BETWEEN THE HEDGES

Thursday, September 06, 2012

Thursday Watch

Posted by Gary .....at 12:34 AM

Evening Headlines
Bloomberg:

Draghi Credibility at Stake as ECB Tries to Save The Euro. European Central Bank President Mario Draghi’s task today is straight-forward: produce a plan to save the euro. Draghi pledged more than a month ago to do what’s needed to preserve the single currency; now he’s under pressure to follow through with details of a bond-purchase plan to lower borrowing costs in Spain and Italy and prevent a breakup of Europe’s monetary union. Expectations have built to such an extent that Draghi risks losing credibility unless he delivers at a press conference after today’s Governing Council meeting in Frankfurt, economists and investors said. “Draghi has put his credibility squarely on the line,” said Julian Callow, chief European economist at Barclays Capital in London. “He has made it his business to save the euro, so he is going to be called on that.” Draghi told the European Parliament this week that the ECB needs to intervene in bond markets to wrest back control of interest rates in a fragmented euro-area economy and save the currency, according to a recording of a closed-door session obtained by Bloomberg News. His blueprint, sent to council members just two days ago and opposed by Germany’s Bundesbank, proposes unlimited buying of government debt with maturities of up to about three years, two central bank officials said yesterday on condition of anonymity. Rate Cut? Draghi will hold a press conference at 2:30 p.m., 45 minutes after the ECB announces its interest-rate decision. Economists are split over whether policy makers will lower the benchmark rate to a new record low, with 30 of 58 in a Bloomberg survey predicting a quarter-point cut to 0.5 percent and 28 forecasting no change.
VeriFone(PAY) Falls as Quarterly Revenue Misses Estimates. VeriFone Systems Inc. (PAY) tumbled in late trading after the maker of credit-card terminals reported third-quarter sales that fell short of analysts’ estimates, citing unfavorable currency swings, competitive pressure in Europe and a fire in Brazil. The shares of San Jose, California-based VeriFone dropped as much as 17 percent to $29.50 after closing at $35.38 in New York. The stock had declined less than 1 percent this year.
Iron Ore Will Drop to $50/ton Long Term, Andy Xie Says. Xie keeps forecast that ore will hit %50/t, probably before mid-2013, and stay down permanently, according the economist. Any rebound will be small, temporary because of high short-term steel inventory, lack of long-term growth prospects. Steel production is still rising, while demand declines as Chinese local govts resist production cuts, arrange financing to keep mills in their cities producing; "This story will come to a crashing end," he said. Steel, ore won't bottom until production stops, inventory is liquidated and "you see some bankruptcies in the steel industry." Steel demand unlikely to grow as construction of highways, railroads, properties has peaked; car market will probably see single-digit growth.
Citigroup(C), Goldman(GS), UBS(UBS) Sued Over Mortgage-Backed Bonds. Citigroup Inc. (C), Goldman Sachs Group Inc. (GS) and UBS AG (UBSN) were sued separately in New York over losses on $368.7 million in mortgage-backed securities. The three banks made “material misrepresentations” about the loans backing the securities and about the transfer of the loans into trusts, according to filings today in New York State Supreme Court.
Chinese Solar-Panel Exporters Face Threat of EU Tariffs. The European Union threatened to impose tariffs on solar panels from China in the wake of similar U.S. trade protection, saying EU producers may be victims of unfair price undercutting. The EU opened a probe into whether Chinese manufacturers of solar panels sell them in the 27-nation bloc below cost, a practice known as dumping. The inquiry covers crystalline silicon photovoltaic modules or panels and cells and wafers used in them. At stake is whether European competitors such as Solarworld AG, Germany’s largest maker of the renewable-energy technology, win levies to counter growing competition from China. The investigation will determine whether solar panels from China are “being dumped and whether the dumped imports have caused injury to the union industry,” the European Commission, the EU’s trade authority in Brussels, said today in the Official Journal.

Wall Street Journal:

Europe Outlook Dims as Bank Meets. Downturn Deepened Over Summer, Complicating Choice for ECB Officials.
U.S. Competitiveness Slips. Northern European countries topped the overall ranking of a global competitiveness report released Wednesday by the World Economic Forum, as the United States slipped for the fourth year in a row. "In addition to the burgeoning macroeconomic vulnerabilities, some aspects of the country's [United States] institutional environment continue to raise concern among business leaders, particularly the low public trust in politicians and a perceived lack of government efficiency," said the WEF, a think tank that also hosts the annual meeting of global business and political leaders in the Alpine town of Davos, Switzerland.
Retiree Health Costs Rising. State and local governments in New York will have to come up with an additional quarter of a trillion dollars to pay the entire tab for retiree health care, according to a new report. The $250 billion bill for retiree health coverage is up from $210 billion two years ago, said the study issued by the Empire Center for New York State Policy on Wednesday. Referred to as "other post-employment benefits," or OPEB, the unfunded obligations represent a troubling strain on budgets.
Desperately Seeking Middle-Class Taxes. What Obama's critique of Ryan tells us about Obama's budget plans. Democrats in Charlotte are pounding away at the savage budget cuts that Mitt Romney and Paul Ryan supposedly favor and their phantom plan for "raising taxes on the middle class," as President Obama puts it. The truth is the opposite, but table that for a moment. The President seems not to realize his critique is really a scorching if implicit indictment of his own time in office.

Business Insider:

Zero Hedge:

CNBC:

US Will Go Over the 'Fiscal Cliff': Orszag. The U.S. will go over the fiscal cliff early next year before a deal gets cut in January to address the country’s fiscal problems, Peter Orszag, a former Obama administration official and current vice chairman at Citigroup, told CNBC’s "Closing Bell" on Wednesday. “I think what's going to happen is probably early next year, not late, next year, you will have a big fiscal deal that gets cut,” he said.
World Bank Appoints Chief Economist From India.

NY Times:

Greek Government and Public at Odds Over New Cuts.

ABC News:

Secret Service Investigating Purported Ransom of Mitt Romney’s Tax Returns. Someone claims to have stolen years of Mitt Romney’s tax returns from a Tennessee office of the financial firm PricewaterhouseCoopers, and the Secret Service is investigating what appears to be a ransom scheme. The local Democratic and Republican parties in Williamson County, Tenn., where the PricewaterhouseCoopers office is located, both received packages, each containing a thumb drive and a letter outlining a competitive-bidding ransom scheme that appears designed to pit Republicans and Democrats against each other over the release of Romney’s taxes.

CNN:

U.S. debt $417 billion below the debt ceiling. The debt ceiling is currently set at $16.394 trillion. At the end of August, the amount of debt subject to that limit -- which excludes certain types of debt -- was $15.977 trillion, roughly $417 billion below the cap. Since the government typically borrows between $100 billion and $125 billion a month, that means it's on track to hit the ceiling sometime in December. But the Treasury Department will likely be able to use "extraordinary measures" to keep the debt just below the legal limit for a couple of months. Bottom line: Congress will likely need to raise the ceiling in early 2013 or Treasury will risk defaulting on the country's legal obligations by failing to pay all of its bills in full and on time.

Rasmussen Reports:

Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows Mitt Romney attracting support from 48% of voters nationwide, while President Obama earns 45% of the vote. Two percent (2%) prefer some other candidate, and five percent (5%) are undecided.

Reuters:

Romney raps Obama over growing debt, food stamp record. Republican presidential candidate Mitt Romney blasted U.S. President Barack Obama over the size of the national debt and the record number of Americans on food stamps, in a jab on the eve of a major speech by the Democrat. Romney said "two big numbers out this week" prove that Americans are not better off than when Obama took office in 2009. "We've gone from $10 trillion that the president inherited from all prior presidents to $16 trillion," Romney told reporters in the swing state of New Hampshire. The Treasury Department this week announced that the public debt had surpassed $16 trillion. "The other number's forty-seven. Forty-seven million now on food stamps. When he came to office there were 32 million. He's added 15 million people," Romney said. He was referring to an Agriculture Department report on Tuesday that showed the number of people on food stamps jumped to a record high of 46.7 million in June.

Evening Recommendations

None of note

Night Trading

Asian equity indices are -.75% to +.50% on average.
Asia Ex-Japan Investment Grade CDS Index 149.0 -1.5 basis points.
Asia Pacific Sovereign CDS Index 122.0 unch.
FTSE-100 futures +.29%.
S&P 500 futures +.22%.
NASDAQ 100 futures +.20%.

Morning Preview Links

Earnings of Note
Company/Estimate

(COO)/1.29
(ULTA)/.51
(MFRM)/.28
(NAV)/-1.41
(HOV)/-.14

Economic Releases
8:15 am EST

ADP Employment Change for August is estimated to fall to 140K versus 163K in July.

8:30 am EST

Initial Jobless Claims are estimated to fall to 370K versus 374K the prior week.
Continuing Claims are estimated to fall to 3315K versus 3316K prior.

10:00 am EST

ISM Non-Manufacturing for August is estimated to fall to 52.5 versus 52.6 in July.

11:00 am EST

Bloomberg consensus estimates call for a weekly crude oil inventory decline of -4,950,000 barrels versus a +3,778,000 barrel gain the prior week. Distillate supplies are estimated to fall by -1,550,000 barrels versus a +873,000 barrel gain the prior week. Gasoline inventories are estimated to fall by -3,000,000 barrels versus a -1,509,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -1.5% versus unch. the prior week.

Upcoming Splits

None of note

Other Potential Market Movers

The ECB rate decision, Spanish/French bond auctions, Eurozone GDP data, Challenger Job Cuts report for August, ICSC Chain Store Sales report for August, BoE rate decision, Australia trade data, OECD economic outlook, weekly Bloomberg Consumer Comfort Index, (SYK) analyst meeting and the (QLGC) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and technology 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 day.

Wednesday, September 05, 2012

Stocks Slightly Lower into Final Hour on Rising Global Growth Fears, Transports Sector Weakness, US "Fiscal Cliff" Worries, High Food/Energy Prices

Posted by Gary .....at 4:06 PM

Broad Market Tone:

Advance/Decline Line: Lower
Sector Performance: Mixed
Volume: Light
Market Leading Stocks: Performing In Line

Equity Investor Angst:

VIX 17.72 -1.45%
ISE Sentiment Index 153.0 +50.0%
Total Put/Call .90 +1.12%
NYSE Arms .85 -37.72%

Credit Investor Angst:

North American Investment Grade CDS Index 100.35 bps -.68%
European Financial Sector CDS Index 232.81 bps -2.47%
Western Europe Sovereign Debt CDS Index 219.73 -1.85%
Emerging Market CDS Index 235.74 -2.46%
2-Year Swap Spread 16.5 +.5 basis point
TED Spread 30.75 -1.25 basis points
3-Month EUR/USD Cross-Currency Basis Swap -30.5 -3.25 basis points

Economic Gauges:

3-Month T-Bill Yield .10% +1 basis point
Yield Curve 135.0 +1 basis point
China Import Iron Ore Spot $86.70/Metric Tonne -.23%
Citi US Economic Surprise Index -2.0 +.8 point
10-Year TIPS Spread 2.30 +3 basis points

Overseas Futures:

Nikkei Futures: Indicating +7 open in Japan
DAX Futures: Indicating -7 open in Germany

Portfolio:

Slightly Higher: On gains in my Retail sector longs and Emerging Markets shorts
Disclosed Trades: None
Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades slightly lower on eurozone debt angst, high food/energy prices, US "fiscal cliff" worries and rising global growth fears. On the positive side, Steel, Coal, Education and Airline shares are especially strong, rising more than +.75%. Copper is gaining +1.5%, the UBS-Bloomberg Ag Spot Index is down -1.3% and Gold is falling -.2%. The 10Y Yld is rising +2 bps to 1.59%. The Germany sovereign cds is down -.8% to 58.85 bps, the France sovereign cds is down -1.3% to 131.25 bps, the Spain sovereign cds is down -4.2% to 451.50 bps and the Italy sovereign cds is down -6.0% to 395.51 bps. Moreover, the European Investment Grade CDS Index is down -2.1% to 140.14 bps, the Spain 10Y Yld is down -2.4% to 6.41% and the Italian/German 10Y Yld Spread is down -5.6% to 403.55 bps. On the negative side, Alt Energy, Oil Tanker, Energy, Semi, Disk Drive, Networking, Medical Equipment and Road & Rail shares are especially weak, falling more than -.75%. Transport shares have traded poorly throughout the day again. Major Asian indices fell overnight, led lower by a -1.74% decline in South Korea. The Nikkei fell another -1.1% and is down -4.3% in 5 days. The Shanghai Comp fell another -.3% to the lowest level since early March 2009. This index is now down -7.4% ytd and down -15.7% over the last 12 months. The UBS/Bloomberg Ag Spot Index is up +25.0% since 6/1. The benchmark China Iron/Ore Spot Index is down -52.1% since 9/7/11. The China Hot Rolled Steel Sheet Spot Index is also picking up downside steam. As well, despite their recent bounces off the lows, the euro, copper and lumber all continue to trade poorly given equity investor perceptions that the Eurozone has successfully kicked-the-can and global central bank stimuli will boost economic growth in the near future. US weekly retail sales have decelerated to a sluggish rate at +2.5%. US Trucking Traffic continues to soften. Moreover, the weekly MBA Home Purchase Applications Index has declined in 6 out of the last 7 weeks and has been around the same level since May 2010 despite investor perceptions of a big improvement in the nationwide housing market. The Baltic Dry Index has plunged around -65.0% from its Oct. 14th high and is now down around -60.0% ytd. Shanghai Copper Inventories have risen +119% ytd. Oil tanker rates have plunged, with the benchmark Middle East-to-US voyage down to 22.50 industry-standard worldscale points, which is the lowest since May, 2009. The 10Y T-Note continues to trade too well. There still appears to be a fairly high level of complacency among US investors regarding the deteriorating macro backdrop. It remains unclear to me whether or not Germany will destroy its own balance sheet or allow the ECB to monetize debt in a major way in an attempt to "save" the euro even as investors have been pricing this outcome into stocks. Massive tax hikes and spending cuts are still yet to hit in several key eurozone countries that are already in recession. A lack of economic competitiveness and growth incentives remain unaddressed problems. The European debt crisis is also really affecting emerging market economies now, which will further pressure exports from the region and further raise the odds of more sovereign/bank downgrades over the intermediate-term. I continue to believe that China's problems are much larger than commonly perceived and cannot be solved with another massive stimulus package given their real estate bubble, soaring food prices, massive overcapacity in certain key parts of the economy and growing bad loans problem. I continue to believe QE3 would be a major mistake given the recent surge in stock prices, rising inflation expectations, rising gas prices, worrisome food crisis headlines and less pessimistic US economic data. Little being discussed by global central bankers will actually boost global economic growth to an extent that overcomes the growing macro headwinds over the intermediate-term, in my opinion. Uncertainty surrounding the effects on business of Obamacare, the "US fiscal cliff" and the election outcome uncertainty will likely become more and more of a focus for US investors as the year progresses. The explosion higher in the Israel sovereign cds(+31 bps in about 3 weeks to 165.0 bps) is another big red flag. The Mid-east appears to be unraveling again at an alarming rate. The quality of the stock rally off the June lows remains poor as breadth, volume, leadership, lack of big volume/gainers and copper/lumber/transports relative weakness all continue to be concerns. Thus, recent market p/e multiple expansion on global central bank stimulus/action hopes, is creating an unstable situation for equities, which could become a big problem this fall unless a significant macro catalyst materializes soon. For this year's equity advance to regain traction, I would expect to see further European credit gauge improvement, a subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower food/energy prices, a US "fiscal cliff" solution, a calming in Mid-east tensions and higher-quality stock market leadership. I expect US stocks to trade modestly lower into the close from current levels on eurozone debt angst, profit-taking, more shorting, high food/energy prices, US "fiscal cliff" concerns, growing Mid-east unrest, technical selling and rising global growth fears.

Bear Radar

Posted by Gary .....at 1:43 PM

Style Underperformer:

Mid-Cap Growth -.53%

Sector Underperformers:

1) Road & Rail -1.90% 2) Disk Drives -1.15% 3) Oil Tankers -1.08%

Stocks Falling on Unusual Volume:

DK, BP, AXP, BBL, COP, DFS, OMG, SNTA, SSL, FE, NS, TGP, FRAN, HITK, CVGW, MHO, LUX, FDX, UPS, TAC, YZC, NATI, MATW, FGP, LANC, CEO, CAJ, LF, ELLI, NNI and FCFS

Stocks With Unusual Put Option Activity:

1) PHM 2) PAY 3) ECA 4) NUE 5) UPS

Stocks With Most Negative News Mentions:

1) AMD 2) FDX 3) BTU 4) AMR 5) GM

Charts:

Bull Radar

Posted by Gary .....at 10:36 AM

Style Outperformer:

Large-Cap Value +.24%

Sector Outperformers:

1) Steel +1.66% 2) Airlines +1.51% 3) Restaurants +.81%

Stocks Rising on Unusual Volume:

QLIK, GWRE, GDOT, SRPT, GPOR, SWY, HIG, YELP and LNKD

Stocks With Unusual Call Option Activity:

1) GFI 2) AOL 3) MRX 4) JNK 5) MWW

Stocks With Most Positive News Mentions:

1) HON 2) AN 3) LCC 4) AMZN 5) ICE

Charts:

Wednesday Watch

Posted by Gary .....at 12:40 AM

Evening Headlines
Bloomberg:

Asian Stocks Fall 5th Day as U.S. Manufacturing Contracts. Asian stocks fell, with the regional benchmark index headed for the longest losing streak in eight weeks, as economic reports from the U.S. to China and Australia stoked concern global growth is slowing. Samsung Electronics Co. (005930), South Korea’s largest exporter of consumer electronics that gets 20 percent of its revenue in America, lost 1.3 percent in Seoul. Westpac Banking Corp. (WBC), Australia’s No. 2 lender by market value, slid 1.6 percent. Fortescue Metals Group Ltd., Australia’s third-biggest iron-ore producer, plunged 9.4 percent as prices of the steelmaking material fell to a three-year low on slowing growth in China. The MSCI Asia Pacific Index dropped 0.9 percent to 116.20 as of 12:45 p.m. in Tokyo, heading for a fifth day of losses. More than three stocks declined for each that rose on the index. Volatility across the region gained before the European Central Bank meets tomorrow. “The macro backdrop is quite challenging and growth conditions are fragile obviously,” said Nader Naeimi, Sydney- based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $100 billion. “The market is getting nervous about going into the ECB meeting. There’s a lot of speculation on the ECB about what they will do.”
Shanghai Stock Index Falls to Lowest Since 2009. China’s stock indexes fell, dragging the Shanghai Composite Index to the lowest level since February 2009, on concern the economic slowdown is deepening. Sany Heavy Industry Co. (600031), the country’s biggest machinery maker, slumped to the lowest level in two years as the Securities Times reported China’s 2012 industrial output growth may slow. Angang Steel Co. sank to a seven-year low, leading declines by material producers. China Vanke Co., the nation’s largest publicly traded property company, rose to a two-week high after August sales increased from July.
FedEx(FDX) Cuts Profit Forecast as Express Sales Slump on Economy. FedEx Corp., operator of the world’s largest cargo airline, said quarterly earnings will fall short of its forecast after a weak global economy damped revenue from express shipments. Profit for the quarter that ended Aug. 31 will range from $1.37 to $1.43 a share, Memphis, Tennessee-based FedEx said today in a statement. That was less than the June 19 projection (FDX) of $1.45 to $1.60 a share, and the stock (FDX) slid 3.5 percent to $84.50 at 5:21 p.m. after regular New York trading. The cut in profit adds to evidence of how Europe’s economic slump and slowing growth in Asia are dragging on FedEx, which is seeking money-saving efforts such as buyouts for some employees. The company is considered an economic bellwether because it moves goods ranging from financial documents to pharmaceuticals. “The global economy is weak and it’s impacting their business in the short run,” said Arthur Hatfield, a Raymond James & Associates Inc. analyst in Memphis. “I don’t think there’s anything inherently broken with their business.”
Risk Increases of Prolonged World Slowdown, BOJ’s Miyao Says. The odds of an extended world economic slowdown have increased and the Bank of Japan (8301) needs to remain ready to take decisive action if necessary, board member Ryuzo Miyao said. “The risk that the global economic slowdown will be prolonged is increasing slightly,” Miyao said in a speech in Shimonoseki, southwestern Japan today. For Japan, excessive strength in the yen may weigh on exports, profits and stock prices, Miyao said.
Obama Enters Convention With Lowest Incumbent Ratings Since ’84. More voters had an unfavorable opinion of President Barack Obama than favorable going into the Democratic National Convention that began tonight, with his lowest ratings among women since he took office, a poll found. An ABC News/Washington Post survey found 49 percent of registered voters disapproving of Obama, compared with 47 percent viewing him favorably. The poll gave the highest unfavorable rating of any incumbent going back to 1984, and he is the first incumbent in the survey with a higher unfavorable than favorable rating.
Euro May Decline to Two-Year Low on Channel: Technical Analysis.
Most Influential 50 in 2012 Shows Turmoil: Bloomberg Markets. The ability to move markets or shape ideas and policies. The clout to affect the price of a security or the structure of a deal. These are the attributes that define the people who hold sway in the world of finance -- those who make up the second annual 50 Most Influential list in the October issue of Bloomberg Markets magazine.
First Black President Can't Help Blacks Stem Wealth Drop. The employment roller coaster punched a hole in his bank balance and left his net worth “sitting at zero,” says the married father of two. “We’re easily three years behind where we would have been,” Brown says. So are millions of other African-Americans whose tenuous hold on prosperity has slipped since President Barack Obama reached the White House. The recession and anemic recovery, while painful for most Americans, have been especially punishing for blacks, stripping jobs, homes and wealth from people who have historically lagged. Today’s 14.1 percent black unemployment rate is almost twice the 7.4 percent white rate, and the racial gap -- after narrowing from 2005 to 2009 -- has widened since the recession’s June 2009 end. At Obama’s inauguration, 7.1 percent of whites were jobless compared with 12.7 percent of blacks. Amid a fitful economic recovery over the past three years, black households’ median annual income fell 11.1 percent, more than twice the 5.2 percent inflation-adjusted decline suffered by white households, according to an analysis of Census Bureau data by Sentier Research.
Wells Fargo(WFC) Has Biggest Risk Appetite, CreditSight Says. Wells Fargo & Co., the U.S. bank with the biggest market value, takes greater risk on its investments in stocks and bonds than competing lenders, according to a CreditSights Inc. report. Wells Fargo’s $227 billion portfolio of securities marked for sale yielded 3.97 percent at the end of June, the most among 17 of the largest U.S. banks measured by CreditSights, according to a Sept. 3 report from the New York-based financial-research firm. The company’s investments appear to have more credit and interest-rate risk than rivals, CreditSights said. “Wells Fargo’s all-in securities yield of nearly 4 percent seems indicative of a higher risk appetite,” CreditSights analysts including Peter Simon wrote in the report.

Wall Street Journal:

Caddell and Schoen: A Campaign in Need of a Clintonian Pivot. With his poll numbers worsening, the president needs to appeal to swing voters and independents.
Small Is New Order For Struggling Malls. Many struggling shopping malls are trying to find salvation by going small—in their purchasers, sales prices and, in some cases, size. As the nation's largest mall owners sell off or give up their most-troubled properties—dogged by deteriorating neighborhoods, newer rivals and online sales—smaller real-estate companies are snapping them up at discount prices and trying to find ways to pull them out their death spirals. Sometimes, that involves demolition.

MarketWatch:

Australia’s Q2 growth falls shy of estimates. The country’s gross domestic product advanced 0.6% in the three months to the end of June, the Australian Bureau of Statistics said. The result missed a 0.8% forecast in a Dow Jones Newswires survey and a 0.7% rise tipped by Reuters.
Many company insiders have recently accelerated their selling.

Business Insider:

Zero Hedge:

CNBC:

Fears Rising, Spaniards Pull Out Their Cash and Get Out of Spain. “The macro situation in Spain is getting worse and worse,” Mr. Vildosola, 38, said last week just hours before boarding a plane to London with his wife and two small children. “There is just too much risk. Spain is going to be next after Greece, and I just don’t want to end up holding devalued pesetas.”Mr. Vildosola is among many who worry that Spain’s economic tailspin could eventually force the country’s withdrawal from the euro and a return to its former currency, the peseta.

Boston Herald:

National Debt Hits $16 Trillion; GOP Critical. The Treasury Department said Tuesday that the national debt has topped $16 trillion, the result of chronic government deficits that have poured more than $50,000 worth of red ink onto federal ledgers for every man, woman and child in the United States. The news was greeted with a round of press releases from Barack Obama’s GOP rivals, who used the grim-but-expected news to criticize the president for the government’s fiscal performance over his 3 1/2 years in office. Obama has presided over four straight years of trillion dollar-plus deficits. "We can no longer push off the tough decisions until tomorrow," said No. 2 House Republican Eric Cantor, R-Va. "It’s time to address the serious fiscal challenges we face and stop spending money we don’t have."

NY Times:

Banks Face Suits as States Weigh Libor Losses. The scandal over global interest rates has state officials like Janet Cowell of North Carolina working intensely behind the scenes to build a case for suing the nation’s largest banks. Ms. Cowell, the state’s elected treasurer, and several of her staff members have spent the summer combing through the state’s investments trying to determine how much the state may have lost because of suspected manipulation of the London interbank offered rate, or Libor, which is used as a benchmark for trillions of dollars of financial contracts around the world. “We think this could be as big as the mortgage crisis settlement, that this could be a really high impact situation and that we should be aggressive on this,” Ms. Cowell said, referring to the $25 billion settlement that the nation’s biggest banks entered with state attorneys general.
A Chinese City Moves to Limit New Cars. It is as startling as if Detroit or Los Angeles restricted car ownership. The municipal government of Guangzhou, a sprawling metropolis that is one of China’s biggest auto manufacturing centers, introduced license plate auctions and lotteries last week that will roughly halve the number of new cars on the streets. The crackdown by China’s third-largest city is the most restrictive in a series of moves by big Chinese cities that are putting quality-of-life issues ahead of short-term economic growth, something the central government has struggled to do on a national scale.

ABC News:

Red Carpet for Solyndra Figure at Democratic Convention. The Obama campaign rolled out the red carpet this week for a former top Energy Department official who was at the center of the ill-fated government loan to Solyndra, a California solar panel firm that wound up in bankruptcy. Steven J. Spinner joined other top fundraisers for a VIP tour of the Democratic National Convention floor in Charlotte Monday evening, posing and waving for a photographer while standing behind the podium. When he saw ABC News cameras, however, he ran for the exit.

Rasmussen Reports:

50% Favor Repeal of Health Care Law, 41% Opposed.

Reuters:

HSBC China services PMI weakens to one-year low of 52.0. China's services sector grew at its slowest pace in a year in August, even though firms are hiring more workers at higher wages, a private sector survey showed on Wednesday, following gloomy manufacturing polls earlier in the week. The HSBC services sector Purchasing Managers' Index fell to 52.0 in August from 53.1 in July, but remained above the 50-point line that delineates expansion from contraction. A new business sub-index expanded at its slowest rate since August 2011, weighing on the headline figure. An employment sub-index rose to 52.7, its highest since November, while input prices, which primarily reflect labour costs, were at their highest since May.
Solyndra backers could reap $341 million in tax breaks. Investment funds that were early backers of Solyndra LLC stand to reap up to $341 million in tax breaks from its bankruptcy, according to court documents filed on Tuesday, a prospect that could add fuel to the political firestorm around the failed solar panel maker. The U.S. government, which lent Solyndra $528 million and may never recover the money, had demanded that the company reveal the value of future tax breaks available to Madrone Partners and Argonaut Ventures, a fund which is controlled by a foundation linked to Democratic fundraiser George Kaiser. News of possible tax breaks for investors with ties to the Democratic Party could spark a new round of Republican attacks on the Obama administration for its decision to back Solyndra.
S&P Report Says China's Metals Sector Faces A Profit Slump.
Fortescue shares fall 10 pct on iron ore price slide. Shares in Australia's Fortescue Metals Group fell as much as 10 percent in early trade on Wednesday after iron ore prices hit fresh lows.
Finisar(FNSR) 1st-qtr misses Wall Street view, sees weaker 2nd-qtr profit. Finisar Corp reported first-quarter results that fell short of Wall Street expectations as the optical communication components maker continued to grapple with slowing demand in Europe and China, and forecast a weak second-quarter profit.

Financial Times:

Deutsche Bank(DB) cuts equities sales staff in Asia. Deutsche Bank cut 10 per cent of its Asian equities sales and trading staff on Tuesday, according to people familiar with the situation, as a long-expected cull across the industry in the region gets under way.
US accuses BP of gross negligence in gulf. The US Department of Justice intends to prove at trial that gross negligence or wilful misconduct by BP caused the 2010 Deepwater Horizon disaster in the Gulf of Mexico, government lawyers have said, in the clearest statement yet that they are seeking the maximum possible penalties from the British oil group.

Telegraph:

Brinkmanship as Spain warns over bail-out terms. Spain has issued a veiled warning that it will not accept a full bail-out from Europe if the terms are too harsh, a move that would paralyse the European Central Bank and call the euro’s survival into question.

China Daily:

China is considering taking retaliatory measures against a likely European Commission probe into photovoltaic companies of the Asian nation, citing an official at the Ministry of Commerce. The ministry is "not optimistic" about results of recent consultations with the EU over the solar issue, the person said.

China Business News:

The combined net loss at 80 large to medium-sized Chinese steel cos. for July was 1.98b yuan, citing a document from the China Iron and Steel Association. 38 had losses totaling 3.6b yuan for the month, the report said.

Securities Times:

China's 2012 industrial output growth may slow to about 10%, from 13.9% in 2011 and 15.7% in 2010, citing a joint report by the Ministry of Industry and Information Technology and the Chinese Academy of Social Sciences. The manufacturing industry is facing weakening demand and production overcapacity, according to the report.

Shanghai Securities News:

The China Banking Regulatory Commission has required lenders to count interbank payment financing due by year-end as on-balance-sheet lending, citing a notice from the commission. This will help stop banks from skirting loan quotas through interbank payment financing.

Evening Recommendations
Piper Jaffray:

Rated (DGI) Overweight, target $27.