Today's Headlines

Bloomberg:

• ECB’s Rescue Worsens Spain, Italy Maturity Crunch: Euro Credit. European Central Bank President Mario Draghi’s bid to bring down Spanish and Italian yields may spur the nations to sell more short-dated notes, swelling the debt pile that needs refinancing in the coming years. “In a way what the ECB has done is making the situation worse,” said Nicola Marinelli, who oversees $160 million at Glendevon King Asset Management in London. “Focusing on the short-end is very dangerous for a country because it means that every year after this they will have to roll over a much larger percentage of their debt.”
• German Exports Fell In June As Crisis Curbed Euro-Area Demand. German exports dropped more than economists forecast in June as the sovereign debt crisis curbed demand from euro-area trading partners. Exports, adjusted for work days and seasonal changes, fell 1.5 percent from May, when they jumped 4.2 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a 1.3 percent decline, according to the median of 15 estimates in a Bloomberg News survey. Imports fell 3 percent from May.
• German June Industrial Production Fell on Construction Output. German industrial production declined in June, led by a drop in construction output. Production fell 0.9 percent from May, when it gained a revised 1.7 percent, the Economy Ministry in Berlin said today. Economists had forecast a drop of 0.8 percent, the median of 34 estimates in a Bloomberg News survey showed. Production fell 0.3 percent from a year earlier when adjusted for working days.
• King Backs Cameron Budget Plan as BOE Lowers Outlook: UK Economy.
• Cathay Pacific Stock Drops on Unexpected First-Half Loss. Cathay Pacific Airways Ltd. (293), the biggest international air-cargo carrier, fell the most in about three months in Hong Kong after posting an unexpected loss on a freight slump, higher fuel costs and waning premium travel. The airline swung to a first-half loss of HK$935 million ($121 million) as it carried 10 percent less cargo and suffered from wider losses at a freight venture with affiliate Air China Ltd. (753) Volumes have fallen because of slower global trade and competition from fast-growing Middle Eastern airlines. “Cargo is really bad,” said Jim Wong, a Hong Kong-based transport analyst at Nomura Holdings Inc.
  
• Fisher Says More Stimulus May Overburden Central Banks. Federal Reserve Bank of Dallas President Richard Fisher said adequate economic stimulus is in place and that global central banks may not have the capacity to undertake additional measures. “We’re at the risk of overburdening the central banks,” Fisher said in an interview today on “Bloomberg Surveillance” with Tom Keene and Sara Eisen. “We keep applying what I call monetary Ritalin to the system. We all know there’s a risk of over-prescribing.” Fisher said the largest banks have $1.5 trillion in excess reserves that they would like to put to work and that the private sector now must take the next steps to boost growth. Lawmakers also must act to eliminate uncertainty about government spending and tax rates, Fisher said. “We have done our job,” Fisher said of the Fed. “We have done enough. Just doing more doesn’t solve the problem. The problem is engaging the transmission. We provided the gas, the gas tank is full.”
• Oil Rises for Fourth Day on Supply, Middle East Tension. Oil rose for a fourth day as a government report showed U.S. stockpiles dropped more than expected and on concern tension in the Middle East will disrupt global supplies. Prices climbed to the highest level since May as the Energy Department said inventories fell 3.73 million barrels last week, more than double the 1.55 million forecast by analysts polled by Bloomberg. Former Syrian Prime Minister Riad Hijab, who defected this week, arrived in Jordan today, and Egyptian aircraft struck gunmen in northern Sinai, killing 20. “The inventory decline is far bigger than what had been expected, and that’s why prices are up,” said Marshall Berol, co-portfolio manager of the Encompass Fund in San Francisco, which has about $300 million in assets. “The tension in the Middle East is escalating.” Crude oil for September delivery rose 25 cents, or 0.3 percent, to $93.92 a barrel at 12:56 p.m. on the New York Mercantile Exchange after increasing to $94.72, the highest intraday level since May 15. Oil traded at $94.37 a barrel before release of the inventory report at 10:30 a.m. Futures have climbed 22 percent since reaching an intraday low of $77.28 on June 28. Brent oil for September settlement advanced 45 cents, or 0.4 percent, to $112.45 on the London-based ICE Futures Europe exchange.
• Northeast Asian LNG Prices Extend Drop on Weak Demand, WGI Says. LNG prices for near-term delivery to northeast Asia fell for a 10th week to their lowest in more than a year amid low demand for the fuel, World Gas Intelligence said.
• Recession Generation Opts to Rent Not Buy Houses to Cars. “Every decision that I have made since I lost my job has been colored by that insecurity I feel about the future,” said Anselmo, 28, who now rents an apartment in Austin, Texas, and works as a consultant for UnitedHealth Group Inc. “Buying a house is just further out on the timeline for me than it used to be.” Anselmo and many of his peers are wary about making large purchases after entering adulthood in the deepest recession and weakest recovery since World War II. Confronting a jobless rate above 8 percent since 2009 and student-loan debt hitting about $1 trillion, 20-to-34-year-olds are renting apartments, cars and even clothing to save money and stay flexible.
• Adelson Sues National Jewish Democratic Council For Libel. Sheldon Adelson, chairman of the Las Vegas Sands Corp. (LVS), sued the National Jewish Democratic Council and its top officers for libel, saying the organization falsely claimed he approved of prostitution in his Macau casinos. Adelson, a billionaire and top fundraiser for Republican Mitt Romney’s presidential campaign, filed his $10 million suit today in Manhattan federal court. He claims the NJDC, its president, David Harris, and its chairman, Marc Stanley, “crossed the threshold from constitutionally protected speech to defamation of a public figure.” The suit is over an article that Adelson says was authored by Harris and posted on the NJDC website claiming Adelson approved of prostitution in his Macau casinos and urging Romney to cease accepting his donations.

Wall Street Journal:

• The Romney Hood Fairy Tale. The false, invented analysis behind Obama's tax claims. The charge is that even though Mr. Romney is proposing to cut tax rates for everybody across the board, Mr. Romney will finance this by imposing a tax increase on the middle class. His evidence is a single study by the Tax Policy Center, a liberal think tank that has long opposed cutting income tax rates. The political left always says Daddy Warbucks gets all the tax-cut money. So this is hardly news, except that the media are treating this joint Brookings Institution and Urban Institute analysis as if it's nonpartisan gospel. In fact, it's a highly ideological tract based on false assumptions, incomplete data and dishonest analysis. In other words, it is custom made for the Obama campaign.
• China Firm to Buy Control of U.S.-Backed Battery Maker. A123 Systems Inc., a struggling, U.S. government-backed manufacturer of advanced batteries for electric vehicles, is turning to one of China's largest auto parts makers for a bailout. The Waltham, Mass.-based company said on Wednesday that Wanxiang Group Corp., a Chinese conglomerate, agreed to acquire up to an 80% stake in return for an up to $450 million investment. The investment would secure the future of the company, which warned earlier this year it was in danger of running out of money.
• Health Law Likely to Spur Retail, Restaurant Cuts. Employers in the retail and restaurant industries are more likely than other companies to drop their health plans or cut workers' hours when new health-law requirements take effect in 2014, according to new data from the consulting firm Mercer. A Wall Street Journal article last week said retail and restaurant franchisees were bracing for higher costs as part of the law, and several said they planned to change workers' health benefits.

MarketWatch:

• Good takeover targets beyond Best Buy(BBY).
• Don’t get suckered by the Draghi put. Commentary: Unlike Greenspan, ECB chief doesn’t deliver at all.

CNBC.com:

• A ‘Brixit’ Could Be Next Problem for Europe: Nomura. The U.K. is not renowned for its smooth relationship with its European partners and, like the end of a tempestuous love affair where both partners have tried their best to accommodate the others’ demands, the relationship could finally hit the rocks with Britain leaving the EU for good, according to a report by Nomura.
• Fed Painted ‘in a Box’ as Markets Demand QE3: Kashkari. Ebullient stock markets are increasingly pricing in the possibility that the Federal Reserve will soon unveil another round of monetary stimulus, Pimco Managing Director Neel Kashkari told CNBC Wednesday. “The Fed is really in a box right now,” said Kashkari, who was an architect of the Troubled Asset Relief Program that bailed out major banks during the 2008 financial crisis. Inflation expectations and stocks are at levels that appear to be assuming imminent Fed action, he told CNBC's “Squawk Box.”“Those indicators have already priced in … that the Fed should act,” Kashkari said.
• Why $9 Corn Could Be a Big Problem for the Economy.
• Municipal Finances Reaching an 'Inflection Point': Whitney. Cash-strapped local governments are facing an "inflection point" that will force them into deciding between providing services and honoring debt obligations, financial analyst Meredith Whitney told CNBC.

Business Insider:

• Japan Is Quietly Circling A Financial Black Hole.
• This Is The Genius Way You'll Be Paying For Everything One Day.
• Two Senators Are Trying To Make Jamie Dimon's Worst Nightmare A Reality.
• The Last Two Times Export Orders Collapsed Like This, We Were In A Recession. (graph)
• Obama Is Falling Apart In Colorado, And Here's The Number That Proves It.

Zero Hedge:

• The Pace Of US Downward Revisions Is Picking Up. (graphs)
  
• From Chicago To New York And Back In 8.5 Milliseconds.
• Be Careful What QE You Wish For #2467: Gas Prices Surging Again.
• Flowcharting The ECB's Known Unknown Next Steps.
• Monti's Bluffing Unleashes Bull Market In Crude. (graphs)
  

CNN:

• Why London Bankers Are Shrugging Off Standard Chartered Threat. Money managers in the City of London react to the U.S. allegations that Standard Chartered hid money tied to Iran: Everyone does it. Standard Chartered may be down, but it is certainly not out. While it appears that the bank is in very hot water with state regulators over its business dealings with the Islamic Republic of Iran, its story is far from unique. Many major international banks have done business with Iran in violation of U.S. sanctions – with most paying hefty fines for doing so. That may be why senior bankers and portfolio managers in the City of London don't seem too worried about the beating Standard Chartered's stock has taken in the past few days after New York State regulators threw the book at the bank on Monday. Talk that the bank could lose its ability to work and trade in the state is being dismissed as simply "loony."

Gallup:

• U.S. Small-Business Owners' Optimism Declines in July. (graph)
  

Reuters:

• Iron Ore-Shanghai rebar falls for 4th day in 6, ore hits 2-1/2 yr low. China's steel futures slipped for a fourth day in six on Wednesday as sluggish demand kept pressure on spot prices of raw material iron ore, and further weakness was expected in both commodities before the start of any recovery. Iron ore, down about 17 percent this year, reached its cheapest level in 2-1/2 years as Chinese steel mills, the world's biggest buyers of the ore, limited spot purchases as they awaited a rebound in steel prices.The most-traded January rebar contract on the Shanghai Futures Exchange closed down half a percent at 3,667 yuan ($580) a tonne. The contract hit an all-time low of 3,631 yuan on Friday and is down 11 percent this year. The spot steel market is "still very weak", said an iron ore trader based in Shanghai. "It's difficult to expect any meaningful recovery in both steel and iron ore prices in the near term," the trader said. A stuttering Chinese economy is limiting the country's demand for raw materials. With abundant stocks at home, analysts expect China's imports of iron ore and other commodities such as copper and crude oil to drop for a second month in a row in July. The data is due to be released on Friday.
• Coal miner Alpha Natural(ANR) posts big second-quarter loss. Alpha Natural Resources Inc, which idled four mines and cut production as coal prices slumped this year, reported a quarterly loss of $2.2 billion on Wednesday after charges to write down assets and restructure operations. The company also narrowed its production target for this year and said it might need to further adjust production levels as pricing remains "unattractive" in U.S. domestic and European export markets. Alpha's stock dropped 5.1 percent to $6.55 in Wednesday morning trading on the New York Stock Exchange.
• Copper Slips on Weak Euro; China Data Eyed.
• Fitch updates Greek mortgage assumptions.

Financial Times:

• Rio(RIO) Hurt By Fall in Commodities Prices. Rio Tinto is sticking to plans to plough $16bn into development projects this year on hopes of a pick-up in Chinese growth, even as falling prices for key commodities such as iron ore depressed first-half earnings.

Telegraph:

• McDonald's(MCD) sales worst in two years as US recession bites. McDonald's blamed a 'sluggish' US economy as the world's biggest fast-food chain delivered its worst monthly sales in more than two years.
• Euro founder admits some nations may be forced to leave. One of the founding fathers of the euro admits that some states may be forced to abandon the single currency, but insists Germany would be better off staying in.
• Fears are rising that euro crisis threatens region's biggest economies. New figures are fanning concerns that the eurozone debt crisis is driving its powerhouse economies, France and Germany, into recession.

Corriere:

• Italian Government to Cut 2012 GDP Forecast to -2.1%. The current forecast is for a -1.2% contraction in 2012 GDP.
  

Sydney Morning Herald:

• China Pushes for More Say on Iron Ore Prices. BEIJING is pushing for a greater say in setting the price of iron ore, just as Australia's most important export earner hovers near an eight-month low. The Ministry of Industry and Information Technology - the Chinese agency in charge of the steel industry - last week held a meeting in Beijing with major steel makers to discuss how to better influence the price. ''We need to take advantage of the slowing import growth [of iron ore] and declining price to push for a more equitable iron ore price mechanism,'' a statement on the ministry's website said.

ChannelNewsAsia:

• China Launches Trading Platform for Rare Earth Metals. BEIJING: China on Wednesday launched a trading platform for rare earth metals, state media reported, as it moves to boost its pricing power over the strategic resources for which it dominates global production. China's leading producer of rare earths, Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co., started the platform in cooperation with nine other companies and institutions, Xinhua news agency said.

Caixin Online:

• China Criticizes 4 Provinces for Lax Property Controls. China's property inspection team sent by the State Council criticized the Chinese provinces of Hubei, Hunan, Hebei and Shangdong for not "strictly" implementing property control policies.

Etemaad:

• Iran Sees No Drop in Crude-Oil Exports to China. Iran's exports of crude oil to its biggest customer China haven't decreased, citing Iranian Deputy Foreign Minister Abbas Araghchi. "The Chinese are purchasing nearly 150,000 barrels of Iranian crude a day and continue to import oil without any decline," Araghchi said. The two countries have agreed on methods for China to pay for Iranian oil, he said.

Bear Radar

Style Underperformer:

• Large-Cap Growth -.33%

Sector Underperformers:

• 1) Internet -1.30% 2) Disk Drives -1.20% 3) Restaurants -1.04%

Stocks Falling on Unusual Volume:

• TRNX, EZCH, NXTM, WCRX, SODA, PCLN, JIVE, BLKB, FSYS, SPPI, JAZZ, ECPG, Z, EBIX, EXPE, ANEN, TRIP, FOSL, SPRD, MOLX, BBEP, IRWD, WPZ, QUAD, CWH, THS, CCC, AVT, CLH and AH
  

Stocks With Unusual Put Option Activity:

• 1) WFR 2) BZH 3) TSO 4) MET 5) EXPD
  

Stocks With Most Negative News Mentions:

• 1) LOW 2) YUM 3) GM 4) UAL 5) PAY
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +.19%

Sector Outperformers:

• 1) Gold & Silver +1.14% 2) Airlines +.88% 3) Steel +.84%

Stocks Rising on Unusual Volume:

• MCP, ESRX, SLW, SKYW, CSC, PBR, LAMR, GPOR, REXX, GMCR, NUAN, DF, SEM, KNXA, RAX, VC, IFF and TSN
  

Stocks With Unusual Call Option Activity:

• 1) WFR 2) RIMM 3) ESRX 4) ARIA 5) SLW
  

Stocks With Most Positive News Mentions:

• 1) MON 2) CVS 3) CAH 4) HCA 5) ACI
  

Charts:

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

Wednesday Watch

Evening Headlines
Bloomberg:

• Greece Rating Outlook Cut to Negative by S&P. Greece’s credit rating may be cut again by Standard & Poor’s on concern a worsening economy raises the likelihood the troubled nation will need more support from European Union lenders. The outlook on Greece’s CCC rating, already eight levels below investment grade, was revised to negative from stable, S&P said yesterday in a statement. The change reflects the risk of a downgrade if Greece is unable to obtain the next disbursement from the European Union and International Monetary Fund rescue package, the rating company said. Greece’s economy has been squeezed by the fiscal tightening needed to qualify for rescue-loan disbursements, with gross domestic product shrinking for five straight years and unemployment rising to 22.5 percent from 7.9 percent. Finance Minister Yannis Stournaras said yesterday the government is still working on identifying almost a third of the cuts required by international creditors to resume the flow of bailout funds. Greece may need as much as 7 billion euros ($8.7 billion) in loans this year as gross domestic product shrinks as much as 11 percent in 2012 and 2013, S&P said.
• ECB's Rescue Worsens Spain, Italy Maturity Crunch: Euro Credit. ECB President Mario Draghi's bid to bring down Spanish and Italian yields may spur the nations to sell more short-dated notes, swelling the debt pile that needs refinancing in the coming years. The average maturity of Spanish debt is the shortest since 2004 as Spain, like Italy, hasn't issued 15- or 30-year bonds all year. As Prime Ministers Mario Monti and Mariano Rajoy fight to avoid bailouts that may threaten the euro's survival, the ECB's plan risks adding to pressure on the two nations' treasuries. "In a way what the ECB has done is making the situation worse," said Nicola Marinelli, who oversees $160 million at Glendevon King Asset Management in London. "Focusing on the short-end is very dangerous for a country because it means that every year after this they will have to roll over a much larger percentage of their debt."
  
• Lawsuit Could Undo Sale That Created New GM(GM), Company Says. The new General Motors Co. could be undone by a lawsuit that pits general creditors against hedge funds including Elliott Management Corp. and Fortress Investment Group LLC (FIG) over $3 billion, the car company said in a lawsuit that went to trial today.
• Coal to Drop as Steel Output Slows in BHP Setback: Commodities. Coal used to make steel is set to drop to the lowest price in two years, eroding earnings at BHP Billiton Ltd. (BHP) and Rio Tinto Group (RIO), as European demand wanes and China shifts supply contracts to Mongolia from Australia. The contract price may drop 11 percent to $200 a metric ton in the three months to Dec. 31 from $225 a ton this quarter, according to seven analysts and industry officials in a Bloomberg survey. The spot price in China fell 24 percent to $179.50 as of Aug. 2, the lowest this year, according to data compiled by Bloomberg. A deepening debt crisis in the eurozone has dragged down demand and prices of commodities, forcing the world’s largest steelmaker ArcelorMittal (MT) to shutter or idle plants in the region. Slowing economic growth in China, the second-biggest importer of metallurgical coal, has increased chances of output cuts at mills and further shrinkage in demand for the fuel. “Steel demand in Europe is very weak and consumption has slowed dramatically in recent months,” said Tim Cahill, an analyst at J&E Davy Holdings Ltd. in Dublin. “It’ll get worse in the second half as government spending slows and banks stop lending to home buyers. Unless the U.S., Europe, China pump in serious stimulus, global steel demand will remain subdued.”
• Foreigners Flee Indian State Companies on Intervention. Foreign investors are cutting their holdings in India’s state-controlled companies to a three-year low as Prime Minister Manmohan Singh’s government sacrifices shareholder return to revive the weakest economy in nine years.

Wall Street Journal:

• SEC-Money Fund Showdown: Aug. 29. After months of wrangling in Washington, U.S. regulators are planning to vote later this month on a proposal to tighten rules governing the $2.6 trillion money-market mutual-fund industry. Securities and Exchange Commission Chairman Mary Schapiro has waged a public campaign this year to rein in money funds. Her goal: to avoid a repeat of 2008, when a run on one fund threatened to destabilize the financial system. But the proposal has faced stiff opposition from the mutual-fund industry, which argues that the rules effectively would kill their businesses.
• Best Buy(BBY) Founder Envisions New Tack. Best Buy Co. founder Richard Schulze envisions a turnaround plan for the electronics retailer that involves cutting prices to better compete against Amazon.com Inc. and other online retailers while ensuring that the in-store customer-service experience is as good as Apple Inc.'s, according to people familiar with the matter.
• Wall Street Cooks Up New CMBS, CDS Alphabet Soup. Two of the most notorious financial acronyms of the credit crisis – CDS and CMBS – are back. Markit, the leading provider of credit default swap indexes, is preparing to launch in January the first index of swaps on commercial mortgage backed bonds since 2008, called CMBX 6.
• Tensions Rise Over Iranian Hostages. Evidence Emerges Men Held by Syria Rebels Are Linked to Iran's Revoltionary Guard, as Tehran Warns U.S. on Their Fate. A band of 48 Iranians being held hostage by Syria's rebel army journeyed from Tehran on a trip organized by a travel agency owned by the elite troops who support and protect the Iranian regime, people familiar with the trip said. That connection—denied by Iran, a staunch supporter of the Assad government—suggests the hostages have strong ties to Iran's elite Revolutionary Guard Corps, as the rebels claim. Tehran, which says the hostages are religious pilgrims, warned it would hold the U.S. responsible for their fate due to its support of the opposition.
• ObamaCare's Phony Deficit Reduction. Lost in the fuzzy budgetary math is a simple truth: Repealing the law means lower taxes and spending. Defenders of President Obama's health law are flaunting a Congressional Budget Office claim that overturning the law would worsen the federal deficit. Repeal, said a CBO report late last month, would cancel $890 billion in new entitlement spending but eliminate revenues of even greater magnitude. Don't be bamboozled. Even if it were true that ObamaCare raises more money than it spends, that would hardly be reason to keep it, or any law.

Business Insider:

• Morgan Stanley's(MS) Entire US Economic Outlook In One Huge Slide.
• Police Radio Transmissions Raise The Possibility There Were Multiple Shooters In The 'Dark Knight' Massacre.

Zero Hedge:

• Europe's Scariest Chart In More Detail.
• And You Thought Q2 Earnings Were Bad?
• US Midwest Hit By Perfect Gasoline Storm.
• Consumer Credit Misses As Revolving Credit Has Biggest Contraction Since April 2011.

CNBC:

• China Reforms Fail to End Stocks’ Bad Run. When Guo Shuqing became China’s top securities regulator in October, investors hoped that he would bring a reformist zeal to the job that would help break the stock market’s two-year losing streak. They were right about the zeal but wrong about the impact on the market. Barely a week has gone by without the regulator announcing another new measure to improve the functioning of the country’s beleaguered market. But after a brief climb upwards, the benchmark Shanghai Composite Index is down nearly 13 percent since Mr. Guo took office.
• Fiscal Cliff Looms Large as Congress Leaves Town. A much-reviled Congress has now departed for a five week vacation — leaving behind a mountain of unfinished work as well as renewed anxiety that lawmakers and President Obama will be unable to get their act together in time to avoid slipping off the fiscal cliff at the end of the year.
• Dwindling US Crops Are a Global Concern. The U.S. government is expected this week to slash another 15 percent off its estimate of this year's drought-decimated corn crop, likely adding to growing angst in nations like China and India that are fighting to tamp down inflation.

IBD:

• United Therapeutics(UTHR) Gets Lift From Expanded Lineup.

CleanEnergyAuthority:

• Army to Issue $7 Billion RFP for Solar, Renewables.

Read more here: http://blogs.sacbee.com/capitolalertlatest/2012/08/fiscal-analyst-hundreds-of-millions-at-risk-from-facebook-slide.html#storylink=cpy

CNN:

• Monti under pressure to renounce bailout. "We can do it alone" is the latest rallying cry to be heard in Italy as economists and politicians shower Mario Monti with proposals to use the country's own vast but often dormant resources to slash its debt mountain rather than become hostage to the perceived diktat of Germany and Brussels. Initiatives range from the patriotically modest to politically opportunist. But they add up to a crescendo of protests that the prime minister will find hard to ignore as he considers giving up sovereignty in exchange for the uncertain outcome of intervention to prop up Italy's debt by eurozone bailout funds and the European Central Bank.
• Gas prices climb 30 cents a gallon. Gas prices continued their slow but steady march higher Tuesday, surpassing a nationwide average of $3.63 cents a gallon on the back of refinery problems in the United States and higher crude oil prices globally.

CFO:

• Banks’ Liquidity Hinges on Risky Assets. By funding short-term cash needs with structured-finance securities, banks are creating significant liquidity risks for themselves and some of their markets, says Fitch Ratings. Repos, or repurchase agreements, are a key source of short-term financing for Wall Street banks and other financial institutions, and they are under scrutiny once again for being fraught with risk. A Fitch Ratings report last week found a significant weak point in repo markets, a part of the “shadow banking” system that finances trillions of dollars in banks’ trading activities. The repo market is “an important utility in the financial system and promotes liquidity,” says Martin Hansen, senior director of macro credit research at Fitch Ratings. The problem with the repo market currently, though, is the quality of the collateral Wall Street banks and other financial institutions are using to borrow this short-term cash, says Fitch.

Techcrunch:

• Report: Pinterest’s Growth Slows, But Still On Track To Pass Yahoo(YHOO) Referrals In August.

Breitbart.com:

• Lovitz Says Obama Mockery Drew Death Threats. Jon Lovitz spent much of George W. Bush’s presidency doing what nearly all of his peers did – making fun of the Commander in Chief. And no one said a peep. When the “Saturday Night Live” alum chided President Barack Obama for saying the rich don't pay their fair share earlier this year, he ended up letting a security escort walk him to his car. Lovitz tells Big Hollywood that his now infamous podcast rant against Obama’s class warfare rhetoric led to death threats left on the voice mail of his Universal City-based comedy club.

Rasmussen Reports:

• 44% Say Jobs Market Worse Than A Year Ago. Confidence in the U.S. job market has fallen again, with the highest number of Americans in 10 months describing the employment situation as worse than it was a year ago.

Reuters:

• EBay(EBAY) lures big retailers in Amazon(AMZN) battle. EBay Inc, once a scrappy auction site for mom and pop sellers, is enticing some of the world's largest retailers by arguing it can help them compete better against e-commerce leader Amazon.com Inc. EBay Chief Executive John Donahoe and other executives have been telling retailers that Amazon is their enemy, while eBay is a friend because, unlike Amazon, it holds no inventory.
• Egypt launches air strikes on suspected militants in Sinai-state media. Egypt launched air strikes in the Sinai region close to the border with Israel on Wednesday, killing more than 20 suspected Islamic militants, the state-run Ahram news website said. The air strikes on positions in the town of Sheikh Zouaid followed the deaths of 16 border guards last Sunday in an attack blamed partly on Palestinian militants.
• Morgan Stanley(MS) considers shutting offices, cutting staff-sources. Morgan Stanley, under fire to boost profit margins in its retail brokerage arm, is considering closing brokerage offices, laying off support staff and requiring some branch managers also to generate revenue as advisers under a cost-cutting drive, three people briefed on internal discussions said.
• Weak credit quality of US cities bigger concern than bankruptcies-Morgan Stanley(MS). Morgan Stanley's municipal debt strategists said on Tuesday that weaker local credit quality should be a greater concern for municipal debt investors than Chapter 9 bankruptcy filings. "Our updated case study analysis of recent Chapter 9 filings affirms that bankruptcies may pick up somewhat, but the ongoing deterioration of local credit quality is a more relevant systemic risk," Morgan Stanley Research's Michael Zezas and Meghan Robson said in a report.
• Congress to extend wind energy tax credit, says Senate's Reid. Congress will vote to extend a $12 billion federal tax credit for utility-scale wind energy projects that is in danger of expiring at the end of the year, Senate Majority Leader Harry Reid said at a clean energy summit in Las Vegas on Tuesday.
• Priceline(PCLN) shares fall as outlook trails Street forecast. Priceline.com, the online travel agency, topped quarterly profit estimates on Tuesday, but its shares slumped about 15 percent in extended trading as it said weakening conditions in Europe could hurt growth in the current period. Priceline.com, which competes with Expedia Inc and Orbitz Worldwide Inc, owes much of its success to international bookings on its popular European travel site Booking.com. But the weakness of the euro against the U.S. dollar has hurt the value of international bookings. The company said more deterioration could come in Europe, which represents 60 percent of its total booked room nights.
• Express Scripts(ESRX) ups view after strong results with Medco. Express Scripts Holding Co on Tuesday raised its full-year earnings forecast, citing a strong second quarter, increased use of more profitable generic drugs and sooner-than-expected cost savings from its $29 billion acquisition of rival pharmacy benefit manager Medco Health Solutions. Express Scripts shares, which were already up about 25 percent this year, rose more than 7 percent.
• Cree(CREE) forecasts weak 1st-qtr as rising costs dent margins. LED maker Cree Inc forecast weak results for the current quarter after its fourth-quarter profit almost halved on rising costs.

Shanghai Securities News:

• China Able to Expand Property Controls If Prices Rebound. China will be able to expand property market controls if home prices rebound, citing a ministry official. The government may further tighten property lending and increase land supply, citing an industry official. China may also speed up a property tax trial, expand and extend home purchase restrictions. The authority will also probably adopt "target-based" management on home prices. The housing ministry has asked local governments to report land sales on a weekly basis to manage the market, citing a person close to the ministry.
• China Considers New Iron-Ore Pricing Mechanism. China is considering setting up a new iron-ore pricing mechanism amid declining ore prices and falling earnings at domestic steelmakers, citing the Ministry of Industry and Information Technology.
• China GDP Slowdown Not Part of Temporary Trend. China's slowdown in gdp growth isn't temporary and constitutes a trend, Li Zuojun, vice director of resources and environment at the State Council's development research center, wrote today.
  

Al Arabiya News:

• FSA Claims It Killed Russian General in Syria Who Had Been Aiding Assad Regime.

Evening Recommendations
Oppenheimer:

• Rated (NDSN) Outperform, target $64.

RBC Capital:

• Rated (TSCO) Outperform, target $105.

Night Trading

• Asian equity indices are -.25% to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 149.50 unch.
• Asia Pacific Sovereign CDS Index 127.50 +2.0 basis points.
  
• FTSE-100 futures -.15%.
  
• S&P 500 futures -.11%.
  
• NASDAQ 100 futures +.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (TDW)/.59
• (RL)/1.78
• (CSC)/.22
• (NWSA)/.32
• (CXW)/.37
• (MDRX)/.18
• (MNST)/.61
• (JACK)/.35
• (M)/.64
• (DISH)/.66

Economic Releases
8:30 am EST

• Preliminary 2Q Non-farm Productivity is estimated to rise +1.4% versus a -.9% decline in 1Q.
• Preliminary 2Q Unit Labor Costs are estimated to rise +.5% versus a +1.3% gain in 1Q.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,550,000 barrels versus a -6,522,000 barrel decline the prior week. Distillate inventories are estimated to rise by +250.000 barrels versus a -974,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,750,000 barrels versus a -2,174,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.5% versus a -.8% decline the prior week.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Spain Industrial Production report, China inflation data, 10Y T-Note auction and the weekly MBA mortgage applications report could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Rising into Final Hour on Euro Bounce, Short-Covering, Global Central Bank Stimulus Hopes, Investor Performance Angst

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Around Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 15.89 -.38%
  
• ISE Sentiment Index 137.0 +28.04%
  
• Total Put/Call .79 unch.
  
• NYSE Arms .70 -20.31%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 102.86 bps +.11%
  
• European Financial Sector CDS Index 245.39 bps +.78%
  
• Western Europe Sovereign Debt CDS Index 244.23 +.98%
  
• Emerging Market CDS Index 242.73 -1.07%
  
• 2-Year Swap Spread 19.25 -.25 basis point
  
• TED Spread 34.0 -2.25 basis points
  
• 3-Month EUR/USD Cross-Currency Basis Swap -37.75 +.75 basis point
  

Economic Gauges:

• 3-Month T-Bill Yield .10% +2 basis points
  
• Yield Curve 137.0 +5 basis points
  
• China Import Iron Ore Spot $116.20/Metric Tonne -.34%
  
• Citi US Economic Surprise Index -33.80 +.9 point
  
• 10-Year TIPS Spread 2.21 +4 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating +96 open in Japan
• DAX Futures: Indicating +1 open in Germany
  

Portfolio:

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

BOTTOM LINE: Today's overall market action is bullish as the S&P 500 builds on recent gains despite rising eurozone debt angst, high food/energy prices, US "fiscal cliff" worries, earnings concerns and rising global growth fears. On the positive side, Coal, Alt Energy, Oil Tanker, Energy, Semi, Disk Drive, Networking, I-Banking, HMO, Education and Hospital shares are especially strong, rising more than +1.5%. Small-caps are relatively strong. Tech and Commodity-related shares have traded well throughout the day, as well. The UBS-Bloomberg Ag Spot Index is down -.8% and Copper is rising +1.3%. The 10Y Yld is gaining +7 bps to 1.63%. Major Asian indices were mostly higher overnight, led by a +1.1% gain in India. Major European indices were mostly higher, boosted by a +2.2% gain in Spain. The France sovereign cds is falling -1.98% to 145.98 bps, the Japan sovereign cds is down -3.3% to 84.91 bps and the Italian/German 10Y Yld Spread is falling -2.7% to 448.63 bps. On the negative side, Utility, Drug, REIT, Airline, Road & Rail, Telecom and Biotech shares are lower-to-flat on the day. The Transports have not participated in the last 2 days of broad market rally. Oil is rising +1.3%. The Bloomberg European Bank/Financial Services Index fell -.41% today and Brazilian stocks are falling -.7%. The UK sovereign cds is rising +.8% to 56.17 bps and the Spain 10Y Yld is gaining +1.8% to 6.86%. The UBS/Bloomberg Ag Spot Index is up +24.4% in about 9 weeks. The benchmark China Iron/Ore Spot Index is down -35.8% since 9/7/11. Moreover, the China Hot Rolled Steel Sheet Spot Index is also picking up downside steam. As well, despite their recent bounces off the lows, the euro, copper and lumber all continue to trade poorly given equity investor perceptions that global central bank stimuli will boost economic growth in the near future. US weekly retail sales have decelerated to a sluggish rate at +2.0%. US Trucking Traffic continues to soften. Moreover, the Citi US Economic Surprise Index, while showing some improvement recently, is still back to Sept. 2011 levels. Lumber is -3.0% 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 big improvement in the nationwide housing market. The Baltic Dry Index has plunged around -60.0% from its Oct. 14th high and is now down around -50.0% ytd. Shanghai Copper Inventories have risen +76.0% ytd. Oil tanker rates have plunged recently, with the benchmark Middle East-to-US voyage down to 22.50 industry-standard worldscale points, which is the lowest since May, 2009. The CRB Commodities Index is now down -17.3% since May 2nd of last year despite the recent surge in food/energy prices. The 10Y T-Note continues to trade too well. There still appears to be a fairly high level of complacency among US investors regarding the deteriorating macro backdrop. It remains unclear to me whether or not Germany will put its own balance sheet on the line to save the euro even as investors have been pricing this outcome into stocks. The Citi Eurozone Economic Surprise Index is at -67.90 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. 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. Little if anything being discussed by global central bankers will actually boost global economic growth in any meaningful way over the intermediate-term, in my opinion. Thus, recent market p/e multiple expansion on global central bank stimulus hopes, is creating an unstable situation for equities, which could become a big problem this fall unless a significant macro catalyst materializes soon. 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 modestly lower into the close from current levels on rising eurozone debt angst, profit-taking, more shorting, technical selling, high food/energy prices, earnings worries, US "fiscal cliff" concerns and rising global growth fears.

Today's Headlines

Bloomberg:

• German Factory Orders Fall Twice as Much as Forecast. German factory orders declined more than twice as much as economists forecast in June as sales to euro-area countries slumped. Orders, adjusted for seasonal swings and inflation, dropped 1.7 percent from May, when they rose 0.7 percent, the Economy Ministry in Berlin said today. Economists forecast a 0.8 percent decline, according to the median of 35 estimates in a Bloomberg News survey. From a year earlier, orders fell 7.8 percent when adjusted for work days. “All in all, quite a gloomy report,” said Annalisa Piazza, an economist at Newedge Strategy in London. “Exports are badly hit by the current cyclical slowdown and the export- led German industrial sector is not going to be spared from the slump in trade activity.” Orders from the euro region sank 4.9 percent in June after jumping 7.8 percent in May, today’s report showed. Domestic orders fell 2.1 percent, while demand from non-euro nations rose 0.6 percent.
• German Rents, Costs, Have Surged, Led by Berlin, Bild Says. German rents and heating costs have surged since the start of the 1990s, led by Berlin and Baden- Wuerttemberg, Bild-Zeitung reported, citing figures published by the Federal Statistics Office in Wiesbaden. Rents in the two states rose nine percent over the past six years, Bild said. Since 1995, rents in all of Germany increased 23.5 percent on average, the newspaper said. Electricity costs have surged 80 percent since 1991 while heating prices have climbed as much as threefold, depending on the type of fuel, Bild said.
• Defaulting Sovereigns Risk Second Restructuring, Moody's Says. Nations that undergo distressed debt exchanges risk defaulting a second time, Moody’s Investors Service said in a report that may presage challenges facing Greece. Of 30 sovereign distressed exchanges since 1997, more than a third were followed by another default event, according to Moody’s. Losses to investors ranged from 5 percent to 95 percent with a mean of 47 percent, New York-based Moody’s said.
• S&P 500 Puts at 14-Month Low as VIX Tumbles on ECB Bets: Options. The cost of protecting against a drop in U.S. stocks fell to its lowest level in more than a year amid increasing optimism European policy makers will take steps to ease the region's debt crisis. Puts with an exercise level 10% below the S&P's 500 Index cost 9.18 points more than calls betting on a 10% rally, according to data on three-month options compiled by Bloomberg. The price relationship known as skew fell to 8.73 last month, the lowest since May 2011.
• Monti Told by Lawmaker Allies to Halt Berlusconi Criticism. Italian Prime Minister Mario Monti was advised by allies in parliament to curb his criticism of his predecessor, Silvio Berlusconi, or risk seeing his government fall. Monti, who relies on Berlusconi’s People of Liberty party to govern, told the Wall Street Journal in an interview published today that Italy’s borrowing costs would be substantially higher if the billionaire were still in charge.
• Oil Surges to 2-Month High. Crude oil for September delivery increased $1.37, or 1.5 percent, to $93.57 at 11:42 a.m. on the New York Mercantile Exchange. The contract touched $93.69, the highest level since May 17. Prices are down 5.3 percent this year. Brent oil for September settlement rose $2.16, or 2 percent, to $111.71 on the London-based ICE Futures Europe exchange. The contract reached $111.85, the highest level since May 16.
• U.S. CEOs Less Confident on Economy, Survey Shows. Confidence among U.S. chief executive officers declined in the second quarter as more business leaders said economic conditions will worsen in the next six months, a private survey showed. The Young Presidents’ Organization sentiment index fell to 60 in the second quarter from 65.1 in previous three months, the largest decline since the survey began in 2009. Readings greater than 50 show the outlook was more positive than negative. “High gas prices, ongoing woes in Europe, and reduced growth in Asia, China in particular, no doubt dampened CEO optimism in the latest survey,” Stephen Slifer, YPO Global Pulse economic adviser and chief economist at NumberNomics, said in a statement. “The results seem to be pointing toward slower growth ahead and not a global contraction.”
• US Job Openings Rise in June. The number of positions waiting to be filled climbed by 105,000 to 3.76 million, the most since July 2008, from a revised 3.66 million the prior month, the Labor Department said today in Washington. Hiring and firings cooled.
• Gen Y Eschewing V-8 for 4G Threatens Auto Demand. The auto industry says it’s concerned that financially pressed young people who connect online instead of in person could hold down peak demand by 2 million units each year. The rate of U.S. auto sales to 18-to-34-year-old buyers declined to 11 percent in April 2012, down from 17 percent for the same age group in April 2007, before the recession, according to Southfield, Michigan-based R.L. Polk & Co.
• Egypt Buries Soldiers Slain in Border Attack. Egypt buried on Tuesday the 16 soldiers killed by suspected Islamist militants in the Sinai Peninsula near the borders with Gaza and Israel, as pressure built on the new Egyptian president to back away from plans to ease restrictions on crossings to the Palestinian territory. The ceremonies were disrupted by hecklers who chanted against President Mohammed Morsi of Egypt's Muslim Brotherhood and Gaza's Hamas rulers. Both Islamist groups condemned the killings, but the deadly attack is likely to prevent any relaxation of security along the border and fuel Egyptian fears of Palestinian militancy spilling across.
• Harder-Luck Foreclosures Grow as Funding for Help Wanes.

Wall Street Journal:

• Gunmen Kill 19 at Nigerian Church. Gunmen fired on a worship service in a church in central Nigeria, killing at least 19 people—including the pastor—and wounding others in a nation often divided by religion, the military said Tuesday. The attack targeted a Deeper Life church in the town of Otite in Kogi state, about 155 miles southwest of Nigeria's capital, Abuja. Blood stained the floors of the church as police and soldiers surrounded it Tuesday morning, witnesses said. It was unclear how many people were wounded in the attack Monday night. The gunmen surrounded the church in the middle of a worship service and opened fire with Kalashnikov assault rifles, military spokesman Lt. Col. Gabriel Olorunyomi said. The church's pastor was among the dead. Soldiers searched for gunmen through the night, but had made no arrests as of Tuesday morning, Lt. Col. Olorunyomi said.
• Chinese Trial to Echo a Dark Past. When Gu Kailai—the wife of a disgraced Chinese politician—walks into a courtroom here on Thursday, it will recall the trial of another once-powerful woman, more than a quarter-century ago—and a watershed moment in China's modern history.
• David Wessel Answers Your Tax Questions.
• Iran Vows Support For Assad's Regime.
• Romney Attacks Obama on Welfare Mandates. Mitt Romney accused President Barack Obama Tuesday of gutting federal mandates that require welfare recipients to look for work.
• ECB Bond Purchases Tied to Conditionality. The European Central Bank will tie future purchases of troubled governments' securities to strict conditions to be set by the region's bailout funds, but these purchases could be "substantial" and "sustainable," ECB Governing Council member Ardo Hansson said Monday, in a sign the central bank is determined to rein in surging borrowing costs. In an interview, Mr. Hansson said the ECB could discuss some proposals for its revamped program of government-bond purchases at its next meeting in September.
• ABA Council Votes Against Accrediting Foreign Law Schools. The vote wasn’t close. The American Bar Association’s Council of Legal Education and Admissions to the Bar overwhelmingly against accrediting foreign law schools, ending more than four years of debate, the National Law Journal reported.
  

Barron's:

• Fossil(FOSL) Rockets Higher on Growing Watch Sales. Fossil jumped 33% in early trading on Tuesday after the company beat earnings expectations and projected better than expected annual operating profits.

CNBC.com:

• Gross to Investors: Stay Away From Europe. Bill Gross’ latest message to investors - don’t put your money into Europe because they are not going to get out of their debt crisis any time soon. Gross, Founder and Co-Chief Investment Officer of Pimco, manager of the world’s largest bond fund, wrote in an editorial in the Financial Times on Monday that the ultimate aim of European leaders is to get their hands on private-sector money because they know they will need it to fund the European economy. The current public-spending program is not sustainable and efforts to fix the debt crisis have been, and will be, futile, he said. Policymakers in Europe now face an unprecedented expansion of risk spreads and credit agency downgrades which “almost guarantee that sickbed countries can never be discharged from intensive care,” he added. He warned investors not to part with their money. “Investors get distracted by the hundreds of billions of euros in sovereign policy checks, promises that make for media headlines but forget it’s their trillions that are the real objective,” Gross wrote. “Even Mr Hollande in left-leaning France recognizes that the private sector is critical for future growth in the EU. He knows that, without its partnership, a one-sided funding via state-controlled banks and central banks will inevitably lead to high debt-to-GDP ratios and a downhill vicious cycle of recession.” “Psst…investors: Stay dry my friends!” Gross said. “Interest rates over and above each country’s nominal GDP growth rate will inevitably add to a country’s debt as a percentage of GDP , even if budgets are in primary balance,” he said. “At current yields, growth rates, and deficits, the spread may incrementally add 2-3 percent to Spain and Italy’s tenuous debt ratios every year.” If GDP growth remains close to flat, the two nations will still drown in debt even if they have to borrow at 4 percent. And without the private sector’s participation, all efforts such as the European Financial Stability Facility and ultimately the European Stability Mechanism, will be futile, he said.
• European CEO Confidence at 9-Month Low: Survey. Confidence levels among European CEOs are at a nine-month low, with less than a third of the region’s business leaders expecting conditions to improve over the next year, according to a survey by the Young Presidents’ Organization (YPO).
• A Story of Caution and Fear for Small Businesses. Small businesses are less inclined to hire or to spend on growing their businesses than they were earlier in the year, according to the latest Wells Fargo/Gallup Small Business Index. The quarterly survey’s latest statistics tell a story of caution, even perhaps fear. The number of business owners expecting to be in a good financial position in the next 12 months declined seven percentage points to 59 percent. Meanwhile, those expecting increased revenue in the next 12 months declined by six percentage points to 43. Separately, the July NFIB Small Business Survey report shows that small business optimism is at its lowest level since October 2011.
• London Banks Take Another Hit on StanChart Iran Claims. Standard Chartered’s share price, which lost close to a fifth of its value in early trading Tuesday after news of U.S. regulators’ allegations that it helped Iran launder up to $250 billion broke, may not be the only victim of the accusations.

Business Insider:

• CHART OF THE DAY: The World's Stock Markets Are Holding Hands Again.
• Investors Are Actually Much More Bullish Than Everyone Says.

Zero Hedge:

• Desperately Seeking: Subprime Collateral. Like everywhere else, quality collateral is increasingly being soaked away and nowhere is this more evident than in the auto industry. We recently noted the significance of the auto industry and its self-fulfilling (and destroying) channel-stuffing 'mandates' around the world but today we get confirmation of the depths the car industry will stoop to.
• Europe's Mountainous Divide And Why Draghi's Words Fixed Nothing.
• Short Squeezeability Of Two Main Market ETFs Slides To Multi Year Lows. (graph)
• Putting A Face To Einstein's Definition Of Insanity. If ever there was a name and a face synonymous with Einstein's famous definition of repeating the same action and expecting a different unicorn-full world of happiness, it is Boston Fed's Eric Rosengren.
• Robert Shiller Has A Chiller For Housing Recovery Hopes.

New York Times:

• ‘Les Riches’ in France Vow to Leave if 75% Tax Rate Is Passed. President François Hollande is vowing to impose a 75 percent tax on the portion of anyone’s income above a million euros ($1.24 million) a year. “Should I be preparing to leave the country?” the executive asked Mr. Grandil. The lawyer’s counsel: Wait and see. For now, at least.

Reuters:

• Spanish, Italian yields bounce as caution sets in. Spanish and Italian short-term government bond yields rose on Tuesday as caution took over after a strong rally fuelled by the prospect of the European Central Bank buying the two countries' debt. Investors are not yet fully convinced ECB intervention would succeed in insulating Spain and Italy in the debt crisis and worries remain over the barriers that must be overcome before the ECB can step in. The ESM bailout fund, which the ECB wants countries to tap before it buys their bonds, is not yet functional, awaiting among other things a German Constitutional Court ruling on it on Sept 12. Germany's Bundesbank has also yet to be convinced of the plan to buy bonds and some analysts wonder how strong any ECB intervention would be given failed past attempts to cap borrowing costs in Greece, Ireland and Portugal. Ten-year Spanish yields rose 6 bps to 6.86 percent, with the psychological 7 percent level that sparks fear of an imminent loss of market access still within reach. Equivalent Italian yields were 5 bps higher at 6.05 percent.
• Number of Firms Operating in Spain Hits 5-Year Low. The number of companies operating in Spain fell for a fourth straight year in 2011 to a five-year low, according to data on Tuesday, highlighting the impact of the global crisis that has tipped the country into recession and made one in four jobless. The national statistics institute (INE) said the number of companies active in the euro zone's fourth largest economy fell by 1.6 percent last year to 3.199 million, marking the fourth consecutive year of contraction.
• Italy's recession pain stretches to a year. Italy shrank further into recession in the second quarter for a 2.5 percent yearly decline, data showed on Tuesday, threatening attempts by Mario Monti's technocrat government to control a debt crisis that is undermining the whole euro zone. A 0.7 percent fall in gross domestic product, only slightly better than the first quarter's 0.8 percent decline, means the Group of Seven economy has now been contracting for at least a year, according to figures from government agency ISTAT. This will weaken tax revenues and hit jobs and consumer spending, a vicious circle which makes it harder for Monti, who is aiming to cut the budget deficit to 0.1 percent of GDP in 2014, to meet his public finance goals.
• Fitch: rule changes could increase U.S. banks cap ratios volatility.
• US gasoline demand dips as prices rise-MasterCard(MA). U.S. motorists bought fewer gallons of gasoline in the last two weeks as prices at the pump shot up, MasterCard said in its weekly SpendingPulse report released Tuesday. Gasoline demand fell 3 percent over the two weeks ending Aug. 3 from a year earlier, after the average price at the pump rose 10 cents to $3.53 per gallon, MasterCard said. Last week's four-week moving average for demand was 4 percent lower than a year earlier.

Telegraph:

• Greek exit from euro is 'manageable’ says Jean-Claude Juncker. Jean-Claude Juncker, leader of the eurozone finance ministers' group, says the world could cope with Greece leaving the eurozone - but that it still holds dangers.
• Wealthy Brits look to flee abroad to escape high taxes, crime and rain. Crime, high taxes and even the weather are driving a growing number of wealthy Britons to actively consider moving abroad, according to a financial advisory firm.
• Nationalisation of RBS could help bank's recovery - Lord McFall and Jon Moulton. Full public ownership of the Royal Bank of Scotland would help the clean-up of the part-nationalised lender, according to Lord McFall, a member of the House of Lords economic affairs committee, and venture capitalist Jon Moulton.