Gloom covered the front pages of the papers today. (If it bleeds it leads!) But this time, there were relatively few silver linings to help brighten up the darkness. Perhaps all the problems we saw in the spring aren’t quite solved yet.

Economic weakening was the big meta-story. For Europe, it was reported in the form of increasing disputes about how to resolve the ongoing financial problems of Greece and Spain, among others. The Financial Times (FT) led with “Athens and Berlin in public spat over funds,” which is just what it sounds like, following with “Dutch socialists catch scent of victory” (p. 2). This is important because Holland, which is one of the few remaining AAA credits in Europe, has been a key German ally in demanding fiscal austerity from debtor nations. If Holland changes sides, the European balance of economic power shifts, too. Moreover, the socialists are eurosceptics and have opposed the fiscal rescue pacts and funds; take away the rescue mechanisms, and the euro would most likely have already failed. The Dutch election and the pending ruling by the German Constitutional Court are therefore both potential deal breakers for the euro. It should be an interesting early September. The New York Times (NYT) also weighed in with “Europeans to Debate Further Aid to Greece” (p. A4) and “European Officials Meet as Signs Point to Recession” (p. B3).

The big financial news yesterday was the release of the Federal Reserve (Fed) meeting minutes, which were widely interpreted as signaling that the U.S. economy will receive additional monetary stimulus very soon. The news made the front pages of the Wall Street Journal (WSJ) with “Fed Moves Closer to Action” and the Financial Times (FT) with “Fed shows a strong consensus for action,” as well as the front business page of the New York Times (NYT) with “Many at Fed Ready to Act if Necessary.” These articles all seem to agree that the Fed will provide additional easing unless the economy improves sharply and unemployment starts to drop much more quickly than it has been. This is also the consensus of the private economic forecasters I follow, as well as Commonwealth’s Investment Research team.

What is interesting about this story is the unanimity of reaction in the press and economic community—and the absence of reaction in the equity markets. I would have thought that the markets would have responded more positively to the prospect of additional stimulus. The fact that they did not means that either the market already expected more stimulus—which is probable—or the Fed is losing its ability to goose the markets. If it is number 2, this is not good.

With no overarching stories out there, and with the dog days seeming to lie back down for a nap, each of the papers chose a different front page today. The New York Times stayed with politics, as expected, and chose to focus on the “legitimate rape” controversy with “Ignoring Deadline to Quit, GOP Senate Candidate Defies His Party’s Leadership” and “Missouri Controversy May Endanger Republican Chances This Fall,” both on the front page. The stories are pretty much captured in the headlines. The final front pager touches on another story we have been following, “Dispute Over Islands Reflects Japanese Fear of China’s Rise,” which is also pretty self-explanatory. I have said it before and I will say it again—keep an eye on this.

The Wall Street Journal (WSJ) put Europe on the front page; “Europe Pressures Intensify” focuses on the problems facing Angela Merkel, the head of the German government. Nothing new there—we have known for a long time that the problem wasn’t solved and that there were no easy solutions—but by putting this on the front page, the WSJ is bringing it back into the conversation in a big way. Look for euro risk to make its way back into discussions and into the market as we come closer to September 12, the deadline for the German Constitutional Court ruling on what Germany can do to aid other countries. U.S. politics only made it to page A5, with “Akins Defies His Party’s Pleas to Quit.” Interesting to see the differences between the papers’ treatments and headlines, and that is why we read both.

For the first time in a while, there don’t seem to be meta-stories that can be cleverly (?) tied together. It is beyond me to connect an incredibly stupid comment in Missouri, finally modern membership at Augusta National, and a suspended death sentence in China, not to mention the economic stories. So we will have to take them one by one.

The big story, which made the front pages, is the remark by the GOP Senate candidate from Missouri that “legitimate” rape victims don’t get pregnant, because their bodies prevent it somehow. To the surprise of no one outside the Missouri Republican Party, many took exception to this. The Financial Times (FT) has a photo and paragraph headed “Rape rage,” the Wall Street Journal (WSJ) has “Crucial Senate Race in Uproar,” and the New York Times (NYT) has “GOP Is Pressing Candidate to Quit Over Rape Remark.” This Senate race was considered one of the easiest for Republicans to win and is crucial to their chances to take over the Senate. The papers report that the candidate is being pressured by the party to step down, but as of this morning, he was refusing. Not sure where this story goes, but I find it hard to think of a way that it’s good for the Republicans. I may have to change my bets on the Senate on Intrade.

The meta-story over the weekend was the conviction of the Russian punk band Pussy Riot on charges of hooliganism. They were sentenced to two years. This made the front page above the fold in both the Financial Times (FT), with a big picture and the headline “Outcry over Pussy Riot verdict,” and the Wall Street Journal (WSJ), with “Russian Band Found Guilty.” The FT also followed up on Monday with “Pussy Riot sentences open perilous split in Russian society” (p. 2). The conviction represents a blow against Russia’s reputation as a state ruled by law and is the latest step the government has taken against the opposition.

On Monday, the meta-story was China, hit for both politics and economics. Political issues led the front pages of the New York Times (NYT) and the WSJ, with “Chinese Defer Death Penalty in Lurid Killing” and “Sentencing in China Stokes Politics,” respectively. The FT also covered the subject in “Murder trial verdict looms for disgraced Bo’s wife” (p. 3). These stories show the verdict as an attempt to close down a potentially embarrassing case while minimizing damage to the country’s reputation and exposure during a leadership transition. External politics also received coverage in “Anti-Japan protests flare across China as crisis deepens over disputed islands” (FT,p. 1) and “The South China Sea’s Gathering Storm” (WSJ,p. A11); this is a brewing conflict I have mentioned repeatedly over the past couple of weeks.

In Summary

Should Countries Stay or Go?

The big story today is the most recent decline in Facebook shares, which was prominently reported in the Wall Street Journal (WSJ) with “Facebook Investors Cash Out” (p. A1), in the Financial Times (FT) with “Investors defriend Facebook shares” (p. 1), and in the New York Times (NYT) with “Facebook Shares Hit New Low Amid Fear” (p. B1). Sounds pretty bad, right, when a new tech heavyweight drops almost 50 percent from its initial price? Things must be bad?

The dog that isn’t barking—at most maybe whining a little—is that the U.S. markets are actually doing really well. Yesterday brought them back to relatively high levels, as reported all the way back on page C4 of the WSJ with “Stocks Approach Multiyear Highs.” With the markets doing as well as that, maybe it is time to worry. The fear referenced in the NYT Facebook headline certainly has not shown up in the VIX, referred to as the market’s “fear index,” which the WSJ comments on with “The Fear Gauge Goes Quiet – Too Quiet” (p. C1). We have had a quiet August, and when September rolls in and everyone takes a fresh look at the world politics and economy, perhaps they won’t be as sanguine as they are now.

An interesting mix of stories today. Financial malfeasance makes all of the front pages again. “Bank Deal Rankles Regulators” on page A1 of the Wall Street Journal (WSJ) is about how the Standard Chartered settlement with New York State could derail other investigations and has annoyed British regulators. The Financial Times (FT) has “StanChart rallies as settlement welcomed” on page 1 and a follow-up story on page 15, “StanChart pays hefty price for ‘small errors’,” which makes many of the points I did yesterday about the speed of settlement and the magnitude of the fine with respect to what Standard Chartered admitted. The thrust of the article is that the bank was forced to settle quickly, regardless of the merits of the case, because of the effect uncertainty would have on its business and because of a reluctance to go head-to-head with the regulators. I am not so sure, but we will see. My bet is that more problems will show up.

The front page of the New York Times (NYT) has “No Criminal Case is Likely in Loss at Corzine Firm,” about the collapse of MF Global. Two interesting things here: first is the emphasis that, once again, there is no punishment of individuals for business disasters, and second is the personalizing of the story, even to the headline. Again, I would say this is a growing trend; personal accountability will become a much bigger part of the financial industry, especially at the risk end, and rolling heads will become a mandatory part of settlements. Corzine, of course, is still on the hook from both a civil and regulatory perspective—a point the article makes explicitly.

Europe, the Euro, and the Possible Failure of Political Integration