Today's Headlines

Bloomberg:    

• Chinese Trading Suspensions Freeze $1.4 Trillion of Shares Amid Rout. Chinese companies have found a guaranteed way to prevent investors from selling their shares: suspend trading. Almost 200 stocks halted trading after the close on Monday, bringing the total number of suspensions to 745, or 26 percent of listed firms on mainland exchanges, according to data compiled by Bloomberg. Most of the halts are by companies listed in Shenzhen, which is dominated by smaller businesses. The suspensions have locked up $1.4 trillion of shares, or 21 percent of China’s market capitalization, and are becoming increasingly popular as equity prices tumble. If not for the halts, a 28 percent plunge in the Shanghai Composite Index from its June 12 peak would probably be even deeper. “Their main objective is to prevent share prices from slumping further amid a selling stampede,” said Chen Jiahe, a strategist at Cinda Securities Co.  
• Behind China’s Stocks Bailout: A Need to Salvage New Economy. Who to bail out? And who to let fail? Those are questions policy makers round the world have faced repeatedly in recent years. In China, the leadership’s all-guns-blazing policy response to a stock-market correction shows how its priorities have changed in the campaign to rebalance the world’s No. 2 economy. While rust-belt industries are being allowed to wind down in China’s northeast, officials are micro-managing stock listings and tapping the central bank to arrest a slide in equities. Underlying the effort is concern that, while the old economy drivers languish, the outlook for the new, services and consumption-driven sectors will be damaged by a shock to confidence from tumbling shares. Add to the mix financial stability concerns arising from the leverage used in retail stock purchases, and the case for action became compelling.
• China’s Bubble Burst: Surveillance. (video)
• Greece Clings to Euro Lifeline as Pessimism Clouds Talks. (video) Greece sidestepped an immediate collision with creditors by promising to put its economic proposals in writing as German Chancellor Angela Merkel warned that “only a few days” are left to reach a deal. Euro-area finance chiefs will discuss Greece’s request on a conference call Wednesday morning, the first step toward restarting talks that Greece broke off late last month.
  The rapprochement lessens the risk that the European Central Bank will pull the plug on Greek banks, which are bleeding cash and have been shut for seven business days.
• ECB Adds ‘Moral Hazard’ to Emergency Liquidity Assistance Rules. The European Central Bank warned that “moral hazard” could be a reason to object to the emergency liquidity assistance it allows lenders to access, just a day after it tightened conditions on the aid for Greece. The Eurosystem’s functioning could be disrupted by “provision of ELA at overly generous conditions, which, in turn, could increase the risk of moral hazard on the side of financial institutions or responsible authorities,” the ECB said in a document published on its website Tuesday. “The objective of ELA is to support solvent credit institutions facing temporary liquidity problems. It is not a monetary-policy instrument.” The document on the ECB’s financial-risk management clarifies the conditions surrounding emergency bank aid at a time when policy makers are restricting the provision of such funding to Greek banks. The reference to moral hazard indicates that officials are worried that bending the liquidity rules for Greece, as the country heads for a possible default, may lead future recipients to act less responsibly. 
• Greek Banks Seen Days From Breakdown as Bailout Talks Resume. (video) Greek banks may be facing the end game. The European Central Bank is tightening the credit that’s their only lifeline. Money was pouring out of customer accounts before banks were closed and capital controls imposed a week ago. The prospects of Greece reaching a deal with creditors remain slim after its voters rejected austerity on Sunday. It all adds up to the probability that shareholders, depositors and taxpayers will be tapped to avoid outright failure, according to a person with direct knowledge of discussions on lenders. The crippled financial system poses the greatest threat to Greece remaining in the euro, and the ECB’s cutback in collateral may worsen the banks’ plight.
• China Slump Spreads as Alibaba Sinks, ADRs Approach Bear Market. The rout in Chinese stocks is going global. U.S.-traded Chinese equities extended their plunge to 21 percent from this year’s high as of 10:34 a.m. in New York, approaching a bear market. Alibaba Group Holding Ltd. tumbled to the lowest since its initial public offering, while JD.com Inc. sank a record 9.4 percent. The stocks plunged after the Shanghai Composite Index sank for the fourth time in five days as measures to stabilize the market failed to stop a rout that’s erased more than $3.2 trillion of value in less than a month. “Investors are fleeing anything associated with China, they don’t want to have anything related to China in their portfolio,” Brendan Ahern, chief investment officer at Krane Fund Advisors LLC in New York, said by phone on Tuesday. “Investors are reading the risks around China, and there is a spillover effect in the U.S.-listed stocks.” The Bloomberg US-China Equity Index fell 8.4 percent to 111.14, the steepest drop in four years. The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF, the largest exchange-traded fund tracking mainland shares in the U.S., fell 9.2 percent to $37.53, the lowest since March. Alibaba plunged 4.9 percent to $76.32. JD.com declined to $28.90. 
• European Stocks Inch Toward Correction as Greek Talks Drag on. European stocks extended a four-month low, coming within 0.1 percent of a correction, as Greece attempted to secure a rescue and stay in the euro. The Stoxx Europe 600 Index lost 1.6 percent to 372.74 at the close of trading, reversing gains of as much as 0.4 percent. Italian shares fell the most among western-European markets, with the FTSE MIB Index dropping 3 percent after entering a correction on Monday. Portugal’s PSI 20 Index slid 2.2 percent. “Week by week, we’re seeing markets enter corrections as Greece steps closer to the edge,” said Alessandro Bee, a strategist at Bank J Safra Sarasin, said by phone from Zurich. “We have moments of panic and then take a few days to digest things. I think that will continue as long as the Greek issue drags on.” The Stoxx 600 slid on Monday after Greeks voted against austerity measures in a referendum. The gauge has tumbled 9.98 percent from its April record.
• Iron Tumbles Below $50 as Bear Market Deepens on Supply Outlook. (graph) Iron ore’s bear market deepened, with prices dropping below $50 a ton for the first time since April on concern that low-cost supplies from Australia and Brazil will expand further while demand stumbles in China. Ore with 62 percent content delivered to Qingdao sank 5.1 percent to $49.60 a dry ton on Tuesday, falling for a ninth day, according to Metal Bulletin Ltd. Prices entered a bear market Monday, dropping more than 20 percent from a June high.
• Industrial Metals Drive Commodities Down on China, Greece Woes. Copper tumbled to a six-year low and nickel plummeted the most since 2010 as industrial metals led a plunge in commodities after China’s equity rout and turmoil in Greece eroded prospects for raw-material demand. The Bloomberg Commodity Index of 22 prices fell as much as 2.6 percent to 96.48, the lowest since March 18. Aluminum and lead entered bear markets. Freeport McMoRan Inc., the world’s top publicly listed copper producer, posted the third-biggest drop among companies in the Standard & Poor’s 500 Index of equities. Glencore Plc, the largest commodity trader, slumped to a record in London.
• Refracking Is the New Fracking. The technique itself is nothing new. Oil crews across the world have been schooled on its simple principles for generations: Identify aging, low-output wells and hit them with a blast of sand and water to bolster the flow of crude. The idea originated somewhere in the plains of the American Midwest, back in the 1950s. But as today’s engineers start applying the procedure to the horizontal wells that went up during the fracking boom that swept across U.S. shale fields over the past decade, something more powerful, more financially rewarding is happening. The short life span of these wells, long thought to be perhaps the single biggest weakness of the shale industry, is being stretched out. Early evidence of the effects of restimulation suggests that the fields could actually contain enough reserves to last about 50 years, according to a calculation based on Wood Mackenzie Ltd and ITG Investment Research data.
• Cracks in Junk-Bond Market Form as BofA Sees Outlook Darkening. Junk-bond investors who’ve been enjoying more than six straight years of gains fueled by easy-money policies may soon find their streak nearing an end. After the three strongest years on record for issuance and annual returns of 15 percent since the start of 2009, there are growing signs of trouble in high-yield debt. For every speculative-grade company that has had its credit rating upgraded this year, about two others have been downgraded -- the worst ratio since 2009. U.S. high-yield companies posted two consecutive quarters without earnings growth for the first time since the financial crisis. And their average level of debt-to-earnings is at an all-time high. All of this is creating what Bank of America Corp., the second biggest underwriter of the notes, sees as a grim outlook for investors because companies have left themselves little room for error to withstand an interest rate hike just as the Federal Reserve is considering such a move. “The conditions are the worst since the crisis and therefore outlook is the worst since the crisis,” Michael Contopoulos, the head high-yield strategist at Bank of America, said in a telephone interview. “The longer-term prospects for the asset class are worrying.”

CNBC: 

• Are Greece and China repeating history? Two historical parallels are playing out simultaneously on the world market stage — in Greece and in China. Greece may very well suffer the fate of Germany in the inter-war years, battling depression and hyperinflation at the same time, if it ultimately exits the euro and starts printing drachmas to pay off its heavy debts. China's recent meteoric stock market rise, and 30 percent decline in the last three weeks, resembles Japan in late 1989 and the early 1990s: A meteoric rise fueled by the belief in a superior economic system that, in the end, was just as vulnerable to decline as any other speculative bubble in market history. Neither scenario is pretty.
• Oil rout dashes hopes of reprieve for some drillers. (video)
• Blame China stock slide for oil's plunge: Analyst. (video)

ZeroHedge: 

• Europe Revolts: "What Is Happening Now Is A Defeat For Germany".
• China Bans Use Of Terms “Equity Disaster” And “Rescue The Market". (graph)
• The 'Smart' Money Has Been Dumping Stocks Since Greferendum. (graph)
• It Is NOT Priced-In, Stupid!
• European Equity Losses Accelerate: Does This Look 'Contained' To You? (graph)
• "Unleash The Bullard" - S&P 500 Breaks Below Crucial Support. (graph)
•  Greece "Uncontained" - European Bond Yields Are Soaring; Is Portugal Next? (graph)
• The Three Greek "Scenarios" Discussed Today In Brussels.
• ECB Board Member Says Introduction Of Another Greek Currency "Most Realistic Scenario".
• US Trade Deficit Widens In May As Exports Tumble Most In 3 Months. (graph)
• Energy Credit Risk Re-Surges As WTI Crude Extends Losses To Worst Since November. (graph)

Business Insider:

• This editorial should send chills down the spine of every foreign company in China. When Xinhua publishes an editorial telling foreign companies to "put their victim mentality to rest ... and embrace new rules" on national security that expand China's legal reach "to almost every aspect of public life," you can bet this is coming straight from the top. Here's some more:
• Morgan Stanley(MS) thinks Shake Shack(SHAK) shares are just way too expensive right now — and now the stock is getting crushed.
• Here's what happened during the last 10 US bear markets.
• Russia and Argentina's auto markets have both endured massive collapses.
• The US still doesn't have a strategy that has a chance of defeating ISIS.
• 4 ways that staring at screens all day is destroying kids' minds and bodies.
• Gold and silver are getting crushed. (graph)

Telegraph: 

• Greece news live: Obama intervenes in Greek talks after Athens delegation turn up to summit without new reform proposals. President Obama urges for successful conclusion to Greek talks as EU leaders openly discuss ways to manage a "Grexit". 
• European Central Bank tightens noose on banking system as creditor powers punish Greece. Greek 'No' vote sees lenders act in concert, warning of imminent bankruptcy unless Athens capitulates to fresh reform demands.

news.com.au:

• Chinese chaos worse than Greece. WHILE the world worries about Greece, there’s an even bigger problem closer to home: China. A stock market crash there has seen $3.2 trillion wiped from the value of Chinese shares in just three weeks, triggering an emergency response from the government and warnings of “monstrous” public disorder. And the effects for Australia could be serious, affecting our key commodity exports and sparking the beginning of a period of recession-like conditions. “State-owned newspapers have used their strongest language yet, telling people ‘not to lose their minds’ and ‘not to bury themselves in horror and anxiety’. [Our] positive measures will take time to produce results,” writes IG Markets. “If China does not find support today, the disorder could be monstrous.”

21st Century Business Herald:

• Chinese Stock Suspensions Rise to >1,200. More than 500 China-listed companies apply fr share suspensions, including continuation of suspensions, as of 10:10 pm local time, citing exchange data. In total, >1,200 companies (>40% of listed companies) plan suspensions July 8.