Global shares pause, guarded stimulus hopes from ECB, Fed

The impact of the three-year euro debt crisis on Asia was evident on Tuesday with Japan's Manufacturing Purchasing Managers Index (PMI) falling at its fastest pace since last year's earthquake and tsunami, as demand for Japanese goods slows in Europe and China.

Market sentiment has been underpinned by speculation the ECB, at a meeting on Thursday, may resume its bond buying program to shoot down rising Spanish and Italian borrowing costs, but uncertainty remained partly because Germany has repeated its opposition to such a step.

The Fed has also come under greater pressure to act as recent data for the third quarter has disappointed, but many economists do not expect further easing until September. The Fed starts a two-day interest rate policy meeting on Tuesday.

"With the market at a crossroads between satisfaction and disappointment, investors have little choice other than to sit on the sidelines for now and see what the central banks do," said Kim Soo-young, an analyst at KB Investment & Securities.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.1 percent after touching a three-week high on Monday. The index was set for a monthly gain of about 2.2 percent, compared to a near flat showing last July.

U.S. stocks finished mostly flat on Monday as investors paused following the best two-day run this year, while European shares hit three-month highs to end above a key technical level.

Japan's Nikkei stock average finance/markets/index?symbol=jp%21n225">.N225 opened down 0.4 percent, after hitting a one-week high on Monday. .T

The euro steadied at $1.2263,, below a three-week high of $1.2390 touched on Friday but well above a two-year low around $1.2042 reached last week.

The Australian dollar held near a four-month high against the U.S. dollar of $1.0508 and an all-time peak versus the euro around A$1.1646, both reached in offshore trade, as speculation of monetary stimulus spurred investor appetite for high-yielding currency.

"We expect that the Fed will choose to wait for more decisive data and that the ECB measures will be watered down versus market expectations - and will likely boost market volatility and increase demand for safer assets such as the USD," said Barclays Capital analysts in a research note.

"More fundamentally, it seems to us that the market response to policy initiatives from the ECB or anywhere else should be conditioned by the degree to which they address the deeper drivers of the economic and financial problem," they said.

More evidence emerged of the euro zone debt crisis damaging economic activities and dampening morale.

The Markit/JMMA Japan Manufacturing Purchasing Managers Index showed on Tuesday it fell to a seasonally adjusted 47.9 in July from 49.9 in June.

On Monday, the European Commission's sentiment index showed the euro zone's business sentiment fell to a 34-month low in July, near levels last seen after the collapse of Lehman Brothers.

Expectations for an imminent ECB action supported Italy's debt auction on Monday, with Rome selling 5.48 billion euros in bonds, near the top of its planned issue range, and benchmark 10-year borrowing costs falling below 6 percent for the first time since April. But 10-year yields stayed elevated near 6 percent.

Asian credit markets held steady, after the spread on the iTraxx Asia ex-Japan investment-grade index fell to its lowest since early April on Monday in thin trading volumes.

Romney's foreign controversies overshadow economic message

Hoping to take advantage of President Barack Obama's "you didn't build that" comment, Romney's campaign sent teams of high-profile supporters to 18 events in a dozen swing states to hammer home its message that Obama is an anti-business lover of big government.

One-time Republican presidential rivals Newt Gingrich and Tim Pawlenty, who is now a vice presidential possibility, were among the Romney supporters who fanned out across the country to push attacks on Obama for saying, "If you own a business, you didn't build that."

But Romney was forced to fight off his own controversy after he called Jerusalem the Israeli capital and said later that differences in culture powered Israel's economic success compared with the Palestinians.

Both comments angered Palestinian leaders, just days after Romney annoyed Britons during a stop in London by questioning their readiness to host the Olympic Games.

Romney pointed to the big difference in wealth between Israel and the Palestinians and suggested Israel's culture was the reason for the gap.

"If you could learn anything from the economic history of the world, it's this: culture makes all the difference," he told a fundraising event in Jerusalem.

The chief Palestinian negotiator, Saeb Erekat told Reuters that Romney's comments amounted to "a racist statement that shows a lack of knowledge."

He added, "Everyone knows that the Palestinians cannot reach their full potential given the Israeli restrictions imposed on them."

It was another bumpy day on an international trip aimed at showing U.S. voters that the former governor of Massachusetts can handle foreign policy, an area where his election rival Obama has a lead in opinion polls.

"He's been fumbling the foreign policy football from country to country. And there's a threshold question that he has to answer to the American people, and that's whether he is prepared to be commander in chief," Obama campaign spokeswoman Jen Psaki said on Air Force One.

White House spokesman Josh Earnest, asked about the comparison made by Romney between Israelis and Palestinians, told reporters in Washington that some people were looking at those comments and "scratching their heads a little bit."

Romney received words of encouragement on his visit to Poland on Monday from Lech Walesa, a former union leader and ex-Polish president, who said: "I wish you to be successful because this success is needed for the United States of course, but for Europe and the rest of the world too. Governor Romney, get your success. Be successful."

But Solidarity, the union led by Walesa in the 1980s that helped topple communism in Poland, distanced itself from Romney, who it said "supported attacks on trade unions and employees' rights."

OBAMA 'CONTEMPTUOUS'

Obama and Romney are running neck and neck in national polls ahead of the November 6 election, which has focused heavily on jobs.

Romney has criticized Obama's economic leadership and jumped on his recent "you didn't build that" comment to accuse him of being hostile to small businesses.

The Obama campaign says critics have taken that remark out of context and ignored Obama's broader point that public investment helped private businesses prosper.

Obama, headlining a $40,000-a-plate fundraiser with big-money donors at a New York hotel, did not mention that controversy or Romney's gaffes overseas, but said his campaign was being outspent, mostly on negative advertising. The event garnered nearly $2.5 million for Obama's re-election effort.

"Right now, the economy is still rough enough for enough people that this is going to be a close election," Obama told an audience that included investment banker Robert Wolf and Evercore Partners Chairman and Bill Clinton-era Deputy Treasury Secretary Roger Altman.

Appearing at a television store in Arlington, Virginia, Gingrich, former speaker of the U.S. House of Representatives, said Obama's comments on business in fact reflected his true approach.

"When you read the totality of that speech, Obama is so clearly contemptuous," Gingrich told reporters, who were the only attendees at the event. "The longer this argument goes on, the better it is for Romney."

The Romney campaign also released the latest in a series of videos featuring reactions to the comments by small-business founders. In the latest, an Ohio small-business owner says he was "ticked off" by Obama's comment.

Polls show that while Obama is well liked and seen as having done a good job on foreign policy, voters often trust Romney more to improve the economy and lower the unemployment rate of 8.2 percent.

Syrian and Rebel Forces Claim Gains in Nation’s Largest City

In a school transformed into a base, a rebel commander sat at a small desk, drinking tea as updates came over a walkie-talkie. His fighters were on the front lines, watching government troops who had massed around the city. An AK-47 sat on the desk, because the fighting, for the moment, had stopped.

The Syrian Army has descended on Aleppo, with troops, tanks, helicopters and warplanes, hoping to rout hundreds and perhaps thousands of armed opposition fighters who have grabbed a tenuous foothold here.

The battle in Aleppo, Syria’s largest city, could signify a decisive moment in the 17-month-old conflict, proving the government’s resilience or exposing its fragility. The Syrian government, which successfully stopped most rebel attacks on Damascus last week, has promised to make quick work of its opponents in Aleppo.

On Sunday, the rebel commander, Abu Mohammed, who is from Aleppo, boasted of other plans. “We are preparing ourselves for a long, hard guerrilla war,” he said, as he ordered his men to organize night patrols in Salaheddiin, the district at the center of the fighting. “The regime says the war on Aleppo will be ‘the mother of all battles,’ and that they will finish it quickly. But we say, the fighting will be long.”

For most of the uprising, Aleppo, the country’s vital commercial heart, was comparatively quiet, as its merchant class threw its lot in with the government, or remained leery of taking sides. The uprising against President Bashar al-Assad flared here occasionally, in student protests that the government stamped out quickly.

Mr. Assad’s opponents targeted their enemies in the city, and ambushed army soldiers on its outskirts. But full-fledged combat was largely centered elsewhere.

Ten days ago, the city was thrust forcefully into the war as rebels, including defected soldiers organized under the banner of the Free Syrian Army, charged into the city from the surrounding countryside, joining local fighters. They embedded themselves in neighborhoods, and quickly clashed with government soldiers in Salaheddiin and other districts.

Now the city is transformed, its gardens and schools bursting with displaced residents. Its hospitals are filled with civilians wounded during clashes or by the government’s incessant, random shelling. New boundaries have emerged, as the army and its foes delineate their territory with tanks or burned cars.

On Monday, the government and its opponents both claimed victories here. Opposition fighters said that after a pitched battle lasting several hours, they had seized control of a vital checkpoint northwest of the city, in Anadan, freeing up a route for supplies and fighters between Aleppo and the Turkish border. In the fight, the rebels seized several tanks and other military vehicles, activists said.

But with Syrian warplanes and helicopters controlling the skies, it seemed doubtful that the rebels could hold the position. At the same time, Syrian state television reported that the army had won back control of Salaheddiin — vanquishing the “mercenary gunmen,” as one soldier put it. By nightfall, though, clashes in the district raised doubt about that claim.

The combat came as the Syrian government suffered another high-ranking defection from its diplomatic corps, the fourth since the uprising against Mr. Assad began in March 2011. Britain’s Foreign Office announced that the Syrian chargé d’affaires, Khaled al-Ayoubi, the top Syrian diplomatic representative in Britain, had resigned because “he is no longer willing to represent a regime that has committed such violent and oppressive acts.” Diplomats from Iraq, Cyprus and the United Arab Emirates have also defected in recent weeks.

At the United Nations, Secretary General Ban Ki-moon said Monday that the reduced team of monitors had been targeted twice in armed attacks, including an assault Sunday on a convoy led by the new commander. No one in the armored vehicles was hurt.

Mr. Ban also said that he and Kofi Annan, the special envoy to Syria, were “deeply concerned about the situation in Aleppo” and what he called the Syrian military’s use of “all kinds of heavy weapons, including airplanes.”

President Obama, in a phone call with Prime Minister Recep Tayyip Erdogan of Turkey, expressed “growing concerns about the Syrian regime’s ruthless attacks against its own people, most recently in Aleppo,” according to a statement from the White House. The two leaders spoke about how to “coordinate efforts to accelerate a political transition in Syria,” the statement said, without elaborating on those efforts.

On the road to Aleppo, near the devastated city of Homs, the war raced up the road, in buses that ferried soldiers and trucks that hauled tanks. Less than a hundred miles further, the war lingered, on the side of the highway, in the carcasses of military trucks and armored vehicles.

The destruction was evidence of an early attempt by the rebels to stop the army from advancing on Aleppo. Rebel commanders said they either control many of the roads around Aleppo, or have the ability to attack the city’s approaches. The government has increasingly been forced to rely on the airport, which it still controls, opposition activists said. That has not stopped tanks from advancing on the city.

Clashes have occurred in the impoverished, informal neighborhoods on Aleppo’s outskirts, where the rebels have found willing supporters, and in the central districts of the ancient city. Still outgunned, the rebels nonetheless have managed to capture heavier weapons, including tanks and antiaircraft guns mounted on the backs of trucks.

Electricity and water have been cut to many neighborhoods. Most bakeries are closed. The United Nations humanitarian chief, Valerie Amos, said Sunday that 200,000 people had fled the city. Those unable to leave have settled in parks, in Kurdish and Christian neighborhoods that have been spared most of the fighting.

At one of the city’s state-run hospitals, the wards were overflowing with patients wounded in the fighting. Some sat in chairs, and others waited on the ground for treatment, though most of the doctors had not been able to show up for work.

“The ambulances cannot move in the city,” he added. “We have no blood donors. We have no blood bags. The government doesn’t reply to our calls to supply us with more medical staff and equipment.”

The fighters seek treatment at field hospitals, fearing informers and state security officers in the government hospitals. “For the regime, each injured male is a terrorist,” said a volunteer doctor in one of the field hospitals. He said they were bracing for a flood of people, as the state health system faltered.

“We are working hard, to keep these field hospitals away from Assad’s security, and the army’s eyes,” he said.   

The Chick-fil-A Business

Dan Cathy, the president and chief operating officer of Chick-fil-A, the fast-food chain based in Atlanta, recently dragged his company into the middle of the same-sex marriage debate. He told one interviewer that the country is “inviting God’s judgment on our nation when we shake our fist at him and say, ‘We know better than you as to what constitutes a marriage.’ ” Antigay remarks like these are offensive. But they are not a reason to kick the company out of town, as the officials in Boston and Chicago have threatened to do.

Mayor Michael Bloomberg of New York City has the correct take on the matter. Mr. Cathy and his family have long supported efforts to deny same-sex couples the right to marry. Mr. Bloomberg worked hard for marriage equality in New York State. But, said Mr. Bloomberg, “You can’t have a test for what the owners’ personal views are before you decide to give a permit to do something in the city.”

Other officials were considerably less sensitive to the fact that controversial, even hurtful, political views are protected by the First Amendment. One Chicago alderman unwisely threatened to try to use his powers over city businesses to shut out future Chick-fil-A franchises.

Speaker Christine Quinn of the New York City Council also overreached when she sent a letter, on Council stationery, calling for the president of New York University to “sever your relationship” with a Chick-fil-A eatery on campus. “Let me be clear,” she wrote, “I do not want establishments in my city that hold such discriminatory views.”

As a gay woman who recently got married, Ms. Quinn’s anger about Mr. Cathy’s comments is understandable. And she stressed on Monday that the letter was “solely my own opinion.” But, as a powerful city leader and a leading candidate for mayor, she and others in city governments should take care not to be seen muscling aside businesses whose owners don’t agree with their views. That won’t work, especially in a city as big, diverse and opinionated as New York.