Today's Headlines

Bloomberg: 

• Greece Needs $40 Billion in New Euro-Area Financing, IMF Says. Greece needs at least another 36 billion euros ($40 billion) over the next three years from euro-area states and easier terms on existing debt to keep the nation’s finances sustainable, according to an International Monetary Fund analysis. Even if Greece delivers on reforms proposed by its international creditors, euro countries will have to come up with new financing and ease the nation’s debt load through steps such as doubling maturities on existing loans, according to a June 26 “preliminary draft” debt-sustainability analysis released Thursday.

• Defiant Varoufakis Says He’ll Quit If Greeks Endorse Austerity. Yanis Varoufakis said Greece won’t “extend and pretend” that it can pay its debts, vowing to quit as finance minister if voters don’t support the government in Sunday’s referendum. With banks shut and the economy hobbled by capital controls, Varoufakis said in a Bloomberg Television interview in Athens that he would “rather cut my arm off” than sign a deal that fails to restructure Greece’s debt. 

• Merkel Said to Brace for Greece Turmoil Whichever Way Vote Goes. German Chancellor Angela Merkel’s government is bracing for a protracted phase of political turmoil in Greece followed by tortuous negotiations even if Greeks vote for further austerity on Sunday, according to two people involved in policy making in Berlin. A quick solution to the crisis in Greece isn’t in sight because European rules mean any new negotiations on financial help would be more complex than to date, one of the officials said. The backing of German lawmakers is required even just to restart aid talks, inserting additional uncertainty at a time when trust in Greek intentions is at a low, the second official said. Both asked not to be named discussing government deliberations.

• Greek Referendum on Bailout Too Close to Call, Poll Shows. The battle lines are drawn in Greece. Now the politicians are waiting for the people. A GPO poll cited by euro2day.gr said 47 percent leaned toward a “yes” vote, an endorsement of austerity and the international bailout. The “no” camp, the government’s position rejecting those terms, was 43 percent. The margin of error in the survey of 1,000 people was 3.1 percentage points. 

• Here's the Grim Future That Awaits Greece's Babies Born in the Crisis. Greek children face a very different fate than their German counterparts, economic forecasts show.

• Shanghai Composite Tumbles Below 4,000 as State Support Fails. China’s Shanghai Composite Index fell below the 4,000 level for the first time since April, as margin traders continued to unwind positions amid doubts over the effectiveness of government measures to support equities. The benchmark stock index slumped 3.5 percent to 3,912.77 at the close. The gauge has tumbled 24 percent from its June 12 peak, helping wipe out at least $2.4 trillion of value. Fifteen stocks dropped for each one that rose Thursday, with industrial, power and commodity shares leading losses. The drop below 4,000 is a blow to investors who had speculated authorities would intervene to support shares, a strategy employed near closely watched levels in the past.

• China to Individual Investors: Go Ahead, Bet the House on Stocks. In China, you can now literally bet the house on the nation’s tumultuous stock market. Under new rules announced Wednesday by the country’s securities regulator, real estate has become an acceptable form of collateral for Chinese margin traders, who borrow money from securities firms to amplify their wagers on equities. That means if share prices fall enough, individual investors who pledge their homes could be at risk of losing them to a broker. While the rule change was intended to help revive confidence in China’s $7.7 trillion stock market after a 24 percent slump in less than three weeks, analysts say securities firms may be reluctant to follow through. Accepting real estate as collateral would tether brokerages to another troubled sector of the economy, adding to risk-management challenges as they try to navigate the world’s most-volatile stock market. “It does come across as relatively desperate,” said Wei Hou, an analyst at Sanford C. Bernstein & Co. in Hong Kong. “Globally, illiquid assets such as real estate are not accepted as collateral as they are very hard to liquidate.”

• Three Seconds Has Become an Eternity in the Chinese Stock Market. Lack of continuous pricing prevents investors from using strategies that rely on speed and precision, a hurdle that’s gotten even bigger in recent weeks as volatility in Chinese shares climbed to the most extreme levels worldwide.

• Chinese Stocks Just Lost 10 Times Greece's GDP. "What happens in China will turn out to be far more consequential than any sting that Greece may deliver," says HSBC's Neumann. As China's equity markets lose their roar, the risk is that demand more broadly on the Mainland could take a hit. That would knock out an essential engine of world demand over the past decade. As dramatic as events in Greece currently appear, however, ultimately, it's difficult to see these proving decisive for the world economy.''  

• U.S. Sees Islamic State Casting Wide Net to Catch Young Recruits. How is Islamic State different from al-Qaeda? According to the U.S. Department of Justice, one answer lies in a much more relaxed attitude to recruitment and targets. Al-Qaeda exercises tight control of its membership and focuses on carefully planned large-scale “spectacular” attacks, Assistant Attorney General John Carlin told reporters in London Wednesday. 

• European Stocks Drop Amid Greek Crisis With Automakers Falling. European stocks declined for the third time in four days, as investors awaited a Greek referendum on creditors’ proposals this weekend. The Stoxx Europe 600 Index lost 0.4 percent to 385.46 at the close in London, after rising as much as 0.3 percent in the morning.

• Shale Drillers' Safety Net Is Vanishing. The insurance protecting shale drillers against plummeting prices has become so crucial that for one company, SandRidge Energy Inc., payments from the hedges accounted for a stunning 64 percent of first-quarter revenue. Now the safety net is going away. The insurance that producers bought before the collapse in oil -- much of which guaranteed minimum prices of $90 a barrel or more -- is expiring. As they do, investors are left to wonder how these companies will make up the $3.7 billion the hedges earned them in the first quarter after crude sunk below $60 from a peak of $107 in mid-2014. 

• Iron Exports From Australia’s Port Hedland Expand to Record. Iron ore exports from Australia’s Port Hedland climbed to an all-time high in June as mining companies in the world’s largest shipper increased low-cost supplies. Prices tumbled the most in a year. Total shipments jumped 14 percent to 38.4 million tons last month from a year earlier, the Pilbara Ports Authority said on Thursday. That exceeded the previous record of 38 million tons in May, according to port authority data compiled by Bloomberg. Exports to China were 32.6 million tons, also a record.

• September Fed Liftoff Stays in Play Even as Pay Gains Disappoint. Thursday’s jobs report probably keeps Federal Reserve officials on course to raise rates as soon as September, economists said, although the lack of wage pressure may damp their confidence in the outlook for higher inflation. “The Fed would very much like to raise interest rates in September, and we think they will, but it is far from a sure thing,” said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. 

• Janus’s Gross Says Economic Cycle Driven by ‘Artificial Rates’. Bill Gross, manager of the $1.5 billion Janus Global Unconstrained Bond Fund, said the U.S. economic cycle is weak and driven primarily by “monetary stimulation” and “artificial interest rates.” Gross, in an interview with Bloomberg Radio, said the current economic environment has the potential to create asset bubbles that may ultimately pop, and the Federal Reserve will have to weigh that, along with employment and inflation data, when it decides whether to raise rates. Although Fed Chair Janet Yellen and Vice Chair Stanley Fischer are “neo-classically demand-driven economists, the ground underneath them is shifting to more monetary, liquidity, financial conditions focus,” Gross said. He added that rates could rise in September. 

• Hedge Funds Had a Really Bad Day This Week. Huge drawdowns after the referendum news. On Monday, as the deteriorating situation in Greece dominated the headlines and roiled markets, some of the world's most prominent hedge funds experienced their largest "drawdown" since August 2007, according to Barclays analyst Keith Parker. Why the big move on Monday? As Parker puts it, it seems a lot of these hedge funds have long positions in peripheral euro-zone bonds. Greek government bond yields jumped sharply on Monday, as markets digested the news of a surprise referendum. The below shows the correlation between the one-month return of macro hedge funds and various asset classes. You can see hedge fund returns are moving more in tandem with Italian government bonds than they are with the euro or oil, for instance.

• Hedge Funds Decline in June as Stocks Tumble on Greek Woes. Hedge funds posted losses across strategies last month as uncertainty over whether Greece will remain in the euro sent global stock markets tumbling. Winton Capital Management declined about 3.1 percent in June in its $12.1 billion Winton Futures Fund, leaving it down 1.9 percent this year, according to a letter sent to investors, a copy of which was obtained by Bloomberg News. David Einhorn’s main hedge fund at Greenlight Capital fell 4.3 percent in the month, bringing year-to-date losses to 3 percent. Hedge funds on average fell 1.2 percent last month, curbing year-to-date profits to 1.3 percent, according to the HFRX Global Hedge Fund Index.

Wall Street Journal:

• Hilsenrath Analysis: Jobs Report Keeps Fed on Track for 2015 Rate Increase. The Labor Department‘s June employment report, released Thursday, broadly confirmed the Federal Reserve‘s narrative about how the U.S. economic expansion is unfolding in 2015, keeping the central bank on track to raise short-term interest rates later this year, barring some new setback.

• Trader Fights the Market Tide in Shanghai. Ye Fei’s flagship fund was up 388% for the year when the Shanghai market peaked June 12. As the Shanghai Composite slid a further 5% Wednesday, China’s best-performing fund manager fought to save his clients’ investments from a laptop in a basic hotel room. Ye Fei rode the boom beautifully. As of June 12, when the Shanghai Composite Index hit its recent peak, his flagship Yi Tian Ya Li fund was up 388% for the year, making it the top performer among 1,664 “private securities-investment funds” tracked by...

• BP Agrees to Pay $18.7 Billion to Settle Deepwater Horizon Oil Spill Claims. Settlement includes all federal and state claims.

• Anthem(ANTM), Cigna(CI) Rekindle Merger Talks. Cigna also continues to pursue possible takeover of Humana(HUM).

MarketWatch.com: 

• 30-year mortgage rate rises to 4.08%, highest since October. 

• Spain is trying to avoid being Europe’s next debt bomb. But the economy is still shaky and politics are simmering. “We’re at a strong phase of the [economic] cycle here, but cycles aren’t always going to be the same. In fact they’re running a quite large deficit at a strong moment in the cycle,” Hugh said. “How long it is or how it’s all going to work out in the medium term, we don’t know because we haven’t been here before.”

• 3 things to know about Puerto Rico’s debt crisis.

Fox News: 

• US reportedly blocks Arab allies' attempts to deliver weapons to Kurds fighting ISIS. (video) The U.S. has reportedly blocked any attempts by Middle East allies to fly weapons to the Kurds fighting the Islamic State in Iraq. The Telegraph reports that U.S. allies say President Obama and other Western leaders, including Britain’s David Cameron, aren’t showing leadership over the escalating ISIS crisis in Iraq, Syria and throughout the Middle East.

ZeroHedge:

• IMF Bolsters Greek "No" Vote, Says Country Needs Debt Haircut.

• Finally The Truth: "The Greek Debt Is So Big Everyone Understands It Won’t Be Repaid". (graph)

• Crude Slides After US Oil Rig Count Rises For First Time Since December. (graph)

• The Last Time This Happened In Credit, Bernanke Unleashed QE3. (graph)

• Americans Not In The Labor Force Soar By 640,000 To Record 93.6 Million; Participation Rate Drops To 1977 Levels. (graph)

• Since 2007 The US Has Lost 1.4 Million Manufacturers, Gained 1.4 Million Waiters And Bartenders. (graph)

• Factory Orders Scream Recession: Annual Drop Biggest Since 2008. (graph)

• Part-Time Jobs Surge By 161,000; Full-Time Jobs Tumble By 349,000. (graph)

• June Payrolls Increase By 223K, Less Than Expected; Unemployment Rate Drops To 5.3%. (graph)

• The Coming Era Of Pension Poverty. (graph)

Business Insider:

• This poll is absolutely brutal for Chris Christie.

• Analysts say Tesla(TSLA) shares are too expensive, raise their price target 177%.

• June had more IPOs than any month since August 2000. (graph)

• Russia is challenging Nordic countries along their borders.

• A Greek politician told us Grexit will '100%' happen if 'No' wins on Sunday — and plans are already being made.

Washington Post:

• In China, hostile foreign forces blamed for bursting stock market bubble. “Believe in my country,” Cao Zenghui, deputy general manager of Sina Weibo, whose company runs China’s main microblogging service and who personally has more than 100,000 followers, posting a national flag as his profile image. “It is not just a stock market issue any more. I will fight with forces who short China’s economy. No eggs can remain unbroken when the nest is upset.”

Politico:

• Soros helps pro-Clinton Super PACs to $20 million haul. A trio of pro-Hillary Clinton groups raised more than $20 million in the first half of the year, including at least $1 million from billionaire financier George Soros, POLITICO has learned.

Financial Times: 

• Chinese relaxation of lending rules fails to support flagging stocks. China Securities Regulatory Commission moved late on Wednesday to relax collateral rules on margin loans. But that failed to staunch market losses on Thursday, with the Shanghai Composite Index closing down 3.5 per cent and the Shenzhen stock exchange finishing the day down 5.6 per cent. The move to loosen rules on margin finance — using borrowed money to trade shares — represents something of a climbdown by the regulator, which had previously tried to curb leveraged bets.

Telegraph:

• Greece crisis live: IMF says Greece needs €50bn bail-out as Varoufakis says he will resign if there is a "yes" vote. An estimated €8bn has been withdrawn from banks in the last two weeks, as capital controls begin to take their toll.

EKathimerini:

• Greece May See Some Foods Shortages By Next Week. Shortages of commodities of broad consumption such as imported meat, beans, rice will start to be felt next week, citing people from the retail commerce sector.
  
  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

CNA:

• Greek Shipowners Consider Moving HQs to Cyprus. Greek shipowners, ship management companies are considering moving their HQs to Cyprus given strong economic uncertainty in Greece.