Friday Watch

Evening Headlines
Bloomberg:  

• Greek Drama Won’t End With Vote as Polls Indicate a Tight Race. Germany and the rest of the euro region are bracing for more Greek political upheaval followed by tortuous negotiations even if the country votes for more austerity in Sunday’s referendum. There is no quick fix to the crisis because European Union rules make negotiations on financial aid difficult to re-start, according to an official in Chancellor Angela Merkel’s government. Adding to the murky landscape are polls showing the outcome of Sunday’s referendum on austerity too close to call.  

• Greece Tugs at Euro’s Heartstrings Amid Economic Case for Exit. (video) Some economists don’t fear a Greek exit from the euro because they can count the costs. Most political leaders are petrified because they can’t. No one quite knows how a Grexit would be engineered, but the case for it runs like this: with 11 million people, Greece represents 3.2 percent of the population and 1.8 percent of the output of the 19-nation euro zone’s 10.1 trillion-euro ($11 trillion) economy.

• China Stocks Plunge to Extend Biggest Three-Week Rout Since 1992. China’s Shanghai Composite Index headed for its steepest three-week decline since 1992 as government measures to shore up equities failed to stop margin traders from unwinding positions at a record pace. The benchmark stock gauge sank 7.1 percent to 3,635.03 at 10:26 a.m. The measure has tumbled 30 percent from its June 12 peak, helping wipe out at least $2.8 trillion of value. Eighty stocks fell for each that rose on the index Friday. China’s markets regulator said Thursday it will investigate and “strictly” punish manipulation. The China Securities & Regulatory Commission is examining recent short-selling activity for stock-index futures amid the slump, people with knowledge of the matter said. Regulators have made late-night announcements almost every day since the benchmark index entered a bear market this week. “For now, the mood is verging on panic, and it is extremely hard to calm a bear who is in a rage,” said Bernard Aw, a strategist at IG Asia Pte Ltd. in Singapore. “Chinese brokers may still be looking at reducing their risk exposure by closing more margin debt.” The outstanding balance of margin debt on the Shanghai Stock Exchange dropped for a ninth day on Thursday, sliding to 1.29 trillion yuan ($208 billion) in the longest losing streak since the city’s bourse began to compile the data on March 31, 2010. A five-fold surge in margin debt had helped propel the gauge up more than 150 percent in the 12 months through June 12. The Shanghai Composite has fallen 13 percent this week. The CSI 300 Index declined 7.4 percent Friday, while Hong Kong’s Hang Seng Chinese Enterprises Index slumped 1.6 percent and the Hang Seng Index dropped 0.6 percent.

• Chinese Tycoons Lose $34 Billion in June. The worst monthly slump in Chinese stocks in two years wiped away more than $34 billion in combined net worth of the richest people in China and Hong Kong in June. Of those 45 wealthy people on the Bloomberg Billionaires Index, more than 80 percent lost money in June as the Shanghai Composite Index tumbled. “The fortunes of billionaires are closely tied to the rise and fall of stocks,” said Zhang Lu, a Shanghai-based analyst at Capital Securities Corp. “When the market is more unstable, like now, their fortunes go down.”

• Good Idea at the Time: China Learns Cost of Relying on Stocks. It sounded like a good idea at the time: encourage growth in China’s stock market as a way for companies to raise capital. And if that paid down some of the nation’s record debt load in the process, so much the better. The problem: promoting a market where retail investors dominate daily trading left policy makers vulnerable to swings in sentiment that are tough to control. That’s a reality Premier Li Keqiang’s government faces now as it steps up efforts to stop the bleeding in China’s volatile equity market.

• Dreams Collide With China Slowdown for Job-Seeking Graduates. Dang is among 7.5 million college graduates entering China’s job market this summer, the most ever and almost seven times the number in 2001. Their dreams are colliding with an economy growing at the slowest pace in a generation, adding pressure on policy makers to spur the employment-intensive services sector. “Every year it’s the most difficult job-seeking season for graduates in history, and the next year is even more difficult,” said Xiong Bingqi, deputy director of the 21st Century Education Research Institute, a Beijing-based think tank. “The services sector isn’t developed enough to create enough effective demand for college grads.” 

• The Chinese Descend on Japan's Property Market, Pushing Prices Up. The trend has already hit Sydney, Vancouver and the U.S. Now it’s happening in Japan: busloads of real estate buyers from China coming in, buying up homes and pushing prices higher. Realty agencies in Beijing are organizing twice-monthly tours to Tokyo and Osaka, where 40 Chinese at a time come for three-day property-shopping trips, seeking safe places to invest their cash abroad. They’re being prompted by the yen’s decline to 22-year lows and excitement over the 2020 Tokyo Olympics driving up prices, as they did in Beijing in 2008. Property tours will soon start from Shanghai too. 

• Asia Stocks Swing Before Greek Vote as Investors Weigh U.S. Jobs. Asian stocks fluctuated, with the regional benchmark gauge set for a weekly decline, as investors awaited Greece’s referendum and weighed U.S. jobs data. The MSCI Asia Pacific Index added 0.1 percent to 147.08 as of 9:20 a.m. in Tokyo after falling as much as 0.1 percent. The measure is headed for a 0.5 percent decline this week.

• Shale Boom Shows Strength as Rigs Gain With Oil Under $60. For the first time in almost seven months, America’s shale drillers put rigs in oil fields back to work, and they’re doing it at a lower price. The last time they added rigs, crude futures were trading near $70 a barrel. Now, even after a rebound, they’re under $60. And yet drilling rigs rose in almost every major U.S. oil basin in the country this week, raising the total by 12, according to field-services company Baker Hughes Inc.

Wall Street Journal:

• Europe’s Great Project Faces Its Biggest Challenge in Greek Bailout Referendum. The euro is EU’s crowning glory and the instrument that may most seriously challenge European unity. The great project that some hoped would eventually create a European superstate faces the biggest challenge of its 65-year history on Sunday, when Greeks vote in a referendum that could decide whether they crash out of the eurozone—and shift the continent’s destiny. The European Union, whose precursor brought the region’s nations together after World.

• As Mergers Multiply, U.S. Antitrust Cops Raise Their Game. Corporate deal making is at an eight-year high at the same time the Obama administration’s antitrust enforcers are on their strongest footing ever, setting up a tug-of-war over industry consolidation.

• Prominent Obama Fundraiser Joins Effort to Press Biden to Run in 2016. A prominent Obama fundraiser who says a Joe Biden presidential campaign is a “strong possibility” has signed on to the independent group working to nudge the vice president into the 2016 race.

• Hillary’s Email Story Unravels. Now that we know she edited the emails before turning them over, the entire record is suspect. Clinton scandals have a way of bumping and rolling along to a point where nobody can remember why there was any outrage to begin with. So in the interest of clarity, let’s take the latest news in the Hillary email escapade, and distill it into its basic pieces: • Nothing Mrs. Clinton has said so far on the subject is correct. The Democratic presidential aspirant on March 10 held a press conference pitched as her first and last word on the revelation that she’d used a private email server while secretary of state. She...

Fox News:

• IT boss ‘blown away’ that IRS backup tapes in Lerner case erased, watchdog says. (video) The chief technology officer at the IRS was "blown away" after learning backup tapes that likely contained messages to and from controversial ex-official Lois Lerner were destroyed, according to an internal government watchdog report.

CNBC:

• Greece latest: IMF fuels tensions with $66BN aid call. Stay tuned for more analysis on Greece as the country heads towards a referendum on Sunday, with tensions running even higher after an International Monetary Fund (IMF) report said the country needed 60 billion euros in additional aid. The IMF also said Greece would need comprehensive debt relief. The report sparked another defiant message from Prime Minister Alexis Tsipras, who used a television interview to urge Greeks to vote against the lenders' most recent offer.

ZeroHedge:

• Did The IMF Just Open Pandora's Box?

• Chinese Government "Losing Control": Stocks Are Collapsing, Hitting New Bear Market Lows. (graph)

• Government Trolls Are Using "Psychology-Based Influence Techniques" On YouTube, Facebook And Twitter.

• Trading Stocks - It's Easier Than Farmwork... And Porn. (video)

• JPMorgan(JPM) Banker: "We Can't Make Money Anymore..."

• "There Are Obvious Signs Of Distress" In The Manufacturing Industry. (graph)

• NSA Leak Reveals Both Merkel And Schauble Saw Greek Debt As Unsustainable Even After Haircut.

• "It Could Never Happen Here" - America Is Not Greece. (cartoon)

• Plunge In Export Prices Is Now Worse Than The Great Financial Crisis. (graph)

• Jobs Jolt Sparks Bond Bid; Stocks Skid As "Day Of Greckoning" Looms. (graph)

Business Insider:

• Greece's largest industry is suddenly in shambles.

• Foreign brands are struggling in China.

• The enormous ISIS attack in Egypt is a game-changer.

• Here comes another mega-merger: Aetna and Humana are reportedly close to a multi-billion deal.

• Obama's counterterrorism policy is facing mounting criticism. 

• In New York City and Chicago, the smart city is here — and it's keeping track of everything. (video)

• Study says if you're driving an electric car on the East Coast, you're probably polluting more than your gas-guzzling neighbor.

• The South China Sea is now a 'core interest' of Beijing — and that's a problem for its neighbors.

NY Times:

• White House Orders Review of Rules for Genetically Modified Crops. The Obama administration said on Thursday that it would update the way the government regulated genetically modified crops and some other biotechnology products, saying that the nearly 30-year-old system had become outdated and confusing and did not foster public confidence.

Reuters:

• U.S. probe sees no links among black church fires in South. Federal law enforcement officials have found no links among any of several recent fires at African American churches in the U.S. South and have determined that two were started by natural causes and one was due to an electrical fire. "All of the fires remain under active investigation and federal law enforcement continues to work to determine the cause of all of the fires," Justice Department spokeswoman Melanie Newman said in a statement. "To date the investigations have not revealed any potential links between the fires."
  
  According to an opinion poll conducted for Efimerida ton Syntakton newspaper between Saturday and Tuesday, 54% of surveyed Greeks are planning to vote "no" with33% planning to vote "yes."
  The poll conducted by the ProRata institute also showed that 86% of those surveyed planned to vote on Sunday.
  - See more at: http://wbponline.com/Articles/View/49857/oxi-no-leads-in-polls-before-sunday-vote-in-greece#sthash.nuL4mSxl.dpuf
  'Oxi' (No) Leads in Polls Before Sunday Vote in Greece - See more at: http://wbponline.com/Articles/View/49857/oxi-no-leads-in-polls-before-sunday-vote-in-greece#sthash.nuL4mSxl.dpuf

The Straits Times:

• China futures exchange temporarily suspends 19 accounts from short-selling: Sources. China Financial Futures Exchange (CFFEX) has suspended 19 accounts from short-selling for one month, sources with direct knowledge said on Friday. The move came after China's securities market regulator launched an investigation into suspected market manipulation, citing evidence from the CFFEX and stock exchanges. The stock market has slumped more than 20 per cent since mid-June.

Night Trading

• Asian equity indices are -1.5% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 110.0 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 58.5 -.5 basis point.

• S&P 500 futures +.03%.

• NASDAQ 100 futures -.01%.

Morning Preview Links

BOTTOM LINE:  US equity markets are closed for Independence Day.