Evening Headlines
Bloomberg:
- Merkel Says New Talks Must Wait After Greece Blows Off IMF Payment. German Chancellor Angela Merkel ruled out an immediate return to
debt talks as Greece became the first advanced economy to miss payment
to the International Monetary Fund and its European bailout also
expired. While Merkel rejected talks before a July 5 referendum called by
Greek Premier Alexis Tsipras on further budget cuts, euro-area finance
ministers signaled the deadlock may be thawing. As capital controls
ration bank withdrawals and pensions, Greek society is feeling the pain.
- Tsipras Under Pressure to Cede After Greece Misses IMF Payment. European leaders are waiting for signs that Greek Prime Minister
Alexis Tsipras is ready to compromise as his country buckles under
capital controls and fails to make its International Monetary Fund
payment. With Greek
society feeling the pain of rationed bank withdrawals and pensions, the
government is looking for a way out of economic ruin after a bailout
expired and the country joined delinquent Sudan and Zimbabwe in being in
arrears to the global lender of last resort. An 11th-hour request
for a new two-year rescue package to tide over a ravaged economy was
sternly dismissed by German Chancellor Angela Merkel. With Greece’s stay
in the euro club at stake, finance ministers in the 19-nation bloc are
scrambling for a solution to pull Greece away from the precipice after
morethan five years of crisis fighting and two bailouts.
- Greece Crisis Ripples Across European Companies as Markets Swing. Greece’s financial turmoil rippled across corporate Europe as a
market rout sabotaged planned bond sales and stock offerings and threw
companies into crisis-response mode to deal with unsettled customers. German real-estate investor ADO Properties shelved its planned
initial public offering, citing volatile markets, while Adler Real
Estate halted plans to sell a convertible bond to shareholders. Travel
companies TUI AG and Thomas Cook Plc fielded calls from travelers about
access to cash after Greece introduced capital controls to prevent bank
collapses.
- Hidden China Stock Debt Revealed in Online Loans at 22% Interest. Zhang Minmin is one of tens of thousands playing in one of the
riskier corners of China’s stock market, borrowing money at high
interest rates through unregulated online lenders to amplify his bets on
potential equity gains. “Sometimes when the market is good, I would make profits enough to
buy an Audi in just a week or two. However, when the market is down,
it’s also possible to lose half an Audi very quickly,” said Zhang, a
32-year-old who works in the financial industry in Hangzhou, a city near
Shanghai. As more Chinese jumped into the market in the hope of
instant wealth,
peer-to-peer websites offering loans for stock investing have
mushroomed. They are among a multitude of sources of leverage outside of
traditional margin financing that threaten to complicate any efforts to
prevent an unruly reversal of China’s stock market boom, which is
already faltering. Chinese brokers have extended 2.1 trillion yuan ($339
billion) of margin finance to investors, double the amount at the start
of the year. But this often-cited figure is only part of the mountain
of debt taken
out to finance share purchases. Another 1.7 trillion yuan may have
flowed into stock market investment from wealth management products,
online lending sites and other sources, according to a Bloomberg survey
of analysts.
- There Are Now More Stock Traders in China Than Communist Party Members. More
than 90 million Chinese now trade stocks, according to China Securities
Depository and Clearing Co. That compares with 87.8 million Communist
Party members at the end of last year, the state-run Xinhua News Agency reported June 29, two days
before the 94th anniversary of the party’s founding. “As more people get burned, the government feels more pressure,” said
Ronald Wan, chief executive officer of Partners Capital International in
Hong Kong. “A disorderly decline will affect stability in the Chinese
economy.” “The authorities are always sensitive to moves in the market because
they fear a systemic collapse,” said Anthony Neoh, a visiting professor
at the National University of Singapore and a member of the Chinese
securities regulator’s international advisory body. “There’s nothing wrong with greater stock market investment and there’s
nothing wrong with diversification from simply savings,” Howie, a former
managing director at CLSA Asia-Pacific Markets, said in a phone
interview from Singapore. “But the difficulty in China is that none of
what’s been happening in the past few months can be called investment.
It’s all speculation.”
- Billionaire-Backed Hedge Fund to Short India Stocks After Rally. Infina Finance Ltd., a Mumbai-based $190 million hedge fund, has
turned the most bearish in a year on India’s stock market and will short
if it rallies further. “Right now we have the lowest net longs than we had in the last 12
months,” Venkat Subramanian, Infina chief executive officer, said in an
interview. “If the market goes up any further, I would become net
short.”
The long-short equity fund, which counts billionaire Uday Kotak and
Kotak Mahindra Bank Ltd. among investors, is expecting a correction as
foreigners allocate money to other regions and stock valuations become
expensive.
- Singapore Home Prices Post Longest Losing Streak Since 2002. Singapore’s home prices dropped for a seventh consecutive quarter,
the longest losing streak in 13 years, as tighter mortgage curbs cooled
demand in Asia’s second-most expensive housing market. An index tracking private residential prices fell 0.9 percent in the
three months ended June 30, the longest stretch of declines since June
2002, according to preliminary data from the Urban Redevelopment
Authority on Wednesday. The last time prices fell for this long was
eight consecutive quarters from September 2000, the data showed.
- Asian Stocks Advance After Steepest Monthly Drop Since September. Asian stocks rose, after the regional benchmark gauge posted its
biggest monthly drop since September, as energy and materials shares led
gains. The MSCI Asia Pacific Index climbed 0.1 percent to 146.38 as of 9:01
a.m. in Tokyo. The measure slid 3.4 percent in June, leaving it little
changed for the quarter, as Chinese equities in Hong Kong slumped. The
city’s stock market is closed Wednesday for a holiday.
- Bullard Sees U.S. Sheltered From Greek Crisis, September in Play. A September interest rate rise is still “very much in play,”
according to Federal Reserve of St. Louis President James Bullard, who
said the U.S. will gain from any investor flight to safety from the
Greek debt crisis that drives down U.S. bond yields. “I would say the flight to safety is a bullish factor for the U.S.
Increased global uncertainty might be a bearish factor,” Bullard told
reporters after delivering a speech in St. Louis on Tuesday. “They
roughly offset so it would not change the timing of any rate hike. I
would say September is very much still in play.”
- Options Limited for U.S. as Crises Mount in Greece, Puerto Rico. The Obama administration, which has spent years trying to erect
barriers against financial crises, faces fresh turmoil in Greece and
Puerto Rico with few politically feasible tools and an even smaller
appetite to intervene. The combination explains why the administration is signaling that not
all emergencies warrant bailouts, at least not by the U.S. government. With unrelated crises on two continents, its response boils down to
this: Greece is an issue for Europe to resolve, and a long-term fix for
Puerto Rico requires help from Congress.
Wall Street Journal:
- For Greeks, Referendum Poses Murky Choice Between Pain, Pride. Bailout question polarizes voters along ideological, economic lines. Chara Marantidou stood in the rain Tuesday with thousands of Greeks
who support bowing to creditors’ demands, but she was feeling the
uncertainty that is dogging many in this haggard country whether they
agreed with her or not. “I feel like I need to choose between two
doors, but no one’s really told me what lies behind each,” said the
40-year-old freelance designer and mother of two. The debate over a single question,...
MarketWatch.com:
- China’s central bank reveals its weak hand.
China’s domestic stock markets may have bounced back Tuesday, but the
damage from the panic despite interest-rate and reserve-ratio cuts at
the weekend will take longer to heal. The big problem is that the People’s Bank of China explicitly targeted the plunging stock market, and yet the Shanghai Composite kept falling, revealing that the PBOC was not in control.
Even after Tuesday afternoon’s sharp rebound, the index is still
flirting with bear territory, taken as a 20% drop from the recent high.
Zero Hedge:
Business Insider:
USA Today:
Reuters:
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are +.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 113.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 59.75 -1.25 basis points.
- NASDAQ 100 futures +.31%.
Earnings of Note
Company/Estimate
Economic Releases
7:30 am EST
- Challenger Job Cuts for June.
8:15 am EST
- The ADP Employment Change for June is estimated to rise to 218K versus 201K in May.
9:45 am EST
- The Final Markit US Manufacturing PMI for June is estimated at 53.4 versus 53.4 in May.
10:00 am EST
- Construction Spending for May is estimated to rise +.4% versus a +2.2% gain in April.
- ISM Manufacturing for June is estimated to rise to 53.2 versus 52.8 in May.
- ISM Prices Paid for June is estimated to rise to 51.0 versus 49.5 in May.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,781,820 barrels versus a -4,934,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +213,640 barrels versus a +680,000 barrel gain the prior week. Distillate supplies are estimated to rise
by +1,304,550 barrels versus a 1,837,000 barrel gain prior. Finally,
Refinery Utilization is estimated to rise by +.22% versus a +.9% gain the prior week.
Afternoon:
- Total Vehicle Sales for June are estimated to fall to 17.2M versus 17.71M in May.
Upcoming Splits
Other Potential Market Movers
- The Eurogroup Meeting on Greece, Eurozone PMI, Australia Trade report, weekly MBA Mortgage Applications report, (F) June Sales call, (PBR) general meeting, (KRFT) special meeting and the (SNX) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity
shares in the region. I expect US stocks to open modestly higher
and to weaken into the afternoon, finishing mixed. The Portfolio is
50% net long heading into the day.
