Monday Watch

Today's Headlines 

Bloomberg: 

• If You Think Greece’s Crisis Will End Any Time Soon, Think Again. Frustrated by Greece’s cat and mouse game with its creditors? Get used to it. Even if Prime Minister Alexis Tsipras clinches the 7.2 billion euros ($8 billion) that creditors are withholding, he’s going to need another cash infusion shortly thereafter. What will ensue is a renewed battle after almost five months of trench warfare. The beleaguered country requires a third bailout of about 30 billion euros, according to Nomura International Plc analysts Lefteris Farmakis and Dimitris Drakopoulos. Tsipras says any aid must be on his terms rather than those of governments whose taxpayers have forked out billions in the past five years to keep Greece in the euro.

• Chinese Are Piling Money Into Stocks Instead of Buying Cars. The stockbroker is beating the car salesman in the battle for Chinese wallets. With China’s stock market more than doubling in the past year, consumers like Tom Zhang are deferring big-ticket purchases to chase the rally. The Beijing resident was deciding between a Buick and a Volkswagen Passat before concluding his 300,000 yuan ($48,000) would be better off in equities. He was right, as his holdings soared to 800,000 yuan in value in little more than a year. “I feel like I am good at this, that I can make more,” Zhang, 26, said as he left a branch of Qilu Securities Co. in Beijing. “Why would I kill the hen when there are more eggs on the way? I can always buy my car later.” 

• Hedge Funds Seek Returns in Japan as China Bubble Concerns Mount. 

• Emerging Stocks Head for Longest Slide Since 1990; Oil Retreats. Emerging-market equities headed for their longest decline since 1990 as China’s imports slumped and U.S. jobs data bolstered the case for interest-rate increases. Bonds and oil fell. The MSCI Emerging Markets Index slid an 11th day, dropping 0.4 percent by 11:32 a.m. in Hong Kong. U.S. index futures slipped 0.1 percent. Government debt from Indonesia to Thailand declined, as Malaysia’s ringgit touched its weakest level since 2006. Turkey’s lira sank to a record low after the ruling party failed to win a majority in elections. U.S. oil decreased 1 percent while gold rallied. Chinese imports dropped 18 percent, confirming cooling investment that is putting economic growth targets at risk.

• OPEC’s Open Oil Spigots Spur Retreat for Bulls and Bears Alike. Oil speculators accelerated their retreat from both bullish and bearish wagers before OPEC ministers held firm in their plan to pump ever more crude. Speculators reduced short wagers in West Texas Intermediate crude by 8.6 percent and long bets by 2 percent, for an overall 0.2 percent contraction in the net-long position, U.S. Commodity Futures Trading Commission data through June 2 show. OPEC stuck to its strategy of defending market share rather than prices at a meeting in Vienna June 5. The group is pumping the most oil since 2012, even with prices 45 percent below last year’s peak. The supply glut persists because even though U.S. producers idled a record number of rigs and global drillers slashed spending plans, output has yet to collapse. 

• Shrinking Iron Ore Imports by China Highlight Demand Concern. Iron ore imports by China contracted in May from April and the same month a year earlier, highlighting weakening demand in the largest buyer as policy makers seek to shift the economy away from investment-led growth. Cargoes fell 12 percent from April to 70.87 million metric tons, and were 8.4 percent lower than a year earlier, according to customs data on Monday. That’s the lowest monthly total since February. Adjusted for the number of days in the month, the imports in May were at the slowest pace since November.

• Bond-Market Game of Chicken With Fed Is More Dangerous Than Ever. If the Federal Reserve is really so intent on raising interest rates this year, why is Wall Street chopping its forecasts for bond yields? For all the hand-wringing over the recent selloff that wiped out about $1.2 trillion in value from the global bond market, the fixed-income market’s best and brightest have actually taken down their year-end estimates for Treasuries in four of the past five months. It amounts to a dangerous game of chicken, in which many analysts and investors are betting the Fed won’t lift rates too fast because of the damage it may inflict on the economy -- even after last week’s stronger-than-expected jobs report. And the stakes have never been higher for holders of debt globally, who are more exposed to the potential for big losses than at any time in history, based on a metric known as duration.

• Billionaire Zell ‘Most Concerned’ About Dollar If Fed Lifts Rate. Billionaire investor Sam Zell said he’s concerned an interest-rate increase by the Federal Reserve may roil global currency markets. “The bigger impact might be on the dollar,” he said in an interview with Maria Bartiromo on the Fox News show “Sunday Morning Futures” when asked whether a rate boost could hurt real estate prices. He’s “most concerned about” the impact on currencies.

Wall Street Journal:

• U.S. Is Awash in Glut of Scrap Materials. A strong dollar, slowing Chinese economy cut into demand abroad for salvaged metal and paper. American companies have complained for the past year that the headwinds of a strong dollar and a slowing Chinese economy are hurting their earnings. For sellers of scrap metal, used cardboard boxes, and other waste, those headwinds are more like a hurricane. 

• Dow Theory Has Investors Skittish on Market’s Next Leg. Century-old stock-market tool is signaling a correction could be coming.

• Trade Pacts Face Growing Pushback. The decades-old argument that trade agreements boost both exports and jobs at home is losing its political punch. 

• New Housing Headwind Looms as Fewer Renters Can Afford to Own. Some forecast demographic changes will help lead to a decline in homeownership rate. 

• GE(GE) Nears Deal to Sell Private-Equity Lending Unit to CPPIB. Deal would be for more than $10 billion in buyout loans.
  

• The Chinese Have Your Numbers. The U.S. government gives up personal data secrets with barely a fight. U.S. government incompetence seems to grow by the month, and now we know it’s becoming a threat to national, and even individual American, security. The Obama Administration announced last week that Chinese hackers made off this year with personnel files that may have included those of all 2.1 million federal employees, plus former employees going back to the 1980s. This is no routine hack. The Office of Personnel Management (OPM) lost background-check data to the Chinese nine months before this breach and still hadn’t...

CNBC:

• New toys for flash boys in China's fledgling derivatives market. The rapid liberalization of Chinese derivatives markets has attracted a new breed of creative traders employing complex trading strategies that can generate quick profits - and an extra dollop of risk - in China's runaway stock boom.

Zero Hedge:

• The Central Banks Are Losing Control Of The Financial Markets.

• A Professor Speaks Out: How Coddled, Hyper Sensitive Undergrads Are Ruining College Learning.

• Citi Clients "Complain How Difficult It Is To Make Money", "Everyone Is Worried About Liquidity Shocks". (graph)

• Another Bubble Alert: Home Down Payments Hit Three-Year Low.

• Citi: Euro Bond Market Faces "Historic" Levels Of Risk. (graph)

• Should We Raise The Voting Age? 

• Deutsche Bank Co-CEOs To Resign Amid Shareholder Frustration.

Business Insider:

• Al Qaeda is becoming an even more important part of the Syrian rebellion.

• Greece's plans have no support from its creditors.

• China May imports down 18.1% to 803.33 bln yuan: govt.

Reuters:

• American Airlines(AAL) CEO cites capacity growth risks. American Airlines Group Inc (AAL.O) Chief Executive Doug Parker voiced concern on Sunday about the risk that capacity growth among airlines could depress profits, but told Reuters that in contrast with past cycles, the rise in capacity "feels different."

Telegraph:

• Greece told to strike a deal or face 'dramatic consequences'. Time is running out for Syriza and Greece's lenders to find common ground, European leaders warn.

The Guardian:

• Juncker vents fury over Greek bailout talks at G7 summit. Irate European commission president accuses Greek PM of undermining negotiations, and leaders agree to maintain Russia sanctions.

Night Trading

• Asian indices are -.5% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 111.0 +2.5 basis points.

• Asia Pacific Sovereign CDS Index 59.75 + basis points.

• S&P 500 futures -.06%.

• NASDAQ 100 futures -.10%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (SHLD)/-2.59

• (HRB)/2.68

• (PBY)/.03

• (UNFI)/.85

• (CASY)/.85

Economic Releases

10:00 am EST

• Labor Market Conditions Index for May.
  

Upcoming Splits

• (MPC) 2-for-1

Other Potential Market Movers

• The China inflation data, (QSII) analyst day, (MCD) May sales report, (AAPL) Worldwide Developers Conference and the (GPRO) annual meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the week.