Today's Headlines

Bloomberg:

• Ukraine Says It Destroyed Part of Armed Convoy From Russia. Ukraine said its troops attacked and partially destroyed a column of armed vehicles that had crossed the border from Russian territory, while Russia said it was concerned about an attack on another convoy carrying aid. Ukrainian government troops engaged the vehicles that had arrived overnight through a rebel-held section of the border, Andriy Lysenko, a spokesman for the country’s military, told reporters in Kiev today. Ukrainian soldiers continue to come under shelling, including rounds fired from Russia, he said. The government in Kiev has for months said that separatist rebels in its easternmost regions are receiving support from Russia, which backs them with artillery fire. Russia has repeatedly denied any involvement in the Ukrainian unrest. The Foreign Ministry in Moscow said it was concerned about potential attempts to disrupt the humanitarian convoy and repeated a call for a cease-fire to allow for aid delivery. 
• EU Warns Russia on Further Sanctions as Ukraine Escalates. European Union governments warned Russian President Vladimir Putin that they’re ready to expand sanctions if the conflict in Ukraine intensifies. Citing a “worsening crisis in eastern Ukraine and its humanitarian impact on the civilian population,” EU foreign ministers urged Russia in a joint statement today to stop “any form of border hostilities,” including arming pro-Russian separatists, and to pull back its forces from the border. Illustrating the stakes, Ukraine said its troops attacked an armed convoy that had crossed the border from Russia just as the 28 ministers wound up emergency talks in Brussels. U.S. and European stocks tumbled on the news. 
• Ruble Drops With Eurobonds Souring Weekly Rally on Convoy Attack. The currency fell 0.5 percent to 36.2000 per dollar at 5:51 p.m. in London, reversing a gain of as much as 0.4 percent. Russia’s dollar-denominated bonds due in March 2030 fell for the first time in six days, sending the yield up 23 basis points to 4.73 percent. Local markets had closed before Ukraine announced the attack, with the Micex Index completing its best week since March and 10-year ruble bond yields sliding the most since 2009. “It certainly has the potential to be the start of something much bigger and more serious than we’ve seen so far, given that it puts Ukrainian forces into direct conflict with Russian forces,” Neil Shearing, the chief emerging-market economist at Capital Economics Ltd., said by phone from London. “It now seems to be fairly clear that Russian military vehicles have passed into Ukraine. If this is the beginning of something more serious, it would have serious market implications.”
• Russia Bracing for Price Growth at 5-Year High on Food Ban. Russia is preparing for consumer prices to rise at the fastest pace since 2010 after President Vladimir Putin banned food imports from the U.S. and its allies and backed a sales tax, according to three officials. Annual inflation is likely to accelerate to 8 percent in 2015, far above a 4.5 percent target, the officials said, asking not to be identified as the information isn’t public. Prices may grow 10 percent next year for the first time since 2008 if tit-for-tat sanctions escalate, two of them said.
• Iraq Leader-in-Waiting Calls for Unity Against Insurgents. Iraq’s leader-in-waiting Haidar al-Abadi vowed to fight graft and build an inclusive government to counter a spreading Islamist insurgency in his first comments since ending a dispute over who will lead the country. Poised to replace caretaker Prime Minister Nouri al-Maliki, Abadi won backing from Iraq’s top Shiite cleric, while Massoud Barzani, president of the largely autonomous Kurdish region, said he’d support the premier-designate in a call for a government that “involves all Iraqi factions,” state-run National Iraqi News Agency reported.
• China Bank Bad-Loan Buffers Slip in Sign of Profit Pressures. Chinese banks’ loan-loss reserves fell to the lowest level against soured debt in three years, signaling a looming drag on profits from the need to set aside more money as delinquencies rise. The bad-loan coverage ratio fell to 262.9 percent as of June 30 from 273.7 percent three months earlier, the China Banking Regulatory Commission said in a statement today. Nonperforming loans have climbed for almost three years, the longest run since the data began in 2004, to reach 694.4 billion yuan ($113 billion). 
• Hong Kong Cuts Growth Forecast After Unexpected Contraction. Hong Kong cut its economic growth forecast for the year after an unexpected contraction in the second quarter as a slowdown in China crimped the purchases of luxury items and weighed on local sentiment. The economy is forecast to expand 2 percent to 3 percent, the government said in a statement, compared with its February prediction of 3 percent to 4 percent. Gross domestic product fell 0.1 percent in the second quarter from the prior three months, missing the median estimate of 10 analysts surveyed by Bloomberg News for 0.4 percent growth. 
• Apple(AAPL), Samsung Face Rising Challenges in China Market. The world’s biggest phone market is getting a lot tougher for Apple Inc. (AAPL) and Samsung Electronics Co. (005930) China Mobile Ltd. (941), the biggest carrier, is cutting subsidies by $2 billion in a sign the industry is less willing to pay for expensive devices like the iPhone and Galaxy S. That may accelerate growth for Chinese makers Xiaomi Corp. and Lenovo Group Ltd. (992) that offer similar features for lower prices.
• U.S. Investment Outflow Hits Record as China Cuts Holdings. The U.S. posted a record cross-border investment outflow in June as China and Japan reduced their holdings of Treasuries and private investors abroad sold bonds and notes. The total net outflow of long-term U.S. securities and short-term funds such as bank transfers was $153.5 billion, after an inflow of $33.1 billion the previous month, the Treasury Department said in a report today. The June figure, and $40.8 billion in net selling of Treasury bonds and notes by private investors in June, were the largest on record, the Treasury said.
• European Stocks Drop as Ukraine Attacks Armed Convoy. European stocks pared a weekly rally, erasing gains in the final hour of trading, after Ukraine said its troops partially destroyed a military convoy that entered the country from Russia. SVG Capital Plc lost 4.5 percent after Permira Holdings Ltd. sold its entire stake in the company. BHP Billiton Ltd. climbed 1.2 percent after the world’s biggest mining company said it may spin off some assets. Hennes & Mauritz AB (HMB) advanced after posting a surge in sales last month. The Stoxx Europe 600 Index fell 0.4 percent, the most in a week, to 329.72 at the close of trading in London.
• Treasuries Climb as Safety Demand Jumps Amid Turmoil in Ukraine. Treasuries rose, sending 30-year (USGG30YR) yields to the lowest since May 2013, as conflict in Ukraine spurred investor safety demand and reports signaled the U.S. economy will struggle to gain traction. 
• End of Boom Forces Miners to Review $616 Billion of Deals. A proposed spinoff by BHP Billiton Ltd. (BHP) of about $15 billion in assets signals the start of a new round of disposals as the biggest mining companies adapt to the end of a boom for commodities. With Anglo American Plc (AAL) fielding offers on a weekly basis for mines and Rio Tinto Group last month dumping Mozambique coal assets for a fraction of what it paid three years ago, producers are streamlining in the wake of China-led minerals demand that drove record profits as metals prices soared.

Wall Street Journal:

• Ukraine Says Russian Armored Vehicles Destroyed. Vehicles Had Been Seen Crossing Border Near Russian Aid Convoy. Ukrainian artillery destroyed a large part of a column of armored vehicles that had been seen entering Ukraine from Russia, Ukrainian President Petro Poroshenko said Friday. Ukraine, backed by Western capitals, has for weeks accused Russia of sending men and heavy weapons to pro-Russia rebels that hold several towns and cities in Ukraine's east. 
• Credit Default Swaps Near Revamp After Banco Espírito Santo Snafu. Investors Are Counting On Changes To The CDS Market to Fix Problems.

CNBC:

• George Soros loads up on bearish market bet. (video) Soros Fund Management, the large family office that manages assets for billionaire George Soros, raised its protection against a U.S. stock market drop dramatically, sparking concerns that the powerful investment firm is expecting a big fall in equities. 
• DoubleLine's Gundlach: Could see US 10-year yields go to 2.2%. (video)
• Commodities are flashing a warning sign. Commodities have been getting crunched and I believe it has rather serious implications for both the global economy and worldwide monetary policies.

ZeroHedge:

• It Begins: Ukraine Troops Destroy Part Of "Armed" Russian Convoy, Stocks Crash.
• Russia Responds: Ukraine Statement On Convoy "Provocation", Seeks To Aggravate Conflict, Drag In Russia.
• Europe Says Would Consider Any "Unilateral Military Action By Russia A Blatant Violation Of International Law".
• German Stocks Give Up Week's Gains As Bund Yields Plunge To Record Lows. (graph)
• Subprime Car Loans Are The New "Cash For Clunkers" - Auto Production Soars Most Since July 2009. (graph)
• Consumer Confidence Collapses To 9-Month Low, Biggest Miss In Over 8 Years. (graph)
• Ebola Outbreak "Moving Faster" Than Reported Cases Suggest, May Be Far Worse WHO Warns. (graph)
• Producer Prices Slide Driven By Biggest Plunge In Energy Since November 2013, Core PPI Rises Most Since May. (graph)
• Empire Manufacturing Tumbles Most In 2 Years, Biggest Miss In 4 Months. (graph)
• NATO Accuses Russia Of Escalating Ukraine Conflict, Demands Withdrawal Of Russian Troops From Border.

Business Insider:

• Deere(DE) Laying Off More Than 600 US Plant Workers. 
• Apple(AAPL) Is Now Storing Users' Personal Data On Servers In China.
• CITI: The Economy Has Entered Its Scary 'Phase 3' Where Bubbles Form Prior To A Crash.

Reuters:

• High-yield bond funds post 5th week of global outflows -BofA. Investors worldwide pulled $2.4 billion out of high-yield junk bond funds in the week ended Aug. 13, marking the fifth straight week of withdrawals and indicating increasing concern over risk assets, data from a Bank of America Merrill Lynch Global Research report showed on Friday. The outflows from junk bond funds came after record withdrawals of $11.4 billion in the prior week and against the backdrop of investors moving into plain-vanilla securities including Treasuries.
• Fed's Kocherlakota sees continued weak job market, low inflation.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.90%

Sector Underperformers:

• 1) Retail -1.25% 2) Gaming -1.01% 3) HMOs -1.0%

Stocks Falling on Unusual Volume:

• ADSK, JWN, DTK, DDS, WB, FONR, CHKR, OVTI, APH, XIV, ZIV, CAP, WHZ, XON, TEVA, PCLN, PWRD, ULTI, TNXP, WERN, ICE, EPZM, FL, GVA, TRUE and CHKR

Stocks With Unusual Put Option Activity:

• 1) XLU 2) HOT 3) HYG 4) JWN 5) BZH
  

Stocks With Most Negative News Mentions:

• 1) ERUS 2) FB 3) BA 4) CSCO 5) F
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth -.40%

Sector Outperformers:

• 1) Utilities +.12% 2) Oil Service +.10% 3) Telecom -.09%
  

Stocks Rising on Unusual Volume:

• MNST, A, TASR, UPL, AMAT and NLNK

Stocks With Unusual Call Option Activity:

• 1) WY 2) MNST 3) UPL 4) JCP 5) LNCO
  

Stocks With Most Positive News Mentions:

• 1) UNS 2) AMAT 3) GILD 4) MNST 5) TLT
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Friday Watch

Evening Headlines 
Bloomberg: 

• Russia Truce Plan at Odds With Reports on APC Movements. Russia proposed a cease-fire for humanitarian aid deliveries to war-torn parts of southeastern Ukraine as a convoy of aid trucks from Moscow waited near the border with rebel-held areas. Even as Russia struck a conciliatory note, news outlets including Novoye Vremya and Hromadske TV reported seeing armored personnel vehicles crossing into Ukraine. The government in Kiev has been saying for months that the separatist rebels are receiving reinforcements from Russian territory. The government in Moscow has repeatedly denied any involvement in the unrest. The dispute over the Russian convoy, which the leadership in Moscow says is carrying emergency supplies, has stoked tensions between the two countries and has prompted the U.S. and the European Union to warn Russia against using aid as a pretext for a military intervention. Russia says the supplies are needed to help citizens of Luhansk and Donetsk, where fighting has cut off water and power connections. 

• Islamic State Said to Challenge Al-Qaeda for Leadership. The radical Islamic State’s advances in Iraq are strengthening its challenge to al-Qaeda in a contest for the leadership of the global jihadi movement, according to five U.S. intelligence officials. Its territorial gains and declaration of a caliphate spanning parts of Syria and Iraq, reinforced by its use of social media to broadcast its accomplishments in many languages, are attracting recruits and even drawing defections from the leadership of the core al-Qaeda group and some affiliates, the officials told reporters at a briefing today. They spoke on the condition of anonymity to discuss intelligence assessments. The U.S. intelligence community thinks the Islamic State has an incentive to conduct a major terrorist strike against U.S. or European targets, in part to further assert itself as the true leader of radical Islam, the officials said. There’s evidence that the group is establishing cells beyond Iraq and Syria, they said.

• Maliki Resigns as Prime Minister to Make Way for Abadi. Iraqi Prime Minister Nouri al-Maliki said he has agreed to leave office and clear the way for his designated successor to take over. The move ends a political impasse and may enable Prime Minister-designate Haidar al-Abadi to pull together a more inclusive government better able to counter Islamist militants advancing in the country’s north, and to heal sectarian and ethnic rifts threatening to tear Iraq apart. 

• Open-Ended Notes Skirt Effort to Curb $14 Trillion Chinese Corporate Debt. Chinese companies are selling a record number of bonds that can be booked as equity this year, sidestepping Premier Li Keqiang’s bid to reduce the world’s biggest corporate debt load. Ten firms have issued perpetual notes that pay higher yields in exchange for having no set maturity date, up from eight last year and two in 2010 when such securities debuted in the nation, Bloomberg-compiled data show. China Railway Construction Corp. led offerings with $800 million of 3.95 percent securities last month. The coupon exceeds the 3.5 percent on its 2023 debentures issued in 2013.

• Asian Stock Index Heads for Best Weekly Gain Since March. Asian stocks were little changed, with the regional benchmark index heading for the biggest weekly rally since March, as investors weighed reports Ukraine tensions are easing and weak economic data that fueled bets central banks will maintain stimulus. Health-care shares rose the most among the 10 industry groups on the regional index while energy stocks led declines. China Mobile Ltd., the world’s largest phone company by users, climbed 2.6 percent as it said it will cut $2 billion from its device subsidy budget. James Hardie Industries Plc., a building-materials supplier, slumped 7 percent in Sydney after reporting profit plunged. Parkson Retail Group Ltd., which operates department stores in China, soared 9.1 percent in Hong Kong after first-half profit beat estimates. The MSCI Asia Pacific Index (MXAP) traded at 147.78 as of 9:50 a.m. in Hong Kong, headed for a 2.5 percent rally this week, the most since the period ended March 28. 

• Wal-Mart’s(WMT) Sales Stagnation Reignites Concern About Economy. Wal-Mart Stores Inc. (WMT)’s latest struggles to revive U.S. sales, following a disappointing Commerce Department report earlier this week, add to evidence that the economy isn’t recovering as quickly as expected. The company posted stagnant same-store sales today in its second-quarter earnings report, marking the sixth straight period of no growth. The world’s largest retailer also cut its earnings forecast for the year, citing higher spending on health care and e-commerce.

• WTI Heads for Fourth Weekly Drop Amid Rising Supply; Brent Gains. West Texas Intermediate headed for a fourth weekly drop, the longest losing streak since November, amid speculation that crude supplies are expanding as global demand slows. Brent gained in London. Futures were little changed in New York after falling 2.1 percent yesterday, the most in two weeks. A supply glut is shielding the market from disruptions, the International Energy Agency said on Aug. 12. Oil production in the U.S., the world’s biggest consumer, rose last month to the fastest pace since April 1987, according to the Energy Information Administration.

Wall Street Journal: 

• Euro-Zone Economy Stalls in Second Quarter as German GDP Slips. Weak Quarter Raises Fears Europe's Recovery Has Faltered as Tensions With Russia Add New Challenges. The euro-zone economy stalled in the second quarter, raising the ugly prospect that the region's meager recovery has lost momentum just as it faces fresh headwinds from Russia and Ukraine. Germany's economy, long Europe's growth engine, shrank for the first time in more than a year, a development economists largely attributed to a mild winter that boosted activity in the first quarter at the expense of the second. The...

• Iraq's Besieged Maliki Quits. Move Is Surprising Reversal. Prime Minister Nouri al-Maliki relinquished power on Thursday, ending eight years of tumultuous rule and opening a new political chapter that U.S. officials hope will move Iraq toward a more united front against marauding jihadists. The surprise move deflates a potential crisis after Mr. Maliki had disputed in court the naming of another politician to the premiership and ominously deployed extra security forces across... 

• Midwestern Farmland Values Flatten as a Hot Market Cools. As Crop Prices Fall, So Does Demand for Land.

• Banks, Financial Firms Load Up on Cheap Debt. Banks and other financial companies world-wide are issuing bonds in the U.S. at a record pace, taking advantage of this year's surprising slump in interest rates and a brightening outlook for the sector. These firms' debt sales hit $391 billion this year through Thursday morning, a 32% jump from the same period last year and a 19% rise from the same span of 2007, a year of record issuance, according to data provider Dealogic. That is a higher year-over-year increase than in the broader U.S. corporate-bond market. Sales by... 

CNBC:

• Coke(KO) buys 16.7% stake in Monster Beverage(MNST), Monster shares soar.

• Evidence suggests Ebola toll underestimated: WHO. Staff with the World Health Organization battling an Ebola outbreak in West Africa see evidence the numbers of reported cases and deaths vastly underestimates the scale of the outbreak, the U.N. agency said on its website on Thursday.

• Pershing Square sues US over Fannie Mae, Freddie Mac. Pershing Square Capital Management LP, the hedge fund firm run by William Ackman, on Thursday sued the U.S. government, claiming that its stripping of profits from Fannie Mae and Freddie Mac unconstitutionally short changes investors in the companies' common stock.

Zero Hedge:

• Putin Punks West (Again): Russian Troops Enter Ukraine, Guardian Reports.

• ISIS Issues Threat To White House; Secret Service Taking "Appropriate Steps".

• US Sending 600 Troops, APCs And Tanks To Countries Bordering Russia To "Reassure Threatened Allies".

• David Tepper Unwinds S&P, Nasdaq Calls; Liquidates QCOM, JPM; Adds To AAL, GM: Full 13F.

• 3 Things Worth Thinking About. (graph)

• 14 Reasons Why The U.S. Economy's Bubble Of False Prosperity May Be About To Burst.

Business Insider: 

• David Einhorn Adds To Apple(AAPL) Stake, Trims Micron(MU).

• EXPERT: Obama's Reconciliation With Iran Helps Fuel Middle East Mayhem.

• Texas National Guard Deploys To US-Mexico Border.

NY Times:

• Hedge Funds Give Quarterly Snapshot of Their Portfolios.

NBCNewYork:

• Thousands Rally in Times Square Over Missouri Shooting. Thousands of people rallied in Times Square and on surrounding blocks Thursday evening over the police shooting of Michael Brown, the unarmed black teenager shot last weekend in Ferguson, Missouri.

Reuters:

• Billions in oil investments at risk from low crude prices, says Carbon Tracker. More than half a trillion dollars of investments in major oil projects over the next decade are at risk from high costs and low crude oil prices, an environmental think tank said on Friday, warning that shareholders' returns could suffer. 

• Applied Materials(AMAT) profit beats on memory chip demand. Chip-equipment maker Applied Materials Inc reported a better-than-expected third-quarter profit as contract manufacturers spend more on technology used to make smartphone and memory chips.

Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.99

Telegraph: 

• France rebels against austerity as Europe's recovery collapses. France’s finance minister sends tremors through European capitals with a defiant warning that his country would no longer try to meet deficit targets.

• Russian armoured vehicles and military trucks cross border into Ukraine. (video) Exclusive: Telegraph witnesses Russian armoured vehicles and military trucks cross the border from Russia into Ukraine.

Evening Recommendations
FBR Capital:

• Rated (ICPT) Underperform, target $172.

• Rated (ENTA) Outperform, target $52.

• Rated (NPSP) Outperform, target $34.

• Rated (ACHN) Outperform, target $12.

• Rated (GILD) Outperform, target $125.

Night Trading

• Asian equity indices are -.25% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 103.50 -.5 basis point.

• Asia Pacific Sovereign CDS Index 72.5 +.25 basis point.

• FTSE-100 futures +.25%.

• S&P 500 futures +.02%.

• NASDAQ 100 futures  +.10%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (EL)/.54

• (JD)/-.10

Economic Releases 
8:30 am EST

• Empire Manufacturing for August is estimated to fall to 20.0 versus 25.6 in July.

• PPI Final Demand for July is estimated to rise +.1% versus a +.4% gain in June.

• PPI Ex Food & Energy for July is estimated to rise +.2% versus a +.2% gain in June.

9:00 am EST

• Net Long-Term TIC Flows for June.

9:15 am EST

• Industrial Production for July is estimated to rise +.3% versus a +.2% gain in June.

• Capacity Utilization for July is estimated to rise to 79.2% versus 79.1% in June.

• Manufacturing Production for July is estimated to rise +.4% versus a +.1% gain in June.

9:55 am EST

• Preliminary Univ. of Mich. Consumer Confidence for August is estimated to rise to 82.5 versus 81.8 in July.

Upcoming Splits

• None of note

Other Potential Market Movers

• The UK gdp report and Fed's Kocherlakota speaking could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by real estate 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 day.

Stocks Higher into Final Hour on Central Bank Hopes, Less Eurozone Debt Angst, Short-Covering, Homebuilding/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 12.79 -.85%

• Euro/Yen Carry Return Index 143.01 +.08%

• Emerging Markets Currency Volatility(VXY) 6.72 -1.61%

• S&P 500 Implied Correlation 51.31 +.10%

• ISE Sentiment Index 70.0 -12.50%

• Total Put/Call .97 +3.19%

• NYSE Arms 1.20 -5.53% 

Credit Investor Angst:

• North American Investment Grade CDS Index 59.49 -2.01%

• European Financial Sector CDS Index 65.96 -4.46%

• Western Europe Sovereign Debt CDS Index 33.43 -4.27%
• Asia Pacific Sovereign Debt CDS Index 72.81 +.90%

• Emerging Market CDS Index 272.61 -1.14%

• China Blended Corporate Spread Index 315.62 -.32%
• 2-Year Swap Spread 23.0 unch.

• TED Spread 20.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -13.50 -1.5 basis points

Economic Gauges:

• 3-Month T-Bill Yield .03% unch.

• Yield Curve 199.0 -1.0 basis point

• China Import Iron Ore Spot $93.20/Metric Tonne unch.

• Citi US Economic Surprise Index -2.60 -2.3 points

• Citi Emerging Markets Economic Surprise Index -7.70 -2.2 points

• 10-Year TIPS Spread 2.22 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating -10 open in Japan

• DAX Futures: Indicating +9 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Ukraine Organizes Aid as Russian Convoy Nears Border. Ukraine sent its own aid to the country’s war-torn east as a Russian convoy with emergency supplies neared the border in defiance of conditions set by the government in Kiev. President Vladimir Putin, visiting the Crimea peninsula he annexed from Ukraine in March, said Russia shouldn’t isolate itself and pledged to work to halt the conflict that’s flared for months between pro-Russian separatists and government forces, killing more than 1,500 people, according to United Nations estimates. The U.S and the European Union have slapped sanctions on Russian businesses and individuals, and Ukraine’s parliament passed a bill today allowing similar measures.

• Finland Sees World on Brink of Cold War Before Putin Meeting. Finnish President Sauli Niinistoe said the world risks sinking into a political deadlock as dangerous as the cold war that dominated relations between the U.S. and the Soviet Union decades ago. As the Finnish head of state prepares to meet President Vladimir Putin in the southern Russian town of Sochi tomorrow, he said talks between the two will focus on finding a way to defuse tensions surrounding the conflict in Ukraine. Russia today confirmed the meeting will take place.

• Euro-Area Pickup Stalls as Big Economies Fail to Grow. The euro area’s recovery unexpectedly stalled in the second quarter as its three biggest economies failed to grow, underlining the vulnerability of the region to weak inflation and the deepening crisis in Ukraine. Gross domestic product in the three months through June was unchanged from the first quarter, when it increased 0.2 percent, Eurostat, the European Union’s statistics office in Luxembourg, said today. The median of 37 forecasts in a Bloomberg News survey was for growth of 0.1 percent. In a separate report, the agency confirmed inflation at 0.4 percent in July.

• Germany 10-Year Bond Yield Drops Below 1% as GDP Shrinks. German bonds rose, pushing 10-year yields below 1 percent, boosting speculation that the European Central Bank will have to act to avert the kind of slump that stymied economic growth in Japan for more than a decade. Euro-area bonds from Ireland to Greece advanced as data showed Europe’s largest economy shrank more in the second quarter than analysts predicted and France’s stagnated.

• France Risks EU Deficit Clash After Scrapping Targets. The French government abandoned its 2014 deficit targets after the economy unexpectedly failed to grow for a second straight quarter, risking a clash with European partners striving to meet their own fiscal goals. Finance Minister Michel Sapin said that European policy is partly to blame for the lack of expansion in the region’s second-biggest economy. French gross domestic product stagnated in the three months through June, national statistics office Insee said today in Paris. Economists forecast a 0.1 percent gain, a Bloomberg survey showed. 

• Commodities Fall to 6-Month Low as Gain for Year Paring. Commodities erased gains for the year as oil and grains declined on signs of ample supplies as economic growth halted in Europe and factory output slowed in China, the biggest consumer of industrial metals and energy. The Bloomberg Commodity Index of 22 raw materials dropped 0.5 percent to 125.593 by 5:11 p.m. in London, for a 0.1 percent decline this year. Lean hogs, Brent crude and gasoline fell at least 2 percent today. Lean hogs, Brent crude and aluminum fell at least 1.6 percent today. Cotton, grains and oilseeds are the worst-performing commodities this year in the Bloomberg index. Soybeans dropped 20 percent and corn lost 12 percent on record U.S. harvests. Brent is heading for a second monthly decline, the longest streak since May 2013, as shale fracking allowed the U.S. to pump the most oil in 27 years even as fighting in the Middle East threatened to disrupt supplies.

• Europe Stocks Climb as GDP Data Fuel Stimulus Speculation. European stocks advanced, reversing earlier losses, as data showing the euro area’s recovery stalled in the second quarter fueled speculation of more central bank stimulus. ThyssenKrupp AG climbed after posting quarterly earnings that beat projections. Royal Boskalis Westminster NV surged 8.2 percent after saying it will start a share buyback program. RWE AG declined 2.1 percent after saying first-half profit fell 62 percent. Novozymes A/S slid 6.5 percent after the supplier of enzymes reported second-quarter net income that trailed analyst estimates. The Stoxx Europe 600 Index rose 0.3 percent to 331.04 at the close of trading, after earlier dropping as much as 0.4 percent.

Wall Street Journal:

• 50 Financial Twitter Feeds You Must Follow. 

ZeroHedge: 

• Putin Says The Petrodollar Must Die, "The Dollar Monopoly In Energy Trade Is Damaging Russia's Economy".

• Conditioned To Catch The Falling Knife.

• Ukraine Passes Russian Sanctions Law: Gas Transit Halt Seems Imminent.

• Copper & Crude Are Getting Crushed. (graph)

• A Full Look Inside The Russian Humanitarian Convoy (And The Tanks Surrounding It). (pics)

• Are There No Hard Limits On Financial Finagling?

• Import Prices Have First Drop Since April; Price Of Imported Cars Plunges Most Since 1992. (graph)

Business Insider: 

• Heavy Russian Military Equipment Is Joining The 'Aid' Convoy To Eastern Ukraine.

• EL-ERIAN: The 'Bad News Is Good News' Trade Has Limits.

• Russia's 'Aid' Convoy Has Gone Rogue And Is 15 Miles From Rebel-Held Ukraine.

• This Is What $11.62 Trillion Worth Of Household Debt Looks Like. (graph)

• Tension Between Obama And Netanyahu Is At An All-Time High.

Stratfor: 

• China's Credit Slowdown Raises Concerns About Overall Economic Health. The dramatic and widely unexpected drop in Chinese credit supply in July has raised concerns that the economic "recovery" China seemed poised to make starting in June -- when aggregate financing in China hit a whopping $320 billion, which was more than seven times greater than July's figure -- has been nipped in the bud. There are also concerns that the coming months will bring even worse news from the world's second-largest economy. These concerns are aggravated by anecdotal reports repeated in mainstream news media saying July's decline is the result of the policy-driven credit tightening by the government and also reflects a drop in Chinese enterprises' demand for new loans. If the latter is the case, it raises important questions about the underlying health and trajectory of China's economy.

InterpreterMagazine:

• BREAKING: Reporters Witness Russian Crossing Into Ukraine. More Russian Armor Spotted Moving Toward Ukraine. (video)

Reuters:

• Rights group says Chinese police open fire on Tibetan protesters. Chinese police have opened fire on Tibetan demonstrators in southwestern China, wounding 10 people, after the Tibetans protested against the detention of a respected village leader, a Tibetan rights group said. The crackdown in the Ganzi prefecture of Sichuan province, a flashpoint for Tibetan protests against Chinese rule, underscores simmering tensions between Tibetans and the Chinese authorities. The UK-based International Campaign for Tibet (ICT) group, citing several Tibetan sources in exile, said late on Wednesday the area "is now under tight control, with local Tibetans including the elderly and children subject to interrogation". Photographs that circulated on social media showed Tibetans with "serious wounds on the head and torso" after the incident, the ICT said.

Telegraph:

• Is the eurozone being dragged into deadly spiral of deflation? Portugal, Greece and Spain are in deflation, official figures show, while Italy's inflation rate fell to zero in July.