Today's Headlines

Bloomberg:  

• Tsipras Faces Off With Europe Over Austerity Before Sunday Vote. Greek and European leaders dug into their positions before the country’s referendum on Sunday, as polls showed the outcome is impossible to predict and what happens next even more uncertain. Officials from Berlin to Madrid reiterated that a “no” to the latest proposals by creditors would deepen Greece’s economic misery. Greek Prime Minister Alexis Tsipras told supporters in Athens that a “no” vote was the ticket out, as he appealed for a 30 percent cut in his nation’s debt.

• Greeks Face German Parliament Hurdles Even If Vote Is ‘Yes’. Any future bailout program for Greece faces hurdles in Germany’s lower house of parliament even if Greeks ignore their government’s advice to reject a creditor offer in Sunday’s referendum and vote “yes,” German lawmakers said. Sentiment has soured among members of Chancellor Angela Merkel’s bloc since Prime Minister Alexis Tsipras took office and adopted a confrontational stance, said the lawmakers. Tsipras, or any possible successor, may struggle to get the Bundestag to even authorize Merkel to start negotiations on a third aid program, they said.

• Schaeuble Popularity Soars as Germans Doubt Greece’s Euro Future. German Finance Minister Wolfgang Schaeuble scored his highest-ever approval rating in an ARD-DeutschlandTrend poll that identified a decline in public support for Greece remaining in the euro. Seventy percent of Germans said they were satisfied with Schaeuble’s work, placing him second on a list of Germany’s leading politicians above Chancellor Angela Merkel, who was in third slot with 67 percent, according to the poll conducted by Infratest Dimap released Friday. Foreign Minister Frank-Walter Steinmeier topped the list with 73 percent approval.

• Euro Area Said to Weigh Push for Aid Deal Even If Greeks Vote No. Euro-area finance ministers may be ready to start work on a third bailout agreement for Greece after Sunday’s referendum, even if voters reject the bloc’s last aid proposal, according to two officials familiar with negotiations. A broad majority of finance chiefs have agreed to examine an official request from Greek Prime Minister Alexis Tsipras for aid from the European Stability Mechanism, the people said, asking not to be identified because the talks are confidential. That process could begin as soon as next week, one of them said.

• The Other Contagion: What If Greece Thrived After Euro Exit? It is the scenario few talk of: What if Greece left the euro area and its economy thrived? The reason for the silence may be that it’s too ridiculous a concept to even consider. As the country’s referendum on austerity nears, economists are lining up to warn that quitting the euro and defaulting on its debts would make Greece an even bigger pariah in financial markets and push it toward a deeper depression with the bankruptcies, unemployment and social unrest that entails. Such pain, so the conventional wisdom goes, would scare the likes of Spain and Portugal into rededicating themselves to the German-branded austerity and economic reform that membership of the single currency demands. To some, a euro zone without Greece would be smaller yet possibly stronger. But economists at Oxford Economics Ltd. and Citigroup Inc. this week gave voice to the question of what would happen if Greece dusted itself down within a couple of years and rode a falling currency back to economic growth. That would challenge the theory that leaving the euro was economic suicide. And it could encourage other members to consider devaluation and default more appealing than life within the euro and so pose an even bigger threat to the currency bloc’s sustainability than if Greece stayed.

• ECB Said to Extend Backstop to Bulgaria Amid Greek Fallout. The European Central Bank is set to extend a backstop facility to Bulgaria and is ready to assist other nations in the region to ward off contagion from Greece, according to people familiar with the situation. The ECB would provide access to its refinancing operations, offering euros to the banking system against eligible collateral, the people said, asking to remain anonymous because the matter is confidential. The ECB and the Bulgarian central bank declined to comment.

• Can China Catch the Falling Knife in Equity Markets? (video) Bloomberg’s Stephen Engle reports on the current drop in Chinese equities and the government’s attempt to restore confidence in those markets.

• European Stocks Fall as German Bunds, Yen Rise Before Referendum. European stocks fell for a second day and German bonds gained as Greece called for a writedown on its debt and investors braced for a referendum this weekend. The yen and the Swiss franc strengthened. The Stoxx Europe 600 Index decreased 0.5 percent at 10:46 a.m. in New York. The yield on Germany’s 10-year bund fell five basis points to 0.79 percent. The yen and the franc climbed 0.3 percent against the dollar. Humana Inc. jumped in German trading as Aetna Inc. agreed to buy the company. Chinese shares capped their biggest three-week slide since 1992. Oil was set for its worst week since March. U.S. markets were shut for a holiday. Stocks extended declines in a week where more than $1.5 trillion was erased from the value of global equities after Greek Prime Minister Alexis Tsipras short-circuited bailout talks by calling a referendum. Tsipras said today that a 30 percent so-called haircut and a 20-year grace period was the only way the country’s debt could become sustainable. 

• Europe Stocks Fall Most Since December. The Euro Stoxx 50 Index lost 5 percent in the week after Greek Prime Minister Alexis Tsipras announced a surprise referendum on creditors’ bailout demands. 

• Seven-Day Plunge in Iron Ore Sinks Vale as Brazilian Stocks Fall. A seven-day selloff in iron ore sent Vale SA, the world’s largest producer of the commodity, to its worst week since January. The Ibovespa joined a slide in emerging-market stocks. Shares of Vale extended their weekly tumble to 8.8 percent as shipments of the steelmaking ingredient surged and data showed the slowdown in China’s steel industry deepened. The miner, whose top export market is the Asian nation, accounts for about 6 percent of Ibovespa’s weighting.

• Iron Ore Routed on Jump in Cargoes as Citi, Goldman Get It Right. Iron ore capped the biggest weekly loss since April as shipments surged and data showed the slowdown in China’s steel industry deepened, vindicating banks from Goldman Sachs Group Inc. to Citigroup Inc. that had forecast declines. Ore with 62 percent content delivered to Qingdao lost 0.7 percent to $55.26 a dry metric ton on Friday, falling for a seventh day, according to Metal Bulletin Ltd. Prices lost 11 percent this week to the lowest level since April. Producers’ shares sank, with Rio Tinto Group dropping to the lowest since 2009 in London and Anglo American Plc falling to a 12-year low.

Wall Street Journal:

• Regulators Warn Banks on Loans to Oil, Gas Producers. Move could limit ability of energy companies to obtain financing. U.S. regulators are sounding the alarm about banks’ exposure to oil-and-gas producers, a move that could limit their ability to lend to companies battered by a yearlong slump in prices. The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. are telling banks that a large number of loans they have issued to these companies are substandard, said people familiar with the matter, as they issue preliminary results of a joint national examination of major loan portfolios. The substandard designation indicates regulators doubt a borrower’s ability to repay or question the value of the assets that back a loan. The designation typically limits banks’ ability to extend additional credit to the borrowers.

• Holiday Weekend Brings Worries of Islamic State Terror Attacks. U.S. Officials monitor potential suspects ahead of July 4; scare at Washington Navy Yard. Federal counterterrorism officials are on edge heading into the July 4 weekend, monitoring hundreds of potential suspects they fear could be contemplating attacks on behalf of Islamic State, officials said.

MarketWatch.com:

• Know this about Sunday’s Greek referendum! Here’s a guide to what’s happening and what’s at stake.

• As China stocks sink, some accuse Morgan Stanley(MS), other foreign forces. The recent, drastic stock-market meltdown in China seems to have freaked out the country’s government and central bank, as their repeated efforts to stabilize the markets have failed, at least so far. And now, some segments of Chinese society are now raising the possibility that “evil” market forces going short to ruin the economy, and even suspecting investment “predators” of lurking behind the turmoil, with Morgan Stanley among the names mentioned.

Fox News:

• Man arrested in connection with San Francisco killing had been deported several times, officials say. (video) The man arrested in connection with the seemingly random killing of a woman who was out for a stroll with her father along the San Francisco waterfront is an illegal immigrant who previously had been deported five times, federal immigration officials say.

ZeroHedge:

• What It All Comes Down To On Sunday. 

• Massive "No" Demonstration Floods Athens' Syntagma Square As Tsipras Speaks - Live Webcast. (video) 

• Greek Banks Considering 30% Haircut On Deposits Over €8,000: FT. 

• BofA's Dire Prediction: Only Direct Government Buying Can Save China Stocks Now. (graph)

• Martin Armstrong: Troika Is Maneuvering To Rig The Greek Referendum.

• Barack Obama Tells Another Whopper - He Did Not Create 12.8 Million Jobs. (graph)

• Do Share Buybacks Create Value? (Spoiler Alert: No). (graph)

• Crude Carnage Continues - WTI Hits $55 Handle, Brent Tests $60. (graph)

• 3 Things: Valuations, Employment, Sectors. (graph)

• Egypt Is On The Edge Of Full Blown Civil War.

• Contagion Continues: Italy, Spain Stocks Tumble To Post-Greferendum Lows. (graph)

• Chinese Stocks Plummet Despite Government Threats To Shorts, Europe Lower, US Closed. (graph)

Business Insider:

• The Iran deal is the worst agreement in US diplomatic history.

• 9 photos show the chaos in Greece right now. (pic)

• China's slowdown is bad news for the world's big industrial exporters.

Reuters:

• Greek FinMin Varoufakis says bail-in report "malicious rumour". Greek Finance Minister Yanis Varoufakis said on Friday a Financial Times report that Greece was making contingency plans for the possible bail-in of deposits was a "malicious rumour". Varoufakis made the comment on his Twitter account. The Financial Times said the contingency plans could include a 30 percent bail-in on deposits above 8,000 euros.

Financial Times:

• Renzi threatened by political contagion from Greece. Beppe Grillo, the comedian and leader of Italy’s populist Five Star Movement, was so gleeful at Alexis Tsipras’s decision to call a bailout referendum last weekend that he quickly hatched plans to travel to Greece for the occasion. “Power to the people, not the banks,” Mr Grillo wrote on his blog as he announced he would be in Athens’ Syntagma Square on Sunday to cheer on the embattled Greek prime minister.

Telegraph:

• Whether Greece votes yes or no, the euro cannot survive in its current form. Best case scenario? The EU will undergo years of painful convulsions, precipitating a new treaty that imposes greater centralisation and restrictions on the fiscal independence of nation states.

• Enough of this charade: Greece must be told to leave the euro. It is no use pretending that the buffoons who pass for a government in Athens can solve this economic crisis. 

• Greece crisis live: Banks will run out of money on Monday morning as Tsipras urges Greece to reject "blackmail". Yes and No voters come out in force in Athens tonight after it is revealed Brussels tried to block IMF report calling for Greek debt relief.

Friday Watch

Evening Headlines
Bloomberg:  

• Greek Drama Won’t End With Vote as Polls Indicate a Tight Race. Germany and the rest of the euro region are bracing for more Greek political upheaval followed by tortuous negotiations even if the country votes for more austerity in Sunday’s referendum. There is no quick fix to the crisis because European Union rules make negotiations on financial aid difficult to re-start, according to an official in Chancellor Angela Merkel’s government. Adding to the murky landscape are polls showing the outcome of Sunday’s referendum on austerity too close to call.  

• Greece Tugs at Euro’s Heartstrings Amid Economic Case for Exit. (video) Some economists don’t fear a Greek exit from the euro because they can count the costs. Most political leaders are petrified because they can’t. No one quite knows how a Grexit would be engineered, but the case for it runs like this: with 11 million people, Greece represents 3.2 percent of the population and 1.8 percent of the output of the 19-nation euro zone’s 10.1 trillion-euro ($11 trillion) economy.

• China Stocks Plunge to Extend Biggest Three-Week Rout Since 1992. China’s Shanghai Composite Index headed for its steepest three-week decline since 1992 as government measures to shore up equities failed to stop margin traders from unwinding positions at a record pace. The benchmark stock gauge sank 7.1 percent to 3,635.03 at 10:26 a.m. The measure has tumbled 30 percent from its June 12 peak, helping wipe out at least $2.8 trillion of value. Eighty stocks fell for each that rose on the index Friday. China’s markets regulator said Thursday it will investigate and “strictly” punish manipulation. The China Securities & Regulatory Commission is examining recent short-selling activity for stock-index futures amid the slump, people with knowledge of the matter said. Regulators have made late-night announcements almost every day since the benchmark index entered a bear market this week. “For now, the mood is verging on panic, and it is extremely hard to calm a bear who is in a rage,” said Bernard Aw, a strategist at IG Asia Pte Ltd. in Singapore. “Chinese brokers may still be looking at reducing their risk exposure by closing more margin debt.” The outstanding balance of margin debt on the Shanghai Stock Exchange dropped for a ninth day on Thursday, sliding to 1.29 trillion yuan ($208 billion) in the longest losing streak since the city’s bourse began to compile the data on March 31, 2010. A five-fold surge in margin debt had helped propel the gauge up more than 150 percent in the 12 months through June 12. The Shanghai Composite has fallen 13 percent this week. The CSI 300 Index declined 7.4 percent Friday, while Hong Kong’s Hang Seng Chinese Enterprises Index slumped 1.6 percent and the Hang Seng Index dropped 0.6 percent.

• Chinese Tycoons Lose $34 Billion in June. The worst monthly slump in Chinese stocks in two years wiped away more than $34 billion in combined net worth of the richest people in China and Hong Kong in June. Of those 45 wealthy people on the Bloomberg Billionaires Index, more than 80 percent lost money in June as the Shanghai Composite Index tumbled. “The fortunes of billionaires are closely tied to the rise and fall of stocks,” said Zhang Lu, a Shanghai-based analyst at Capital Securities Corp. “When the market is more unstable, like now, their fortunes go down.”

• Good Idea at the Time: China Learns Cost of Relying on Stocks. It sounded like a good idea at the time: encourage growth in China’s stock market as a way for companies to raise capital. And if that paid down some of the nation’s record debt load in the process, so much the better. The problem: promoting a market where retail investors dominate daily trading left policy makers vulnerable to swings in sentiment that are tough to control. That’s a reality Premier Li Keqiang’s government faces now as it steps up efforts to stop the bleeding in China’s volatile equity market.

• Dreams Collide With China Slowdown for Job-Seeking Graduates. Dang is among 7.5 million college graduates entering China’s job market this summer, the most ever and almost seven times the number in 2001. Their dreams are colliding with an economy growing at the slowest pace in a generation, adding pressure on policy makers to spur the employment-intensive services sector. “Every year it’s the most difficult job-seeking season for graduates in history, and the next year is even more difficult,” said Xiong Bingqi, deputy director of the 21st Century Education Research Institute, a Beijing-based think tank. “The services sector isn’t developed enough to create enough effective demand for college grads.” 

• The Chinese Descend on Japan's Property Market, Pushing Prices Up. The trend has already hit Sydney, Vancouver and the U.S. Now it’s happening in Japan: busloads of real estate buyers from China coming in, buying up homes and pushing prices higher. Realty agencies in Beijing are organizing twice-monthly tours to Tokyo and Osaka, where 40 Chinese at a time come for three-day property-shopping trips, seeking safe places to invest their cash abroad. They’re being prompted by the yen’s decline to 22-year lows and excitement over the 2020 Tokyo Olympics driving up prices, as they did in Beijing in 2008. Property tours will soon start from Shanghai too. 

• Asia Stocks Swing Before Greek Vote as Investors Weigh U.S. Jobs. Asian stocks fluctuated, with the regional benchmark gauge set for a weekly decline, as investors awaited Greece’s referendum and weighed U.S. jobs data. The MSCI Asia Pacific Index added 0.1 percent to 147.08 as of 9:20 a.m. in Tokyo after falling as much as 0.1 percent. The measure is headed for a 0.5 percent decline this week.

• Shale Boom Shows Strength as Rigs Gain With Oil Under $60. For the first time in almost seven months, America’s shale drillers put rigs in oil fields back to work, and they’re doing it at a lower price. The last time they added rigs, crude futures were trading near $70 a barrel. Now, even after a rebound, they’re under $60. And yet drilling rigs rose in almost every major U.S. oil basin in the country this week, raising the total by 12, according to field-services company Baker Hughes Inc.

Wall Street Journal:

• Europe’s Great Project Faces Its Biggest Challenge in Greek Bailout Referendum. The euro is EU’s crowning glory and the instrument that may most seriously challenge European unity. The great project that some hoped would eventually create a European superstate faces the biggest challenge of its 65-year history on Sunday, when Greeks vote in a referendum that could decide whether they crash out of the eurozone—and shift the continent’s destiny. The European Union, whose precursor brought the region’s nations together after World.

• As Mergers Multiply, U.S. Antitrust Cops Raise Their Game. Corporate deal making is at an eight-year high at the same time the Obama administration’s antitrust enforcers are on their strongest footing ever, setting up a tug-of-war over industry consolidation.

• Prominent Obama Fundraiser Joins Effort to Press Biden to Run in 2016. A prominent Obama fundraiser who says a Joe Biden presidential campaign is a “strong possibility” has signed on to the independent group working to nudge the vice president into the 2016 race.

• Hillary’s Email Story Unravels. Now that we know she edited the emails before turning them over, the entire record is suspect. Clinton scandals have a way of bumping and rolling along to a point where nobody can remember why there was any outrage to begin with. So in the interest of clarity, let’s take the latest news in the Hillary email escapade, and distill it into its basic pieces: • Nothing Mrs. Clinton has said so far on the subject is correct. The Democratic presidential aspirant on March 10 held a press conference pitched as her first and last word on the revelation that she’d used a private email server while secretary of state. She...

Fox News:

• IT boss ‘blown away’ that IRS backup tapes in Lerner case erased, watchdog says. (video) The chief technology officer at the IRS was "blown away" after learning backup tapes that likely contained messages to and from controversial ex-official Lois Lerner were destroyed, according to an internal government watchdog report.

CNBC:

• Greece latest: IMF fuels tensions with $66BN aid call. Stay tuned for more analysis on Greece as the country heads towards a referendum on Sunday, with tensions running even higher after an International Monetary Fund (IMF) report said the country needed 60 billion euros in additional aid. The IMF also said Greece would need comprehensive debt relief. The report sparked another defiant message from Prime Minister Alexis Tsipras, who used a television interview to urge Greeks to vote against the lenders' most recent offer.

ZeroHedge:

• Did The IMF Just Open Pandora's Box?

• Chinese Government "Losing Control": Stocks Are Collapsing, Hitting New Bear Market Lows. (graph)

• Government Trolls Are Using "Psychology-Based Influence Techniques" On YouTube, Facebook And Twitter.

• Trading Stocks - It's Easier Than Farmwork... And Porn. (video)

• JPMorgan(JPM) Banker: "We Can't Make Money Anymore..."

• "There Are Obvious Signs Of Distress" In The Manufacturing Industry. (graph)

• NSA Leak Reveals Both Merkel And Schauble Saw Greek Debt As Unsustainable Even After Haircut.

• "It Could Never Happen Here" - America Is Not Greece. (cartoon)

• Plunge In Export Prices Is Now Worse Than The Great Financial Crisis. (graph)

• Jobs Jolt Sparks Bond Bid; Stocks Skid As "Day Of Greckoning" Looms. (graph)

Business Insider:

• Greece's largest industry is suddenly in shambles.

• Foreign brands are struggling in China.

• The enormous ISIS attack in Egypt is a game-changer.

• Here comes another mega-merger: Aetna and Humana are reportedly close to a multi-billion deal.

• Obama's counterterrorism policy is facing mounting criticism. 

• In New York City and Chicago, the smart city is here — and it's keeping track of everything. (video)

• Study says if you're driving an electric car on the East Coast, you're probably polluting more than your gas-guzzling neighbor.

• The South China Sea is now a 'core interest' of Beijing — and that's a problem for its neighbors.

NY Times:

• White House Orders Review of Rules for Genetically Modified Crops. The Obama administration said on Thursday that it would update the way the government regulated genetically modified crops and some other biotechnology products, saying that the nearly 30-year-old system had become outdated and confusing and did not foster public confidence.

Reuters:

• U.S. probe sees no links among black church fires in South. Federal law enforcement officials have found no links among any of several recent fires at African American churches in the U.S. South and have determined that two were started by natural causes and one was due to an electrical fire. "All of the fires remain under active investigation and federal law enforcement continues to work to determine the cause of all of the fires," Justice Department spokeswoman Melanie Newman said in a statement. "To date the investigations have not revealed any potential links between the fires."
  
  According to an opinion poll conducted for Efimerida ton Syntakton newspaper between Saturday and Tuesday, 54% of surveyed Greeks are planning to vote "no" with33% planning to vote "yes."
  The poll conducted by the ProRata institute also showed that 86% of those surveyed planned to vote on Sunday.
  - See more at: http://wbponline.com/Articles/View/49857/oxi-no-leads-in-polls-before-sunday-vote-in-greece#sthash.nuL4mSxl.dpuf
  'Oxi' (No) Leads in Polls Before Sunday Vote in Greece - See more at: http://wbponline.com/Articles/View/49857/oxi-no-leads-in-polls-before-sunday-vote-in-greece#sthash.nuL4mSxl.dpuf

The Straits Times:

• China futures exchange temporarily suspends 19 accounts from short-selling: Sources. China Financial Futures Exchange (CFFEX) has suspended 19 accounts from short-selling for one month, sources with direct knowledge said on Friday. The move came after China's securities market regulator launched an investigation into suspected market manipulation, citing evidence from the CFFEX and stock exchanges. The stock market has slumped more than 20 per cent since mid-June.

Night Trading

• Asian equity indices are -1.5% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 110.0 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 58.5 -.5 basis point.

• S&P 500 futures +.03%.

• NASDAQ 100 futures -.01%.

Morning Preview Links

BOTTOM LINE:  US equity markets are closed for Independence Day.

Market Week in Review

• S&P 500 2,076.78 -1.21%*

The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 2,076.78 -1.21%

• DJIA 17,730.11 -.90%

• NASDAQ 5,009.21 -2.01%

• Russell 2000 1,248.26 -2.73%

• S&P 500 High Beta 33.46 -2.79%

• Goldman 50 Most Shorted 141.25 -4.99% 

• Wilshire 5000 21,746.23 -1.37%

• Russell 1000 Growth 998.99 -1.24%

• Russell 1000 Value 1,015.02 -1.24%

• S&P 500 Consumer Staples 494.86 -.37%

• Solactive US Cyclical 131.46 -2.28%

• Morgan Stanley Technology 1,015.18 -2.78%

• Transports 8,122.50 -1.42%

• Utilities 561.13 +1.55%

• Bloomberg European Bank/Financial Services 117.12 -2.94%

• MSCI Emerging Markets 40.01 -.55%

• HFRX Equity Hedge 1,209.85 -1.69%
• HFRX Equity Market Neutral 994.63 +.26%

Sentiment/Internals

• NYSE Cumulative A/D Line 234,277 -.72%

• Bloomberg New Highs-Lows Index -258 -438

• Bloomberg Crude Oil % Bulls 21.21 +8.71%

• CFTC Oil Net Speculative Position 327,433 +.09%
• CFTC Oil Total Open Interest 1,650,025 -.12%

• Total Put/Call 1.02 -5.56%

• OEX Put/Call .38 -69.35%

• ISE Sentiment 83.0 -7.78%

• NYSE Arms 1.12 -10.40%

• Volatility(VIX) 16.79 +19.84%

• S&P 500 Implied Correlation 61.30 -.16%

• G7 Currency Volatility (VXY) 9.81 +3.15%

• Emerging Markets Currency Volatility (EM-VXY) 8.86 +2.67%

• Smart Money Flow Index 16,846.51 -2.45%

• ICI Money Mkt Mutual Fund Assets $2.615 Trillion +.5%
• ICI US Equity Weekly Net New Cash Flow -$3.463 Billion

• AAII % Bulls 22.6 -36.4%
• AAII % Bears 35.1 +61.9%

Futures Spot Prices

• CRB Index 224.55 +.09%

• Crude Oil 56.58 -5.23%

• Reformulated Gasoline 202.49 +.44%

• Natural Gas 2.84 +2.94%

• Heating Oil 183.34 -1.55%

• Gold 1,165.0 -.79%

• Bloomberg Base Metals Index 162.75 +.25%

• Copper 263.10 -.68%

• US No. 1 Heavy Melt Scrap Steel 249.33 USD/Ton unch.
• China Iron Ore Spot 55.63 USD/Ton -10.3%

• Lumber 285.70 -2.43%

• UBS-Bloomberg Agriculture 1,166.91 +5.55%

Economy

• ECRI Weekly Leading Economic Index Growth Rate 1.4% +20.0 basis points

• Philly Fed ADS Real-Time Business Conditions Index -.1537 +3.63%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 125.62 +.12%

• Citi US Economic Surprise Index -25.1 +5.5 points

• Citi Eurozone Economic Surprise Index -4.4 -11.8 points

• Citi Emerging Markets Economic Surprise Index -18.6 +2.3 points

• Fed Fund Futures imply 54.0% chance of no change, 46.0% chance of 25 basis point cut on 7/29

• US Dollar Index 96.11 +.94%

• Euro/Yen Carry Return Index 142.55 -1.52%

• Yield Curve 176.0 -1.0 basis point

• 10-Year US Treasury Yield 2.38% -9.0 basis points

• Federal Reserve's Balance Sheet $4.441 Trillion -.36%

• U.S. Sovereign Debt Credit Default Swap 17.02 +4.14%

• Illinois Municipal Debt Credit Default Swap 228.0 +5.35%

• Western Europe Sovereign Debt Credit Default Swap Index 26.15 +14.89%

• Asia Pacific Sovereign Debt Credit Default Swap Index 59.11 +2.96%
  

• Emerging Markets Sovereign Debt CDS Index 312.11 +2.83%
  

• Israel Sovereign Debt Credit Default Swap 65.09 +.49%

• Iraq Sovereign Debt Credit Default Swap 687.39 +4.67%

• Russia Sovereign Debt Credit Default Swap 330.87 +1.09%

• iBoxx Offshore RMB China Corporates High Yield Index 120.76 -.04%

• 10-Year TIPS Spread 1.92% -2.0 basis points

• TED Spread 27.25 -.75 basis point

• 2-Year Swap Spread 26.0 +2.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap 20.75 -.25 basis point

• N. America Investment Grade Credit Default Swap Index 68.19 +3.37%

• America Energy Sector High-Yield Credit Default Swap Index 1,194.0 +11.0%

• European Financial Sector Credit Default Swap Index 89.43 +15.9%
  

• Emerging Markets Credit Default Swap Index 302.10 +.19%
  

• CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 90.50 +2.0 basis points

• M1 Money Supply $3.030 Trillion +1.01%

• Commercial Paper Outstanding 952.30 -2.9%

• 4-Week Moving Average of Jobless Claims 274,750 +1,000

• Continuing Claims Unemployment Rate 1.7% unch.

• Average 30-Year Mortgage Rate 4.08% +6 basis points
• Weekly Mortgage Applications 366.50 -4.68%

• Bloomberg Consumer Comfort 44.0 +1.4 points

• Weekly Retail Sales +1.40% +10.0 basis points

• Nationwide Gas $2.77/gallon -.01/gallon

• Baltic Dry Index 794.0 -4.22%

• China (Export) Containerized Freight Index 811.09 n/a

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 32.50 -13.33%
• Rail Freight Carloads 275,564 -.49%

Best Performing Style

• Large-Cap Value -1.4%

Worst Performing Style

• Small-Cap Growth -3.0%

Leading Sectors

• Gaming +3.3%

• Hospitals +1.9%

• Utilities +1.3%

• Tobacco +1.3%

• Agriculture +.6%

Lagging Sectors

• Airlines -5.0% 

• Steel -6.2%

• Coal -6.3%

• Alt Energy -6.6%

• Disk Drives -6.9%

Weekly High-Volume Stock Gainers (37)

• CB, BSET, LJPC, THC, ASMB, PRTO, CYH, CACC, LPNT, LPG, NNBR, HRTG, CFI, UHS, CHRS, IBP, HCA, AVAV, IPI, TRR, DERM, GRBK, MYRG, GNCA, JUNO, CBMG, PETX, NGHC, UBSI, CARA, ACHC, ED, XNCR, LNN, STRZA, CLGX and STL

Weekly High-Volume Stock Losers (60)

• GEF, UE, PDVW, CY, LADR, CVTI, HYH, TDW, ATI, UIL, EVDY, FANG, KN, DWA, RYAM, SYY, SMTC, CBPX, CTL, SEMI, CXO, NSM, CNCE, CCC, COUP, ROVI, DV, VTAE, VCYT, VSAR, CRS, TECD, CBT, VICR, TW, TMST, NKTR, COLL, UNT, KATE, NVIV, RELY, TAL, SNX, CSII, IMDZ, APOG, PARR, ADRO, UPL, SPNC, HIFR, CREE, TUES, MU, LIFE, APOL, WRLD, AMBC and MEI

Weekly Charts

ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change

Stocks Reversing Lower into Afternoon on China Bubble-Bursting Fears, Greece Bailout Referendum Concerns, Global Growth Worries, Financial/Retail Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 17.05 +5.97%

• Euro/Yen Carry Return Index 142.55 +.15%

• Emerging Markets Currency Volatility(VXY) 8.86 -.67%

• S&P 500 Implied Correlation 61.75 +2.37%

• ISE Sentiment Index 62.0 -11.4%

• Total Put/Call 1.0 -11.5%

• NYSE Arms 1.06 -16.27% 

Credit Investor Angst:

• North American Investment Grade CDS Index 68.45 +.03%

• America Energy Sector High-Yield CDS Index 1,225.0 +.84%

• European Financial Sector CDS Index 89.43 +2.22%

• Western Europe Sovereign Debt CDS Index 25.49 -2.56%

• Asia Pacific Sovereign Debt CDS Index 58.42 -1.17%

• Emerging Market CDS Index 301.89 -1.04%
  

• iBoxx Offshore RMB China Corporates High Yield Index 120.76 +.06%

• 2-Year Swap Spread 26.0 +1.5 basis points

• TED Spread 27.25 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -20.75 unch.

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.

• Yield Curve 175.0 +2.0 basis points

• China Import Iron Ore Spot $55.63/Metric Tonne -6.03%

• Citi US Economic Surprise Index -25.10 -1.0 point

• Citi Eurozone Economic Surprise Index -4.4 +.5 point

• Citi Emerging Markets Economic Surprise Index -18.60 +2.8 points

• 10-Year TIPS Spread 1.92 +1.0 basis point

Overseas Futures:

• Nikkei 225 Futures: Indicating -12 open in Japan 
• China A50 Futures: Indicating -329 open in China

• DAX Futures: Indicating -5 open in Germany

Portfolio: 

• Slightly Lower: On losses in my retail/medical sector longs and emerging markets shorts

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg: 

• Greece Needs $40 Billion in New Euro-Area Financing, IMF Says. Greece needs at least another 36 billion euros ($40 billion) over the next three years from euro-area states and easier terms on existing debt to keep the nation’s finances sustainable, according to an International Monetary Fund analysis. Even if Greece delivers on reforms proposed by its international creditors, euro countries will have to come up with new financing and ease the nation’s debt load through steps such as doubling maturities on existing loans, according to a June 26 “preliminary draft” debt-sustainability analysis released Thursday.

• Defiant Varoufakis Says He’ll Quit If Greeks Endorse Austerity. Yanis Varoufakis said Greece won’t “extend and pretend” that it can pay its debts, vowing to quit as finance minister if voters don’t support the government in Sunday’s referendum. With banks shut and the economy hobbled by capital controls, Varoufakis said in a Bloomberg Television interview in Athens that he would “rather cut my arm off” than sign a deal that fails to restructure Greece’s debt. 

• Merkel Said to Brace for Greece Turmoil Whichever Way Vote Goes. German Chancellor Angela Merkel’s government is bracing for a protracted phase of political turmoil in Greece followed by tortuous negotiations even if Greeks vote for further austerity on Sunday, according to two people involved in policy making in Berlin. A quick solution to the crisis in Greece isn’t in sight because European rules mean any new negotiations on financial help would be more complex than to date, one of the officials said. The backing of German lawmakers is required even just to restart aid talks, inserting additional uncertainty at a time when trust in Greek intentions is at a low, the second official said. Both asked not to be named discussing government deliberations.

• Greek Referendum on Bailout Too Close to Call, Poll Shows. The battle lines are drawn in Greece. Now the politicians are waiting for the people. A GPO poll cited by euro2day.gr said 47 percent leaned toward a “yes” vote, an endorsement of austerity and the international bailout. The “no” camp, the government’s position rejecting those terms, was 43 percent. The margin of error in the survey of 1,000 people was 3.1 percentage points. 

• Here's the Grim Future That Awaits Greece's Babies Born in the Crisis. Greek children face a very different fate than their German counterparts, economic forecasts show.

• Shanghai Composite Tumbles Below 4,000 as State Support Fails. China’s Shanghai Composite Index fell below the 4,000 level for the first time since April, as margin traders continued to unwind positions amid doubts over the effectiveness of government measures to support equities. The benchmark stock index slumped 3.5 percent to 3,912.77 at the close. The gauge has tumbled 24 percent from its June 12 peak, helping wipe out at least $2.4 trillion of value. Fifteen stocks dropped for each one that rose Thursday, with industrial, power and commodity shares leading losses. The drop below 4,000 is a blow to investors who had speculated authorities would intervene to support shares, a strategy employed near closely watched levels in the past.

• China to Individual Investors: Go Ahead, Bet the House on Stocks. In China, you can now literally bet the house on the nation’s tumultuous stock market. Under new rules announced Wednesday by the country’s securities regulator, real estate has become an acceptable form of collateral for Chinese margin traders, who borrow money from securities firms to amplify their wagers on equities. That means if share prices fall enough, individual investors who pledge their homes could be at risk of losing them to a broker. While the rule change was intended to help revive confidence in China’s $7.7 trillion stock market after a 24 percent slump in less than three weeks, analysts say securities firms may be reluctant to follow through. Accepting real estate as collateral would tether brokerages to another troubled sector of the economy, adding to risk-management challenges as they try to navigate the world’s most-volatile stock market. “It does come across as relatively desperate,” said Wei Hou, an analyst at Sanford C. Bernstein & Co. in Hong Kong. “Globally, illiquid assets such as real estate are not accepted as collateral as they are very hard to liquidate.”

• Three Seconds Has Become an Eternity in the Chinese Stock Market. Lack of continuous pricing prevents investors from using strategies that rely on speed and precision, a hurdle that’s gotten even bigger in recent weeks as volatility in Chinese shares climbed to the most extreme levels worldwide.

• Chinese Stocks Just Lost 10 Times Greece's GDP. "What happens in China will turn out to be far more consequential than any sting that Greece may deliver," says HSBC's Neumann. As China's equity markets lose their roar, the risk is that demand more broadly on the Mainland could take a hit. That would knock out an essential engine of world demand over the past decade. As dramatic as events in Greece currently appear, however, ultimately, it's difficult to see these proving decisive for the world economy.''  

• U.S. Sees Islamic State Casting Wide Net to Catch Young Recruits. How is Islamic State different from al-Qaeda? According to the U.S. Department of Justice, one answer lies in a much more relaxed attitude to recruitment and targets. Al-Qaeda exercises tight control of its membership and focuses on carefully planned large-scale “spectacular” attacks, Assistant Attorney General John Carlin told reporters in London Wednesday. 

• European Stocks Drop Amid Greek Crisis With Automakers Falling. European stocks declined for the third time in four days, as investors awaited a Greek referendum on creditors’ proposals this weekend. The Stoxx Europe 600 Index lost 0.4 percent to 385.46 at the close in London, after rising as much as 0.3 percent in the morning.

• Shale Drillers' Safety Net Is Vanishing. The insurance protecting shale drillers against plummeting prices has become so crucial that for one company, SandRidge Energy Inc., payments from the hedges accounted for a stunning 64 percent of first-quarter revenue. Now the safety net is going away. The insurance that producers bought before the collapse in oil -- much of which guaranteed minimum prices of $90 a barrel or more -- is expiring. As they do, investors are left to wonder how these companies will make up the $3.7 billion the hedges earned them in the first quarter after crude sunk below $60 from a peak of $107 in mid-2014. 

• Iron Exports From Australia’s Port Hedland Expand to Record. Iron ore exports from Australia’s Port Hedland climbed to an all-time high in June as mining companies in the world’s largest shipper increased low-cost supplies. Prices tumbled the most in a year. Total shipments jumped 14 percent to 38.4 million tons last month from a year earlier, the Pilbara Ports Authority said on Thursday. That exceeded the previous record of 38 million tons in May, according to port authority data compiled by Bloomberg. Exports to China were 32.6 million tons, also a record.

• September Fed Liftoff Stays in Play Even as Pay Gains Disappoint. Thursday’s jobs report probably keeps Federal Reserve officials on course to raise rates as soon as September, economists said, although the lack of wage pressure may damp their confidence in the outlook for higher inflation. “The Fed would very much like to raise interest rates in September, and we think they will, but it is far from a sure thing,” said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. 

• Janus’s Gross Says Economic Cycle Driven by ‘Artificial Rates’. Bill Gross, manager of the $1.5 billion Janus Global Unconstrained Bond Fund, said the U.S. economic cycle is weak and driven primarily by “monetary stimulation” and “artificial interest rates.” Gross, in an interview with Bloomberg Radio, said the current economic environment has the potential to create asset bubbles that may ultimately pop, and the Federal Reserve will have to weigh that, along with employment and inflation data, when it decides whether to raise rates. Although Fed Chair Janet Yellen and Vice Chair Stanley Fischer are “neo-classically demand-driven economists, the ground underneath them is shifting to more monetary, liquidity, financial conditions focus,” Gross said. He added that rates could rise in September. 

• Hedge Funds Had a Really Bad Day This Week. Huge drawdowns after the referendum news. On Monday, as the deteriorating situation in Greece dominated the headlines and roiled markets, some of the world's most prominent hedge funds experienced their largest "drawdown" since August 2007, according to Barclays analyst Keith Parker. Why the big move on Monday? As Parker puts it, it seems a lot of these hedge funds have long positions in peripheral euro-zone bonds. Greek government bond yields jumped sharply on Monday, as markets digested the news of a surprise referendum. The below shows the correlation between the one-month return of macro hedge funds and various asset classes. You can see hedge fund returns are moving more in tandem with Italian government bonds than they are with the euro or oil, for instance.

• Hedge Funds Decline in June as Stocks Tumble on Greek Woes. Hedge funds posted losses across strategies last month as uncertainty over whether Greece will remain in the euro sent global stock markets tumbling. Winton Capital Management declined about 3.1 percent in June in its $12.1 billion Winton Futures Fund, leaving it down 1.9 percent this year, according to a letter sent to investors, a copy of which was obtained by Bloomberg News. David Einhorn’s main hedge fund at Greenlight Capital fell 4.3 percent in the month, bringing year-to-date losses to 3 percent. Hedge funds on average fell 1.2 percent last month, curbing year-to-date profits to 1.3 percent, according to the HFRX Global Hedge Fund Index.

Wall Street Journal:

• Hilsenrath Analysis: Jobs Report Keeps Fed on Track for 2015 Rate Increase. The Labor Department‘s June employment report, released Thursday, broadly confirmed the Federal Reserve‘s narrative about how the U.S. economic expansion is unfolding in 2015, keeping the central bank on track to raise short-term interest rates later this year, barring some new setback.

• Trader Fights the Market Tide in Shanghai. Ye Fei’s flagship fund was up 388% for the year when the Shanghai market peaked June 12. As the Shanghai Composite slid a further 5% Wednesday, China’s best-performing fund manager fought to save his clients’ investments from a laptop in a basic hotel room. Ye Fei rode the boom beautifully. As of June 12, when the Shanghai Composite Index hit its recent peak, his flagship Yi Tian Ya Li fund was up 388% for the year, making it the top performer among 1,664 “private securities-investment funds” tracked by...

• BP Agrees to Pay $18.7 Billion to Settle Deepwater Horizon Oil Spill Claims. Settlement includes all federal and state claims.

• Anthem(ANTM), Cigna(CI) Rekindle Merger Talks. Cigna also continues to pursue possible takeover of Humana(HUM).

MarketWatch.com: 

• 30-year mortgage rate rises to 4.08%, highest since October. 

• Spain is trying to avoid being Europe’s next debt bomb. But the economy is still shaky and politics are simmering. “We’re at a strong phase of the [economic] cycle here, but cycles aren’t always going to be the same. In fact they’re running a quite large deficit at a strong moment in the cycle,” Hugh said. “How long it is or how it’s all going to work out in the medium term, we don’t know because we haven’t been here before.”

• 3 things to know about Puerto Rico’s debt crisis.

Fox News: 

• US reportedly blocks Arab allies' attempts to deliver weapons to Kurds fighting ISIS. (video) The U.S. has reportedly blocked any attempts by Middle East allies to fly weapons to the Kurds fighting the Islamic State in Iraq. The Telegraph reports that U.S. allies say President Obama and other Western leaders, including Britain’s David Cameron, aren’t showing leadership over the escalating ISIS crisis in Iraq, Syria and throughout the Middle East.

ZeroHedge:

• IMF Bolsters Greek "No" Vote, Says Country Needs Debt Haircut.

• Finally The Truth: "The Greek Debt Is So Big Everyone Understands It Won’t Be Repaid". (graph)

• Crude Slides After US Oil Rig Count Rises For First Time Since December. (graph)

• The Last Time This Happened In Credit, Bernanke Unleashed QE3. (graph)

• Americans Not In The Labor Force Soar By 640,000 To Record 93.6 Million; Participation Rate Drops To 1977 Levels. (graph)

• Since 2007 The US Has Lost 1.4 Million Manufacturers, Gained 1.4 Million Waiters And Bartenders. (graph)

• Factory Orders Scream Recession: Annual Drop Biggest Since 2008. (graph)

• Part-Time Jobs Surge By 161,000; Full-Time Jobs Tumble By 349,000. (graph)

• June Payrolls Increase By 223K, Less Than Expected; Unemployment Rate Drops To 5.3%. (graph)

• The Coming Era Of Pension Poverty. (graph)

Business Insider:

• This poll is absolutely brutal for Chris Christie.

• Analysts say Tesla(TSLA) shares are too expensive, raise their price target 177%.

• June had more IPOs than any month since August 2000. (graph)

• Russia is challenging Nordic countries along their borders.

• A Greek politician told us Grexit will '100%' happen if 'No' wins on Sunday — and plans are already being made.

Washington Post:

• In China, hostile foreign forces blamed for bursting stock market bubble. “Believe in my country,” Cao Zenghui, deputy general manager of Sina Weibo, whose company runs China’s main microblogging service and who personally has more than 100,000 followers, posting a national flag as his profile image. “It is not just a stock market issue any more. I will fight with forces who short China’s economy. No eggs can remain unbroken when the nest is upset.”

Politico:

• Soros helps pro-Clinton Super PACs to $20 million haul. A trio of pro-Hillary Clinton groups raised more than $20 million in the first half of the year, including at least $1 million from billionaire financier George Soros, POLITICO has learned.

Financial Times: 

• Chinese relaxation of lending rules fails to support flagging stocks. China Securities Regulatory Commission moved late on Wednesday to relax collateral rules on margin loans. But that failed to staunch market losses on Thursday, with the Shanghai Composite Index closing down 3.5 per cent and the Shenzhen stock exchange finishing the day down 5.6 per cent. The move to loosen rules on margin finance — using borrowed money to trade shares — represents something of a climbdown by the regulator, which had previously tried to curb leveraged bets.

Telegraph:

• Greece crisis live: IMF says Greece needs €50bn bail-out as Varoufakis says he will resign if there is a "yes" vote. An estimated €8bn has been withdrawn from banks in the last two weeks, as capital controls begin to take their toll.

EKathimerini:

• Greece May See Some Foods Shortages By Next Week. Shortages of commodities of broad consumption such as imported meat, beans, rice will start to be felt next week, citing people from the retail commerce sector.
  
  According to an opinion poll conducted for Efimerida ton Syntakton newspaper between Saturday and Tuesday, 54% of surveyed Greeks are planning to vote "no" with33% planning to vote "yes."
  The poll conducted by the ProRata institute also showed that 86% of those surveyed planned to vote on Sunday.
  - See more at: http://wbponline.com/Articles/View/49857/oxi-no-leads-in-polls-before-sunday-vote-in-greece#sthash.nuL4mSxl.dpuf
  'Oxi' (No) Leads in Polls Before Sunday Vote in Greece - See more at: http://wbponline.com/Articles/View/49857/oxi-no-leads-in-polls-before-sunday-vote-in-greece#sthash.nuL4mSxl.dpuf

CNA:

• Greek Shipowners Consider Moving HQs to Cyprus. Greek shipowners, ship management companies are considering moving their HQs to Cyprus given strong economic uncertainty in Greece.