What’s the Story?

by CC July 16, 2012 9:02 am • Commentary

WSJ

U.S. stock futures edged lower after June retail sales unexpectedly fell, adding to worries about China’s economy and the consequences of the Spanish bank bailout.

Less than an hour before the opening bell, Dow Jones Industrial Average futures slipped 42 points, or 0.3%, to 12669. The Dow ran up 203.82 points, or 1.6%, on Friday to end a six-session losing streak.

Standard & Poor’s 500-stock index futures eased five points, or 0.4%, to 1347 and Nasdaq 100 futures lost seven, or 0.3%, to 2570. Changes in stock futures don’t always accurately predict stock moves after the opening bell.

Retail sales fell for the third straight month in June, bucking economists’ expectations for an increase, the Commerce Department reported.

Manufacturing activity in New York rose more than expected in July, though new orders in the region sunk into territory indicating contraction for the first time since November 2011, according to the the Federal Reserve Bank’s Empire State Manufacturing Survey.

Economists expect a 10 a.m. report on business inventories in May to show a 0.2% increase.

WSJ

An index covering New York manufacturing activity climbed five points, though new orders in the region sunk into contractionary territory for the first time since November 2011, according to the Federal Reserve Bank of New York’s Empire State Manufacturing Survey released Monday. The Empire State’s business conditions index rose to 7.4 in July, reversing a sharp fall in June that look the reading to just 2.29. The new orders index dropped five points, to -2.7. An uptick in the headline reading suggests “that conditions improved modestly over the month,” the report said. Economists surveyed by Dow Jones Newswires had expected the index to increase to 5.0. Aside from new orders, other Empire subindexes generally recovered from last month’s downturn. The shipments index rose five points to 10.3, after plunging to 4.81 in June. But that is still below the year-high of 24.14 hit in May. Labor conditions improved. The employment index rose to 18.5 from 12.37. The workweek index, however, tumbled further to zero from 3.09. Price measures continued to ease this month. The prices paid index declined for the fourth consecutive month, falling a steep 12 points to 7.4 in July. That’s the lowest level since mid-2009. “This index has fallen a cumulative 43 points since March, pointing to a significant reduction in the pace of input price increases in recent months,” the report said. The prices received index rose to 3.7 from 1.03, pointing to a small increase in selling prices. Optimism about the future also waned.

Marketwatch

U.S. retail sales fell by a seasonally adjusted 0.5% in June to mark the third straight decline, the first time that’s happened since midway through the last recession in 2008, according to the latest government data. Excluding autos, sales dropped 0.4%, the Commerce Department said Monday. Economists surveyed by MarketWatch had forecast a 0.2% increase in overall retail sales and no change excluding autos. Gasoline stations reported the biggest drop, down 1.8%, but almost every sector of the economy posted a decline. In the past 12 months, retail sales have risen 3.5%, but they fell in each month of the second quarter. Sales in May were unchanged at a 0.2% decline, while sales in April were revised down to a 0.5% drop from -0.2%.

Reuters

Citigroup Inc reported lower second-quarter profit on Monday as the big banking group lost money on the sale of a stake in a Turkish bank and suffered from the drag of its troubled assets left over from the credit crisis.

Net income was $2.9 billion, or 95 cents per share, compared with $3.34 billion in the same quarter a year earlier, the company said.

Citigroup is the third largest U.S.-based bank by assets.

FT

The head of Europe’s top banking regulator has raised the bar for lenders’ capital requirements, insisting that the 9 per cent capital ratio they had to hit as a “temporary buffer” by June is to become permanent, reports the Financial Times.

Andrea Enria, chairman of the European Banking Authority, said “capital conservation” was his priority, with the eurozone crisis persisting and the six-year phase-in of Basel III global capital standards set to begin next year.

Europe’s Bank shifts view on bond losses

The European Central Bank, in a sharp turnaround, advocated imposing losses on holders of senior bonds issued by the most severely damaged Spanish savings banks—though finance ministers have for now rejected the approach, according to people familiar with discussions, reports The Wall Street Journal.

The ECB’s new position was made clear by its president, Mario Draghi, at a meeting of eurozone finance ministers discussing a rescue for Spain’s struggling local lenders in Brussels the evening of July 9.

WSJ

Exchange operator CME Group Inc. (CME) said its current system of customer protection is inadequate after two major futures brokers failed in less than a year.

Duke Energy Corp. (DUK) has named Keith Trent, who most recently led Duke’s commercial business, as the new head of its regulated utilities business, following the resignation of John McArthur earlier this week.

J.C. Penney Co. (JCP) was dealt another setback Friday when a judge granted a preliminary injunction to Macy’s Inc. (M) in its case against Martha Stewart Living Omnimedia Inc. (MSO).

United Parcel Service Inc. (UPS) said its proposed acquisition of TNT Express N.V. (TNTE.AE, TNTEY) is expected to close in the fourth quarter as European Union regulatory authorities need more time to analyze certain areas of the deal.