Greek Financial Markets Will Reopen Monday With Restrictions.Greece’s financial markets will reopen with some limitations to trading, the nation’s Finance Ministry said. Greek traders will be able buy stocks only if they use new money such
as funds transferred from abroad, cash-only deposits or from money
earned from the future sale of stocks, the Finance Ministry said in a
decree on Friday. Foreign investors will be excluded from all
restrictions, provided that they were already active in trading before
the imposition of capital controls last month. The Athens Stock Exchange will reopen on Aug. 3, according to a
separate e-mail statement from the bourse. That will follow a five-week
shutdown, the longest since a stretch of almost six weeks that ended in
Junk Bond Rally Loses Steam in Europe as Global Sell-Off Deepens. Europe, the only positive area for the global high-yield market this month, is succumbing to a global sell-off. Junk bonds in Europe lost 0.44 percent since July 21, according to
Bank of America Merrill Lynch index data. The securities returned about 1
percent this month, the most since February, as comparable global
benchmarks suffered losses. Slumping oil prices, wild gyrations in Chinese equities and concerns
that the U.S. Federal Reserve is moving closer to raising interest rates
reversed a European rally that had been triggered by improvements in
the Greek debt crisis. Investors withdrew $1.4 billion from high-yield
bond funds globally in the week through July 29, the most in four weeks,
Bank of America Corp. said in a report on Friday.
China Auto Sales Will Tank if Stocks Enter Bear Market. China’s vehicle sales may post its first annual decline in more than
17 years if the stock market continues to slide, according to the China
Automobile Dealers Association. Vehicle sales will tank if an equity rout continues, and expand 1
percent to 2 percent this year if stock prices stabilize and the economy
recovers, said Luo Lei, deputy secretary-general of industry trade
group. “A stock market plunge hurts consumer confidence,” Luo said in a
phone interview Friday. “People wouldn’t want to spend on cars when the
market keeps on declining. Dealers are sacrificing their margins and
giving out big incentives to help attract buyers.”
Brazil Real Extends Worst Monthly Drop Since March on Fiscal Woe. The real fell to a 12-year low and extended its biggest monthly
decline since March as budget reports added to concern that Brazil will
be lowered to junk. Standard & Poor’s cited a slowing economy
and fiscal turmoil Tuesday when it changed its outlook to negative on
the nation’s credit rating, already at the lowest level of investment
grade. The central bank’s decision the next day to avoid further
increases in interest rates
limited the desirability of the nation’s assets to global investors
looking for higher yields. The real dropped 1.3 to 3.4155 per dollar at 11:53 a.m. in Sao Paulo,
the weakest level on a closing basis since March 2003. It has fallen 9
percent in July, the worst performance among 31 major currencies after
Asian Currencies in Steepest Drop in 10 Months as Growth Slows. Asian currencies weakened the most in 10 months in July as slowing
economic growth and the prospect of higher U.S. interest rates spurred
outflows. South Korea’s won led declines, falling 4.7 percent in its biggest
monthly drop since 2011. Thailand’s baht lost 4.2 percent and Taiwan’s
dollar depreciated 1.9 percent. The Bloomberg-JPMorgan Asia Dollar
Index, which tracks the region’s 10 major currencies excluding Japan’s
yen, fell 1.4 percent. Taiwanese gross domestic product increased by
the least since 2012 last quarter, a report showed on Friday, and
expansion in South Korea was the slowest in more than two years. A gauge
manufacturing fell to a 15-month low in July, fueling concern a slowdown
in Asia’s largest economy hasn’t bottomed out yet.
Puerto Rico Muni Index Falls to Six-Year Low as Default Looms.An index that tracks the performance of Puerto Rico’s municipal debt
fell to a six-year low with the commonwealth on the verge of defaulting
on some of its obligations for the first time. The Standard & Poor’s Municipal Bond Puerto Rico index closed at
151.97 Thursday, the least since the wake of the global financial crisis
in July 2009. The commonwealth’s Public Finance Corp. will likely fail to make $58
million in bond payments due Aug. 1, the first default since Puerto Rico
was ceded to the U.S. following the Spanish-American War. Government
officials say they can’t make the payment because the legislature didn’t
appropriate the funds last month for the current fiscal year.
European Stocks Cap Best Monthly Advance in Five Amid Earnings. European
stocks were little changed amid earnings reports, completing their
biggest monthly rally since February. Miners and energy companies fell
as commodities extended a monthly
plunge. Spain’s CaixaBank SA dropped 2.4 percent after cutting its net
interest income growth forecast for 2015. BNP Paribas SA climbed 2.9
percent as France’s largest bank swung to its biggest quarterly profit
in more than three years.
The Stoxx Europe 600 Index gained less than 0.1 percent to 396.37 at the close of trading.
The U.S. Economy Is on Track to Finish a Decade Without Significant Growth. It would take a miracle for growth to reach 3 percent this year, marking a decade without it. The U.S. economy keeps chugging ahead, more like a tortoise than a
hare. At this rate, it won't be anywhere near where economists expect it
to be at the end of the year. Gross domestic product expanded
at a 2.3 percent annualized rate in the second quarter, according to
Commerce Department figures published Thursday. While that was an
improvement over the 0.6 percent pace in the first three months of the
year, it was less than economists had forecast. The new figures
all but assure GDP for the year yet again will fail to reach the
3-percent mark, the pace economists generally say is needed in order for
the average American to really feel it. ``This
has been a uniquely slow period of growth that's delivered very little
for low- and middle-income households,'' said Jared Bernstein, a senior
fellow at the Center on Budget and Policy Priorities in Washington and
former chief economist for Vice President Joe Biden. ``We need to grow
faster and more equitably.''
Exit From Leveraged-Credit Funds Seen as Sign of Things to Come. When you use borrowed money to make a bet, you can win big and you
can lose big, as some investors in closed-end debt funds are finding out
right now. Shares of such funds are plunging way below the value of their
underlying assets, with the biggest discounts since the U.S. financial
crisis. Traders seem to just want to get this stuff off their books,
even at a painful price. At best, these funds are just a small corner of the $39 trillion U.S.
debt market and their suffering is perhaps a temporary phenomenon that
doesn’t reflect broader problems. At worst, it’s a harbinger of a more
significant selloff ahead in debt markets that have swelled to
unprecedented sizes on the heels of the Federal Reserve’s stimulus.
Stocks Turmoil Leaves Chinese Investors in Nowhere-to-Run Bind. Wei Lili is running out of investment options. Apartment prices in
her city of Wuhan are beyond her reach even after a recent property
slump, and the volatile stock market is too great a risk. “It takes more than a million yuan to buy a flat, and stocks are like
a roller coaster -- they are too soul-wrenching for me,” said Wei, 52, a
government worker in the central Chinese city. She’s lost almost half
of a 30,000 yuan ($4,800) investment in stocks, she said, declining to
elaborate. The party may be ending for Chinese investors who have seen housing
prices boom over most of the past decade and gained from wagers on
everything from surging commodity prices to industrial-company loans.
With the stock market in a funk, lackluster prospects for an
oversupplied housing market and interest rates falling, savers like Wei
face a new era of lower investment returns should the recent equities
China ETF Heads to Record Monthly Drop Amid Mainland Stock Rout. The biggest U.S. exchange-traded fund tracking mainland Chinese
stocks fell for the second time this week, heading for the biggest
monthly loss since its was started in 2013 amid concern Chinese policy
makers will fail to stem a selloff in the A-share market. Investors in the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF are enduring the widest
price swings on record and have pulled more than $274 million from the
fund’s assets in the past four weeks as the government implemented
unprecedented intervention measures to stem a rout that wiped out $4
trillion in market value. Historical 30-day volatility in the ETF surged
to 96.75 percent on Thursday as the fund dropped 3 percent to $39.83 in New York.
Aussie Wage Challenge: Find Five Bartenders for Each Lost Miner. The
prospect of escalating job losses in Australia’s mining industry looms
as an increasing strain on the nation’s economy, with new jobs paying a
fraction of those that are disappearing. A survey of 50 mining
executives found 80 percent plan to cut workers in the next 12 months,
up from 50 percent a year ago, according to results released
Wednesday by Newport Consulting. While services jobs -- helped by
tourism -- are rising, the problem for consumption growth is that it
takes five bartenders to make up the compensation for each lost miner.
Taiwan Economy Grows Least Since 2012 as China Hurts Exports. Taiwan’s economy grew at the slowest pace in three years as exports
collapsed amid weaker global demand and rising competition from regional
rivals. Gross domestic product rose 0.64 percent in the three months through
June from a year earlier, according to preliminary data released by the
statistics bureau Friday. That compares with a pace of 3.37 percent in
the previous quarter, and is lower than all estimates in a Bloomberg
survey whose median was 2.55 percent.
China’s Stocks Extend Slump in Worst Monthly Decline Since 2009. China’s stocks fell, with the benchmark index heading for its worst
monthly drop in almost six years, as the government struggled to
rekindle investor interest amid a $3.5 trillion rout. The Shanghai Composite Index slid 1.6 percent to 3,647.39 at 9:35
a.m. local time, making it the world’s worst performer this month with a
15 percent slump. Energy stocks led declines before the release of
manufacturing data on Saturday.
Asia Stocks Climb to Pare July Drop as Fed Outlook Boosts Dollar. Asian stocks advanced, trimming a third monthly loss amid signs the
steepest rout in commodities since 2011 has been arrested. The dollar
maintained gains as speculation firms over the timing for U.S. rate
The MSCI Asia Pacific Index rose a third day, adding 0.3 percent by
10:38 a.m. in Tokyo and paring its July drop to 3.4 percent.
Wall Street Journal:
Investigators Face Pressure to Confirm MH370 Link. Plane debris and suitcase found on remote island set to be analyzed in France. Accident investigators appeared tantalizingly close to determining
whether a piece of plane debris belongs to Malaysia Airlines Flight 370,
but still faced a long and complex process in trying to solve one of
the world’s greatest aviation mysteries.
Hillary’s Friends in High Places. Everyone—from her aides to the State and Justice departments—is bending over backward to protect her. ‘Friends of Bill” was a 1990s Washington catchphrase, shorthand for
President Clinton’s favored inner circle. His wife, it turns out, has a
far bigger fan club. “Friends of Hillary”—the people looking out for her
welfare, and benefiting in turn—seem to occupy the highest echelons of
government and business.
LinkedIn's(LNKD) revenue beat fails to connect with investors. LinkedIn Corp, operator of the biggest social networking site for professionals, reported a better-than-expected 33 percent rise in quarterly revenue on
Thursday, driven by strong growth in its business serving
recruiters. LinkedIn's shares were down 3.9 percent in after-hours
trading, however, as investors focused on the company's widening
losses and an underwhelming full-year revenue forecast.
Expedia(EXPE) beats Wall Street view, shares rise. Expedia Inc on Thursday posted
a second-quarter profit above analysts' expectations and
announced a larger dividend as travel bookings grow, sending its
shares up more than 7 percent in after-market trade.
Amgen(AMGN) profit tops Street view, boosts full-year forecast. Amgen Inc on Thursday reported
higher-than-expected second-quarter profit and revenue, helped
by strong sales of its Enbrel rheumatoid arthritis drug and cost
cutting, and the company raised its full-year forecasts. Amgen's shares rose 1.8 percent in extended trading.
Corporate giants sound profits alarm over China slowdown.
Some of the world’s largest companies have sounded the alarm about the
slowdown in the Chinese economy, warning that weaker growth would hit
profits in the second half of the year. Car companies such as PSA
Peugeot Citroën, Audi and Ford have slashed growth forecasts while
industrial goods groups such as Caterpillar and Siemens have all spoken
out on the negative impact of China.
China Asks Insurers to Avoid Net Sales of Equities. China
Insurance Regulatory Commission asked insurers to try their best to
avoid net sales of equities in near future, citing a person from an
South China Morning Post:
Foreign Short Selling 'Overblown' by China, Markit Says.
Accusations of foreigners short selling shares is "overblown" by Chinese
market regulators and not the cause of a recent rout in the stock
market, citing financial data co. Markit analyst Relte Stephen Schutte
as saying. Official data shows minimal short selling of individual
shares with shorting of domestic ETFs at only 1.2% of total domestic
ETFs under management, Schutte said.
None of note
Asian equity indices are -.5% to +.5% on average.
Asia Ex-Japan Investment Grade CDS Index 110.75 +2.0 basis points.
Asia Pacific Sovereign CDS Index 62.5 +1.25 basis points.
The 2Q Employment Cost Index is estimated to rise +.6% versus a +.7% gain in 1Q.
9:00 am EST
ISM Milwaukee for July is estimated to rise to 50.0 versus 46.55 in June.
9:45 am EST
Chicago Purchasing Manager Index for July is estimated to rise to 50.8 versus 49.4 in June.
10:00 am EST
Final Univ. of Mich. Consumer Sentiment for July is estimated at 94.0 versus a prior estimate of 93.3.
None of note
Other Potential Market Movers
The Eurozone CPI report, Eurozone Unemployment report and the China Manufacturing PMI report 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.