Today's Headlines

Bloomberg:

• Ukraine Says Tanks Enter From Russia Amid Plan for Convoy. Ukraine said an armored column including 10 tanks entered from Russia early today as the government in Moscow unveiled plans to send a second convoy with humanitarian aid into its neighbor’s rebel-held territory. Government forces destroyed two tanks, captured crew members and seized other vehicles from the column that was flying separatist banners, Andriy Lysenko, a spokesman for Ukraine’s military, told reporters in Kiev today. Russian Foreign Minister Sergei Lavrov said he had no information about the incident and accused Ukraine of providing “a lot of disinformation about our invasions.”

• Islamic State Militants Seize Air Base in Syria, Group Says. (video) Islamic State militants seized a Syrian air base, dislodging forces loyal to President Bashar al-Assad from their last stronghold in the northeastern Raqqa province. The al-Qaeda breakaway group, which is also fighting government forces in Iraq, stormed the Tabaqa air base after battles that began last week, said the Syrian Observatory for Human Rights, which monitors the daily developments of the civil war. The government moved its aircraft to other bases, it said. 

• Israel Warns of Extended Gaza Conflict as Hamas Leaders Defiant. (video) Israel and the Gaza Strip’s ruling Hamas group showed no sign of backing down as Egyptian mediators tried to coax them back into a temporary cease-fire.

• China May Cut Salaries of SOE Executives by 70%, Caijing Says. China may cut salaries of executives at state-owned enterprises and financial institutions by as much as 70 percent, the most drastic proposal yet in a planned overhaul of SOE management, according to Caijing magazine. The upper limit for the annual salary of bosses at central SOEs and banks would be set at 600,000 yuan ($97,532) under the change, Caijing magazine reports, citing unidentified people with knowledge of a draft plan by the Ministry of Human Resources and Social Security, the Ministry of Finance and other related agencies.

• China Stocks Fall Most in Week on Lending Concern. China’s stocks fell, capping the benchmark index’s biggest loss in a week, as concern that new bank lending isn’t picking up overshadowed a rally for airlines. China Citic Bank Corp. and Huaxia Bank Co. led declines for financial companies, sliding at least 1.2 percent. Baoshan Iron & Steel Co., the largest-listed steelmaker, lost 3.1 percent after reporting a 14 percent drop in first-half profit. China Eastern Airlines Corp., the second-biggest domestic carrier, surged by the daily limit in Shanghai on the prospect it will benefit from an aviation investment fund. The Shanghai Composite Index (SHCOMP) fell 0.5 percent to 2,229.27 at the close, the biggest loss since Aug. 14. 

• European Stocks Climb After Draghi Signals More Stimulus. European stocks rose to their highest level this month, following two weekly increases, after European Central Bank President Mario Draghi signaled policy makers are ready to add stimulus. Banks contributed the most to the Stoxx Europe 600 Index’s gain, with Banca Monte dei Paschi di Siena SpA rallying 5.8 percent, and Banco Santander SA and BNP Paribas SA each adding at least 2 percent. Arkema SA (AKE) advanced 2.6 percent after Deutsche Bank AG recommended investors buy shares of the maker of composites and coatings. Eurazeo SA rose 3.4 percent after Societe Generale SA increased its rating on the stock. The Stoxx 600 gained 1.1 percent, the most since Aug. 18, to 340.46 at the close of trading in London, with all 19 industry groups up.

• German Business Climate Drops for Fourth Month on Risks. German business confidence declined for a fourth month, reflecting a faltering euro-area economy that European Central Bank President Mario Draghi says might need more stimulus. The Ifo institute’s business climate index, based on a survey of 7,000 executives, fell to 106.3 in August from 108 in July. Economists predicted a drop to 107, according to the median of 39 estimates in a Bloomberg News survey.

• Short Sellers Add Bets Against VIX As Volatility Fades. Volatility in U.S. equity markets is near an all-time low and traders have loaded up on bets it has further to fall. Short holdings on an exchange-traded note tracking the Chicago Board Options Exchange Volatility Index reached a six- month high in August, essentially a bet that the volatility gauge will keep falling. There are about 19 million shares of the iPath S&P 500 VIX Short-Term Futures ETN that have been borrowed and sold to speculation on declines, almost three times the level from early June, data compiled by Markit Ltd. shows.

• Swaps Boom Is Unintended Consequence of New Curbs on Wall Street. The $9.8 trillion U.S. corporate-bond market may look pretty sleepy right now, but there’s more and more happening in its shadows. Instead of bothering with trading investment-grade bonds themselves, investors are increasingly turning to derivatives tied to the creditworthiness of specific companies. Volumes in such synthetic wagers have surged to the highest levels since at least the beginning of 2011, in many cases outpacing trading in the underlying bonds, according to Barclays Plc (BARC) data. This reflects investors’ concern that they can’t get in and out quickly enough in the market for cash bonds. Wall Street is pulling back in debt trading, potentially leaving investors vulnerable at a time when the outlook may change quickly given the Federal Reserve is grappling with how to exit from a sixth year of record stimulus. The boom in derivatives also underscores how traders are delving back into more complicated structures that are inherently leveraged, amplifying potential gains or losses.

MarketWatch.com:

• China’s troubling targeting of foreign companies.

ZeroHedge:

• France In "Political Turmoil" After Hollande Unexpectedly Dissolves Government.

• Russia Prepares 2nd Humanitarian Convoy "Invasion".

• Services PMI Drops Most In 6 Months, "Recovery Has Lost Some Momentum", Markit Says. (graph)

• New Home Sales Drop To Lowest Since March As Northeast Craters; Biggest Supply Since October 2011. (graph) 

• Dallas Fed Plunges, Biggest Miss In 16 Months As New Orders Collapse. (graph)

• The New Misery Index. (graph)

• Behold The Magic Of Accounting In First Half Earnings. (graph)

Business Insider: 

• PAUL RYAN: 'We Were Right'. Rep. Paul Ryan (R-Wisconsin) looks back at the 2012 election and says, "We were right." Ryan, the 2012 vice presidential nominee alongside presidential nominee Mitt Romney, says the pair was right about the Obama administration's foreign policy leading to the kinds of crises popping up in the Middle East with the Islamic State of Iraq and Syria. He says Romney was right when he declared Russia the U.S.' greatest geopolitical foe, as evidenced by the current crisis in Ukraine.

• Ukrainian Forces Clash With Rebels Near Russian Border And Accuse Moscow Of Opening New Front.

• This Is The Chart That's Been Keeping Mario Draghi Up At Night.

Financial Times:

• Market watchdog warns on danger of cyber attack.

De Standard:

• German Economy Isn't Good News, Coene Says. "The faltering German motor isn't good news for the other European economies, also not for Belgium," European Central Bank Governing Council member Luc Coene says in an interview. "The tone from most here when it comes to Europe is best described as worrying," Coene says. There is concern internationally over the sustainability of the recovery in Europe, he said. "September will give a good indication of economic activity in the fall adn of whether the recent weakening of the economy is temporary or longer lasting. If it's the latter, there will probably be a downward correction" in growth forecasts, Coene says.