Bloomberg:
- European Banks Near 70% Greek Rollover Deal. Greek creditors may be headed toward a rollover agreement involving 70 percent of their bonds to prevent a default and meet politicians’ calls that they contribute to Greece’s second rescue in as many years. Under the French proposal, half the Greek debt held by banks and insurers maturing in the next three years would be swapped for new 30-year Greek bonds. The redemptions from another 20 percent would be invested in a special purpose vehicle that would serve as collateral for the banks, two people familiar with the plan said. “We’ve been working on this” and hope other countries will join the proposal, French President Nicolas Sarkozy said today at a press conference in Paris. Germany’s biggest banks and insurers are weighing the French proposal, a person familiar with the matter said today.
- Consumer Spending in U.S. Stagnated in May. Consumer spending unexpectedly stagnated in May as employment prospects dimmed and rising inflation caused Americans to cut back. Purchases were little changed, the weakest outcome since June 2010, after a revised 0.3 percent gain the prior month that was smaller than previously estimated, Commerce Department figures showed today in Washington. The median estimate of economists surveyed by Bloomberg News called for a 0.1 percent gain. Prices excluding food and energy rose more than forecast. Wages and salaries increased 0.2 percent in May after climbing 0.4 percent a month earlier. Disposable incomes, or the money left over after taxes, were up 0.6 percent from a year earlier after adjusting for inflation, the smallest 12-month gain since May 2010. Because incomes rose as spending stagnated, the savings rate rose to 5 percent from 4.9 percent in April. Today’s report also showed inflation picked up from a year ago. The gauge tied to consumer spending patterns increased 2.5 percent from May 2010, following a 2.2 percent gain in the 12 months ended in April. The Fed’s preferred price measure, the so-called core inflation reading that excludes food and fuel, rose 1.2 percent in May from a year earlier, compared with the 1.1 percent advance in April. It rose 0.3 percent in May from the prior month, the biggest one-month gain since October 2009.
- European Profits Poised to Trail U.S. Narrowing margins and slowing sales at Hennes & Mauritz AB (HMB) and Royal Philips Electronics NV suggest more European companies may miss analysts’ earnings estimates, underperforming U.S. peers that cut expenses in the recession. Stockholm’s H&M, the world’s second-largest clothing retailer, and Amsterdam-based Philips were among at least five European companies that last week disclosed less-than- anticipated sales or profitability. The announcements contrast with statements from U.S. companies FedEx Corp. (FDX) and Bed Bath & Beyond Inc. (BBBY), which both boosted profit forecasts last week. “Since the post-recession expansion, U.S. companies have just trounced Wall Street estimates, and that hasn’t let up yet,” said Jim Paulsen, chief investment strategist for Wells Capital Management in Minneapolis, which oversees $340 billion. “Europe’s performance has been far worse than the U.S. in that regard, and I expect that will continue.”
- Commodities Fall to Five-Month Low as Greece Debates Budget Cuts for Loans. Commodities fell to a five-month low, extending two weeks of losses as Greek lawmakers discuss budget cuts needed to ensure a bailout loan, raising speculation of slower growth and demand for raw materials. The Standard & Poor’s GSCI index of 24 raw materials fell 0.5 percent to 641.91 by 3:53 p.m. in London, after earlier today falling to 635.27, the lowest level since Jan. 28. Cotton was down as much as 5 percent at $1.1692, the lowest level since Dec. 1. “Investors are withdrawing funds from commodities as they are afraid of a slowdown,” said John Flanagan , the president of Flanagan Trading Corp. in Fuquay-Varina, North Carolina. Money managers cut their net-long positions in 18 U.S. commodities by 13 percent to 1.13 million futures and options contracts in the seven-days ended June 21, data from the Commodity Futures Trading Commission show. Crude oil for August delivery declined 38 cents, or 0.4 percent, to $90.78 a barrel on the New York Mercantile Exchange. The most active contract has lost about 12 percent this month and is heading for its worst performance since May 2010 as the International Energy Agency said it’s prepared to release more stockpiles to stabilize prices, after a June 23 pledge to inject 2 million barrels a day for 30 days.
- European Commission Likely to Propose EU-Wide Taxes, FT Reports. The European Commission is likely to propose an increase in its revenue-raising powers, including the introduction of taxes that apply throughout the European Union, the Financial Times reported, citing officials involved in drafting the budget that’s due to be presented this week. The commission will make an “ambitious” proposal, the newspaper cited Andreas Schwarz, a member of the budget commissioner’s cabinet, as saying. A tax on financial transactions or activity is one option being considered; others include levies on airline tickets and tapping some revenue from the EU’s emissions-trading system, the FT said.
- Spain Banks Hide $70.7 Billion in Bad Assets. Spanish banks have 50 billion euros ($70.7 billion) in unrecognised problematic real estate assets, El Confidencial reported, citing a report by the Boston Consulting Group. The consulting group estimates that Spanish banks need between 20 billion euros and 30 billion euros in additional capital and that Spain’s bank rescue fund, known as the FROB, could end up taking over 20 percent of the banking industry, El Confidencial added.
- India Bonds Decline as Fuel-Price Increase May Stoke Inflation.
- Bank of America's(BAC) Stock Is 'Massively Undervalued,' Rochdale's Bove Says. Bank of America Corp. (BAC) is being “massively undervalued” by investors, and its stock will recover as earnings outpace costs linked to troubled home loans, said Richard X. Bove, an analyst at Rochdale Securities LLC. “Under the bleakest of scenarios Bank of America’s book value will rise in the next three years,” Bove, who is based in Lutz, Florida, wrote today in a note to clients. “At some point the market will adjust to the company’s real values.”
- NYC Plans 'I Do' Campaign to Woo Gay Weddings. New York City Mayor Michael Bloomberg plans to unveil a campaign to sell the most populous U.S. city as a gay-wedding destination after thousands marched to celebrate the state’s legalization of such marriages.
- Los Angeles Dodgers File for Bankruptcy. The Los Angeles Dodgers filed for bankruptcy protection after Major League Baseball rejected a television deal with Fox Sports, leaving team owner Frank McCourt unable to make payroll this week.
- Duration of U.S. Slowdown is Up for Debate. The strength of the U.S. economy depends on whether you believe optimists like Mark Zandi or pessimists like David Rosenberg.
- Court Strikes Down Violent Video Game Limits. The U.S. Supreme Court struck down a California law prohibiting sales of violent video games to minors, saying the ban is an unconstitutional infringement on speech rights. The nation’s highest court today rejected the state’s contention that violent games are akin to sexual materials, which the government can restrict to protect children. “Even where the protection of children is the object, the constitutional limits on governmental action apply,” Justice Antonin Scalia wrote for five justices. The vote to strike down the law was 7-2, with the majority divided in its reasoning.
- Why China's Heading for a Hard Landing, Part 1: A. Gary Shilling.
- Stocks Fall. Optimism Stands Tall. Stock analysts have a reputation for their rosy outlooks. But to many investors, that optimism may have just scaled new heights. The U.S. economy has slowed noticeably in recent weeks, prompting economists to ratchet down their estimates for growth and investors to drive stocks down 7% since late April. Market strategists started reducing their year-end forecasts for the Standard & Poor's 500-stock index. But individual stock analysts have remained noticeably upbeat. As a group, they have not only kept their estimates for corporate earnings for the current quarter intact, but they have raised them. Analysts expect S&P 500 companies, in aggregate, to earn $24.24 a share in the second quarter, according to Birinyi Associates. Those estimates have increased from $22.18 at the end of March and reflect a 16% rise from the same quarter last year. Skeptics warn that analysts have set the bar too high, increasing the chances companies may disappoint, triggering more market turmoil. Analysts expect the S&P 500 companies to earn $99.86 a share in aggregate this year, up 2.3% from their April 1 estimate, according to FactSet. Strategists expect $95.24, according to John Butters, senior earnings analyst at FactSet. The median gap between the two groups is now 5.6%, the biggest disparity in at least three years, he says. For 2012, the divergence is even wider: $112 a share for analysts, compared with $105 for strategists. The underlying question for strategists and analysts alike is, "how long can growth stay anemic and corporations still do well?" says Bob Doll, chief equity strategist for fundamental equities at money manager BlackRock Inc., who confesses he isn't sure which camp is right.
- Some European Insurers Could Face Heavy Losses. Insurance companies across Europe are sitting on large portfolios of bonds issued by financially shaky governments and banks, raising concerns that some insurers could fall victim to the Continent's financial crisis.
- Germans Becoming Resigned to Messy Euro Divorce. Highlighting the mood of growing dismay, an opinion poll in the Sunday edition of the Frankfurter Allgemeine newspaper indicated that 71% of Germans no longer trust the euro — up from 66% in April and less than 50% in 2008.
- White House Wants 56.2 MPG by 2025, But Auto Industry Says Not So Fast.
- Ex-Citi(C) VP Accused of Embezzling More Than $19 Million.
- Ken Duberstein: Pelosi Undermining President Obama on Debt. President Barack Obama will meet today with Senate Minority Leader Mitch McConnell (R-KY) as talks over the government's debt levels resume. This will be the third time the two men have sat down together since Obama became President. House Minority Leader Nancy Pelosi demanded over the weekend that her caucus be at the debt talks table if they're expected to vote for any deal that the President makes. Ken Duberstein, former chief of staff to President Ronald Reagan and a supporter of President Obama in the 2008 election, says the President needs to become a more active participant in these debt discussions.
- These Fake Chinese Microchips Were Made to Disarm U.S. Missiles. Last year, the U.S. Navy bought 59,000 microchips for use in everything from missiles to transponders that turned out to be counterfeits from China. Wired reports the chips weren't only low-quality fakes, they had been made with a "back-door" and could have been remotely shut down at any time. If left undiscovered the result could have rendered useless U.S. missiles and killed the signal from aircraft that tells everyone whether it's friend or foe.
- Sovereigns, Pensions Invest More In Hedge Funds; Do It Directly. Sovereign wealth funds and pensions are not only investing more in hedge funds, they’re rolling up their sleeves and doing their investing directly, rather than relying on funds of funds, according to a new study from Citi Prime Finance. The study, based on interviews with almost 60 major investors representing $1.65 trillion in AUM and hedge fund managers with $186 billion AUM, also had good news for smaller funds:
- Gulf Countries Still Likely to Increase Output in Summer - Gulf Sources. With more oil coming in parallel from two different sources, " overall, supply will exceed demand...and eventually it will [damp] prices," the official said. Oil prices already fell sharply last week over the IEA announcement. "But they will not collapse," the official added.
- Dallas Fed: Texas Manufacturing Slumps. The Federal Reserve Bank of Dallas reported that its monthly survey of Texas factory activity fell sharply in June. The Manufacturing Outlook Survey found that general business activity slumped to -17.5, down 10.1 from May. Negative numbers indicate contracting business business activity, while positive figures indicate growth in the sector. The production index that measured conditions at 84 factories around Texas dropped to 5.6 from 12.7 in May, which the Dallas Fed interpreted as slower growth in the sector.
- 55% Favorr Health Care Repeal, Just 17% Says New Law Will Improve Quality of Care. Most voters still want to repeal the national health care law, and confidence that the law will improve the quality of health care has fallen to a new low. A new Rasmussen Reports national telephone survey finds that 55% of Likely Voters at least somewhat favor repeal of the health care law, while 38% at least somewhat oppose it. This includes 40% who Strongly Favor repeal and 25% who are Strongly Opposed. Just 17% now believe the health care law will improve the quality of health care in this country. That’s down from 20% percent earlier this month and the lowest level measured since the passage of the law. Forty-nine percent (49%) say the quality of health care will get worse under the new law, while 24% say it will stay the same.
- Fed's Kocherlakota - US Tax Code Needs Changes. U.S. lawmakers should change the tax code to discourage household and business borrowing that threatens the stability of the financial system, a top Federal Reserve official said on Monday. The current U.S. tax code allows households to deduct interest payments on home mortgages and corporations to deduct interest payments on debt. Both policies subsidize leverage, encouraging the kind of excessive borrowing that helped trigger the recent financial crisis, Minneapolis Fed President Narayana Kocherlakota said in remarks prepared for delivery to the Tri-State Bankers Summit in Big Sky, Montana.
- Greek Unions Urge Huge Anti-Austerity Strike Turnout. Greece's main labour unions called on Monday for a massive turnout in a 48-hour strike this week which they said could help to block austerity policies demanded by international lenders as the price for a bailout. ADEDY, the public sector union representing half a million civil servants, and its private sector equivalent GSEE, which represents 2 million workers, have called the two-day stoppage to coincide with a vote in parliament on an austerity package which the government must win to avoid defaulting on its debts. "The strike may prove a catalyst in overthrowing the austerity policies, helping the country to break loose from the chains of its lenders," ADEDY said in a statement.
- Deutsche Boerse Buys Leading Indicator Chicago PMI. Deutsche Boerse AG has bought leading economic indicator the Chicago Purchasing Managers from Kingsbury International, the exchange said on Monday.
- China Cities Owe $1.65 Trillion, Some 'May Default'. Chinese local governments held $1.65 trillion in debt at the end of 2010, the state auditor said Monday, warning there is a risk some could default amid fears that bad loans will harm the economy. Excessive borrowing by authorities to fund infrastructure and other projects has sparked concerns among China's leadership about the risks the loans pose to the financial stability of the world's second largest economy. By the end of last year, local governments had 10.7 trillion yuan ($1.65 trillion) of debt, the National Audit Office (NAO) said in a statement, or about 27 percent of China's 2010 GDP of 39.8 trillion yuan. "The ability of some areas and industries to repay debt is weak and potentially risky," the NAO said. The state auditor said some local governments had to make new borrowings in order to pay back old loans, and some are depending heavily on revenue from land sales to meet their repayments.
- An association of German family-run companies says it wants mechanisms included in the treaty governing Europe's single currency that would allow countries to be excluded from membership. Around a hundred firms belonging to the Stiftung Familienunternehmen signed a letter to lawmakers saying it should be made possible for a country to exit the euro or to be excluded for running excessive deficits.
- Former German Finance Minister Peer Steinbrueck called for a restructuring of Greek debt and criticized Angela Merkel's hesitant attitude in an interview. "We don't have to discuss about the 'whether' of a restructuring any more but about the 'how'," Steinbrueck said.
- Wait Time to See Canadian Doctors Grows for Patients With Urgent Conditions. It's taking longer for patients with an urgent condition to see a doctor, a new survey suggests. The Canadian Medical Association, the College of Family Physicians of Canada and the Royal College of Physicians and Surgeons of Canada released their findings on the opinions of doctors, medical residents and medical students on Monday. When physicians were last surveyed in 2007, 65 per cent of family doctors saw urgent care patients within one day, compared with 61 per cent in 2010. In 2007, 37 per cent of specialists said they saw urgent care patients within a day, compared with 32 per cent in 2010.
- China Checks Into Accounting Issues for Firms Listed Abroad. CHINA is looking into accounting issues involving Chinese companies listed in North America, an official at the country's securities regulator said in the watchdog's first public remarks since a series of accounting scandals. Corporate misbehavior, unfamiliarity with the US market and some practices involved in overseas listings had all contributed to recent investor distrust of Chinese companies, said Wang Ou, vice head of research at the China Securities Regulatory Commission.
- China Yurun Food Group Ltd., a Chinese supplier of meat products, is facing pressure from surging pork prices, which will erode profit margins.
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