Good morning! Here’s what you need to know.
1. Standard & Poors cut its long-term outlook for US Treasury securities from “stable” to “negative.” It was the first time since the attack on Pearl Harbor in 1941 that the US has received a “negative” rating. If the S&P “outlook” leads to an actual “downgrade,” US borrowing costs will increase.
2. The hope is that S&P’s “negative” outlook will galvanize political elites in Washington to get a deal done on fiscal reform. But as Gerald Seib points out, the two parties can’t even agree on what’s causing the deficit in the first place.
3. The so-called “Gang of Six” — a bipartisan group of US Senators — is expected to announce any day now its plan for tackling the US fiscal crisis. Yesterday’s S&P report will likely give the “Gang of Six” more leverage in the political debate that follows.
4. Some analysts and brokers see DeKalb County (Georgia) as the tipping point in the wrangling over financial transparency for municipal bonds. Brokers fear that the more investors know about the financials that underpin muni bonds, the less attractive those bonds will become.
5. State tax collections are up smartly from a year ago, according to the Nelson Rockefeller Institute at SUNY. Despite the recent improvement, collections remain well below peak levels. Local tax revenues, which had been rising, are now “weakening.”
6. The Financial Times reports: “The eurozone is on track for a sustained economic recovery according to a closely watched industry survey – but at the cost of a widening gulf between the German-led core and the struggling periphery.”
7. The United States is engaged in a multi-pronged diplomatic offensive to bring the Afghanistan War to a negotiated settlement. Toward that end, the US is in talks with the Taliban.
8. Egypt’s new government is engaged in a diplomatic offensive of its own. It is renewing ties to Iran and Hamas, which Egypt had long shunned, and which are enemies of The United States and Saudi Arabia.
9. The popular uprising against the regime in Syria continues to gather force. The city of Homs has become the epicentre of the revolt.
10. President Obama’s poll numbers continue to slide, according to the latest survey from the ABC News/Washington Post team. But Mr. Obama’s Republican opposition is such that, if the election were held today, he would win re-election.