Bear Radar

Style Underperformer:

• Small-Cap Growth -1.62%

Sector Underperformers:

• 1) Oil Tankers -5.01% 2) Gaming -4.75% 3) Alt Energy -3.45%

Stocks Falling on Unusual Volume:

• SEP, KTWO, FCAM, CLM, PRFT, EPC, TGH, AOS, DL, EFOI, CAF, CBPO, ALV, DQ, SOHU, VXUS, TTM, ST, NVRO, CNW, NOAH, CHU, BCPC, DEPO, NAV, YUM, CMA, GDDY, IBKR, COMM, TSLA, SYNT, SWKS, GM, BWA, LEA, TEN, NVRO, INVN, DK, MGM, THRM and NHTC

Stocks With Unusual Put Option Activity:

• 1) EWH 2) EWC 3) EWJ 4) XHB 5) SCHW
  

Stocks With Most Negative News Mentions:

• 1) HOG 2) TSLA 3) MXIM 4) M 5) SCHW
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Value -1.22%

Sector Outperformers:

• 1) Gold & Silver +.06% 2) Utilities -.50% 3) REITs -.64%
  

Stocks Rising on Unusual Volume:

• RPTP and QUNR

Stocks With Unusual Call Option Activity:

• 1) PEP 2) FTR 3) RPTP 4) CONN 5) TAP
  

Stocks With Most Positive News Mentions:

• 1) ALGT 2) BBW 3) RTN 4) SSS 5) GSBC
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 12.8% Above 100-day average
• 0 Sectors Rising, 10 Sectors Declining
• 19.8% of Issues Advancing, 77.8% Declining
• 11 New 52-Week Highs, 106 New Lows
• 43.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.3
• Vix 17.9
• Total Put/Call 1.40
• TRIN/Arms 1.79

Wednesday Watch

Evening Headlines 

Bloomberg:  

• China Freezes Trading in 1,300 Companies, Locking Up 40% of Market Cap. A wave of Chinese companies halted trading in their shares and regulators unveiled new measures to prop up the value of small-cap stocks in the latest attempts to stem a rout that’s wiped more than $3.5 trillion of value. At least 1,301 companies have halted trading on mainland Chinese exchanges, locking up $2.6 trillion of shares, or about 40 percent of the market’s capitalization. The central bank said Wednesday it will provide “ample liquidity” to the stock market, while China Securities Finance Corp. was said to seek more than 500 billion yuan ($80.5 billion), according to people familiar with the matter. The China Financial Futures Exchange raised margin requirements for sell orders on CSI 500 index futures.

• China’s $3 Trillion Stocks Rout Puts Car Sales in ‘Meat Grinder’. Automakers in China are finding themselves in a “lose-lose situation” after a world-beating stock-market boom that diverted funds away from purchases turned into a bust, further denting demand in the world’s largest car market. An increasing number of car buyers in China are canceling their purchases and risking forfeiture of their down payments after a stock-market rout that has erased about $3.2 trillion in value, according to Cui Dongshu, secretary-general of China’s Passenger Car Association. “The plunging stock market is essentially a meat grinder, shredding money meant for buying cars,” Cui said in a phone interview. The association is scheduled to release monthly sales data Wednesday, with Cui describing the results as the “worst June ever” with all car categories badly hit.

• Holding Chinese Brokerages’ Bonds Is Risky Business Amid Rout. Investors are demanding ever steeper yield premiums to hold the offshore bonds of some Chinese brokerages as Moody’s Investors Service warns about the risks of relaxing margin financing rules. The extra spread over Treasuries on Haitong Securities Co.’s $670 million of 3.5 percent notes due 2020 soared to a record 227 basis points Monday, the most since they were sold in April, Bloomberg-compiled prices show. The spread on Citic Securities Co.’s $800 million of 2.5 percent debentures due 2018 registered their worst-ever one month performance. China’s securities firms raised more than $32 billion selling bonds in the second quarter, using the proceeds to help fuel a stunning 468 percent rise in margin lending in the 12 months to June 15, when stocks began to nosedive. Equities have lost more than $3.2 trillion since, prompting authorities to relax lending rules, including allowing real estate as an acceptable form of collateral for traders.

• China Tries Japan's Approach to a Stock Bubble. In any discussion of historical precedents for China's ongoing battle with stock traders, Japan's epic "price-keeping operations" deserve pride of place.

• Greece Must Meet Sunday Deadline to Reform or Face Euro Exit. European leaders set a Sunday deadline for Greece to accept a rescue, saying otherwise they’ll take the unprecedented step of propelling the country out of the euro. At a Brussels summit, Greece’s anti-austerity government was ordered to make new economic reform proposals that could earn it another aid package and head off financial ruin. “We have only a few days left to find a solution,” German Chancellor Angela Merkel told reporters late Tuesday after euro-area leaders met in Brussels. She conceded that she is “not especially optimistic.” Sunday now looms as the climax of a five-year battle to contain Greece’s debts, potentially splintering a currency that was meant to be unbreakable and throwing more than half a century of European economic and political integration into reverse. 

• EU Commission Has Grexit Scenario Prepared, Juncker Says. (video) Greece’s creditors have prepared a blueprint to remove the indebted nation from the the 19-nation euro, an unprecedented move after failing for five months to agree on an aid bailout. “The commission is prepared for everything,” European Commission President Jean-Claude Juncker said after a meeting of euro-area leaders in Brussels. “We have a Grexit scenario, prepared in detail.”

• Gundlach Sees Greek Euro Exit Opening ‘Pandora’s Box’. Greece’s likely exit from the euro currency group “opens Pandora’s box” by setting a precedent that makes membership porous, according to Jeffrey Gundlach, co-founder of DoubleLine Capital. Greece will exit the euro currency area in “slow motion,” which should be positive in the short run for the currency since it removes an economic drag, Gundlach said on a wide-ranging webcast on Tuesday from Los Angeles. But that would raise questions about whether other members of the bloc may eventually leave, he said. “There’s never one cockroach.” The five-year-old DoubleLine Core Fixed Income Fund has returned 1.4 percent this year, beating 95 percent of comparable funds, according to data compiled by Bloomberg. Over the past five years, the $4.4 billion fund has beaten 97 percent of peers. The firm’s $46.6 billion Total Return Bond Fund has also returned 1.4 percent this year, beating 77 percent of peers. Over five years, it’s returned 6.8 percent, outpacing 99 percent of rivals.  

• Bull Herd Is Culled in Europe as JPMorgan Says Fear the Selloff. A crack has formed in what had been a consensus of confidence among European stock strategists. JPMorgan Chase & Co. told clients this week to hold off on fresh purchases of the shares, reducing its suggested allocation to the equivalent of a hold. In so doing, it became the only brokerage of eight surveyed by Bloomberg News that has anything but a buy on the region’s equities. 

• How a Chaotic Grexit Could Wipe Out $1.4 Trillion in Global M&A. (video) The fallout of a Greek exit from the euro could wipe out as much as $1.4 trillion in future mergers and acquisitions, according to a study by law firm Baker & McKenzie. A disorderly ‘Grexit’ -- where the financial impact spreads unconstrained across global markets -- could stymie about $250 billion of dealmaking next year in Europe, excluding the U.K., according to the study, which is based on financial modeling by Oxford Economics.

• Westpac, ANZ Tighten Investor Mortgage Lending as Prices Surge. Westpac Banking Corp. and Australia & New Zealand Banking Group Ltd. are further tightening lending to investors in residential real estate amid efforts to cool the housing market. Westpac, the largest lender to landlords, said in a statement Wednesday it will lend a maximum of 80 percent of the value of a home to be rented out, down from 95 percent. ANZ Bank said it cut the loan-to-value ratio to 90 percent from 97 percent, and will introduce an interest rate “floor” to ensure borrowers can repay mortgages if borrowing costs rise. The moves follow similar curbs by National Australia Bank Ltd. last month after pressure from the regulator to limit the growth in lending to investors. Home prices have surged 43 percent in Sydney since May 2012 amid record low interest rates, fueling concern of a property bubble in the nation’s largest city. 

• China’s Stocks Plunge as State Intervention Fails to Stop Rout. China’s Shanghai Composite Index plunged amid concern a raft of measures to stabilize equities is failing to stop the bear-market rout as traders unwind margin bets at a record pace. The Shanghai Composite tumbled as much as 8.2 percent, the most since 2007, before paring losses to 4.8 percent to trade at 3,549.92 at 9:56 a.m. local time. There were four gainers among the 1,106 stocks that trade on the benchmark gauge, which has slumped 28 percent since the June peak. PetroChina Co., the biggest stock, tumbled 4.9 percent as nine out of 10 industry gauges dropped at least 4 percent in the CSI 300 Index.

• Asian Stocks Enter Correction Amid China Rout, Greece Crisis. Asian stocks slipped into a correction, with the regional benchmark index falling 10 percent from its April peak, as Chinese shares extended a rout and European leaders gave Greece until Sunday to submit a new set of reforms. Chinese brokerages Huatai Securities Co. and Citic Securities Co. slumped at least 16 percent in Hong Kong, leading losses on the regional benchmark index. Hong Kong Exchanges & Clearing Ltd. dropped 7.8 percent, heading for a record ninth day of decline. Fortescue Metals Group Ltd., Australia’s third-largest iron ore producer, sank 3.6 percent as the raw material used to make steel dropped below $50 a metric ton for the first time since April. The MSCI Asia Pacific Index dropped 2.1 percent to 140.59 as of 11:11 a.m. in Tokyo.

• Iron Ore Sinks Below $50 as Wolfe Sees Risk of Extended Collapse. Iron ore’s bear market deepened, with prices dropping below $50 a metric ton for the first time since April, on concern that low-cost production from Australia and Brazil will expand further while demand stumbles in China. “Supply is now outpacing demand, pointing to renewed price pressure,” said Gordon Johnson, an analyst at Wolfe Research LLC in New York. Iron ore may collapse significantly below the $47-a-ton low that was set earlier this year, he said. Commodities tumbled this week, led by metals, on increased concern that China’s consumption is stalling, and as investors confront the prospect Greece may be ejected from the euro zone. Iron ore’s renewed drop highlights that the same factors of surging supply and weaker demand growth, which dragged prices to the decade-low early April, remain at the forefront. Miners’ shares sank, with Rio Tinto Group at the lowest in two years.

• China’s Peak Steel Demand Threatens to Spark Trade Hostilities. China’s demand for steel has peaked, if the Japanese experience of the 1970s is anything to go by. That could spur more trade conflicts as the nation ships its excess production overseas. The current decline in Chinese steel output signals the growth period for the commodity has ended in a country where the pace of economic expansion is slowing. Risaburo Nezu, a senior research adviser at RIETI, a think-tank linked to Japan’s trade ministry, expects a prolonged slump, with an absence of growth in demand likely for the next 10 or 20 years. 

• Aluminum Bear Market Piles Pressure on World’s Biggest Smelters. The world’s biggest aluminum makers will be under even more pressure to make deeper production cuts and stave off a price slump that saw the metal trade near its lowest level in six years on Tuesday. China, which accounts for half of the world’s aluminum output, is on pace to export record amounts of metal products this year, helping to deepen a worldwide glut. Producers outside China, including Alcoa Inc. and United Co. Rusal, had already cut back capacity through last year. Still, 1 million metric tons more, enough to supply Japan for six months, will probably be curtailed within a year, according to Macquarie Group Ltd.

Wall Street Journal:

• Beijing’s Response to Stock Selloff Reveals Deep Insecurity. All-out push to force up markets comes amid new law to combat ‘dangers’. Far more than simply a market crisis, the turmoil on the Shanghai Stock Exchange is viewed by China’s leadership as a potential security threat to the regime. That helps explain the barrage of measures unleashed by financial authorities to counter a sudden market downturn that threatened to shake public confidence in the.. 

• 5 Things to Watch in the Fed’s June Meeting Minutes.

• China’s Stock Plunge Is Scarier Than Greece. There are four basic signs of a bubble, and the Chinese stock market is on the extreme end of all four. China’s state-sponsored stock-market rally is unraveling, with potentially dangerous consequences. The first major sign that all wasn’t going according to script came on June 15. Chinese had awakened expecting big gains because it was President Xi Jinping’s birthday, but the Shanghai market fell more than 2%. One deeply indebted day trader committed suicide by jumping out a window, his net worth wiped out by the collapse of a single stock that he had borrowed heavily to purchase. The market has since fallen...

• Twilight of the Euro Welfare State? It’s not from charitable impulse that Germany is reluctant to let Greece leave the common currency.

Fox News:

• US Army plans to cut 40,000 troops over next two years. (video) The U.S. Army is planning to cut more than 40,000 troops over the next two years, a senior U.S. defense official confirmed to Fox News Tuesday. General Martin Dempsey announced at a Senate Armed Services Committee Hearing Tuesday that dwindling resources was a major factor in the decision to cut the number of active troops from 490,000 to 450,000.

MarketWatch.com:

• China’s government had no reason to intervene in the stock market. Over the past three weeks, the benchmark index for China’s A-share (yuan-denominated) market has plunged by more than 30%, despite government efforts to break the fall. 

• Copper sinks to 2009 levels as China worries weigh. 

• Container Store(TCS) shares jump after posting smaller-than-expected loss. 

CNBC:

• Why oil could revisit its lows and then some. (video) After another volatile session, oil looks increasingly set to test its lows of the year, and that could mean a temporary decline of near 20 percent. Analysts say crude futures could continue to trade lower for now if the twin pressures on risk markets from Greece and China continue, and Iran succeeds in striking a nuclear deal that would ultimately mean more oil would hit an already oversupplied crude market.

Zero Hedge: 

• China Crashes Most Since 2007 Amid "Panic Sentiment"; Over Half Stocks Suspended, PBOC Promises "Liquidity Support". (graph)

• China Now Risks "Financial Crisis"; Loses Could Be "In The Trillions" BofA Says.

• When Does The Chinese Carnage Stop? (In 3 Charts). (graph)

• The Greferendum Shocker: Tsipras "Intended To Lose" And Is Now "Trapped By His Success".

• Merkel Mocks Greece And The Referendum: There Is Money, But The Deal Is Much Harsher Now (And No Debt Haircut).

• Presenting China's Plunge Protection Playbook. (graph)

• Just One Chart. (graph)

• Europe's Spiralling Game Of Chicken - Politics Always Trumps Economics.

• Cronyism Pays: Eric Holder Triumphantly Returns To Law Firm That Lobbies For Banks.

• Surprise! CEOs Are Getting Rich By Buying Back Stock. (graph)

• Why GM(GM) Is Back Below Its IPO Price - Pictures From GM's China "Parking Lot". (graph)

• Disorderly Collapse - The Endgame Of The Fed's Artificial Suppression Of Defaults. (graph)

• Dow Swings 670 Points In V-Shaped-Hope-Recovery Despite Commodity Carnage. (graph)

Business Insider: 

• 'Events are now spinning out of control' in Greece.

• Iran is winning — and they know it.

• Both Greece and China can 'ignite a global systemic meltdown'.

• It looks like Apple Watch sales are tanking. (graph)

Reuters: 

• Gartner cuts worldwide device shipment growth forecast for 2015. Research firm Gartner Inc said worldwide shipment of devices such as PCs, tablets and smartphones is expected to grow by 1.5 percent to 2.5 billion units this year, slower than the 2.8 percent it forecast earlier. The cut in growth forecast is mainly due to the slowdown in PC purchases in western Europe, Russia and Japan as a stronger dollar pushed up prices, Gartner said on Tuesday.

Telegraph: 

• The really worrying financial crisis is happening in China, not Greece. China looks like it is heading for its version of the 1929 stock market crash. 

• Greece news live: bail-out talks collapse without agreement forcing leaders into emergency weekend summit to resolve Greece's fate. "This is the most critical moment in our history" - EU puts firm deadline as preparations for Grexit and possible humanitarian crisis begin  

• The starkest pictures that show the emotional effect of the Greece debt crisis. (pic)

21st Century Business Herald:

• China Stock Rout Risks Pledged Shares of Listed Companies. Chinese listed companies face increasing pressure to pledge more shares as collateral if market plunge persists as capitalization of 132 listed companies has halved since they pledged shares for funds, citing statistics from financial data provider Wind Info. Almost one-third China listed companies pledged some of their shares for funds this year as of July 7, the report said.

National Business Daily:

• More Than 51% of China-Listed Companies Halted From Trading. More than 51% of 2,776 Shanghai- and Shenzhen-listed companies will suspend trading today based on statements as of 11:20 pm yesterday, citing its calculation.

Evening Recommendations 

Maxim:

• Rated (GES) Buy, target $24.

• Rated (JVA) Buy, target $7.

Night Trading

• Asian equity indices are -2.75% to -.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 118.75 +5.75 basis points.

• Asia Pacific Sovereign CDS Index 61.75 +1.25 basis points.

• S&P 500 futures -.75%.

• NASDAQ 100 futures -.79%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (AA)/.23

• (WDFC)/.76

Economic Releases

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -488,890 barrels versus a +2,386,000 gain the prior week. Gasoline supplies are estimated to fall by -222,220 barrels versus a -1,757,000 barrel decline the prior week. Distillate inventories are estimated to rise by +944,440 barrels versus a +392,000 barrel increase the prior week. Finally, Refinery Utilization is estimated to rise by +.18% versus a +1.0% gain prior.
  

2:00 pm EST

• FOMC Minutes from June 16-17 Meeting.

3:00 pm EST

• Consumer Credit for May is estimated to fall to $18.5B versus $20.541B in April.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Williams speaking, Australia Unemployment report, $21B 10Y T-Note auction, weekly MBA mortgage applications report, Cantor Fitzgerald Healthcare conference and the (UAL) sales performance could also impact trading today.

BOTTOM LINE: Asian indices are sharply lower, weighed down by industrial and technology shares in the region. I expect US stocks to open lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the day.

Stocks Reversing Higher into Final Hour on Greece Debt Deal Hopes, Short-Covering, Lower Long-Term Rates, Gaming/Utility Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 16.7 -1.88%

• Euro/Yen Carry Return Index 140.44 -.87%

• Emerging Markets Currency Volatility(VXY) 9.25 +3.47%

• S&P 500 Implied Correlation 59.63 -3.40%

• ISE Sentiment Index 61.0 -42.45%

• Total Put/Call 1.32 +23.36%

• NYSE Arms .95 -34.91% 

Credit Investor Angst:

• North American Investment Grade CDS Index 71.67 +.41%

• America Energy Sector High-Yield CDS Index 1,268.0 +1.72%

• European Financial Sector CDS Index 100.76 +3.56%

• Western Europe Sovereign Debt CDS Index 31.85 +7.73%

• Asia Pacific Sovereign Debt CDS Index 61.83 +2.14%

• Emerging Market CDS Index 317.08 +1.31%
  

• iBoxx Offshore RMB China Corporates High Yield Index 120.75 -.15%

• 2-Year Swap Spread 25.50 -1.0 basis point

• TED Spread 27.5 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -22.75 unch.

Economic Gauges:

• 3-Month T-Bill Yield .01% +1.0 basis point

• Yield Curve 167.0 -3.0 basis points

• China Import Iron Ore Spot $49.60/Metric Tonne -5.13%

• Citi US Economic Surprise Index -21.5 +2.1 points

• Citi Eurozone Economic Surprise Index -6.7 -.2 point

• Citi Emerging Markets Economic Surprise Index -18.60 -.4 point

• 10-Year TIPS Spread 1.89 -3.0 basis points

Overseas Futures:

• Nikkei 225 Futures: Indicating -6 open in Japan 
• China A50 Futures: Indicating -759 open in China

• DAX Futures: Indicating +157 open in Germany

Portfolio: 

• Higher: On gains in my retail/medical sector longs and emerging markets shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:    

• Chinese Trading Suspensions Freeze $1.4 Trillion of Shares Amid Rout. Chinese companies have found a guaranteed way to prevent investors from selling their shares: suspend trading. Almost 200 stocks halted trading after the close on Monday, bringing the total number of suspensions to 745, or 26 percent of listed firms on mainland exchanges, according to data compiled by Bloomberg. Most of the halts are by companies listed in Shenzhen, which is dominated by smaller businesses. The suspensions have locked up $1.4 trillion of shares, or 21 percent of China’s market capitalization, and are becoming increasingly popular as equity prices tumble. If not for the halts, a 28 percent plunge in the Shanghai Composite Index from its June 12 peak would probably be even deeper. “Their main objective is to prevent share prices from slumping further amid a selling stampede,” said Chen Jiahe, a strategist at Cinda Securities Co.  
• Behind China’s Stocks Bailout: A Need to Salvage New Economy. Who to bail out? And who to let fail? Those are questions policy makers round the world have faced repeatedly in recent years. In China, the leadership’s all-guns-blazing policy response to a stock-market correction shows how its priorities have changed in the campaign to rebalance the world’s No. 2 economy. While rust-belt industries are being allowed to wind down in China’s northeast, officials are micro-managing stock listings and tapping the central bank to arrest a slide in equities. Underlying the effort is concern that, while the old economy drivers languish, the outlook for the new, services and consumption-driven sectors will be damaged by a shock to confidence from tumbling shares. Add to the mix financial stability concerns arising from the leverage used in retail stock purchases, and the case for action became compelling.
• China’s Bubble Burst: Surveillance. (video)
• Greece Clings to Euro Lifeline as Pessimism Clouds Talks. (video) Greece sidestepped an immediate collision with creditors by promising to put its economic proposals in writing as German Chancellor Angela Merkel warned that “only a few days” are left to reach a deal. Euro-area finance chiefs will discuss Greece’s request on a conference call Wednesday morning, the first step toward restarting talks that Greece broke off late last month.
  The rapprochement lessens the risk that the European Central Bank will pull the plug on Greek banks, which are bleeding cash and have been shut for seven business days.
• ECB Adds ‘Moral Hazard’ to Emergency Liquidity Assistance Rules. The European Central Bank warned that “moral hazard” could be a reason to object to the emergency liquidity assistance it allows lenders to access, just a day after it tightened conditions on the aid for Greece. The Eurosystem’s functioning could be disrupted by “provision of ELA at overly generous conditions, which, in turn, could increase the risk of moral hazard on the side of financial institutions or responsible authorities,” the ECB said in a document published on its website Tuesday. “The objective of ELA is to support solvent credit institutions facing temporary liquidity problems. It is not a monetary-policy instrument.” The document on the ECB’s financial-risk management clarifies the conditions surrounding emergency bank aid at a time when policy makers are restricting the provision of such funding to Greek banks. The reference to moral hazard indicates that officials are worried that bending the liquidity rules for Greece, as the country heads for a possible default, may lead future recipients to act less responsibly. 
• Greek Banks Seen Days From Breakdown as Bailout Talks Resume. (video) Greek banks may be facing the end game. The European Central Bank is tightening the credit that’s their only lifeline. Money was pouring out of customer accounts before banks were closed and capital controls imposed a week ago. The prospects of Greece reaching a deal with creditors remain slim after its voters rejected austerity on Sunday. It all adds up to the probability that shareholders, depositors and taxpayers will be tapped to avoid outright failure, according to a person with direct knowledge of discussions on lenders. The crippled financial system poses the greatest threat to Greece remaining in the euro, and the ECB’s cutback in collateral may worsen the banks’ plight.
• China Slump Spreads as Alibaba Sinks, ADRs Approach Bear Market. The rout in Chinese stocks is going global. U.S.-traded Chinese equities extended their plunge to 21 percent from this year’s high as of 10:34 a.m. in New York, approaching a bear market. Alibaba Group Holding Ltd. tumbled to the lowest since its initial public offering, while JD.com Inc. sank a record 9.4 percent. The stocks plunged after the Shanghai Composite Index sank for the fourth time in five days as measures to stabilize the market failed to stop a rout that’s erased more than $3.2 trillion of value in less than a month. “Investors are fleeing anything associated with China, they don’t want to have anything related to China in their portfolio,” Brendan Ahern, chief investment officer at Krane Fund Advisors LLC in New York, said by phone on Tuesday. “Investors are reading the risks around China, and there is a spillover effect in the U.S.-listed stocks.” The Bloomberg US-China Equity Index fell 8.4 percent to 111.14, the steepest drop in four years. The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF, the largest exchange-traded fund tracking mainland shares in the U.S., fell 9.2 percent to $37.53, the lowest since March. Alibaba plunged 4.9 percent to $76.32. JD.com declined to $28.90. 
• European Stocks Inch Toward Correction as Greek Talks Drag on. European stocks extended a four-month low, coming within 0.1 percent of a correction, as Greece attempted to secure a rescue and stay in the euro. The Stoxx Europe 600 Index lost 1.6 percent to 372.74 at the close of trading, reversing gains of as much as 0.4 percent. Italian shares fell the most among western-European markets, with the FTSE MIB Index dropping 3 percent after entering a correction on Monday. Portugal’s PSI 20 Index slid 2.2 percent. “Week by week, we’re seeing markets enter corrections as Greece steps closer to the edge,” said Alessandro Bee, a strategist at Bank J Safra Sarasin, said by phone from Zurich. “We have moments of panic and then take a few days to digest things. I think that will continue as long as the Greek issue drags on.” The Stoxx 600 slid on Monday after Greeks voted against austerity measures in a referendum. The gauge has tumbled 9.98 percent from its April record.
• Iron Tumbles Below $50 as Bear Market Deepens on Supply Outlook. (graph) Iron ore’s bear market deepened, with prices dropping below $50 a ton for the first time since April on concern that low-cost supplies from Australia and Brazil will expand further while demand stumbles in China. Ore with 62 percent content delivered to Qingdao sank 5.1 percent to $49.60 a dry ton on Tuesday, falling for a ninth day, according to Metal Bulletin Ltd. Prices entered a bear market Monday, dropping more than 20 percent from a June high.
• Industrial Metals Drive Commodities Down on China, Greece Woes. Copper tumbled to a six-year low and nickel plummeted the most since 2010 as industrial metals led a plunge in commodities after China’s equity rout and turmoil in Greece eroded prospects for raw-material demand. The Bloomberg Commodity Index of 22 prices fell as much as 2.6 percent to 96.48, the lowest since March 18. Aluminum and lead entered bear markets. Freeport McMoRan Inc., the world’s top publicly listed copper producer, posted the third-biggest drop among companies in the Standard & Poor’s 500 Index of equities. Glencore Plc, the largest commodity trader, slumped to a record in London.
• Refracking Is the New Fracking. The technique itself is nothing new. Oil crews across the world have been schooled on its simple principles for generations: Identify aging, low-output wells and hit them with a blast of sand and water to bolster the flow of crude. The idea originated somewhere in the plains of the American Midwest, back in the 1950s. But as today’s engineers start applying the procedure to the horizontal wells that went up during the fracking boom that swept across U.S. shale fields over the past decade, something more powerful, more financially rewarding is happening. The short life span of these wells, long thought to be perhaps the single biggest weakness of the shale industry, is being stretched out. Early evidence of the effects of restimulation suggests that the fields could actually contain enough reserves to last about 50 years, according to a calculation based on Wood Mackenzie Ltd and ITG Investment Research data.
• Cracks in Junk-Bond Market Form as BofA Sees Outlook Darkening. Junk-bond investors who’ve been enjoying more than six straight years of gains fueled by easy-money policies may soon find their streak nearing an end. After the three strongest years on record for issuance and annual returns of 15 percent since the start of 2009, there are growing signs of trouble in high-yield debt. For every speculative-grade company that has had its credit rating upgraded this year, about two others have been downgraded -- the worst ratio since 2009. U.S. high-yield companies posted two consecutive quarters without earnings growth for the first time since the financial crisis. And their average level of debt-to-earnings is at an all-time high. All of this is creating what Bank of America Corp., the second biggest underwriter of the notes, sees as a grim outlook for investors because companies have left themselves little room for error to withstand an interest rate hike just as the Federal Reserve is considering such a move. “The conditions are the worst since the crisis and therefore outlook is the worst since the crisis,” Michael Contopoulos, the head high-yield strategist at Bank of America, said in a telephone interview. “The longer-term prospects for the asset class are worrying.”

CNBC: 

• Are Greece and China repeating history? Two historical parallels are playing out simultaneously on the world market stage — in Greece and in China. Greece may very well suffer the fate of Germany in the inter-war years, battling depression and hyperinflation at the same time, if it ultimately exits the euro and starts printing drachmas to pay off its heavy debts. China's recent meteoric stock market rise, and 30 percent decline in the last three weeks, resembles Japan in late 1989 and the early 1990s: A meteoric rise fueled by the belief in a superior economic system that, in the end, was just as vulnerable to decline as any other speculative bubble in market history. Neither scenario is pretty.
• Oil rout dashes hopes of reprieve for some drillers. (video)
• Blame China stock slide for oil's plunge: Analyst. (video)

ZeroHedge: 

• Europe Revolts: "What Is Happening Now Is A Defeat For Germany".
• China Bans Use Of Terms “Equity Disaster” And “Rescue The Market". (graph)
• The 'Smart' Money Has Been Dumping Stocks Since Greferendum. (graph)
• It Is NOT Priced-In, Stupid!
• European Equity Losses Accelerate: Does This Look 'Contained' To You? (graph)
• "Unleash The Bullard" - S&P 500 Breaks Below Crucial Support. (graph)
•  Greece "Uncontained" - European Bond Yields Are Soaring; Is Portugal Next? (graph)
• The Three Greek "Scenarios" Discussed Today In Brussels.
• ECB Board Member Says Introduction Of Another Greek Currency "Most Realistic Scenario".
• US Trade Deficit Widens In May As Exports Tumble Most In 3 Months. (graph)
• Energy Credit Risk Re-Surges As WTI Crude Extends Losses To Worst Since November. (graph)

Business Insider:

• This editorial should send chills down the spine of every foreign company in China. When Xinhua publishes an editorial telling foreign companies to "put their victim mentality to rest ... and embrace new rules" on national security that expand China's legal reach "to almost every aspect of public life," you can bet this is coming straight from the top. Here's some more:
• Morgan Stanley(MS) thinks Shake Shack(SHAK) shares are just way too expensive right now — and now the stock is getting crushed.
• Here's what happened during the last 10 US bear markets.
• Russia and Argentina's auto markets have both endured massive collapses.
• The US still doesn't have a strategy that has a chance of defeating ISIS.
• 4 ways that staring at screens all day is destroying kids' minds and bodies.
• Gold and silver are getting crushed. (graph)

Telegraph: 

• Greece news live: Obama intervenes in Greek talks after Athens delegation turn up to summit without new reform proposals. President Obama urges for successful conclusion to Greek talks as EU leaders openly discuss ways to manage a "Grexit". 
• European Central Bank tightens noose on banking system as creditor powers punish Greece. Greek 'No' vote sees lenders act in concert, warning of imminent bankruptcy unless Athens capitulates to fresh reform demands.

news.com.au:

• Chinese chaos worse than Greece. WHILE the world worries about Greece, there’s an even bigger problem closer to home: China. A stock market crash there has seen $3.2 trillion wiped from the value of Chinese shares in just three weeks, triggering an emergency response from the government and warnings of “monstrous” public disorder. And the effects for Australia could be serious, affecting our key commodity exports and sparking the beginning of a period of recession-like conditions. “State-owned newspapers have used their strongest language yet, telling people ‘not to lose their minds’ and ‘not to bury themselves in horror and anxiety’. [Our] positive measures will take time to produce results,” writes IG Markets. “If China does not find support today, the disorder could be monstrous.”

21st Century Business Herald:

• Chinese Stock Suspensions Rise to >1,200. More than 500 China-listed companies apply fr share suspensions, including continuation of suspensions, as of 10:10 pm local time, citing exchange data. In total, >1,200 companies (>40% of listed companies) plan suspensions July 8.