- Ukraine Crisis Echoes 1914, German Ex-Leader Schmidt Says. The Ukraine crisis reverberating across Europe recalls 1914 before the outbreak of World War I as Russia, the U.S. and European governments risk sleepwalking into conflict, said former German Chancellor Helmut Schmidt. “I don’t want to encourage a third world war and especially not calls for more money for arms for NATO,” Schmidt, 95, was cited as saying in an interview with Germany’s best-selling Bild newspaper today. “But the danger that the situation intensifies as in 1914 is growing day by day.”
- China Orders Interbank Lending Curbs to Quell Shadow Debt. The Chinese government ordered lenders to curb interbank borrowing in the latest effort to check growth in the informal shadow-banking industry that threatens to undermine the nation’s financial system. A commercial bank should limit its interbank borrowing to less than a third of its liabilities, while its lending to another financial firm shouldn’t exceed 50 percent of its Tier 1 capital, according to a statement on the People’s Bank of China’s website yesterday. Financial institutions need to better manage the maturity of interbank funding and control liquidity risks, the PBOC said. “Given that interbank financing has been important in funding the business of some lenders, the rules will limit overall lending in the economy, not just in the market,” Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole, wrote in an e-mail. “While much needed to control the risk in the banking system, they are a medium-term negative for the growth outlook.”
- China’s Small-Cap Stocks Enter Bear Market on Slowdown. China’s small-company stocks fell, dragging the benchmark index down more than 20 percent from its February peak, on concern valuations are too high as the economy slows and new share offerings divert funds. The ChiNext index dropped 2.2 percent to 1,226.47 at the close in Shenzhen, entering a bear market after tumbling 21 percent from a record high of 1,558.62 on Feb. 17. The Shanghai Composite Index (SHCOMP) slid 5.5 percent during the period. Bocom International Holdings Co. and UBS AG predict further losses for the ChiNext as a housing slump adds risks to an economy that analysts predict will grow at the slowest pace in 24 years.
- Hong Kong Growth Cools to Slowest Pace Since 2012 on Exports. Hong Kong’s economy grew in the first quarter at the slowest pace since a contraction in 2012 because of weakness in exports. Gross domestic product expanded 0.2 percent from the previous three months, the government said in a statement on its website today. That was less than the 0.4 percent estimate in a Bloomberg News survey of 11 economists.
- Most European Stocks Decline as Travel Companies Retreat. Most European stocks dropped, following the Stoxx Europe 600 Index’s largest decline in a month yesterday, as travel-and-leisure companies slid after TUI AG reported a wider loss and auto-related shares slipped. TUI AG fell 2.5 percent after the tour operator’s loss before interest, taxes and amortization widened. Renault SA and Daimler AG each retreated more than 1 percent as a report showed European car sales slowed. Banco Espirito Santo SA decreased 5.5 percent as it announced a capital increase. Bouygues SA (EN) climbed 4.4 percent after a report that Orange SA has studied buying Bouygues Telecom. The Stoxx 600 added 0.1 percent to 338.99 at the close of trading as more than three stocks retreated for every two that advanced.
- Iron Ore Futures in Singapore Decline to Lowest Since ’13. Iron ore futures in Singapore fell to the lowest level since the contract started last year on concern that slowing demand growth in China, the biggest user, could worsen the global seaborne glut.
- Euro Drops as Peripheral Bonds’ Fall Boosts Economic Concern. The euro fell against most of its major peers as investors sold peripheral government bonds amid speculation the region’s economy remains sluggish. “The story is a bearish one for the euro,” Vassili Serebriakov, a New York-based foreign-exchange strategist at BNP Paribas SA, said by phone. “There’s scope to build up euro shorts. We see the market starting to position that way starting last week.”
- Bullard Says Fed Closer to Goals Than Any Time in Five Years. Federal Reserve Bank of St. Louis President James Bullard said the Fed is closer to its goals for employment and inflation than at any time in five years, helping to warrant its tapering of record stimulus. “Fed goals are within sight,” Bullard, who doesn’t vote on monetary policy this year, said today in Little Rock, Arkansas. “This helps to justify the FOMC’s tapering of asset purchases,” he said, referring to the Federal Open Market Committee.
- Blankfein Sees Concern in Guilty Plea by Any Global Bank. Goldman Sachs Group Inc. (GS) Chief Executive Officer Lloyd C. Blankfein said he understands the concern over the potential impact to the financial markets of any global bank pleading guilty to a crime. “There’s concern being shown, and I don’t magnify it, but I don’t minimize it either,” Blankfein said today in an interview after the New York-based firm’s annual shareholder meeting in Irving, Texas. “You hope it’s not existential, and you hope there’s not a knock-on effect to that.”
- Scientific Authoritarians. The case for skepticism about climate scientists.
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- Exclusive: Iran pursues ballistic missile work, complicating nuclear talks. Despite apparently reducing illicit purchases that breach U.N. sanctions, Iran is pursuing development of ballistic missiles, a confidential U.N. report says, posing an acute challenge to six powers negotiating with Tehran to rein in its nuclear program. On Sunday, Iranian Supreme Leader Ayatollah Ali Khamenei described as "stupid and idiotic" Western expectations for his country to curb its missile program. He decreed mass production of ballistic weapons, striking a defiant tone just before nuclear talks resumed on Wednesday in Vienna. The high-stakes negotiations aim for a deal by a July 20 deadline to end a long stand-off that has raised the risk of a wider Middle East war.
- Exclusive: German industry sees 'irreparable damage' from Russia sanctions. Europe's showdown with Moscow over Ukraine is already having a major impact on German business in Russia and imposing economic sanctions would cause lasting damage to industry, a confidential paper sent to the German government by a business lobby warns. The paper from the German-Russian chamber of foreign trade, a group representing 800 companies that provides support to German firms operating in Russia, underscores the extent of concern among German businesses over the Ukraine crisis. It also suggests industry is stepping up efforts to dissuade Chancellor Angela Merkel's government from pressing ahead with tougher sanctions.
- Why Europe threatens Britain’s recovery. Our neighbours need to grow if we are to achieve our goal of a balanced economy.
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