Morning Market Roundup: China Woes, Euro 2-Year Low, Calif. & Mortgages

Here’s what’s important in the business world

China: The price of oil slipped below $87 a barrel on Monday as the Chinese premier gave a downbeat assessment of the economy, underlining the possibility that demand may drop in the world’s second-biggest crude consumer.

By early afternoon in Europe, benchmark oil for August delivery was down 35 cents at $86.75 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.02 to finish at $87.10 per barrel in New York on Friday.

In London, Brent crude was up 32 cents at $102.72 on the ICE futures exchange.

The weekend comments from Premier Web Jiabao came after China reported that economic growth fell to a three-year low of 7.6 percent in the second quarter. Wen said China’s economy has not yet entered a recovery and “economic difficulties may continue for some time.”

The fall in the price of oil was limited by signs that crude supplies are facing some constraints, which could act to push prices higher.

Californian Mortgages: In the foreclosure-battered inland stretches of California, local government officials desperate for change are weighing a controversial but inventive way to fix troubled mortgages: Condemn them.

Officials from San Bernardino County and two of its cities have formed a local agency to consider the plan. But investors who stand to lose money on their mortgage investments have been quick to register their displeasure.

Discussion of the idea is taking place in one of the epicenters of the housing crisis, a working-class region east of Los Angeles where housing prices have plummeted. Last week brought another sharp reminder of the crisis when the 210,000-strong city of San Bernardino, struggling after shrunken home prices walloped local tax revenues, announced it would seek bankruptcy protection.

Now – and amid skepticism on many fronts – officials from the surrounding county of San Bernardino and cities of Fontana and Ontario have created a joint powers authority to consider what role local governments could take to stem the crisis. The goal is to keep homeowners saddled by large mortgage payments from losing their homes – which are now valued at a fraction of what they were once worth.

Under eminent domain, the city or county would be required to pay those investors “fair value” for the seized mortgages. So Mortgage Resolution Partners would find private investors to fund that.

EURO: Financial markets were subdued Monday ahead of a raft of U.S. corporate earnings statements that should shed more light on the state of the U.S. economic recovery, while the euro fell to a fresh two-year low against the dollar amid ongoing concerns over Europe’s debt crisis.

Coming off a buoyant session on Friday, when investors cheered a round of positive earnings from JPMorgan Chase & Co. and Wells Fargo Bank, the spotlight will remain on the banks. Citigroup is due to unveil its second-quarter earnings before the market opening bell.

Over the course of the week, around 90 companies listed on the S&P 500 are due to report earnings. They include Bank of America, Coca-Cola, Goldman Sachs, Google, IBM, Intel, Microsoft and Morgan Stanley.

That appears to be the view in the markets, which started the week on a subdued note.

In Europe, the FTSE 100 index of leading British shares was down 0.2 percent at 5,654 while Germany’s DAX fell the same rate to 6,545. The CAC-40 in France was 0.4 percent lower at 3,169.

The Associated Press contributed to this report.