IMF raises warning flags, dials back growth forecasts for China, world
The IMF is now projecting slower growth for China and the world this year and next and raising the possibility of a so-called hard landing in China. "In the past three months, the global recovery, which was not strong to start with, has shown signs of further weakness" as "downside risks continue to loom large, importantly reflecting risks of delayed or insufficient policy action," the IMF said.
Prolonged U.S. drought spurs sharp rise in agricultural futures
A drought that blankets much of the U.S. Midwest is helping to boost agricultural commodities, with soybeans seeing their highest prices since 2008 and corn at 10-month highs. Forecasts call for no significant precipitation for the next 10 days. Given that outlook, "the path of least resistance is for higher prices until the crops get enough rain to stabilize yields," said Jim Gerlach, president of A/C Trading in Indiana.
U.S. retail sales register 0.5% decline in June
Defying forecasts, U.S. retail sales extended their losing streak to three months, declining 0.5% in June, according to the Commerce Department. The decline only adds to a growing collection of recent indicators that the U.S. economy is losing steam. "Evidence is increasingly clear that the U.S. economy is slowing," said Jim Baird, an investment strategist at Plante Moran Financial Advisors in Michigan.
U.K. economy to grow in 2nd half but is projected flat for year
The U.K. is likely to return to growth in the latter half of the year, with low inflation boosting consumer spending, according to a projection by Ernst & Young. But growth for the full year will be flat, while 2013 is expected to see growth of 1.6%.
Former Barclays official says he believed BOE pushed Libor manipulation
Former Barclays operating chief Jerry del Missier said he believed the Bank of England had sanctioned a request communicated to him by then-CEO Bob Diamond in 2008 to lower the bank's Libor submissions. "I relayed the content of the conversation I had with Mr. Diamond and fully expected the Bank of England views would be fully incorporated in the Libor submission," he told U.K. lawmakers.
Libor scandal has banks rethinking rate-setting seats
Banks around the world are reconsidering their participation in rate-setting panels in the wake of the Libor scandal involving Barclays. In Singapore, Royal Bank of Scotland withdrew from one such group. "People are saying, 'Hang on, what's the value in this for me?' Especially for those currencies which may not be trading in high volumes," said a source at one bank.
Citigroup posts 12% lower profit for 2nd quarter
Citigroup beat expectations but still posted a 12% decline in second-quarter profit as the third-largest U.S. bank continues to wrestle with bad assets from the credit crisis. "The problem is they have no justifiable way to grow," said Jeff Sica, president of New Jersey-based Sica Wealth Management.
U.S. reportedly builds criminal cases in Libor scandal
The Justice Department is putting together several criminal cases regarding the London Interbank Offered Rate against financial institutions and their employees, including traders at Barclays, said government officials who requested anonymity. One source said charges could be filed this year against at least one bank. That case is expected to nudge others toward settlement. All told, civil and criminal actions against the industry could tally up to tens of billions of dollars.
China's Lenovo is set to become world's largest PC-maker this year
China's Lenovo Group is expected to replace Hewlett-Packard this year as the world's top manufacturer of personal computers based on sales, industry analysts said. It will mark the first time a Chinese company is No. 1 in a technology sector.
France readies plan to boost auto industry
The French government is preparing measures to increase vehicle sales and provide broad assistance to the automotive sector, Finance Minister Pierre Moscovici said. He said the government is "looking for solutions" to automakers' problems after PSA Peugeot Citroen said it will close a factory near Paris and lay off 14,000 workers.
Obama criticizes Indian restrictions on foreign investment
U.S. President Barack Obama said India's restrictions on foreign investment are excessive and warned that the investment climate there is deteriorating. "In too many sectors, such as retail, India limits or prohibits the foreign investment that is necessary to create jobs in both our countries, and which is necessary for India to continue to grow," Obama said.
IASB reports "regret" that U.S. is stalling on IFRS
Securities and Exchange Commission staff did not recommend in a report what the agency should do about adopting International Financial Reporting Standards, despite 2½ years of consideration. It's possible that any kind of recommendation will not come until next year. The International Accounting Standards Board expressed "regret" that the U.S. hasn't made a bold move toward the global system.
Market Activity
Asian-Pacific markets are mixed; Chinese shares slide
Asian-Pacific stock markets were mixed Monday, with Chinese shares falling amid high-profile profit warnings. China's Shanghai Composite dropped 1.7%. Hong Kong's Hang Seng Index added 0.2%. Taiwan's Taiex closed down 0.2%. South Korea's Kospi gained 0.3%. Australia's S&P/ASX advanced 0.6%. India's Sensex was up 0.1% shortly after midday. Japan's exchanges were closed for a holiday.
Japanese sales of dollar bonds reach record-breaking $11B
Japanese companies sold more than $11 billion in U.S. dollar-denominated bonds last week, a record high. The bonds offered cheap funding because of a negative dollar-yen basis swap.
Investors shy from U.S. contractors as "fiscal cliff" approaches
With a "fiscal cliff" of tax increases and spending cuts drawing closer, investors are driving down stock prices of companies that get most of their sales from the U.S. government. Unless Congress takes action, the Pentagon must cut defense spending by $500 billion Jan. 2.
Economics
U.S. businesses scale back hiring plans, survey finds
With the European debt crisis hurting sales, U.S. companies are cutting back on hiring, according to a June survey by the National Association for Business Economics. Of responding companies, 23% said they plan to hire during the next six months, compared with 39% in the previous survey, conducted in late March and early April.
Men get most of U.S. jobs created after recession, data show
About 80% of net jobs created since the U.S. recession ended in June 2009 went to men, including 61% last year. One reason is a rebound in manufacturing, which is dominated by men.
Analysis: Private sector reinvents U.S. economy
The U.S. economy has heavy burdens to overcome, but presidential candidates appear to be overlooking important good news when they discuss the situation, according to The Economist. "Led by its inventive private sector, the economy is remaking itself," the magazine notes. "Old weaknesses are being remedied and new strengths discovered, with an agility that has much to teach stagnant Europe and dirigiste Asia."
Analysis: European recovery requires massive stimulus
Europe must implement a major stimulus program, supplementing labor-market reform and reduced social spending, if it is to revive the economy, according to Barron's. "The cure for deficits is growth. And the quickest way to spur growth is via monetary reflation," the publication notes. "A still-cheaper euro -- at parity with the U.S. dollar -- can restore Europe's competitiveness, end its debt crisis, and save its currency."
Survey: Investors with financial advisers more ready for retirement
Consumers who utilize financial advisers are much more prepared for retirement than those who don't, according to a survey by LIMRA. Among consumers who have an adviser, 60% are putting money into a retirement plan or an individual retirement account, compared with 38% of those who don't work with an adviser.
Geopolitical/Regulatory
U.S. regulator adds protection for customer funds
U.S. regulator adds protection for customer funds
The U.S. Commodity Futures Trading Commission approved rules to improve protection of customer funds, after Peregrine Financial Group was accused of fraud. The rules require brokers to increase reporting on customer accounts and that senior management approve major transfers or withdrawals from customer accounts.
France's financial-transaction tax prompts questions
European brokers are concerned about France's financial-transaction tax, which is supposed to go into effect Aug. 1. Many details about the tax, which covers transactions including high-frequency trading and naked sovereign credit default swaps, remain unclear. "There hasn't been appropriate planning for such a fundamental change," said Juan Pablo Urrutia, European general counsel at ITG. "Some may still be hoping that it will be delayed, but I can't see that happening given the political 'war on finance' platform on which President Francois Hollande was elected."
Some lawmakers seek lower top tax rate on dividends than Obama
U.S. Senate Democrats are splitting from President Barack Obama by trying to make the top tax rate on dividends 23.8%. Obama's budget proposal calls for a rate nearly 20 percentage points higher. The lower rate is part of an effort to extend expiring income-tax cuts by one year.
Financial Products
AQR Capital introduces 4 defensive mutual funds
AQR Capital Management launched four mutual funds pursuing defensive strategies designed to deliver typical equity yields but with lower volatility than equities usually experience. The AQR International Defensive Equity, AQR U.S. Defensive Equity, AQR Emerging Defensive Equity and AQR Risk-Balanced Commodities Strategy funds are distributed through advisers.
Ethics
Peregrine CEO is arrested, accused of fraud and lying
Peregrine Financial Group CEO Russell Wasendorf Sr. was arrested. Prosecutors said the 64-year-old admitted stealing more than $100 million from clients of the futures brokerage. In a note found after a failed suicide attempt, Wasendorf confessed to embezzling from customers and defrauding banks for almost two decades.
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