Evening Headlines
Bloomberg:
- Berlusconi Cabinet Will Call for Confidence Vote on Revised Austerity Plan. Italy’s Senate may approve Prime Minister Silvio Berlusconi’s revised 45.5 billion-euro ($63.7 billion) austerity package in a confidence vote after bond yields surged amid concern the government may weaken the plan. Senators will meet at 9:30 a.m. in Rome to discuss and cast votes on the amended package, which will raise the value-added tax rate by one percentage point to 21 percent, introduce a 3 percent levy on incomes over 300,000 euros a year and increase the retirement age of women in the private sector from 2014. The vote may pave the way for final approval later this week by the Chamber of Deputies. The measures were approved at a Cabinet meeting in Rome yesterday after Italians took to the streets in a general strike to protest the plan, and following weeks of bickering that stoked concern among investors and European leaders that Italy may struggle to tame Europe’s second-biggest debt burden. The confidence vote was forced by the “seriousness of the global financial crisis,” Berlusconi’s office said in a statement. This government only knows how to lie,” said Pier Luigi Bersani, leader of the main opposition Democratic Party, in an e-mailed statement. “The idea is always the same: offload the weight of the budget cuts on the masses and shield the rest.”
- U.S. Company Risk Measure Jumps as Europe Evokes '08 Comparison. A benchmark gauge of U.S. corporate credit risk climbed on concern that Europe's fiscal imbalances will hurt U.S. debt markets, as bankers cite parallels to the 2008 financial crisis. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rose 5.4 basis points from Sept. 2 to a mid-price of 126.4 as of 4:52 p.m. in New York, according to index administrator Markit Group Ltd. The measure is at the highest closing price since reaching a more than one-year high of 126.8 on Aug. 22. The index has increased from 95.8 basis points on Aug. 1 as investor concerns have mounted about the faltering U.S. economic recovery and upheaval in Europe's government bond markets. "It's a very gloomy market environment right now," said Rizwan Hussain, a credit strategist at Morgan Stanley in New York. "An '08 type of comparison clearly does not bode well.'' Credit-default swaps on Charlotte, North Carolina-based Bank of America Corp. climbed 26.1 basis points from Sept. 2 to 352.9 basis points, according to data provider CMA, as the largest U.S. lender's bid to resolve mortgage liabilities with an $8.5 billion settlement faces drawn-out litigation and may require a bigger payout as investors and regulators scrutinize the deal.
- The cost of protecting debt issued by India's state-run banks against default has climbed to a two-year high, spurred by concern that the lenders may have to set aside more money to cover bad loans. Five-year credit-default swaps on State Bank of India, the nation's biggest lender, rose 102 basis points this quarter to 290 basis points, the highest level since April 2009.
- Erdogan Promises New Sanctions in Escalating Turkey-Israel Feud. Tossing out an ambassador, suspending defense ties and boosting Turkey’s naval presence in the eastern Mediterranean won’t be Prime Minister Recep Tayyip Erdogan’s last word in his most recent showdown with Israel. Erdogan said his government will announce new steps to punish Israel -- not long ago its strongest regional ally -- unless Prime Minister Benjamin Netanyahu apologizes for the killing of nine Turks last year in an Israeli commando raid at sea. Among the moves may be a visit by Erdogan to the Gaza Strip, ruled by the Islamic group Hamas.
- Romney Calls for Corporate Tax Cut, China Sanctions in Plan. Republican presidential candidate Mitt Romney proposed a reduction of U.S. corporate taxes, fewer federal regulations, new trade agreements, and sanctions against China for currency manipulation in a plan he said would boost the U.S. economy and create jobs. The former Massachusetts governor, speaking today at a trucking company in North Las Vegas, Nevada, also called for the elimination of taxes on interest, dividends and capital gains for individuals making $200,000 or less per year. Seeking to highlight the business experience he has said sets him apart from other 2012 Republican presidential contenders, Romney released his 59-point proposal two days before President Barack Obama is scheduled to present his own job-revival ideas in a speech to Congress. "The right course for America is to believe in growth," Romney said. "The right answer for America is not to grow government."
- Citigroup(C) CEO Pandit's 'Globality' Goal Imperiled. Vikram Pandit, who oversaw Citigroup Inc. (C)’s recovery with the help of a $45 billion government bailout, faces a profit squeeze as he adds staff and branches outside the U.S. amid a global economic slump.
- 'Helicopter Ben' May Deter Lending With Lower Rates Policies, Gross Says. Federal Reserve Chairman Ben S. Bernanke risks causing a decline in longer-term lending by holding down benchmark interest rates, Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said in an opinion piece on the Financial Times website. If the Fed seeks to drive down longer-maturity yields, as some are anticipating, then the central bank may “destroy leverage and credit creation in the process,” Gross wrote in the piece, which was titled ‘Helicopter Ben’ Risks Destroying Credit Creation.’
- Dodd-Frank Forces Early Call in SEC Probe of Fannie Mae's Mudd. Last March the U.S. Securities and Exchange Commission told Daniel Mudd, former head of Fannie Mae, that he could face claims for his role in the firm’s collapse. He may be the first chief executive officer to benefit from a rule that regulators sue or drop such cases within six months.
- European Bailout Tensions Threaten German Coalition. Merkel Fights to Quell Rebellion as Mock Vote Shows 25 Lawmakers Oppose Legislation on Bigger Bailout Fund. German Chancellor Angela Merkel is fighting to quell a rebellion within her ruling coalition that could potentially destabilize her government, after 25 lawmakers from her center-right camp indicated they might not support legislation to strengthen Europe's bailout fund. Mock votes among lawmakers in Ms. Merkel's coalition late Monday showed she will have to fight to keep her governing majority together in a crucial ballot on Sept. 29, when Germany's parliament will vote on proposals to make the main euro-zone bailout fund bigger and more flexible. The measures in question are a key plank of a deal struck July 21 by European leaders to restore investor confidence in euro-zone government debt. But a larger-than-expected number of backbenchers from Ms. Merkel's Christian Democrats, as well as from her junior coalition partners the Free Democrats, refused to support the measures in Monday's mock votes. The lack of support is a public signal of dissent within the ranks of the party. Germany's parliament is widely expected to pass the measures despite the unrest in government ranks, because opposition parties have said they will back the legislation. But reliance on opposition votes would be a severe embarrassment for the chancellor, raising questions about the survival of her government. The unrest within the coalition reflects many lawmakers' belief that ever-expanding bailouts of poorer euro nations pose a growing risk to German taxpayers.
- Groupon Reevaluating IPO Plans Due to Market Volatility.
- Exclusive: Carol Bartz Out at Yahoo(YHOO); CFO Time Morse Named Interim CEO.
- S&P Met With Bond Firms. Some Investors Got the Impression U.S. Downgrade Was More Likely Than Not. Standard & Poor's Corp. officials held private meetings with large bond investors weeks before the firm's historic U.S. debt downgrade, leaving some believing the chance of a credit-rating cut was higher than they previously thought. Though S&P had put the U.S. on "credit watch" in mid-July, some investors were skeptical that S&P would actually strip the U.S. of its triple-A rating, maintained since 1941. S&P said in a news release on July 14 that "there is at least a one-in-two likelihood that we could lower" the U.S. ratings within 90 days.
- SEC Looks Into Effect of ETFs on Market. U.S. securities regulators are looking into whether turbocharged exchange-traded funds amplified August's topsy-turvy swings in the stock market. Securities and Exchange Commission officials have had discussions with firms that trade ETFs, asking questions about whether they added to the market's volatility, according to people familiar with the talks. ETFs, which typically track market indexes, trade on exchanges like stocks. Exchange-traded funds have surged in popularity and now generate 35% to 40% of exchange trading volume, according to Morningstar Inc. Such funds sometimes are used by high-frequency traders, who buy and sell stocks and other assets at a rapid clip.
- Probe Into Goldman(GS) Widens. Prosecutors in New York are pressing ahead with their inquiry into the way Goldman Sachs Group Inc. marketed certain mortgage-linked instruments before the financial crisis, issuing subpoenas to Morgan Stanley(MS) and other investors in the deals, people familiar with the matter said. Some of the subpoenas were received in recent weeks, the people said. The Manhattan district attorney's office began its probe into Goldman following the release in April of a U.S. Senate subcommittee report into the causes of the crisis. Goldman was featured prominently in that report.
- The Other Climate Theory.
- Obama Jobs Plan to Cost $300 Billion.
- White House to Propose Short Term Plan to Avert Post Office Bankruptcy. President Barack Obama will propose a plan to allow the U.S. Postal Service to push off a scheduled $5.5 billion health care payment until the new year, The New York Times reports.
- European Scramble to ECB Safety at Highest in Over a Year as ECB Deposits Surge to €167 Billion. (graph)
- "The European Financial System Is Finished" In Quotes.
NY Times:
- U.S. Takes Hard Line in Suits Over Bad Mortgages.
- In Euro Zone, Banking Fear Feeds on Itself. As Europe struggles to contain its government , the greatest fear is that one of the Continent’s major banks may fail, setting off a financial panic like the one sparked by Lehman’s bankruptcy in September 2008. European policy makers, determined to avoid such a catastrophe, are prepared to use hundreds of billions of euros of bailout money to prevent any major bank from failing. But questions continue to mount about the ability of Europe’s banks to ride out the crisis, as some are having a harder time securing loans needed for daily operations. American financial institutions, seeking to inoculate themselves from the growing risks, are increasingly wary of making new short-term loans in some cases and are pulling back from doing business with their European counterparts — moves that could exacerbate the funding problems of European banks.
Forbes:
- Sallie Krawcheck Out At Bank Of America(BAC) Merrill Lynch.
- 4 Worrisome Jobs Charts.
- Pentagon Chief: Threat of Another 9/11 is Real. Defense Secretary Leon Panetta says that after a decade of war with al-Qaida the potential for another devastating terrorist assault "remains real."
- Dear Mr. President... We asked 10 small businesspeople the one thing they'd ask President Obama to do to make it easier for them to hire. Below are edited excerpts of their conversations.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 22% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-four percent (44%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -22 (see trends).
- More Restaurants are Targeting Customers Who Use Food Stamps. The number of businesses approved to accept food stamps grew by a third from 2005 to 2010, U.S. Department of Agriculture records show, as vendors from convenience and dollar discount stores to gas stations and pharmacies increasingly joined the growing entitlement program. Now, restaurants, which typically have not participated in the program, are lobbying for a piece of the action. Louisville-based Yum! Brands(YUM), whose restaurants include Taco Bell, KFC, Long John Silver's and Pizza Hut, is trying to get restaurants more involved, federal lobbying records show.
- No Plans for Extra Euro Zone Bank Capital Support - Sources. Euro zone governments have no plans to inject any further capital into banks over and above the money earmarked for the financial sector in the emergency loan programmes to Greece, Ireland and Portugal, sources said. Euro zone officials discussed the issue of banking sector recapitalisation on Monday and Tuesday as part of the preparations for the informal meeting of European Union finance ministers in Poland on September 16. The issue has returned to the table after the IMF called for additional capital to boost the European banking sector, estimating the extra need at 200 billion euros (175 billion pounds) in a draft version of an unpublished report leaked to the press.
- German Austerity Drive Risks Euro-Slump. German finance minister Wolfgang Schäuble has vowed to halt rescue payments to Greece unless the country complies totally with the EU-IMF demands, brushing aside warnings that a Greek collapse would set off a disastrous chain reaction and a global banking crisis. “The next tranche can be paid only when the conditions have been met. There is no room for manouvre here,” he told the Bundestag. Yields on 10-year Greek debt spiked to a fresh record of 19.8pc on fears of a disorderly default. The tough words reflect sentiment in Berlin that Greece should be left to its fate or even be ejected from the monetary union, even though the chief reason Greece has failed to meet its deficit target is the crushing effect of recession. The economy will have shrunk by 12pc by the end of this year, playing havoc with debt dynamics. Mr Schäuble rebuffed calls from the International Monetary Fund for a softening of Europe’s austerity drive. “Piling on more debt now will stunt rather than stimulate growth in the long run. Highly indebted Western democracies need to cut expenditures, increase revenues and remove structural hindrances in their economies, however politically painful,” he wrote.
- The southwestern Chinese city of Chongqing may widen its property-tax trial to target more luxury home owners, citing an official. The existing property-tax trial, already implemented for seven months, has had a limited effect on the city's property market.
Citigroup:
- Upgraded (DHI) to Buy, target $13.
- Rated (DKS) Buy, target $43.
- Rated (FINL) Buy, target $24.
- Asian equity indices are +.50% to +2.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 160.50 -14.5 basis points.
- Asia Pacific Sovereign CDS Index 146.50 -8.25 basis points.
- FTSE-100 futures +1.39%.
- S&P 500 futures +.54%.
- NASDAQ 100 futures +.54%.
Earnings of Note
Company/Estimate
- (NAV)/1.26
- (MW)/1.04
- (CASY)/1.06
- (HOV)/-.50
2:00 pm EST
- The Fed's Beige Book.
- None of note
- The German court bailout legality ruling, Fed's Williams speaking, Fed's Evans speaking, JOLTs Job Openings report, weekly MBA mortgage applications report, weekly retail sales reports, BofA Merrill Real Estate Conference, Kaufman Bros. Investor Conference, Stifel Nicolaus Healthcare Conference, CSFB Auto/Transports Conference, Robert W. Baird Healthcare Conference, Barclays Back-to-School Conference, Dahlman Rose Transports Conference, Scotia Capital Financials Summit, William Blair Life Sciences Conference, Goldman Sachs Retailing Conference, Jefferies Shipping Conference, Keefe Bruyette Woods Insurance Conference, (SCOR) Investor Day and the (POOL) Investor Day could also impact trading today.
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