Today's Headlines

Bloomberg:

• Kuroda Warns Against Forgoing Japan’s Planned Sales-Tax Increase. Bank of Japan Governor Haruhiko Kuroda warned against a delay in the nation’s planned sales-tax increase, while pledging that the central bank will take action should its two-year, 2 percent inflation target be endangered. Budget consolidation is vital, and a loss of confidence in Japan’s fiscal sustainability could lead to higher government bond yields, undermining BOJ monetary stimulus, Kuroda told reporters today in Tokyo. He said he hopes that Prime Minister Shinzo Abe’s government will proceed with fiscal tightening.

• ABS: Subprime Auto Underwriting in 'Decay," Citi Says. Subprime auto ABS credit underwriting has been slackening while spread differentials to prime have been tightening, Citi analysts led by Mary Kane write. Avg FICO for on-the-run subprime auto ABS "deteriorated significantly" to 578; was 587 in pre-crisis 2006. 2Y, 3Y class spread pickups for on-the-run subprime auto names recently widened from roughly 14 bps and 45 bps, to 23 bps and 55 bps, respectively.

• Fed Belongs to Everybody as Public Says It’s Our Money. The unprecedented frenzy surrounding Federal Reserve Chairman Ben S. Bernanke’s potential successor shows that Americans won’t let the central bank go back to its opaque and secretive ways.

• The Danger Lurking Behind Facebook's(FB) New Video Ads. (video) Mashable Chief Strategy Officer Adam Ostrow takes a look at the new video advertising effort from Facebook, and whether the move will threaten the social network's user experience.

• Colorado Fracking Stresses Regulators as Permit Bids Soar. New rules governing oil and gas extraction in Colorado may increase the review period for permits and add to a backlog of well applications as energy exploration proceeds at a pace to eclipse last year’s record. The new regulations by the Colorado Oil and Gas Conservation Commission, which went into effect Aug. 1, would require wells to be at least 500 feet (152 meters) from the nearest occupied building and mandate pre-drilling notice for nearby landowners and measures to reduce noise, odors, dust and light.

Wall Street Journal:

• Michigan's Saginaw County Postpones Debt Sale. Saginaw County Becomes Latest Casualty of Detroit's Bankruptcy.

• Retail Sales in July Below Expectations. Angst in Teen Apparel: Aéropostale and American Eagle Issue Profit Warnings.

MarketWatch:

• Gold jumps above $1,300; industrial metals rise. Gold for December delivery GCZ3 +2.12% rallied $24.60, or 1.9%, to end at $1,309.90 an ounce on the New York Mercantile Exchange. 

• U.S. jobless claims edge up to 333,000.

CNBC:

• India's rupee hits record lows, here's what it means. The broad-based selloff in emerging markets has pushed the Indian currency into free fall, underscoring the need for investors to tread more cautiously.

Zero Hedge:

• If Housing Is Booming - Why Do We Need Another Fix.

• Here Is Why Italy Keeps Bailing Out Monte Paschi Again And Again And Again.

• Troika Lenders Demand Confiscation Of Homes In "Bastion Of Stability" Greece. 

• Merle Hazard On "The Great Unwind". (graph)

• The Federal Reserve Relies On A Flawed Economic Model.

Business Insider:

• JPMorgan(JPM) Faces A Criminal And Civil Justice Department Probe Over Mortgage-Backed Securities.

Reuters:

• McDonald's(MCD) July sales just beat, helped by Monopoly, McWraps. McDonald's Corp on Thursday reported slightly higher-than-expected July sales at established restaurants after the early return of its popular Monopoly promotion and new premium wrap sandwiches helped bring U.S. gains that offset weakness in Europe and Asia. 

• Libya's worst oil unrest since civil war stores up future trouble. Unrest that has already slashed Libya's oil output to the lowest levels since the 2011 civil war and more than halved its exports is now spreading, with serious implications for its economy, foreign companies and consumers of crude. 

• U.S. same-store sales rise in July, helped by promotions. A group of large U.S. retailers on Thursday reported higher sales for July, but they had to use discounts to lure cost-conscious shoppers, raising concerns about the current back-to-school season. 

• Canadian Solar sees lower shipments as European sales slump. Canadian Solar Inc forecast lower shipments and margins for the current quarter as its market share shrinks in the European Union, the biggest solar market where the EU plans to cap imports of cheap solar panels made in China. Shares of the company, most of whose manufacturing operations are in China, were down 7 percent at $13.26 on the Nasdaq on Wednesday.

Financial Times:

• Brazil calls for IMF eurozone rescue programmes revision. Brazil calls for IMF eurozone rescue programmes revision. Brazil has called for International Monetary Fund-backed rescue programmes for southern eurozone countries, particularly Greece, to be reviewed to make them more economically sustainable. The call came from finance minister Guido Mantega who was seeking to explain Brazil’s stance on Greece’s rescue programme after an apparent difference of opinion last week between Brasília and its IMF representative, Paulo Nogueira Batista.

Telegraph:

• Greek youth unemployment soars to 64.9pc. Greek youth unemployment soared to a fresh high of almost 65pc in May, underscoring the dire state of the recession-hit economy.

The Economic Times:

• US Fed's Richard Fisher says France biggest euro zone worry. Dallas Fed President Richard Fisher said France worried him more than any other euro zone country and the risks to the French economy must not be underestimated, in an interview published in German paper Handelsblatt on Thursday. "France worries me, more than any other country. Against the backdrop of European history a strong France is important. The risks to economic development there must not be underestimated. The world is watching carefully," he said.

Xinhua:

• China Properly, Effectively Enacts Govt-Spending Cuts. Violations of regulation proposed by Premier Li Keqiang to halt construction of new govt buildings, cut spending on govt receptions, vehicles, banquets, haven't been eliminated, citing statement from government. State Council to work with relevant authorities to step up supervision, investigate problems. No new workers to be added to overstaffed govt depts. 

Bear Radar

Style Underperformer:

• Large-Cap Growth +.22%

Sector Underperformers:

• 1) Oil Tankers -2.01% 2) Education -1.75% 3) Disk Drives -1.04%

Stocks Falling on Unusual Volume:

• XPO, RDEN, IMPV, WD, TUMI, SGI, TWGP, FIO, HTWR, SN, FCN, BIOS, NGVC, ALR, APEI, GMCR, CROX, ADES, PKT, CTL, HIW, HSC, CLMT, WTR, DF, AMCX, MBI and SCTY

Stocks With Unusual Put Option Activity:

• 1) UAL 2) GRPN 3) FIO 4) AMAT 5) M
  

Stocks With Most Negative News Mentions:

• 1) CVI 2) TGT 3) CLMT 4) DF 5) IGNT
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.37%

Sector Outperformers:

• Gold & Silver +5.56% 2) Steel +2.90% 3) Coal +1.57%
  

Stocks Rising on Unusual Volume:

• GRPN, USU, OWW, SSYS, DXCM, FWLT, TSLA, RWT, VHC, CWH, GDP, LTD, IPI and TMUS

Stocks With Unusual Call Option Activity:

• 1) XOMA 2) CXO 3) GRPN 4) GRPN 5) CLR
  

Stocks With Most Positive News Mentions:

• 1) AES 2) LOW 3) COST 4) BKE 5) MDLZ
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines 
Bloomberg:

• Fragile Five Unravel as Developing Economies Suffer: Currencies. Emerging-market currencies are trailing their peers in advanced economies by the most since 2009 as a global recovery eludes countries from China to Brazil. The 20 most-traded developing-nation currencies tracked by Bloomberg weakened an average 5.3% against the dollar in the past three months, compared with a 1.1 percent gain for the six comprising IntercontinentalExchange Inc.'s Dollar Index. That's the biggest gap since the height of the banking crisis four years ago. Options prices signal that the Indonesian rupiah, Turkish lira and Brazilian real will tumble further. 

• China Escalates Islands Challenge to Japan on Philippine Success. China escalated tensions with Japan by sending ships into waters near islands claimed by both sides for more than 24 hours, drawing a formal diplomatic protest from the Japanese government. Ships from China’s newly formed coast guard remained in the Japanese-controlled waters for the longest time since Japan bought the islands last year, Cabinet Secretary Yoshihide Suga said at a briefing in Tokyo today. Japan’s Foreign Ministry summoned a Chinese diplomat and “sternly protested,” he said. The Chinese move mirrors the approach it has taken in asserting its sovereignty claims in a dispute with the Philippines over the Scarborough Shoal area of the South China Sea. That strategy signals a more aggressive stance amid a broader push by President Xi Jinping to make China a maritime power in the region.

• EU Decides Against Anti-Subsidy Duties on Chinese Solar Panels. The European Union decided against imposing preliminary anti-subsidy tariffs on Chinese solar panels, opting to wait another four months to assess whether the levies are warranted in the biggest EU trade fight of its kind. The European Commission waived the right to impose provisional EU duties to counter alleged trade-distorting government aid to Chinese solar-panel manufacturers. The commission, the 28-nation EU’s regulatory arm, will study whether “definitive” anti-subsidy levies should be applied by Dec. 8.

• Australian Jobs Drop in Blow for Rudd’s Re-Election Bid: Economy. Australian employers unexpectedly cut payrolls in July and unemployment held at an almost four-year high, denting Prime Minister Kevin Rudd’s bid for a come-from-behind election win. The number of people employed fell 10,200, the statistics bureau said in Sydney today. That compares with the median estimate for a 5,000 rise in a survey of 24 economists. The jobless rate held at 5.7 percent as fewer people sought work. 

• Bank of Japan Refrains From Adding to Record Monetary Stimulus. The Bank of Japan refrained from adding to unprecedented monetary stimulus after consumer prices rose in June and a recovery in the world’s third-biggest economy maintained momentum. Governor Haruhiko Kuroda’s board stuck with an April pledge to expand the monetary base by 60 trillion yen to 70 trillion yen ($723 billion) per year, a statement released in Tokyo today showed. All 26 economists in a Bloomberg News survey predicted the decision.

• Japan's Nuclear Nightmare. Thailand’s stocks are falling at the fastest pace in Asia as an amnesty bill for political protesters spurs demonstrations in the streets of Bangkok and threatens to delay the nation’s biggest-ever infrastructure spending plan.

• Thai Stocks Biggest Losers in Asia as Protests Spur Swings.

• Asian Stocks Rise as Bank of Japan Keeps Stimulus Policy. Asian stocks rose, led by health-care companies, after the Bank of Japan maintained its stimulus policy and Chinese exports grew more than forecast. Toyota Motor Corp. (7203) gained 0.5 percent, leading Japanese exporters higher as the yen headed for its first decline in five days. Kubota Corp. surged 5.8 percent after profit at the Japanese tractor maker climbed 50 percent, topping analyst forecasts. Telstra Corp. (TLS) gained 1.7 percent as Australia’s largest phone company posted earnings that beat analyst estimates after luring subscribers to its wireless services. The MSCI Asia Pacific Index gained 0.6 percent to 134.14 as of 11:15 a.m. in Hong Kong, with all 10 industry groups on the gauge advancing.

• Rubber Rallies Most in Three Weeks as Weaker Yen Boosts Appeal. Rubber rallied the most in three weeks as a smaller-than-expected surplus for Japan weakened the nation’s currency, increasing the appeal of contracts in yen, and ahead of Chinese trade data. Rubber for delivery in January on the Tokyo Commodity Exchange gained as much as 4.2 percent, the biggest advance for a most-active contract since July 19. Futures were 3.6 percent higher at 255.2 yen a kilogram ($2,639 a metric ton) at 11:58 a.m. local time. That pared this year’s decline to 16 percent. 

• Rebar Advances for 7th Day as Iron Ore Rises to Three-Month High. Steel reinforcement-bar futures in Shanghai climbed for the seventh day after prices of iron ore, a key ingredient in steel making, jumped to the highest in more than three months. Rebar for January delivery on the Shanghai Futures Exchange climbed as much as 0.7 percent to 3,740 yuan ($611) a metric ton, the highest level since April 17, and was at 3,733 yuan at 10:15 a.m. local time. The price is up 2.4 percent this month.

• Egypt’s President Warns Opponents Mediation Has Ended. Egypt’s interim president Adly Mansour vowed to press ahead with the government’s plans, sending a warning to backers of ousted President Mohamed Mursi that “those who stay behind will bear the consequences.” Signaling that a crackdown on two main opposition sit-ins in Cairo squares may be imminent, Mansour said in a televised speech last night that “the train of the future has taken off” and “all of us have to catch it.”

• JPMorgan( Says U.S. Faults MBS Amid Parallel Criminal Probe. JPMorgan Chase & Co. (JPM), the largest U.S. bank, said it’s under federal criminal investigation for practices tied to sales of mortgage-backed bonds that the Justice Department has already concluded broke civil laws. The department’s civil division told the bank in May of its preliminary finding after examining securities tied to subprime and Alt-A loans, which were sold to investors from 2005 to 2007, JPMorgan said today in a filing. The U.S. Attorney’s Office led by Benjamin Wagner in Sacramento has been conducting civil and criminal inquiries, the filing shows.

Wall Street Journal:

• China Labor Camps Under Fire from State Think Tank. An influential Chinese government-run think tank is the latest to decry the country’s controversial system of re-education through labor, with a newly published report describing the system as outdated and in violation of judicial principles. The Chinese Academy of Social Sciences, in a political development report published on Monday, said abuses in the system have become increasingly apparent and had given rise to widespread public opposition, according to state media reports  summarizing CASS’s findings.

• Diplomatic Rift With Putin Grows as Obama Cancels. Relations Strained Over Russia's Decision to Grant Asylum to NSA Leaker. President Barack Obama's decision to pull out of a one-on-one meeting with Russian President Vladimir Putin in Moscow next month punctuates a steady decline in relations and represents an unusually sharp rebuke for an administration pledged to engaging adversaries.

• Probe Turns Up Heat on Banks. Prosecutors Target Firms That Process Payments for Online Payday Lenders, Others. The Justice Department is targeting banks that service a broad range of what it considers questionable financial ventures, including online payday lenders. The government has issued subpoenas to banks and other companies that handle payments for an array of financial offerings, ramping up an investigation that has been under way for several months, according to Justice Department officials and other people familiar with the matter. It's a shift in strategy: Rather than just targeting individual firms, the government is now going after the infrastructure that enables companies to withdraw money from people's bank accounts.

• Officials Tighten Crude-Shipping Standards. The Federal Railroad Administration plans to start asking shipping companies to supply testing data they use to classify their crude-oil shipments, saying it is concerned that some shipments are being transported in tank cars that aren't safe enough. In a letter to American Petroleum Institute CEO Jack Gerard last week, the FRA said it is investigating whether some crude shipments contain chemicals—possibly from the hydraulic-fracturing process used to extract it—that make them more hazardous than their classification indicates.

• Members Only. How the White House is weaseling Congress out of ObamacCare. The White House on Wednesday released the legal details behind its ObamaCare bailout for Members of Congress and their staffs, and if anything this rescue is worse than last week's leaks suggested: Illegal dispensations for the ruling class, different rules for the hoi polloi.

• Ali Soufan: How Al Qaeda Made Its Comeback. The U.S. regarded the terrorist group's affiliates as local problems—instead of fighting their potent Islamist ideology.

Fox News:

• Obama administration using housing department to compel diversity in neighborhoods. In a move some claim is tantamount to social engineering, the Department of Housing and Urban Development is imposing a new rule that would allow the feds to track diversity in America’s neighborhoods and then push policies to change those it deems discriminatory. The policy is called, "Affirmatively Furthering Fair Housing." It will require HUD to gather data on segregation and discrimination in every single neighborhood and try to remedy it.

• Obama standing by decision to lift moratorium on releasing Guantanamo Bay prisoners back to Yemen. In spite of the ongoing terror threat emanating from Yemen, the White House says it does not plan to rethink President Obama's decision last May to lift a moratorium on releasing Guantanamo Bay prisoners back to that country.

MarketWatch.com:

• China risks rise as growth model shifts. Commentary: A huge change in economic drivers is coming.

• Tapering views emerge from Fed speeches.

CNBC:

• Green Mountain(GMCR) earnings beat, revenue falls short. Green Mountain Coffee reported earnings that beat Wall Street forecasts on lower coffee costs and strong sales of its single serve K-Cups, but the stock is tumbling in late trading on weaker-than-forecast sales. 

• Tesla(TSLA) posts surprise profit; shares jump 15%. Tesla reported a surprise second-quarter operating profit, causing the premium electric carmaker's shares to jump more than 15 percent after the closing bell.

Zero Hedge: 

• Chinese Trade Data Brings New Hope Even As Old Discrepancies Remain. (graphs)

• Real Personal Income Points To Recession. (graph)

• No More Spills? New Technology Could Transform The Pipeline Sector.

• Attention Krugman: NY Fed Admits Net Wealth Not Changed By Stimulus Spending.

• "Hello HSBC, This Is JPMorgan - We Urgently Need Some Of Your Gold".

• Greek Villagers Chase Tax Collectors Out Of Town.

Business Insider:

• IRS Manual Details The DEA's Use Of Tips From Intelligence Agencies.

New York Times:

• Mine Deal Puts New Scrutiny on China’s State Industries.

Real Clear Politics:

• Costly Myths About Climate Change.

Reuters:

• Agrium(AGU) profit hit by cold North American spring. Canadian fertilizer company Agrium Inc reported a fall in quarterly profit due to an unusually cold spring in North America, but said it expected strong demand for crop inputs for the rest of the year. Unseasonably cool weather in the U.S. Midwest this spring compressed the usual time period for farmers to apply fertilizer to their fields.

• Vale(VALE) profit dives on FX charge; cost-cutting continues. Brazilian miner Vale SA said on Wednesday its second-quarter profit plunged after the company recorded a surprise $2.78 billion in foreign exchange losses on currency derivatives and debt, one of its worst bottom-line results in a decade. 

• SolarCity(SCTY) results top Street but shares drop 10 pct. SolarCity Corp, the U.S. solar installer backed by Tesla Motors founder Elon Musk, on Wednesday reported better-than-expected quarterly results, but sharply higher costs and an unchanged outlook for the year sent its shares down 10 percent in extended trade. 

• Fusion-io(FIO) reports wider fourth-quarter loss. Storage drive maker Fusion-io Inc reported a bigger quarterly loss as sales and marketing costs jumped almost 51 percent.

China Daily:

• China Gov't Study Reaffirms Huai River 'Cancer Villages'. A government study has reaffirmed the existence of "cancer villages" along the Huai River in eastern China, citing Yang Gonghuan, a former health official who led the study.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are unch. to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 145.50 +1.5 basis points.

• Asia Pacific Sovereign CDS Index 111.0 +1.5 basis points.

• FTSE-100 futures +.29%.

• S&P 500 futures +.32%.

• NASDAQ 100 futures +.34%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AAP)/1.48

• (NVDA)/.19

• (ONXX)/-.41

• (MNST)/.64

• (PCLN)/9.43

• (MCP)/-.24

• (BNNY)/.14

• (DV)/.41

• (AES)/.28

• (SSYS)/.44

• (DDS)/.79

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to rise to 335K versus 326K the prior week.

• Continuing Claims are estimated to fall to 2950K versus 2951K prior.

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Trade/Inflation data, BoJ Press Conference, 2Q Mortgage Delinquencies/Foreclosures, ECB Monthly Bulletin, 30Y T-Bond auction, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, Goldman Power/Utility Conference, (HAR) investor day and the (SYNA) investor meeting could also impact trading today.

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

Stocks Slightly Lower into Final Hour on Rate Worries, Rising Emerging Markets Debt Angst, Technical Selling, Homebuilding/Retail Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 13.05 +2.59%
• Euro/Yen Carry Return Index 134.12 -1.10%
• Emerging Markets Currency Volatility(VXY) 9.29 -.11%
• S&P 500 Implied Correlation 48.52 +.58%

• ISE Sentiment Index 128.0 +17.43%

• Total Put/Call .98 +10.11%

• NYSE Arms .92 -20.05% 

Credit Investor Angst:

• North American Investment Grade CDS Index 75.90 +1.66%

• European Financial Sector CDS Index 138.19 +1.22%

• Western Europe Sovereign Debt CDS Index 83.50 unch.

• Emerging Market CDS Index 312.83 +1.45%

• 2-Year Swap Spread 17.5 unch.

• TED Spread 22.50 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -8.0 +.25 bp

Economic Gauges:

• 3-Month T-Bill Yield .04% unch.

• Yield Curve 229.0 -4 bps

• China Import Iron Ore Spot $133.10/Metric Tonne +1.29%

• Citi US Economic Surprise Index 36.70 unch.
• Citi Emerging Markets Economic Surprise Index -27.60 +.2 point

• 10-Year TIPS Spread 2.26 unch.

Overseas Futures:

• Nikkei Futures: Indicating -60 open in Japan

• DAX Futures: Indicating +8 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech sector longs, index hedges and emerging markets shorts
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• Emerging-Market Stocks Decline as Earnings Miss Estimates. Emerging-market stocks fell to the lowest level in four weeks after results from Tata Motors Ltd. to AngloGold Ashanti Ltd. (ANG) missed analysts’ estimates and Banco Santander SA lowered its outlook for Brazil’s Ibovespa. The MSCI Emerging Markets Index dropped 0.9 percent to 937.48 at 11:42 a.m. in New York, set for the lowest close since July 10. Tata Motors slumped 3 percent in Mumbai as sales growth at its Jaguar Land Rover Ltd. unit slowed, while South Africa’s AngloGold tumbled to 12-year low after also suspending its dividend. Most Brazilian shares retreated as mining company MMX Mineracao e Metalicos SA sank. Fourteen out of the 24 currencies tracked by Bloomberg fell, led by India’s rupee. About 60 percent of the companies in the benchmark of developing nations that reported quarterly results missed earnings projections, according to data compiled by Bloomberg.

• Carney’s BOE Rates Guidance Stumbles on Investor Skepticism. Bank of England Governor Mark Carney’s campaign to restrain interest-rate expectations is already running into skepticism. Gilt yields rose to the highest in more than a month after Carney took the unprecedented step of saying the bank probably won’t raise its benchmark from a record-low 0.5 percent until unemployment falls to 7 percent. While policy makers don’t expect that to occur before the third quarter of 2016, investors bet faster inflation will force them to act sooner. 

• European Stocks Drop on BOE Comments; Natixis Slides. European stocks fell as the Bank of England said it won’t raise interest rates or reduce bond purchases until the U.K.’s jobless rate falls below 7 percent, sparking concern it expects the economic recovery to be slow. Natixis SA dropped the most in six months after posting a 29 percent decline in second-quarter net income. Rexel (RXL) SA lost 4.2 percent after its largest shareholder sold a 10 percent stake. Randgold Resources Ltd. led mining stocks lower after reporting a slump in sales and earnings. ING Groep NV surged to a two-year high after quarterly pretax profit rose. The Stoxx Europe 600 Index declined 0.2 percent to 302.81 at the close of trading, as Bank of England Governor Mark Carney said the U.K. economy hasn’t reached “escape velocity.”

• BofA(BAC) Put Toxic Debt in Bond as Staff Resisted, U.S. Says. Bank of America Corp.’s traders fought off efforts by the firm in 2007 to include risky Alt-A mortgages in a securitization. That wasn’t enough to spare investors from being cheated, according to the U.S. The Department of Justice accused the company in a lawsuit yesterday of misleading investors about the quality of loans tied to $850 million in mortgage-backed securities. The complaint chronicles friction among bank staff in 2007 and 2008 as they excluded risky Alt-A loans while leaving in wholesale debts once scorned as “toxic waste” by the firm’s then-chief.

Wall Street Journal: 

• Obama Cancels Meeting With Putin Amid Tension Over Snowden. Relations Strained Over Russia's Decision to Grant Asylum to NSA Leaker. President Barack Obama canceled a bilateral meeting with Russian President Vladimir Putin set to be held in Moscow next month, following Russia's decision to grant asylum to former U.S. contractor Edward Snowden, the White House said Wednesday.

• Fed’s Pianalto: Ready to Scale Back QE if Labor Market Stays on Current Path. The president of the Cleveland Federal Reserve Bank said Wednesday she would be ready to scale back the central bank’s $85 billion-per-month bond-buying program if the labor market continues on its current path of improvement. The official, Sandra Pianalto, didn’t specify a timeframe for when she thought the first reduction in the bond-buying program would be appropriate.

• Regulator Steps Up Probe Into S&P. SEC Enforcement Division Investigates Handling of 2011 Real-Estate Offering.

Fox News: 

• Al Qaeda intercept challenges narrative of terror group 'on the run'. Reports that top-level communications among 20 Al Qaeda operatives prompted the ongoing security alert affecting U.S. embassies around the world have raised even more questions about the Obama administration's repeated claims that Al Qaeda is "on the run." The assertion that Al Qaeda -- with the death of Usama bin Laden and of many of his lieutenants -- is a shell of its former self was a linchpin of the 2012 Obama campaign. Even with the ongoing security threat, the State Department insisted as recently as Tuesday that the "Al Qaeda core has been weakened, decimated," despite lingering concerns about the affiliates.  

CNBC:

• US becoming 'refiner to the world' as diesel demand grows. U.S. refineries are expanding their diesel-production capacity, not so much for truckers in the U.S., but for drivers in places such as Mexico City and Santiago, Chile. 

• S&P 500's most shorted stocks. As the S&P 500 continues to trade near record highs, short interest appears to be on the rise. According to data from FactSet, in the first half of July average short interest for S&P 500 stocks increased more than 5 percent, with over 55 percent of those companies seeing a spike in short interest. 

Zero Hedge: 

• Springtime For Summers: Larry's "Fed Chairman" Odds Surge, Overtake Yellen. (graph)

• Abe Sanctions Government Funding To "Freeze" Fukushima With Giant Ice Wall.

• Spot The Difference. (graphs)

• From Obama 'Hope-And-Change' To Housing's 'Hhmm' Reality.

Business Insider:

• Android Now Controls A Breathtaking 80% Of The Smartphone Market.

• BRIDGEWATER: Here Are 5 Reasons Why The Euro Crisis Is Far From Over.

Indianapolis Business Journal:

• Slumping Caterpillar(CAT) to lay off 125 workers in Lafayette. Caterpillar Inc. said it's laying off 125 workers at its Lafayette large-engine plant because of weak product demand. The Peoria, Ill.-based company, the world's largest maker of construction and mining equipment, said the indefinite layoffs will begin Aug. 26. Caterpillar has a Lafayette work force of about 1,800. Company spokesman Jim Dugan said in a prepared statement that demand for the plant's products has fallen in the past year, the Journal & Courier reports. Dugan says the company has already implemented some cost-cutting measures, including "temporary layoffs, vacation shutdowns, and a reduction in flexible workforce."

Reuters:

• Merkel challenger Steinbrueck takes aim at ECB low rates policy. Chancellor Angela Merkel's main challenger in next month's German election criticised ECB President Mario Draghi's pledge to keep interest rates at record lows for an extended period, saying the move put savers in an "unspeakable situation". In rare criticism of the independent European Central Bank by a leading German politician, Social Democrat Peer Steinbrueck said on Tuesday savers faced a creeping "expropriation" of their money by inflation that is running higher than interest rates. "That is an unspeakable situation so I am very sceptical about Mario Draghi's move to announce such a low interest rate policy - almost a policy of zero interest rates - for the ECB for the coming years," Steinbrueck told Reuters in an interview.

• Carlyle profit misses estimates; prospects for U.S. deals poor. Carlyle Group LP on Wednesday posted a second-quarter profit after a year-ago loss, but it fell short of Wall Street's expectation that a stock market rally would benefit the company more, and it struck a gloomy note on the outlook for private equity deals in the United States. 

• Ralph Lauren sales at its own stores slow; shares fall. Ralph Lauren Corp on Wednesday reported disappointing quarterly sales at its own stores, raising concerns that it is expanding too quickly, and the fashion company reiterated its forecast for modest growth this fiscal year. Shares of Ralph Lauren fell 6.1 percent to $177.89 in midday trading.

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.


While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3211790/CurrentIssue/88924/Restructuring-Flowers-slams-Europe-over-inaction.html?copyrightInfo=true

Valor Economico:

• Brazil Govt Sees Possibility for Weak GDP Growth in 3Q. Govt knows economic activity was weak in July and sees possibility that rate of recovery seen up to 2Q will slow in 3Q, columnist Claudia Safatle reported. Anfavea data on vehicle sales and output, released yesterday, support this expectation.

Kyodo:

• Fukushima Plant Leaking 300 Tons/Day of Toxic Water to Sea. Tokyo Electric's Fukushima Dai-Ichi nuclear plant is leaking 300 tons of contaminated water into the ocean per day, citing the industry ministry's Agency for Natural Resources and Energy.