Today's Headlines

Bloomberg:

• Israel Airstrike Kills Three Hamas Commanders in Gaza Strip. An Israeli airstrike killed three senior military commanders from the Gaza Strip’s ruling Hamas movement a day after Prime Minister Benjamin Netanyahu warned that forces would hunt militant leaders down. The raid, coming close behind an apparent attempt on the life of Hamas’s top military chief, was followed by a barrage of rockets on Israel from Gaza and a wave of Israeli aerial attacks on the Palestinian territory. The surge in violence threatens to overwhelm Egyptian efforts to halt six weeks of hostilities that have killed 2,075 Palestinians, including 27 today, according to Gaza officials, and 67 on the Israeli side. The last in a series of Egypt-brokered truces unraveled Aug. 19. 

• Red Cross Says Russian Aid May Head to Ukraine Tomorrow. The Red Cross said truckloads of Russian humanitarian aid may start crossing the border tomorrow to eastern Ukraine, where months of fighting has cut off water and electricity to residents of the region’s biggest cities. Inspections of almost 300 Russian trucks have begun, Laurent Corbaz, the International Committee of the Red Cross’s head of operations for Europe, said today in Moscow. The organization had been seeking security guarantees as battles raged on between Ukraine’s army and pro-Russian separatists.

• Euro Area Shows Signs of Weakening as Surveys Miss Forecasts. Euro-area manufacturing and services activity slowed in August, signaling that the economy of the 18-nation region remains vulnerable to weak inflation and rising tensions with Russia. A Purchasing Managers Index for both industries fell to 52.8 from 53.8 in July, London-based Markit Economics said today. A reading exceeding 50 indicates expansion. Economists predicted a decline to 53.4, according to the median of 20 estimates in a Bloomberg News survey.

• French Manufacturing Activity Shrinks for Fourth Month in August. French manufacturing activity contracted for a fourth month in August, signaling that the euro area’s second-largest economy is unlikely to return to growth after stagnating in the first half. A Purchasing Managers Index for the manufacturing industry fell to 46.5 from 47.8 in July, London-based Markit Economics said today. That’s the lowest level in more than a year. Economists forecast no change, according to a Bloomberg News survey. A composite gauge of both manufacturing and services activity rose to 50, the mark that divides expansion from contraction, from 49.4. 

• Euro-Area Consumer Sentiment Drops as Ukraine Threatens Recovery. Euro-area consumer confidence declined in August as escalating political tensions in eastern Europe threaten the region’s already faltering economic recovery. An index of household sentiment in the euro zone decreased to minus 10 from minus 8.4 in July, the European Commission in Brussels said in a preliminary report today. That is below the median forecast of minus 9.1 in a Bloomberg News survey of 22 economists. 

• Europe Stocks Rise as Data Signals Need for Stimulus. European stocks rose to the highest level this month as investors bet that a slowdown in euro-area manufacturing and services growth will increase pressure on the European Central Bank to do more to support the recovery. Raiffeisen Bank International AG (RBI) rallied 11 percent after posting second-quarter net income that exceeded analysts’ projections. Nobel Biocare Holding AG advanced 3.9 percent after raising its 2014 profit-margin forecast. Fresnillo Plc led mining companies lower. The Stoxx Europe 600 Index added 0.7 percent to 337.51 at the close of trading.

• Fed Optimism Spurs Record Bets Against Stock Volatility. A soft touch on monetary policy will continue to suppress stock volatility, or so suggests the record stretch of cash going into an exchange-traded note that rallies as calm returns to equities. The Chicago Board Options Exchange Volatility Index, known as the VIX (VIX), has decreased 31 percent this month and investors are wagering on further declines. In the five weeks through Aug. 15, they put almost $320 million into the VelocityShares Daily Inverse VIX Short Term ETN (XIV) -- the longest stretch of weekly investments since the note began trading in 2010.

• High-Speed Traders Enlist Chilton to Improve Image in Washington. Former U.S. Commodity Futures Trading Commission member Bart Chilton, an outspoken critic of some high-speed trading practices while at the agency, has been enlisted in a Washington-based effort to improve the image of an industry beset by regulatory and legislative scrutiny.

MarketWatch.com:

• Fed's George wants rate hikes sooner rather than later. 

• Unloved no more? Investor bullishness hits 2014 high. (graph)

Fox News:

• Hospital discharges US Ebola patients. (video)

CNBC:

• Japan has fallen victim to the Keynesian scam. Japan saw its economy shrink at an alarming 6.8 percent annualized rate in the second quarter, proving its greatest national disaster, Abenomics, has failed and the Japanese economy has fallen victim to the scam called Keynesian economics.

• Fed's Williams: First rate hike during 2015 seem reasonable. (video) San Francisco Federal Reserve President John Williams said hiking the benchmark interest rate in the summer of 2015 is a "reasonable guess" based on the current economic progress, noting a broad improvement the labor market.

ZeroHedge:

• Obamacare Is A Disaster For Businesses, Philly Fed Finds.

• The Schizophrenic US Housing Market In One Chart. (graph)

• European & Russian Stocks Surge Despite Tumbling Bund Yields. (graph)

• Bad News For Profit Margins As Philly Fed Prices-Received-Less-Paid Drops To 2012 Levels. (graph)

• Philly Fed Surges To Highest Since March 2011 Despite Plunge In Jobs & New Orders. (graph)

• US Manufacturing PMI Surges To Over 4-Year High, Biggest Beat On Record. (graph)

• The Crazy-Making Fed.

• The Italian Job: How Borrowing And Printing Lead To An Economic Dead End. (graph)

• Previewing Yellen's Jackon Hole "Gobbledygook": Not One Analyst Thinks Yellen Will Say Anything Remotely Hawkish.

Business Insider:

• eBay(EBAY) Is Considering Spinning Off PayPal And The Stock Is Soaring.

• Germany Is Telling Ukraine To Back Off Crushing Pro-Russian Rebels Or Else Putin Will Get Mad.

Reuters:

• U.S. regulators step up warnings to banks for poor risk-spotting. U.S. regulators are sending some of the biggest global banks verbal warnings as they crack down on the firms' poor grasp of their own weaknesses, and push for rapid improvements in risk assessment, according to two sources familiar with the matter. The firms who received the warnings are among the largest banks in the world, but the sources declined to name individual firms because the enforcement actions are not public. 

• Banks push for delay to introduction of derivatives rules. The international banking industry has asked regulators for more time to implement derivatives rules that could add $800 billion to the global financial industry's cost of doing business, people familiar with the matter said.

• Brazil's July job growth weakest for the month since 1999. Job creation in Brazil slowed in July to its weakest pace for the month since 1999, another sign Latin America's biggest economy might have slipped into recession during a tightly-contested presidential race.