- Portugal Smolders as Allianz Says Crisis Isn’t Over. When asking Allianz SE’s chief investment officer about the euro area’s sovereign debt woes, be prepared for an emphatic response. “The fundamental problems are not solved and everybody knows it,” Maximilian Zimmerer said at Bloomberg LP’s London office. The “euro crisis is not over,” he said. While extraordinary stimulus from the European Central Bank has encouraged investors to pile into the region’s government bonds this year, that’s not a sufficient remedy for Zimmerer, who oversees 556 billion euros ($757 billion) at Europe’s largest insurer. Countries are still building up their debt piles, and that’s storing up trouble for the future, he said.
- Espirito Santo Turmoil Shows ECB's Challenge in Managing Systemic Risk. The Espirito Santo saga is giving believers in the end of the euro-area crisis cause for pause. Although a return to the panic days of the crisis may be unlikely, the case, involving the inability of a parent company of a bank in Portugal to make some short-term debt payments, has sent government bonds of Europe’s most-indebted nations and the stocks of lenders tumbling, showing how fragile investor confidence in the region’s banking recovery is. “This shows that even a bank in a peripheral country can have systemic reach,” said Jerome Forneris, who helps manage $9 billion at Banque Martin Maurel in Marseille. “A solution must be found, but it must be found quickly.”
- Risk Stirs as Portugal to Puerto Rico Disrupt Complacency. Credit investors lulled into complacency by the largesse of central banks are getting a reminder about risk. The events are triggering turmoil in debt markets from London to New York, renewing concern the financial system remains vulnerable six years after central banks began flooding their economies with cheap cash to break free from the global credit crisis. The same policy makers that helped drive bond yields to unprecedented lows, have warned investors are becoming too complacent about risks.
- Nowotny Says Hungary Must Realize It Needs Solvent Banks. European Central Bank Governing Council member Ewald Nowotny called on Hungary to be mindful of its economy’s needs when inflicting a fresh round of losses on banks including units of Austrian lenders. Nowotny, who also is the governor of the Austrian central bank, identified Hungary as one of the “problem areas” of Austrian banks, which are among the biggest in the former communist part of Europe. The “major exposure” of the lenders, which include Erste Group Bank AG, Raiffeisen Bank International AG (RBI) and UniCredit Bank Austria AG, make the neighboring country a “more sensitive issue” than even war-torn Ukraine, he said.
- Israel Calls Up 33,000 Reserves as Rockets Bring Its First Civilian Casualty. Israeli Prime Minister Benjamin Netanyahu said international pressure won’t keep his country from taking action to end a barrage of rocket fire from the Hamas-controlled Gaza Strip as the death toll in the Palestinian enclave topped 100. “We are weighing all options and preparing all options,” Netanyahu said today in a televised news conference, as the military called up 33,000 reserve soldiers in advance of a possible ground incursion into Gaza. Israeli aircraft so far have led the attack against Gaza rocket squads, which caused the first Israeli civilian casualty of the week's conflict today when a missile struck a gas station in Ashdod, injuring three.
- Rebels Kill 23 Ukraine Troops as EU Widens Sanction List. Separatists killed 23 Ukrainian soldiers and wounded 93 in fighting near the border with Russia as the European Union added 11 names to a list of people it has sanctioned for supporting the insurrection. Some of the soldiers died after being hit by fire from Grad rocket systems near Zelenopillya, a village about 5 kilometers (3 miles) from Ukraine’s eastern frontier, military spokesman Vladyslav Seleznyov said by phone. A day earlier, the ministry said Ukrainian forces killed more than 50 insurgents in air strikes near Donetsk, the country’s largest eastern city. “In the past 24 hours in different areas, 23 Ukrainian troops were killed,” Seleznyov said today. “Ninety-three were wounded among Ukraine’s military and border service. The wounds include shell shock.”
- European Stocks Are Little Changed, Post Weekly Decline. European stocks were little changed, halting five days of losses, amid increased takeover activity and as investors bet the financial troubles of Banco Espirito Santo SA won’t spiral into an euro-area banking crisis. Imperial Tobacco Group Plc rose to the highest price since at least 1996 after confirming talks with Reynolds American Inc. and Lorillard Inc. to buy some assets and brands. Symrise AG climbed as a report said Japan’s Ajinomoto Co. may be interested in buying the German maker of flavors and fragrances. Indesit Co. added 2.9 percent after Whirlpool Corp. agreed to pay $1 billion for a controlling stake in the Italian appliance maker. The Stoxx Europe 600 Index added 0.2 percent to 336.91 at the close in London after rising as much as 0.5 percent. The benchmark gauge lost 3.2 percent this week, the most since March, as investors weighed valuations near the highest levels since 2009 and as concern resurfaced that the region remains vulnerable to shocks.
- Soybeans Head for Longest Slump Since 1973 on Bigger Supplies. Soybean futures extended declines, heading for the longest slump in 41 years, after a government reported showed supplies will climb in the U.S., the world’s biggest grower. Corn fell to a four-year low. “This is a bearish supply freight-train hitting the market,” Dale Durchholz, the senior market analyst for AgriVisor LLC in Bloomington, Illinois, said in a telephone interview. “Rapidly rising U.S. and global inventories” are coming, he said. Soybean futures for November delivery fell 1.6 percent to $10.755 a bushel at 11:46 a.m. on the Chicago Board of Trade. Prices headed for a 10th straight loss, the longest streak since July 1973.
- China State TV Says IPhone Creates Security Concern. China’s state-owned national television broadcaster said a feature of Apple Inc. (AAPL)’s iPhone software that tracks user locations poses a security concern.
- Winning Currency War Fails to Deliver Spoils for Japan Business. Japan is missing out on the spoils of victory from fighting a currency war. Despite a 30 percent decline in the yen since 2011 against the currencies of its trading rivals, Japan’s exports of goods fell 0.6 percent in the same period, according to an analysis published on the Federal Reserve Bank of New York’s blog. By contrast, U.S. exports rose 6 percent during the same timeframe, undermining any argument that Japan’s trade weakness could be based in softness of the global economy. The more likely reason lies in a limited pass-through from exchange rates to export prices, economists Mary Amiti, Oleg Itskhoki and Jozef Konings wrote in the July 7 post. That means a 10 percent decline in the currency doesn’t fully translate into a 10 percent decline in export prices; the less it does the smaller the impact on foreign demand.
- Plosser Says Rate Increase Closer Thank Many People Think. “We are closer than a lot of people might think,” Plosser said today in a Bloomberg Television interview with Michael McKee in Jackson Hole, Wyoming. If the Fed waits too long, “We’ll lose credibility. We may lose control of inflation.”
- Classrooms in U.S. Prepare for Flood as Migrants Become Pupils. The record flood of Central American children crossing the U.S. border is stretching funds and setting off improvisation at public schools. While politicians spend the summer fighting over how to turn back the tide, school leaders across the U.S. are struggling to absorb a new student population the size of Newark, New Jersey’s. More than 40,000 children, many of them fresh from violent, harrowing journeys, have been released since October to stateside relatives as courts process their cases. “These kids were homesick and heartbroken,” said Robin Hamby, a family specialist for Fairfax County Public Schools in suburban Washington, which began feeling the surge almost as soon as it began three years ago.
- ECB Eyes Risks of Use of Computer-Based Forex Trading. ECB Officials, Currencies Bankers Met at ECB-Hosted Contact Group on July 7.
- Investors Pull Assets from Boaz Weinstein Saba Capital Hedge Fund. Investors Withdraw Nearly 20%, or about $400 Million, from Saba Capital Master Fund.
- Flood of lawsuits to follow wave of illegal immigrants? Illegal immigrants pouring across the border could trigger a wave of lawsuits flooding the U.S. court system for years and costing taxpayers millions, according to legal experts.
- Hedge funds hold line on bullish stock bets. Stocks reaching record highs in early July haven't caused hedge funds to decrease their market exposure. In fact, many are adding to their bullish bets. Hedge funds that practice a "market neutral" strategy—generally keeping their long and short bets in balance—are now 18 percent net long, according to Bank of America Merrill Lynch data as of July 2. Market neutral funds average an exposure of zero; the new positioning means they are relatively bullish, with a preference for stocks displaying a potential for growth and those with relatively small market capitalization, according to the firm. By comparison, the same funds were 10 percent net long as of June 18.
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- German, French Business Lobbies Criticize U.S. Bank Fines. Federation of German industries head Ulrich Grillo says U.S. is weakening Europe's financial system, citing an interview.
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