1. travel
2. tourist destinations
3. greece

Market Snapshot*
DJIA
17683.58
-46.52
4991.94
-17.26
S&P 500
2068.76
-8.01
10-Year
2.2771%
+1
Nasdaq
Monday, July 06, 2015
30-Year
3.0719%
2 8/32
Euro
$1.10535
-0.0032
$52.53
-4.4
Nymex Crude
Source: SIX Telekurs, ICAP plc
Stocks
U.S. stocks drifted lower Monday after
Greeks resoundingly rejected creditors'
conditions for further financial aid. More
than 61% of Greek citizens voted "no" in
Sunday's referendum on the terms for a
bailout that included pension cuts, tax
increases and other measures. The referendum was on whether to accept austerity terms demanded by the country's
creditors in exchange for further aid. The
"no" vote appeared to increase the likelihood that Greece may eventually exit the
eurozone.
Treasurys
Investors piled into ultrasafe U.S.
Treasury bonds Monday as Greece's
sovereign debt crisis plunged further into
uncharted territory. "It is a flight to quality
trade," said Tom di Galoma, head of
rates and credit trading in New York at
ED & F Man Capital Markets. "Greece
being forced to leave the eurozone is
truly the biggest risk right now."
Forex
The Japanese yen rose modestly against
the euro and the dollar Monday as
investors sought to protect their wealth
amid concerns that Greece has moved
closer to exiting the eurozone. The yen
rose 0.6% toward a five-week high
against the common currency, with one
euro buying 135.69 yen. The yen also
increased 0.3% against the dollar, trading
at 122.44 yen against the U.S. currency.
Tomorrow’s Headlines
Germany Stays Tough on Greek Debt Relief
Germany stood firm against debt relief for Greece the day after the country’s
voters issued a resounding “no” to more austerity, signaling a possible tough
fight ahead on one of the few remaining opportunities for compromise.
About 61% of Greek voters strongly backed Prime Minister Alexis Tsipras’s
stance against the pension cuts and tax increases that creditors—the rest of
the eurozone and the International Monetary Fund—say are necessary to get
Greece’s economy going again.
That leaves cutting debt as a central subject. German Chancellor Angela
Merkel and French President Francois Hollande, whose country has emerged
as one of the few friendly voices for Greece in the eurozone, were to discuss
the issue in Paris on Monday evening, and it will be a major theme at a summit of eurozone leaders on Tuesday.
Raising expectations on the possibility of resuming negotiations, the country’s
confrontational Finance Minister Yanis Varoufakis resigned on Monday under
pressure from Mr. Tsipras and creditors. Though extremely popular at home,
Mr. Varoufakis has exasperated European colleagues with his blunt talk since
taking the job at the end of January.
Humana Cuts View Days After Aetna Deal
Humana Inc. on Monday cut its earnings outlook because of higher-thanexpected medical costs as the company discussed its previously announced
$34.1 billion tie-up with Aetna Inc.
continued on page 2
Tomorrow’s Calendar
7:45 a.m.
07/04 The Retail Economist/Goldman Sachs Weekly Chain Store
Sales Index - WoW (previous +2.2%), YoY (previous +2.7%)
8:30 a.m.
May U.S. International Trade in Goods & Services Deficit
(expected -42.8B), Exports (previous 189.91B), Exports Percent
Change (previous +1%), Imports (previous 230.78B), Imports
Percent Change (previous -3.3%)
8:55 a.m.
07/04 Johnson Redbook Retail Sales Index MoM % Change
(previous -1.5%), 12MonChgPct (previous +1.4%), 52WkChgPct
(previous +1.7%)
10:00 a.m.
IMF staff report on the U.S. economy
10:00 a.m.
Jul IBD/TIPP Economic Optimism Index Economic Optimism Index
(previous 48.1), 6-Month Economic Outlook (previous 45.3)
10:00 a.m.
May Job Openings & Labor Turnover Survey
4:30 p.m.
07/03 API Weekly Statistical Bulletin Crude Stocks (Net Change)
(previous +1.9M), Gasoline Stocks (Net Change) (previous +0.33M),
Distillate Stocks (Net Change) (previous +0.26M), Refinery Runs
N/A
Obama hosts Vietnamese Communist Party chief at the White House
Commodities
Oil prices on Monday skidded to their
biggest single-day declines in more than
three months, as gyrations in Chinese
stocks and the prospect of more crude
from the U.S. and Iran revived worries
about the global supply glut. China's
stock markets have plunged in recent
weeks, which sparked worries among
investors about oil demand in the world's
second-largest consumer.
*preliminary values subject to adjustments
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
page 1
Monday, July 06, 2015 4 p.m. ET
Tomorrow’s Headlines
continued
Humana Chief Executive Bruce Broussard said the company is performing in a “reasonable fashion,” but that hospital
admissions in its Medicare Advantage business “have not
come down as quickly” as it projected.
As a result, the insurer predicted earnings of $1.60 to $1.65
a share for the quarter ended in June, short of the $2.36
anticipated by analysts polled by Thomson Reuters. For the
year, Humana sees per-share earnings excluding certain
costs of $7.75, down sharply from its previous estimate of
$8.50 to $9.
The new outlook comes as Humana recently agreed to be
bought by rival Aetna for about $230 a share in cash and
stock. On a conference call Monday, Aetna Chief Financial
Officer Shawn Guertin said Humana’s updated outlook was
“consistent with the information we examined during our
diligence,” adding the companies did “months of thoughtful
analysis.”
Humana also said it had revised its 2016 bids to reflect the
higher costs and was confident in its pricing plans. Aetna
noted that it had reached the same conclusion after hiring
an independent company to review the bids.
Seritage Shares Rise After
Spinoff From Sears
Seritage Growth Properties’ shares gained as much as 4%
in their market debut on Monday after the real estate spinoff of Sears Holdings Corp. estimated that it brought in
about $1.6 billion through its rights offering.
Seritage Growth, structured as a real-estate investment
trust, plans to use the proceeds of the offering to fund in
part its $2.72 billion purchase of 235 properties and 31
joint-venture interests from Sears. That purchase is expected to close Tuesday.
Seritage said it would lease back all but 11 properties to
Sears.
Sears announced it was exploring spinning off some of its
top Sears and Kmart properties into a REIT last year as it
sought to raise much-needed cash.
FINRA Orders Wells, RJames, LPL
To Pay $30M On Overcharging
Wall Street’s self-regulator ordered three of the nation’s
biggest brokerages to pay more than $30 million in restitution to clients overcharged on mutual-fund sales.
The wealth-management units of Wells Fargo & Co.,
Raymond James Financial Inc. and LPL Financial Holdings
Inc. failed to waive mutual-fund sales fees for certain retirement-plan customers and charitable organizations, the
Financial Industry Regulatory Authority Inc. said Monday.
The restitution follows a similar order against Merrill Lynch
last year. Finra ordered the Bank of America Corp. unit in
June 2014 to pay an $8 million fine and $24.4 million in
restitution to settle allegations that it improperly applied
mutual-fund sales charges to certain accounts.
Mutual-fund companies provide sales-charge waivers for
retirement plans to keep them in line with Employee
Retirement Income Security Act rules that are designed to
reduce conflicts of interest.
Fortress To Restructure Flagship Fund
Fortress Investment Group LLC is set to announce a major
restructuring of its flagship hedge fund on the heels of
heavy recent losses and significant investor withdrawals,
according to people close to the matter.
The fund, Fortress Macro Fund, which is run by closely followed investor Michael Novogratz, is down about 10% so
far this year due in part to poor currency trades. It began
the year at $1.6 billion in assets and managed $1.3 billion
as of March 31. Including related accounts, the fund managed $2.8 billion as of March 31, down from $3.2 billion at
the beginning of the year.
Mr. Novogratz, a former college wrestler known for his highprofile public predictions about global economic trends and
a flamboyant sartorial style, has been in a slump in recent
years. The fund, launched in 2002, managed more than $8
billion in 2007.
Judge Tosses Ex-Goldman
Programmer’s Second Conviction
Sergey Aleynikov has spent about half a decade on trial,
accused of stealing sophisticated trading software from
Goldman Sachs Group Inc. And for the second time in four
years, a court delivered a judgment that went against a
jury’s findings: He isn’t guilty of breaking the law.
On Monday, New York state Justice Daniel P. Conviser dismissed a conviction of Sergey Aleynikov, saying prosecutors hadn’t shown enough evidence to support a jury’s May
verdict that Mr. Aleynikov made unlawful use of secret scientific material.
The ruling is a rebuke to prosecutors in the office of
Manhattan District Attorney Cyrus R. Vance Jr., who
pushed the case in state court even after a similar case
was thrown out at the federal level three years ago.
Mr. Aleynikov was convicted on charges of stealing the
bank’s “secret sauce” trading code in federal court in 2010,
but was acquitted by an appellate court in 2012 after
spending a year in prison. Less than a year after his federal
case was thrown out, Mr. Vance’s office charged him under
state laws.
It is rare for state prosecutors to bring a criminal case related to the same conduct after a federal conviction is overturned—and some lawyers in the defense bar at the time
described the move as overly aggressive.
Wells Fargo will have to pay about $15 million, Raymond
James $8.7 million, and LPL $6.3 million.
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
continued on page 3
page 2
Monday, July 06, 2015 4 p.m. ET
Canada Business Sector
Feels Lower Oil Prices
Tomorrow’s Headlines
continued
American Apparel to Close Stores,
Raise Capital
American Apparel Inc. warned on Monday that it may need
to raise additional capital over the next year even as it
embarks on an aggressive cost-cutting plan to help it end
five years of losses.
The embattled retailer is seeking to save $30 million over
the next 18 months through various measures including
closing stores and laying off workers.
The company didn’t say how many employees would lose
their jobs, but said in a release Monday that it is seeking to
preserve jobs for the “overwhelming majority” of its 10,000
employees. It plans to shut underperforming stores in oversaturated markets, while looking to add new locations in
profitable, fast-growing territories.
Starbucks Raises Prices by About 1%
Starbucks Corp. is raising prices slightly on some of its beverages to cover rising costs including wages and rent, even
as prices for raw coffee have been falling.
The Seattle company, like other coffee purveyors, often
raises prices for its products when coffee prices increase,
but the latest move comes despite a decline of about 42%
in Arabica futures prices from a peak late last year. The
increase, which takes effect Tuesday, will increase the cost
of the average customer order by about 1%, Starbucks
said. Bagged coffee won’t be affected.
Canada’s business sector continues to feel the pain of
lower oil prices, though business sentiment edged up in the
second quarter after a dismal start to the year, the Bank of
Canada said Monday.
Views on sales prospects, capital investment and hiring
remain at relatively weak levels, the central bank said in its
quarterly business outlook survey. The findings are likely to
add to pressure on Bank of Canada Governor Stephen
Poloz to cut interest rates for the second time this year
amid evidence the Canadian economy has stalled.
Canada’s gross domestic product declined 0.6% on an
annualized basis in the first quarter, and shrank 0.1% in
April, providing a weak start to the second quarter.
“There was little in the survey to inspire optimism about
Canada’s economy,” said Leslie Preston, an economist at
TD Bank.
Iran: Nuclear Deal Must Include
Lifting Arms Embargo
Iran is pushing for the United Nations’ arms embargo on
the country to be completely lifted, as part of a final agreement to curb its nuclear program, a senior Iranian diplomat
said on Monday.
Tehran’s demand is among the final issues still being negotiated between Iran and six world powers—Britain, China,
France, Germany, Russia and the U.S.—in an effort to
reach a final agreement in the Austrian capital.
The increase comes from an overall need to manage business costs, including labor and rent expenses, a Starbucks
spokeswoman said.
The Obama administration has cited Tuesday as the deadline for concluding the talks. But U.S. and Iranian officials
have suggested privately in recent days that the negotiations could extend to later in the week.
ISM Services Index
Rises To 56 In June
Obama To Get Pentagon
Briefing On Islamic State
The U.S. service sector plodded along in June, according
to data released Monday by the Institute for Supply
Management. Respondents were generally upbeat about
the economy.
President Barack Obama will get a rare briefing at the
Pentagon Monday about the military’s efforts against
Islamic State as the administration faces persistent criticism
that his strategy is too cautious.
The ISM’s nonmanufacturing purchasing managers index
edged up to 56.0 in June from 55.7 in May. Forecasters
surveyed by The Wall Street Journal had expected last
month’s PMI to rise to 56.3. “The service sector continues
to expand at a solid pace, but the pace of expansion is no
longer accelerating,” wrote economists at Jefferies in a
research note.
Mr. Obama will receive updates from Defense Secretary
Ash Carter, Chairman of the Joint Chiefs of Staff Gen.
Marty Dempsey and others about the Pentagon’s efforts
against Islamic State, and then will make public remarks
based on what he has learned. Mr. Obama’s visit to the
Pentagon is being billed as a routine update, and he isn’t
expected to announce any big changes to the strategy
against the militant group that has proved to be a formidable adversary in both Iraq and Syria.
Earlier Monday, data provider Markit said its service-sector
composite fell to 54.8 in June from 56.2 in May. Markit said
output and employment growth each slowed in June. As
with the ISM, Markit readings above 50 indicate activity is
expanding.
Still, the visit across the Potomac River for the president is
far from routine: last time Mr. Obama appeared at the
Pentagon was in October 2014.
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
page 3
Monday, July 06, 2015 4 p.m. ET
Copyright Dow Jones & Co., Inc.
Talking Points
Tomorrow's News Today is made
available as a complimentary service
to Dow Jones News Service paying
subscribers. No further redistribution is
permitted without written permission
from Dow Jones. Tomorrow’s News
Today is intended to provide factual
information, but its accuracy cannot
be guaranteed. Dow Jones is not a
registered investment adviser, and
under no circumstances shall any of
the information provided be construed
as a buy or sell recommendation or
investment advice of any kind.
Germany Has Much To Lose In Grexit
Want to send a co-branded daily
version to your valued clients?
Dow Jones offers subscribing firms the
opportunity to co-brand Tomorrow's
News Today for redistribution to their
clients. If your firm is interested in
co-branding, please contact us at
[email protected] or
1.800.223.2274.
When Chancellor Angela Merkel joins her fellow European leaders in Brussels
on Tuesday for talks that will decide whether Greece can keep the euro, the cost
of failure will be at the back of her mind.
Should the talks collapse and Greece stumble out of the eurozone, every member state stands to lose the loans extended as part of Greece’s past bailouts—a
factor that could help sway the negotiations one way or another.
Yet, while many countries might see the price of failure as an incentive to seek an
amicable deal, Germany, which has taken the lead in shaping Europe’s answer to
the eurozone crisis for the past five years, faces a less clear-cut calculation.
The German government hasn’t published estimates of how much it could lose
in case of a default, arguing that this scenario could unfold in too many different
ways. Based on available data, however, the Munich-based Ifo economic institute puts total German exposure to Greece, including the loans and a host of
other liabilities, at 88 billion euro ($97 billion), while rating agency Standard &
Poor’s estimates it at 90.6 billion euro.
This would make Germany Greece’s largest creditor in the eurozone and the
country with the most to lose from a Greek default. But because of factors ranging from Germany’s good fiscal position—it is currently generating a budget surplus—buoyant tax revenues, and the fact that many loans to Greece aren’t set to
mature for many years, many economists argue that Berlin would weather a
Greek default largely unscathed.
The hit “would hardly be noticeable for Germans,” said Jens Boysen-Hogrefe,
economist with the Kiel-based institute IfW.
Moritz Kramer, analyst with S&P, said Germany could absorb such losses in its
roughly 300 billion euro federal budget “without triggering any noticeable tax or
spending moves.”
For Dirk Schumacher, economist with Goldman Sachs, “there isn’t a lot at risk in
the near term....Such losses would materialize over several years and they can
be compensated with [normal] fiscal revenues.”
Berlin has 53.4 billion euro in bilateral and eurozone-wide loans and loan guarantees outstanding to Greece. But repayments aren’t due to start until 2020 for
the first program and 2024 for the second.
Should Greece default on the bonds held by the European and national central
banks, Germany would face a hit of up to 7.1 billion euro. It also has a 29 billion
euro exposure to Greece through the eurozone’s Target2 interbank payment system, which would be crystallized only if Greece exited the eurozone.
Losses on the ECB’s bonds would be shared among eurozone central banks,
which could result in a reduction in the profits the Bundesbank pays to the government. It isn’t clear how the Target2 claims would be dealt with, since the eurozone wasn’t designed to break up.
Economists also stress a default would almost certainly be only partial. And
while Germany looks to be Greece’s largest creditor in absolute terms, it is only
middle-ranking in relative terms, with countries such as France, Italy, Spain and
even Slovenia being owed more as a share of their gross domestic products.
Germany’s relative immunity could strengthen Ms. Merkel’s hand in coming talks
with Greek Prime Minister Alexis Tsipras.
Berlin officials have said repeatedly they wouldn’t be “blackmailed” into rushing a
deal ahead of the next large redemption of Greek bonds on July 20. Speaking
Monday, Sigmar Gabriel, German economics minister and vice chancellor, made
it clear he wasn’t afraid of a default. “The ultimate insolvency of the country
seems to be imminent,” Mr. Gabriel said, adding that it was up to Greece to prevent it.
continued on page 5
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
page 4
Monday, July 06, 2015 4 p.m. ET
Talking Points
continued
Seib: Don’t Dismiss The Donald
Search Google for Donald Trump buffoon and you will get
more than 50,000 hits in return. As that suggests, the tendency to dismiss Mr. Trump, the billionaire populist
Republican presidential candidate as exactly that—a buffoon—is pretty widespread.
It’s also a mistake. Mr. Trump is important for two reasons:
first for the damage he can do to the Republican Party, and
second for the useful lesson he can teach that same party.
The potential damage comes largely in the harm he can
do—indeed, already may have done—to Republicans’ crucial mission of building better bridges to Hispanics. The lesson comes by way of illustrating the depths of populist
anger running through sectors of the GOP right now.
It seems necessary to note that Mr. Trump isn’t a serious
contender for the Republican presidential nomination, in the
sense that he might actually win. But he can win a place on
the campaign stage, at least for a while, his relative strength
increased by the dilution of support across a sprawling GOP
field that now has more than a dozen affirmed contenders.
He ranked second in the most recent CNN/ORC national
poll of Republican voters at 12%, and tied for second in the
latest Quinnipiac survey of Iowa voters.
Nobody is more eager to remind us of this burst of support
than Mr. Trump himself, who seems available to jump on
the phone at any time with any cable-TV host to discuss it.
The specific problem for Republicans is that what most of
Mr. Trump’s interlocutors ask about is the view of Hispanics
he laid out in his announcement speech, which was more
of an announcement screed.
That was the speech in which he characterized Hispanic
immigrants this way: “They’re bringing drugs. They’re bringing crime. They’re rapists. And some, I assume, are good
people.” As for the country of Mexico itself, he declared:
“They are not our friend, believe me.”
This view of Hispanics is associated with a man who, for
the moment at least, has a good chance of carrying those
views into nationally televised Republican presidential
debates starting in one month.
The reason this matters so deeply is best illustrated in a
new book, “2016 and Beyond,” by Republican pollster Whit
Ayres. The book’s subtitle is “How Republicans Can Elect a
President in the New America,” and Mr. Ayres musters data
that shows that task is pretty much impossible without an
improved performance among Hispanic voters.
In a nutshell, the story is this: The white population is steadily shrinking as a share of the electorate, and the Hispanic
population is steadily growing. But the Republicans’ presidential-campaign performance has been going in the
reverse order: Its candidates are winning more of a shrinking white vote and losing more of a growing Hispanic vote.
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
page 5