Today's Headlines

Bloomberg:

• China Ships Ply Disputed Waters as Japan Mulls Marine Forces. Ships from China’s new coast guard confronted Japanese vessels in disputed waters as Japan’s Defense Ministry said the country should bolster marine forces and consider a first-strike capability to deal with threats. Four Chinese vessels ordered Japanese ships to leave waters around disputed islands known as Diaoyu in China and Senkaku in Japan, China’s State Oceanic Administration said on its website. China’s strengthened coast guard began operations on July 22, and the action appeared to mark an escalation as previous maneuvers generally involved three vessels.

• Yen Strengthens Amid Increase in Demand for Refuge; Rand Slides. The yen strengthened against all of its 16 most-traded peers as investors sought safety amid a drop in Asian stocks after disappointing Japanese corporate earnings. The Bloomberg Dollar Index headed for a five-day decline amid bets the Federal Reserve won’t signal a change next week in monetary stimulus. Japanese government 10-year bonds, which are sensitive to inflation, rose even as data showed consumer prices gained the most since 2008. The Japan-U.S. yield gap was little changed. South Africa’s rand slid as China ordered cuts in excess production capacity, dimming export prospects.

• Russia Sees Risks Emerging as Foreigners Amass State Debt. Russia’s financial industry faces risks from surging demand for domestic ruble bonds as investors plow into the securities, competing with local banks for the assets used as refinancing collateral, the central bank said. Non-resident holdings of ruble-denominated sovereign notes, known as OFZs, are now approaching the emerging-market average of 30 percent, compared with 21 percent on Feb. 1 and 7 percent on July 1, 2012, the Moscow-based regulator said in a report today. Bank Rossii and the Finance Ministry plan to start monitoring foreign ownership of OFZs to reduce risks.

• Brazil’s Batista Loses Billionaire Status as Debts Mount. Eike Batista, ranked as the world’s eighth-richest person last year, ceased to be a billionaire after Mubadala Development Co. converted an investment in his companies into debt, further eroding the value of his assets. 

• Clearing Next Greek Payment Leads to Talk of 2014 Options. No sooner did European creditors plug one hole in Greece’s finances than they started fretting over the next as the 3 1/2-year tussle between the Athens government and its rescuers looked set to drag into 2014. Euro-area governments today cleared the release of 2.5 billion euros ($3.3 billion), part of 5.8 billion euros in funding to tide Greece past Germany’s Sept. 22 elections that will determine the course of the crisis management. Less than two hours later, a European Union official was discussing how to fill a 3.8 billion-euro gap expected in 2014.

• European Stocks Slide for First Week in Five on Earnings. European stocks declined for the first week in five as worse-than-estimated earnings from BASF SE and ABB Ltd. raised concern the economic recovery is faltering. BASF and ABB each fell more than 4.5 percent. Sulzer (SUN) AG slumped 19 percent as it planned to sell a unit. Siemens AG (SIE) and Metso Oyj (MEO1V) both declined at least 4.5 percent after cutting their forecasts. Banco Bilbao Vizcaya Argentaria SA (BBVA) and Banco Santander SA rose as the pace of recession in Spain slowed. The Stoxx Europe 600 Index slid 0.3 percent to 298.91 this past week.

• Rubber Declines for Second Day as Yen Gains Before Fed Meeting. Rubber fell for a second day as Japan’s currency strengthened on speculation the Federal Reserve will maintain bond purchases, cutting the appeal of yen-denominated contracts. The most-active contract lost as much as 2.2 percent to 250.2 yen a kilogram ($2,529 a metric ton) on the Tokyo Commodity Exchange and traded at 252.1 yen at 1:06 p.m. local time. The price has gained 0.2 percent this week, bringing this year’s loss to 17 percent.

• IMF Sees Market Volatility Risk in Fed’s Exit From Record Easing. The International Monetary Fund cautioned that the U.S. Federal Reserve’s exit from unprecedented asset purchases could spur market reactions causing “excessive” interest-rate volatility. That would have “adverse global implications,” the fund’s board of directors said today in a statement, part of an annual review of the world’s largest economy. “Effective communication on the exit strategy and a careful calibration of its timing will be critical for reducing these risks,” the Washington-based fund said.

• VIX Contracts Retreat to Five-Year Low as Stocks Surge: Options. The cost of options protecting against U.S. stock swings fell to a five-year low, a sign to Russell Investments and Credit Suisse Group AG that investors are too confident in more equity gains after this year's rally. Implied volatility for options on the Chicago Board Options Exchange Volatility Index has dropped 37% to 48.4 from a peak on June 20, according to data complied by Bloomberg on three-month contracts with an exercise price near the gauge. It reached 44.8 last week, the lowest since May 2008.

• Obama Said Not Ready to Decide on Fed Chief for Several Weeks. President Barack Obama won’t announce a replacement for Federal Reserve Chairman Ben S. Bernanke at least until September, according to an administration official. Obama hasn’t made a decision on naming the next Fed chief, according to the official, who asked for anonymity to discuss internal planning. 

• Wiretap Evidence Included in SAC Capital Case, U.S. Says.

Wall Street Journal:

• Egyptians Gather for Rival Protests. Mass protests planned; ousted president Morsi ordered held for 15 days and interrogated. Egyptians braced for a bloody confrontation between hundreds of thousands of rival protesters on Friday as prosecutors ramped up criminal accusations against ousted President Mohammed Morsi. Tens of thousands of pro- and anti-Morsi protesters had already filled squares throughout the nation by late Friday afternoon. By early evening, 24 people had been injured in fighting between the two sides in cities throughout the country, according to Egyptian state media. Friday's early taste of violence augured worse clashes after nightfall, after most people in this Muslim-majority country break their daylong Ramadan fast. The Brotherhood has organized as many as 34 protests in Egypt's capital alone and many more in rural governorates. 

• Barclays(BCS) Sets Plans to Raise Capital. Convertible-Bond Sale, Possible New Stock Sale, Likely to Be Announced Next Week. Barclays is putting the finishing touches on a plan to boost its capital levels that will likely involve the bank issuing billions of pounds worth of new securities, according to people familiar with the matter.

• Obama, House GOP Gear Up for Fall Budget Battle. One of the few facts in the budget wars in Washington to which both sides generally subscribe is that future deficits are being driven by spending on federal benefits, particularly health, not on the roughly one-third of domestic and defense spending that’s subject to annual appropriation by Congress. Now Congress and the president are heading to a showdown over spending — over that already-shrinking third, which covers everything from bullets for the Army to bureaucrats in the Agriculture Department.

• What Company Earnings Are Telling Us About the Global Economy.

Fox News:

• Uh Ho: Obama Says Vietnamese Dictator Inspired by Founding Fathers. It may come as some unwelcome news to the families of the nearly 60,000 Americans who died in the Vietnam War that the whole thing was just a misunderstanding. That was the impression President Obama gave on Thursday when he spoke to the press after his meeting with Vietnamese President Truong Tan Sang.

CNBC:

• Buying banks can be 'dangerous investing': Bove. Analyst Dick Bove is one of the market's biggest advocates for bank stocks, but he is worried that investors may be getting a little too enthusiastic.

Zero Hedge:

• Japan Food And Energy Prices Rise; All Others Drop. (graph)

• The ABCs Of The 'Little Red Riding Hood Market'.

• Consumer Confidence Surges To Six Year High. (graph)

• Drone Technology Gets Energized.

• A Warning About The Dangers Of Central Planning And Moral Hazard By... Ben Bernanke.

Business Insider:

• Chinese Policymakers Are Being Sent To A Mao Bootcamp Where They're Being Re-educated With Communist Party Ideals.

• Here's The Real Reason Why Wall Street Is Freaked Out About The Insider Trading Charges Against SAC Capital.

Washington Post:

• Detroit: Liberalism Can't Go on Forever.

NY Post:

• EXCLUSIVE: Fed-up Silda Spitzer plans to divorce Eliot after election. Silda Spitzer is privately telling friends she plans to divorce her hooker-loving husband, Eliot Spitzer, Page Six can exclusively reveal. Multiple sources tell us long-suffering Silda — who, he last night admitted, will not be joining him on the campaign trail — “has had enough” and plans to start divorce proceedings after his run for New York City comptroller is over.

Reuters:

• METALS-Copper falls as concerns over China's growth weigh. Copper fell for a second straight day on Friday, as concerns about growth in top consumer China weighed on the outlook for industrial metals demand, but a weak dollar prevented further losses. Three-month copper on the London Metal Exchange, untraded at the close, was last bid at $6,870 a tonne from a last bid of $7,010 on Thursday.

• Brazil's Embraer sees weakening demand for bigger business jets. Brazilian planemaker Embraer SA has seen early signs of weakening demand for its Legacy 650 business jets in the "super mid-size" segment, Chief Executive Frederico Curado told analysts on a Friday conference call. As a result, Embraer's business jet unit is on track to hit the lower end of its 2013 delivery and revenue targets, he said. 

• General Electric(GE) to cut 600 jobs in France-union. General Electric is to cut 600 jobs in France, mostly at its finance arm, a union official said on Friday, as it seeks to cut back on the division's activities in the wake of the banking crisis.

Financial Times:

• US presses banks for multibillion payments over mortgage securities. Bank of America, JPMorgan Chase and Royal Bank of Scotland are being pressed for multibillion-dollar payments to the US government over toxic mortgage-backed securities, according to people familiar with negotiations. The Federal Housing Finance Agency, the US housing regulator, sued 18 international financial groups in 2011, alleging they broke federal securities laws in selling $200bn of mortgage-backed securities and demanding compensation for billions of dollars of losses.

@Market_Time:

• France's CAC Index and EPS - hard times. (graph)

Echoing fears that European policymakers remain in a state of cognitive dissonance – recognizing the need for root-and-branch overhaul of peripheral banks, but backtracking on joint liability plans – Christopher Flowers, the legendary FIG investor who now runs the £2.3 billion ($3.5 billion) private equity group JC Flowers, sounded the alarm over the negative sovereign-bank feedback loop. In a shot across the bows of market bulls, who cite the return of capital flows to weaker eurozone states, Flowers issued a stark warning: "There is a scenario where we have a Lehman-type event: we wake up some Thursday and a big country is in trouble. "And the ECB will have to decide to support banks x, y, z. And then the ECB will, in fact, decide to own bank x, y, z.


While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3211790/CurrentIssue/88924/Restructuring-Flowers-slams-Europe-over-inaction.html?copyrightInfo=true

Decanter.com:

• Brazil's Economic Slowdown Hampering Wine Imports. Brazil's economic slowdown is hitting middle-class spending power and curtailing demand for wine after annual imports tripled in the past 10 years, citing analysts from Rabobank.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.73%

Sector Underperformers:

• 1) Networking -1.77% 2) HMOs -1.71% 3) Oil Service -1.28%

Stocks Falling on Unusual Volume:

• RBS, NGD, MFRM, ARII, HZO, CKEC, EXPE, ABAX, SWI, AIMC, TYPE, QLIK, TPX, CAM, GPN, DRC, GRA, INFA, NTGR, APD, AWAY, TAL, DECK, OKE, CRUS, BGG, TGI, SMTC, FET, DLB, MU, SNDK, FSL, VRTX, BAS and OUTR

Stocks With Unusual Put Option Activity:

• 1) EXPE 2) CRUS 3) HAL 4) XHB 5) SBUX
  

Stocks With Most Negative News Mentions:

• 1) BBBY 2) GE 3) PCP 4) FLS 5) RIG
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth -.62%

Sector Outperformers:

• Restaurants +1.49% 2) Homebuilders +.16% 3) Telecom -.18%
  

Stocks Rising on Unusual Volume:

• SBUX, PSO, USU, LOGM, BCOV, ATVI, PFG, VRSN, CLF and MCK

Stocks With Unusual Call Option Activity:

• 1) EXPE 2) GPOR 3) SPXS 4) QLIK 5) HALO
  

Stocks With Most Positive News Mentions:

• 1) RTN 2) RYL 3) OPEN 4) PBR 5) LLL
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg:   

• Moody’s Sees Local Default as $21 Billion Matures: China Credit. Local-government financing vehicles need to repay a record amount of debt this year, prompting Moody’s Investors Service to warn Premier Li Keqiang may set an example by allowing China’s first onshore bond default. Some 127 billion yuan ($21 billion) of so-called LGFV notes expire in the second half, according to Everbright Securities Co., the most in its data going back to 2000 and more than double the 62.7 billion yuan that matured in the first six months. The yield premium over top-rated notes for one-year AA debt, the most common rating for LGFVs, widened to 67 basis points yesterday, the highest level since Jan. 16, Chinabond data show. The comparable gap in India is 47. “With bonds approaching maturity, the weaker ones will have some problems as cash flows that they generate are very weak,” said Christine Kuo, a Moody’s analyst in Hong Kong. “I wouldn’t rule out the possibility of the government showcasing some companies to go under.”

• China to Cut Manufacturing Capacity as Li Reshapes Economy. China ordered more than 1,400 companies in 19 industries to cut excess production capacity this year, part of efforts to shift toward slower, more-sustainable economic growth. Steel, ferroalloys, electrolytic aluminum, copper smelting, cement and paper are among areas affected, the Ministry of Industry and Information Technology said in a statement yesterday. Excess capacity must be idled by September and eliminated by year-end, the ministry said, identifying the production lines to be shut within factories. China’s extra production has helped drive down industrial-goods prices and put companies’ profits at risk, while a survey this week showed manufacturing weakening further in July. Premier Li Keqiang has pledged to curb overcapacity as part of efforts to restructure the economy as growth this year is poised for the weakest pace since 1990. “This detailed list shows the government is serious in its efforts to restructure the economy and is prepared to tolerate the necessary pain,” Zhang Zhiwei, chief China economist at Nomura Holdings Inc. (8604) in Hong Kong, wrote in an e-mailed research note late yesterday.

• Inter-Korean Talks Break Down With ‘Pushing and Shoving’. Talks between the two Koreas aimed at reopening the jointly-operated Gaeseong factory park broke down yesterday, with negotiators from both sides “pushing and shoving” and no agreement for dialogue to resume. The scuffle broke out when North Korea’s chief negotiator Pak Chol Su and about 20 officials entered a room of South Korean journalists to explain their position, according to a pool report distributed yesterday by the South’s Unification Ministry. “There was some pushing and shoving” after about 10 South Korean officials tried to break up the briefing, according to the report.

• Singapore Home Prices Climb to Record as Loan Curbs Imposed. Singapore home prices climbed to a record in the second quarter as gains in suburban housing values accelerated, prompting the government to implement new measures on property loans. The island-state’s private residential property price index rose 1 percent to 215.4 points in the three months ended June 30, extending a 0.6 percent increase in the first quarter, according to revised figures released by the Urban Redevelopment Authority today. The pace of gains in prices in the suburbs more than doubled from the previous three months. 

• Rebar Set for First Weekly Loss in Eight as China Output to Gain. Steel reinforcement-bar futures in Shanghai were poised for the first weekly drop in eight on concern that a rally this month may spur more output in China. Rebar for delivery in January on the Shanghai Futures Exchange fell as much as 0.5 percent to 3,665 yuan ($598) a metric ton and was at 3,674 yuan at 11:10 a.m. The contract lost 0.5 percent this week, the first such drop since May.

• China Swaps Set for Biggest Weekly Gain in a Month as Cash Wanes. The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, climbed 12 basis points, or 0.12 percentage point, this week to 4.07 percent as of 10:48 a.m. in Shanghai, according to data compiled by Bloomberg.

• Chinese Stocks Fall, Led by Technology, Consumer Companies. Chinese stocks fell for a third day, led by technology and consumer-staples companies. Cement producers and drugmakers advanced. BOE Technology Group Co. slumped for a second day after the maker of flat-screen television panels said it planned a share sale that may be China’s largest private placement. Kweichow Moutai Co. led losses for consumer-staples producers after the industry group jumped the most in the CSI 300 Index yesterday. Anhui Conch Cement Co. rose 4 percent as BNP Paribas SA said the biggest cement producer will benefit from an order from the government to cut production capacity in 19 industries. The Shanghai Composite slipped 0.4 percent to 2,012.39 at 10:41 a.m. local time.

• Asian Stocks Fall as Topix Slides on Earnings; Gas Climbs. Asian stocks fell, with the regional benchmark index trimming a fifth weekly advance, as Japanese shares dropped amid disappointing earnings. The yen and South Korea’s won climbed, while gasoline rebounded. The MSCI Asia Pacific Index dropped 0.3 percent to 135.77 as of 11:45 a.m. in Tokyo, reducing its climb in the week to 0.6 percent. Japan’s Topix index headed for its biggest drop since mid-June as chip-testing equipment maker Advantest Corp. reported a wider-than-estimated loss.

• Russian Growth Forecasts Trimmed as Recession Risks Rise. Russia’s economy will probably grow less than previously forecast from April to September as risks mount of a recession in the world’s largest energy exporter. Gross domestic product will advance 3 percent from a year earlier in the third quarter compared with 2 percent in the second, the median of 15 estimates in a Bloomberg survey showed. That’s down from 3.1 percent and 2.1 percent in June’s poll. There’s a 30 percent chance of a recession next year, up from 20 percent a month ago, according to a survey of 13 economists. 

• Gold Set for Best Weekly Run Since March on Outlook for Stimulus. Gold headed for the longest weekly rally since March as U.S. economic data backed the case for sustained monetary stimulus. Russia and Kazakhstan added bullion to reserves for a ninth month in June. Spot gold gained as much as 0.3 percent to $1,338.50 an ounce, and traded at $1,334.55 at 8:30 a.m. in Singapore. Prices are 3 percent higher this week after advancing to a one-month high of $1,348.65 on July 24.

• Senate Democrats Said to Circulate Letter Backing Yellen For Fed. A group of Senate Democrats is rallying behind Federal Reserve Board Vice Chairman Janet Yellen to succeed Chairman Ben S. Bernanke, circulating a letter to colleagues in support of her potential candidacy, according to a Senate aide. The letter has been signed by several Democrats and was originally drafted by SenatorSherrod Brown, an Ohio Democrat, said the aide, who asked for anonymity to discuss the document, which hasn’t been made public. The exact number of signers remained unknown to Senate staff, the aide said. 

• White House Protects U.S. Aid to Egypt By Avoiding Talk of Coup. The Obama administration, in a move that may protect U.S. aid to Egypt, has concluded that it doesn’t have to make a formal determination on whether the ouster of President Mohamed Mursi was a coup, according to an administration official. Making such a determination, which potentially would have required cutting off aid, wouldn’t be in the U.S. national interest, said the official, who asked not to be identified. Egypt is a stabilizing force in the region, and it’s to the U.S.’s advantage to continue providing aid, the official said. 

Wall Street Journal: 

• Google(GOOG) Has Shown Another Living Room Device. Google's home-entertainment experiments extend beyond the gadget the company announced Wednesday, which turns TV sets into an extra screen for watching Web videos and other content.

• Holder Targets Texas in New Voting-Rights Push. Justice Department Wants to Scrutinize State for Potential Discrimination. The Obama administration moved to retain some oversight of the way states conduct elections after the Supreme Court invalidated part of the landmark 1965 Voting Rights Act, setting up a new fight with Republican governors.

• U.S. Eases Bite of Penalties Against Iran. White House, Seeking to Improve Ties With New Leader in Tehran, Lifts Curbs on Medical Supplies, Agricultural Products. The Treasury Department's announcement Thursday was viewed by many Iran-watchers as a gesture of good will from Washington as it seeks to restart talks with Tehran over its nuclear program once Mr. Rouhani enters office next month. However, the White House is clashing with Congress, where a bilateral group of lawmakers is seeking to tighten the sanctions, say U.S. officials and Capitol Hill staffers. Their proposed legislation would significantly toughen financial penalties on Iran by targeting the country's oil exports, ships and banks by October, in an effort to convince Tehran to halt its nuclear program.

• Deckers(DECK) Second-Quarter Loss Widens as UGG, Teva Sales Fall. Deckers Outdoor Corp.'s (DECK) second-quarter loss widened as the footwear maker recorded a decline in UGG and Teva brand sales as well as weaker margins. Shares fell 5.3% to $55.74 after hours as revenue fell short of the company's projections. 

• Jindal and Walker: Unworkable ObamaCare. Opaque rules, big delays and rising costs: The chaos is mounting. Remember when President Obama famously promised that if you like your health-care plan, you'll be able to keep your health-care plan? It was a brilliantly crafted political sound bite. Turns out, the statement is untrue.

Barron's: 

• Starbucks(SBUX) Brews Better-Than-Expected Results; Shares Jump 6%.

Fox News: 

• EXCLUSIVE: Benghazi hero fought alongside fallen SEALs, still recovering at Walter Reed. One of the most severely wounded survivors of the Benghazi terror attack, Diplomatic Security agent David Ubben, risked his life to help save his fellow Americans, and is still being treated at Walter Reed medical center to this day, Fox News has learned. Fox News is the first news organization to make direct contact with Ubben -- who has had multiple surgeries at Walter Reed to save his right leg, which was badly wounded in the Sept. 11 attack. Fox News has also learned new details about Ubben's heroic actions on the night of the attack, including fighting alongside the former Navy SEALs who were later killed. 

MarketWatch.com:

• China money-market funds see big outflows: Fitch. Assets under management at Chinese open-ended money-market funds dropped nearly 40% in the quarter ended June on heavy redemptions by both retail and institutional investors, according to calculations made by Fitch Ratings. The outflows were "unprecedented in the market's relatively short history," the credit ratings agency said.

CNBC: 

• Goldman(GS) CEO on risk: The worst 'absolutely will happen'. Investors should always prepare for the most extreme risk scenario because it will happen, Goldman Sachs CEO Lloyd Blankfein told the Australian Institute of Company Directors at a breakfast briefing on Friday. Blankfein has headed up Goldman Sachs since 2006, steering it through the fallout of the global financial crisis of 2007-2008. He said the experience had taught him to accept the reality that the worst thing you can imagine will inevitably happen. "Most risk management is really just advanced contingency planning and disciplining yourself to realize that, given enough time, very low probability events not only can happen, but they absolutely will happen," said Blankfein. "The definition of infinity is that you wait long enough, everything happens," he added.

• Prosecutors seek 'any and all' SAC assets in sweeping complaint. If federal prosecutors are successful in their case against SAC Capital, the firm and its multi-billionaire founder Steve Cohen could be left virtually penniless. That is because in addition to the five-count criminal indictment against the firm unsealed today, U.S. Attorney Preet Bharara unveiled a separate civil complaint targeting "any and all assets" of SAC and its funds. The complaint does not specify the amount the government is seeking, but notes that at their peak, the firm and its funds were worth $15 billion. Forbes has listed Cohen's personal net worth at $9.3 billion as of March—virtually all of it tied to the hedge fund business he founded.

Zero Hedge: 

• How Deep Is The Real Economic Problem In China?

• Regulators Fold; Lift 'Skin-In-The-Game' Rules To Keep Housing Bubble Dreams Alive.

• Goldman(GS) And JPMorgan(JPM) Probed Over Metals Warehouse Manipulations.

• Detroit's Fallout: Muni Illiquidity And Full-Faith-And-Credit Failure.

• Just How Bad Is The US Economy? (graph)

• Seth Klarman Is "Very Worried About The Future" In A World That Is Living On A Prayer.

Business Insider:

• Chinese Wage Growth Is Slowing Significantly. (graph)

• Investor Momentum In The Housing Market May Have Swung Too Far.

• Amazon(AMZN) Misses On Earnings, Posts A Bad Forecast, Stock Drops.

New York Times:

• Under Code, Apps Would Disclose Collection of Data. Like food packages that display nutrition labels, some mobile apps could soon display information that allows consumers to decide at a glance whether the apps are good for them.

Reuters:

• Mobile growth dip takes shine off Samsung Elec Q2 profit record. Samsung Electronics Co Ltd is under mounting pressure to produce eye-catching new smartphones after its mobile business shrank 3.5 percent in the second quarter, taking the gloss off a record $8.5 billion operating profit. The South Korean IT giant on Friday said April-June operating profit increased 47.5 percent from a year ago to 9.53 trillion won ($8.54 billion), in line with its estimate. Profits at its mobile division, the biggest earnings generator, jumped 52 percent to 6.28 trillion won from a year ago but fell 3.5 percent from the previous quarter. The reporting period included the launch of its flagship Galaxy S4 in April, backed by a massive advertising campaign, in Samsung's biggest assault yet on arch rival Apple Inc's iPhone.

• SolarWinds(SWI) revenue misses estimates on weak license sales. Network management software maker SolarWinds Inc reported lower-than-expected quarterly revenue due to a shortfall in license sales and forecast current-quarter results below Wall Street estimates. SolarWinds shares fell 17.5 percent in extended trading.

• Competition, discount website drag on Expedia(EXPE); shares tank. Online travel agency Expedia Inc reported a quarterly profit far short of market estimates due to higher competition and poor performance in its discount website Hotwire.com, sending its shares crashing 25 percent in extended trade. 

• Turmoil hits Tunisia after secular politician slain. Tunisian opposition politician Mohamed Brahmi was shot dead on Thursday in the second such assassination this year, setting off violent protests against the Islamist-led government in the capital and elsewhere. "This criminal gang has killed the free voice of Brahmi," his widow, Mbarka Brahmi, told Reuters, without specifying who she thought was behind the shooting outside their home in Tunis.

• Nikkei falls to 2-week low on stronger yen, weak earnings. Japan's Nikkei share average fell to a two-week low on Friday morning, as selling accelerated on the back of a firmer yen and disappointing quarterly earnings from the likes of Canon Inc and Advantest Corp. The Nikkei fell 1.9 percent to 14,288.92 in mid-morning trade after slipping to a low of 14,236.46 earlier, the lowest level since July 9.

Asian Investor:

• EM, Commodity Hedge Funds Fall Out Of Favour.
  

South China Morning Post:

• US dollar loan rise triggers warning for Hong Kong. Sharp growth in greenback funding spurs Monetary Authority to raise risk alert and order banks to tighten credit controls. Hong Kong banks are building up a potentially dangerous exposure to foreign currency loans after an explosion in US dollar loans in May. That lending surge triggered moves by the Hong Kong Monetary Authority to rein in over-aggressive lending, forcing banks to step up credit controls to manage the risks. Bank loans in May increased 40 per cent from April, followed by a 20 per cent growth in June. Of the amount, 60 per cent was in US dollars. The growth over the two-month period is higher than the average of 19 per cent for the first six months. "It is quite a worrying sign as the growth rate is substantial," a HKMA spokesman said. "The HKMA is contacting all banks to understand why there is such a strong growth in US dollar loans, and whether such a trend will continue."

China Daily:

• PBOC's Zhou Reiterates Prudent Monetary Policy. People's Bank of China Governor Zhou Xiaochuan reiterates that the nation will continue a prudent monetary policy and keep a "reasonable" amont of money supply and credit, according to an article written by Zhou. Zhou also said that downward pressure on the economy is "relatively big," according to the article.

• Researcher Says China Won't Have 'Hard Landing'. China's economy won't have a "hard landing" and will stabilize, Zhang Liqun, a researcher with the State Council's Development Research Center, writes in an article.

• China Researcher Says Large Fiscal Stimulus Unnecessary. China doesn't need to roll out large-scale fiscal stimulus on infrastructure, citing Jia Kang, director of the Finance Ministry's fiscal science research center.

• China 1H Vehicle Imports Drop for 1st Time Since 2006. China's imports of vehicles fell -10.7% in 1H to 526,000 units, the 1st half-year drop since 2006 when the Asian nation cut tariffs, citing customs data. Dealers are trying to ease high inventory pressure as imported vehicle sales are still rising, the report cites Wang Cun, a manager at the country's largest vehicle importer, China Automobile Trading Co., as saying.

China Securities Journal:

• China Shouldn't Eagerly Introduce Policies Now. China shouldn't be too eager in introducing economic policies now as they come with costs, Li Hongxia, a researcher at the Ministry of Finance's fiscal science research center, writes in a commentary. China shouldn't judge how the economy is doing based solely on the GDP figure, Li writes.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.0% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 142.0 +1.0 basis point.

• Asia Pacific Sovereign CDS Index 109.75 +5.5 basis points.

• FTSE-100 futures +.39%.

• S&P 500 futures +.23%.

• NASDAQ 100 futures +.21%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AON)/1.10

• (B)/.47

• (LEA)/1.37

• (LYB)/1.63

• (SWK)/1.21

• (TYC)/.48

• (WY)/.30 

Economic Releases
9:55 am EST

• Final Univ. of Mich. Consumer Confidence for July is estimated to rise to 84.0 versus a prior estimate of 83.9.

Upcoming Splits

• None of note

Other Potential Market Movers

• The German import price data 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 mixed. The Portfolio is 75% net long heading into the day.

Stocks Reversing Higher into Final Hour on Central Bank Hopes, Earnings Optimism, Short-Covering, Tech/Biotech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.03 -1.14%
• Euro/Yen Carry Return Index 137.47 -.38%
• Emerging Markets Currency Volatility(VXY) 9.23 +1.43%
• S&P 500 Implied Correlation 50.93 -3.01%

• ISE Sentiment Index 101.0 +16.0%

• Total Put/Call .93 -4.12%

• NYSE Arms .84 -3.43% 

Credit Investor Angst:

• North American Investment Grade CDS Index 76.71 +.46%

• European Financial Sector CDS Index 148.64 +3.78%

• Western Europe Sovereign Debt CDS Index 89.0 -2.20%

• Emerging Market CDS Index 294.91 +.64%

• 2-Year Swap Spread 15.0 -.75 bp

• TED Spread 24.75 +.25 bp

• 3-Month EUR/USD Cross-Currency Basis Swap -9.5 -.25 bp

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 225.0 +2 bps

• China Import Iron Ore Spot $132.10/Metric Tonne unch.

• Citi US Economic Surprise Index -4.70 +2.8 points
• Citi Emerging Markets Economic Surprise Index -29.80 +1.0 point

• 10-Year TIPS Spread 2.15 unch.

Overseas Futures:

• Nikkei Futures: Indicating -132 open in Japan

• DAX Futures: Indicating +31 open in Germany

Portfolio: 

• Higher: On gains in my biotech/retail/medical/tech sector longs
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
• Market Exposure: Moved to 75% Net Long

Today's Headlines

Bloomberg: 

• Asia-Pacific Bond Risk Rises, Credit-Default Swap Prices Show. The cost of insuring corporate and sovereign bonds in the Asia-Pacific region against non-payment rose, according to traders of credit-default swaps. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan jumped 7 basis points to 141 basis points as of 8:46 a.m. in Singapore, Westpac Banking Corp. (WBC) prices show. The gauge is set for its third straight day of increases, the longest stretch in more than a month, according to data provider CMA. The Markit iTraxx Australia index climbed 3 basis points to 118 basis points as of 10:47 a.m. in Sydney, according to National Australia Bank Ltd. prices. The Markit iTraxx Japan index rose 1.5 basis points to 95.5 basis points as of 9:19 a.m. in Tokyo, according to Citigroup Inc. prices. The measure is heading for its highest close since July 11, CMA data show.

• Jobless Parisians Mean Fewer Peugeots in Slumping France. Marie-Estelle Cevatheean dreams of a new car that would be better suited to her growing family after having a baby late last year. Instead, with no work, the 31-year-old Parisian can’t afford to replace her seven-year-old Citroen (UG) C3 subcompact. “We don’t have the money yet to buy a new car,” Cevatheean said. “I need to find a job first.” With unemployment in France rising and consumer confidence at a record low, auto sales in the country have tumbled more than any other major European market this year. That portends more pain for French automakers Renault SA (RNO) and especially cash-strapped PSA Peugeot Citroen.

• French Auto Suppliers Post Profit Drop on Europe Slump. Michelin & Cie (ML) and Faurecia SA reported a drop of more than 10 percent in first-half profit as automakers pushed prices lower on slumping demand in Europe. Michelin, Europe’s largest tiremaker, said operating profit excluding one-time items declined 13 percent to 1.15 billion euros ($1.52 billion). Faurecia, the region’s biggest maker of car interiors, posted a 16 percent decrease in operating profit to 256 million euros. 

• European Stocks Decline Amid Earnings Reports; BASF Falls. European stocks declined from an almost eight-week high as companies from BASF SE to ABB Ltd. reported earnings that missed analysts’ estimates. BASF fell to a three-month low after also saying that full-year targets now look more challenging. ABB tumbled the most in three months as its first profit increase in six quarters trailed forecasts and its order book shrank. Siemens AG plunged the most since August 2011 after saying it won’t reach its profit-margin goal for the 2014 fiscal year. Michelin (ML)& Cie. lost 1.4 percent after posting a 13 percent slide in first-half earnings. The Stoxx Europe 600 Index dropped 0.5 percent to 299.63 at the close of trading, after earlier falling as much as 1.1 percent. 

• Egypt Islamists Call for ‘Freedom’ Rally Amid Army Pressure. The Muslim Brotherhood’s leader urged Egyptians to rally for “freedom,” setting the Islamists on a collision course with an army that’s signaled it’s losing patience with protests in support of ousted President Mohamed Mursi. The appeal by Mohammed Badie, the Brotherhood’s supreme guide, came a day after military chief Abdelfatah al-Seesi urged Egyptians to take to the streets tomorrow to give the military and police a broad mandate to combat “violence” and “terrorism.” The military issued a further statement on its Facebook page today, giving a 48-hour ultimatum and warning that its tactics in dealing with violence and terrorism would change after tomorrow.

• Soybeans Drop to 17-Month Low on Slack Demand; Corn, Wheat Fall. Soybeans fell to the lowest in 17 months on signs of declining demand for the oilseed and its products and amid favorable weather in the U.S. Midwest. Corn and wheat also dropped. Soybean exports in the week through July 18 fell 32 percent to 82,231 metric tons, the U.S. Department of Agriculture data said in a report today. Soybean-meal and -oil exports fell to marketing-year lows.

• Gold Rises as Jobless Claims Bolster Outlook for Stimulus. Gold gained for the first time in three days after a report showed more Americans filed for unemployment benefits, boosting prospects that the Federal Reserve will maintain stimulus measures to spur economic growth. Gold futures for December delivery rose 0.2 percent to $1,323.10 an ounce at 10:35 a.m. on the Comex in New York. Trading was 30 percent higher than the average for the past 100 days for this time of day, according to data compiled by Bloomberg.

• Palm Drops to Lowest in More Than Three Years on Supplies. Palm tumbled to the lowest level in more than three years as global supplies of the world’s most-consumed cooking oil climb the most since 1999 and demand expands at the slowest pace in more than a decade. Futures slumped as much as 3.2 percent to 2,151 ringgit ($672) a metric ton in intraday trading on the Bursa Malaysia Derivatives in Kuala Lumpur, a level not seen since October 2009, before closing at 2,170 ringgit.

• PulteGroup, Horton Tumble on Lower-Than-Expected Home Orders. PulteGroup Inc. (PHM:US) and D.R. Horton Inc. (DHI:US), the largest U.S. homebuilders, tumbled after reporting lower-than-expected orders, adding to concerns that higher mortgage rates will hamper the nation’s housing recovery. PulteGroup, based in Bloomfield Hills, Michigan, said second-quarter orders fell 12 percent on a lower community count. D.R. Horton said orders increased 12 percent, which was below analysts’ forecast for 28 percent growth, according to Adam Rudiger, an analyst at Wells Fargo & Co. in Boston. 

• SAC Capital Indicted in Six-Year U.S. Insider Probe. SAC Capital Advisors LP, the $14 billion hedge fund founded by Steven A. Cohen, was indicted for perpetrating what prosecutors called an unprecedented insider trading scheme that was revealed as part of the government’s six-year crackdown on Wall Street crime. The insider trading case against the Stamford, Connecticut-based firm is the most significant to be brought by the U.S. since former Goldman Sachs Group Inc. (GS) director Rajat Gupta was charged in October 2011. Gupta, convicted in New York federal court last year, was sentenced to two years in prison.

• Obama Ambassadors Gave At Least $13.6 Million in Campaign Money. When it comes to job benefits, Matthew Barzun is about to enjoy some of the best. As the new U.S. ambassador to the U.K., he’ll live in Winfield House, a London mansion set on 12 acres with gardens second only to those in Buckingham Palace in size. He’ll be able to borrow art from museums for free and host the president as an overnight guest when he’s in town. Barzun, a 42-year-old technology entrepreneur nominated this month to the Court of St. James’s, earned those perks: He raised at least $1.2 million as finance chairman for President Barack Obama’s re-election campaign.

Wall Street Journal:

• Unworkable ObamaCare. Opaque rules, delays and inconsistent guidance from Washington: The chaos is mounting.

Zero Hedge: 

• How Spain Just Made Mario Draghi's Nightmare Worse. (graphs)

• Jobless Claims Rise Modestly, Improving Trend Stalls. (graph)

• Ugly Durable Goods Number Masked By Second Monthly Surge In Boeing Orders. (graph)

• About That US Recession... (graph)

• DR Horton(DHI) On The Real Impact Of Soaring Rates: "Shocked Homebuyers".

• SAC's Real Gross Exposure: Up To $44 Billion.

Business Insider: 

• Europe Looks Fine Now, But A Political Perfect Storm Is Brewing.

• GOOGLE(GOOG): We Have Big Plans For Google TV.

Mortgage Daily:

• Early-Stage Mortgage Delinquency Soars. During June, residential loans that were at least 30 days past due numbered 4,785,000, climbing from 4,569,000 a month earlier.

Forbes:

• Obama Doubles Down on Moving Left by  Doug Schoen.

Reuters:

• Exclusive: DOJ starts probe into Wall St. metals warehousing - sources. The U.S. Department of Justice has started a preliminary probe into the metals warehousing industry following complaints that storage firms owned by Wall Street banks and major traders have inflated prices, sources familiar with the matter said. 

• Harley-Davidson(HOG) profit rises as U.S. demand rebounds. Harley-Davidson Inc reported a 9.9 percent rise in its quarterly profit rose on Thursday, helped by a modest rebound in demand for its motorcycles in the United States, its No. 1 market. 

• Siemens, BASF warnings weigh on European shares. Profit warnings by German heavyweights BASF and Siemens hit the country's stock index and cast a shadow over the broader European market on Thursday.

Telegraph:

• Unilever boss dampens hope of economic recovery in Europe. The chief executive of consumer goods giant Unilever has dampened hopes of an economic recovery in Europe by warning that progress to rebuild the continent’s finances is “very slow”. 

• IMF fears Fed tapering could 'reignite' euro debt crisis. The tapering of stimulus by the US Federal Reserve risks reigniting the eurozone debt crisis and pushing the weakest countries into a "debt-deflation spiral", the International Monetary Fund has warned. 

AFR: 

• Australia at risk from high $US, low yen: OECD. A lower yen and a higher US dollar will drag down growth in Asia posing a threat to the Australian economy, according to a leading global economist.

Xinhua:

• China Hasn't Seen 'Massive' Capital Outflow. There is no trend of "massive" foreign capital outflow, citing Cao Hongying, an official with the foreign investment department of the Ministry of Commerce.