German court says ESM is constitutional. As expected, Germany's Constitutional Court has ruled that the eurozone's ESM rescue fund and the "fiscal compact" are constitutional, opening the way for the country's president to sign the proposals into law. However, the court said that German liability must not surpass €190B without the Bundestag providing further authorization. Still the ruling sent equity, oil and commodity markets higher, as well as the euro, although some risk assets have since fallen back a bit (see below for details).
Spain considers request for ECB bond purchases. Spain is considering asking for assistance from the ECB's bond-buying program, PM Mariano Rajoy has told Finnish newspapers. While Rajoy ruled out asking for a full bailout and taking orders over the budget, he has no objection to IMF monitoring. His comments indicate that Spain would apply for the precautionary assistance program, which carries lighter conditions.
Top Stock News
Ford mulls Mulally replacement. The directors of Ford (NYSE:F) are due to meet tomorrow, when they're expected to discuss one of the most pressing issues facing the automaker: the retirement of CEO Alan Mulally. President of the Americas, Mark Fields, is poised to be promoted to COO, anointing him as a probable successor to Mulally, Bloomberg reports.
Zuckerberg predicts big things for mobile. Mark Zuckerberg yesterday attempted to soothe concerns about Facebook's (NASDAQ:FB) mobile monetization, predicting that the social network will eventually make more money off mobile than from PCs. Zuckerberg admitted that the company jumped the gun in embracing HTML5, something that was responsible for the sluggish performance of its mobile apps. He also acknowledged that Facebook's "disappointing" share price "doesn't help" as an incentive for employees.
Documents put P-E firms in bad light over bids. Unsealed court documents show how Blackstone (NYSE:BX), Goldman Sachs' (NYSE:GS) P-E arm, Bain and other firms appear to have colluded on bids for companies they were buying in order keep prices down. In Bain's $32.1B purchase of hospital giant HCA in 2006, rival suitors agreed to "stand down" as part of an understanding to divide up the acquisition of other firms. The documents are part of a lawsuit against P-E companies for the alleged rigging of bids.
Apple expected to introduce iPhone 5. Apple (NASDAQ:AAPL) frenzy should go into overdrive today with the expected unveiling of the iPhone 5, which will reportedly offer 4G cellular technology, have a bigger screen, and run on the new iOS 6. Investment banker Rajeev Chand says the device will have to be "a major step up" given the expectations, but then the iPhone 4S received a fairly lukewarm reception and went on to be a raging success.
Microsoft, Nokia work round the clock to finish WP8. Microsoft (NASDAQ:MSFT) isn't finished developing Windows Phone 8, The Verge reports, and is "working overtime" with Nokia (NYSE:NOK) to make sure that the OS meets its October 29 launch date. Any major delay would be a huge problem for Nokia, whose Lumia 920 and 820 WP8 phones already appear fated to begin selling weeks after the next iPhone.
Top Economic & Other News
Dutch go to the polls. Holland is voting in a general election today, with polls showing the two mainstream pro-European parties in the lead but neck and neck. The more radical left and right-wing euro-skeptic groups have faded, reducing fears that they'll gain enough influence to be able to effectively push for Holland to breach eurozone budget rules, block programs such as the ESM, or even leave the EU.
EU unveils new powers for ECB. European Commission President Jose Manuel Barroso today outlined EU plans to turn the ECB into the eurozone's banking supervisor, the first step towards a banking union. The ECB would begin overseeing the bloc's largest banks from July 2013 and smaller institutions six months later, although national authorities would retain control of daily supervision. Giving the ECB supervisory power will also enable the ESM to provide aid directly to banks.
Fed expected to turn on the printing presses. The FOMC is due to start its two-day policy meeting today, with almost two-thirds of economists surveyed by Bloomberg expecting an announcement of QE3 and one about extending the duration of the Fed's zero-interest-rate policy into 2015. However, Sumitomo Mitsui's Katsunori Kitakura tells Reuters that, "I feel that the market is getting a bit too excited about the chance of QE."
Were is Xi? The feverish speculation over the whereabouts and well-being of China's presumed next president and current VP, Xi Jinping, continues as his absence from public view reaches an 11th day. Typically quick to shoot down rumors, Beijing has been silent on the subject. The great economic power "looks like a tin-pot dictatorship," comments the WSJ.
Boehner unsure about ability to avert fiscal cliff. Republican House Speaker John Boehner isn't sure that Congress and President Obama can reach a deal to avoid the fiscal cliff. "I’m not confident at all," Boehner quipped. It may just be electioneering by the Republicans to keep the heat on the President, but it's risky banter with a resolution already priced into the markets.
Japanese machinery orders slay expectations. Japanese core machinery orders rose 4.6% on month in July vs. +5.6% in June and consensus of +1.4%. The increase was led by a jump in manufacturing sector orders, although economists remain cautious over prospects for economic growth. One points out that bookings haven't yet recovered from a 14.8% plunge in May.
In Asia, Japan +1.7%. Hong Kong +1.1%. China +0.3%. India +0.8%.
In Europe, at midday, London flat. Paris +0.7%. Frankfurt +0.7%.
Futures at 7:00: Dow +0.4%. S&P +0.4%. Nasdaq +0.6%. Crude +0.5% to $97.63. Gold +0.6% to $1746.
Today's economic calendar:
FOMC meeting begins
7:00 MBA Mortgage Applications
8:30 Import/Export Prices
10:00 Wholesale Trade
10:30 EIA Petroleum Inventories
1:00 PM Results of $21B, 10-Year Bond Auction
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