Evening Headlines
Bloomberg:
- Citigroup Sees 90% Chance That Greece Leaves Euro. Citigroup Inc. (C) raised its estimate of the chances Greece will drop the euro in the next 12 to 18 months to about 90 percent, with prolonged economic weakness and spillover for the euro area. In an analyst note, Citigroup updated its forecast for a Greek exit from the 17-nation currency union from a previous estimate of 50 percent to 75 percent, and said it would most likely happen in the next two to three quarters. Specifically, the bank assumes a Greece exit would occur on Jan. 1, 2013, while saying that is not a forecast of a precise date. “Our base case is for prolonged economic weakness and financial market strains in periphery countries, spilling over into renewed recession for the euro area as a whole this year and the next,” the Citigroup note said. Citigroup also said that even with the Spanish bank bailout, both Spain and Italy are “likely” to enter some form of bailout by the end of 2012.
- Spain at 7% Stresses Inadequacies of Rescue Options: Euro Credit. Money managers with more than $800 billion are betting European policy makers can only offer Spain a temporary respite from record borrowing costs. Yields on Spain's two-, five-, 10- and 30-year government securities climbed to euro-era highs this week amid speculation the nation will need a bailout to backstop its regions and banks. While the OECD called for the ECB to buy Spanish debt, investors including AllianceBernstein Ltd. and M&G Group Plc said policy makers are hamstrung in how to rescue an economy twice the combined size of Greece, Ireland and Portugal. "This crisis is unprecedented so the responses need to be unprecedented," said Arif Husain, the London-based director of European fixed-income at AllianceBernsteain, which oversees $407 billion. "Anything the ECB can do would prove temporary. The whole problem is that anything that's happening at the moment is unconvincing, and markets hate uncertainty."
- BNP, Credit Agricole Seek to Escape Euro Area’s ‘Shifting Sands’. France’s biggest banks are rushing to cut the more than 140 billion euros ($171 billion) they provide their operations in Europe’s troubled economies, seeking to protect themselves against a possible breakup of the euro. In a retreat, French banks, especially BNP Paribas SA (BNP) and Credit Agricole SA -- the largest by assets -- are trying to make their businesses in Italy, Spain, Greece, Portugal and Ireland less reliant on funds from the parent company.
- Fidelity Joins BlackRock in Weighing Libor Action Against Banks. BlackRock Inc. (BLK), Fidelity Investments and Vanguard Group Inc., firms that collectively manage more than $7 trillion, are gauging how their clients have been hurt by Libor manipulation and whether to take legal action as at least a dozen banks are being investigated for rate-rigging. The money managers can take cues from Charles Schwab Corp. (SCHW) and the city of Baltimore, which in lawsuits predating the record fine levied on London-based Barclays (BARC) Plc last month, sued lenders for artificially suppressing, Libor, or the London interbank offered rate. Schwab alleged last year that returns on money funds and short-term debt strategies were depressed by the banks’ actions, while Baltimore’s lawsuit against Barclays and other banks stems from lower returns on interest-rate swaps.
- China’s Stocks Swing Between Gains, Losses; Developers Retreat. China’s stocks swung between gains and losses as property developers declined on concern the government will maintain curbs on the real estate market while consumer staples producers rose on earnings prospects. China Vanke Co. led declines for developers after the Xinhua News Agency said China must prevent local government “fine tuning” of property policies from leading to a weakening of controls on the real estate market. Shanghai Lujiazui Finance & Trade Zone Development Co. (600663) slumped for a fourth day after the developer said first-half profit slid 54 percent. Wuliangye Yibin Co. and Luzhou Laojiao gained more than 1 percent on speculation earnings for liquor companies jumped in the first half of the year.
- Making the Rich Poorer Doesn’t Enrich the Middle Class by Caroline Baum.
- Canon Falls Most in 13 Years After Cutting Forecast: Tokyo Mover. Canon Inc. (7751), the world’s largest camera maker, plunged the most in more than 13 years in Tokyo trading after cutting its full-year profit forecast because of a stronger yen and expectations for weaker global growth. The shares declined as much as 14 percent to 2,308 yen, the biggest intraday drop since Oct. 9, 1998, and changed hands at 2,430 yen as of 11:29 a.m.
- Hong Kong to Oslo Flirt With Bubbles on Cheap Cash: Mortgages.
- China Car Sales Prove Impossible to Know for Shareholders. Forget spreadsheets. Yankun Hou, an award-winning auto industry analyst at UBS AG (UBSN), counts Toyotas and BMWs in the parking lots of car factories in China using satellite images from Google Maps to gauge inventory buildups. Recently, the absence of official retail vehicle sales and inventory data has led to a divergent picture of auto demand in China. Auto manufacturers are reporting better-than-estimated deliveries to dealerships, while distributor groups tell of rising stockpiles at showrooms.
- U.S. Finds China’s Human Rights Situation Is Deteriorating. Human rights conditions in China are worsening, with the repression of lawyers, journalists and bloggers increasing, Assistant Secretary of State Michael Posner said today. “The overall human rights situation in China continues to deteriorate,” said Posner, who oversees democracy, human rights and labor issues for the State Department, after the 17th U.S.- China Human Rights Dialogue.
- Sands China Earnings Decline 40% on Impairment, Winnings. Growth is slowing in the world’s largest gaming hub as high-stake gamblers, or the VIPs who contribute more than 70 percent of Macau’s revenue, cut back spending amid a weaker Chinese economy. Smaller Wynn Macau Ltd. reported a drop in revenue for the second quarter. The stock dropped 5.2 percent to HK$21.10 at 9:54 a.m. in Hong Kong trading. The benchmark Hang Seng Index lost 0.16 percent.
Wall Street Journal:
- Europe's Crisis Hits Profits. Weaker Results at Ford(F), Apple(AAPL), Glaxo(GSK) Show Ripple Effect of Continent's Troubles. Europe's deepening economic crisis is cutting into corporate earnings, with the continent's woes threatening to exert a drag on multinational corporations around the world into next year. This week, U.S. companies ranging from Ford Motor Co. to Apple Inc. have blamed disappointing results on slowed spending by European consumers. Meanwhile European heavyweights including steelmaker ArcelorMittal and pharmaceutical company GlaxoSmithKline PLC said they are suffering more than expected on their home turf. In a sign of how bad companies think it could get, hard-hit Spanish communications company Telefónica SA said Wednesday it is suspending dividend payments and share buybacks.
- Business Confidence is Low in Europe's Core. Economic weakness in the euro zone is penetrating the bloc's stronger countries, data published Wednesday suggest, at a time when those nations could be called on to provide more aid to weaker members. Germany's closely watched Ifo index of business confidence for July was weaker than expected, falling to its lowest level in more than two years, the Munich-based Ifo institute said Wednesday. The German manufacturing sector saw its current business situation "much less favorably" than in the previous month, the institute said, and capacity utilization was "clearly lower." Manufacturers' expectations dropped sharply.
- House Passes Ron Paul’s ‘Audit the Fed’ Bill. The House voted Wednesday to open up the Federal Reserve‘s core monetary policy decisions to the scrutiny of the federal government.
- Russian Spy Ring Aimed to Make Children Agents. A Russian spy ring busted in the U.S. two years ago planned to recruit members' children to become agents, and one had already agreed to his parents' request, according to current and former U.S. officials.
MarketWatch:
- China’s green policy, forex hit European buyers. For now, boomtime is over for Sino-European trade. There was a time when buyers from across Europe would flock to China to buy up everything from stone tiling to children’s clothing, fueling a booming trade between the two economies. But Beijing’s push to clean up its polluting industrial base, along with rising labor costs and unfavorable foreign-exchange rates, is altering the nature of China’s role in global trade, and with European buyers in particular.
Business Insider:
Zero Hedge:
- Deep Fried Black Swan Goes Global As Drought Spreads From US To Asia, And Now To Southern Europe.
- The Amazing Hockey-Stick Of Q4 Consensus Earnings. (table)
- Guest Post: You Didn’t Build That. Even if Obama was talking about infrastructure and the wider economic system (which I suspect was the case) it is taxpayers who fund infrastructure creation, and the overwhelming majority of businesses and business owners (other than the bailed-out financial institutions and similar) contribute heavily to tax revenue.
- Fukushima - Local Children Unwitting (And Unwilling) Radioactive Guinea Pigs.
- Why Listen To Keynes In The First Place?
CNBC:
- Oil Rallies Amid Talk of More Fed Easing. Oil prices staged a sharp turnaround ahead of the close in floor trading at the NYMEX Wednesday, as traders speculated about the prospects for more Fed easing.
- Despite Economy, Whole Foods(WFM) Earnings Top Estimates. Whole Foods reported quarterly profit that topped Wall Street's view after sales at established stores defied the softening U.S. economy, sending the upscale grocer's shares surging in an after-hours relief rally.
- Visa(V) Posts Net Loss but Results Beat Expectations.
- Portfolio Managers Say Credit Costs Will Rise. After indicating last quarter that U.S. credit conditions were diverging from Europe’s, credit portfolio managers have a negative outlook on short-term domestic corporate debt. Credit portfolio managers at banks, insurance companies, and asset management firms foresee higher credit risk in the United States in the next three months, a change from last quarter’s view that credit conditions were worsening in Europe but improving domestically. If the forecast proves true, its means investors could demand higher premiums on corporate debt, and more indebted companies than previously forecast could default. The credit managers’ outlook for five-year credit spreads in the United States – for both investment-grade and high-yield credits – turned “sharply negative,” says Som-lok Leung, executive director of the International Association of Credit Portfolio Managers (IACPM), which surveyed its members. In the United States, the three-month outlook for spreads on investment-grade bonds changed from a positive reading of 15.2 in April to a negative reading of -19.1 at the beginning of July. In Europe, the outlook on spreads worsened to -30 from -9.8. The IACPM survey uses a “diffusion index” to measure credit sentiment. The farther a reading is from zero, either positive or negative, the greater the consensus among portfolio managers that credit conditions will move in a certain direction. A negative number means credit spreads will widen.
Reuters:
- Las Vegas Sands(LVS) earnings slump, miss forecasts. Las Vegas Sands Corp earnings fell, missing forecasts, as its "hold," or money won from gamblers, fell at its casinos in Las Vegas, Macau and Singapore, and legal fees rose, sending its shares down 5.8 percent in after-hours trading.
- US congressman says no legal power to stop China-Canada oil deal. Congressman Randy Forbes, a Republican who has been wary of China's military and economic power, said he is alarmed by a bid by China's state oil company CNOOC for Canadian oil company Nexen. But Forbes said there is not much he can do about it.
- Brazil's Vale profit slumps on China, currency woes. Brazil's Vale became on Wednesday the latest victim of China's economic slowdown after second-quarter profit tumbled because of slowing demand for iron ore that will spill over into the coming quarters. Net income at the world's largest producer of the mineral hit its lowest level in more than two years, underscoring its dependence on Chinese purchases of its flagship product.
- Western Digital(WDC) bets on enterprise, high prices in 2013. Western Digital Corp trounced lofty Wall Street expectations on record sales, and the hard disk drive (HDD) maker is banking on the enterprise market to help maintain its high margins. Western Digital shares jumped 20 percent in after-market trade to $38.77.
- Euro exit beats begging bowl, says Spanish elder statesman. The regional leader of Asturias in Spain has become the country’s first major figure to call for a radical change of strategy and exit from the euro, unless monetary union is fundamentally reformed.
- BBA 'warned weekly' about Libor says former rate-compiler. The British Bankers Association was given weekly warnings in 2008 that the process of setting the Libor interest rates was being distorted.
- Moody's downgrades outlook for 17 German banks. Moody’s has downgraded the outlook for 17 German banks after a similar move against the government’s credit rating earlier this week. Moody’s on Wednesday cut the outlook on a swathe of state-backed regional banks, known in Germany as landesbank, but also included IKB Deutsche Industriebank and Deutsche Postbank. Many of the landesbank have struggled since the 2008 financial crisis and amid Europe’s ongoing economic crisis, which has seen growth slow.
Xinhua:
- China Must Prevent Weakening of Property Controls. China must prevent local government "fine tuning" of property policies from leading to a weakening of controls on the real estate market, according to a commentary. Fine-tuning policies that compromise the central government's macro control "bottom line" on the real estate market must be stopped, according to the commentary, written by a reporter named Wang Libin.
- None of note
- Asian equity indices are -.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 174.0 -5.0 basis points.
- Asia Pacific Sovereign CDS Index 143.75 +2.25 basis points.
- FTSE-100 futures +.03%.
- S&P 500 futures -.15%.
- NASDAQ 100 futures -.05%.
Earnings of Note
Company/Estimate
- (RCL)/.03
- (KMB)/1.28
- (PHM)/.05
- (STRA)/1.85
- (UTX)/1.41
- (VMC)/.06
- (HSY)/.61
- (LLL)/1.88
- (XOM)/1.95
- (HOT)/.61
- (ZMH)/1.32
- (CME)/82
- (ABC)/.69
- (RTN)/1.22
- (CL)/1.33
- (MMM)/1.65
- (BWA)/1.37
- (MCK)/1.48
- (CA)/.60
- (AMGN)/1.55
- (CERN)/.54
- (EXPE)/.72
- (KLAC)/1.32
- (AMZN)/.03
- (CSTR)/1.16
- (CB)/1.14
- (SBUX)/.45
- (FB)/.11
- (AGCO)/1.78
- (DECK)/-.59
8:30 am EST
- Durable Goods Orders for June are estimated to rise +.3% versus a +1.1% gain in May.
- Durables Ex Transports for June are estimated to rise +.1% versus a +.4% gain in May.
- Cap Goods Orders Non-Defense Ex Air for June are estimated to rise +.1% versus a 1.6% gain in May.
- Cap Goods Shipments Non-Defense Ex Air for June are estimated to rise +.6% versus a +.4% gain in May.
- Initial Jobless Claims are estimated to fall to 380K versus 386K the prior week.
- Continuing Claims are estimated to fall to 3300K versus 3314K prior.
10:00 am EST
- Pending Home Sales for June are estimated to rise +.3% versus a +5.9% gain in May.
11:00 am EST
- Kansas City Fed Manufacturing for July is estimated to rise to 4.0 versus a reading of 3.0 in June.
Upcoming Splits
- (RAVN) 2-for-1
- (TROX) 5-for-1
Other Potential Market Movers
- The 7Y T-Note auction, Geithner's LIBOR testimony, weekly EIA natural gas inventory report and the weekly Bloomberg Consumer Comfort Index could also impact trading today.