The UK asked that several of the largest nations in the alliance support a budget freeze for the EU and has received support from France and Germany, the two largest economies in the region by GDP.

According to the Prime Minister’s website:

Prime Minister David Cameron has announced that he and other European leaders will call for a real-terms freeze in the EU budget for 2014-2020.

Cameron specifically said he had the support of French President Nicolas Sarkozy and German Chancellor Angela Merkel.

“All around Europe, countries are tightening their belts to deal with their deficits. Europe cannot be immune from that. We want to see real budgetary restraint for 2014-20 – the time of the next financial perspective. That is why the text we will publish talks about at least a real-term freeze in the budget for that period.”

Cameron may be voted out of office in his own country for his successful push to get austerity measures into place which could cost 400,000 public jobs. But, at least he may be able to say that he was instrumental in his effort to blunt the growth of the EU budget.

Douglas A. McIntyre

24/7 Wall St. will look at the Twitter posts at Reuters Biz, WSJ, Financial Times, CNN Money, MarketWatch, CNBC, and 24/7 Wall St. each day to see which stocks are most frequently mentioned. It is clear that in this area of social media these tweet are a sign of which companies the Twitter universe is interested in. These financial sites are followed by a combined 625,000 Twitter users which makes them a sizeable sample of Wall St.’s interests. In some cases, we will publish the actual tweets from the sites.

Among the most tweeted stocks on StockTwits are Madison Square Garden Inc (NYSE: MSG), Baidu Inc (NASDAQ: BIDU), SPX, VIVUS Inc (NASDAQ: VVUS), Tesla (NASDAQ: TSLA), AK Steel Holding Corporation (NYSE: AKS), and Netflix Inc (NASDAQ: NFLX).NYT: Greece Pushes Through Pension Overhaul Despite Protests http://nyti.ms/bCVx3L

MarketWatch: European Central Bank holds rates; Trichet press conference at 8:30 a.m. Eastern http://on.mktw.net/clr9j8

MarketWatch: Bank of England keeps rates at record low 0.5% http://on.mktw.net/cg7Kn4

FT: Brussels to look closely at Google probe: The fact EU commissioner has commented on the case for the first time si… http://bit.ly/aKlxO0

CNBC: IMF raises 2010 global economic growth forecast but says financial risks rising

WSJ: The European Central Bank left its key interest rate unchanged at 1.00% Thursday, as widely expected. http://wsj.com

DailyFinace: Bank of England Leaves Benchmark Rate at 0.5% http://bit.ly/bDGhFH

Douglas A. McIntyre

24/7 Wall St. will look at the Twitter posts at Reuters Biz, WSJ, Financial Times, CNN Money, MarketWatch, CNBC, and 24/7 Wall St. each day to see which stocks are most frequently mentioned. It is clear that in this area of social media these tweet are a sign of which companies the Twitter universe is interested in. These financial sites are followed by a combined 625,000 Twitter users which makes them a sizeable sample of Wall St.’s interests. In some cases, we will publish the actual tweets from the sites.

Among the most tweeted stocks on StockTwits are SPX, IMAX Corporation (NASAQ: IMAX), FAS, Ctrip.com International (NASDAQ: CTRP), DAX, and Sears Holdings (NASDAQ: SHLD).Economist: China says won’t dump Treasuries; surprise fall in German industry orders; US service firms grow weakly http://ow.ly/283ua

DailyFinance: Mortgage Loan Applications Rise on Refinance Demand http://bit.ly/axWxcO

DailyFinance: Sony Cuts Price in Latest Round of E-Reader Wars http://bit.ly/bumG47

Yahoo! Finance: California Pension Funds in Big Trouble http://yhoo.it/9pwKpL

MarketWatch: Bond insurer Ambac gets listing warning from NYSE http://on.mktw.net/drf5pd

CNN Money: Dollar rebounds on uncertain economic outlook http://bit.ly/c3gJ2J

Reuters Biz: EU bank watchdogs set to detail stress tests http://link.reuters.com/feb36m

Reuters Biz: BP boss Hayward in MidEast talks as relief well advances http://link.reuters.com/pag36m

Douglas A. McIntyre

Reuters:   Saudi investors are seeking a 10% to 15% stake in BP.

Reuters:   Microsoft Corporation (NASDAQ: MSFT) will cut a small number of jobs.

Reuters:   Borders launched an e-book store.

Reuters:   Sony (NYSE: SNE) cut its e-reader price to better compete with the Amazon.com (NASDAQ: AMZN) Kindle and Barnes & Noble (NYSE: BKS) NookReuters:   Google Inc.’s (NASDAQ: GOOG) China website is being reviewed by the government.

Reuters:   China’s AgBank priced to be the largest IPO in history.

Reuters:   ICBC, one of China’s largest banks, may raise more money.

Reuters:   KKR will probably launch its IPO in mid-July.

WSJ:   Job benefits may cause the jobless to “pickier” in the job searches.

WSJ:   Steel production in falling, a sign that the economy is slowing.

WSJ:   Apple Inc (NASDAQ: AAPL ) said an app developer fraudulently set up several hundred iTunes accounts.

WSJ:   Japanese companies are redesigning products for emerging markets.

WSJ:   Google has increased its efforts to get more marketshare for its Chrome browser.

WSJ:   BP plc said it will not issue new equity.

WSJ:   VW added to its stake in Porsche.

WSJ:   The Obama home energy efficiency program may cause problems for real estate investors.

WSJ:   The UK is cutting its budget while the US is considering increasing its spending plan.

WSJ:   The EU said Monsanto cannot stop Argentine farmers who export seed with the company’s patented formula to Europe.

WSJ:   AT Kearny and Booz called off merger talks.

WSJ:   European governments are selling more property to bring in money.

NYT;   India is expanding its role as a drugmaker.

NYT:   UK inflation could hurt that nation’s recovery.

FT:   The Walt Disney Company (NYSE: DIS) will expand its language schools in China.

FT:   The earnings for global investment banks will drop sharply.

Bloomberg:   Samsung posted a record profit on chip sales.

Bloomberg:   China will put a resource tax on oil, gas, and coal on western sections of the country.

Bloomberg:   Microsoft Xbox sales probably broke $1 billion in the company’s last fiscal year.

Douglas A. McIntyre

Reuters:   Work on the BP plc (NYSE: B) oil spill will be delayed because of Hurricane Alex.

Reuters:   China’s economic growth slowed.

Reuters:   Oil prices fell for the fourth day.

Reuters:   The euro hit record lows against the Swiss franc.Reuters:   Microsoft Corporation killed its Kin phone.

Reuters:   Amazon.com (NASDAQ: AMZN) launched a less expensive Kindle.

Reuters:   Google Inc.’s (NASDAQ :GOOG) operating license in China is under review.

Reuters:   Amazon will buy online store Woot.

WSJ:   China’s banks are trying to find a source of earnings beyond lending in the People’s Republic.

WSJ:   GlaxoSmithKline (NYSE: GSK) has set up a number of small biotech units.

WSJ:   Democrats on a panel set up by Obama said spending cuts would have to outweigh taxes to drop the deficit.

WSJ:   Toyota (NYSE: TM) found engine problems in 270,000 cars

WSJ:   Wellpoint cut back rate increases.

WSJ:   Federal authorities began a crackdown on film piracy.

WSJ:   Robert Benmosche, CEO of American International Group, threatened to resign again.

WSJ:   Yahoo! Inc. (NASDAQ:YHOO) said it would buy back $3 billion in shares.

WSJ:   Moody’s may downgrade Spain’s Aaa rating.

WSJ:   The financial reform bill would cut FDIC charges for some small banks.

WSJ:   JAL will ask for more funds to operate in bankruptcy.

WSJ:   GM is expanding the launch of its Chevrolet Volt battery-powered car.

WSJ:   The WTO condemned subsidies offered to Airbus by European nations.

WSJ:   Warner Music (NYSE: WMG) and MTV will team up to market songs.

WSJ:   The SEC said that pension funds may not seek political contributions from politicians that oversee them

NYT:   Documents show Goldman Sachs Group put pressure on American International Group to make insurance payments.

NYT:   The TARP could be phased out early.

NYT:   During Q2 the DJIA was down 10% and the S&P 500 by 12%.

FT:   Manufacturing growth slowed in Asia.

FT:   The EU agreed to harsh guidelines for banker bonuses.

FT:   BP plc is trying to raise more money.

Bloomberg: Boeing (NSYE: BA) may get a lift for its Air Force tanker bid from the WTO censure of Airbus.

Bloomberg:   Apple Inc. (NASDAQ: AAPL) was sued by consumers over iPhone reception charges.

Bloomberg:   Google’s Chinese plans may push more advertisers to Baidu (NASDAQ: BIDU)

Douglas A. McIntyre

“Moody’s decision to initiate this review was prompted by (1) the deteriorating (short-term and long-term) economic growth prospects; (2) the challenges the government faces in achieving its fiscal targets; and (3) concerns over the impact of rising funding costs over the medium term”

The news is likely to add to the near panic in the capital markets which have growing concerns about deficits and national debt in Spain, Portugal, Ireland, Greece. A large number of economists have said that Greece will not be able to avoid defaulting on its sovereign paper. Nouriel Roubini recently commented that the southern European nation would be best off to renegotiate its debt in an orderly fashion now.

Behind much of the concern about the financial future of the Eurozone and its weakest nations are 1)signs that banks in the region are starved for capital and that stress tests of many of the financial firms will show that they are in trouble and need capital, and 2) a realization that austerity measures may not work. Government decisions to cut costs and raise taxes could be undermined by the actions of powerful unions and angry voters.

The increase in taxes in the weakest economies may also prove to be regressive and could actually hurt the treasury receipts in each of the countries.

The entire Moody’s opinion:

London, 30 June 2010 — Moody’s Investors Service has today placed Spain’s Aaa local and foreign currency government bond ratings on review for possible downgrade.

Moody’s decision to initiate this review was prompted by (1) the deteriorating (short-term and long-term) economic growth prospects; (2) the challenges the government faces in achieving its fiscal targets; and (3) concerns over the impact of rising funding costs over the medium term.

If at the conclusion of the review, Spain’s ratings are lowered, it would most likely be by one, or at most two, notches, according to Moody’s. The rating agency intends to conclude its review within a three-month period.

The Spanish government’s Prime-1 short-term rating is not affected by this review. Spain’s falls under the Eurozone’s Aaa regional ceilings, which are not affected by the review of the Spanish government’s ratings.

RATIONALE FOR REVIEW

“Spain’s growth prospects are weaker than those of other Aaa-rated sovereigns,” says Kathrin Muehlbronner, a Moody’s Vice President — Senior Analyst and lead analyst for Spain. In the short term, the government’s accelerated fiscal consolidation combined with the higher borrowing costs currently facing the government, consumers, and businesses will likely depress growth.

From a longer-term perspective, it will take several years for the economy to adjust to the fallout from the collapse of the real-estate boom, to reduce the high level of private sector indebtedness to levels more in line with other EU countries, and to find new, internal sources of economic growth. Accordingly, Moody’s now expects GDP growth to average just slightly above 1% over the entire 2010-2014 period.

The weaker growth trajectory in turn complicates an already very challenging fiscal consolidation programme. “Moody’s believes that more fundamental adjustments to key spending items will be required in order to achieve the government’s budget deficit targets,” says Ms Muehlbronner. Moody’s own forecasts for Spain’s fiscal deficits are higher than the government’s targets. According to Moody’s projections, Spain’s debt-to-GDP ratio is likely to rise to about 80% by 2014.

Moody’s noted that the government’s efforts to put forward structural reforms — in the labour market, the banking sector and potentially also the pension system — are positive developments that could help revive Spain’s growth potential in the medium term. These proposals, however, have yet to restore investor confidence. As a result, the government’s funding costs remain elevated and its debt affordability ratio (the ratio of interest on the debt to government revenues) is likely to become increasingly out of line with those of other top-rated countries over time.

FACTORS TO BE CONSIDERED IN THE REVIEW

The review of Spain’s sovereign rating will assess the broader political commitment to structural reform and the likelihood that the reforms approved by parliament will be far-reaching enough to significantly stimulate long-term growth. Specifically, Moody’s will also review Spain’s upcoming 2011 budget plan, due to be presented in September, to assess whether the deficit target for 2011 can be achieved. The rating agency will also consider the contribution from the country’s regional and local governments towards the fiscal consolidation effort.

The outcome of the review could also be affected if the costs of recapitalizing Spain’s banking sector, which Moody’s currently believes to be manageable, were to turn out to be much larger than expected.

For further information, please see Moody’s Special Comment “Key Drivers of Decision to Review Spain’s Aaa for Possible Downgrade” available on www.moodys.com.

PREVIOUS RATING ACTION & METHODOLOGY

Moody’s last rating action affecting Spain was implemented on 29 July 2009, when the rating agency affirmed Spain’s Aaa local and foreign currency government bond ratings and their stable outlook. The last rating action on Spain prior to that was taken on 24 May 2006, when the rating agency affirmed the Aaa foreign and domestic currency country ceilings of the Eurozone. Prior to that, the last rating action on Spain was implemented on 13 December 2001, when Moody’s raised the government’s local and foreign currency bond ratings to Aaa with a stable outlook from Aa2/positive.

The principal methodology used in rating the government of Spain is “Moody’s Sovereign Bond Methodology”, published in 2008, which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody’s website.

Douglas A. McIntyre

Greece showed how bad a crisis of confidence can be. The capital markets lose faith and eventually the interest rates a nation must pay are so high that they cannot even handle the debt service.

Several members of Congress say they are concerned about the estimated $100 billion cost to the US from participation in the IMF’s rescue of the weak Eurozone nations. Their logic is that the US contribution to the IMF is large enough to put tens of billions of dollars of American capital at risk. Since the loans are likely to be paid back, at least as the economy of the Eurozone stands now, the fears are overblown.It is inconceivable that the US would offer any direct aid to any nation in Europe.  Congress is concerned enough about the U.S. deficit that has cut funding for the new unemployment benefit package. If the US will not help its own citizens, there is no chance it would help any country with faltering finances

Nonetheless, the US does offer aide to many countries around the world whether that is through military means or support for nations that hold strategic interest for America. Europe’s fate is about to become a strategic interest. A deep recession there, defaults on sovereign or bank debt, and exposure US banks have in the region could all severely damage the American economy and the balance sheets of some of the largest financial firms headquartered inside its borders. Aid to Europe may become a necessity rather than a choice.

Congress is reluctant to invest further in the economic health of the US much beyond the $787 billion aid package passed more than a year ago. Perhaps that is because there is little evidence that it worked or because the mid-term elections may be largely determined by the public’s view of federal deficit spending.

A collapse of Europe’s economy becomes more likely as each day passes. A US-lead salvation of the region may be the only way to prevent another sharp slowing of the American economy. Congress may have another hard expenditure decision to make before the end of the year.

Douglas A. McIntyre

The numbers helped cause a rally in Europe’s markets and uptick in US futures.

Chart from INO

Douglas A. Mcintyre

Sponsor: 5 best investments for 2010 – The next nine months represent a bold new era for investors.

French and German banks were particularly exposed to the residents of Greece, Ireland, Portugal and Spain. At the end of 2009, they had $958 billion of combined exposures ($493 billion and $465 billion, respectively) to the
residents of these countries. This amounted to 61% of all reported euro area banks’ exposures to those economies. French and German banks were most exposed to residents of Spain ($248 billion and $202 billion, respectively).

The survey shows  for the first time the extent to which Europe’s largest banks could be severely and perhaps irreparably be damaged by a devaluation or default on the sovereign obligations of the four troubled nations. So far, the plans by the Eurozone and IMF to back paper from these nations, and perhaps others, has caused the creation of a $1 trillion rescue facility. A sell-off in the euro over the last several weeks indicates that the fund may not be adequate if a panic sweeps the capital markets because of concern that contagion would bring down the finances of all four nations. Each has embarked on plans to cut national expenses, but they cuts may be inadequate and they are being protested in each country.

The bank’s exposure may be one reason that Germany and France ended up supporting the Eurozone bailout fund. If their financial firms end up facing the kinds of losses that American banks did during the credit crisis, France and Germany mat need  to set up their own TARP funds. Several EU nations with smaller exposure might have to do the same thing. The obligations for the TARP-lake facilities could dwarf the commitments made by Eurozone nations to the bailout facility.

In other words, countries such as France and Germany will have to pay for the weakness of  Eurozone nations either through aid to the weaker nations in the alliance or direct aid to their own banks.

Douglas A. McIntyre

In a surprising statement, Merkel argued that stimulus efforts and a financial rescue of weak European nations are worsening the underlying deficit problems in the region.Merkel has taken the deficit reduction side of the “cut expenses”/”spend to stimulate” debate. Her rationale is compelling. Eurozone nations, especially those with weak economies,  have already stretched their sovereign financial borrowing to the limit. Greece, Portugal, and Spain need austerity and not government investment in future growth and improved employment.

Merkel’s advice is easy for Germany to take, but not so easy for its neighbors. The German economy has already shown some signs of brightening. It is the world’s second largest exporter after China, and Chinese data shows a huge recovery in its trade. Paired with budget cuts, Germany may run a surplus in the next few years.

Polls of international capital markets investors done by the WSJ and Bloomberg underscore the growing concern about the financial crisis in Greece, Spain, and Portugal. The most powerful buyers of fixed income paper believe it is only a matter of time before Greece defaults. The contagion from a default would be nearly inevitable as money would flee European debt.

Merkel held out little or no hope for a middle path, which would be that some of the $1 trillion rescue facility be used to increase the liquidity of weak Eurozone nations and allow them to keep their stimulus plans in place.  For Merkel, it is a black or white world–either austerity or default.

There have been suspicions that Germany would like to withdraw from the Eurozone or see the alliance fail so it could rely on its own currency to deal with trading partners. Merkel may get her wish if her public pessimism about the region turns out to be true and powerful investors continue to bet against the Europe.

Douglas A. McIntyre