Today's Headlines

Bloomberg:

- Federal Reserve Chairman Ben S. Bernanke said the central bank acted with the “highest integrity” in talks on Bank of America Corp.’s takeover of Merrill Lynch & Co., defending his record against some lawmakers who have alleged officials’ actions were inappropriate. “The Federal Reserve acted with the highest integrity throughout its discussions,” Bernanke said today in testimony to the House Oversight Committee. He said that “in retrospect,” the Fed’s actions have strengthened Bank of America, Merrill and the financial system and protected taxpayer interests.

- Treasuries extended gains after the government sold $27 billion of seven-year securities in the last of three auctions this week that totaled a record $104 billion. The notes at the sale drew a yield of 3.329 percent, lower than forecast, and more than double the amount of bids than the last auction in May from a category of investors that includes central banks. “The auction was pretty good,” said James Collins, a Chicago-based interest-rates strategist in the futures division at Citigroup Global Markets Inc., one of the 17 primary dealers that trade with the Fed and are required to participate in Treasury sales. “There was an enormous amount that was put up for sale. People have the appetite for it.”

- The Federal Reserve will let one of its emergency programs expire and trim two others in a sign that improving financial markets allow a first step toward ending its unprecedented interventions. “Conditions in financial markets have improved in recent months, but market functioning in many areas remains impaired and seems likely to be strained for some time,” the Fed said in its statement.
- Iraq is set to welcome back foreign oil companies into the war-torn nation to develop the world’s third-largest crude reserves three decades after expelling them. Eight of the world’s top 10 non-state oil producers, including Exxon Mobil Corp. and Royal Dutch Shell Plc, are vying for the right to help Iraq develop six oilfields and two natural-gas deposits. More than 30 companies in total are bidding for $16 billion worth of technical service contracts for producing fields that will be awarded in Baghdad on June 29-30. The government, also running a second bidding round for 11 oil and gas fields, aims to boost production to about 6 million barrels a day by 2015, from 2.4 million barrels in May. Saudi Arabia, the world’s biggest oil exporter, produces 8 million barrels a day. Companies investing in Iraq are looking to take a stake in the long-term potential that the country’s 115 billion barrels of reserves hold after gaining a foothold through the service contracts for operational fields. Iraq will earn 100 times more than the foreign companies it hires to develop the deposits, the minister told parliament in Baghdad on June 23. The deposits being offered in the first licensing round may yield $1.7 trillion in profit for the country, based on an oil price of $50 a barrel, while oil companies seeking service contracts will gain $16 billion over the 20-year life of the contracts, he said. Iraq may be a more attractive long-term development for international investors since it has produced only about 8 percent of its oil compared with more than 20 percent by Saudi Arabia and Iran, Shafiq said.

- Crude oil and gasoline rose after militants attacked a Royal Dutch Shell Plc pipeline supplying an export terminal in Nigeria, Africa’s largest producer. U.S. oil inventories fell by 3.87 million barrels to 353.9 million barrels last week, the lowest since March, the Energy Department said yesterday. Stockpiles, which have fallen in six of the past seven weeks, are up 17 percent from a year earlier. Gasoline supplies rose 3.87 million barrels to 208.9 million last week, the Department of Energy said. Refineries operated at the highest rates this year and fuel demand fell 5.5 percent, the biggest drop since January.

- Tax to Fund US Health Plan May Cut Employer-Provided Benefits. Zappos.com’s warehouse and customer-service workers are paid $10 to $11 an hour and get health benefits worth about $7,500 a year. Lawmakers led by Senator Max Baucus are talking about slapping a $495 tax on some of those covered by the medical plan to help pay for extending coverage to some of the 46 million Americans who lack it. Under the funding proposal being considered by the Senate Finance Committee, the tax for Lloyd Blankfein, chief executive officer of Goldman Sachs Group Inc., would be about $9,600, based on the $40,543 value of his health insurance last year. Baucus, 67, the chairman of the Senate Finance Committee, says the best way to pay for a $1 trillion overhaul of American medical care would be to tax health benefits provided by employers that are more generous than those offered to federal workers -- including lawmakers like him. The government benefits are worth $4,200 for individuals and $13,000 for families.

- The slump in global airline travel may have reached a “floor” following a 9.3 percent decline in passenger traffic last month, the International Air Transport Association said today. While demand weakened from a 3.1 percent decline recorded in April, the past two months have been stronger than the 11.1 percent drop reached in March, even after adjusting for distortions caused by the timing of Easter, IATA said today. “We may have hit bottom, but we are a long way from recovery,” Chief Executive Officer Giovanni Bisignani said in a statement.

- Mahmoud Ahmadinejad urged President Barack Obama against “interfering,” as authorities widened a crackdown on protests over the disputed election that returned the Iranian leader to the presidency. Ahmadinejad accused Obama of being influenced by “a bunch of backward politicians” in the European Union, and said he risked repeating the “fiascos” of former President George W. Bush. “I ask Obama to improve himself before it’s too late, and avoid interfering in Iran’s affairs,” the state-run Mehr news agency cited Ahmadinejad as saying today in southern Iran. Authorities took 70 academics into custody at an undisclosed location late yesterday after they met with Mousavi, according to his Web site. Mousavi said “a big fraud” had been committed over the election and that “ill-wishers” were setting “traps” for the demonstrators by portraying them as agents of foreign governments. He said his access to people is restricted, his newspaper’s staff members have been arrested and the publication shut down, as have other papers. He also criticized Supreme Leader Ayatollah Ali Khamenei’s backing of Ahmadinejad. “The supreme leader’s support of the government in normal conditions is useful, but it is not in the country’s interest that the supreme leader and the president are considered as one,” Mousavi said.

- Bets against the Standard & Poor’s 500 Index rose for the first time since March as investors increased short sales of health-care companies including Merck & Co. and Cardinal Health Inc. Short interest on the S&P 500 climbed to 9.8 billion shares as of June 15, a gain of almost 1 percent from two weeks earlier, according to data compiled by U.S. exchanges and Bloomberg and released yesterday. Wagers against health-care shares rose more than 7 percent, the most of 10 groups, to 890.3 million as President Barack Obama proposed an industry overhaul. “Anything that’s done could be detrimental to the health- care industry in terms of long-term business prospects,” said Michael Cuggino, who as chief executive officer of San Francisco-based Pacific Heights Asset Management LLC helps manage $3.8 billion. “There’s unease. What policies are ultimately passed could be limiting future earnings of certain companies.”

- Occidental Petroleum Corp.(OXY), the fourth-biggest U.S. oil producer by market value, is drilling exploratory wells in California in a bet that deposits there hold hundreds of millions of barrels of crude. Occidental is counting on prospects near Long Beach and in other parts of the state to drive “meaningful” reserves and output growth in the next decade, Chief Executive Officer Ray Irani said. Chief Financial Officer Stephen Chazen said the company is targeting fields with oil and natural-gas reserves equivalent to at least 150 million barrels of crude each. That would be about one-third the size of Chevron’s deepwater Tahiti field in the Gulf of Mexico, which began production in May. Chief Financial Officer Stephen Chazen said the company is targeting fields with oil and natural-gas reserves equivalent to at least 150 million barrels of crude each. That would be about one-third the size of Chevron’s deepwater Tahiti field in the Gulf of Mexico, which began production in May.

- American Airlines(AMR) and United Airlines(UAUA) raised most domestic fares by as much as $20 for a round trip, the second increase in as many weeks, as they try to take advantage of peak U.S. summer travel season demand.

Wall Street Journal:

- ObamaCare Isn’t Inevitable. While still good, President Barack Obama's political health is deteriorating, threatened by what he thought would be balm -- his ambitious plan for a government takeover of health care. Mr. Obama remains slightly more popular than most presidents have been in their opening months. But his job approval rating has drifted down to 60% in the RealClearPolitics.com average. His disapproval numbers have nearly doubled to 33%. More troubling to Team Obama is the growing gap between the president's approval rating and declining support for major items on his policy agenda. Independents are increasingly joining Republicans in opposition to administration initiatives that range from reviving the economy to closing the terrorist detention facility at Guantanamo.

- House Speaker Nancy Pelosi has put cap-and-trade legislation on a forced march through the House, and the bill may get a full vote as early as Friday. It looks as if the Democrats will have to destroy the discipline of economics to get it done. Despite House Energy and Commerce Chairman Henry Waxman's many payoffs to Members, rural and Blue Dog Democrats remain wary of voting for a bill that will impose crushing costs on their home-district businesses and consumers. The leadership's solution to this problem is to simply claim the bill defies the laws of economics.

- The Internal Revenue Service is demanding that hedge-fund and private-equity investors disclose hundreds of billions of dollars they have invested offshore, boosting scrutiny of accounts popular for tax advantages.The move comes as regulators and lawmakers are seeking to crack down on questionable use of offshore tax havens and could uncover sources of income that aren't being taxed but should be.

- The U.S. is prepared to take further legal action if European nations persist in providing what it sees as "gross over-reaching" government assistance for aircraft under development by the European aerospace giant Airbus, U.S. Trade Representative Ron Kirk said Thursday. The U.S. and the European Union have filed countersuits against each other over their respective aerospace champions in the World Trade Organization.

- The California Institute for Regenerative Medicine is poised to give up to $210 million in grants and loans to businesses and research institutions this summer in the first of what it hopes is an annual series of awards for stem-cell research.

BusinessWire:
- The global economy remains fragile, but the worst of the recession “is now in the rear view mirror” and improving economic conditions during 2009’s second half will help boost equity prices higher, with stocks likely outperforming all other asset classes over the next 12 months, according to Robert C. Doll, Vice Chairman and Global Chief Investment Officer of Equities at BlackRock, Inc. (NYSE: BLK). Doll believes that stocks in the United States and most other markets are on track to post double-digit percentage gains this year, with US stocks outperforming European stocks and emerging markets outpacing developed markets for all of 2009. Prospects for equities will depend largely on the pace and extent of global economic recovery, Doll noted. “Numerous economic ‘green shoots’ have emerged, with home buying levels, housing inventories, business confidence, consumer confidence, corporate inventories and industrial production levels all more positive than a few months ago,” Doll said in his annual mid-year update and outlook for the economy and the financial markets. “Productivity measures have also been trending higher, which is good news for corporate profits, inflation and overall growth.

Google Blog:

- A couple of months ago we announced Google(GOOG) Voice, a service that gives you one phone number to link all your phones and makes voicemail as easy as email. We are happy to share that Google Voice is beginning to open up beyond former GrandCentral users.

NY Times:

- The Sears Tower, that bronze-black monument that forms the 110-story peak of the skyline here and stands as the tallest office building in the Western Hemisphere, will soon have another unique feature: wind turbines sprouting from its recessed rooftops high in the sky.

- Over 100 hedge fund managers gave their opinions on everything from new regulation to the direction of the markets, in the latest poll of the industry published Thursday by RSM McGladrey. The poll shows that, despite wide-spread wariness about over-excessive regulation from the Obama Administration (75 percent fear that they will go too far and stifle the market), fund managers are said they are ready to work with regulators. Six of ten hedge fund managers believe the economy will return to positive growth next year, but nearly all of them see higher taxes, declining real estate values and increasing unemployment as posing big challenges ahead. About a third of the respondents believe the Dow Jones Industrial Average will be below 8,000 in six months, while the rest think it will be around the current levels.

MarketWatch:
- Emerging markets have underpinned the post-March stock surge. But a top China letter is suddenly worried. In a Special Update after the market closed Tuesday, Cabot China & Emerging Markets Report (CCEMR) said: "The Halter USX China Index /quotes/comstock/10t!hxc.x (HXC 4,741, +95.50, +2.06%) has dropped through its 25-day moving average as the sharp correction of the past week-and-a-half has taken a real toll on leading stocks. The Index remains above its 50-day moving average, but it's a very near thing. Another bad day could see the Cabot China-Timer flashing a red light."

TheDeal.com:

- Analysts speculate that TD Ameritrade Holding Corp. (AMTD) and Charles Schwab Corp. (SCHW) are likely candidates to bid for E*Trade(ETC).

Rassmussen:

- Thirty percent (30%) of voters now say the $787-billion economic stimulus plan passed by Congress is hurting the U.S. economy, up three points from late last month. A new Rasmussen Reports national telephone survey finds that for the second month in a row 31% say the plan has helped the economy. That's down from 34% who thought the plan would help in late February just after Congress approved it. Thirty-one percent (31%) now say the plan has had no impact on the economy, also unchanged from May.

Reuters:
- U.S. homebuilder Lennar Corp (LEN) posted a wider year-over-year quarterly net loss, but saw a sequential rise in new home sales and orders, sending its shares up almost 10 percent in early trade. "During the second quarter, the housing market experienced a rise in sales of new homes, compared to the first quarter, as more confident homebuyers took advantage of increased affordability," Chief Executive Stuart Miller said in a statement.

- AQR Capital Management LLC, among the world's largest hedge fund managers, will introduce another hedge fund-style mutual fund next month, as it expands its reach beyond the biggest investors. Greenwich, Connecticut-based AQR, a $20 billion firm led by former Goldman Sachs Group Inc (GS) star Cliff Asness, led a new wave of hedge funds marketing to the masses when it launched the AQR Diversified Arbitrage Fund ADAIX.O in January." We, in about two weeks, expect to introduce a whole new series of style exposures for retail investors," AQR co-founder David Kabiller told Reuters in a rare interview.

- Microsoft Corp (MSFT) will sell the standard home-user version of its new Windows 7 operating system for 8 percent less than the comparable version of its Vista system, as the global downturn hits spending on technology. The world's largest software company, whose recent ads champion low-priced PCs against more expensive Apple Inc (AAPL) computers, said the new system will be available at even lower prices for a short time, as it looks to tempt buyers ahead of the holiday shopping season.

- European asset managers are eyeing U.S. fund houses, seeking to pounce while sellers outnumber buyers, delegates at the Fund Forum in Monaco said this week. "We are seeing a large number of asset managers up for sale in the U.S. where their owners have taken the view that it is a way of strengthening their balance sheets," said Martin Gilbert, chief executive of Aberdeen Asset Management. "I expect M&A activity to be pretty intense this year."

Financial Times:
- World shipping faces a long-term capacity glut because owners failed to cancel enough of the excess vessels ordered during the industry’s boom, according to a report by one of the sector’s most respected analytical companies. The World Shipbuilding Market annual report, by London-based Drewry Shipping Consultants, says the glut of orders could be bad news for shipping companies and shipbuilders. Shipping companies will face long-term depressed rates for their services because of excess availability, while yards could face a long-term drought of orders once those currently awaiting building are delivered. Many shipping markets, including the tanker, dry bulk, container and car carrier segments, experienced a boom from shortly after China joined the World Trade Organization in 2001 until the middle of last year. Owners embarked on a spree of ship orders at the height of the boom. In dry bulk – ships that carry iron ore, coal and other bulk commodities – vessels with a capacity of about 70 per cent of the world fleet are currently on order. In container shipping, one of the most important markets, demand is now falling more than 20 per cent year-on-year, making many of the ships significantly in excess of requirements. Nigel Gardiner, Drewry’s managing director and the report’s main author, said there were some market projections that about 50 per cent of ships on order would be cancelled. Instead, he expected owners to let delivery slip backwards. 40 per cent of ships on order last year from Chinese yards were not delivered during the year. Many Chinese yards took orders before the facilities themselves were built and took orders from less financially stable owners. Many of the “greenfield” yards might now never be built and many others in many countries might face bankruptcy.