Monday Watch

Weekend Headlines 
Bloomberg:

• Russia Vows to Respond After Shelling From Ukraine. Russia pledged to respond to a Ukrainian shelling that it said killed one person in the south of the country as President Vladimir Putin prepared to meet German Chancellor Angela Merkel in Brazil. One Russian citizen died and two others were seriously wounded today after the Ukrainian army fired a shell into the Rostov region, the Foreign Ministry said in a website statement. Ukraine did not shoot at its neighbor, Andriy Lysenko, a spokesman for the Defense Ministry, told reporters in Kiev. As Russia described events as an “aggressive act,” Merkel arrived in Rio, where she will attend soccer’s World Cup final and meet Putin, Steffen Seibert, a German government spokesman, said on Twitter. Ukrainian President Petro Poroshenko, who had earlier been reported as planning to attend the match as well, won’t be making the trip, his office said. The Rostov incident is an “escalation of the danger to our citizens on our own territory,” Russian Deputy Foreign Minister Grigory Karasin said on state television. “Clearly, this won’t go unanswered.” 

• Israel Extends Offensive as Gazans Seek Shelter. Israel’s airstrikes against Hamas entered a seventh day as militants in the Gaza Strip kept firing cross-border rockets and thousands of Palestinians fled their homes in advance of a possible ground invasion. Israeli forces dropped leaflets yesterday and left voice and text messages urging residents in the northern Gaza town of Beit Lahiya to leave because it intends to attack “terrorists and terror infrastructure,” the army said. About 17,000 Gazans of all ages sought refuge in shelters run by the United Nations Relief and Works Agency, spokesman Chris Gunness said on Twitter. As trucks carrying tanks traveled south to the Gaza border, Israel edged closer to its first ground assault on the territory since 2009 and world leaders appealed for a cease-fire. The Palestinian Authority appealed to the United Nations yesterday for international protection.

• Merkel Warns of Euro Fragility, Citing Portugal Turmoil. German Chancellor Angela Merkel said turmoil in global markets caused by a Portuguese bank underscores the euro region’s fragility and shows the need for governments to respect debt and deficit limits. Merkel’s warning at a campaign rally of her Christian Democratic Union today was a renewed message to France and Italy to refrain from softening euro-area rules as she revived rhetoric reminiscent of the peak of Europe’s debt crisis. While policy makers put “many rules” in place to prevent a repeat of the crisis, “if we now move away from those rules, for instance on the Stability and Growth Pact, on everything we’ve done to stabilize the euro, we could very quickly get into a situation where we start foundering,” Merkel said in a speech in the eastern German city of Jena.

• Europe Needs $795 Billion Problem Property Loan Solution. European banks and asset managers plan to sell or restructure 584 billion euros ($795 billion) of riskier real estate as they try to clean up their balance sheets, Cushman & Wakefield Inc. said. The region’s lenders, asset managers and bad banks, such as Spain’s Sareb, sold 40.9 billion euros of loans tied to property in the first six months, 611 percent more than a year earlier, the New York-based broker said in a report today. Transactions will reach a record 60 billion euros this year, Cushman & Wakefield estimates.

• Singapore GDP Unexpectedly Shrinks as Manufacturing Declines. Singapore’s economy unexpectedly contracted in the second quarter as a tight labor supply and company moves to shift production overseas hurt manufacturing. Gross domestic product fell an annualized 0.8 percent in the three months through June from the previous quarter, when it expanded a revised 1.6 percent, the trade ministry said in a statement today. The median of 17 estimates in a Bloomberg News survey was for a 2.4 percent gain. Manufacturing fell 19.4 percent in the second quarter from the previous three months, data showed.

• Las Vegas Sands(LVS), Adelson Face $5 Billion Macau Plan Suit. The Las Vegas Sands Corp. (LVS) and Chairman Sheldon Adelson were sued by a former potential partner in a casino venture for as much a $5 billion over claims of trade-secret theft.

• Asia Stocks Rise First Time in 5 Days, Led by Health Care. Asian stocks rose, with the regional benchmark gauge on course for its first gain in five days, as telecommunications firms and health-care shares advanced. SoftBank Corp. added 1.4 percent in Tokyo, leading phone companies to the largest gain among 10 industry groups on the regional index. Sumitomo Dainippon Pharma Co. surged 4 percent after Canada approved the use of one of the Japanese pharmaceutical manufacturer’s drugs. Hyundai Hysco Co. slumped 3.2 percent as the U.S. government imposed duties on steel pipe from South Korea and eight other nations. The MSCI Asia Pacific Index added 0.3 percent to 146.47 as of 9:42 a.m. in Hong Kong.

• Gold Near 4-Month High as Investors Assess Geopolitical Tensions.

• Individuals Pile Into Stocks as Pros Say Bull Is Spent. Main Street and Wall Street are moving in opposite directions. Individual investors are plowing money back into the U.S. stock market just as professional strategists say gains for this year are over. About $100 billion has been added to equity mutual funds and exchange-traded funds in the past year, 10 times more than the previous 12 months, according to data compiled by Bloomberg and the Investment Company Institute. The growing optimism contrasts with forecasters from UBS AG to HSBC Holdings Plc, who say the stock market will be stagnant with valuations at a four-year high. While the strategists have a mixed record of being right, history shows the bull market has already lasted longer than average and individuals tend to pile in at the end of the rally.

Wall Street Journal:

• Obama Contends With Arc of Instability Unseen Since '70s. Convergence of Security Crises Poses Serious Challenge to Barack Obama's Foreign Policy. A convergence of security crises is playing out around the globe, from the Palestinian territories and Iraq to Ukraine and the South China Sea, posing a serious challenge to President Barack Obama's foreign policy and reflecting a world in which U.S. global power seems increasingly tenuous. The breadth of global instability now unfolding hasn't been seen since the late 1970s, U.S. security strategists say, when the Soviet... 

• Flood of Child Migrants Spurs Local Backlash. The federal government is scrambling to find temporary housing for thousands of children streaming across the Mexican border, asking states for help as an increasing number of governors and local officials protest efforts to send the migrants to their communities. While some officials are welcoming the children, concerns voiced in states and communities near the southwest border and beyond demonstrate the depth of the Obama...

• Spanish Bad-Debt Data Tell Divergent Stories. Nonperforming Loans Are Falling; Analysts Point to Broader Measure. (graph) 

• Portugal Isn't Euro Zone's Biggest Problem. What should worry investors is how growth appears to be stalling in some of the euro zone's biggest economies.

• The Full-Time Scandal of Part-Time America. Fewer than half of U.S. adults are working full time. Why? Slow growth and the perverse incentives of ObamaCare.  

MarketWatch.com:

• U.S. stocks will be ‘very disappointing’ for 10 years. Opinion: Equities have been overvalued for some time, six gauges show.

Fox News:

• ISIS destroys shrines and mosques, may be targeting Mecca. ISIS is leaving a path of destroyed churches, shrines and mosques in its wake as it storms across Syria and Iraq, and has even set its sights on Mecca -- Islam's holiest site.

CNBC: 

• Lindt poised to acquire Russell Stover.

• US oil output booms—now refiners have to catch up.

• What happened to Japan's yen-driven export boom? When Japan's Prime Minister Shinzo Abe came to power in late 2012, he hoped a weaker yen would give exporters a much-needed boost as well as spur the inflation needed to revive the world's third biggest economy. Eighteen months on and after an almost 30 percent decline in the yen's value driven by massive monetary stimulus from the Bank of Japan, the currency has failed to lead to the export boom the government had hoped for.

• Are the Fed and the ECB falling behind the curve? If you believe some of the U.S. Federal Reserve (Fed) governors' forecasts, the answer for the Fed's case is a resounding "yes."

Zero Hedge:

• Russell 2000 Slumps Into Red For 2014; Gold Best Year-To-Date. (graph)

• 5 Things To Ponder: The Everything Boom.

• Is It Time To Sell The "Old Guy At A Club" Market?

• Goldman(GS) Warns, Congress Is Preparing To Tame The Fed.

• About That China PMI Number... (graph)

• NSA Whistleblower Speaks: "The Ultimate Goal is Total Population Control".

• Trump Plaza To Close In September As Atlantic City Implosion Claims Fourth Casino.

• When Perfect "There Can't Be A Recession" Indicators Fail.

• Bundesbank Warns Draghi: "Monetary Policy... Is Too Loose".

• Ignoring Occam's Razor (Or Why It's Not Different This Time).

• Forget Puerto Rico, German Munis Are In Trouble.

• Goldman Admits Market 40% Overvalued, Economy Slowing, So... Time To Boost The S&P Target To 2050 From 1900.

• JPMorgan(JPM) Blows Up The Fed's "We Can 'Control' The Crash With Reverse Repo" Plan. (graph)

• Are The 12 Regional Banks Of The Fed Private Entities?

• Merkel Slams Obama's "Cold War" Espionage "Doesn't Belong In 21st Century".

• What Is Power Consumption Telling Us About The US Economy? (graph)

• Orwell Would Be Proud: US Media Admits Divine Right To Decide What Public Needs To Know.

• Fed Members Reach Peak Complacency. (graph)

• "Pot-For-Poverty": Bastion Of Liberalism Unveils Free Marijuana For The Poor.

• China - It's Politics, Not Just Finance.

Business Insider:

• The Pentagon Has Successfully Tested Self-Guided Bullets.

• Putin's Critics Face 'Soviet Fear' In Moscow.

• The Savings That Come From Switching To Alternative Fuel Vehicles Are Tumbling.

• The Polar Vortex Is Coming Back Next Week.

• China's Top Paper Warns Against 'New Cold War' With US.

• UN: Iraq Is Headed For Chaos.

• This Map Shows Why The South China Sea Could Lead To The Next World War.

• China Is Making A Huge Arctic Play — Even Though It Has No Claim.

• Close Aide To Saddam Praises ISIS Extremists And Calls For The Fall Of Baghdad.

• Russia Warns Ukraine Of 'Irreversible' Consequences After Shells Land In Russia.

• Obama's Middle East Policy Enters The 'Dark Unknown' As It Reconsiders Assad.

Reuters:

• Whiting to buy Kodiak for $3.8 bln, create No. 1 Bakken producer. Whiting Petroleum Corp said on Sunday it would acquire Kodiak Oil & Gas Corp for $3.8 billion in stock, to become the largest producer in North Dakota's Bakken shale oil formations, eclipsing Harold Hamm's Continental Resources Inc.

Telegraph:

• BIS chief fears fresh Lehman from worldwide debt surge. Jaime Caruana says investors are ignoring prospect of higher interest rates in the hunt for returns. The world economy is just as vulnerable to a financial crisis as it was in 2007, with the added danger that debt ratios are now far higher and emerging markets have been drawn into the fire as well, the Bank for International Settlements has warned. Credit spreads have fallen to to wafer-thin levels. Companies are borrowing heavily to buy back their own shares. The BIS said 40pc of syndicated loans are to sub-investment grade borrowers, a higher ratio than in 2007, with ever fewer protection covenants for creditors. The disturbing twist in this cycle is that China, Brazil, Turkey and other emerging economies have succumbed to private credit booms of their own, partly as a spill-over from quantitative easing in the West. Their debt ratios have risen 20 percentage points as well, to 175pc. Average borrowing rates for five-years is 1pc in real terms. This is extemely low, and could reverse suddenly. “We are watching this closely. If we were concerned by excessive leverage in 2007, we cannot be more relaxed today,” he said.

Welt am Sonntag:

• ECB Loose Policy Jeopardizes Reform Effort. ECB's "expansionary measures and announcements" could further weaken countries' will for reform and budget consolidation, putting more pressure on monetary policy, ECB Governing Council member Jens Weidmann says. Weidmann rejects ECB plans to buy asset-backed securities linked to loans to enterprises, as central bank would risk "becoming Europe's bad bank".

Der Spiegel:

• Germany's Merkel to Resign Voluntarily Before Term Ends. Chancellor Angela Merkel "determined" to step down willingly, not wait until electoral defeat or replacement by another party member, citing members of her cabinet, CDU party. Merkel undecided whether to run in future for top UN or EU posts.

Hong Kong Economic Times:

• China May Need 4-5 Years to Restabilize Property Market. China economic situation in 2H depends on the performance of the property market, citing an exclusive interview with Zhu Baoliang, head of the State Information Center's economic forecasting department in Beijing. If the govt doesn't handle the situation properly, a property market crisis may emerge next year, Zhu says. Downward pressure for the economy exists as government stimulus can't "genuinely" help stabilize the economy, Zhu said.

Weekend Recommendations

Barron's:

• Bullish commentary on (WFM), (GME), (TJX), (BBBY), (SPLS), (TGT), (JCI), (BA) and (DOV).

• Bearish commentary on (SHLD), (JCP), (HE) and (AMZN).

Night Trading

• Asian indices are -.25% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 102.50 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 72.0 +.5 basis point.

• FTSE-100 futures +.28%.

• S&P 500 futures +.13%.

• NASDAQ 100 futures +.14%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (C)/1.05

Economic Releases

• None of note

Upcoming Splits

• (AAON) 3-for-2

• (OILT) 2-for-1

• (SFBS) 3-for-1

Other Potential Market Movers

• The RBA minutes could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by health care and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.

Weekly Outlook

Week Ahead by Bloomberg. 
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on rising Mideast turmoil/Ukraine-Russia tensions, earnings outlooks, technical selling, profit-taking, rising European/emerging markets debt angst and yen strength. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Market Week in Review

• S&P 500 1,967.57 -.90%*

 The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 1,967.57 -.90%

• DJIA 16,943.81 -.73%

• NASDAQ 4,415.49 -1.57%

• Russell 2000 1,159.93 -3.99%

• S&P 500 High Beta 33.28 -2.03%

• Wilshire 5000 20,554.98 -1.27%

• Russell 1000 Growth 913.58 -1.13%

• Russell 1000 Value 992.81 -.99%

• S&P 500 Consumer Staples 465.51 +.30%

• Solactive US Cyclical 136.63 -1.24%

• Morgan Stanley Technology 963.57 -1.39%

• Transports 8,254.31 -.49%

• Utilities 559.43 +.93%

• Bloomberg European Bank/Financial Services 103.59 -3.94%

• MSCI Emerging Markets 43.78 -.31%

• HFRX Equity Hedge 1,175.28 -.79%

• HFRX Equity Market Neutral 967.41 +.16%

Sentiment/Internals

• NYSE Cumulative A/D Line 228,237 -1.01%

• Bloomberg New Highs-Lows Index -70 -608

• Bloomberg Crude Oil % Bulls 42.86 +121.50%

• CFTC Oil Net Speculative Position 424,887 -4.70%

• CFTC Oil Total Open Interest 1,742,131 -.99%

• Total Put/Call .88 unch.

• OEX Put/Call 3.11 +170.43%

• ISE Sentiment 109.0 -3.54%

• NYSE Arms 1.05 +87.50%

• Volatility(VIX) 12.08 +17.05%

• S&P 500 Implied Correlation 50.38 +9.83%

• G7 Currency Volatility (VXY) 5.33 +3.09%

• Emerging Markets Currency Volatility (EM-VXY) 5.82 -.68%

• Smart Money Flow Index 11,669.06 +1.27%

• ICI Money Mkt Mutual Fund Assets $2.575 Trillion +.21%

• ICI US Equity Weekly Net New Cash Flow -$8.887 Billion

• AAII % Bulls 37.6 -2.3%

• AAII % Bears 28.7 +27.8%

Futures Spot Prices

• CRB Index 297.07 -3.15%

• Crude Oil 100.83 -3.13%

• Reformulated Gasoline 290.85 -3.61%

• Natural Gas 4.15 -5.54%

• Heating Oil 286.09 -2.28%

• Gold 1,337.40 +1.29%

• Bloomberg Base Metals Index 201.83 unch.

• Copper 326.90 -.17%

• US No. 1 Heavy Melt Scrap Steel 357.0 USD/Ton unch.

• China Iron Ore Spot 96.90 USD/Ton +.42%

• Lumber 330.90 -1.30

• UBS-Bloomberg Agriculture 1,329.42 -5.25%

Economy

• ECRI Weekly Leading Economic Index Growth Rate 4.3% unch.

• Philly Fed ADS Real-Time Business Conditions Index .2503 -3.25%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 125.67 +.32%

• Citi US Economic Surprise Index -13.10 -3.4 points

• Citi Emerging Markets Economic Surprise Index -4.40 +4.6 points

• Fed Fund Futures imply 38.0% chance of no change, 62.0% chance of 25 basis point cut on 7/30

• US Dollar Index 80.19 -.10%

• Euro/Yen Carry Return Index 143.98 -.60%

• Yield Curve 207.0 -6.0 basis points

• 10-Year US Treasury Yield 2.52% -12.0 basis points

• Federal Reserve's Balance Sheet $4.340 Trillion +.15%

• U.S. Sovereign Debt Credit Default Swap 16.41 -14.6%

• Illinois Municipal Debt Credit Default Swap 170.0 +1.02%

• Western Europe Sovereign Debt Credit Default Swap Index 36.89 +18.69%

• Asia Pacific Sovereign Debt Credit Default Swap Index 71.96 +2.04%
  

• Emerging Markets Sovereign Debt CDS Index 190.29 -.75%
  

• Israel Sovereign Debt Credit Default Swap 86.50 +13.07%

• Iraq Sovereign Debt Credit Default Swap 350.03 +4.56%

• Russia Sovereign Debt Credit Default Swap 172.94 -5.65%

• China Blended Corporate Spread Index 303.39 +.97%

• 10-Year TIPS Spread 2.26% unch.

• TED Spread 21.75 -1.0 basis point

• 2-Year Swap Spread 16.75 +3.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -11.50 -.5 basis point

• N. America Investment Grade Credit Default Swap Index 57.96 +4.58%
  

• European Financial Sector Credit Default Swap Index 71.69 +18.81%
  

• Emerging Markets Credit Default Swap Index 225.54 -3.15%
  

• CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 82.0 -1 basis point

• M1 Money Supply $2.846 Trillion +.7%

• Commercial Paper Outstanding 1,041.80 -1.1%

• 4-Week Moving Average of Jobless Claims 311,500 -3,500

• Continuing Claims Unemployment Rate 2.0% unch.

• Average 30-Year Mortgage Rate 4.15% +3 basis points

• Weekly Mortgage Applications 353.90 +1.90%

• Bloomberg Consumer Comfort 37.6 +1.2 points

• Weekly Retail Sales +3.80% +50 basis points

• Nationwide Gas $3.63/gallon -.03/gallon

• Baltic Dry Index 814.0 -8.85%

• China (Export) Containerized Freight Index 1,092.07 -.46%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 27.50 unch.

• Rail Freight Carloads 227,097 -14.23%

Best Performing Style

• Large-Cap Value -1.0%

Worst Performing Style

• Small-Cap Growth -4.6%

Leading Sectors

• Gold & Silver +2.5%

• REITs +1.0%

• Airlines +.9%

• Utilities +.9%

• Telecom +.4%

Lagging Sectors

• Gaming -4.6% 

• Coal -4.9%

• Social Media -5.1%

• Alt Energy -5.2%

• 3D Printing -5.5%

Weekly High-Volume Stock Gainers (5)

• AMRE, BDSI, TRW, MIC and AVAV

Weekly High-Volume Stock Losers (12)

• ANAC, MBUU, MSM, EROS, MYRG, TCS, TTS, RARE, SRPT, LL, PBPB and GIMO

Weekly Charts
ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change

Stocks Slightly Higher into Final Hour on Central Bank Hopes, Short-Covering, Earnings Optimism, Tech/Biotech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Light

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 12.18 -3.26%

• Euro/Yen Carry Return Index 143.95 -.03%

• Emerging Markets Currency Volatility(VXY) 5.85 -1.02%

• S&P 500 Implied Correlation 50.36 -2.85%

• ISE Sentiment Index 97.0 +2.11%

• Total Put/Call .79 -25.47%

• NYSE Arms 1.11 -3.45% 

Credit Investor Angst:

• North American Investment Grade CDS Index 58.23 +.72%

• European Financial Sector CDS Index 71.69 +.17%

• Western Europe Sovereign Debt CDS Index 36.89 +1.35%

• Asia Pacific Sovereign Debt CDS Index 71.96 +.69%

• Emerging Market CDS Index 225.60 -.31%

• China Blended Corporate Spread Index 303.39 +1.11%

• 2-Year Swap Spread 16.75 unch.

• TED Spread 21.75 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -11.5 +.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.

• Yield Curve 207.0 -1.0 basis point

• China Import Iron Ore Spot $96.90/Metric Tonne unch.

• Citi US Economic Surprise Index -13.10 -.5 point

• Citi Emerging Markets Economic Surprise Index -4.40 +1.6 points

• 10-Year TIPS Spread 2.27 unch.

Overseas Futures:

• Nikkei Futures: Indicating +56 open in Japan

• DAX Futures: Indicating +2 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech/tech/medical sector longs

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• 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.

Wall Street Journal:

• 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.

Fox News:

• 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.

CNBC: 

• The costs of Obama’s housing mistakes keep piling up.

• 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.

ZeroHedge: 

• Banco Espirito Santo: All The Latest News.

• Germany Instructs Its Companies To Limit Cooperation, Procurement Orders With The US.

• UN Demands Europe "Open Its Doors" As Syrian Refugees Reach "Saturation Point".

• WTI Crude Drops Below $101 - Lowest in 2 Months. (graph)

• As The SEC Finally Gets Involved In CYNK, One Short Has A Big Problem.

Business Insider: 

• Retailers Have Given Some Discouraging Commentary About The US Economy To Start Earnings Season.

• LEBRON JAMES IS GOING BACK TO CLEVELAND.

• Hamas Is Well On Its Way To Winning The Latest Conflict In Gaza.

• An Ominous Sign That Heroin Use Is Blowing Up In The US.

Breitbart.com: 

• EXCLUSIVE: TSA Allowing Illegals to Fly Without Verifiable ID, Says Border Patrol Union.

Frankfurter Allgemeine Zeitung:

• 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.