Daily Agenda: Merkel Faces Political Challenge over Bailout

Chinese stocks slide lower; Thai baht hits multiyear low against U.S. dollar in wake of attack; Wal-Mart posts weaker earnings than expected.

Germany's Chancellor Angela Merkel Attends Cabinet Meeting As Lawmakers Balk At Greek Deal

Angela Merkel, Germany’s chancellor, arrives ahead of a cabinet meeting at the Chancellery in Berlin, Germany, on Wednesday, Aug. 12, 2015. Greece’s third bailout risks being held up by German lawmakers just as the Greek government submits a new raft of proposals to its parliament, throwing into jeopardy a timeline that aims to get cash to the country. Photographer: Rolf Schulten/Bloomberg *** Local Caption *** Angela Merkel

Rolf Schulten/Bloomberg

A rift between the International Monetary Fund and Greece’s European creditors has raised new questions about the $95 billion bailout agreed to by euro zone finance ministers late last week. The IMF has declared that it will not participate in advancing further funds to Athens until October and made demands for debt forgiveness to be part of the agreement among the lenders. IMF Director Christine Lagarde has publicly declared that Greek debt levels are simply unsustainable. This places German Chancellor Angela Merkel in a politically awkward situation as she seeks approval for the latest round of funding for Greece from the Bundestag tomorrow. Merkel has in the past insisted that the IMF must participate in any fresh round of bailouts and the fund’s demands now imperils the parliamentary support for the new funding.

Chinese stocks drop sharply. The benchmark Shanghai Composite index ended today’s trading session at 3,749.1, a decline of over 6 percent, the largest drop since selling restrictions were imposed in July. Some analysts have concluded that some of today’s selling pressure was sparked by an announcement Friday by the China Securities Finance Corporation (CSFC) would taper its buying activities when market volatility abates.

U.K. inflation edges upward. Data issued by the Office of National Statistics today showed a marginal uptick in prices for July with the core producer price index up 0.3 percent year-over-year and core consumer price index levels up 1.2 percent versus July 2014. Despite reaching a multimonth high, the pace of inflation remains well below the Bank of England’s target level of 2 percent.

Baht hits six-year low. In the wake of yesterday’s bombing in Bangkok that killed at least 20 people, the Thai baht fell to 35.648 versus the U.S. dollar in trading today. Analysts note that the currency, already weakened by pressure on Asian currencies in the wake of China’s surprise devaluation, will likely be impacted by reduced tourism in the wake of the explosion.

Citi to pay $180 million over hedge fund marketing. The Securities and Exchange Commission on Monday ordered two Citigroup subsidiaries to pay investors $180 million in compensation for losses in hedge funds. According to regulators, Citi misrepresented the risk associated with the strategies the funds pursued prior to the credit crisis.

Home Depot raises guidance. In a signal that the U.S. housing market recovery is picking up steam, on Tuesday hardware giant The Home Depot raised full-year guidance for the second time year-to-date. The suburban Atlanta–headquartered company expects earnings per share to grow at 31 to 14 percent, up from earlier guidance for 11 to 12 percent.

Wal-Mart Stores reports weaker-than-forecast earnings. Wal-Mart Stores released mixed second-quarter results on Tuesday with the retail giant reporting higher-than-forecast revenues for the period at $120.3 billion but disappointing on earning at $1.08 per share versus an expected $1.12. The company lowered full-year guidance downward to a range of $4.40 to $4.70 per share versus a prior $4.70 to $5.05.