Today's Headlines

Bloomberg: 

• China Joins Europe in Syria Economic Risk Warning at G-20 Summit. China and Europe at a Group of 20 summit hosted by Russia warned that U.S.-led strikes on Syria would risk harming the global economy, bolstering efforts to rally opposition to the proposed attack. “Such a military action will definitely have a negative impact on the world economy, especially on the oil price,” Chinese Vice Finance Minister Zhu Guangyao told reporters in St. Petersburg today. “We hope that this issue could be solved at the United Nations and through diplomatic channels.”

• Turkey Reinforces Syria Border as Erdogan Backs U.S. Attack. Turkey deployed tanks and anti-aircraft guns to reinforce its military units on the Syrian border, as the U.S. considers strikes against Syria. Convoys carrying tanks and rocket-launchers headed to border areas in Hatay, Gaziantep and Sanliurfa provinces today and yesterday, according to Hurriyet newspaper and Anatolia news agency. Tanks, missile launchers and anti-aircraft guns on hilltops near the border town of Kilis were aimed Syria, state-run TRT television said. F-16s, tanker and cargo planes as well as at least one drone landed at southern Incirlik Air Base, Anatolia said. Turkish Prime Minister Recep Tayyip Erdogan, who has expressed a willingness to join any international coalition against Syria, yesterday vowed to respond to any attack from its southern neighbor.

• Draghi Says ECB Ready to Act as Market Rates Advance. Mario Draghi said the European Central Bank is “ready to act” as rising money-market rates threaten his drive to reassure investors that borrowing costs will stay low. Bond yields extended their gains. “We will remain particularly attentive to the implications that these developments may have to the stance of monetary policy,” the ECB president said at his monthly press conference in Frankfurt today after the bank left its benchmark rate at a record low of 0.5 percent. “I’m very, very cautious about the recovery. I can’t share enthusiasm, it’s just the beginning. The shoots are still very, very green.”

• Spain’s Deficit Struggle Shows Threat to ECB Rally: Euro Credit. Spain’s bid to meet its budget-deficit target for the first time in five years is running into trouble, fueling concerns that increased financial stability is masking deeper economic problems. The shortfall for the central government in the first seven months of the year was 4.38 percent of Spanish output, compared with a 3.8 percent goal for the year, government data show. Economists at the savings banks’ foundation Funcas, Mizuho International and Bank of America Merrill Lynch said Spain may miss the European Union’s overall goal for this year of 6.5 percent as benefit spending climbs and tax income falters.

• German Factory Orders Drop as Boost From Air Show Fades: Economy. German factory orders (GRIORTMM) fell in July after demand was boosted by the Paris Air Show a month earlier. Orders, adjusted for seasonal swings and inflation, dropped 2.7 percent from June, when they rose a revised 5 percent that was larger than originally estimated, the Economy Ministry in Berlin said today. Economists forecast a July drop of 1 percent, according to the median of 39 estimates in a Bloomberg News survey. 

• France Sells 10-Year Bonds With Highest Yield Since Election. The treasury sold 4.24 billion euros ($5.59 billion) of 2023 debt at an average yield of 2.57 percent, the highest at any auction since May 2012. It also sold 2.49 billion euros in 2021 securities at an average yield of 2.17 percent -- more than 1.42 percent on May 2 -- and 1.66 billion euros 2045 debt at 3.6 percent. 

• European Stocks Rise as ECB Holds Benchmark Rate at Low. European stocks climbed as European Central Bank President Mario Draghi reiterated that interest rates will stay low for an extended period, while the Federal Reserve said it saw a modest to moderate U.S. economic recovery. PSA Peugeot (UG) Citroen added 5.4 percent as its chief executive officer predicted a market-share increase in an interview with Le Parisien. Telecom Italia SpA rose 8.4 percent after a report that Egyptian billionaire Naguib Sawiris may buy a stake in Italy’s biggest phone company. TeliaSonera AB slid 1.9 percent as Finland cut its holding in the network operator. The Stoxx Europe 600 Index added 0.7 percent to 304.55 at the close of trading.

• WTI Crude Rises as Cushing Supply Drops to 17-Month Low. “Inventory levels continue to come down, which is supportive of the market,” said Adam Wise, who helps manage a $6 billion oil and gas bond portfolio as a managing director at Manulife Asset Management in Boston. “The market’s really holding its breath waiting for the full impact of the Syria situation to play itself out.” WTI crude for October delivery increased 82 cents, or 0.8 percent, to $108.05 a barrel at 1:08 p.m. on the New York Mercantile Exchange.

• Euro Slides to Six-Week Low on Draghi Comments; Krona Weakens. “Draghi is still not very confident about the economic recovery, and that’s contributing to the weakness in the euro,” Douglas Borthwick, head of foreign exchange at Chapdelaine & Co. in New York, said in a telephone interview. “The market knows very well that the ECB is going to be on hold with a bias towards lower rates for the foreseeable future.”

• Gold Drops as U.S. Economic Data Stokes Concern About Tapering. Futures for December delivery fell 0.7 percent to $1,380.40 an ounce at 10:15 a.m. on the Comex in New York. Prices rose as much as 0.7 percent earlier as the Senate Foreign Relations Committee voted yesterday to authorize President Barack Obama to conduct a limited military operation in Syria.

• Consumer Comfort in U.S. Declines for a Fourth Straight Week. (graph) Consumer confidence fell for a fourth consecutive week to its lowest level since early April as Americans’ views on the economy and buying climate deteriorated. The Bloomberg Consumer Comfort Index eased to minus 32.3 for the period ended Sept. 1, its weakest reading since April 7, from minus 31.7. The gauge has dropped 8.8 points after reaching a more than five-year high in the week ended Aug. 4. The series of declines is the longest since January.

• Sluggish August Retail Sales Seen Boding Ill for Holiday Season. L Brands Inc. (LTD), which owns Victoria’s Secret and has powered through a choppy economy, reported August same-store sales that narrowly missed estimates, the latest evidence of weakness among U.S. apparel chains. Sales at L Brands stores open at least 12 months rose 2 percent, compared with a predicted gain of 2.1 percent. 

• Money Fund Lehman Moment Lurks as New Protections Stall. A year ago, when opposition from the asset-management industry killed her plan to make money-market mutual funds safer, U.S. Securities and Exchange Commission Chairman Mary Schapiro looked to Timothy Geithner, then the Treasury Secretary, to tackle “one of the pieces of unfinished business from the financial crisis.” It remains unfinished.

Wall Street Journal: 

• Confronting Syria: Streaming Coverage.

Fox News: 

• Putin warns Russia could come to Syria's aid over US strike. As he touched down in St. Petersburg on Thursday morning, President Obama greeted his host Vladimir Putin with a handshake and a smile. But the cordial greeting belies the tinderbox the two leaders are sitting on, as they posture and deliberate over a potential U.S. strike on Syria -- one of Russia's closest Mideast allies.  Putin escalated concerns about the fallout from any strike when he indicated in an interview published Wednesday that his country could send Syria and its neighbors in the region the components of a missile shield if the U.S. attacks. 

MarketWatch: 

• 10-year Treasury yields close in on 3%.

• Greece headed for third bailout: Eurogroup chief.

• 30-year mortgage rate rises to 4.57%.

CNBC:

• US planned layoffs jump in August: Challenger. Employers announced 50,462 layoffs last month, up 33.8 percent from 37,701 in July, according to the report from consultants Challenger, Gray & Christmas. The August job cuts were up 57 percent from the same time a year ago. For 2013 so far, employers have announced 347,095 job losses, close to the 352,185 that were seen in the first eight months of last year. 

• 'Bad idea' if Fed wages war on higher bond yields. (video)

• Rich get richer as big hedge funds rake in cash.

Zero Hedge: 

• Unemployment Rate Surges To Highest Since 2011 - Gallup Polling. (graph)

• Chinese Province 'Busted' For Fake Data; Exaggerated 2013 Output By Over 150%.

• Bonds, Bunds, Bonos, And BTPs Battered. (graphs)

• August Service ISM Soars To 58.6, Highest Since 2005, Second Biggest Two Month Surge In History. (graph)

• A Post-ECB Reminder On The 'State' Of Europe.

• JPMorgan(JPM) To Stop Making Student Loans.

• Standoff In The Mediterranean: The US vs Russian Navies. (pic)

• Maybe This Is Why We Now Have A Serial-Bubble Economy. (graph)

Business Insider: 

• CDC Report: E-Cigarette Use By Kids Doubled In The Last Year.

• 'Boots On The Ground' In Syria Just Became A Lot More Likely.

• The Valuation Expert Who Nailed Apple(AAPL) Says That Tesla(TSLA) Is Worth A Fraction Of Its Current Price.

MacRumors:

• Chinese Labor Group Alleges Major Labor Violations at Apple(AAPL) iPhone 5C Supplier Jabil Circuit(JBL).

Reuters: 

• India's inverted yield curve fails rupee and slams economy. Viewed in one light, India's steeply inverted yield curve is the result of a deliberate and classic policy strategy to defend a weak currency. From another perspective, it is pointing at deep economic problems to come, possibly even recession. The central bank measures though are also taking a toll on the banking sector, which is heavily reliant on short-term money markets for capital. Since longer-term yields are lower - they have risen but not to the extent of short-term rates - bank lending has suffered and the value of the bonds on their books has fallen. "There is a concern here that we have a recession in India, which could trigger further outflows," said Claudio Piron, a strategist with BofA Merrill Lynch in Singapore. The problem was that the Reserve Bank of India lacked credibility, he said. "That's when the market thinks that you are undermining growth. And if you undermine growth, the fiscal numbers, be they corporate or government balance-sheets, will look worse and you will get more currency weakness and more outflow."

• Italy finances slipping as political crisis brews. Italy, which three months ago got off the European Union's blacklist of countries with excessive fiscal deficits, may be put straight back on it next year unless it can reverse a worrying trend in its public finances. 

• Brazil stocks slip on inflation concerns. 

• Brazil central bank hints at another rate rise-minutes.

BBC:

• UK has new Syria chemical evidence - David Cameron.

Echoing fears that European policymakers remain in a state of cognitive dissonance – recognizing the need for root-and-branch overhaul of peripheral banks, but backtracking on joint liability plans – Christopher Flowers, the legendary FIG investor who now runs the £2.3 billion ($3.5 billion) private equity group JC Flowers, sounded the alarm over the negative sovereign-bank feedback loop. In a shot across the bows of market bulls, who cite the return of capital flows to weaker eurozone states, Flowers issued a stark warning: "There is a scenario where we have a Lehman-type event: we wake up some Thursday and a big country is in trouble. "And the ECB will have to decide to support banks x, y, z. And then the ECB will, in fact, decide to own bank x, y, z.


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Folha de S.Paulo:

• Brazil May Punish U.S. Firms if Obama Doesn't Apologize. Brazil's govt may send law to Congress that would punish cos. involved in spying if U.S. President Barack Obama doesn't make formal apology to President Dilma Rousseff over spying allegations. Such a law could affect Google(GOOG) and Microsoft(MSFT).