Today's Headlines

Bloomberg:

• IMF Reduces Global Growth Outlook as U.S. Expansion Weakens. World economic growth will struggle to accelerate this year as a U.S. expansion weakens, China’s economy levels off and Europe’s recession deepens, the International Monetary Fund said. Global growth will be 3.1 percent this year, unchanged from the 2012 rate, and less than the 3.3 percent forecast in April, the Washington-based fund said today, trimming its prediction for this year a fifth consecutive time. The IMF reduced its 2013 projection for the U.S. to 1.7 percent growth from 1.9 percent in April, while next year’s outlook was trimmed to 2.7 percent from 3 percent initially reported in April. “Downside risks to global growth prospects still dominate,” the IMF said in an update to its World Economic Outlook. It cited “the possibility of a longer growth slowdown in emerging market economies, especially given risks of lower potential growth, slowing credit, and possibly tighter financial conditions if the anticipated unwinding of monetary policy stimulus in the U.S. leads to sustained capital flow reversals.”

• Chinese Cash Squeeze Causes Auto Dealer Panic, Group Says. China’s money-market squeeze, which sent interbank borrowing costs soaring last month, may prompt auto dealers to cut vehicle orders and slow expansion plans to conserve cash, according to an industry group. “The cash crunch has led to psychological panic among dealers over access to financing,” Luo Lei, deputy secretary-general of the China Automobile Dealers Association, said in a telephone interview from Beijing today. “So far, it hasn’t caused any real damage to the industry, but if the cash crunch continues, the impact will spread to auto dealers.” About 28 percent of dealers surveyed said they felt “anxious” about their funds last month, up from 11 percent in May, the trade body said in a statement today. Only 21 percent of respondents said they had ease of access to financing in June, down 27 percentage points from a month earlier, the survey showed. The survey’s findings add to signs that the cash squeeze has spread beyond non-financial companies.

• China Central Bank Tightens Rules on Interbank Bond Trading. China’s central bank is tightening rules on interbank bond market trading by ordering all transactions to be conducted through the National Interbank Funding Center as it seeks to boost transparency. Transactions including forward deals and repurchases can’t be reversed or changed once agreed between the two parties, the People’s Bank of China said in a statement posted on its website today. Clearing agencies should not engage in settling trades outside the interbank market, according to the statement. Alterations to bond ownership, such as inheritance that are not related to trading, must be supported by legal documents explaining the nature of the transaction, it said.

• Italy’s Credit Rating Cut to BBB by S&P; Outlook Is Negative. Italy’s credit rating was lowered to BBB, or two levels above junk, by Standard & Poor’s because of expectations for a further weakening of economic prospects and the nation’s impaired financial system. The outlook on the rating, reduced from BBB+, remains negative, the New York-based ratings company said in a statement today. Italy’s economic output in the first quarter of 2013 was 8 percent lower than in the last quarter of 2007 and continues to fall, S&P said. The company lowered its growth forecast for 2013 to minus 1.9 percent, from minus 1.4 percent, in part because of the rigidities in the labor and product markets.

• British Manufacturing Decline Casts Doubt on Recovery: Economy. U.K. manufacturing unexpectedly shrank in May amid a drop in pharmaceuticals and metals output, casting doubts on the strength of the economic recovery in the second quarter. Factory output fell 0.8 percent from April, when it declined 0.2 percent, the Office for National Statistics said today in London. The median forecast of 25 economists in a Bloomberg News survey was a 0.4 percent increase.

• European Stocks Advance as Alcoa Boosts Earnings Optimism. European stocks rose to the highest level in almost a month as Alcoa Inc. started the U.S. earnings-reporting season with results that beat analysts’ estimates. Mining companies led gains after Alcoa said China will lead an increase in global aluminum demand. Electricite de France SA jumped the most since October 2008 after a report that the utility will increase its tariff. LVMH Moet Hennessy Louis Vuitton SA added 2.1 percent after it agreed to acquire 80 percent of Italian clothier Loro Piana SpA. The Stoxx Europe 600 Index gained 0.8 percent to 294.58, its highest level since June 10.

• Tepco’s ‘Fukushima Fifty’ Leader Yoshida Dies of Cancer. Masao Yoshida, the plant manager who led the fight to bring Japan’s Fukushima atomic station under control during the 2011 nuclear disaster, has died. He was 58. He died on July 9 at a hospital in Tokyo, according to a statement from Tokyo Electric Power Co (9501)., the operator of the Fukushima Dai-Ichi nuclear plant. The cause was esophageal cancer, the statement said. The illness was unrelated to the radiation exposure after the nuclear accident, according to Tepco, as Tokyo Electric is known.

• Yen Tumbling 9% Splits Top Forecasters From Futures: Currencies. The most accurate foreign-exchange forecasters expect the yen to fall about 9 percent this year to levels not seen since 2008, putting them in opposition to futures traders who are paring bets on a decline.

• Egypt Sets Poll Timetable as Killings Threaten Transition. Egypt named former Finance Minister Hazem El-Beblawi to serve as interim premier, leading a government that will have to oversee elections and revive a crumbling economy to end a deepening crisis following the ouster of Islamist leader Mohamed Mursi.

• FedEx(FDX) Rises on Speculation Bill Ackman May Acquire Stake. FedEx Corp. (FDX) rose the most in 19 months on speculation that it may be an investment target for William Ackman’s Pershing Square Capital Management LP, an Edward Jones analyst said. The stock increased 6.2 percent to $105 at 11:21 a.m. in New York trading, after jumping 7.3 percent for the largest intraday increase since December 2011.

Wall Street Journal: 

• `Abenomics’ Brings an IPO Flood.

Fox News:

• GOP to White House: ObamaCare delay for businesses unfair to everyone else. House Republican leaders on Tuesday urged the Obama administration to grant everybody a reprieve from the ObamaCare insurance mandate, suggesting the recent decision to delay only the requirement on businesses would be unfair to everyone else. "We agree with you that the burden was overwhelming for employers, but we also believe American families need the same relief," House Speaker John Boehner and several other top Republicans wrote in a letter to President Obama. 

MarketWatch:

• NYSE Euronext(NYX) to take over Libor; terms unknown.

CNBC: 

• Hold That 'Pig': GOP's Corker Says of Obamacare. (video) The catastrophic crash of an oil-laden freight train in a small Quebec town last weekend will bring more scrutiny to the railroad industry's transport of oil and may boost the case for pipeline development.

• Fatal Oil Train Disaster Brings Scrutiny to Oil-by-Rail Boom. The catastrophic crash of an oil-laden freight train in a small Quebec town last weekend will bring more scrutiny to the railroad industry's transport of oil and may boost the case for pipeline development.

Zero Hedge: 

• Presenting China's First Too Big To Fail "Lack Of Liquidity" Casualty.

• Egypt: 6 Charts And 2 Scenarios.

• Meet America's Second Largest Employer: A Temp Agency.

• Exposing The Lie Behind The Nonfarm Payroll Numbers. (graphs)

• Kermit Krushed By Latest Stolpering As Asmussen Sends EURUSD Under 1.2800.

Business Insider: 

• A Complete Analysis Of Egypt's Textbook Coup.

• The New York Times Eviscerates Eliot Spitzer And Anthony Weiner.

New York Times:

• Crisis-Struck Europeans Losing Faith in Governments. Less than 10 percent of people in the European countries hardest hit by the sovereign debt crisis believe that their leaders are doing a good job at fighting corruption, reflecting a crisis of faith in government since the crisis crippled much of the euro zone in 2008, an anti-corruption group has found. A global survey of people’s views on corruption by Transparency International, released on Tuesday, revealed a deep disconnect between elected leaders and the people they govern. Roughly half of the 114,000 people surveyed viewed political parties as the most corrupt institutions, and more than half think their governments are run by special interest groups, the survey showed.

NYPost: 

• IRS mistakenly posted 100,000 Social Security numbers to gov't website: group. The IRS mistakenly posted the Social Security numbers of tens of thousands of Americans on a government website, the agency confirmed Monday night. One estimate put the figure as high as 100,000 names. The numbers were posted to an IRS database for tax-exempt political groups known as 527s and first discovered by the group Public.Resource.org.

Reuters:

• Kroger(KR) to buy Harris Teeter(HTSI) for $2.5 billion, shares rise. Kroger Co said on Tuesday it would buy regional grocer Harris Teeter Supermarkets Inc in a $2.5 billion deal, the latest in a string of grocery industry consolidations. 

• METALS-Copper falls on strong dollar, China growth worries. Copper fell on Tuesday as the dollar rose and Chinese inflation data reinforced worries about slowing growth in the world's top copper consumer, though risk appetite in the wider markets and oversold conditions kept losses in check. Copper, down nearly 15 percent this year, fell on Friday after strong U.S. jobs data bolstered concerns that the Federal Reserve could start winding down its stimulus programme as early as September.

• U.S. venture capital funding in Q2 down 54 pct on previous year. U.S. venture capital firms raised $2.9 billion in the second quarter of 2013, down 54 percent on the same period last year, Thomson Reuters and National Venture Capital Association data showed on Tuesday. This is the lowest quarterly figure for U.S. venture capital fundraising since the third quarter of 2011. During the second quarter of 2013, the top five U.S. venture capital funds accounted for 55 percent of total fundraising. 

• IMF says Brazil should beware inflation, not ease monetary policy. Brazil's central bank ought not ease monetary policy any further because inflation is already too high, the International Monetary Fund said on Tuesday. "(Brazil's) inflation is currently above the bend. At this point, to use additional monetary stimulus would in our view be wrong," Thomas Helbling, the IMF's chief for its World Economic Studies division, told a news conference.

Bear Radar

Style Underperformer:

• Large-Cap Growth +.59%

Sector Underperformers:

• 1) Medical Equipment -1.44% 2) Computer Services -1.38% 3) Hospitals -.37%

Stocks Falling on Unusual Volume:

• ISRG, MAKO, RYAAY, EROC, CVC, BBVA, APU, XXIA, SNCR, DGX, CSIQ, SODA, VAR, LH, MU, SSYS, JKS, MPEL, ANGI, NLSN and VHC

Stocks With Unusual Put Option Activity:

• 1) JDSU 2) ISRG 3) TGT 4) XLF 5) KRE
  

Stocks With Most Negative News Mentions:

• 1) DGX 2) ZION 3) P 4) JDSU 5) XXIA
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Value +.67%

Sector Outperformers:

• Homebuilders +3.90% 2) Road & Rail +2.07% 3) Oil Tankers +1.98%
  

Stocks Rising on Unusual Volume:

• GTN, BBEP, ALK, TV, VSTM, FDX, YY, AWAY, AMAT, ETE, TCK, LINE, BKS, DHI, FSL, PBH, FDX, ZOLT, KBH, IRF, LEN, NFLX, XONE and QCOR

Stocks With Unusual Call Option Activity:

• 1) FDX 2) XLNX 3) ISRG 4) SVU 5) RPRX
  

Stocks With Most Positive News Mentions:

• 1) KLAC 2) PG 3) ED 4) HTSI 5) IP
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg: 

• Best-Ranked Bank OCBC Cautions on China Crunch: Southeast Asia. Oversea-Chinese Banking Corp. (OCBC), Southeast Asia’s second-largest lender, says banks doing business in China will have to be more prudent with liquidity to weather any future crises. The credit crunch that started in mid-June is temporary and caught some lenders by surprise, OCBC Chief Executive Officer Samuel N. Tsien, 58, said in a Bloomberg Television interview with Haslinda Amin in Singapore yesterday. A money-market liquidity squeeze in China will probably cut the country’s credit growth by about 750 billion yuan ($122 billion) as its central bank continues to crack down on excessive lending, a Bloomberg survey shows. Tsien has focused on expansion in China, Taiwan and Hong Kong to offset waning profitability in the lender’s home market of Singapore. In China, “liquidity is something that cannot be counted on for certain,” said Tsien, who heads Asia’s strongest bank, according to rankings compiled by Bloomberg Markets in May. “You have to be prepared to have adequate liquidity to fund your assets.” 

• Morgan Stanley Favors Credit-Default Swaps to Hedge China Slump. Investors concerned about a sudden slowdown in China should buy sovereign credit-default swaps and currency options, according to Morgan Stanley. The U.S. investment bank prefers default swaps and puts, particularly on the yuan and Taiwanese dollar, to protect against a scenario in which growth in the world's second-biggest economy slumps to 5.5% as the central bank tightens lending to local governments and property developers, it said in a research note dated yesterday. Markets are pricing in a 10% chance of this happening in the next 12 months, the lender wrote. The cost of insuring China's debt from non-payment soared 56.2 basis points this year to 122.5 yesterday, the second-biggest gain in a CMA gauge of 40 investment-grade issuers in Asia outside Japan, as policy makers instigated the worst cash crunch in a decade in an attempt  to control lending.

• Japan Says China Trying to Change Status Quo in Region by Force. China is trying to change the regional status quo by force, based on claims that contradict international law, Japan said in the first defense white paper to be published under Prime Minister Shinzo Abe’s government. “In cases where China’s interests conflict with those of neighboring countries, including Japan, it has taken measures that have been called high-handed, including trying to change the status quo by force,” the Defense Ministry said in its annual report released today on Japan’s security situation.  

• Rupee Plunge Spurs State Bank to Increase Rates: Corporate India. State Bank of India, the nation’s largest lender, will raise interest rates for overseas credit to protect its profit as the rupee’s plunge to a record raises the risk of borrowers defaulting on their loans. The state-owned bank will increase lending rates to cover the probability of rising bad loans from unhedged currency exposure and higher foreign-currency yields, said Managing Director Hemant Contractor, who heads the lender’s international operations. Overseas loans accounted for more than 16 percent of State Bank’s 10.8 trillion-rupee ($177 billion) loan book as of March 31, exchange filings show.

• Tanker Demolitions Slumping as Rupee Reaches Record Low: Freight. The Indian rupee’s slump to a record low is curbing tanker demolitions, prolonging a capacity glut and the most unprofitable freight rates in at least 16 years.

• China Stocks Swing Between Gains and Losses After Inflation Data. China’s stocks swung between gains and losses after the release of June inflation data. Property and consumer-staples companies fell, while cement companies advanced. Poly Real Estate Group Co., the nation’s second-biggest developer, slumped for the first time in four days. Kweichow Moutai Co., China’s biggest liquor maker by market value, slid 0.9 percent after Credit Suisse Group AG cut its rating on the nation’s consumer-staples producers. Jiangxi Wannianqing Cement Co. jumped the most this year after estimating first-half profit probably more than doubled from a year earlier. The Shanghai Composite Index slipped 0.2 percent to 1,954.03 at 10:48 a.m. local time, after plunging 2.4 percent yesterday.

• Asian Stocks Advance on Earnings Outlook as Gas Declines. Asian stocks rebounded from the biggest slump in the regional benchmark in two weeks, and regional credit risk declined after Alcoa Inc. started the U.S. earnings season with results that beat analysts’ estimates. The Dollar Index rose with gold, while industrial metals fell. The MSCI Asia Pacific Index climbed 1.1 percent by 11:05 a.m. in Tokyo. Standard & Poor’s 500 Index futures increased 0.3 percent.

• What’s Good for U.S.-China-Japan Leaves Emerging Markets Losers. What’s good for the global economy’s superpowers risks creating losers in other parts of the world. Signs that the Federal Reserve is preparing to curtail its stimulus are boosting interest rates abroad as well as in the U.S. The strictest credit squeeze in China in at least a decade threatens to erode a pillar of international growth. Japan’s reflation push is lifting the exchange rates of trade rivals and luring capital. While the transitions could mean slower growth in the U.S. and China, they ultimately prime the three biggest economies for less volatile and longer-lasting expansions. Losers for now include the emerging markets and commodity producers previously buoyed by easy U.S. monetary policy and Chinese demand. Economies that still need cheap cash or weaker currencies, including the euro area, also could suffer.

• Pimco Shuns Korea to Turkey Covered Debt on Liquidity. Bankers attempting to sell covered bonds around the world are hitting a roadblock as investors including Pacific Investment Management Co. say difficulty trading debt from fledgling markets is driving them away.

• Rubber Recovers From One-Week Low as Weak Yen Boosts Appeal. Rubber rebounded from the lowest level in a week as Japan’s currency weakened below 101 per dollar, raising the appeal of yen-denominated futures. Rubber for delivery in December added as much as 0.4 percent to 241 yen a kilogram ($2,383 a metric ton) and was at 240.3 yen on the Tokyo Commodity Exchange at 12:11 p.m. Futures slid to 237 yen earlier, the lowest level for a most-active contract since July 1.

• Citigroup(C) to BTG at Risk of Losses on Batista, Moody’s Says. Citigroup Inc.’s Brazil unit and Grupo BTG Pactual (BBTG11) are among banks that may face “sizable” losses if companies controlled by Brazilian billionaire Eike Batista default, Moody’s Investors Service said. Citigroup’s loans and other risks linked to Batista’s faltering commodities companies total 206 million reais ($91 million), or 42 percent of the profit generated by the New York-based bank’s Brazil unit for last year, Moody’s said today in a report. At Sao Paulo-based BTG, the exposure is 649 million reais, or 32 percent of profit.

• U.S. Said to Mull Two Separate Leverage Ratios for Banking Firms. U.S. regulators may set two separate capital standards for the largest banks, one for parent companies and another for their government-backed lending units, said a person with knowledge of the matter. One leverage ratio would set capital at 6 percent of assets and the other would be 5 percent under the joint proposal scheduled to be published tomorrow by the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, the person said.

Wall Street Journal: 

• Central Bankers Hone Tools to Pop Bubbles. Central bankers around the world are searching for ways to halt borrowing binges before they morph into bubbles, and to push lenders to shore up their defenses before the next crisis arrives. In Seoul’s upscale Gangnam neighborhood, made famous by pop star Psy’s viral music video, government curbs on real-estate lending froze a market in which home prices had been rising as fast as 25% a year. In Toronto, housing prices reversed their rapid rise and fell for five months after the government changed rules to effectively increase monthly payments on new loans. But in Tel Aviv, home prices kept right on climbing—up 11% over the past year for a three-bedroom apartment—even after the central bank boosted minimum down payments and made mortgage lending less attractive to banks. Central bankers everywhere else are watching these experiments closely, among them Ben Bernanke, chairman of the U.S. Federal Reserve.

• Peeks Are Still Available for Some Key Economic Data. One provider has ended early looks at some market-moving figures, but other opportunities remain. 

• Michael McConnell: Obama Suspends the Law. Like King James II, the president decides not to enforce laws he doesn't like. That's an abuse of power. President Obama's decision last week to suspend the employer mandate of the Affordable Care Act may be welcome relief to businesses affected by this provision, but it raises grave concerns about his understanding of the role of the executive in our system of government.

Fox News: 

• The cost of subsidies for those seeking government aid through ObamaCare has increased dramatically, critics say. The cost of subsidies for those seeking government aid through ObamaCare has increased dramatically, critics say – even before a single dollar has been collected. Republican Sen. Orrin Hatch of Utah wrote a letter to the administration asking why the president is already requesting 107 percent more than three years ago to pay for subsidies. "They low-balled everything, and they knew they were not asking for enough money to actually do this," John Goodman of the National Center for Policy Analysis said. "And so now they are coming along saying: 'Oh, we've just discovered we don't have enough money'.  They should’ve known that from day one." "I don’t think most of America will be shocked that a government project is coming in over budget," Jim Capretta of the American Enterprise Institute said. "It’s the typical story and so yeah it's probably happening in this case as well."

CNBC:

• Companies Set to Beat Lowered Bar for Earnings Season.

Zero Hedge: 

• Average Cost Per 'Official' Wiretap In The US: $50,452.

• The Remarkable Goldman Extrapolation Engine Strikes Again.

• A Historic Inversion: Gold GOFO Rates Turn Negative For The First Time Since Lehman. (graph)

• Rainman Economics.

• Ken Rogoff: "Policymakers Should Be Cautious Seeing Gold's Drop As A Vote Of Confidence".

Business Insider: 

• Gallup Poll Shows How Badly MSNBC Is Lagging In The Cable News Wars. 

• Experts Destroy Obama's Argument That Americans Must Sacrifice Privacy For Security.

New York Times:

• U.S. Considers Faster Pullout In Afghanistan. Increasingly frustrated by his dealings with President Hamid Karzai, President Obama is giving serious consideration to speeding up the withdrawal of United States forces from Afghanistan and to a “zero option” that would leave no American troops there after next year, according to American and European officials.

Reuters:

• Tesla Motors(TSLA) to replace Oracle Corp(ORCL) on Nasdaq 100 Index.

• China inflation picks up, limits room for policy easing. China's annual consumer inflation accelerated more than expected in June as food costs soared, data showed on Tuesday, limiting room for the People's Bank of China to loosen policy to underpin the slowing economy. The central bank is seen keeping policy largely neutral in the near term to balance the need to keep the world's second-largest economy on an even keel while warding off consumer inflation as well as possible property bubbles, analysts say. "The price pressure for food items came back a little bit. It will be more difficult for them to ease policy, especially to cut interest rates," said Kevin Lai, an economist at Daiwa in Hong Kong. "It reduces the likelihood of interest rate cuts this year and that is not a good policy background to have. But I think inflation will ease by the end of the year as demand won't be strong."

• Intuitive Surgical(ISRG) sees Q2 revenue below views, shares dive 12 pct. Intuitive Surgical Inc, maker of the da Vinci surgical robot, said on Monday it expects second-quarter revenue below analysts' expectations, and its shares fell 12 percent in after-hours trading. The company said it expects revenue for the quarter of about $575 million, up 7 percent from a year ago but well below the average analyst forecast of $629.6 million reported by Thomson Reuters I/B/E/S.

• Alcoa(AA) posts quarterly profit; sees aluminum demand growth. Alcoa Inc remains optimistic that global demand for aluminum will grow 7 percent this year, driven largely by demand from the aerospace and commercial transportation sectors, the largest aluminum producer in the United States said on Monday. 

• U.S. hospitals speed transition to digital records -study. U.S. hospitals are making major strides in switching to electronic health records from paper, driven by an infusion of federal funding for the nationwide effort, according to a report by the Robert Wood Johnson Foundation. The number of hospitals with a basic electronic health records system in place jumped to 44 percent in 2012, up 17 percentage points from 2011. Hospitals that have gone digital have tripled since 2010, when healthcare providers began receiving federal funds to finance the change, the report found.

• Hedge funds in June post first decline of the year. Hedge funds recorded their first monthly loss in eight months in June, as they battled volatile stock and bond markets, according to data published on Monday by industry tracker Hedge Fund Research. On average, hedge funds lost 1.3 percent last month, while the broader S&P 500 stock index fell about 1.7 percent. The decline came after seven months of gains, which had been the longest run of positive performance since 2011 for the $2.25 trillion hedge fund industry. Hedge funds have gained 3.6 percent for the year, trailing the Standard & Poor's 500, which rose 12.6 percent during the first half of 2013.

Telegraph:

• Unbalanced and unsustainable - this is the wrong kind of growth.

The Standard:

• Beijing seen ready to bear debt. Beijing is likely to shoulder local government debt if there is any default, according to an official at one of China's most influential think-tanks. Gao Peiyong, a senior official at the Chinese Academy of Social Science, was speaking to a forum in Beijing on Sunday. Gao estimated local government debt is likely to have exceeded 10 trillion yuan (HK$12.6 trillion). The International Monetary Fund has warned China's local government debt has doubled from 2010 and may now reach 20 trillion yuan - which is more than 50 percent of its gross domestic product.

Economic Information Daily:

• China to Use Financial Policies to Curb Overcapacity. China will implement "strict" financial policies to curb overcapacity. People's Bank of China and China Banking Regulatory Commission will "strictly" check applications for financing by companies that are high energy consumers or heavy polluters, citing a person from PBOC's monetary policy dept. as saying. National Development and Reform Commission and the Ministry of Industry and Information Technology will also coordinate to speed up the process of phasing out outdated capacity.

Evening Recommendations 
Piper Jaffray:

• Rated (WDC) Overweight, target $77.

Night Trading

• Asian equity indices are +.25% to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 158.0 +1.0 basis point.

• Asia Pacific Sovereign CDS Index 117.25 +3.25 basis points.

• FTSE-100 futures +.39%.

• S&P 500 futures +.36%.

• NASDAQ 100 futures +.32%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (WWW)/.34

Economic Releases
7:30 am EST

• The NFIB Small Business Optimism Index for June is estimated to rise to 94.9 versus 94.4 in May.

10:00 am EST

• JOLTs Job Opening for May are estimated to rise to 3800 versus 3757 in April.

Upcoming Splits

• None of note

Other Potential Market Movers

• The BoJ Minutes, Germany PPI data, UK gdp report, Greece T-Bill auction, 3Y T-Note auction, weekly retail sales reports, Semicon West Conference, (BBRY) shareholder meeting, (GIS) Investor Day, (DHR) analyst meeting, (KLAC) analyst briefing and the (LRCX) analyst briefing could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and technology 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.

Stocks Higher into Final Hour on Less Eurozone Debt Angst, Short-Covering, Technical Buying, Retail/Utilities Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Light

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 14.82 -.47%
• Euro/Yen Carry Return Index 135.51 +.08%
• Emerging Markets Currency Volatility(VXY) 10.82 -1.01%
• S&P 500 Implied Correlation 52.57 -.30%

• ISE Sentiment Index 87.0 -10.31%

• Total Put/Call 1.03 +9.57%

• NYSE Arms .73 +12.30% 

Credit Investor Angst:

• North American Investment Grade CDS Index 83.59 -3.44%

• European Financial Sector CDS Index 160.44 -3.01%

• Western Europe Sovereign Debt CDS Index 96.0 unch.

• Emerging Market CDS Index 339.58 -2.04%

• 2-Year Swap Spread 17.25 -.5 bp

• TED Spread 23.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -10.5 +.5 bp

Economic Gauges:

• 3-Month T-Bill Yield .04% unch.

• Yield Curve 228.0 -4 bps

• China Import Iron Ore Spot $121.90/Metric Tonne -.57%

• Citi US Economic Surprise Index -12.10 +1.9 points
• Citi Emerging Markets Economic Surprise Index -31.40 +2.9 points

• 10-Year TIPS Spread 2.08 +1 bp

Overseas Futures:

• Nikkei Futures: Indicating +215 open in Japan

• DAX Futures: Indicating +4 open in Germany

Portfolio: 

• Slightly Higher: On gains in my medical and retail sector longs
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and then covered some of them
• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg: 

• German Industrial Production Decreased in May. German industrial production (GRIPIMOM) dropped more than economists predicted in May, adding to signs that Europe’s sovereign debt crisis is weakening a recovery in the region’s largest economy. Production fell 1 percent from April, when it gained a revised 2 percent, the Economy Ministry in Berlin said today. That’s the first decline since January. Economists forecast a drop of 0.5 percent, according to the median of 38 estimates in a Bloomberg News survey. From a year earlier, production decreased 1 percent when adjusted for working days. German exports unexpectedly fell in May, the Federal Statistics Office said today, and factory orders dropped for a second month as the 17-nation euro region struggles to emerge from the longest recession since the introduction of the single currency in 1999. German manufacturing output fell 0.7 percent in May, with production of investment goods down 2.3 percent, today’s report showed. Construction slumped 2.6 percent, while energy output dropped 1.5 percent. 

• Peugeot First-Half Sales Drop 9.8% on European Decline. PSA Peugeot Citroen (UG), Europe’s second-biggest carmaker, reported a 9.8 percent drop in first-half vehicle sales because of slumping demand in its home region and the end of component-kit deliveries to Iran.

• European Stocks Rise as Portugal Reaches Coalition Deal. European stocks rose, rebounding from their biggest decline in almost two weeks, amid speculation that economic data will improve and as Portugal’s politicians reached an agreement to hold the governing coalition together. The Stoxx Europe 600 Index added 1.4 percent to 292.37 at the close.

• China's Liquidity Crunch Highlight the Rebalancing Pains that Still Lay Ahead. (graph)

• China’s Ordos Struggles to Repay Debt: Xinhua Magazine. A Chinese city known for its empty skyscrapers is struggling to repay debt and has resorted to borrowing from companies to pay workers, a magazine published by the official Xinhua News Agency reported. Some district governments of Ordos, Inner Mongolia, had to borrow money from companies to pay salaries of municipal employees, Economy & Nation Weekly said in a July 5 report on its website. Ordos local-government entities have amassed 240 billion yuan ($39 billion) of debt, while the city had 37.5 billion yuan of revenue last year, the publication said without specifying annual interest costs.

• Paulson’s PFR Gold Fund Fell 23% in June, 65% This Year. John Paulson, the billionaire hedge-fund manager seeking to rebound from losses tied to bullion, posted a 23 percent decline in his PFR Gold Fund last month, according to a letter to investors. The drop brings losses in the strategy, formerly known as the Paulson Gold Fund, to 65 percent since the start of the year, the firm said in the July 3 letter, a copy of which was obtained by Bloomberg News.

Wall Street Journal:

• Nearly 1 in 6 Americans Receive Food Stamps.

Fox News:

• White House wants US aid to Egypt to keep flowing.

CNBC:

• Why Underemployment May Be Worse Than It Looks. The level of underemployed workers looks bad on its face but even worse when it's not the government doing the counting. 

• India's Tumbling Currency Matters, and Here's Why.

• FDIC to Raise Key Leverage Ratio to 5%. (video)

• Rising Mortgage Rates Swing Housing Sentiment. Just as America's homeowners were finally coming up for air, they are suddenly turning more negative on the housing market. Fewer people think now is a good time to buy or to sell a house, according to a monthly survey in June from Fannie Mae. Those numbers had just hit a survey high in May, thanks to rising home prices and record low mortgage rates. Now mortgage rates have soared well over a full percentage point in the past two months, and 57 percent of respondents to the survey expect them to go even higher. That's the highest level in the survey's three-year history.

Zero Hedge:

• Chart Of The Day: Taper Fears Lead To Biggest Monthly Loss In Bank Securities Portfolios Since Lehman. 

• Europe's Cleanest Dirty Shirt Sees Exports Collapse & Production Plunge. (graphs) Just when the jawboning from Europe is reaching its climax that Portugal is fixed again, Greece is fixed, and the core is showing green shoots from the near-depression, Germany (the corest of the core) comes out with its worst exports data since 2009. While imports remained stable - suggesting domestic demand is sustained for now - YoY export growth collapsed 3.2%, the worst tumble since November 2009 "illustrating that Germany's economy still has difficulties shifting into higher gear."

• The Collateral Shortage Is Back, With A Twist. (graph)

• Q2 2013 Earnings Week 1 Cheatsheet. (graph)

Business Insider: 

• For Only The Second Time In Its History, The World Health Organization Has Called An Emergency Meeting About A Virus.

• Investors Plowed Back In To Stocks In June. (graph)

New York Times:

• In Brazil, a Reminder of Emerging-Market Risks. THE protests in Brazil last month were the latest vivid reminder of the perils of investing in emerging markets. Tens of thousands of demonstrators thronged the streets of São Paulo, Rio de Janeiro and other cities, incited partly by a rising cost of living and a slowing economy. Cars burned. Tear gas billowed. And the Brazilian stock market sank.

ValueWalk:

• Global Economy Stagnates to 2008 Levels: Citigroup(C).

Reuters:

• China govt agencies told to cut expenditures by 5% this year. China's Finance Ministry has told central government agencies to cut expenditures by 5 per cent this year, a move the official Xinhua news agency said was part of an austerity campaign launched by the country's new leaders. A ministry circular ordered spending cuts in a range of areas, including the building and renovation of government offices, meetings, domestic and overseas trips, vehicles and official receptions, Xinhua reported on Sunday. The planned cuts come at a time when China is facing potentially its worst economic downturn in at least 14 years. Analysts say the economy is backsliding into another downturn but top leaders are reluctant to take policy steps to stimulate growth.

• Mexico's auto output, exports fall in June -AMIA. Mexico's auto production and exports both fell slightly in June from a year earlier, the Mexican Auto Industry Association said on Monday.
  Automobile output for the month dropped 0.8 percent to 266,351 vehicles, while exports slid 1.5 percent to 225,753, AMIA said. Cars are a key component of Mexico's manufacturing sector.
  June shipments to Latin America were down 15.5 percent to 26,342 vehicles, while exports to the United States edged up by 1 percent to 151,803.

• Fitch: Sovereign Outlook - Fed Exit Adds to Challenges for Emerging Markets.

• Russian car sales slide 11 pct in June - AEB. Sales of cars in Russia fell for the fourth straight month, down 11 percent year-on-year in June, the Association of European Businesses (AEB) said on Monday. Car sales have been sliding as Russia's $2 trillion economy has faltered, causing the AEB to recently slash its forecast for the full year to a fall of 5 percent.

CNN:

• Death toll rises in clashes Monday in Egypt. Top Egyptian security officials defended army and police actions in the clashes Monday in Cairo that led to the deaths of more than 50 people, saying they were defending the Republican Guard headquarters against attackers. Health Ministry official Khaled al-Khatib put the number of fatalities at 51 and said 435 others were wounded when Egyptian security forces clashed with supporters of deposed President Mohamed Morsy and the Muslim Brotherhood outside the headquarters. Witnesses said the military and police fired as protesters took a break from holding a vigil at the Republican Guard headquarters to perform their dawn prayers. Morsy was reportedly detained in the building after his arrest Wednesday.

Financial Times:

• Markets Insight: China faces a difficult credit bubble workout. Markets Insight: China faces a difficult credit bubble workout. The financial shock which has recently hit the emerging markets stemmed in part from a period of severe stress in the Chinese money markets, which has now been brought under control. But the challenges facing China are chronic, not acute. And since the country is much more than “first among equals” in the Brics, a prolonged slowdown in its economy would keep all emerging market assets under pressure for a long while.

Telegraph: 

• German exports suffer amid eurozone weakness. German exports suffered their steepest month-on-month decline in more than 18 months in May, as continued weakness in the eurozone and other key markets held back growth. Exports, the traditional driver of growth in Europe's biggest economy, fell 6.5pc to €88.2bn (£76bn) in May, from €94.3bn in April, according to Destatis, Germany's statistics office. This was the biggest drop since December 2011. On an annual basis, total exports fell 4.8pc, driven by a 9.6pc drop in exports to the eurozone.

Bild-Zeitung:

• DIHK Sees Eastern German Growth at Zero. Economic growth in Germany's eastern states will be at zero this year vs. .5% in 2012, citing Martin Wansleben, managing director of the DIHK national industry and trade chambers. 56% of eastern cos. sees a risk to their business due to energy, commodity prices vs 48% in western Germany.

Echoing fears that European policymakers remain in a state of cognitive dissonance – recognizing the need for root-and-branch overhaul of peripheral banks, but backtracking on joint liability plans – Christopher Flowers, the legendary FIG investor who now runs the £2.3 billion ($3.5 billion) private equity group JC Flowers, sounded the alarm over the negative sovereign-bank feedback loop. In a shot across the bows of market bulls, who cite the return of capital flows to weaker eurozone states, Flowers issued a stark warning: "There is a scenario where we have a Lehman-type event: we wake up some Thursday and a big country is in trouble. "And the ECB will have to decide to support banks x, y, z. And then the ECB will, in fact, decide to own bank x, y, z.


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Business Standard:

• RBI wants curb on rupee forecast by bankers. RBI has been concerned because the rupee has weakened by 12% since the start of this financial year. Whether by communicating or by curtailing communication, the Reserve Bank of India (RBI) is taking all unconventional steps to arrest the fall in the rupee. In its latest move, RBI has told treasury officials of banks to not give rupee forecasts against the dollar - particularly to the media, analysts and in their reports. It affects market sentiments to a larger extent, particularly in a situation when rupee trading is volatile, it says.

Nikkei:

• Vale to Limit Investment as Emerging Markets Slow. Vale plans to curb capital investment over next few years because of slower economic growth in emerging markets, citing interview with CEO Murilo Ferreira.

ShanghaiDaily.com: 

• Consumer morale drops to 9-month low.

Xinhua:

• China's Li Says East China Ports Face Downward Pressure. China Premier Li Keqiang inspected import and export situation at a port today in southern Chinese province of Guangxi.

Economy & Nation:

• China's Erdos Govt Faces 'Severe' Debt Pressure. Some district governments of the city of Erdos in northern China had to borrow money from companies to pay salaries of government employees, according to a report posted on July 5. Erdos city government has debt of 240b yuan, report cites a person close to the city government as saying. Fiscal revenue of Erdos city government was 37.5b yuan last year, the report said. Economy & Nation Weekly is a publication controlled by the official Xinhua News Agency.