Broad Equity Market Tone:
- Advance/Decline Line: Slightly Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 14.82 -.47%
- Euro/Yen Carry Return Index 135.51 +.08%
- Emerging Markets Currency Volatility(VXY) 10.82 -1.01%
- S&P 500 Implied Correlation 52.57 -.30%
- ISE Sentiment Index 87.0 -10.31%
- Total Put/Call 1.03 +9.57%
Credit Investor Angst:
- North American Investment Grade CDS Index 83.59 -3.44%
- European Financial Sector CDS Index 160.44 -3.01%
- Western Europe Sovereign Debt CDS Index 96.0 unch.
- Emerging Market CDS Index 339.58 -2.04%
- 2-Year Swap Spread 17.25 -.5 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -10.5 +.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .04% unch.
- China Import Iron Ore Spot $121.90/Metric Tonne -.57%
- Citi US Economic Surprise Index -12.10 +1.9 points
- Citi Emerging Markets Economic Surprise Index -31.40 +2.9 points
- 10-Year TIPS Spread 2.08 +1 bp
Overseas Futures:
- Nikkei Futures: Indicating +215 open in Japan
- DAX Futures: Indicating +4 open in Germany
Portfolio:
- Slightly Higher: On gains in my medical and retail sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and then covered some of them
- Market Exposure: 50% Net Long
Bloomberg:
- German Industrial Production Decreased in May. German
industrial production (GRIPIMOM) dropped more than economists predicted
in May, adding to signs that Europe’s sovereign debt crisis is
weakening a recovery in the region’s largest economy. Production fell 1
percent from April, when it gained a revised 2 percent, the Economy Ministry in Berlin said today. That’s the first decline since January. Economists forecast a drop of 0.5 percent, according to the median of 38 estimates in a Bloomberg News survey. From a year earlier, production decreased 1 percent when adjusted for working days. German exports unexpectedly fell in May, the Federal
Statistics Office said today, and factory orders dropped for a
second month as the 17-nation euro region struggles to emerge
from the longest recession since the introduction of the single
currency in 1999. German manufacturing output fell 0.7 percent in May, with
production of investment goods down 2.3 percent, today’s report
showed. Construction slumped 2.6 percent, while energy output
dropped 1.5 percent.
- European Stocks Rise as Portugal Reaches Coalition Deal.
European stocks rose, rebounding from their biggest decline in almost
two weeks, amid speculation that economic data will improve and as
Portugal’s politicians reached an agreement to hold the governing
coalition together. The Stoxx Europe 600 Index added 1.4 percent to 292.37 at
the close.
- China’s Ordos Struggles to Repay Debt: Xinhua Magazine. A Chinese city known for its empty
skyscrapers is struggling to repay debt and has resorted to
borrowing from companies to pay workers, a magazine published by
the official Xinhua News Agency reported. Some district governments
of Ordos, Inner Mongolia, had to borrow money from companies to pay
salaries of municipal employees, Economy & Nation Weekly said in a
July 5 report on its website. Ordos local-government entities have
amassed 240 billion yuan ($39 billion) of debt, while the city had 37.5
billion yuan of revenue last year, the publication said without
specifying annual interest costs.
- Paulson’s PFR Gold Fund Fell 23% in June, 65% This Year. John Paulson, the billionaire hedge-fund manager seeking to rebound from losses tied to bullion,
posted a 23 percent decline in his PFR Gold Fund last month,
according to a letter to investors.
The drop brings losses in the strategy, formerly known as
the Paulson Gold Fund, to 65 percent since the start of the
year, the firm said in the July 3 letter, a copy of which was
obtained by Bloomberg News.
Wall Street Journal:
Fox News:
CNBC:
- Rising Mortgage Rates Swing Housing Sentiment. Just as America's homeowners were finally coming up for air, they
are suddenly turning more negative on the housing market. Fewer people
think now is a good time to buy or to sell a house, according to a
monthly survey in June from Fannie Mae. Those numbers had just
hit a survey high in May, thanks to rising home prices and record low mortgage rates. Now mortgage rates have soared well over a full
percentage point in the past two months, and 57 percent of respondents
to the survey expect them to go even higher. That's the highest level in
the survey's three-year history.
Zero Hedge:
- Europe's Cleanest Dirty Shirt Sees Exports Collapse & Production Plunge. (graphs) Just when the jawboning from Europe is reaching its climax that Portugal
is fixed again, Greece is fixed, and the core is showing green shoots
from the near-depression, Germany (the corest of the core)
comes out with its worst exports data since 2009. While imports remained
stable - suggesting domestic demand is sustained for now - YoY export growth collapsed 3.2%, the worst tumble since November 2009 "illustrating that Germany's economy still has difficulties shifting into higher gear."
Business Insider:
New York Times:
- In Brazil, a Reminder of Emerging-Market Risks.
THE protests in Brazil last month were the latest vivid reminder of the
perils of investing in emerging markets. Tens of thousands of
demonstrators thronged the streets of São Paulo, Rio de Janeiro and
other cities, incited partly by
a rising cost of living and a slowing economy. Cars burned. Tear gas
billowed. And the Brazilian stock market sank.
ValueWalk:
Reuters:
- China govt agencies told to cut expenditures by 5% this year. China's
Finance Ministry has told central government agencies to cut
expenditures by 5 per cent this year, a move the official Xinhua news
agency said was part of an austerity campaign launched by the country's
new leaders. A ministry circular ordered spending cuts in a range of areas,
including the building and renovation of government offices, meetings,
domestic and overseas trips, vehicles and official receptions, Xinhua
reported on Sunday. The planned cuts come at a time when China is facing potentially its worst economic downturn in at least 14 years. Analysts say the economy is backsliding into another downturn but top
leaders are reluctant to take policy steps to stimulate growth.
- Mexico's auto output, exports fall in June -AMIA. Mexico's auto production and
exports both fell slightly in June from a year earlier, the
Mexican Auto Industry Association said on Monday.
Automobile output for the month dropped 0.8 percent to
266,351 vehicles, while exports slid 1.5 percent to 225,753,
AMIA said. Cars are a key component of Mexico's manufacturing sector.
June shipments to Latin America were down 15.5 percent to
26,342 vehicles, while exports to the United States edged up by
1 percent to 151,803.
- Russian car sales slide 11 pct in June - AEB.
Sales of cars in Russia fell for the fourth straight month, down 11
percent year-on-year in June, the Association of European Businesses
(AEB) said on Monday. Car sales have been sliding as Russia's $2
trillion economy has faltered, causing the AEB to recently slash its
forecast for
the full year to a fall of 5 percent.
CNN:
- Death toll rises in clashes Monday in Egypt. Top
Egyptian security officials defended army and police actions in
the clashes Monday in Cairo that led to the deaths of more than 50
people, saying they were defending the Republican Guard headquarters
against attackers. Health Ministry official Khaled al-Khatib put the
number of fatalities at 51 and said 435 others were wounded when
Egyptian security forces clashed with supporters of deposed President
Mohamed Morsy and the Muslim Brotherhood outside the headquarters.
Witnesses said the military and police fired as protesters took a break
from holding a
vigil at the Republican Guard headquarters to perform their dawn
prayers. Morsy was reportedly detained in the building after his arrest
Wednesday.
Financial Times:
- Markets Insight: China faces a difficult credit bubble workout. Markets Insight: China faces a difficult credit bubble workout. The
financial shock which has recently hit the emerging markets stemmed in
part from a period of severe stress in the Chinese money markets, which
has now been brought under control. But the challenges facing China
are chronic, not acute. And since the country is much more than “first
among equals” in the Brics, a prolonged slowdown in its economy would
keep all emerging market assets under pressure for a long while.
Telegraph:
- German exports suffer amid eurozone weakness. German exports suffered their steepest month-on-month decline in more than 18
months in May, as continued weakness in the eurozone and other key markets
held back growth. Exports, the traditional driver of growth in Europe's biggest economy, fell
6.5pc to €88.2bn (£76bn) in May, from €94.3bn in April, according to
Destatis, Germany's statistics office. This was the biggest drop since
December 2011. On an annual basis, total exports fell 4.8pc, driven by a 9.6pc drop in
exports to the eurozone.
Bild-Zeitung:
- DIHK Sees Eastern German Growth at Zero. Economic growth in
Germany's eastern states will be at zero this year vs. .5% in 2012,
citing Martin Wansleben, managing director of the DIHK national industry
and trade chambers. 56% of eastern cos. sees a risk to their business
due to energy, commodity prices vs 48% in western Germany.
Echoing fears that
European policymakers remain in a state of cognitive dissonance –
recognizing the need for root-and-branch overhaul of peripheral banks,
but backtracking on joint liability plans – Christopher Flowers, the
legendary FIG investor who now runs the £2.3 billion ($3.5 billion)
private equity group JC Flowers, sounded the alarm over the negative
sovereign-bank feedback loop.
In a shot across the bows of market bulls, who cite the return of
capital flows to weaker eurozone states, Flowers issued a stark warning:
"There is a scenario where we have a Lehman-type event: we wake up some
Thursday and a big country is in trouble.
"And the ECB will have to decide to support banks x, y, z. And then the
ECB will, in fact, decide to own bank x, y, z.
While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3211790/CurrentIssue/88924/Restructuring-Flowers-slams-Europe-over-inaction.html?copyrightInfo=true
Business Standard:
- RBI wants curb on rupee forecast by bankers. RBI has been concerned because the rupee has weakened by 12% since the start of this financial year. Whether
by communicating or by curtailing communication, the Reserve Bank of
India (RBI) is taking all unconventional steps to arrest the fall in the
rupee. In its latest move, RBI has told treasury officials of banks to
not give rupee forecasts against the dollar - particularly to the media,
analysts and in their reports. It affects market sentiments to a larger extent, particularly in a situation when rupee trading is volatile, it says.
Nikkei:
- Vale to Limit Investment as Emerging Markets Slow. Vale plans to curb capital investment over next few years because of slower economic growth in emerging markets, citing interview with CEO Murilo Ferreira.
ShanghaiDaily.com:
Xinhua:
- China's Li Says East China Ports Face Downward Pressure. China
Premier Li Keqiang inspected import and export situation at a port today
in southern Chinese province of Guangxi.
Economy & Nation:
- China's Erdos Govt Faces 'Severe' Debt Pressure. Some district
governments of the city of Erdos in northern China had to borrow money
from companies to pay salaries of government employees, according to a
report posted on July 5. Erdos city government has debt of 240b yuan,
report cites a person close to the city government as saying. Fiscal
revenue of Erdos city government was 37.5b yuan last year, the report
said. Economy & Nation Weekly is a publication controlled by the
official Xinhua News Agency.
Style Underperformer:
Sector Underperformers:
- 1) Semis -1.80% 2) Homebuilders -1.13% 3) Road & Rail -.70%
Stocks Falling on Unusual Volume:
- INTC, AFOP, BAP, TTM, HOMB, FMX, INT, FBC, BABY, SOXX, CLDX, WRLD, TRS, CAP, PBF, PRAA, AI, FMC, TRN, CP, NXTM, WWWW, GWW, ZINC, SPWR, CFX, FFIN, QCOM and IDT
Stocks With Unusual Put Option Activity:
- 1) JNPR 2) INTC 3) DELL 4) KRE 5) M
Stocks With Most Negative News Mentions:
- 1) CFX 2) FMC 3) FLEX 4) INTC 5) ANGI
Charts:
Style Outperformer:
Sector Outperformers:
- Energy +1.12% 2) Oil Service +1.08% 3) Tobacco +.96%
Stocks Rising on Unusual Volume:
- LINE, BBEP, SNTS, REGI, LNCO and WLT
Stocks With Unusual Call Option Activity:
- 1) BAX 2) JNPR 3) LO 4) DELL 5) HBAN
Stocks With Most Positive News Mentions:
- 1) AMTD 2) AGCO 3) AOL 4) OSK 5) LMT
Charts:
Weekend Headlines
Bloomberg:
- China Cash Squeeze Seen Creating Vietnam-Size Credit Hole. China’s
money-market cash squeeze is
likely to reduce credit growth this year by 750 billion yuan ($122
billion), an amount equivalent to the size of Vietnam’s economy,
according to a Bloomberg News survey. The number is the median
estimate of 15 analysts, whose projections last week ranged from cuts of
20 billion yuan to 3 trillion yuan. The majority of respondents also
said they approve of the government’s handling of the credit crunch and
said the episode reinforces their expectations for policy reforms such
as loosening controls on interest rates. June credit data due as soon as
this week will give investors clues to how much the cash squeeze, which
sent interbank borrowing costs soaring to records last month, is
affecting the world’s second-biggest economy. Whether a slowdown
extends into the second half may hinge on how effectively Premier Li
Keqiang can redirect funding after his clampdown on speculation. “The
liquidity crunch has increased downside risks,” said Louis Kuijs, chief
China economist at Royal Bank of Scotland
Group Plc in Hong Kong, who estimates it will reduce aggregate
credit by 1.8 trillion yuan this year.
- China Metal Futures Volumes Slump as Super Cycle Fades.
Industrial metals futures trading in China slumped in the first half of
this year amid a rout in global commodities as investment banks called
an end to the super cycle of gains in raw materials prices. Zinc volume
dropped the most among base metals, falling 43 percent in the first six
months from a year ago to 7.25 million lots on the Shanghai Futures
Exchange, data from the China Futures Association showed. The total
number of contracts on the SHFE and futures bourses in Dalian and
Zhengzhou climbed with the addition of four new products including
coking coal. The LMEX Index of six base metals on the London Metal
Exchange, the biggest bourse for metals trading, dropped 13 percent this
year on concern that slowing growth in China, the largest user of
metals, would damp demand. Raw materials lagged behind equities this year as banks from UBS AG to Deutsche Bank
AG forecast the decline of the commodity super cycle, a longer-than-average period of rising prices.
- Rupee
Rout Spurs Biggest SBI Risk Jump Since 2008: India Credit. Bond risk
for State Bank of India has surged most since 2008's credit crisis as a
plunging rupee threatens to hurt company finances and boost loan
defaults. The cost to insure debt of the nation's largest lender against
non-payment for five years rose 86 basis points in June, the most since
October 2008, to 275, according to data provider CMA. Credit-default
swaps on Bank of China Ltd. climbed 43 basis points to 157. The average
swap price for five Indian lenders jumped 93 basis points to 295 last
month, as the rupee slid 4.9 percent and touched a record low of 60.765
per dollar.
- China Stocks Drop Most in Two Weeks as Energy Shares at 2008 Low.
Chinese stocks dropped the most in two weeks as indexes tracking energy
and industrial companies sank to the lowest levels since November 2008.
China Shenhua Energy Co., the nation’s biggest coal producer,
slipped 2.6 percent, taking its losses this year to 38 percent. Yunnan
Tin Co. plunged 7 percent after saying its chairman is under
investigation. Zijin Mining Group Co. (601899), China’s largest gold
producer, declined for the first time in six days after saying
first-half profit probably decreased. The Shanghai Composite Index
(SHCOMP) fell 1.4 percent to 1,978.93 at 11:10 a.m. local time, after
climbing 1.4 percent last week. The CSI 300 Index slid 1.3 percent to
2,198.79. The Hang Seng China Enterprises Index (HSCEI) tumbled 2.4
percent in Hong Kong.
- Asia Stocks Drop on Fed Stimulus, China Lending Concern.
Asian stocks dropped amid concern a credit squeeze in China will curb
growth and after a better-than-forecast monthly U.S. jobs report fueled
speculation that the Federal Reserve may begin reducing stimulus this
year. BHP Billiton Ltd. (BHP), the world’s biggest mining company,
fell 2.3 percent in Sydney as metals prices retreated the most in two
months. Asiana Airlines Inc. tumbled 5.7 percent in Seoul after one of
its planes crashed at San Francisco International Airport. Zijin Mining
Group Co. (2899) dropped 8.9 percent in Hong Kong after China’s biggest
gold miner by market value said profit may slump as much as 55 percent.
The MSCI Asia Pacific Index slid 0.9 percent to 130.11 as
of 11:19 a.m. in Hong Kong, with more than two companies falling
for each that rose. All 10 industry groups on the gauge
retreated.
- Trichet Says Flexibility Is Implicit in ECB’s Forward Guidance.
Former European Central Bank
President Jean-Claude Trichet said his successor Mario Draghi’s pledge
to keep interest rates low contains implicit flexibility to move if
circumstances change. “You cannot exclude to move because you might
have to move,” Trichet said in an interview in Aix-en-Provence, France.
“In any case, it’s always conditional because nobody can think for one
second that you would hesitate to move rates in any direction if there
is a case to do that. Implicitly forward
guidance remains conditional in the eyes of market
participants.”
- Salafist Party Asserts Role in Egypt as the Brotherhood Teeters. The dethronement of Egypt’s Muslim
Brotherhood party is giving rise to a new political power. The ultra-conservative Nour Party was the only Islamist
group to support the military-backed plan to topple Mohamed Mursi and the Muslim Brotherhood organization that fielded him
for office. The move has cast them as political power brokers,
evidenced by their scuttling, for now, of Mohamed ElBaradei’s
appointment as prime minister. “The Nour Party for the time being has a
veto power over major decisions because the new order needs at least one
major Islamist party on its side,” said Shadi Hamid, director of
research at the Brookings Doha Center in the Qatari capital.
“It’s never been so influential.”
- Analysts Boosting S&P 500 Target 11% Cut Profit Growth Near Zero. The same equity analysts who lowered
second-quarter profit growth predictions to almost nothing in
2013 are raising price forecasts, convinced the economy is
growing fast enough to lure more investors and boost valuations. Standard
& Poor’s 500 Index earnings rose 1.8 percent last
quarter, down from a projection of 8.7 percent six months ago,
according to more than 11,000 analyst estimates compiled by Bloomberg.
At the same time, share-price targets for companies from GameStop Corp.
(GME) to Goldman Sachs (GS) Group Inc. are rising at
the fastest rate in two years.
- Hedge Funds Post June Decline as Bernanke Roils Markets.
Hedge funds posted their biggest monthly loss in more than a year after
signs that the U.S. Federal Reserve may scale back its unprecedented
stimulus triggered a selloff across global markets. Hedge funds lost
1.4 percent in June, the most since May 2012, paring the gain in the
first six months of 2013 to 1.4 percent, according to data compiled by
Bloomberg. Hedge funds that use computer models to decide when to buy
and sell securities slumped 6.3 percent last month, extending losses for
the year to 7.1 percent, and emerging-market stock funds declined 6.6
percent, leaving them down 9.7 percent in 2013.
- WTI Crude Climbs a Fifth Day on U.S. Jobs Gain, Egyptian Unrest.
West Texas Intermediate rose for a
fifth day, the longest run of gains since April, as the U.S. added more
jobs than forecast in June and protests in Egypt fanned concern about
disruptions in Middle East oil supply. Futures advanced as much as 0.9
percent in New York after
capping the biggest weekly advance in more than two years on
July 5. WTI for August delivery climbed as much as 90 cents to
$104.12 a barrel in electronic trading on the New York
Mercantile Exchange and was at $103.79 at 9:39 a.m. Sydney time.
The contract increased $1.98, or 2 percent, to $103.22 on July
5, the highest settlement since May 2012. Prices rose 6.9
percent last week, the most since February 2011.
- Biofuel Investments at Seven-Year Low as BP(BP) Blames Cost. Europe’s
biggest oil companies are scaling back work on the next generation of
biofuels, a setback for the effort to create a gasoline substitute that
doesn’t drain the food supply. BP Plc (BP/) and Royal Dutch Shell
(RDSA) Group Plc have halted funds for four separate ventures because
the technology to produce fuel from woody plants and waste won’t be
economical until 2020
or beyond, executives at both companies said in interviews.
- Rebar Falls for First Time in 5 Days as China Construction Slows.
Steel reinforcement-bar futures in Shanghai fell for the first time in
five days amid a seasonal slowing in Chinese construction and after a
decline in local stocks and commodities. Rebar for delivery in January on the Shanghai Futures Exchange fell as much as 1.3 percent to 3,575 yuan ($582) a
metric ton and was at 3,609 yuan at 11:22 a.m. local time.
Futures climbed 2.4 percent last week.
- Losing $317 Billion Makes Treasuries Safer for Mizuho to HSBC. The
biggest investors in Asia and Europe are keeping their money in
Treasuries even after the steepest two-month loss for the securities
erased $317 billion of market value. Mizuho Asset Management Co., which
oversees $32 billion,
added Treasuries due in 10 years or longer to its holdings in
the past month. HSBC Private Bank, with $480 billion in assets,
bought U.S. notes when 10-year yields rose to 2.5 percent.
Deutsche Asset & Wealth Management, which manages about $1.3
trillion, is holding debt maturing in less than four years,
betting American interest rates will remain subdued.
Wall Street Journal:
- Secret Court's Redefinition of 'Relevant' Empowered Vast NSA Data-Gathering. The National Security Agency's ability to gather phone data on
millions of Americans hinges on a secret court ruling that redefined a
single word: "relevant." This change—which specifically enabled the surveillance recently
revealed by former NSA contractor Edward Snowden—was made by the secret
Foreign Intelligence Surveillance Court, a group of judges responsible
for making decisions about government surveillance in national-security
cases. In classified orders starting in the mid-2000s, the court
accepted that "relevant" could be broadened to permit an entire database
of records on millions of people, in contrast to a more conservative
interpretation widely applied in criminal cases, in which only some of
those records would likely be allowed, according to people familiar with
the ruling.
- Trade Talks Could Raise Heat on China. European Union Officials Arrived in Washington to Begin Negotiations Monday. The U.S. is launching broad trade talks with Europe this week and
preparing for the next stage of negotiations with select Asia-Pacific
nations, part of the Obama administration's effort to find new fuel for
economic growth.
U.S. trade experts and business leaders
say they expect the deals will also put pressure on the only major
economy absent from the negotiating tables: China.
- Smartphone Makers Hit By Rising Competition. Samsung
gives weaker-than-expected earnings guidance and HTC posts tepid
results. Samsung Electronics Co.'s weaker-than-expected earnings
guidance for its second quarter and tepid results from HTC Corp. show
that high-end smartphone makers are starting to see growth taper amid
intense competition and cheaper devices flooding the market.
- Egypt's Opposition Nominates New Premier. Secular
and Hard-Line Factions Propose London-Trained Economist, but Support
Shows Cracks; Demonstrations Calm. Leaders of Egypt's hard-line Salafist
Nour Party and secular party
leaders agreed to put forward Ziad Bahaa-Eldin, a London-trained
economist, as a candidate for prime minister, officials from Mr.
Bahaa-Eldin's Social Democratic Party said. The decision followed
lengthy negotiations on Sunday. Mohamed ElBaradei, leader of a grouping
of political parties called the National Salvation Front, will be
nominated for a vice-president post, the party officials
said. Mr. ElBaradei couldn't be reached to comment.
- ObamaCare's 'Liar' Subsidies. The White House says you can sign up 'without further verification.' The White House seems to regard laws as mere suggestions, including the
laws it helped to write. On the heels of last week's one-year suspension
of the Affordable Care Act's employer mandate to offer insurance to
workers, the Administration is now waiving a new batch of its own
ObamaCare prescriptions.
Fox News:
- Thousands protest in Egypt after Muslim Brotherhood, opponents call for rallies. Thousands are protesting in Egypt after both the Muslim Brotherhood
and their opponents called for new mass rallies Sunday, renewing fears
of another round of street violence after the country’s military removed
Islamist President Mohammed Morsi from office. The calls for competing rallies come after clashes two days ago
between the rival camps left at least 36 dead and more than 1,000
injured nationwide.
CNBC:
- As Competition Wanes, Amazon(AMZN) Cuts Back Discounts.
Jim Hollock's first book, a true-crime tale set in Pennsylvania, got
strong reviews and decent sales when it appeared in 2011. Now "Born to
Lose" is losing momentum—yet Amazon, to the writer's intense
frustration, has increased the price by nearly a third.
- Hedge Fund Sues Treasury Over Fannie, Freddie. A large hedge fund that invested in shares of the government-sponsored
mortgage companies Fannie Mae and Freddie Mac has sued the U.S. Treasury
Secretary and the head of the Federal Housing Finance Agency along with
the agencies themselves, arguing that their attempts to wind down the
companies violate a Congressional mandate.
Business Insider:
New York Times:
- A New Anti-American Axis? THE flight of the leaker Edward J. Snowden from Hong Kong to Moscow last
month would not have been possible without the cooperation of Russia
and China. The two countries’ behavior in the Snowden affair
demonstrates their growing assertiveness and their willingness to take
action at America’s expense.
Mortgage Professional America:
- Return of the piggyback loan.
Piggyback loans, which fell from favor during the housing downturn, are
slowly making a comeback as home values start to pick up, several
industry leaders have said. Piggyback mortgages – when a borrower takes
out a second mortgage in the form of a home equity or line of credit –
accounted for 3.8% of the loans originated by surveyed bankers in 2012,
compared to 1.7% of the loans for 2010, according to the ABA’s 2013 Real
Estate Lending Survey. The loans were commonly used by borrowers who
wanted to avoid paying for mortgage insurance but didn’t have enough
money for a 20% down payment.
Reuters:
- European regulator preparing database on bankers. The European Union
will soon begin sharing information on how bankers fare in 'fitness and
probity' tests in member states, making it harder for errant bankers to
evade regulatory scrutiny by crossing national borders.
- EU financial transaction tax will hit FX users hard - report.
A proposed EU financial transaction tax (FTT) could discourage use of
the foreign exchange (FX) market by typically raising costs of doing
business by up to 700 percent, a report said on Monday. The report by
the Global Financial Markets Association (GFMA) said that due to the
double-sided nature of the proposed tax, transaction costs for pension
funds would increase by around 1,500 percent. And they could reach as
high as 4,700 percent for some FX products such as those that involve
short-dated swaps with a very low transaction cost.
- Euro zone to decide on Greece's cash injection, warn Portugal.
The euro zone must decide on Monday how to keep Greece on a lifeline
but is divided over whether to delay aid payments to Athens in an
attempt to force through unpopular reforms ranging from
sacking public workers to selling state assets. A split in Greece's governing coalition over how to shrink
the country's public sector has cast doubt upon Athens' ability
to meet the demands of its bailout programme, although Finance
Minister Yannis Stournaras said on Sunday much had been done to
reassure international creditors.
- Brazil seeks U.S. response to alleged spying on citizens.
Brazil will demand an explanation from the United States over report
its citizens' electronic communications have been under surveillance by
U.S. spy agencies for at least a decade, foreign minister Antonio
Patriota said on Sunday.
AP:
- 30 killed in school attack in northeast Nigeria.
Islamic militants attacked a boarding school before dawn Saturday,
dousing a dormitory in fuel and lighting it ablaze as students slept,
survivors said. At least 30 people were killed in the deadliest attack
yet on schools in Nigeria's embattled northeast. Authorities blamed the
violence on Boko Haram, a radical group whose name means "Western
education is sacrilege." The militants have been behind a series of
recent attacks on schools in the region, including one in which gunmen
opened fire on children taking exams in a classroom.
Financial Times:
- White House set for Wall Street clash over trade talks. The
Obama administration has set itself up for a fight with Wall Street
after resisting European demands to include financial services
regulation in transatlantic trade talks as the list of sticking points
grows before negotiations begin this week. Washington is concerned that including a
framework for financial regulatory convergence in the talks could be used by banks to circumvent tough rules stemming from the 2010 Dodd-Frank law, and as a way for Europeans to delay their own reforms.
Telegraph:
- Portugal shows that this eurozone crisis is not over. The eurozone crisis may have been briefly absent from the headlines over the
past couple of months but as the flare-ups in Portugal and Greece this week
have highlighted it certainly never went away - despite the vocal
protestations of some French politicians.
NZZ:
- Swatch
1H 'Much More Difficult' Than Year Ago. CEO Nick Hayek said 'we
observed partially declining revenue at luxury brands' in China and
Swatch had as much as double-digit percentage growth in its low. mid-
and high price segments in that market.
Frankfurt Allgemeine Sonntagszeitung:
- ECB Executive Board member Yves Mersch in an interview with
Frankfurter Allgemeine Sonntagszeitung says ECB in its role as bank
supervisor must "check whether the banks' balance sheets are in order.
This must be done thoroughly to protect against surprises." Mersch said
the lenders whose balance sheets are not in order "may not necessarily
be the banks in the crisis countries".
Der Spiegel:
- ECB Rate Cut Was Blocked by Seven Council Members. ECB Chief
Economist Peter Praet at July 4 council meeting had prepared proposal to
cut key interest rate to .25%, apparently supported by ECB chief Mario
Draghi. Seven council members, mainly from norther euro member states
and including Jens Weidmann, Klaas Knot and Joerg Asmussen, argued
against a rate cut.
- KfW Wouldn't Have Lent to Spain
Without Guarantee. Members of German state-owned KfW's management board
said at a July 4 administrative board meeting that lender wouldn't have
made EU800m loan to Spanish state-owned development bank ICO under
normal circumstances because the loan is much too risky. Loan was only
extended because German government is liable for the full amount.
Tagesspiegel:
- EU Needs Treaty Change to Oversee Banks, Buch Says. Claudia Buch,
head of IWH economic institute and member of German govt's council of
economic advisers, says it would be difficult on current legal basis for
the ECB to close down European banks once it takes over supervision
duties. Buch says issue is so important that European treaties have to
be changed. "Without determined restructuring of the banks, this crisis
can become a cliffhanger," Buch says.
Boersen-Zeitung:
- Deutsche Bank CFO Stefan Krause tells Boersen-Zeitung the bank
will reduce liquidity, shrink its derivatives business and change its
business model to comply with regulatory requirements. Krause says
possible introduction of risk-unweighted leverage ratios would hurt
Deutsche's business model that's based on hedging risks. Krause says no
transfer of its core capital from Germany to the U.S. is necessary to
meet separate U.S. capital requirements.
El Pais:
- Poll
Shows Spanish Ruling Party's Support Falling. Support for Spain's
ruling People's Party fell to 23% this month, from 24.5% in June, citing
survey by Metroscopia polling firm. The People's Party scored 44.6% of votes in November 2011 general elections. Support for Socialists rises to 21.6% from 21.5%, compared with 28.7% of votes in November 2011 election.
China Securities Journal:
- China 2Q GDP Growth May Slow to 7.5%. China June exports data may
be "relatively weak" or even show a fall from a year ago, citing a
personal familiar with the data. New loans in June may be about 800b
yuan. China may not release policies to boost economy in short term as
the government has greater tolerance for slowing growth and its
determination to promote economic transformation.
Weekend Recommendations
Barron's:
- Bullish commentary on (UNH), (LRCX) and (DELL).
- Bearish commentary on (NDLS).
Night Trading
- Asian indices are -2.0% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 157.0 -1.5 basis points.
- Asia Pacific Sovereign CDS Index 114.0 -4.75 basis points.
- NASDAQ 100 futures +.26%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
3:00 pm EST
- Consumer Credit for May is estimated to rise to $12.5B versus $11.06B in April.
Upcoming Splits
Other Potential Market Movers
- The German Trade/Industrial Production data, China CPI, Eurozone Finance Ministers Meeting and the (AMAT) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the week.
U.S. Week Ahead by Reuters (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.
BOTTOM LINE: I expect US stocks to finish the week modestly lower on rising global growth fears, more emerging markets unrest, increasing Eurozone/Asian
debt angst, earnings outlook concerns, more shorting and technical selling. My intermediate-term
trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.
