Tuesday Watch

Evening Headlines 

Bloomberg:   

• Greek Bailout Rests on Asset Sale Plan That’s Already Failed. Greece’s last-ditch bailout requires the country to sell 50 billion euros ($55 billion) of assets, an ambition it hasn’t come close to achieving under previous restructuring plans. The government of then-Prime Minister George Papandreou in 2011 set the same financial goal, which it sought to achieve by hawking airports, seaports, and beachside real estate. Since then, such deals have yielded 3.5 billion euros, according to the state privatization authority. Making the asset-sale math work as the economy contracts will be difficult for Greek Prime Minister Alexis Tsipras, who on Monday bowed to demands from European creditors in exchange for a bailout of as much as 86 billion euros that will keep the country in the euro zone. Half the money from asset disposals is already earmarked for the country’s teetering banks. They need the money to rebuild their capital buffers and, without it, may no longer be able to operate.  

• Tsipras Faces Mutiny After Capitulating to Demands. Prime Minister Alexis Tsipras returned to face a mutiny within his coalition after he surrendered to European demands for action to qualify for as much as 86 billion euros ($95 billion) of aid Greece needs to stay in the euro. With two factions in his government already saying they won’t support the deal, Tsipras met with his closest aides as he tries to stop the revolt from spreading before a vote in parliament Wednesday. Creditors’ demands include an overhaul of sales tax, a broadening of the tax base and a clampdown on pension costs.

• Credibility in Chinese Markets Almost Destroyed: Lewis. (video)

• China May Tip World Into Recession: Morgan Stanley. Forget about all the shoes, toys and other exports. China may soon have another thing to offer the world: a recession. That is the prediction from Ruchir Sharma, head of emerging markets at Morgan Stanley Investment Management, who says a continuation of China’s slowdown in the next years may drag global economic growth below 2 percent, a threshold he views as equivalent to a world recession. It would be the first global slump over the past 50 years without the U.S. contracting. “The next global recession will be made by China,” Sharma, who manages more than $25 billion, said in an interview at Bloomberg’s headquarters in New York. “Over the next couple of years, China is likely to be the biggest source of vulnerability for the global economy.” 

• Inflation Is Hitting Japanese Households Hard. Prime Minister Shinzo Abe came to power vowing to drag Japan out of deflation and stagnation. His logic was that rising prices would drive higher salaries and increased consumption. More than two years on, prices are rising, but wages adjusted for inflation have sunk to the lowest since at least 1990. 

• Singapore Economy Contracts Most Since 2012 on Manufacturing. Singapore’s economy contracted more than analysts predicted last quarter, underscoring the weakening outlook for Asian nations amid sluggish global growth. The local dollar weakened to its lowest level in more than a month. Gross domestic product fell an annualized 4.6 percent in the three months through June from the previous quarter, when it expanded a revised 4.2 percent, the trade ministry said in a statement on Tuesday. The median in a Bloomberg News survey was for a 1.5 percent contraction. Growth in global trade has slowed in the last few years after outpacing world expansion for decades, according to the International Monetary Fund. A commodities slump, China’s slowdown and uneven recoveries in the U.S. and Europe have damped the exports that power many Asian economies.

• Asia Stocks Rise, Following U.S. Shares, Amid Relief Over Greece. Asian stocks rose, following gains in U.S. equities, amid optimism over Greece’s bailout agreement. The MSCI Asia Pacific Index gained 0.4 percent to 142.98 as of 9:01 a.m. in Tokyo.

CNBC:

• China's Tsinghua Unigroup plans $23B bid for Micron Technology. China's state-owned Tsinghua Unigroup plans to submit an offer to buy U.S. chipmaker Micron Technology for $21 a share or $23 billion, according to Dow Jones. If the deal goes through, it would be the biggest Chinese takeover of a U.S. company, dwarfing the $7 billion takeover of Smithfield Foods by Shuanghui International in May 2013. 

• Einhorn: Netflix(NFLX) overvalued, soared on 'bad news'.

Zero Hedge:

• Greece Just Lost Control Of Its Banks, And Why Deposit Haircuts Are Imminent.

• Donald Trump: A False Flag Candidate? “In 1987, Trump registered as a Republican in New York. But in 1999, he registered with the Independence Party. In 2001, he registered as a Democrat. In 2009 he was back in with the GOP. “Hillary Rodham Clinton sat in the front row at Trump’s 2005 wedding with Melania Knauss.“ According to Politico, Trump has donated more than $100,000 to the Clinton Foundation.“ In the 2006 cycle, Trump donated $5,000 to the Democratic Senatorial Campaign Committee, $20,000 to the Democratic Congressional Campaign Committee, but only $1,000 to the National Republican Senatorial Committee.“ When Trump flirted with running for president in 2012, CNN reported he had given $541,650 to federal Democratic candidates and committees since 1990 – more than the $429,450 he contributed to GOP candidates and committees.”

• What Assets Did Greece Just Hand Over To Europe: "Airports, Airplanes, Infrastructure And Most Certainly Banks".

• China Big Cap Stocks Continue Slide Despite Another Liquidity Injection; Margin Debt Rises For 2nd Day. (graph)

• Miners Buried In Billions Of Debt After "Colossal Misjudgment Of Demand". (graph)

• Will Chinese Farmers Never Learn? (graph)

• US Automakers Worst Nightmare: Chinese Auto Inventories Explode In May.

• US Equities Soar On Greek "Deal"; Greek Stocks, Euro Plunge. (graph)

Business Insider:

• Here's the reported US concession that could clinch the Iran nuclear deal.

• Boy Scouts committee approves allowing gay adults to serve as leaders.

• China's real problem isn't stocks, it's real estate.

• US companies are expected to report their worst sales decline in nearly six years.

Telegraph:

• Greek deal poisons Europe as backlash mounts against 'neo-colonial servitude'. 'It is now perfectly clear to a lot of people that the only way out of neo-colonial servitude is to break free of monetary union,' said one Syriza rebel. 

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.25% to +1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 108.75 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 59.0 -1.0 basis point.

• S&P 500 futures -.04%.

• NASDAQ 100 futures unch.

Morning Preview Links

Earnings of Note

Company/Estimate

• (AIR)/.21

• (CBSH)/.67

• (FAST)/.46

• (JNJ)/1.69

• (JPM)/1.44

• (WFC)/1.03

• (ADTN)/.11

• (CSX)/.53

• (MRTN)/.30

• (YUM)/.63

Economic Releases

6:00 am EST

• The NFIB Small Business Optimism Index for June is estimated to rise to 98.5 versus 98.3 in May.
  

8:30 am EST

• Retail Sales Advance for June are estimated to rise +.3% versus a +1.2% gain in May.

• Retail Sales Ex Autos for June are estimated to rise +.5% versus a +1.0% gain in May.

• Retail Sales Ex Autos and Gas for June are estimated to rise +.4% versus a +.7% gain in May.

• The Import Price Index for June is estimated to rise +.1% versus a +1.3% gain in May.
  

10:00 am EST

• Business Inventories for May are estimated to rise +.3% versus a +.4% gain in April.

Upcoming Splits

• (NFLX) 7-for-1

Other Potential Market Movers

• The Eurzone Industrial Production report, Eurozone ZEW Index, SEMICON West, weekly US retail sales reports, (AZZ) annual meeting, (FAST) monthly sales release, (LRCX) analyst meeting and the (GIS) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and consumer shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.