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The market is down this morning as
we try to digest the economic news from around the world. The U.S.
economy is slowing; the Non-Farm payroll report last week showed fewer new net jobs than are needed to put new
entrants in the work force on payrolls. Eurozone Finance Ministers are
meeting this morning to work on the bank and bond buying program agreed to ten days ago between their
leaders. China’s economy is looking weaker with every economic report
that comes out.
Premier Wen Jiabao called for
aggressive fiscal and monetary policies after government data showed consumer prices dropped 0.6% last
month. This was the largest month-to-month drop in two
years. Producer Prices were down 2.1% in June. Ren Zianfeng, economist at HIS Consulting, told the Taipei Times “Today’s inflation data show that deflation could become a larger concern for
China than inflation.”
The Peoples Bank of China cut
interest rates last Thursday for the second time in a month. There have
been three bank reserve reductions since last November.
Spain’s borrowing costs popped over
7% on ten-year bonds this morning. Eurozone Finance Ministers are
expected to relax Spain’s financial targets today and make progress on a loan package for Spanish
banks. Bank inspections are taking place on all eurozone
banks. The Finance Ministers hope to have the results of these
inspections by September.
The investigation into Barclays PLC
submitting low LIBOR quotes has taken a turn. Ex-CEO Bob Diamond
revealed emails between him and the Deputy Governor of the Bank of England, Paul Tucker. Mr. Tucker was concerned that Barclay’s LIBOR submissions were too
high. This might indicate the bank was encountering difficulty
borrowing money from other banks.
On October 26, 2008, Tucker wrote
Diamond he was “struck that your (government guaranteed) bond was issued at around 140 over gilts….That’s a
lot.” A few days earlier, on the 22nd, Tucker asked to “talk to one or
both of you about LIBOR…it’s a slightly sensitive point.”
Tucker appeared before the Treasury
Select Committee this morning to explain the emails and the record of a phone call he had with the Barclay’s
CEO. Tucker told the committee the phone call record gave the “wrong
Barclay’s Diamond testified last
week, he didn’t feel the call and emails were an instruction to the bank to lower their LIBOR submissions, but the
bank did just that a few days later. Tucker also denied that any
government officials pressed him to push Barclays to lower their LIBOR quotes. Sky News has the story and excerpts from the emails.
The Muslim Brotherhood is pushing
forward in their effort to lock down Egypt over the weekend. Newly
elected President Mohamed Mursi ordered the parliament to reconvene on Tuesday. Egypt’s Supreme Constitutional Court had ruled one-third of the parliament was
unlawfully elected before the Presidential elections. The military
tribunal that was governing Egypt disbanded the legislature until new elections could be
The Muslim Brotherhood has a
majority in the parliament, so this move by Mursi is an open challenge to the military and the
Court. With the parliament behind him, Mursi can enact changes to
the constitution. Mursi ordered new elections would be held for
parliament, after a new constitution was passed by referendum.
Reuters has the story on Egyptian Parliament defying Army.
Even the though the market looks
soft today, it looks like sellers are not panicking and buyers want to step in. Earnings season will start tonight when Alcoa (AA) announces after the
bell. Are you ready for some earnings? Analysts expect AA to show a sharp drop in in second quarter on lower
We need earnings to bring out some
Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners
are universally corrupt. He therefore is the truest friend of the liberty of his country who tries most to promote
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