Tuesday Watch

Evening Headlines 

Bloomberg:   

• Greek Bailout Rests on Asset Sale Plan That’s Already Failed. Greece’s last-ditch bailout requires the country to sell 50 billion euros ($55 billion) of assets, an ambition it hasn’t come close to achieving under previous restructuring plans. The government of then-Prime Minister George Papandreou in 2011 set the same financial goal, which it sought to achieve by hawking airports, seaports, and beachside real estate. Since then, such deals have yielded 3.5 billion euros, according to the state privatization authority. Making the asset-sale math work as the economy contracts will be difficult for Greek Prime Minister Alexis Tsipras, who on Monday bowed to demands from European creditors in exchange for a bailout of as much as 86 billion euros that will keep the country in the euro zone. Half the money from asset disposals is already earmarked for the country’s teetering banks. They need the money to rebuild their capital buffers and, without it, may no longer be able to operate.  

• Tsipras Faces Mutiny After Capitulating to Demands. Prime Minister Alexis Tsipras returned to face a mutiny within his coalition after he surrendered to European demands for action to qualify for as much as 86 billion euros ($95 billion) of aid Greece needs to stay in the euro. With two factions in his government already saying they won’t support the deal, Tsipras met with his closest aides as he tries to stop the revolt from spreading before a vote in parliament Wednesday. Creditors’ demands include an overhaul of sales tax, a broadening of the tax base and a clampdown on pension costs.

• Credibility in Chinese Markets Almost Destroyed: Lewis. (video)

• China May Tip World Into Recession: Morgan Stanley. Forget about all the shoes, toys and other exports. China may soon have another thing to offer the world: a recession. That is the prediction from Ruchir Sharma, head of emerging markets at Morgan Stanley Investment Management, who says a continuation of China’s slowdown in the next years may drag global economic growth below 2 percent, a threshold he views as equivalent to a world recession. It would be the first global slump over the past 50 years without the U.S. contracting. “The next global recession will be made by China,” Sharma, who manages more than $25 billion, said in an interview at Bloomberg’s headquarters in New York. “Over the next couple of years, China is likely to be the biggest source of vulnerability for the global economy.” 

• Inflation Is Hitting Japanese Households Hard. Prime Minister Shinzo Abe came to power vowing to drag Japan out of deflation and stagnation. His logic was that rising prices would drive higher salaries and increased consumption. More than two years on, prices are rising, but wages adjusted for inflation have sunk to the lowest since at least 1990. 

• Singapore Economy Contracts Most Since 2012 on Manufacturing. Singapore’s economy contracted more than analysts predicted last quarter, underscoring the weakening outlook for Asian nations amid sluggish global growth. The local dollar weakened to its lowest level in more than a month. Gross domestic product fell an annualized 4.6 percent in the three months through June from the previous quarter, when it expanded a revised 4.2 percent, the trade ministry said in a statement on Tuesday. The median in a Bloomberg News survey was for a 1.5 percent contraction. Growth in global trade has slowed in the last few years after outpacing world expansion for decades, according to the International Monetary Fund. A commodities slump, China’s slowdown and uneven recoveries in the U.S. and Europe have damped the exports that power many Asian economies.

• Asia Stocks Rise, Following U.S. Shares, Amid Relief Over Greece. Asian stocks rose, following gains in U.S. equities, amid optimism over Greece’s bailout agreement. The MSCI Asia Pacific Index gained 0.4 percent to 142.98 as of 9:01 a.m. in Tokyo.

CNBC:

• China's Tsinghua Unigroup plans $23B bid for Micron Technology. China's state-owned Tsinghua Unigroup plans to submit an offer to buy U.S. chipmaker Micron Technology for $21 a share or $23 billion, according to Dow Jones. If the deal goes through, it would be the biggest Chinese takeover of a U.S. company, dwarfing the $7 billion takeover of Smithfield Foods by Shuanghui International in May 2013. 

• Einhorn: Netflix(NFLX) overvalued, soared on 'bad news'.

Zero Hedge:

• Greece Just Lost Control Of Its Banks, And Why Deposit Haircuts Are Imminent.

• Donald Trump: A False Flag Candidate? “In 1987, Trump registered as a Republican in New York. But in 1999, he registered with the Independence Party. In 2001, he registered as a Democrat. In 2009 he was back in with the GOP. “Hillary Rodham Clinton sat in the front row at Trump’s 2005 wedding with Melania Knauss.“ According to Politico, Trump has donated more than $100,000 to the Clinton Foundation.“ In the 2006 cycle, Trump donated $5,000 to the Democratic Senatorial Campaign Committee, $20,000 to the Democratic Congressional Campaign Committee, but only $1,000 to the National Republican Senatorial Committee.“ When Trump flirted with running for president in 2012, CNN reported he had given $541,650 to federal Democratic candidates and committees since 1990 – more than the $429,450 he contributed to GOP candidates and committees.”

• What Assets Did Greece Just Hand Over To Europe: "Airports, Airplanes, Infrastructure And Most Certainly Banks".

• China Big Cap Stocks Continue Slide Despite Another Liquidity Injection; Margin Debt Rises For 2nd Day. (graph)

• Miners Buried In Billions Of Debt After "Colossal Misjudgment Of Demand". (graph)

• Will Chinese Farmers Never Learn? (graph)

• US Automakers Worst Nightmare: Chinese Auto Inventories Explode In May.

• US Equities Soar On Greek "Deal"; Greek Stocks, Euro Plunge. (graph)

Business Insider:

• Here's the reported US concession that could clinch the Iran nuclear deal.

• Boy Scouts committee approves allowing gay adults to serve as leaders.

• China's real problem isn't stocks, it's real estate.

• US companies are expected to report their worst sales decline in nearly six years.

Telegraph:

• Greek deal poisons Europe as backlash mounts against 'neo-colonial servitude'. 'It is now perfectly clear to a lot of people that the only way out of neo-colonial servitude is to break free of monetary union,' said one Syriza rebel. 

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.25% to +1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 108.75 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 59.0 -1.0 basis point.

• S&P 500 futures -.04%.

• NASDAQ 100 futures unch.

Morning Preview Links

Earnings of Note

Company/Estimate

• (AIR)/.21

• (CBSH)/.67

• (FAST)/.46

• (JNJ)/1.69

• (JPM)/1.44

• (WFC)/1.03

• (ADTN)/.11

• (CSX)/.53

• (MRTN)/.30

• (YUM)/.63

Economic Releases

6:00 am EST

• The NFIB Small Business Optimism Index for June is estimated to rise to 98.5 versus 98.3 in May.
  

8:30 am EST

• Retail Sales Advance for June are estimated to rise +.3% versus a +1.2% gain in May.

• Retail Sales Ex Autos for June are estimated to rise +.5% versus a +1.0% gain in May.

• Retail Sales Ex Autos and Gas for June are estimated to rise +.4% versus a +.7% gain in May.

• The Import Price Index for June is estimated to rise +.1% versus a +1.3% gain in May.
  

10:00 am EST

• Business Inventories for May are estimated to rise +.3% versus a +.4% gain in April.

Upcoming Splits

• (NFLX) 7-for-1

Other Potential Market Movers

• The Eurzone Industrial Production report, Eurozone ZEW Index, SEMICON West, weekly US retail sales reports, (AZZ) annual meeting, (FAST) monthly sales release, (LRCX) analyst meeting and the (GIS) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and consumer shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Rising into Afternoon on Greece Debt Deal, China Bounce, Short-Covering, Gaming/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.19 -15.69%

• Euro/Yen Carry Return Index 141.97 -.77%

• Emerging Markets Currency Volatility(VXY) 8.83 -.90%

• S&P 500 Implied Correlation 58.59 -1.89%

• ISE Sentiment Index 105.0 +32.91%

• Total Put/Call .52 -48.0%

• NYSE Arms .66 -27.98% 

Credit Investor Angst:

• North American Investment Grade CDS Index 67.69 -2.12%

• America Energy Sector High-Yield CDS Index 1,257.0 -.14%

• European Financial Sector CDS Index 74.42 -6.26%

• Western Europe Sovereign Debt CDS Index 23.38 -5.91%

• Asia Pacific Sovereign Debt CDS Index 58.62 -2.17%

• Emerging Market CDS Index 297.45 -.37%
  

• iBoxx Offshore RMB China Corporates High Yield Index 119.76 +.44%

• 2-Year Swap Spread 25.0 -.75 basis point

• TED Spread 27.5 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -18.75 +.75 basis point

Economic Gauges:

• 3-Month T-Bill Yield -.01% -2.0 basis points

• Yield Curve 176.0 unch.

• China Import Iron Ore Spot $50.30/Metric Tonne +.4%

• Citi US Economic Surprise Index -17.1 +4.7 points

• Citi Eurozone Economic Surprise Index -2.7 +1.2 points

• Citi Emerging Markets Economic Surprise Index -16.0 +3.5 points

• 10-Year TIPS Spread 1.88 -1.0 basis point
• # of Months to 1st Fed Rate Hike(Morgan Stanley) 6.32 -1.11

Overseas Futures:

• Nikkei 225 Futures: Indicating +321 open in Japan 
• China A50 Futures: Indicating -537 open in China

• DAX Futures: Indicating -13 open in Germany

Portfolio: 

• Higher: On gains in my tech/biotech/medical/retail sector longs

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value +.43%

Sector Underperformers:

• 1) Coal -2.25% 2) Gold & Silver -1.51% 3) HMOs -.64%

Stocks Falling on Unusual Volume:

• MPLX, ASNA, FELE, PSXP, CUDA, PLXS, STX, NHTC, IOC, FAF, CPG, BKH, TCX, WDC, AET, ANN, SIXD, AEM, DLR, CBOE and BRCD

Stocks With Unusual Put Option Activity:

• 1) TAP 2) MMM 3) EBAY 4) YUM 5) BRCM
  

Stocks With Most Negative News Mentions:

• 1) ASNA 2) GLW 3) WIN 4) MUR 5) VRTS
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.11%

Sector Outperformers:

• 1) Gaming +4.08% 2) Airlines +1.89% 3) Biotech +1.58%
  

Stocks Rising on Unusual Volume:

• REMY, MWE, ANAC, MPC, JAH, GRMN, SUPN and LVS

Stocks With Unusual Call Option Activity:

• 1) RAD 2) A 3) RAX 4) MPC 5) NCT
  

Stocks With Most Positive News Mentions:

• 1) ACN 2) EW 3) NFLX 4) AN 5) MWE
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 2.0% Above 100-day average
• 10 Sectors Rising, 0 Sectors Declining
• 73.8% of Issues Advancing, 24.0% Declining
• 94 New 52-Week Highs, 56 New Lows
• 43.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 40.4
• Vix 14.5
• Total Put/Call .90
• TRIN/Arms 1.06

Monday Watch

Today's Headlines 

Bloomberg:  

• EU Demands Complete Capitulation From Tsipras. European leaders gave Greek Prime Minister Alexis Tsipras a straightforward choice on Sunday: ditch his principles or quit the euro. At an emergency summit in Brussels, Tsipras was presented with a laundry list of unfinished business from previous bailouts that he’d pilloried in opposition and during six turbulent months in office. Euro-area leaders gave him three days to enact their main demands to keep alive chances of adding bailout funds of as much as 86 billion euros ($96 billion) to earlier commitments of 240 billion euros. With Greece running out of money and its banks shut the past two weeks, the gathering was billed as the country’s last chance to stay in the euro. Tsipras, who says he wants to keep Greece in the currency union, has been in financial limbo since his government missed a payment to the International Monetary Fund and allowed its second rescue package to lapse on June 30. 

• China Reality Check: Stocks Are Still Too Expensive for Mobius. Chinese shares have tumbled faster than any of their global peers, suffered the first bear-market retreat since 2012 and erased more value in a month than the annual economic output of the U.K. After all those losses, is now the time to go bargain hunting? Not just yet. That’s the refrain from BlackRock Inc., UBS Group AG and Templeton Emerging Markets Group’s Mark Mobius, who say mainland stocks need to fall further before they’re worth buying.

• China June Imports Fall 6.7% on Year. (video)

• Asia’s Rising Economic Stars Lose Luster on China’s Slowdown. For years after the 2008 financial crisis, Asia’s rapidly expanding economies propped up global growth, with China clocking a pace of more than 9 percent, pulling along its neighbors. Now, China’s continuing slowdown is dragging them too, exposing weaknesses across the region, from Indonesian borrowing needs to record Korean household debt and the bureaucratic and corruption hurdles in the Philippines that hold back its infrastructure projects. Growth is undershooting forecasts, hurt by exports that are falling in nine among 12 main Asian economies, according to data compiled by Bloomberg. The slump, which spans India to Malaysia and South Korea, is partly a consequence of China’s deceleration -- to a growth estimated at 6.8 percent for last quarter, behind the government’s target for about 7 percent for 2015.

• Asian Stocks Advance as Investors Weigh Progress in Greece Talks. Asian stocks rose, with the regional index on course for a third day of gains, as investors weighed negotiations between European leaders and Greece. The MSCI Asia Pacific Index added 0.4 percent to 141.63 as of 9:10 a.m. in Tokyo after dropping 3.7 percent last week.

• Oil Bulls’ Will Broken as Roiled Economies Pose Risk to Growth. Speculators retreated from bullish oil bets at the fastest pace since 2012 on mounting concern that economic turmoil in Europe and Asia will prolong a supply glut. The net-long position in West Texas Intermediate crude fell 20 percent in the week ended July 7, U.S. Commodity Futures Trading Commission data show. Longs dropped 1.7 percent as short wagers jumped 56 percent. 

• Copper Bears Rewarded as Economic Threats Spur Metal Rout. Investors are hastening their retreat from copper, unnerved by the threats to global economic growth. The metal slumped to a six-year low last week as Greece’s efforts to reach a deal with creditors stumbled and Chinese equities plunged. Europe and China consume about two-thirds of the world’s copper. Goldman Sachs Group Inc. and Societe Generale SA see little prospect of a rebound anytime soon.

Zero Hedge:

• The Latest Out Of Europe: "Pretty Steady Level Of Shittiness".

• The Greek "Choice": Hand Over Sovereignty Or Take Five Year Euro "Time Out".

• China Stocks Mixed After Regulators "Bust Illicit Stock Sellers" And Unhalt Over 400 Securities.

• GMO's Montier Shifts To 50% Cash, Sees 3 "Hellish" Scenarios For Markets.

• How Fascist Capitalism Functions: The Case Of Greece.

• Leaked Eurogroup Statement Demands Much More From Greece, Keeps "Temporary Grexit" Option.

• A Broken Greek PM Says He Is "Ready For An Honest Compromise".

• The Crony Capitalist Pretense Behind Warren Buffett's Banking Buys.

• America - We Have A Problem. (graph)

• Russia Readies Fuel Deliveries To Athens, Will Support Greek "Economic Revival".

Business Insider:

• Mexico's most notorious drug lord just escaped from prison in a tunnel built under his cell.

• High debt could crush US shale companies.

• 'China is in the midst of a triple bubble'.

• Europe has made Greece a terrible offer, and the Greek government thinks it's 'very bad'.

• VAROUFAKIS: A 'Grexit' was always part of Germany's plan.

• MERKEL: 'The most important currency has been lost and that is trust'.

Telegraph: 

• Greece news live: eurozone split over Grexit ultimatum plan as Greeks says they are being 'crushed' by Brussels. Negotiations continue into the early hours of the morning as Greek prime minister Tsipras fights to gain "honourable compromise" and stay in the euro.

Night Trading

• Asian indices are unch. to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 109.75 -2.25 basis points.

• Asia Pacific Sovereign CDS Index 60.0 -1.75 basis points.

• S&P 500 futures -.06%.

• NASDAQ 100 futures +.05%.

Morning Preview Links

Earnings of Note

Company/Estimate 

• None of note

Economic Releases

2:00 pm EST

• The Monthly Budget Statement for June is estimated at $50.0B versus $70.5B in May.

Upcoming Splits

• (KR) 2-for-1

• (NFLX) 7-for-1

Other Potential Market Movers

• The Greece EUR 464B IMF payment being due and (AMAT) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and financial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the week.