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Aug 2, 2012

DealBook | DealB%K Afternoon Edition: $440 Million Loss in Glitch Imperils Trading Firm


Thursday, August 2, 2012
TOP STORY
Traders from Knight Capital watched the firm's chief executive, Thomas Joyce, give a television interview from  the floor of the New York Stock Exchange on Thursday.
$440 Million Loss in Glitch Imperils Trading Firm Shares of Knight Capital plunged as the trading firm said that the losses from Wednesday's computer glitch losses threatened its capital base, the money it uses to conduct its business.
  • DEALBOOK » | Flood of Errant Trades Is a Black Eye for Wall Street | CommentPost a Comment
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    DEALBOOK HIGHLIGHTS
    For Wall Street, Real Pain When the Fed Fails to Act A lack of new stimulus moves by the Federal Reserve and the European Central Bank this week may have a direct and painful impact on the chief source of revenue at investment banks on both sides of the Atlantic.
    Bristol-Myers Executive Accused of Insider Trading Robert Ramnarine is accused of trading call options of companies involved in potential deals with his employer, Bristol-Myers Squibb, the pharmaceutical giant.
    Apollo's 2nd-Quarter Profit Falls 66% Apollo Global Management said on Thursday that profit tumbled by 66 percent in the second quarter, as its core private equity business grappled with difficult markets.
    BNP Paribas Profit Falls 13% in Second Quarter Europe's deepening debt crisis curbed trading revenue at the French bank, pushing its net profit down by 13 percent, to $2.27 billion, in the second quarter.
    BUZZ TRACKER
    Former Treasury Official to Join Romney Campaign Michele Davis, a former aide to Henry M. Paulson Jr. when he was Treasury secretary, has told colleagues she plans to join the Romney campaign to mount a public relations defense of the candidate's record at Bain Capital, BuzzFeed reports, citing an unidentified person.
    ING Considers Sale of Canadian and British Assets The firm, which is in the process of splitting its insurance and banking assets, could use the proceeds to repay the Dutch government for a 2008 bailout. Together, the two units employ 1,850 people.
    LOOKING AHEAD
    Economic Reports The data released on Friday will include unemployment for July and the I.S.M. service index for July.
    Corporate Earnings Companies reporting results on Friday will include Beazer Homes, NYSE Euronext, Procter & Gamble, Royal Bank of Scotland, Toyota and Viacom.

    DealBook Video
    Business Day Live: Runaway Trades Spread Turmoil Examining the fallout of an electronic trading debacle. | What the Fed's inaction means for the economy. | A look at Chick-fil-A, as a business. | Keeping fit while traveling.

CBS NEWS | Political Hotsheet Top Stories: Obama: "Trickle-down, tax cut fairy dust" won't work

The CBS News Political Hotsheet newsletter
CBS POLITICAL HOTSHEET TOP STORIES    



   
On the campaign trail, the president mocks Mitt Romney's budget proposal, calling it a throwback to failed policies of the past
Read full story
Obama:

Pelosi: Protesting House-passed tax bill, Nancy Pelosi says Bush-era tax cuts led country to "near depression"; Boehner calls Dem plan "flat-out nuts"

New ads aim for candidates' weaknesses Obama, Romney campaigns are targeting each other in battleground states with new TV ads Thursday

MoveOn blasts As Rafalca makes its Olympics dressage debut, liberal group MoveOn.org targets Romney for the horse's "pampered" lifestyle

Romney to unveil Republican campaign pushes back against a negative analysis of its tax plan

Money Show Investors Daily Alert: Can You Believe These 2 ETFs?


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Jim Jubak on MoneyShow.com

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Skousen's Top 3 Picks, Mark Skousen
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Money Show Traders Daily Alert: Trading Lessons I Learned the Hard Way, Part 2

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MarketWatch | Personal Finance Daily: What we already know about July jobs situation



By MarketWatch
Don’t miss these top stories:
Got your calendar? Good. Here are some critical dates to make a note of if you have an IRA, a Roth IRA, a 401(k) and/or similar assets. It’s not simple, but between September and the end of the year, there are several important deadlines regarding required minimum distributions, recharacterizations and other situations that you must not miss, or the consequences can be time-consuming and costly, writes Robert Powell.
Anne Stanley , Managing Editor, Personal Finance

Don’t miss these critical retirement deadlines

Retirement accounts such as IRAs have critical deadlines coming up. Don’t miss them, or the damage may be time-consuming and costly.
Don’t miss these critical retirement deadlines

ECONOMY AND POLITICS

What we already know about July jobs situation

The market is hotly anticipating Friday’s report from the Labor Department about the jobs situation, but there’s already quite a bit of data available about last month’s picture. See the charts.
What we already know about July jobs situation

Draghi: ECB ready, but governments must act

Markets expressed disappointment Thursday as European Central Bank President Mario Draghi says the institution will ready itself to take action to bring down borrowing costs, but distressed governments must first apply to the region’s rescue funds for help.
Draghi: ECB ready, but governments must act

U.S. jobless claims rise 8,000 to 365,000

Applications for unemployment benefits rose slightly last week, the U.S. government reported Thursday, but the number of people seeking compensation appears to have settled in a range that suggests little change in the rate of U.S. job growth.
U.S. jobless claims rise 8,000 to 365,000

Mr. Global Economy’s delusional mental state

Satyajit Das examines the psychological condition of Mr. Global Economy and finds him delusional, believing complete recovery is imminent.
 
Page 1 Page 2

GATA | THE GATA DISPATCH: Swiss gold repatriation movement leader interviewed

Swiss gold repatriation movement leader interviewed

12:30p ET Thursday, August 2, 2012
Dear Friend of GATA and Gold:
GoldMoney today publishes an interview with Swiss parliament member Luzi Stamm of the Swiss People's Party, who is leading a campaign for a referendum to require the Swiss National Bank to bring the country's gold reserves home. The interview addresses concerns that central banks have misled their countries about the status and security of gold reserves. The interview is headlined "Luzi Stamm: Champion of a New Swiss Gold Initiative" and it's posted at GoldMoney here:

http://www.goldmoney.com/gold-research/roman-baudzus/luzi-stamm-swiss-go...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Stocks and markets in the News | European Markets at Close

  European stocks markets tank after ECB President Mario Draghi fails to identify measures to curb the region’s debt crisis

 Europe stocks tumble after Draghi disappoints

The economist | Politics this week: Highlights of news coverage from July 28th - August 3rd, 2012

The EconomistPolitics this week


» Two days of extensive power cuts affected more than 600m people across India's northern and eastern states. Vital services were forced to run on generators, there was chaos on the roads and nearly 200 trains stopped operating after three electricity grids collapsed. Many people blamed years of inadequate spending on India's energy infrastructure. See article»
» North Korea denied a suggestion made by South Korea that it may be reforming itself. An apparently more open and fun-loving style of the new leader, Kim Jong Un, as well as the sacking of the country's top general, had prompted speculation that the hermit state might be ready to embrace economic change. "All a foolish and silly dream", said the state news agency.
» The army in Myanmar was accused by Human Rights Watch, an international organisation, of killing and persecuting Muslims from the Rohingya ethnic group. A state of emergency was declared in Rakhine, in the west, in June. See article»
» Thousands of parents and activists in Hong Kong protested against a plan to introduce Chinese patriotism classes in schools. The proposed syllabus celebrates the Communist Party, and gives no mention of the Cultural Revolution or the Tiananmen Square massacre in 1989.

A cauldron coming to boil
Click Here! » Rebels and government forces fought to control Aleppo, Syria's second city, while Damascus, the capital, remained in government hands. Rebel Kurds took over a string of towns in the north-east, while the opposition held much of the territory in the north-west near the border with Turkey. See article»
» In Egypt, Hisham Qandil, whom President Muhammad Morsi has appointed as prime minister, announced a cabinet composed largely of technocrats with a handful of Islamists. He kept the existing finance and foreign ministers and appointed a police general, Ahmed Gamal al-Din, as interior minister. Field-Marshal Hussein Tantawi, head of the Supreme Council of the Armed Forces, which has continued to pull the strings in Egypt, was named defence minister. See article»
» Israel's defence minister, Ehud Barak, gave the country's armed forces a month to prepare to conscript ultra-Orthodox Jewish men, after a law exempting them from serving expired at the end of July. See article»
» Barack Obama ordered new economic sanctions against Iran. Leon Panetta, America's defence secretary, said "all options", including military force, were on the table, should Iran refuse to negotiate over its nuclear programme.
» Members of Somalia's constituent assembly voted in favour of a new constitution, paving the way for a government to be elected this month. The vote came shortly after two bombers tried to attack the meeting in Mogadishu, the capital.
» Eight people were killed during a protest against rising prices in Sudan's western region of Darfur.

Return to form
» Russian prosecutors charged Alexei Navalny, an anti-corruption crusader and blogger, with embezzlement, accusing him of leading a criminal gang that stole lumber worth more than $500,000. Coming soon after the start of a trial of three female punk musicians for performing an anti-Putin song at a cathedral, the charges against Mr Navalny stoked fears of a renewed Kremlin crackdown on the opposition to President Vladimir Putin. See article»
» Alexander Lukashenko, the hardline president of Belarus, sacked the country's air force commander after activists flew over Minsk, the capital, and dropped scores of teddy bears wearing parachutes and pro-democracy signs.

Accident investigation
» Prosecutors in Cuba laid charges of reckless driving against Ángel Carromero, a Spanish politician, who was driving a car in which Oswaldo Payá, a Cuban dissident, was killed in an accident last month. Mr Carromero admitted he had brought over money for Mr Payá, but asked the government not to use his case "for political ends".
» Venezuela was officially accepted into Mercosur, the South American trade block that includes Brazil, Argentina, Uruguay and Paraguay. Venezuela's entrance had been delayed because the Paraguayan Congress had not approved it. But Mercosur suspended Paraguay recently following the impeachment in June of its president, Fernando Lugo, paving the way for Venezuela's inclusion.

Cruz to victory
» The tea party claimed another scalp in an election, this time in a Senate race in Texas. In a Republican primary Ted Cruz, who was backed by tea-partiers, easily defeated David Dewhurst, who was favoured by the state's establishment, including Rick Perry, the governor. Mr Cruz is a Cuban-American. If he wins at the general election he will be the first Hispanic from Texas to sit in the Senate. See article»
» The committee drafting measures to be included in the Democratic Party platform, which will be adopted as policy at its national convention in September, came a step closer to formally endorsing gay marriage. Some worry that such a move will dominate coverage of the convention and be a big turn off to moderate swing voters.
» Democrats and Republicans in Congress reached a deal to fund government departments until March, avoiding what would have been yet another messy argument over a government shutdown in the months leading up to November's general election, but also again putting off tricky questions on budget cuts.
» Mitt Romney's foreign-policy tour was mired in controversy. He hinted that Britons weren't prepared to host the Olympic games, shortly before attending the opening ceremony in London. And in Israel he suggested that "culture" could explain the difference in Israel's economic success over the Palestinians. Lech Walesa, a Nobel peace-prize winner, did offer support to Mr Romney in Poland, before later saying that he lacked charisma.

» Michael Phelps, a swimmer from suburban Baltimore, won his 19th Olympic medal, almost all of which are gold and which he has accumulated over three summer games. His haul has beaten the previous record of 18 medals (half of which were gold) won by Larisa Latynina for the Soviet Union in gymnastics between 1956 and 1964.

The Economist | Business this week: highlights of news coverage from July 28th - August 3rd 2012t

The EconomistBusiness this week



» The New York Stock Exchange began an investigation into wild swings in 148 share prices that occurred over a 45-minute period, the latest setback to investor confidence in high-volume electronic trading. The swings, thought to be caused by an errant logarithm that emanated from Knight Capital, a market maker, and flooded the stockmarkets with orders, were not as great as in the "flash crash" in 2010, but did lead to the cancellation of trading in six stocks.


Expensive glitches
Click Here! » UBS said that the technical hitches on the NASDAQ exchange that beset the first day of trading in May of Facebook's shares had cost it $357m. The Swiss bank had carried out "significant" client orders for the stock, which were entered multiple times into the system because of the glitches. It accused NASDAQ of mishandling the flotation and warned it would take steps to recover the loss.
» Facebook's share price continued to slide, as investors digested its first earnings report as a public company. In the three months to June the social network's revenues were 32% higher than a year earlier, but it made a net loss of $157m and there was little guidance as to how it is going to make money from ads on mobile devices. See article»
» Deutsche Bank announced another 1,900 job cuts, mostly in investment banking. Anshu Jain, the new co-chief executive of Germany's biggest bank, admitted that: "Put simply, our cost base is too high." Net profit in the second quarter fell by 45% compared with the same quarter last year, to €661m ($814m).
» CB&I, a Texan engineering company, offered to take over Shaw Group, which is building the first new nuclear-power plants to be permitted in America since 1978. The $3 billion bid underlines the interest in nuclear energy, despite the concerns aroused by the Fukushima disaster in Japan last year.


Trying to regain momentum
» America's growth rate weakened in the second quarter, expanding by 1.5% over the previous quarter at an annual rate, according to a first estimate. Meanwhile, Taiwan recorded a slight contraction in GDP for the second quarter, dragged down by stagnant exports of smartphones and PCs. But in Sweden a surge in exports helped the economy achieve growth of 1.4%, quarter on quarter. See article»
» Standard & Poor's confirmed that Britain will keep its triple-A credit rating. The ratings agency expects the British economy to return to growth later this year. S&P also kept Germany's rating at triple-A, and said it was confident the country would weather the euro-zone crisis. See article»
» British manufacturers had their worst month in July for more than three years, according to a purchasing-managers' index that measures manufacturing activity. Similar indices for China and the United States recorded either a sharp slowdown or a contraction in manufacturing.
» BP 's quarterly earnings disappointed investors, as it wrote down assets in America by $5 billion. The figure was much higher than had been expected and called into question last year's statement by Bob Dudley, BP's boss, that it had "turned a corner" after the Gulf of Mexico oil spill.
» A big trial began in San Jose, California, concerning intellectual-property rights in the design of touch-screen smartphones. The case is the most prominent so far in a series of legal spats around the world between Apple and Samsung over alleged patent infringements. Recent data show that Samsung is extending its lead over Apple in the smartphone market by unit sales, though not by profits.
» Chrysler bolstered Fiat's earnings in the latest quarter. The Italian carmaker, which accumulated a majority stake in Chrysler following the American firm's government bail-out and restructuring, reported a trading profit in all regions except Europe, where the euro-zone crisis is hurting business. Chrysler made a quarterly net profit of $436m; in July its car sales rose by 13% in the United States compared with July 2011.

MGM grand
» It emerged that Carl Icahn, a veteran activist investor, has sold his 25% stake in MGM back to the film studio. After years of financial problems (which held up the production of "Skyfall", the next James Bond film), MGM now intends to file for an IPO. Mr Icahn also used to own a stake in Lions Gate Entertainment, a big studio behind "The Hunger Games", and had hoped to direct a merger of the two.
» Microsoft decided to ditch its Hotmail brand, which has been a mainstay of e-mail since 1996, a virtual lifetime in internet terms. Hotmail will reappear as Outlook.com on PCs and phones, with lots of snazzy social-networking features.

ADVFN III World Daily Markets Bulletin Thursday, 02 August 2012


ADVFN III World Daily Markets Bulletin
Daily world financial news

Thursday, 02 August 2012

US Market Reports
Stocks Regain Ground Following Initial Downward Move

After closing lower in the three previous sessions, stocks saw some further downside at the start of trading on Thursday. The major averages slide firmly into negative territory, although selling pressure waned not long after the open.

The major averages have climbed well off their lows for the young session but currently remain in the red. The Dow is down 81.28 points or 0.6 percent at 12,889.78, the Nasdaq is down 2.78 points or 0.1 percent at 2,917.43 and the S&P 500 is down 8.31 points or 0.6 percent at 1,36.83.

The initial weakness on Wall Street was partly due to a negative reaction to comments by European Central Bank President Mario Draghi, who traders felt failed to live up to last week's promise to do whatever is necessary to support the beleaguered eurozone.

Speaking at a press conference following the ECB's monetary policy meeting, Draghi told reporters that the central bank "may undertake outright open market operations." Traders seemed disappointed that there was not more conviction behind Draghi's remarks.

Carl Weinberg, Chief Economist at High Frequency Economics, said, "Once again, we have no commitment to action from the ECB, and no execution of promises previously made."

"Nothing seems set to happen now," he added. "Traders and investors who expected immediate action are, and should be, disappointed."

The markets did not see much follow-through on the early downward move, however, as traders shifted their focus to tomorrow's monthly U.S. jobs report from the Labor Department.

Ahead of the monthly report, the Labor Department released a report showing a smaller than expected increase in initial jobless claims in the week ended July 28th.

The report showed that initial jobless claims crept up to 365,000 from the previous week's revised figure of 357,000. Economists had expected jobless claims to climb to 370,000 from the 353,000 originally reported for the previous week.

Nonetheless, natural gas stocks continue to see considerable weakness on the day, as reflected by the 2.3 percent loss being posted by the NYSE Arca Natural Gas Index. Apache and Williams are posting notable losses are reporting their quarterly results.

Brokerage, biotechnology, and steel stocks are also seeing significant weakness, with Knight Capital Group once again leading the brokerage sector lower after revealing that a trading glitch resulted in a $440 million loss.

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance on Thursday. Japan's Nikkei 225 Index crept up by 0.1 percent, while Hong Kong's Hang Seng Index ended the day down by 0.7 percent.

Meanwhile, the major European markets have turned lower over the course of the trading day. The U.K.'s FTSE 100 Index is down by 0.5 percent, while the German DAX Index and the French CAC 40 Index have tumbled by 1.4 percent and 1.6 percent, respectively.

In the bond market, treasuries are seeing notable strength on the heels of the headlines out of Europe. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5.3 basis points at 1.486 percent.

Canadian Market Report
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TSX Dips At Open Thursday

Toronto stocks dipped at open Thursday amid selling across a variety of sectors, with the S&P/TSX Composite Index losing 103.50 points or 0.89 percent to 11,515.03.

The Energy Index was down over 1 percent, with Petrominerales diving over 13 percent after reporting a much lower third quarter net earnings.

Cenovus Energy and Suncor Energy lost around 2 percent each. Oil transporter Enbridge Inc. shed nearly 2 percent after posting a steep decline in its second-quarter earnings.

International gold miner Centerra Gold was down 2 percent after slipping into the red in second-quarter. Financial services company Home Capital Group eased 0.50 percent even after reporting improved second quarter net income.

Meanwhile, base-metals miner First Quantum Minerals Ltd. edged up 1 percent even after reporting a lower second-quarter net earnings.

The price of crude oil was firm near $90 Thursday morning as demand worries eased amid falling inventories. Wednesday during trading hours, the EIA revealed that U.S. crude oil stocks dived 6.50 million barrels and gasoline stocks shed 2.20 million barrels in the weekended July 27. Crude for September edged down $0.72 to $88.19 a barrel.

Financial services company Home Capital Group reported improved second quarter net income of C$53.2 million or C$1.54 per share compared to C$48.2 million or C$1.38 per share for the year-ago quarter. Excluding a tax adjustment, net income for the latest quarter was C$55.2 million or C$1.60 per share. Analysts were expecting the company to report a earn C$1.53 per share this quarter.

Software solutions provider Constellation Software Inc. reported second quarter net income of $17.59 million or $0.83 per share down from $55.99 million or $2.64 per share in the year-ago period. However excluding items, adjusted net income rose to $36.16 million or $1.71 per share from $33.51 million or $1.58 per share in the prior-year quarter.

Insurance services provider Great-West Lifeco Inc. reported second quarter net profit of C$491 million or C$0.517 per share, lower than C$526 million or C$0.553 per share last year. Analysts were expecting the company to report a earn C$0.48 per share this quarter.

Communications and consumer electronics company Wi-Lan Inc. reported second-quarter GAAP net loss of $0.1 million, or breakeven per share, compared to GAAP earnings of $10.3 million, or $0.08 per share in the same period last year. Adjusted earnings were $10.1 million or $0.08 per share compared to $20.8 million or $0.17 per share in the comparative period. Analysts were expecting the company to report earnings of $0.08 per share.

Oil transporter Enbridge Inc. posted a steep decline in its second-quarter earnings at C$11 million or C$0.01 per share compared to C$302 million or C$0.40 per share last year. However, adjusted earnings per share were C$0.36 up from C$0.34 in the same quarter a year ago. Analysts were expecting the company to report earnings of $0.38 per share.

International pharmaceuticals company Valeant Pharmaceuticals International, Inc. slipped into the red in second quarter, reporting net loss of $21.6 million or $0.07 per share for the quarter compared to a profit of $56.36 million or $0.17 per share last year.

European Market Report
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European Stocks Broadly Higher At Mid-day

European stocks rose for a second day on Thursday as investors await key interest rate decisions in the eurozone and Britain. Investor mood remains slightly upbeat after German daily Sueddeutsche Zeitung reported that the European Central Bank and the euro zone's permanent rescue fund, the European Stability Mechanism, were planning coordinated action to buy Spanish and Italian government bonds.

Meanwhile, Spain successfully raised more than the maximum target of EUR 3 billion from its debt auction at higher costs, with 10-year bond yields inching up to 6.647 percent, up from the 6.43 percent paid at the prior auction on July 5.

The Euro STOXX 50 Index is currently up 0.63 percent, while the broader Stoxx Europe 50, which also includes U.K. stocks, is moving up 0.72 percent. Around Europe, the German DAX, France's CAC 40, the U.K.'s FTSE 100 and Switzerland's SMI are moving up between 0.3 percent and 0.9 percent.

The Bank of England will announce its latest interest rate decision in a short while from now, while the ECB's decision is due at 7.45 am ET. As expectations remain high for strong European Central Bank action to quell the region's sovereign debt crisis, there is considerable scope for disappointment.

Asian markets ended on a mixed note after the Federal Reserve moved a step closer to pumping additional stimulus, but didn't announce any measures following last month's extension of Operation Twist. Offering a sobering assessment of the U.S economy, the Fed predicted that economic growth would remain moderate over the coming quarters.

In stock specific action, shares of Deutsche Post DHL are climbing 4.2 percent after the German postal and logistics firm lifted its fiscal 2012 forecast for EBIT, a key earning metric.

Continental AG is rallying 3.3 percent after the tire maker reported higher second quarter net income and sales. Airliner Lufthansa is climbing 3 percent after it posted operating profit that beat consensus estimates.

ING Group is moving up 0.4 percent in Amsterdam after the company said it is reviewing strategic options for ING Direct Canada and ING Direct UK.

In economic releases, eurozone industrial producer prices fell 0.5 percent month-over-month in June, the same rate of decline as seen in the prior month, Eurostat reported. Economists had expected a more modest decrease of 0.4 percent. On a yearly basis, inflation eased to 1.8 percent from 2.3 percent in May.

Separately, data from Markit Economics showed that the U.K. construction sector logged a bigger than expected growth in July, driven by an increase in commercial output. The Chartered Institute of Purchasing & Supply/Markit Purchasing Managers' Index rose to 50.9 in July from 48.2 in June. The reading was forecast to rise to 48.7.

Asia Market Reports
Asian Stocks End Lower Ahead Of ECB

Most stock markets in the Asian region ended lower Thursday after the Federal Reserve yesterday disappointed traders by refraining from any new stimulus measures in their latest decision on monetary policy. In a sign that policy makers are concerned with the pace of the recovery, Federal Open Market Committee members repeated their promise to keep interest rates at zero until late 2014.

However, hopes of stimulus measure from the European Central Bank supported stocks.

In the commodities markets, the price of crude oil was extending gains Thursday after an official data revealed U.S. crude oil stocks plummeted last week amid lower imports. Wednesday during trading hours, the EIA revealed that U.S. crude oil stocks dived 6.50 million barrels and gasoline stocks shed 2.20 million barrels in the weekended July 27.

The price of gold slipped back near $1,600 as the U.S. dollar was trading firm after Federal Reserve refrained from any new stimulus measures.

The Japanese market settled marginally higher, recovering from previous session's steep losses, with the Nikkei Index edging up 11.33 points or 0.13 percent to 8,653.18 as investors lapped up stocks that were battered Wednesday.

Seiko Epson Corp edged up from its historical low, adding just over 1 percent and Sumitomo Heavy Industries recovered 2 percent today, after falling about 15 percent in the previous session. Meanwhile, Fast Retailing shed close to 3 percent as traders turned cautious ahead of its earnings reports, due out after the market hours.

Meanwhile, the China's Shanghai Composite index extended losses for a third session, easing 12.18 points or 0.57 percent to 2,118.18. Real estate stocks were the major losers amid speculation that the government is keen in cooling down the red-hot real estate market.

The Hong Kong market snapped its 5-day winning streak to end lower, with the Hang Seng Index surrendering 130.18 points or 0.66 percent to 19,690.20. Traders overlooked better-than-estimated retail sales data out of Hong Kong.

Hong Kong's retail sales increased at a faster pace in June, and the rate of growth exceeded economists' expectations, data released by the Census and Statistics Department showed Thursday.

Poly Real Estate Group Co. and Beijing Capital Development Co. were among the notable losers, dipping close to 10 percent each. China Railway Construction Corp. slipped over 2 percent amid reports that the real estate company is eying for a 15 percent stake in an Italian soccer club.

On the other hand, Baoshan Iron & Steel Co. ended as a notable gainer on speculation that the steel company would opt for buy back its shares.

In Hong Kong, heavyweight stocks HSBC Holdings PLC and China Mobile Ltd. were down about 1 percent each.

Australia stocks ended marginally higher after retail sales data came in better-than-estimated. The benchmark S&P/ASX200 index edged up 6.7 points or 0.16 percent, at 4,269.50, a 10-week high and the broader All Ordinaries index was up 7.40 points or 0.17 percent, at 4,290.10.

Stocks in New Zealand ended near a three-month high helped by upsurges in telecommunications and construction stocks, with the NZX 50 index rising 33.46 points or 0.9 percent to 3564.11.

Shares of Telecom rose close to 2 percent and telecommunications network operator Chorus added over 1 percent. Country's largest construction company, Fletcher Building was under the buyers' radar ahead of its earnings reports.

Elsewhere, the South Korean Kospi shed 10.53 points or 0.56 percent to 1,869.40. Samsung Electronics lost close to 3 percent on profit taking as the stock moved near a 3-month high int eh previous session. Markets in Singapore and India were in the red, while Malaysian stocks settled marginally higher.

Commodities
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Crude Steady Near $90

The price of crude oil was firm near $90 Thursday morning as demand worries eased amid falling inventories. Light Sweet Crude Oil (WTI) futures for September delivery, edged up $0.27 to $89.18 a barrel. Yesterday, oil ended higher after an official data revealed U.S. crude oil stocks plummeted last week amid lower imports.

Wednesday during trading hours, the EIA revealed that U.S. crude oil stocks dived 6.50 million barrels and gasoline stocks shed 2.20 million barrels in the weekended July 27.

This morning, the U.S. dollar was paring recent gains versus the euro and ticking lower against sterling. The buck was moving lower versus the yen and the Swiss franc.

In economic news, euro zone industrial producer prices fell 0.5 percent month-on-month in June, the same rate of decline as seen in the prior month, Eurostat reported. The rate was marginally bigger than the expected decrease of 0.4 percent.

The Bank of England today maintained the asset purchase programme at GBP 375 billion and the key interest rate at a historic low of 0.50 percent, as widely expected.

The European Central Bank is likely to leave its benchmark interest rate at its record low of 0.75 percent. The bank will announce its rate decision at 7.45 am ET.

Traders will look to the weekly jobless claims data from the U.S. Labor Department, due out at 8.30 a.m ET. Economists expect claims to increase to 370,000 in the recent reporting week from 353,000 in the previous week.

Later during the session, the Commerce Department will release its report on factory goods orders for June. Economists estimate a 0.7 percent increase in orders for factory goods, the same pace of increase as in the previous month.

In June 2012 new orders for manufactured goods decreased 0.5%, shipments -1.1% unfilled orders 0.3% and inventories increased 0.1%: ESA | Manufacture's shipments, Inventories and orders

Economics and Statistics Administration Logo
June 2012 new orders for manufactured goods decreased 0.5 percent to $465.8 billion. Shipments fell 1.1 percent to $469.9 billion. Unfilled orders increased 0.3 percent to $988.1 billion and inventories increased 0.1 percent to $605.4 billion.

The Fed sticks with the status quo: Ezra Klein's Wonkbook | The Washington Post




Karl Singer is writing Wonkbook this week while Ezra is on vacation.


RCP Obama vs. Romney:Obama +2.0%; 7-day change: Obama +0.7%.
RCP Obama approval:47.4%; 7-day change: +0.3%.

Top story: The Fed sticks with the status quo

The Fed sees a slowing economy but won’t act now. “The Federal Reserve took no new steps to support the economy Wednesday, but it said in a statement that it was ready to act if job growth did not improve. The statement, released after a meeting of the Fed’s policy-making committee, said that the rate of economic growth had slowed in recent months and was likely to remain ‘moderate over coming quarters.’ As a result, the Fed said it expected the unemployment rate to decline ‘only slowly.’ But the central bank deferred any effort to improve the situation at least until the committee’s next scheduled meeting in mid-September…The absence of action appeared to disappoint some equity investors. The Standard & Poor’s 500-stock index fell 4 points, or 0.29 percent, Wednesday, to 1,375.32. The Dow Jones industrial average dropped sharply after the Fed’s announcement, and then traded erratically before closing near its session low. It fell 37.62 points, also 0.29 percent, to 12,971.06.” Binyamin Appelbaum in The New York Times.
READ: The Federal Open Market Committee’s statement.
@Neil_Irwin: Mike Feroli’s research note on FOMC is titled “Delay and Pray,” which sums things up pretty well.

How the statement changed: “The biggest change is the Fed saying it ‘will provide additional accommodation as needed’ compared to earlier saying it was ‘prepared’ to take further action. The Fed altered its overall assessment of the economy. It now says that the economy ‘decelerated somewhat’ compared with last month’s ‘expanding moderately.’ The small change shifts focus from growth to concerns about slowing. The Fed also removes ‘appears’ from its assessment of slowing household spending, taking a firmer stance. Meanwhile, in the same section the central bank notes that inflation hasn’t been a worry ‘since earlier this year,’ indicating that rising prices shouldn’t hold it back.” Phil Izzo in The Wall Street Journal.
Action is expected at the Fed’s September meeting unless the economy strengthens. “The Federal Reserve moved a step closer to pumping more stimulus into an economy plagued by weakening growth and a jobless rate that has stayed at 8 percent or higher for more than three years. Central bankers led by Ben S. Bernanke concluded their two- day meeting Wednesday saying they ‘will provide additional accommodation as needed’ to bolster the expansion. The Federal Open Market Committee also said it will ‘closely monitor’ economic data and financial developments, suggesting it is focused on the economy’s near-term performance. ‘The default is further easing,’ said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. ‘Unless things improve significantly, they’re going to move’ at their Sept. 12-13 meeting, he said.” Craig Torres in Bloomberg.

Meanwhile, more inflation measures are slowing: http://on.wsj.com/N0wTat.

O’BRIEN: Doves at the Fed should dissent. “This just isn’t good enough. Long-term unemployment is still at previously unthinkable highs. Inflation is still below 2 percent, and is expected to stay below 2 percent for the next five years. It’s well past time for the Fed to do more. Something like Chicago Fed president Charles Evan’s plan to keep rates at zero until inflation is above 3 percent or unemployment is below 7 percent would be a good start. Or San Francisco Fed president John William’s idea about open-ended quantitative easing — basically, printing money until the economy hits some target. Or combine them! If the Fed won’t do more, so-called doves like Williams should start dissenting from the committee’s do-nothingism — something none of them did in August, but Charles Evans did last year when he had a vote.” Matthew O’Brien in The Atlantic.

@binarybits: Probably the most depressing thing about today’s Fed news is there were no dovish dissenters. No one on the FOMC thinks easing is needed.
@rortybomb: After Evans’ dove dissented last Nov, Jan FOMC extended low rates language from mid ’13 to late ’14. Did we need dissent now to get action?

LIPSCHUTZ: The Fed should act, not communicate. “It isn’t just that actions (mortgage-backed or Treasury securities purchases) would speak a lot louder than words, even though the real-world impact of any further Fed action is highly debatable. It is mainly that these particular words would encourage the exact clinging to the sidelines by economic decision makers that now so imperils the economy…If the Fed tells the world short rates will hang near zero for a near economic eternity, it removes the urgency from action, the urgency from borrowing while rates are historically low. At this rate, they may be historically low for the course of a working lifetime. And if economic conditions are generally unsettled (which they certainly are), why rush?” Neal Lipschutz in The Wall Street Journal.

KALETSKY: The next round of QE should go to the public. “Instead of giving newly created money to bond traders, central banks could distribute it directly to the public. Technically such cash handouts could be described as tax rebates or citizens’ dividends, and they would contribute to government deficits in national accounting. But these accounting deficits would not increase national debt burdens, since they would be financed by issuing new money, at zero cost to government or to future generations, instead of selling interest-bearing government bonds. Giving away free money may sound too good to be true or wildly irresponsible, but it is exactly what the Fed and the BoE have been doing for bond traders and bankers since 2009. Directing QE to the general public would not only be much fairer but also more effective.” Anatole Kaletsky in Reuters.

Peter Coy profiles Ben Bernanke and his choice:“Bernanke, 58, was George W. Bush’s chief economic adviser in 2006 when he was appointed to head the Fed. The mild-mannered economist suddenly had immense power. President Barack Obama and House Speaker John Boehner (R-Ohio) are constrained by comparison because they can’t do anything without each other. Bernanke doesn’t need either to act. He has far more control over the Fed than Chief Justice John Roberts does over the Supreme Court. Unlike Roberts, a Fed chairman never votes on the losing side. The vote on Aug. 1 was 11-1, the only dissent

Top op-eds

1) ANTILLA: The benefits of financial regulations matter, too. “To get an idea of who has the upper hand in this fight, consider what it entails to be the chump who has to explain the ‘benefits’ side of financial regulation. Costs can be easy to figure out. Say there’s a regulation that requires new compliance officers. Tally up the salaries. If there’s an assortment of new software you need to comply with Dodd-Frank’s reporting requirements, you call the computer vendors and get the numbers. But how do you measure benefits, like the frauds that never happen because stricter rules are in place? Is there a dollar figure we can put on credit markets that don’t collapse? Or the elderly who don’t lose their life savings because regulators have cracked down on rip-off artists who troll retirement villages? Those are important questions, but they aren’t the ones being asked.” Susan Antilla in Bloomberg.

2) STUTZMAN AND NEEDHAM: Food stamps shouldn’t be part of the farm bill. “For decades, an unholy Washington alliance–between rural lawmakers and their urban and suburban colleagues–has caused exponential growth in spending by combining farm policy and food stamps in one huge legislative package…Instead of combining farm policy, food stamps, telecommunications, energy, forestry and conservation into a single legislative vehicle, we must begin advancing one issue at a time. Even Americans with differing views on the role of the federal government in U.S. agriculture should agree that any farm bill passed by Congress be a farm-only bill…From its name, you’d never know that 80% of the Federal Agriculture Reform and Risk Management Act goes toward the Supplemental Nutrition Assistance Program (SNAP), commonly referred to as food stamps. But it does” Marlin Stutzman and Michael Needham in The Wall Street Journal.

3) SAMUELSON: High-tech health costs can be curbed. “From 2000 to 2005, CT and MRI use among Medicare recipients grew 14 percent annually. Now, growth of both Medicare and non-Medicare spending has slowed to estimated annual rates of 1 percent to 3 percent, the study says…The slowing growth of medical imaging might reflect a natural saturation: Scans are being used in most plausible clinical situations. But the new study, posted on the Web site of the journal Health Affairs, disputes this. It argues that rapid growth was driven partly by powerful non-medical forces: Demanding patients insisted on scans; doctors feared malpractice suits if they refused; and doctors and hospitals wanted to maximize revenues. What explains slower growth is that these incentives weakened, contend economists Frank Levy of the Massachusetts Institute of Technology and David Lee of General Electric.” Robert Samuelson in The Washington Post.

4) ORSZAG: Progress needs to continue on healthcare costs. “The proposals put forward by the experts assembled by the Center for American Progress include multiple steps to eliminate both artificially high prices and unnecessary procedures. For example, rather than have Medicare set prices for lab tests and medical devices, we should put all such purchases out for competitive bidding. In 2011, bidding reduced Medicare spending on wheelchairs and other equipment by more than 40 percent. Another suggestion is to require that all health-care prices be fully transparent to consumers. Other proposals are aimed at the intensity of medical care rather than its price. The faster we can move away from fee-for- service payments, which encourage additional care even if it isn’t helpful, the more value we can get from our health-care system.” Peter Orszag in Bloomberg.

5) HUBBARD: Romney’s economic plan would lead to 12 million jobs. “In contrast to the sclerosis and joblessness of the past three years, the Romney plan offers an economic U-turn in ideas and choices. When bolstered by sound trade, education, energy and monetary policy, the Romney reform program is expected by the governor’s economic advisers to increase GDP growth by between 0.5% and 1% per year over the next decade. It should also speed up the current recovery, enabling the private sector to create 200,000 to 300,000 jobs per month, or about 12 million new jobs in a Romney first term, and millions more after that due to the plan’s long-run growth effects.” Glenn Hubbard in The Wall Street Journal.
Music festival interlude: The Dismemberment Plan play “The City” live at the Pitchfork Music Festival.
Got tips, additions, or comments? E-mail me.
Still to come:The House likes the Bush tax cuts; managed care is back; cybersecurity legislation is set to die in the Senate; oil reserves see a big jump; and a crow makes a human friend.

Economy

A tax plan like Romney’s would increase taxes on middle- and lower-income households while cutting taxes for the rich. “A tax system overhaul along the lines that Mitt Romney has proposed would give big tax cuts to high-income households and increase the tax burden on middle- and lower-income households, according to an analysis from economists at the Tax Policy Center…Even if all possible loopholes for households earning more than $200,000 were eliminated, this group would still be a net gainer under Mr. Romney’s plan, since the marginal tax rate decreases and other changes lop off much of its tax burden. As a result, middle- and lower-income households — the 95 percent of the population earning less than about $200,000 annually — would have to make up the difference, according to the review by the center, which is affiliated with the Brookings Institution.” Catherine Rampell in The New York Times.
@jimtankersley: Easy way for Romney to refute brutal tax plan analysis: Show us his math. What loopholes does he close? What growth rate does he assume?

@tylercowen: The proposed Romney fiscal policy just doesn’t make any sense.
The six-month continuing resolution threatens some programs. “Indeed, the government won’t shut down, but a big part of governing will. The lost cyber funds are just one casualty in a long list affecting public housing, federal prisons, student financial aid, nuclear weapons modernization. Even a polar icebreaker for the Coast Guard is caught in the same Washington ice. Continuing resolutions do only one thing well: ‘continue.’ They don’t allow for new starts and typically set funding at the current rate enjoyed by an agency — with no room for new ideas. The money will flow — sometimes in wasteful directions that no one wants. And Congress diminishes itself by ceding more decisions to the executive branch.” David Rogers in Politico.

The House voted to extend all of the Bush tax cuts. “The Republican-led House voted Wednesday to extend an array of expiring tax cuts for households at all income levels through 2013, a pre-election statement of unyielding opposition to higher taxes for any American. The 256 to 171 vote to preserve tax cuts enacted during the George W. Bush administration fell largely along party lines. It came after the House rejected a Democratic alternative, on a similarly partisan 257 to 170 vote, that would have allowed the cuts to expire on taxable income over $200,000 for individuals and $250,000 for couples filing jointly. Nineteen Democrats joined Republicans in voting to extend the cuts for all income levels; one Republican — retiring Rep. Timothy V. Johnson (Ill.) — was opposed.” Rosalind Helderman and Lori Montgomery in The Washington Post.

The factory sector shrank again. “The U.S. factory sector shrank in July for the second straight month, and gauges of future activity suggest weakness will continue into the fall…In the U.S., the Institute for Supply Management’s index of manufacturing activity barely inched up to 49.8 from June’s reading of 49.7–which was the first contraction in the factory sector since July 2009, the beginning of the economic recovery. Readings under 50 indicate activity is shrinking instead of growing. Details of the ISM report suggested more sluggishness ahead. Order backlogs fell and businesses’ inventories surged, while a measure of new orders–an important gauge of future activity–rose only to 48 from 47.8, suggesting firms are dispatching old orders but not getting many new ones.” Neil Shah in The Wall Street Journal.

Senators struck a deal to extend most tax extenders. “Top Democrats and Republicans on the Senate Finance Committee have struck a deal to extend billions of dollars in business and personal tax breaks in a sign that members from both parties can still cut deals when popular items are on the line. The deal announced just after midnight Wednesday by Senate Finance Committee Chairman Max Baucus (D-Mont.) and Sen. Orrin Hatch (R-Utah) extends long-standing provisions of the so-called tax extenders package like the research and development tax credit, which has been in place off and on for decades. To strike a deal, however, committee leaders agreed to let 25 percent of current tax breaks expire in order to appease Republicans who warned that the overall cost of the package had to be kept in check. ” Steven Sloan in Politico.

The Treasury will offer floating-rate securities. “The U.S. Treasury Department plans to offer floating-rate securities, its first new product in 15 years, as it attempts to maintain surging investor demand for government bonds. Unlike traditional government securities that pay a fixed rate of interest to investors, the payments on these new notes would periodically reset to match prevailing market rates, as measured by a market index. The private-sector advisory committee that offers guidance to the Treasury suggested that the notes initially have a maturity of as long as two years. The new product won’t be sold for at least a year, Treasury officials said Wednesday, reflecting the time needed to change auction systems, determine an index for the note and work out other details.” Matt Phillips and Jeffrey Sparshott in The Wall Street Journal.
Construction toy interlude: A K’NEX Skeeball Machine.

Health Care
Managed care is coming back. “Under pressure to squeeze out costs, some of the U.S.’s biggest health insurers are quietly erecting more hurdles for patients seeking medical care. The companies are in many cases reaching back to the 1990s and boosting the use of techniques that antagonized patients and doctors alike. Today’s approaches are tweaked, but may feel familiar to many: Insurers are rolling out plans with more restricted choices of doctors and hospitals, and weighing new requirements for referrals before patients can see specialists. UnitedHealth Group Inc., Cigna Corp. and others are increasingly requiring doctors to get prior authorization before patients can get certain care such as spinal surgeries. Earlier versions of these practices were closely identified with the managed-care era of the 90s. They later receded in many parts of the country, as employers switched away from restrictive health-maintenance organizations, and insurers backed off some limits.” Anna Wilde Mathews in The Wall Street Journal.

Domestic Policy
The cybersecurity bill is expected to fail in the Senate today. “The Senate’s cybersecurity bill is likely to go down in defeat on Thursday, ending any hope of passing a measure by the end of the year to protect America’s networks. Unless members strike a last-minute deal, the Cybersecurity Act from Sen. Joe Lieberman (I-Conn.) is expected to fall short of the 60 votes needed to end debate. That would be a defeat for the White House, which made an all-hands-on-deck push to get the bill through Congress. Members were working feverishly Wednesday to try to salvage the bill before the August recess.” Jennifer Martinez in The Hill.

TIGER grants are at a turning point. “TIGER grants launched with a roar three years ago, heralded as a clever way to dole out money to states and cities with innovative infrastructure plans. But now, the program, which delivered $3.1 billion nationwide in four rounds of funding, has hit a turning point. Republicans want to kill the grants, which they say have been overly politicized by the Obama administration. The House voted to nix future funding earlier this year. And a six-month extension of current spending laws means it won’t become clear until after the election whether TIGER will survive. The idea was novel when the Transportation Investment Generating Economic Recovery grants came about: Competition would ensure the most beneficial transportation projects won. But someone still has to pick the winners.” Jessica Meyers in 

Politico.
Interspecies friendship interlude: A crow and a human are friends.

Energy
Disaster aid will now be voted on under normal procedures. “Taking no more chances, the House Republican leadership put a little of its muscle to work Wednesday evening to ensure smooth sailing for a livestock disaster aid package before members go home for the August recess. The $383 million bill had been slated to come to the floor Thursday under expedited procedures requiring a two-thirds majority. But rather than risk falling short, the House Rules Committee – an arm of Speaker John Boehner (R-Ohio) – was called back into session to effectively lower the threshold to a simple majority. The bill will come up now Thursday with a conventional rule, approved by the Rules Committee quickly, allowing one hour of debate and no amendments.” David Rogers in Politico.

Oil and natural gas reserves jumped by the highest margin in three decades. “U.S. energy officials estimate that oil and natural-gas reserves jumped in 2010 by the highest margin in at least three decades, lending weight to the idea that the U.S. can meet more of its own energy demand. The Energy Information Administration said in its annual report that proven reserves of crude oil jumped by 13%, with the highest increases seen in Texas, North Dakota and the Gulf of Mexico. Proven reserves of natural gas rose by 12%. The increases were the highest recorded by EIA since it began publishing the estimates in 1977…The EIA estimates show 25.2 billion barrels of oil could be recovered in the U.S., up from the previous estimate of 22.3 billion barrels. Current U.S. petroleum consumption is about seven billion barrels annually. Natural-gas reserves are estimated at 318 trillion cubic feet, up from the previous estimate of 284 trillion cubic feet. Annual U.S. natural-gas consumption is about 24 trillion cubic feet.” Tennille Tracy in The Wall Street Journal.

@drgrist: U.S. energy-related CO2 emissions in early 2012 lowest since 1992 http://bit.ly/McJ1Bh

Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.