Monday, June 15, 2015

Monday Watch

Today's Headlines 
Bloomberg: 
  • Greece Enters Fateful Week After Brussels Talks End Fruitlessly. Greece enters what could be a defining week after last-ditch negotiations between representatives of the Greek government and its creditors collapsed on Sunday. The euro dropped as the European Commission said the talks in Brussels had broken up after just 45 minutes with the divide between what creditors asked of Greece and what its government was prepared to do unbridged. The focus now shifts to a June 18 meeting in Luxembourg of euro-area finance ministers, known collectively as the Eurogroup, that may become a make-or-break session deciding Greece’s ability to avert default and its continued membership in the 19-nation euro area. “While some progress was made, the talks did not succeed as there remains a significant gap,” the commission said in a text message. “On this basis, further discussion will now have to take place in the Eurogroup.”
  • China's $358 Billion in Margin Loans Points to Next Bear Market. Stock forecasters in search of an early-warning system for the next Chinese bear market are zeroing in on the country’s record $358 billion pile of margin debt. When that three-year build-up of leveraged positions starts to unwind, regulators will struggle to limit the selloff, according to Bocom International Holdings Co. and Rabobank International. Almost all of this year’s biggest declines in the Shanghai Composite Index, including a 6.5 percent slump on May 28, were sparked by investor concerns over margin-trading restrictions. The securities regulator announced plans Friday to limit the amount brokerages can lend for stock trading.
  • Fired Miner’s 50% Pay Cut Is Just Start of Australian Wage Pain. Australian wages fell in the first quarter for the first time on record as the wall of Chinese money scooping up the nation’s commodities receded. The implications are profound: stagnant pay limits household spending that accounts for about 55 percent of the economy; it impedes government efforts to repair the budget; and will force the central bank to maintain low interest rates for an extended period or cut even further. 
  • China Stocks Fall From 7-Year High on Margin Debt Concern. China’s stocks fell, with the benchmark index dropping from its highest level in seven years, amid concern regulators will clamp down on margin debt and a flood of share sales may lure funds away from existing equities. Citic Securities Co. and Haitong Securities Co. slid at least 1.4 percent after the securities regulator said it plans to impose a cap on brokerages’ margin debt. The ChiNext index of smaller companies tumbled 3.6 percent as 25 upcoming initial public offerings may lock up the largest amount of funds since new share sales resumed in January 2014.
  • Asian Stocks Fall as Greece Negotiations Collapse With No Deal. Asian stocks dropped for the first time in four days after the latest round of negotiations between Greece and its creditors fell apart. The MSCI Asia Pacific Index declined 0.4 percent to 147.63 as of 9:01 a.m. in Tokyo. Talks in Brussels collapsed after just 45 minutes on Sunday.
  • Treasuries Rise as Greek Default Risk Boosts Demand for Safety. Treasuries rose, pushing benchmark yields toward a one-week low, as the threat of a Greek default raised demand for the relative safety of U.S. government securities. Notes and bonds jumped after the European Commission said talks in Brussels between Greece and its creditors broke up after 45 minutes on Sunday. Lawmakers in Germany, the biggest national contributor to Greek aid, warned that the indebted country is at risk of dropping out of the euro currency bloc.
Wall Street Journal: 
  • Obama’s Favors for the Mullahs. The U.S. makes more concessions to Iran in a prelude to a nuclear deal. The U.S. makes more concessions to Iran in a prelude to a nuclear deal. The Obama Administration has long insisted that any nuclear deal will have no effect on U.S. determination to stop Iran’s regional ambitions or support for terrorism. As the political desire for a deal grows more urgent, however, this claim is proving to be hollow.
CNBC: 
  • Greek default fears rise as '11th-hour' talks collapse. Talks aimed at reaching an 11th-hour deal between Greek ministers and their bailout creditors collapsed on Sunday evening after a new economic reform proposal submitted by Athens was deemed inadequate to continue negotiations. The breakdown is the clearest sign yet that differences between the two sides may be too wide to breach, increasing the possibility that Athens will not secure the €7.2bn in bailout aid it needs to avoid defaulting on its debts - including a €1.5bn loan repayment due to the International Monetary Fund in just two weeks.
  • Huge growth in China’s money funds poses risk. China's asset management industry has had explosive growth in the last two years following the arrival of online money market funds, which have transformed the way millions of Chinese invest their savings. The booming popularity of money funds, however, has led several investment experts to raise serious concerns about risks developing in the industry as a result.
ARD: 
  • Germany's Gabriel Rules Out Saving Greece 'at Any Price'. Germany won't let itself be blackmailed, Vice Chancellor and Economy Minister Sigmar Gabriel says. Some officials in Greek govt "think that the fear of a Greek exit is so great that we'll do anything they want". It shouldn't be the case "that we always say this its the last set of negotiations and then it calamitously carries on," he said.
Night Trading
  • Asian indices are -1.25% to -.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 112.0 +3.0 basis points.
  • Asia Pacific Sovereign CDS Index 62.5 +1.5 basis points.
  • S&P 500 futures -.48%.
  • NASDAQ 100 futures -.51%.

Earnings of Note
Company/Estimate 
  • None of note
Economic Releases
8:30 am EST
  • Empire Manufacturing for June is estimated to rise to 6.0 versus 3.09 in May.
9:15 am EST
  • Industrial Production for May is estimated to rise +.2% versus a -.3% decline in April. 
  • Capacity Utilization for May is estimated to rise to 78.3% versus 78.2% in April.
  • Manufacturing Production for May is estimated to rise +.3% versus unch. in April.
10:00 am EST
  • The NAHB Housing Market Index for June is estimated to rise to 56.0 versus 54.0 in May.
4:00 pm EST
  • Net Long-Term TIC Flows for April.
Upcoming Splits
  • (PPG) 2-for-1
  • (IDXX) 2-for-1
Other Potential Market Movers
  • The German Trade Balance report, BIO Intl Convention and the (DNB) investor day could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by industrial and financial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the week.

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