growth fears. On the positive side, Internet, Semi, Disk Drive, Networking, Computer Service and Road & Rail shares are especially strong, rising more than +1.0%. Tech shares have traded well throughout the day. Copper is gaining +1.7%. Major European indices are higher, boosted by a +1.1% gain in Germany. Spanish stocks are not participating in the recent equity rally. The Bloomberg European Bank/Financial Services Index is rising +1.1% today. Brazil is gaining +1.2%. Major Asian indices were mostly higher overnight, led by a +1.7% gain in Hong Kong. Chinese and Japanese shares are slightly lower over the last 5 days. The Germany sovereign cds is down -1.9% to 74.0 bps, the France sovereign cds is down -1.8% to 165.91 bps and the Italy sovereign cds is down -1.3% to 504.67 bps. The Italian/German 10Y Yld Spread is falling -1.9% to 478.36 bps. On the negative side, Coal, Oil Tanker, Telecom, Bank, I-Bank, Biotech, Hospital, HMO, Insurance, Homebuilding, REIT and Airline shares are under pressure, falling more than -.75%. Financial and Homebuilding shares have traded heavy throughout the day. Oil is up +3.0%, Gold is rising +.3% and the UBS-Bloomberg Ag Spot Index is rising another +.9%. The UBS-Bloomerg Ag Spot Index is up +27.5% in about 6 weeks. The 10Y T-Note Yld is rising just +1 bp to 1.51%. The China benchmark Iron/Ore Spot Price Index has broken down again technically, falling -15.9% since April 13th and -30.6% since Sept. 7 of last year. As well, the China Hot Rolled Steel Sheet Spot Index is also picking up downside steam. US weekly retail sales have decelerated to a sluggish rate at +2.0%, which is the slowest since the week of April 5th of last year. US Trucking Traffic continues to soften. 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 investor perceptions of 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 -29.0% since Sept. 7th of last year. Shanghai Copper Inventories have risen +124.0% 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 down -17.2% since May 2nd of last year despite the recent surge in food prices. Spanish and Italian yields are back in the danger zone. Copper, lumber and the euro currency remain in intermediate-term downtrends. The 10Y T-Note continues to trade too well, which remains a big red flag. I still believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. The European Investment Grade CDS Index, European Financial Sector CDS Index, Spain sovereign cds and Italian cds, among others, have given back little of their April/May gains and appear to be consolidating before another push higher. The Citi Eurozone Economic Surprise Index is at -66.80 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. 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. The odds for QE3 are likely meaningfully lower than investors currently perceive as food prices soar and energy prices rebound. If the Fed embarks on another misguided round of QE, the Ag Spot Index should push through its Aug. 31, 2011 all-time high. This would likely also lead to another surge in energy prices as it would spur another bout of rioting in the Middle-East and other emerging markets. As well, it would greatly curtail any emerging markets stimulus plans, in my opinion. It is unlikely the Fed would take this risk ahead of an election, in my opinion. Uncertainty surrounding the effects on business of Obamacare, the "US fiscal cliff " and the election outcome uncertainty will likely become more and more of a focus for investors as the year progresses. The major averages continue to power higher off their recent lows, however the rally remains poor in quality. Volume, breadth, leadership, big volume/gainers are all lacking. There is a growing disconnect between US equity action and the deteriorating macro environment that is eerily similar to last July, in my opinion. The macro likely must begin improving very soon for equities to avoid a similar fate into the fall. 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, rising food/energy prices, rising global growth fears, more shorting, financial/homebuilding sector weakness and US "fiscal cliff" concerns.

Today's Headlines

Bloomberg:

• Spain Struggles to Sell Debt as French Yields Fall to Record. Spain’s five-year borrowing costs surged as the government pushed through spending cuts in the face of public protests, while France paid record-low yields of less than 1 percent to sell securities of the same maturity. Spanish five-year notes yielded an average 6.459 percent at auction today, up from 6.072 percent a month ago. Prime Minister Mariano Rajoy, who didn’t turn up to defend his cuts in parliament, secured passage of the plan with 180 votes, indicating none of the opposition in the 350-seat chamber supported it. The premier, who asked other euro nations for as much as 100 billion euros ($123 billion) last month to bail out banks, is fighting to maintain access to capital markets.
  
• German Lawmakers Back European Bailout of Spanish Banks. German lawmakers backed a euro-area bailout of Spanish banks after Finance Minister Wolfgang Schaeuble gave assurances that Spain will remain liable for the aid and parliament will be consulted on each step of the rescue. Lower-house lawmakers were forced to interrupt their summer break as they were recalled to Berlin for a special session on bank recapitalizations for Spain of as much as 100 billion euros ($123 billion). They voted 473 to 97 in favor of the bill after the main opposition parties were persuaded to back Chancellor Angela Merkel’s government and most coalition dissent quelled.
• Deutsche Bank, HSBC Traders Investigated in Libor Probe. Traders at Deutsche Bank AG (DBK), HSBC Holdings Plc (HSBA), Societe Generale SA (GLE) and Credit Agricole SA (ACA) are under investigation for interest-rate manipulation in a global probe that led to a record fine for Barclays Plc (BARC) last month, a person with knowledge of the matter said.
• Jobless Claims in U.S. Rise. Applications for jobless benefits increased by 34,000 to 386,000 in the week ended July 14, Labor Department figures showed today. Economists forecast 365,000 claims, according to the median estimate in a Bloomberg News survey.
• Americans Hold Dimmest View on Economic Outlook Since January. The most Americans in six months said the economy in July was getting worse, indicating the slowdown in hiring is dimming moods as the third quarter begins. The share of households viewing the U.S. as heading in the wrong direction rose to 36 percent, the highest since January, from 33 percent in June. The Bloomberg monthly expectations gauge was minus 11, matching June as the lowest level since January. The weekly Bloomberg Consumer Comfort Index fell to minus 37.9 in the period ended July 15, the lowest in a month. Limited wage gains and unemployment stuck above 8 percent risk further slowing consumer spending and leaving the U.S. more vulnerable to a global slowdown. There is also growing pessimism little is being done in Washington to avoid the so-called fiscal cliff at the end of the year, when higher taxes and automatic spending cuts kick in, raising the risk of recession. “A soft labor market and political tensions surrounding potential changes in tax policy are weighing on consumer sentiment,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Consumers are concerned about their incomes and have become much more cautious about spending. The economy is limping into the third quarter.”
• Home Sales to Factories Point to Second-Half Weakness: Economy. Sales of existing U.S. homes unexpectedly dropped. Home purchases slid 5.4 percent in June to a 4.37 million annual rate, an eight-month low, figures from the National Association of Realtors showed today in Washington.
• Manufacturing in Philadelphia Area Contracts for Third Month. Manufacturing in the Philadelphia region shrank for the third consecutive month as new orders and employment declined. The Federal Reserve Bank of Philadelphia’s general economic index rose to minus 12.9 in July from minus 16.6 the month before. Economists forecast the gauge would improve to minus 8, according to the median estimate in a Bloomberg News survey. The index showed the third straight month of contraction in new orders, to minus 6.9 from minus 18.8. Manufacturers were also less optimistic about the prospects for future business, with the six-month outlook for orders falling to 26.1 from 38.2. A gauge of employment declined to minus 8.4 this month from 1.8 in June. The six-month outlook for future hiring also worsened by 7.4 points to 11.3.
• Oil Rises to 8-Week High On Rising Mideast Tension. Oil advanced to the highest level in eight weeks on rising concern that the Middle East will lose stability, disrupting supplies from a region responsible for about 30 percent of world production. Prices gained as much as 3.4 percent after Israeli Prime Minister Benjamin Netanyahu blamed Lebanon’s Iranian-backed Hezbollah organization for the killing of Israeli tourists in Bulgaria and threatened a forceful response. In Damascus, Syria, government forces battled rebels in retaliation for a blast that killed three top anti-insurgency leaders. “People are very concerned about what’s going on in the Middle East and that’s giving oil a boost,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas- based energy consultant. “Iran is back in the spotlight and the situation in Syria is deteriorating. It increases geopolitical risk in the region and builds into fears that production may be disrupted.” Crude for August delivery increased $2.91, or 3.2 percent, to $92.78 a barrel at 12:39 p.m. on the New York Mercantile Exchange after climbing to $92.90, the highest intraday level since May 22. Oil’s seven-day gain is the longest since Feb. 24. Prices are down 6.3 percent this year. Brent oil for September settlement advanced $2.77, or 2.6 percent, to $107.93 a barrel on the London-based ICE Futures Europe exchange.
• Soybeans Rise to Record as Expanding Drought Hurts Midwest Crop. Soybean futures rose to a record as the worst drought in more than 50 years threatens crops in the U.S., the world’s biggest producer. About 48 percent of the Midwest was in severe to exceptional drought as of July 17, up from 33 percent a week earlier, the government said today. The U.S. has declared almost 1,300 counties in 29 states as natural-disaster areas because of the heat. Soybean fields are in the worst shape since 1988, when drought reduced output 20 percent, Department of Agriculture data show. “Soybeans are going downhill fast, and there are few signs for relief,” Gregg Hunt, a market analyst at Archer Financial Services Inc. in Chicago, said in a telephone interview. “Expanding drought will lead very tight U.S. supplies and higher prices to slow demand.” Soybean futures for November delivery rose 1.8 percent $16.4875 a bushel at 11:18 a.m. on the Chicago Board of Trade. Earlier, the price reached a record $16.7375. The previous all- time high for the most-active contract was $16.3675 on July 3, 2008.
• Midwest Weather Expected to Be Hot and Dry Through July. The Midwest will probably remain dry through the end of the month and the heat that has been wilting crops may persist until September. Temperatures in the Great Plains and Midwest are expected to remain 5 to 7 degrees Fahrenheit above normal (2.8 to 3.9 Celsius) through the end of July, according to MDA EarthSat Weather in Gaithersburg, Maryland. The company’s 30- to 60-day outlook calls for above-normal temperatures to grip the center of the U.S. through September.
• Feeding Frenzy Seen If Wall Street Sues Itself Over Libor. Wall Street, grappling with mounting regulatory probes and investor claims over alleged interest-rate manipulation, may face yet another formidable foe: Itself. Goldman Sachs Group Inc. (GS) and Morgan Stanley are among financial firms that may bring lawsuits against their biggest rivals as regulators on three continents examine whether other banks manipulated the London interbank offered rate, known as Libor, said Bradley Hintz, an analyst with Sanford C. Bernstein & Co. Even if Goldman Sachs and Morgan Stanley forgo claims on their own behalf, they oversee money-market funds that may be required to pursue restitution for injured clients, he said.
• Deutsche Bank(DB) Said to Consider Staff Cuts at Investment Bank. Deutsche Bank AG (DBK), Europe’s biggest bank by assets, is considering cutting about 1,000 positions at its investment bank as revenue declines, according to a person with knowledge of the matter. The cuts will be mostly outside Germany, where the firm’s investment banking operations are focused, said the person, who asked not be identified as Deutsche Bank’s plan hasn’t been made public.
• China Developers Face ‘Significant’ Liquidity Woes, KPMG Says. Chinese developers face “significant liquidity issues” and rising funding costs after regulators curbed borrowing through trust companies and property sales fell, according to KPMG LLP. Although there are “indications” that restrictions on real estate trusts may ease soon, the impact is unclear with investor sentiment changing, according to a KPMG report entitled Mainland China Trust Survey 2012. The report, emailed yesterday, didn’t elaborate on what the indications are. Growth in Chinese developers’ new funding slumped by almost 16 percentage points to 5.7 percent in the first half from a year earlier, after the nation’s home sales dropped 6.5 percent as the government maintained property curbs to stem speculation, the National Bureau of Statistics said July 13. New funds channeled through real estate trusts dropped more than 50 percent to 84.6 billion yuan ($13 billion) in the six months ended June 30, according to Use Trust, a Chinese consulting and research firm for the country’s trust industry. “Given the situation of certain real estate developers, many of whom have sourced financing from trust companies, there’s concern among both the trust companies and regulatory authorities around these products,” KPMG said in the report.
  

Wall Street Journal:

• Russia, China Veto Syria Resolution at U.N. Russia and China vetoed a Security Council resolution that would have threatened sanctions against the Syrian leadership, which is under assault by armed rebels in the streets of the capital Damascus. It was the third time Russia and China have vetoed Security Council resolutions that aimed to pressure the government to leave power. This last failure at diplomacy once again highlighted the growing realization that Syria's fate would be decided by bloody clashes in the streets of the capital, and not the halls of the U.N.
• It's Time to Buy Dollar, Hedge Fund FX Concepts Says. Investors should ignore growing expectations of a third round of quantitative easing by the Federal Reserve and pile into the dollar because the U.S. economy is slowing and big trouble is brewing in the euro zone, the head of one of the world's biggest currency hedge funds said Thursday.
• Strikes Threaten to Disrupt London Games. The build-up to the Olympic Games continued to be mired in difficulty after U.K. border officials Thursday said they will stage a 24-hour strike the day before the opening ceremony and the government said it was putting extra army personnel on standby to guard venues. In a move that threatens to cause chaos at Britain's borders as thousands of tourists arrive for the Olympics, the Public and Commercial Services Union said thousands of Home Office staff who are members of the union, including around 5,000 Border Agency staff, will take part in the industrial action next Thursday. The move by the PCS threatens to hold the U.K. government in ransom when the eyes of the world are on Britain.
  

MarketWatch:

• Leading economic index declines in June. ‘The U.S. economy is growing very slowly,’ economist says. The index of leading economic indicators fell 0.3% in June to 95.6, mostly reversing the increase in May, the Conference Board reported Thursday.Weakness in business orders, consumer confidence and building permits contributed to the decline, the board said.

Business Insider:

• This Is The Poll That Should Really Scare Barack Obama.
• FT: 'WORLD BRACED FOR NEW FOOD CRISIS'.
• Read The Letters That Whitney Tilson And Glenn Tongue Sent Investors About Breaking Up.

Zero Hedge:

• Spanish Bond Spreads Hit All-Time Record Highs. (graph)
• Oil Spikes As Netanyahu Threatens Iran.
• The Stunning Political Reality Of The Fiscal Cliff Debate.
• As The US Drought Spreads To India, Will The Black Swan Be Deep Fried.

New York Times:

• Bank of America(BAC) Posts $2.5 Billion Profit, but Mortgage Woes Remain. Despite reporting better-than-expected profits Wednesday, Bank of America continues to have a money pit in its home-loan market. The housing woes of the last few years are still taking a toll on the bank, however. Investors are increasing their demands that Bank of America repurchase soured mortgages, arguing the mortgages were improperly underwritten and sold in the first place. These so-called put-back claims totaled $22.7 billion in the second quarter of 2012, up from $16.1 billion in the first quarter. Chris Kotowski, an analyst at Oppenheimer, noted that the $22.7 billion figure was more than double the total of such claims in the second quarter of 2011, when they stood at $9.9 billion. “It’s not just that it’s going up, it’s going up at an accelerated rate,” Mr. Kotowski said. “It’s hard to know what the ultimate cost will be.” Those concerns help explain why Bank of America’s stock sank nearly 5 percent to $7.53 a share on Wednesday, even though profits were better than expected.

Reuters:

• World Grain Price Surge Triggering Defaults. Grains suppliers are starting to default on previously agreed sales to major importers, including top wheat buyer Egypt, rather than deliver on contracts that are now losing money because of the huge rally in prices sparked by the U.S. drought. The worst drought in more than 50 years is wilting crops in the U.S. Midwest and sending prices into overdrive, with corn alone surging by around 50 percent in the last month. Soybeans have also hit record highs, with wheat not far behind. Crop downgrades in Russia, Ukraine and Kazakhstan as drought followed a bitterly cold winter have added to global price rises, stoking fears of unrest especially in Middle Eastern countries, where high food prices can trigger political protest.
• GM(GM) announces production of Chevrolet Trax in Mexico. U.S. carmaker General Motors Co. on Thursday said it would build the Chevrolet Trax vehicle and a new generation of pickups at plants in Mexico. The Detroit-based company is investing $120 million in a plant in the central state of San Luis Potosi to produce the SUV crossover, said GM Mexico president, Ernesto Hernandez. GM will unveil the Trax at the Paris Motor Show in September before hitting the Mexican market in the fourth quarter, Hernandez added. A further $200 million would head to the Silao plant in Guanajuato state, where work on a new generation of pickups would begin in 2013. Hernandez expected the investments, which total $420 million, would create 1,000 new jobs.
• Morgan Stanley(MS) plans further staff cuts on weak outlook. Morgan Stanley expects to reduce payroll by just over 1,000 employees by the end of this year, part of a plan to cut headcount by 7 percent as measured from the end of 2011, as it prepares for weak economic growth globally and low trading volume, the investment bank said on Thursday. Morgan Stanley, reporting a 24 percent decline in second-quarter revenue, is the latest bank to sound gloomy notes about the economy. Banks have had to cope with companies' reluctance to issue debt and equity, the European debt crisis, and slow stock and bond trading.
• Value retailer Five Below(FIVE) sizzles in market debut. Five Below Inc's shares surged as much as 65 percent in their market debut, as investors rushed to grab a piece of the teen-focused value retailer.
• Troubled Calif. cities view on debt a concern - Moody's. Defaults and bankruptcies by municipal bond issuers are likely to remain few but the cases of the California cities of Stockton and San Bernardino may signal unwillingness among financially troubled cities to pay their debt obligations, a Moody's Investors Service report released on Thursday said. "The looming defaults by Stockton and San Bernardino raise the possibility that distressed municipalities -- in California and, perhaps, elsewhere -- will begin to view debt service as a discretionary budget item, and that defaults will increase," Anne Van Praagh, the Moody's managing director who wrote the report, said in a statement.
• European car discounts revved up to the max. Free road tax, cheap petrol, cash rebates and even a free car. These are only some of the knock-down offers European automakers are offering in a brutal price war to try to lure the few consumers still buying cars in a deepening five-year slump.

Telegraph:

• David Cameron: no end in sight for austerity. David Cameron doesn’t “see a time” when the government’s austerity programme will end.
• IMF loses all faith in the euro project.

Handelszeitung:

• Harvard University Professor Kenneth Rogoff sees an increasing risk that some countries will leave the 17-nation euro area. "At the moment, everyone wants to advance their own interests: Germany wants a political union, the ECB a conservative fiscal policy and peripheral nations an easing of savings measures," Rogoff said in an interview. "It's a real game of poker that creates a lot of instability." "It's difficult to assess the timing," he said when asked about the development of the euro area's turmoil. "It's only clear that the crisis is far from over. In the end, there are only two possible solutions: either Europe is ready to adopt a dramatic centralization of power in Brussels, or the euro will break up."
  

El Mundo:

• Spain Sees Tax Receipts 27% Below Prior Estimate. The Spanish government cut its forecast for tax receipts from the tax hikes approved on July 13 to EU25.1B through 2014 from EU 34.4B, citing official documents.
  

Les Echos:

• French households could face an increase of 50% in electricity prices by 2020 if current legislation and consumption patterns don't change, according to the country's Senate.
  

Globe and Mail:

• Inflation in China weighs on Yum Brands(YUM). Yum Brands Inc., owner of the Taco Bell, Pizza Hut and KFC chains, said Wednesday its second-quarter net income rose 5 per cent, overcoming a rare setback in China with the help solid sales elsewhere, including supersized gains at U.S. Taco Bell stores. The company said its operating profit sagged by 4 per cent in China, adjusted for currency fluctuations, as a result of high commodity inflation that squeezed restaurant profitability.
  

Xinhua:

• China Will Not Relax Property Control Policies. The nation will continue its "firm grip" on the real estate market, seeking to prevent housing prices from rebounding, citing an "urgent" government notice.