Evening Headlines
Bloomberg:- Roesler Opposes Autonomous Government for Crisis Laws, Bild Says. Germany’s vice chancellor Philipp Roesler opposes Mario Monti’s calls on governments to exercise greater autonomy from national parliaments in taking crisis decisions, Bild reported, citing an interview. The control of the government by the parliament is “one of the foundations of our democracy,” Bild quotes Roesler as saying, following comments from Italy’s Prime Minister.
- Citigroup(C) Seen Taking $6 Billion Charge on Smith Barney Venture. Citigroup Inc., the third-biggest U.S. bank, may take a charge of almost $6 billion this quarter as it writes down the value of the Morgan Stanley Smith Barney joint venture, said Jason Goldberg, a Barclays Plc analyst.
- In Egypt, Anti-Semitism Is Back in Fashion. Anti-Semitism, the socialism of fools, is becoming the opiate of the Egyptian masses. And not just the masses. Egypt has never been notably philo-Semitic (just ask Moses), but today it’s entirely acceptable among the educated and creative classes there to demonize Jews and voice the most despicable anti- Semitic conspiracy theories. Careerists know that even fleeting associations with Jews and Israelis could spell professional trouble.
- Richest Family Offices Seeing Fastest Growth as Firms Oust Banks.
- Knight(KCG) Blowup Shows How High-Speed Traders Outrace Rules. The U.S. has the most sophisticated financial markets in the world, yet they can unaccountably spin out of control at a moment’s notice.
- Paulson Advantage Plus Hedge Fund Declines 2% Last Month. John Paulson, the billionaire hedge- fund manager coming off record losses in 2011, posted a 2 percent loss last month in his Advantage Plus Fund, according to a monthly update to investors obtained by Bloomberg News. The fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, is down 18 percent this year with the July loss. Paulson’s Gold Fund, which can buy derivatives and other gold- related investments, rose 0.2 percent in July and has declined 23 percent this year.
- Second TSE System Error in Seven Months Halts Derivatives Trade. The Tokyo Stock Exchange Group Inc. said a computer error halted trading of Topix Index futures, Japanese government bond futures and options trading for more than 90 minutes, the second time in seven months a malfunction has forced a shutdown.
- Standard Chartered Faces N.Y. Suspension Over Iran Deals. Standard Chartered Plc (STAN) conducted $250 billion of transactions with Iranian banks over seven years in violation of federal money laundering laws, a New York regulator said in an order warning that the firm’s U.S. unit may be suspended from doing business in the state.
- Hedge Funds Trailed Stocks Last Month With 0.2% Advance. Hedge funds including MKP Capital Management LLC posted gains last month as global stocks rallied after European Central Bank President Mario Draghi pledged to defend the euro. Funds climbed 0.2 percent in July, according to data compiled by Bloomberg. Global macro (BBHFMCRO) funds advanced while long- short equity and multistrategy (BBHFMLTI) managers declined. John Paulson, the billionaire coming off record losses in 2011, posted declines in his Advantage funds. Hedge funds trailed stocks as the MSCI All-Country World Index (MXWD) returned 1.4 percent last month on speculation the ECB would buy bonds to help cut borrowing costs and save the euro. Macro funds, which bet on economic trends, rose 0.2 percent in July and are down 2.4 percent this year, as government intervention and declining trading volumes limit managers’ ability to make large bets.
Wall Street Journal:
- Italian's Job: Premier Talks Tough in Bid to Save Euro. During an all-night European summit in June, Mario Monti, the Italian Prime Minister, gave German Chancellor Angela Merkel an unexpected ultimatum: He would block all deals until she agreed to take action against Italy's and Spain's rising borrowing costs. Ms. Merkel, who has held most of the euro's cards for the past two years, wasn't used to being put on the defensive. "This is not helpful, Mario," Ms. Merkel warned, according to people present.
- Fed Official Calls for Bond Buying. Eric Rosengren, president of the Federal Reserve Bank of Boston, called on the Fed to launch an aggressive, open-ended bond buying program that the central bank would continue until economic growth picks up and unemployment starts falling again. His call came in an interview with The Wall Street Journal, the first since the central bank signaled last week that it was leaning strongly toward taking new measures to support economic growth. Mr. Rosengren isn't currently among the regional Fed bank presidents with a vote on monetary policy.
- Monsanto(MON) Seeding Sales With iPads. One thousand U.S. sales people for agricultural giant Monsanto will trade rugged laptops for lighter iPads, making it easier for them to share product information with potential customers and complete deals in the field—literally—rather than waiting to finish the transaction back at the office, Monsanto CIO Shirley Cunningham said.
- IMF Pushes Europe to Ease Greek Burden. The International Monetary Fund, facing discontent among its members about the huge sums it has lent to the euro zone, is pushing the currency bloc's governments to take steps to lighten the burden of the bailout loans they made to Athens, officials familiar with continuing discussions said. The IMF pressure—which officials said has been clear in private discussions among Greece's official lenders—comes in response to mounting evidence that Greece's deep recession has thrown the country's bailout program woefully off track from targets set earlier this year.
- The Latest Big Bank Bailout. If elected President, Mitt Romney will have some tough decisions to make on financial regulation. But here's an easy one: Do not expand the taxpayer safety net. Mr. Romney can even help protect taxpayers as a candidate by opposing the extension of a subsidy that largely benefits the biggest banks. It may seem amazing that Congress would even consider such a thing three months before the election. But banks have been lobbying to extend a deposit insurance program that was sold as a temporary response to the financial crisis in 2008.
Business Insider:
Zero Hedge:
Read more here: http://blogs.sacbee.com/capitolalertlatest/2012/08/fiscal-analyst-hundreds-of-millions-at-risk-from-facebook-slide.html#storylink=cpy
CNN:- Fiscal cliff: What's really in it. If lawmakers cannot agree on how to address the pending "fiscal cliff," $7 trillion worth of tax increases and spending cuts will begin to go into effect in January. The smart money says Congress won't come close to an agreement before the November election, and that lawmakers may not even be able to reach one until early next year. At that point, of course, they'd need to undo at least some of the tax increases and spending cuts that went into effect.
Rasmussen Reports: Reuters:- CF Industries(CF) profit misses Wall St view as demand slips. Fertilizer producer CF Industries Holdings Inc posted a lower-than-expected second-quarter profit on Monday due to falling demand after an aggressive spring planting season. Low natural gas prices helped boost profit, as did share repurchases, but farmers bought less nitrogen and phosphate from CF after buying so much in February and March. CF said it expected the sales decline to be temporary and forecast "robust" application of ammonia fertilizer this fall and "high" plantings of corn in 2013.
- Morgan Stanley(MS) ups exposure to Euro peripherals, shorts France. Morgan Stanley's net exposure to five troubled euro zone nations spiked 73 percent in the second quarter, according to the investment bank's quarterly regulatory filing. Morgan Stanley increased its holdings of stocks, bonds and derivatives backed by banks, governments and other counterparties in Greece, Ireland, Italy, Portugal and Spain, while also reducing hedges against the risk that those exposures might turn into losses. At June 30, the bank had $5.41 billion worth of assets related to those five countries, a 35 percent increase from three months earlier, according to a 10-Q filing with the U.S. Securities and Exchange Commission. After factoring in reduced hedges, the bank had $4.18 billion in net exposure to those nations, up 73 percent from its $2.41 billion in exposure at March 31. Morgan Stanley also significantly reduced its exposure to France, flipping to a net short position against the country's sovereign bonds. The bank held $2.74 billion in exposure to French stocks, bonds and derivative counterparties as of June 30, less than half of what it had at March 31. After credit default swap hedging, Morgan Stanley had $1.35 billion in exposure to France, down 67 percent from three months ago. The driver of that change was a $1.95 billion net short position against French sovereign bonds Morgan Stanley held at June 30, compared with a $542 million long exposure on March 31.
Telegraph:- Germany and Italy near blows over euro. German politicians from across the spectrum have reacted furiously to warnings by Italy’s Mario Monti that Bundestag control over EU debt policies threatens to bring about the “disintegration” of the European project. “We must make it clear to Mr Monti that we Germans will not shut down our democracy to pay Italian debts,” said Alexander Dobrindt, secretary-general of Bavaria’s Social Christians (CSU). Bundestag president Norbert Lammert said parliament’s integrity cannot be subordinated to the ups and downs of the markets. Free Democrat (FDP) leaders said Italy’s unelected prime minister is playing with political fire by trying to circumvent democratic legitimacy. The dispute comes as relations between Germany and Italy touch the lowest ebb since the Second World War, with Il Libero publishing a front-page picture of Chancellor Angela Merkel under the headline “Fourth Reich”. “The tone of the debate has turned dangerous. We must be careful that Europe does not rip itself apart,” said German foreign minister, Guido Westerwelle.
WantChinaTimes:
China Daily:- China's corporate debt ratio has reached a "dangerous" level, citing Li Yang, vice president of the Chinese Academy of Social Sciences, as saying at a forum. China had the highest debt-to-GDP ratio in the world in 2011 at 107%, exceeding the 90% watershed set by the OECD, Li said. Further stimulus could add to an already heavy debt burden at companies, Li said.
Xinhua:- Mazda China Jan-July Car Retail Sales Fall .5% Y/Y. Co.'s China car retail sales in the first 7 months of the year falls to 118,300 units.
Economic Information Daily:- China Government-Owned Firms Told to Stop 'Blind' Investment. China central-government owned companies have been asked to stop investment aimed at expanding scope, citing an official at the State-Owned Assets Supervision and Administration Commission.
Caixin Online:- China won't see a new "lending wave" as commercial banks extend loans in a "more reasonable" manner, Agricultural Bank of China Chairman Jiang Chaoliang said in an interview.
Evening Recommendations
Night Trading- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 149.50 -7.5 basis points.
- Asia Pacific Sovereign CDS Index 125.50 -5.25 basis points.
- FTSE-100 futures unch.
- S&P 500 futures +.09%.
- NASDAQ 100 futures +.27%.
Morning Preview Links
Earnings of NoteCompany/Estimate- (MMC)/.58
- (EMR)/1.00
- (MGM)/-.15
- (THC)/.05
- (CVS)/.79
- (FOSL)/.78
- (NUAN)/.40
- (CREE)/.23
- (DIS)/.93
- (PCLN)/7.36
- (ESRX)/.82
- (CVC)/.19
- (BID)/1.52
Economic Releases
10:00 am EST- JOLTs Job Openings for June are estimated to rise to 3717 versus 3642 in May.
3:00 pm EST
- Consumer Credit for June is estimated to fall to $10.250B versus $17.117B in May.
Upcoming Splits
Other Potential Market Movers
- The Fed's Bernanke speaking, Italian GDP, Germany Factory Orders reports, 3Y T-Note auction, US Loan Officer Survey, RBA rate decision, weekly retail sales reports, Jefferies Industrial/Aerospace/Defense Conference and the CSFB Industrials Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
