Evening Headlines
Bloomberg:
- EU Recruits ECB to Lead National Regulators in Bank-Crisis Fight. The European Union today will unveil proposals for euro-area bank oversight that require unprecedented cooperation between the European Central Bank and national regulators. The Frankfurt-based ECB should expand its role as financial-system guardian by becoming the top-level supervisor of every lender in the 17-nation currency region, EU officials said in interviews. At the same time, the central bank would depend on national regulators for day-to-day supervision and ensuring that banks comply with European rules, according to the proposals. Safeguards for the U.K. and the other 9 nations that don’t use the euro are included, to protect them from being drowned out by their neighbors during rulemaking. Today’s plans aim to phase in the new system by Jan. 1, 2014, and all 27 EU members will need to sign off.
- Stimulus to Reverse Commodity Bull-to-Bear Fastest Since 2008. Commodities surged from a bear to a bull market in anticipation of economic stimulus measures from the Federal Reserve, completing the fastest turnaround since the depths of the financial crisis starting in 2008. Within 11 weeks the Standard & Poor’s GSCI spot index rose 22 percent from its 2012 low.
- U.S. State Pension Funding Ratios Declined in 2011, Loop Says. Public pension funds in 16 states and the District of Columbia last year had assets of 80 percent or more of what is need to pay promised benefits to retirees, down from 18 in 2010, Loop Capital Markets said. The median ratio of assets to liabilities for 149 state- level pensions dropped to 73 percent in 2011 from 76 percent the year before as a slowing global economy and the European debt crisis damped investment returns and more states failed to meet annual contribution requirements, Loop said today in a report. Eighty percent is a common threshold of sustainability for retirement plans, according to Loop. Illinois was the lowest- funded state, at 44 percent. “State and local government pension plans’ fiscal health continued to deteriorate slightly over the last year, although the falloff is not significant for the vast majority of plans,” Loop said in the report.
- U.S. Said Set to Target First Non-Bank Firms for Scrutiny. Regulators are poised to choose the first U.S. non-bank companies that are likely to be branded potential risks to the financial system, according to two people with knowledge of the plans. The Financial Stability Oversight Council plans to request confidential data from as many as five firms at a meeting this month, said the people, who declined to be identified because the plans aren’t public. The request is a step toward deciding whether the companies should be subject to Federal Reserve supervision, including stress tests, higher capital levels and tougher liquidity requirements.
- Zuckerberg on Facebook’s(FB) Stock, Mobile, and Morale. For the first time since his company’s disastrous initial public offering on May 18, Facebook Chief Executive Officer Mark Zuckerberg spoke publicly about the social network’s rocky path to the market, saying that the stock’s performance has been “obviously disappointing.” He also argued that investors may be underestimating the traction Facebook is getting on mobile phones, comments that helped the stock gain more than 3 percent on Tuesday.
- Obama to Israel: You're On Your Own. No 'red lines' for Iran and no time to meet Netanyahu. Does President Obama want Israel to bomb Iran before the election? If we had more faith in this Administration's competence, we'd be tempted to think so. Both publicly and behind the scenes, Administration officials have insisted they oppose a unilateral Israeli strike for many reasons: Diplomacy and sanctions still need time to work; an Israeli attack could destabilize the region; Israel doesn't have the military means to do the job thoroughly; and so on. It's no secret the Israelis don't want to strike Iran either, provided the U.S. is serious about keeping a bomb out of the mullahs' hands. But Israel's confidence in Mr. Obama's seriousness is fading fast. This week, Secretary of State Hillary Clinton told Bloomberg Radio that "we're not setting deadlines" for Iran to halt its program.
- Exchanges Plot Fixes for Their Glitches. The biggest U.S. stock exchanges are meeting with some of their largest customers to hatch a plan they hope will convince regulators that the industry can prevent the kind of technology snafus that have dogged the stock market this year, say people involved with the discussions.
- In Chicago, Standoff Built Over Two Years. A teachers strike that shut down the nation's third-largest school district for a second day Tuesday had its roots in the election two years ago of union head Karen Lewis, who harnessed growing teacher anger over school reform efforts here that were targeting teachers' performance and closing poor-performing schools.
- Legg Mason(LM) CEO to Leave Amid Pressure. Facing pressure from activist investor Nelson Peltz's Trian Fund Management LP and battling investor outflows, Legg Mason Inc. said Chairman and Chief Executive Mark Fetting will step down Oct. 1. The Baltimore-based money manager faces a Nov. 30 deadline after which Trian, Legg Mason's largest shareholder, will be free to raise its 10.5% stake in the firm, potentially giving Mr. Peltz more influence.
- Syria's War Animates Zealots in Iraq. The Syrian war is fanning a sectarian backlash in neighboring Iraq, as rising violence attributed to al Qaeda on both sides of the border pushes the government in Baghdad closer to its counterpart in Damascus. The tensions can be seen in and around Al-Qaim, a desert border town in Iraq's Anbar province, where U.S. forces led a campaign six years ago that mostly halted al Qaeda's sway.
Fox News:
- State Department officer killed in attack on US Consulate in Libya, following Egyptian protest at US embassy. Protesters angered over a film that ridiculed Islam's Prophet Muhammad fired gunshots and burned down the U.S. consulate in the eastern Libyan city of Benghazi, killing one American diplomat, witnesses and the State Department said. In Egypt, protesters scaled the walls of the U.S. embassy in Cairo and replaced an American flag with an Islamic banner. It was the first such assaults on U.S. diplomatic facilities in either country, at a time when both Libya and Egypt are struggling to overcome the turmoil following the ouster of their longtime leaders, Muammar Qaddafi and Hosni Mubarak in uprisings last year.
Business Insider:
Zero Hedge:
- Spot The Odd (Unsustainable) Economic Indicator Out? (graphs)
- Firm That Brought You Holo-Tupac Dies Less Than A Year After IPOing, Taking Millions In Taxpayer Subsidies With It.
- De-Industrialisation And Male Jobs. (graphs)
CNBC:
- Recalling ‘Tortilla Riots,’ Mexico President Warns About Food Crisis. World leaders must take swift action to avert a possible food price shock in 2013, Mexico’s President Felipe Calderon says, warning unchecked price volatility in staple food items could trigger an escalation in poverty to crisis levels. “I'm afraid that this new phenomenon of rising of prices of food around the world will provide a new round of crisis related with poverty,” Calderon told CNBC in an exclusive interview on Tuesday. “The problems in Africa, even the Arab spring, in my opinion are some way or another related to the price of food,” Calderon said, adding that next year could mark “a new round of very high prices.” “All the countries should do something and quickly in order to avoid any social and political turmoil around the world,” he added.
- Leaders Remain Far Apart on ‘Fiscal Cliff’ Fix.
- Draghi Alone Cannot Save the Euro. A more aggressive monetary policy would confirm German fears that the ECB was becoming the Banca d’Italia. The difficulty for the ECB is that relevant and appropriate measures are viewed, in Germany, as a giant step on the dismal path to hyperinflationary ruin. So long as this is the case, the ECB cannot make the euro look irreversible. That fact will undermine markets. That would force the ECB to buy more, so making the policy still less credible. The ECB has done what it can, given the politics. The decision of the German constitutional court and the result of the Dutch election may help. But the risks of a breakup cannot be eliminated. If these are to disappear, citizens of debtor countries must see a credible path to growth, while citizens of creditor countries must believe they are not throwing money down a bottomless pit. What the ECB has done is win some time. It has not won the game.
AEI:
Reuters:- Romney criticizes Obama response to Libya, Egypt attacks. Republican presidential candidate Mitt Romney on Tuesday criticized the Obama administration's initial response to violent attacks at U.S. diplomatic missions in Egypt and Libya as a campaign centered on the U.S. economy took a detour into foreign policy. "I'm outraged by the attacks on American diplomatic missions in Libya and Egypt and by the death of an American consulate worker in Benghazi," Romney said in a statement. "It's disgraceful that the Obama administration's first response was not to condemn attacks on our diplomatic missions, but to sympathize with those who waged the attacks," he said. Romney was also likely to weigh in soon on U.S. relations with Israel.
- Texas Instruments(TXN) warns of weakening chip demand. Texas Instruments Inc said on Tuesday that chip demand this quarter would be at the low end of its expectations due to weak markets such as Europe, realizing investor fears. The maker of chips for products ranging from cellphones to cars was able to maintain its financial targets for the quarter only due to an insurance payment, cost cuts and better than expected sales in its declining wireless business. But in reality, TI said that demand in most areas of its chip business was weaker than expected as customers kept product stockpiles low due to concerns about the global economy. TI saw some customers push back orders made in July and August to September, according to Ron Slaymaker, TI's head of investor relations. And on top of this, "overall product demand for the quarter has also declined a little" to the lower end of TI's previous expectation, he told analysts on a call.
- German court seen okaying EU bailout fund, strings attached. Germany's Constitutional Court is expected to give its approval on Wednesday to the euro zone's new bailout fund while insisting on guarantees to safeguard German parliamentary sovereignty and limit Berlin's financial exposure. Chancellor Angela Merkel remained tactfully quiet as the court kept policymakers and markets on tenterhooks for months, delaying the European Stability Mechanism (ESM) and fiscal compact to check that they comply with German democratic rules. But Finance Minister Wolfgang Schaeuble blurted out last week he was "sure" of victory over the 37,000-odd plaintiffs, who include eurosceptics from Merkel's centre-right coalition and Left Party hardliners opposed to European integration.
- NBC skips 9/11 moment of silence, keeps up with Kardashians. For NBC's "Today" show, keeping up with the Kardashians on Tuesday trumped observing a moment of silence marking the attacks of Sept. 11, an American television news tradition observed by every other U.S. broadcast network. At 8:46 a.m., ABC, CBS and Fox all aired live silent footage of grim-faced firefighters and somber families from various memorials, marking the minute 11 years ago when the first of two hijacked airplanes struck New York's Twin Towers. NBC's "Today" morning program at the same moment broadcast an interview with Kris Jenner, the mother of Kim Kardashian and a cast member of the popular reality show "Keeping Up with the Kardashians."
- Moody's warning on U.S. rating extends to some munis. If Moody's Investors Service strips the United States of its triple-A credit rating, a possibility the rating agency warned of on Tuesday, the ratings of three states and dozens of local governments could also be affected. Moody's put federal officials on notice that unless they agree on a plan to tame the nation's debt load, the U.S.'s rating could be downgraded a notch to Aa1 next year.
- Vast crowds demand Catalan autonomy from crisis-hit Spain. Hundreds of thousands of Catalans took to the streets of Barcelona on Tuesday in an unprecedented show of mass support for autonomy from Madrid, blaming Spain's economic crisis for dragging their wealthy region down. Surging unemployment and financial disarray have stoked a fever of separatism in Catalonia, a comparatively prosperous part of Spain whose leaders say their wealth is being sucked dry by the central government. Crowds waved red and yellow striped Catalan flags - one of the oldest still in use in Europe - and sang the Catalan anthem on a national day marking the conquest of Catalonia by Spain's King Philip V in 1714 after a 13 month siege of Barcelona. The central government said the crowd was 600,000 strong. Catalan police gave figures as high as 1.5 million.
Telegraph:
- UK banks could be shut down or forced into bail-outs by Brussels. Banks in London could be shut down or forced into taxpayer-funded bail-outs against the wishes of the British authorities under controversial "banking union" proposals from Brussels, it can be disclosed.
Xinhua:
- China CPPCC Suggests Imposing Tax on Large Stock Sales. The Chinese People's Political Consultative Conference's economic committee suggested imposing taxes on income from large stock sales as the nation cuts stock trading stamp tax and taxes on dividends to bolster revenues, citing Liu Kegu, a member of the CPPPC.
- Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China and several other Chinese banks cut discounts on loans to first-home buyers in Beijing and stopped offering a 15% reduction off the benchmark rate, citing unidentified real estate agents.
Piper Jaffray:
- Rated (DG) Overweight, target $61.
- Asian equity indices are -.25% to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 130.50 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 107.0 -1.5 basis points.
- FTSE-100 futures -.11%.
- S&P 500 futures +.23%.
- NASDAQ 100 futures +.36%.
Earnings of Note
Company/Estimate
- (PLL)/.77
8:30 am EST
- The Import Price Index for August is estimated to rise +1.5% versus a -.6% decline in July.
10:00 am EST
- Wholesale Inventories for July are estimated to rise +.3% versus a -.2% decline in June.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,900,000 barrels versus a -7,426,000 barrel decline the prior week. Distillate inventories are estimated to fall by -500,000 barrels versus a +993,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,700,000 barrels versus a -2,334,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +1.0% versus a -5.1% decline the prior week.
Upcoming Splits
- None of note
Other Potential Market Movers
- The Dutch elections, Eurozone inflation data, Eurozone Industrial Production, German Court Ruling on ESM, EU Bank Union Proposal, Apple's(AAPL) iPhone 5 unveiling, weekly MBA mortgage applications report, USDA Crop Report, 10Y T-Note auction, BofA Merrill Real Estate Conference, BofA Merrill Media/Communications/Entertainment Conference, ThinkEquity Growth Conference, Goldman Natural Resources Conference and the CSFB Capital Goods Conference could also impact trading today.