Even though it is not on the front pages in the U.S., Europe continues to simmer and deserves an update. Spain did make the front page of the Financial Times (FT) with “Catalonian push for independence piles pressure on Spanish premier,” highlighting the problems the regions are creating for any bailout of the country. Not only that, but existing deals are also starting to show cracks; “Deal over bank bailout thrown into doubt” (FT, p. 2) discusses how Germany, Holland, and Finland are backing away from components of the bank bailout deal for Spain and Ireland that they were thought to have agreed on. Nothing solid yet, but a troubling sign.

That troubles are hitting the general population is shown not only in the recent protests in Catalonia, but also in “Protesters Take to the Street in Madrid” on page A4 of the New York Times (NYT), which references the regional protests. The Spanish government is attempting to address the issue, per “Spanish Leader Outlines Fresh Overhauls” on page A12 of the Wall Street Journal (WSJ), but markets are not convinced, as seen in “Debt Auction Shows Unease Over Spain’s Prospects” (NYT, p. B2). Spain is the bellwether here, and Hurricane Spain continues to spin.

As expected, the problems in Europe have not been solved. The eurozone continues to shrink, and a Spanish bailout continues to look inevitable. The papers had multiple stories.

The big story in the U.S. papers was the Democratic National Convention, and this time, Bill Clinton took his turn in the spotlight. The Wall Street Journal (WSJ) led with “Clinton Makes the Case for Obama,” and the New York Times (NYT) went with “Clinton Delivers Stirring Plea for Obama Second Term.” Not sure this counts as news—that the Big Dog is for the Democrat—but whatever.

The real news of the day, in the sense of something that might make a difference, is the announcement of the European Central Bank’s (ECB’s) plan to support the market for European government bonds. The Financial Times (FT) covered this story in “ECB resists capping bond yields in debt plan,” the NYT in “Fear of More Austerity Fuels Greek Unrest Ahead of Crucial Talks” (p. B1, the front business page), and the WSJ in “Europe Outlook Dims as Bank Meets” (p. A9) and “Moment of Truth for Draghi’s Plan” (p. C12). To get ahead of the news cycle a bit, the actual plan announced by the ECB, which will be in the papers tomorrow, is the most aggressive to date. The bank proposed the open-ended purchase of government bonds at short maturities (up to three years) for countries that are in one of the eurozone economic support facilities. In other words, if countries in trouble are willing to commit to an approved plan to balance their finances, the bank will make sure their interest rates don’t spike.

http://www.youtube.com/watch?v=WC5gHNME04E 

So, I started off the morning doing the September Market Thoughts video. While prepping for that, I realized how much had actually happened in August, but how little of it got translated into public perception and the markets.

Politics made the front pages again, but Isaac got moved back. “Romney Vows to Deliver the Country from Economic Travails” and “A Suitor Makes the Case for Divorce” in the New York Times (NYT) and “Romney Vows to ‘Restore’ US” and “After the Celebrating, the Race Moves to Battleground States” in the Wall Street Journal (WSJ) pretty much sum up the political news, while “Storm Weakens But Still is Wreaking Havoc in the South,” (NYT, p. A20) and “Reckoning With Isaac” (WSJ, p. A3) are pretty self-explanatory. The Financial Times (FT) passed on Isaac completely but did have political analysis on page 2, with “Health insurance scheme for elderly rises to top of agenda” and “Parties prepare for tightest of votes in Florida’s bellwether area.” You can see the transition from the convention coverage to the race coverage, from hype to real analysis. Should be a very interesting fall. Once again, I recommend Nate Silver at the NYT as an excellent political analyst.

Europe is the other major meta-story. The deadline is coming near for many European issues, with “Judgment Days Arrive for Euro Crisis” in the WSJ (p. A16) and “Eurozone banks facing sweeping regulation” in the FT (p. 1). In the next two weeks, we have several critical events scheduled in Europe. On September 6, the European Central Bank meets and is widely expected to announce a bond-buying program to support the government bond markets; on September 9, Greece presents its latest attempt at budget cuts; and on September 12, Germany’s constitutional court rules on the legality of the bailout fund and Dutch elections take place, which will probably result in a change of government. I have no doubt I will be hitting all of these issues here in the blog, probably at length.

The two lead stories today are no surprise. Romney’s acceptance of the Republican nomination made two of three front pages: “Republicans Anoint Romney” in the Wall Street Journal (WSJ) and “Romney Secures GOP Nomination After Long Quest” in the New York Times (NYT). The story did not make the Financial Times (FT); the British paper did include election analysis but did not report on the Republican convention.

The second big story today is Hurricane Isaac, which also made two of three front pages—“Hurricane Gains Power and Hits Louisiana Coast” in the NYT and “Obama warns gulf residents not to ‘tempt fate’ as hurricane Isaac nears” in the FT. Isaac only made it to the second page of the WSJ with “Hurricane Isaac Roars Ashore.” Good luck to everyone in Isaac’s path.

Many stories today that deal with issues we have discussed before, with only two new things really worthy of note.

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).

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.