Today's Headlines

Bloomberg:

• Draghi Told Lawmakers ECB Must Buy Bonds for Euro’s Survival. European Central Bank President Mario Draghi said the bank’s primary mandate compels it to intervene in bond markets to wrest back control of interest rates and ensure the euro’s survival. Mounting his strongest case yet for ECB bond purchases, Draghi told lawmakers in a closed-door session at the European Parliament in Brussels yesterday that the bank has lost control of borrowing costs in the 17-nation monetary union. Bloomberg News obtained a recording of his comments, some of which were published by Italian news agency AGI yesterday. “We cannot pursue price stability now with a fragmented euro area because changes in interest rates affect only one country, or two countries at most,” Draghi said. “They have no importance whatsoever in the rest of the euro area.” ECB bond purchases are therefore “a way to comply with our primary mandate,” he said, adding: “Frankly, all this also has to do very much with the continuing existence of the euro.”
• European Stocks Decline on U.S. Manufacturing Report. European stocks retreated the most in two weeks as a report showed that U.S. manufacturing unexpectedly contracted in August. Vodafone Group Plc (VOD) fell 2.6 percent after Sanford C. Bernstein & Co. downgraded the world’s second-largest mobile- phone operator. Royal Ahold NV rose 2.5 percent after saying it may sell its 60 percent stake in Scandinavian retailer ICA, possibly through an initial public offering. The Stoxx Europe 600 Index slid 1.1 percent to 265.43 at the close of trading, its biggest drop since Aug. 22.
• Merkel Swings Into 2013 Election Mode Evoking Crisis, China. German Chancellor Angela Merkel swung into campaign mode with a message of cutting debt, bolstering energy security and a jab at her Social Democratic challengers. Merkel used separate events in the south and west of the country yesterday to hone her stump speech one year out from federal elections that she has said will be fought on the euro- area crisis that spread from Greece and on Germany’s shift away from nuclear power to renewable energies. Due in the fall of 2013, the vote will determine whether Germany’s first woman chancellor and its first from the former communist east secures a third term. “We got used to living beyond our means and to running up debts,” Merkel told a meeting of her Christian Democratic Union party in the western Ruhr Valley city of Recklinghausen. “This has brought us into dependency on financial markets. We will only get out of this dependency if we start thinking more about how we spend less than we take in.”
• Emerging Market Stocks Decline on China, Europe Concerns. Emerging-market stocks fell for the first time in three days as Goldman Sachs Group Inc. cut Chinese earnings estimates and a report showed contraction in U.S. manufacturing for a third straight month. The MSCI Emerging Markets Index (MXEF) slipped 0.6 percent to 947.53 by 11:17 a.m. in New York. Brazil’s Bovespa stock index (VXEEM) declined to a one-month low, with telecommunications company Oi SA and steelmaker Cia. Siderurgica Nacional SA leading the losses. China Merchants Bank Co. dropped for a fifth day in Hong Kong, while the Shanghai Composite Index closed at its lowest level since February 2009. Hyundai Motor Co. (005380) and Kia Motors Corp. (000270) retreated more than 2 percent in Seoul.
• China’s Stocks Fall on Growth, Earnings Concerns. Chinese stocks fell, dragging the benchmark index to the lowest level since February 2009, as Societe Generale SA predicted a weaker growth outlook and Goldman Sachs Group Inc. cut its estimates for Chinese earnings. China Construction Bank Corp. (939) sank the most in ten weeks as Credit Suisse Group AG warned of softening loan demand and lower net interest margins at lenders. The Shanghai Composite Index (SHCOMP) closed 0.8 percent lower at 2,043.65, the lowest level since Feb. 2, 2009
• Home Sales Double in Beijing on Rate Cuts, Centaline Says. Beijing home sales in August surged 110 percent from a year earlier driven by first-home buyers after the central bank cut interest rates and signs of a price rebound damped expectations for cheaper housing.
• U.S. Banks Still Battling Excessive Non-Performing Loans: Mizuho. Two key indicators of banking health in U.S., non-performing loan balances and coverage ratios, still show signs of stress, and this will weigh on the economy, writes Mizuho chief economist Steven Ricchiuto in a client note. Based on FDIC data, non-performing loans still at 4% of total assets, about 2% higher than typical. Coverage ratio still stuck at recessionary levels at just above 1.5%, FDIC data show. Historically, economy likely to remain stuck in "jobless recovery" until the coverage ratio and NPL balances converge. Convergence could take another 2-3 years, they said.
• Manufacturing in U.S. Shrank in August for Third Month. U.S. manufacturing shrank for a third month in August in the longest decline since the recession ended in 2009, threatening to deprive the world’s largest economy of a driver of growth. The Institute for Supply Management’s factory index fell to 49.6 last month, the lowest since July 2009, from 49.8 in July, the Tempe, Arizona-based group said today. Economists in the Bloomberg survey projected an August reading of 50, which is the dividing line between expansion and contraction. Measures of orders and production dropped to three-year lows. The group’s production index decreased to 47.2, the weakest since May 2009. The new orders measure fell to 47.1, while the employment index dropped to 51.6, the lowest since November 2009. The measure of orders waiting to be filled fell to 42.5 from 43. The inventory index rose to 53 from 49.
• Egypt Has ‘No Objection’ to Importing Iranian Oil, Ahram Says. Egypt has “no objection” to importing and refining Iranian oil, the state-run Al-Ahram reported, citing Oil Minister Osama Kamal. Kamal said he believed that President Mohamed Mursi’s recent visit to Iran would open doors for economic cooperation between the two countries, the Cairo-based daily reported.
• Apple(AAPL) Announces Sept. 12 Event As New iPhone Anticipated. Apple Inc. (AAPL) sent out invitations to a Sept. 12 product event in San Francisco, where the company is expected to unveil a redesigned iPhone.
• Food-Stamp Use Climbs to Record, Reviving Campaign Issue. Food-stamp use reached a record 46.7 million people in June, the government said, as Democrats prepare to nominate President Barack Obama for a second term with the economy as a chief issue in the campaign. Participation was up 0.4 percent from May and 3.3 percent higher than a year earlier and has remained greater than 46 million all year as the unemployment rate stayed higher than 8 percent. New jobless numbers will be released Sept. 7. “Too many middle-class families who have fallen on hard times are still struggling,” Agriculture Secretary Tom Vilsack said in an e-mailed statement today. “Our goal is to get these families the temporary assistance they need so they are able to get through these tough times and back on their feet as soon as possible.” Food-stamp spending, which has more than doubled in four years to a record $75.7 billion in the fiscal year ended Sept. 30, 2011, is the USDA’s biggest annual expense.
• Amazon(AMZN) Rivals Netflix(NFLX) in Epix Deal Adding Movies to Prime. Amazon.com Inc. reached a deal with pay-television channel Epix to add movies such as “The Hunger Games” to the roster of films available through Amazon Prime Instant Video, ratcheting up competition with Netflix Inc. (NFLX).
• Oil Falls on U.S., European Manufacturing Data. Oil fell as U.S. and euro-area manufacturing contracted in August, raising concern that slower economic growth will reduce demand. Prices fell as much as 1.5 percent after the Institute for Supply Management’s U.S. factory index declined more than analysts forecast. In the euro area, manufacturing slipped more than initially estimated, London-based Markit Economics reported yesterday.

Wall Street Journal:

• Gold Bugs Loving QE3 Chatter.
• In Europe, Signs of a Jobless Generation.
• Moody's: U.S. Banking Outlook Negative Despite Stronger Banks.

CNBC.com:

• Spain's Capital Flight Now Worse Than Asian Financial Crisis. The flight of capital from Spain is now worse than what Indonesia, one of the hardest hit countries during the Asian financial crisis, experienced in the late 1990s, according to analysis by Nomura.

Business Insider:

• The Scale Of Conflict In Aleppo, Syria Will Blow Your Mind. You wouldn't know it from the lack of media attention, but a major city is being destroyed in Syria.The country's largest city, Aleppo, has been under siege for over a month. It has emerged as the key stronghold in the rebellion against President Bashar al-Assad, whose forces continue to intensify their aerial bombardment of the city. With nearly 3 million people in the city, this is a bigger siege than Leningrad.
• Why Facebook(FB) Is Tanking: Morgan Stanley(MS) Cut Its Facebook Forecast.
• Why Asking For Higher Tax Rates Is Just Plain Stupid.
• Overexposed SEAL Team 6 Has Been 'Likely Benched,' Says An Insider.
• BIG MISS: Construction Spending Falls 0.9%.

Zero Hedge:

• Weak Indian Monsoon Dries Up Centrally-Planned Liquidity Expectations.
• The One Chart To Explain Why ECB's Short-Dated Bond Buying Program Will Fail.
• As The Iron Anvil Falls, Will Australia Be Stuck Below It?
• Nomura: "Spain Will Need Full-Blown Bailout".

Washington Post:

• Pickups drive US auto sales as GM, Ford recover from poor July.

Gallup:

• Americans' Economic Confidence in August Ties 2012 Low. (graph)
  

Rasmussen Reports:

• Rasmussen Employment Index Falls to Ten Month Low. The Rasmussen Employment Index fell nine points in August to 72.0, the lowest level of confidence since October 2011. Worker confidence in the labor market is now roughly the same as it was in the month following the Wall Street meltdown in the fall of 2008.

The Blaze:

• 2012 Dem Platform Drops Language Committing to Keeping Jerusalem the Capital of Israel.

Reuters:

• Baltic index drops as panamax rates weaken. The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry commodities, fell on Tuesday as rates for panamax vessels continued to slip. The main index, which factors in the average daily earnings of capesize, panamax, supramax and handysize dry bulk transport vessels, fell 5 points or 0.72 percent to 693 points. The overall index, which gauges the cost of shipping commodities such as iron ore, cement, grain, coal and fertiliser, has fallen about 60 percent this year.
• Struggling Charlotte awkward setting for Obama, Democrats. It's what campaign strategists might call an "optics" problem: A president asking for another term before an adoring crowd in a state where the unemployment rate hovers around 10 percent four years after the U.S. financial crisis battered its big banks and manufacturers.
• Halliburton(HAL) sees drop in N.American revenue in 3rd qtr. Halliburton Co, the largest oilfield services provider in the United States, said a decline in North American drilling would lower revenue in the region in the third quarter from the second quarter. U.S. benchmark natural gas prices, despite pulling away from decade lows, are still down more than 25 percent from last year. So the number of rigs working has steadily dropped across North America, dampening services companies' pricing power.
• Hedge fund manager Einhorn scores 4.2 percent gain August.

Telegraph:

• Asian exports crumble. (graph)

Irish Independent:

• Global Crisis Moves East as China Suffers Rapid Downturn. CHINA’S industrial output is contracting at the fastest pace since the depths of the global financial crisis, with knock-on effects spreading across the Far East. “It just keeps getting worse,” said Alistair Thornton and Xianfang Ren from IHS Global Insight. “The government has underestimated the pace of the slowdown and is behind the curve.” Evidence of a hard landing over the summer is becoming clearer. Rail volumes fell 8.2pc in July from a year before. The Japanese group Komatsu said its exports of hydraulic excavators to China – a proxy gauge for Chinese construction – fell 48pc in August from a year before. The twin effect of China’s downturn and Europe’s double-dip recession has turned into a full-blown shock for much of Asia. Hong Kong and Singapore both contracted in the second quarter and are probably in technical recession. South Korea’s exports fell 6.2pc in August, with car sales down 18.2pc. India’s exports fell 14.8pc in July, an extra blow as it grapples with its own post-boom hangover. “The coming days ahead are tough,” said Indian commerce secretary S R Rao. Stephen Jen from SLJ Macro Patrners said we are starting to see Phase III of the global crisis as “the eye of the storm moves East”, with China and emerging markets succumbing at last to the effects of debt leverage. Mr Jen said markets have already discounted any likely trouble in Europe and America, but have yet to “price” the mounting risks in Asia correctly. “There seems to be a big gap between the prevalent view on China, and what is likely to happen: the sanguine consensus view that China can do no wrong will likely be proven to be incorrect,” he said.

Ansa:

• Fiat CEO pessimistic about European market picking up. The European automobile market "unfortunately is in a phase of severe contraction" that "reflects economic conditions - one will have to wait a long time for a trend reversal," Marchionne said on a visit to the new Fiat plant in Kragujevac, where he met with Serbia's new president, Tomislav Nikolic. "I am still pessimistic about 2012-2013. We'll have to see in 2014," Marchionne added. Fiat reported a slump in sales on the sluggish European market of 20% in August and July. Marchionne said in July that the carmaker may have to close one of its plants in Italy if weak demand on the European auto market continues.

Bear Radar

Style Underperformer:

• Mid-Cap Value -.70%

Sector Underperformers:

• 1) Coal -4.11% 2) Steel -3.7% 3) Oil Service -2.40%

Stocks Falling on Unusual Volume:

• MPWR, GTAT, SZYM, AIXG, IOC, EMR, LNCE, THRX, BONT, THLD, ARMH, PSE, JBL, SPTN, LYB, NFLX, DY, SRPT, ESL, VCLT, ZUMZ, PFPT, MVO, FSLR, TIF, ETN, CBE, CLF, HAL, FTE, CHKP, NE, MIND, DNP and BAH
  

Stocks With Unusual Put Option Activity:

• 1) EWJ 2) COP 3) EWY 4) NFLX 5) SAN
  

Stocks With Most Negative News Mentions:

• 1) BTU 2) CSX 3) JBL 4) NVDA 5) IR
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Small-Cap Growth -.40%

Sector Outperformers:

• 1) Oil Tankers +.43% 2) Medical Equipment +.26% 3) Tobacco +.03%

Stocks Rising on Unusual Volume:

• MRX, VRX, MDVN, QCOR, ISIS, SWI, GME, AH and AKRX
  

Stocks With Unusual Call Option Activity:

• 1) EWY 2) UNH 3) VRX 4) IAU 5) OCN
  

Stocks With Most Positive News Mentions:

• 1) TUES 2) KFY 3) MDVN 4) PKT 5) RTN
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

Tuesday Watch

Weekend Headlines
Bloomberg:

• EU Outlook Cut by Moody’s to Reflect Germany, France, U.K. Risks. The European Union’s outlook was cut to negative by Moody’s Investors Service, reflecting the risks to Germany, France, the U.K. and the Netherlands that account for about 45 percent of the group’s budget revenue. The ratings company lowered the outlook on the EU’s Aaa long-term bond rating from stable, according to a statement released in Frankfurt late yesterday. It also changed to negative from stable its outlook on the provisional Aaa rating for the EU’s medium-term note program. The change “reflects the negative outlook on the Aaa ratings of the member states with large contributions to the EU budget,” Moody’s said. “The creditworthiness of these member states is highly correlated, as they are all exposed, albeit to varying degrees, to the euro-area debt crisis.” Chancellor Angela Merkel told a crowd of beer drinkers in Bavaria yesterday that Germany must show solidarity with Europe, and indicated she would back a more active crisis-fighting role at the European Central Bank. Her nation shoulders the largest cost of bailing out weaker governments. Risks of a downgrade to the EU’s sovereign debt rating come from a “deterioration in the creditworthiness of EU member states,” Moody’s said. “Additionally, a weakening of the commitment of the member states to the EU and changes to the EU’s fiscal framework that led to less conservative budget management would be credit negative.”
• Merkel Attacks Markets in Call for Voter Support. German Chancellor Angela Merkel renewed her attack on markets for their role in stoking Europe’s financial crisis, saying the challenge for policy makers is to woo voters to support cutting debt levels to escape the sights of investors. Merkel made her comments at an event in the Bavarian town of Abensberg today after her finance minister, Wolfgang Schaeuble, warned against heaping “false expectations” on the European Central Bank to end the debt crisis, now almost three years old. Merkel, speaking at an event organised by the Bavarian Christian Social Union party, said that in the last five years, markets “haven’t served the people,” allowing a few to get rich at the expense of the many. Markets can’t be allowed to destroy the fruits of people’s labor and governments can’t be put at their mercy through excess debt, she said. “The real question about our democracy is: Can we in Germany and in Europe win elections when we jointly stand up for solid finances, when we don’t always spend more than we take in?” Merkel said in a beer tent packed with local party officials dressed in traditional Bavarian lederhosen and dirndls.
• Euro-Area Manufacturing Output Contracts More Than Estimated. Euro-area manufacturing contracted more than initially estimated in August, suggesting the economy may struggle to avoid a recession in the third quarter. A gauge of manufacturing in the 17-nation euro area based on a survey of purchasing managers was revised lower to 45.1 from the reading of 45.3 estimated earlier, London-based Markit Economics said today. The index, which stood at 44 in July, has held for 13 months below 50, indicating contraction.
• Draghi May See Silver Lining in Disappointing Investors. Mario Draghi might not be too worried about disappointing investors this week. As markets look for the European Central Bank president to unveil details of his bond-purchase program on Sept. 6, Italy and Spain are showing little willingness to request aid from Europe’s bailout fund -- a pre-condition for the ECB to start buying their debt. A jump in bond yields may remind governments that they need to act first. “The market is expecting a lot from the ECB,” Gustavo Reis, an economist at Bank of America Merrill Lynch, wrote in a note to clients. “However, we look for little clarification on the bond-buying program. The likely market disappointment should intensify the pressure on Spain.”
• Germany’s Debt Rose 390 Billion Euros on Crisis, Passauer Says. Germany’s debt grew by 390 billion euros ($490 billion) on costs related to banking bailouts and payouts to indebted euro-area countries, Passauer Neue Presse reported, Costs related to bank bailouts increased debt by 322.5 billion euros and funding to help Greece, Portugal and Ireland added 67.5 billion euros, Passauer said, citing a German government response to a request in parliament by the Left Party. The rescue package for Spain wasn’t included in the estimate because terms of the bailout haven’t been completed, the newspaper reported, citing Hartmut Koschyk, state secretary at the Finance Ministry.
• ECB Meeting Won't Be Spain Game-Changer: RBS Credit Strategists. ECB steps toward more liquidity won't fix lack of growth and capital across Spain's economy and banks, head of European macro credit research Alberto Gallo and macro credit analyst Lee Tyrrell-Hendry say. Spain will continue to underperform market, investors should take profits or reset short positions, they said. Expect Spain to be downgraded to high yield over the coming months, they said. Recommend buying protection on Spain 5-yr CDS against selling protectkino on iTraxx Xover.
  
• Regling Says ESM Won’t Work Without German Backing, Spiegel Says. The European Stability Mechanism, the euro area’s permanent rescue fund, is unlikely to be successful if Germany’s highest court rules against it this month, ESM chief Klaus Regling told Der Spiegel. “Without Germany, the ESM doesn’t make any sense,” the magazine quoted Regling as saying in an e-mailed preview of a story to be published tomorrow. If all euro-area states meet targets and improve their competitiveness, the debt crisis “can be overcome in one to two years,” Regling said, according to the magazine.
• The majority of the French are pessimistic about the future and doubt the government's ability to handle issues such as purchasing power and joblessness, a poll conducted for Ouest France found. According to a poll by Ifop, 68% of those queried expressed pessimism about the future, the highest percentage since August 2005 and a three-point increase since a previous poll conducted in January, according to Ifop. On Aug. 30, another poll showed Socialist President Francois Hollande, elected in May, is France's most unpopular leader at just over 100 days into the job.
• France may increase personal income taxes by about 2%, Le Figaro reported, citing sources at Matignon, the workplace of Prime Minister Jean-Marc Ayrault. Yesterday, Finance Minister Moscovici said France's social spending can't be financed by payroll taxes alone and that the government would address the matter in the coming months.
• China Manufacturing Contracts by Most Since 2009, HSBC Says. China’s manufacturing contracted at the fastest pace since March 2009, a private survey showed, indicating the slowdown in the world’s second-largest economy is deepening. The purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics had a final reading of 47.6 for August after a preliminary 47.8 provided Aug. 23. The gauge was at 49.3 in July. The dividing line between expansion and contraction is 50.
• Goldman Sachs Cuts Chinese Earnings Forecasts as Economy Slows. Goldman Sachs Group Inc. lowered its earnings growth forecasts for China's publicly traded companies as slowing growth in the world's second-largest economy crimps profit margins. Profits for companies in the MSCI China Index may increase 1.8% this year and 8.6% in 2013, compared with previous growth estimates of 6% and 12.3%, Helen Zhu and Timothy Moe, analysts at the U.S. bank, wrote in a report.
  
• Hong Kong Recession Risk May Increase on Exports, Tsang Says. Hong Kong’s risk of a “technical recession” may increase after declines in exports and a slowdown in retail sales, Financial Secretary John Tsang said. “We are unable to escape the impact of the European debt crisis,” Tsang wrote on his blog yesterday in Chinese. He didn’t give a forecast for third-quarter gross domestic product.
• Australia Retail Sales Drop by Most Since ’10, Profits Fall. Australian retail sales unexpectedly declined in July by the most in almost two years and company profits dropped for a third straight quarter, sending the local currency to a five-week low. Sales dropped 0.8 percent to A$21.4 billion ($22 billion) from June, when they rose a revised 1.2 percent, the Bureau of Statistics said in Sydney today. That was the first fall this year and steepest since October 2010. Gross operating profit declined 0.7 percent last quarter from the January-March period, when they slid a revised 3.7 percent, another report showed.
• Global Manufacturing Sector Struggling Amidst Waning Demand. (graph)
• Oil Rises to Highest in One Week on Stimulus Speculation. Oil rose to the highest intraday price in more than a week in New York on speculation central banks will take more steps to boost growth after reports signaled the economic slowdown is deepening. Oil for October delivery increased as much as 83 cents to $97.30 a barrel in electronic trading on the New York Mercantile Exchange, the highest intraday price since Aug. 27, and was at $96.86 at 9:29 a.m. Sydney time. Brent oil for October settlement rose $1.21, or 1.1 percent, to $115.78 a barrel on the London-based ICE Futures Europe exchange yesterday.
• Ohio’s Gas-Fracking Boom Seen Aiding Obama in Swing State. Four years ago, Barack Obama pledged to promote a green revolution, saying the government would back alternative-energy technologies that could create 5 million jobs and free the U.S. from a dependence on overseas oil tyrants. Today, the energy industry is one of the main engines of job growth and the U.S. is the closest it has been in almost 20 years to meeting its own needs. Yet the transformation -- driven by a surge in oil and natural gas production -- isn’t primarily green and has little connection to the president’s plans. “We’re moving to energy independence by accident,” said Philip Verleger, who directed the U.S. Treasury office of energy policy under President Jimmy Carter and is now an industry consultant. “Energy policy had nothing to do with it.” The boom in oil and natural gas is setting up an election- year irony: a green-energy president who is getting a boost from fossil fuels.
• Valeant(VRX) to Buy Medicis Pharmaceutical(MRX) for $2.6 Billion. Valeant Pharmaceuticals International Inc. (VRX), Canada’s largest publicly traded drugmaker, agreed to buy Medicis Pharmaceutical Corp. (MRX) for $2.6 billion to expand in wrinkle treatments and other skin-care products.

Wall Street Journal:

• Bernanke Faces Skepticism Over Policy. Ben Bernanke encountered a heavy dose of skepticism and doubt here this weekend. In a highly anticipated speech on monetary policy Friday, the Federal Reserve chairman argued that the Fed's easy-money policies were helping the weak economy and laid the groundwork for more action. But economists and central bankers wondered more openly than usual if the Fed had the tools to fix the problems of the day and expressed frustration that four years of super low interest rates and extraordinary money-pumping by the Fed hadn't done more to spur the slow-moving economy.
• China's Railway Ministry Posts $1.4 Billion Loss.
• Lego Chief Sees Weak U.S. Demand for Toys. The chief executive of Lego A/S signaled deep concern about the U.S. toy market on Friday even after the Danish toy maker reported a solid first-half performance. Despite Lego's momentum through June, Chief Executive Jørgen Vig Knudstorp said in an interview that the approaching presidential elections, rising debt and economic uncertainty are weighing on the critical U.S. market. "The U.S. consumer is still quite heavily indebted, and with an election coming up, whoever gets elected, taxes will go up and government spending will go down," Mr. Knudstorp said. "So what will that do to consumer spending? So there's a big factor of uncertainty in the U.S." Mr. Knudstorp, a 10-year veteran of the toy industry, said clouds have already formed over the U.S. toy market: "These six months have been the most negative toy market that I have seen in the U.S…so that worries us."
• Drought's Grip Is Wide, Deep. As Economists Forecast Long-Term Effects, Several Businesses Already Feel a Hit.
• Euro's Fans Are Short-Term Optimists.

Marketwatch.com:

• Germans rally around Weidmann’s hard line. Commentary: Public pressure mounts against ECB action on Spain. The German press in the last few days has been full of reports that Bundesbank President Jens Weidmann has threatened to resign and had to be talked out of it by Wolfgang Schaeuble, the finance minister. A bit of clever spin-doctory by the Bundesbank’s media magicians. It is highly unlikely that Weidmann will actually leave (what would he do next?) but the reports have fostered, as was no doubt planned, an outpouring of pro-Weidmann support and sympathy from people in Germany who matter.

Business Insider:

• Struggling Spanish Consumers Now Face A Crippling Tax Hike.
• Nomura Has The Best Line To Describe How Difficult The Situation Is In Europe.
• These Two New North Carolina Polls Are Depressing For Obama And His Convention.
• Republicans Are Pouncing On A Startling Admission From The Governor Of Maryland. (video)
• JIM ROGERS: India Can't Overcome Its Growth Issues.
• Germany's Export Collapse.
• China’s Staggering Bad Debt Problem.
• Get Ready For 'Super Wi-Fi' To Be A Big Thing In 2013.
• Why My Doctor Hates Obamacare by Bill Frist.
  

Zero Hedge:

• Key Upcoming Events.
• Is Spain Running Out Of Cash?
• On Volatility, Correlation, And Sentiment Shifts. (graph)
• Draghi's "Promise" Sends Hope Off The Charts.

CNBC:

• Loan Rates Point to Euro Zone Fractures. Interest rates paid by companies in the eurozone’s weaker economies have surged, highlighting the bloc’s fragmentation as the European Central Bank loses control of borrowing costs.
• German Economy Minister Supports Weidmann in Bond Buy Opposition. Germany's economy minister threw his weight behind Bundesbank chief Jens Weidmann's opposition to the European Central Bank's plans to buy debt of euro zone countries with high borrowing costs, saying that they could not replace economic reforms.
• Greek Euro Exit Debate Continues To Make Headlines in Germany. 25% in France Want More Done to Keep Greece in Euro. A Financial Times/Harris poll finds 32% in France think Greece should leave the Euro region, vs. 54% of Germans. Just 26% of Germans think Greece will repay bailout loans. Of UK respondents, 44% were "not at all confident" that Europe policy makers would be able to solve the economic crisis.

New York Times;

• U.S. Is Near Pact to Cut $1 Billion From Egypt’s Debt. Nearly 16 months after first pledging to help Egypt’s failing economy, the Obama administration is nearing an agreement with the country’s new government to relieve $1 billion of its debt as part of an American and international assistance package intended to bolster its transition to democracy, administration officials said.

San Francisco Chronicle:

• Wells Fargo(WFC) Has One-Third of Mortgage Market. Wells Fargo's burgeoning share of the mortgage market - it made 1 out of 3 new mortgages in the first half of this year compared with 1 out of 10 in 2004 - is raising some red flags. Concentration in any market is not good because it can lead to fewer choices and higher prices. But it's of special concern in the banking industry because of its key role in the economy.
  

CNN:

• At Least 1,600 People Die in Syria Civil War Last Week, UNICEF says. Patrick McCormick of the U.N. children's fund said the toll included children, as the government of Bashar al-Assad fights to suppress an 18-month uprising against its rule. Nearly 5,000 people died in August, according to the Center of Documentation of Violation in Syria, which put the toll for the month at 4,937. And there appeared to be no letup in the violence on Sunday, with opposition sources saying at least 144 people were killed across the country.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows Mitt Romney attracting support from 48% of voters nationwide, while President Obama earns 44% of the vote. Two percent (2%) prefer some other candidate, and five percent (5%) are undecided.

Reuters:

• Iran, N.Korea agree to cooperate in science, technology. Iran and North Korea have signed an agreement to cooperate in science and technology, Iranian media reported on Saturday, and Iran's supreme leader declared that the two countries had "common enemies." The two countries will cooperate in research, student exchanges and joint laboratories, and in the fields of information technology, engineering, biotechnology, renewable energy, the environment, sustainable development of agriculture and food technology, the Iranian Labour News Agency (ILNA) reported.
• Iran could strike US bases if Israel attacks-Hezbollah. Iran could hit U.S. bases in the Middle East in response to any Israeli strike on its nuclear facilities even if American forces played no role in the attack, the leader of Lebanon's Iranian-backed militant group Hezbollah said on Monday. "A decision has been taken to respond and the response will be very great," Hezbollah Secretary-General Sayyed Hassan Nasrallah said in an interview with the Beirut-based Al Mayadeen television. "The response will not be just inside the Israeli entity - American bases in the whole region could be Iranian targets," he said, citing information he said was from Iranian officials. "If Israel targets Iran, America bears responsibility."
• Brazil lowers 2012 exports forecast-official.
• German finmin casts doubt on bank supervision launch date. Europe will not be able to introduce centralised banking supervision by its year-end target date, German Finance Minister Wolfgang Schaeuble said on Monday, making clear this would delay any direct bank recapitalisation by the euro zone's rescue fund. Schaeuble also said if the European Central Bank were to take on the supervisory role for Europe's banks, it would need to be reorganised to ensure it remains independent in setting monetary policy.

Financial Times:

• Questions over viability of US ETFs. More than a quarter of exchange-traded funds and notes listed in the US have failed to attract enough assets to be economically viable, according to data compiled for the Financial Times. Cutthroat competition in the fast-growing market for tradable index-tracking funds is making it harder for sponsors to cover costs and forcing some to close funds. As the number of funds increases, assets are being spread more thinly across products, forcing sponsors to lower fees further in order to compete.

Telegraph:

• For how much longer can we keep kicking the can down this road? Mr Tilford draws an all too familiar conclusion. The ECB's bond buying programme will be large enough to ensure Mr Draghi, its architect, doesn't lose face, but it will be too small to dispel convetibility risk and underpin the ECB's credentials as a credible lender of last resort. The euro is becoming a tragedy without end.

Welt am Sonntag:

• Germany's Roesler Rejects Longer Greek Deadline. German Economy Minister Philipp Roesler says payment deferral for Greece would "exacerbate liquidity problems." "More time costs more money; that is not possible," Roesler said.
• Bavarian Minister Says ECB 'Wrong' to Abandon Stability. Markus Soeder, Bavaria's finance minister, said Bundesbank President Jens Weidmann is right in his criticisms of the ECB. ECB actions will lead to inflation, Soeder said.
  

O Estado de S. Paulo:

• Brazil's GDP will expand 1.5% in 2012, citing an interview with Paulo Leme, chairman in Brazil for Goldman Sachs.
  

Nikkei:

• Japan Iron Ore Prices to Fall 14% Next Quarter. Prices for shipments to Japan are set to reach the lowest level in 2 1/2 years because of weak demand in China.
  

Sydney Morning Herald:

• Fortescue cuts spending, staff as ore prices fall. Billionaire Andrew Forrest’s aggressive iron ore production expansion plans are under a cloud after Fortescue Metals announced it would slash costs and defer development on some its key projects as the strain of tumbling commodity prices on the mining industry – and his company’s balance sheet – mounts. It is understood the miner will slow its long-held ambition of nearly tripling its iron ore production to 155 million tonnes per year by June. Fortescue said it will slash an unspecified number of jobs and cut back on operating costs immediately in order to save $300 million. Chief executive Nev Power said Fortescue will defer the development of the Kings deposit within the Solomon mining hub and the full completion of its fourth berth at Herb Elliott Port until iron ore prices return to ‘‘more sustainable levels’’.

Caijing:

• People's Bank of China Deputy Governor Hu Xiaolian said that money can't solve the fundamental problems at the root of the European debt crisis, citing Hu. European politicians must balance their need to appease their citizens with their international promises, the report said.

WantChinaTimes:

• Chinese companies struggle as they wait to get paid. The financial health of Chinese industries is getting worse, with the situation being particular alarming in the machinery, coal and steel sectors, a report by the Chinese Ministry of Industry and Information Technology said Wednesday. According to the report, large sums of money are owed by clients to the machinery industry, given slowing external demand. Money owed between January and February to machinery makers totaled 2.2 trillion yuan (US$346.6 billion), but grew to 2.49 trillion yuan (US$392 billion) in June. That represented a 17.29% increase from last year, higher than the revenue growth rate of 9.44%.

Financial News:

• PBOC Has No Short Term Intention for Loose Money Policy. China's central bank doesn't want the lowering of lenders' reserve requirement ratio to create false expectations for loose monetary policy, according to a Financial News front page commentary by Xu Shaofeng. Reverse repurchase operations can quickly satisfy short term capital needs and stabilize inflation expectations, the commentary said.

Xinhua:

• Bad loan risk looms over banking sector. China's commercial banks are facing a high risk of increased bad loans, partly due to a lending spree to support massive economic stimulus three years ago. That risk might worsen as local governments have attempted to unleash a new round of stimulus packages amid the current economic downturn, market analysts have warned.

Economic Information Daily:

• China's big four banks end-June outstanding loans to local govt financing vehicles stand at 2.6t yuan, rising nearly 500b yuan from a year earlier.

People's Daily:

• Chinese premier says property controls still in "critical period". Chinese Premier Wen Jiabao has reiterated the country still needs to resolutely curb speculative property investment as controls on the real estate sector are still in a "critical period." Wen made the remarks while making an inspection tour of affordable housing projects in the city of Tianjin in north China on Friday.
  

Fars:

• Iran is equipping its unmanned drones with missiles, citing Deputy Defense Minister Mohammad Eslami.
  

Weekend Recommendations

Barron's:

• Made positive comments on (CBI), (PLXS), (JCP), (WMT), (AFL), (VCI) and (WDR).

Night Trading

• Asian indices are -.75% to -.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 154.0 unch.
• Asia Pacific Sovereign CDS Index 125.0 -1.0 basis point.
• FTSE-100 futures -.01%.
  
• S&P 500 futures +.09%.
• NASDAQ 100 futures +.26%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SFD)/.44
• (CPB)/.38
• (FNSR)/.14

Economic Releases
8:58 am EST

• The Final Markit US PMI for August is estimated at 51.9.

10:00 am EST

• ISM Manufacturing for August is estimated to rise to 50.0 versus a reading of 49.8 in July.
• ISM Prices Paid for August is estimated to rise to 46.0 versus 39.5 in July.
• Construction Spending for July is estimated to rise +.4% versus a +.4% gain in June.

Afternoon:

• Total Vehicle Sales for August are estimated to rise to 14.2M versus 14.05M in July.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Eurozone inflation data, China HSBC Services PMI, Australia GDP data, Brazil Industrial Production, RBA interest rate decision, Barclays Energy/Power Conference, Stifel Nicolaus Healthcare Conference, Citi Tech Conference, could also impact trading today.
  

BOTTOM LINE: Asian indices are lower, weighed down by technology and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the week.

Weekly Outlook

U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on rising global growth fears, US "fiscal cliff" concerns, rising food/energy prices, rising Eurozone debt angst, profit-taking, more shorting and technical selling. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Market Week in Review

S&P 500 1,406.58 -.32%*



The Weekly Wrap by Briefing.com.

*5-Day Change