- Oligarchs Blacklisted by EU as U.S. Weighs More Measures. The U.S. is considering further punitive measures on Russian business after Europe blacklisted tycoons close to the Kremlin to pressure President Vladimir Putin to halt backing for separatists in east Ukraine. Rising pressure comes as Ukraine laid the blame on rebels for blocking investigators seeking to reach the crash site of Malaysian Air Flight MH17 in past days. The Organization for Security and Cooperation in Europe said an international team reached the area today.
- U.S. Could Move to Sanction Russia Derivatives, Short-Term Funds. The U.S. might move to limit derivatives trading and short-term loans with Russian companies if sanctions already imposed fail to sway President Vladimir Putin to end support for rebels in eastern Ukraine. U.S. citizens and businesses are still permitted to trade in outstanding debt of any maturity and new short-term debt and derivatives with sanctioned Russian companies. Restrictions on money-market financing and derivatives could be imposed if tougher penalties are necessary, said a Treasury Department official who asked not to be named because further options are still being discussed.
- Argentine Bonds Tumble After Default as Banks Seek Holdout Deal. Argentina’s dollar bonds sank after the country missed a payment on $13 billion of its debt as JPMorgan Chase & Co. (JPM) and other banks sought a deal that would allow the country to resume servicing its securities. A group of international investment banks met with Elliott Management Corp. and other so-called holdout creditors to buy the securities they hold from the country’s 2001 default, according to a bank official familiar with the matter, who asked not to be identified because the information is private. The official said talks would continue. Buenos Aires-based newspaper Ambito reported that a deal on the amount was reached, while other issues had yet to be resolved.
- Netanyahu Says Israel Must Destroy Hamas Tunnels in Gaza. Israel won’t sign up to a truce that curtails its ability to destroy tunnels Hamas dug to launch attacks, Prime Minister Benjamin Netanyahu said today, as the country called up an additional 16,000 reservists. “We are determined to complete this operation, with or without a cease-fire,” Netanyahu said in remarks broadcast by radio before a meeting of the cabinet. “We won’t agree to any proposal that doesn’t let the Israeli army complete this important job.”
- Euro Flows Reveal Shift in Sentiment as Losses Mount: Currencies. The international appetite for euro-zone financial assets that underpinned the local currency the past two years is beginning to erode. While broad data showing real-time flows into and out of the region’s stocks and bonds are hard to find, strategists point to items such as U.S. exchange-traded funds, which pulled $1.1 billion from European assets this month, the first outflow since April 2013. Bonds of Italy and Spain that yielded as much as 7.05 percentage points more than Treasuries two years ago now pay less than their U.S. counterparts, diminishing their appeal. The result is the euro’s biggest monthly loss since February 2013, and Morgan Stanley said this week selling the 18-nation currency remains the surest bet in the developed world.
- Why a French Bank Would Expand in U.S. High-Yield Bond Sales Now. The world’s biggest banks are pouncing on one of the only bright spots in their fixed-income businesses: helping junk-rated companies sell bonds. Case in point is Credit Agricole SA (ACA), which is boosting its U.S. high-yield debt unit by hiring Michael Stiuso, Cindy Cash and Justin Brody in the last several months. The lender has risen to become 12th most-active manager of the debt sales this year, its highest rank ever, up from 17th place in 2013, according to data compiled by Bloomberg. “We have made a conscious decision to develop further our New York sales presence across asset classes, with a focus on U.S. high yield,” Tim Hall, Credit Agricole’s global head of debt capital markets, said in an e-mail. The firm “has made it clear that it is a debt-centric house.”
- Adidas Plunges After Reducing Forecast on Russia, Golf. Adidas AG(ADS) shares fell by a record after the world’s second-largest sporting-goods maker slashed its full-year profit forecast, bursting euphoria around the German company less than a month after its national team’s victory in the World Cup. Adidas said profit this year will miss its forecast by at least 180 million euros ($241 million). The shoemaker and apparel maker scrapped a long-standing growth target for next year, citing a slump in demand for golf supplies in North America combined with turmoil in Russia. The shares tumbled as much as 16 percent in Frankfurt trading, the biggest intraday drop since the company’s 1995 initial public offering.
- Large Banks Enjoy ‘Too-Big-To-Fail Subsidy’ in Crises, GAO Finds. A study by the Government Accountability Office, to be released in full later today, comes after two years of congressional and industry debate over whether large banks continue to get what has come to be known as a too-big-to-fail subsidy despite regulatory changes.
- Ebola Deaths Rise as Quarantines Seek to Limit Disease. The presidents of Sierra Leone and Liberia took drastic actions to control citizen movements in their countries and global health officials promised to send more help to West Africa as the Ebola death toll rose to 729, or 57 more than a week earlier.
- Euro Inflation Slowed to 0.4% in July, Lowest Since 2009. Euro-area inflation (ECCPEST) unexpectedly slowed in July to the weakest in almost five years, underscoring the European Central Bank’s concerns that the economy is too feeble to drive price growth. Inflation was 0.4 percent compared with 0.5 percent in June, the European Union’s statistics office in Luxembourg said today. That is the weakest since October 2009 and below a median forecast of 0.5 percent in a Bloomberg News survey of 42 economists.
- European Stocks Drop Most in Three Weeks; Adidas Forecast. European stocks declined the most in three weeks as Adidas AG lowered its profit forecast and Banco Espirito Santo SA led a plunge in Portuguese equities. Adidas slumped the most in 15 years as the sporting-goods maker said the crisis in Ukraine will reduce its profit from Russia. Banco Espirito Santo sank 42 percent after making provisions of 4.3 billion euros ($5.7 billion). Afren Plc tumbled 26 percent after suspending senior managers following an investigation into unauthorized payments. Royal Dutch Shell Plc (RDSA) added 2.5 percent after beating profit estimates. The Stoxx Europe 600 Index fell 1.3 percent to 335.99 at the close of trading, extending its decline in July to 1.7 percent. The benchmark posted its first back-to-back monthly losses in two years. Portugal’s PSI 20 Index dropped 3.1 percent today as benchmark indexes retreated in every western-European market except Iceland. Germany’s DAX Index slid 1.9 percent and France’s CAC 40 Index slipped 1.5 percent. The U.K.’s FTSE 100 Index decreased 0.6 percent.
- Mortgage-Bond Price Tumble Signals New Risks in Markets. Prices of a new type of U.S. mortgage bonds are plunging this month, teaching investors a lesson on the risks to markets wrought by the growing constraints on Wall Street banks. The $8.2 billion of risk-sharing securities sold in the last year by government-controlled Fannie Mae and Freddie Mac can shift their losses from homeowner defaults to bond buyers. One slice of a deal issued in May traded at 95.7 cents on the dollar yesterday, down from 99.7 cents at the end of last month, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. With JPMorgan Chase & Co. analysts failing to see “any fundamental reason” for the tumble, investors from CQS U.K. LLP to Calvert Investment Management Inc. are speculating that the drop is mainly about the growing amount of the debt running into limits created by new regulations on bond dealers’ ability to smooth trading by building up their inventories. “It could be symbolic of what could happen more broadly in a real ‘risk-off’ environment,” Bill Murray, a New York-based money manager at $14 billion hedge-fund firm CQS, said in an interview.
- Orange Juice Falls to Six-Month Low Amid ‘Dismal’ U.S. Demand. Orange-juice futures fell to the lowest since January as Americans are shunning the breakfast drink, driving down prices even as disease ravages groves in Florida, the world’s second-biggest citrus grower. In the four weeks ended July 5, retail sales in U.S., the world’s biggest consumer, fell 8.3 percent from a year earlier to the lowest for the period since 2002, the Florida Department of Citrus said last week, citing Nielsen Co. data. In 2013-2014, world consumption will drop 3.4 percent, the U.S. Department of Agriculture said July 24.
- Consumer Confidence Declines in U.S. to Lowest Since June. Confidence among U.S. consumers retreated last week to an almost two-month low as limited wage growth chipped away at perceptions about personal finances. The Bloomberg Consumer Comfort Index fell to 36.3 in the period ended July 27, the lowest June 8, from 37.6 the week before. A gauge of households’ financial well-being dropped by the most since mid-May.
- Colorado Overwhelmed by Immigrant License Requests. Undocumented immigrants in Colorado may face waits of a year or more to obtain drivers licenses under a program starting tomorrow, as thousands seeking to apply overwhelm an online scheduling system and available staff. When the state’s Department of Motor Vehicles started accepting appointments from foreign nationals online July 1, it received as many as 107,500 page views an hour, crashing the system for several days. The DMV expects to process 9,551 applicants through September.
- Exxon(XOM) Falls After Reporting Lowest Output in Five Years. Exxon Mobil Corp. (XOM) fell after reporting oil and natural gas production declined to the lowest level in almost five years, raising the stakes as it seeks to pursue crude deposits in Russia.
- US banks braced for large deposit outflows. US banks are steeling themselves for the possibility of losing as much as $1tn in deposits as the Federal Reserve reverses its emergency economic policies and raises interest rates.
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Reuters:
- BES senior bonds sink on bail-in fears. The massive 3.6bn loss at Banco Espirito Santo has fuelled fears that senior bondholders may also be at risk from the raft of problems at the troubled Portuguese bank.
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