Stocks Falling Substantially into Final Hour on Greek Debt Deal Fears, Soaring Eurozone/Emerging Markets/US High-Yield Debt Angst, China Bubble-Bursting Worries, Financial/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 18.38 +31.10%

• Euro/Yen Carry Return Index 143.85 -.47%

• Emerging Markets Currency Volatility(VXY) 9.08 +3.89%

• S&P 500 Implied Correlation 64.52 +6.22%

• ISE Sentiment Index 90.0 +13.92%

• Total Put/Call 1.40 +32.08%

• NYSE Arms 1.44 +84.64% 

Credit Investor Angst:

• North American Investment Grade CDS Index 71.590 +5.96%

• America Energy Sector High-Yield CDS Index 1,125.0 +2.09%

• European Financial Sector CDS Index 90.92 +18.5%

• Western Europe Sovereign Debt CDS Index 27.86 +25.61%

• Asia Pacific Sovereign Debt CDS Index 60.64 +4.33%

• Emerging Market CDS Index 312.72 +2.92%
  

• iBoxx Offshore RMB China Corporates High Yield Index 120.86 unch.

• 2-Year Swap Spread 25.25 +2.0 basis points

• TED Spread 28.25 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -21.75 -1.25 basis points

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.

• Yield Curve 169.0 -8.0 basis points

• China Import Iron Ore Spot $61.29/Metric Tonne -1.16%

• Citi US Economic Surprise Index -29.10 +1.5 points

• Citi Eurozone Economic Surprise Index 1.90 -5.5 points

• Citi Emerging Markets Economic Surprise Index -20.90 -.1 point

• 10-Year TIPS Spread 1.89 -5.0 basis points

Overseas Futures:

• Nikkei 225 Futures: Indicating +56 open in Japan 
• China A50 Futures: Indicating -183 open in China

• DAX Futures: Indicating -73 open in Germany

Portfolio: 

• Slightly Higher: On gains in my index hedges and emerging markets shorts 

• Disclosed Trades: None

• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg: 

• Merkel Says Europe Can’t Put Principles Aside Temporarily. German Chancellor Angela Merkel said Europe can’t throw aside its principles after aid talks with Greece broke down, though she said she remains open to finding a compromise. “If the euro fails, Europe will fail,” Merkel told a party meeting marking the 70th anniversary of the chancellor’s Christian Democratic Union party in Berlin, reviving a phrase she used in earlier years of Europe’s debt crisis. “That’s why we have to fight for these principles,” she said. “We could maybe set them aside in the short term. We could maybe say we’ll just give in. But I say: in the medium and long term, we will suffer damage that way.” 
• Greek Combat Makes Compromise Riskier Than Contagion for Europe. For Europe, compromise with Greece looks increasingly costlier than contagion. As German Chancellor Angela Merkel and her fellow euro-area leaders cast Greece’s July 5 referendum as a choice on whether to remain in the currency, the strategy suggests confidence the rest of the 19-country region is inoculated from any infection. Having spent five years dispensing aid and brokering deals with Athens, it also reflects a shift toward worrying that the bigger risk to the euro’s integrity lies in bowing to a member’s demands. “Although the indirect costs of a Grexit could be significant, this does not mean that they would necessarily outweigh the costs associated with an excessive compromise,” said Torsten Slok, chief international economist at Deutsche Bank AG in New York. “Sending the wrong message across the euro area would risk undermining the medium-term stability of the monetary union.”
• `Freight Train of Unknowns' Confronts Investors With Greece. It's one of those Monday mornings following one of those weekends which created more questions than answers. So it may be premature at best, or pointless at worst, to attempt to figure out what sort of long-term scar tissue will be left on global markets from the decision by Greece's leader to hold a referendum on the country's international aid. There are simply "a freight train of unknowns" confronting markets today,  as Weeden & Co.'s chief global strategist Michael Purves wrote in a note today. Among the boxcars on that train are piles of question marks surrounding the actual language of the Greek referendum, who will run the country if voters don't follow Prime Minister Alexis Tsipras's advice to reject terms of the international bailout, and what sort of social unrest could develop as a result of the whole mess. For investors looking for simple answers, there are only difficult questions as Greece shuts its banks and stock market for the week.
• Credit Risk Gauges in Europe Rise by Most Since Lehman on Greece.
  Measures of risk in Europe's credit markets surged after Greek debt talks broke down, rising the most since Lehman Brothers Holdings Inc. failed in 2008. A benchmark of credit-default swaps rose by as much as 20 percent to the highest in more than a year, according to data compiled by Bloomberg. Greek bank bonds dropped to their lowest levels on record and contracts insuring the Mediterranean nation’s sovereign debt indicated a 91 percent probability of default. The Markit iTraxx Europe index of credit-default swaps on 125 investment-grade companies rose to as high as 80 basis points, and was at 74 basis points 1:29 p.m in London, Bloomberg data show. The index was the most-traded credit-default swap measure globally, with a gross $196 billion changing hands in the week through June 19, the most recent data published by the Depository Trust & Clearing Corp. The Markit iTraxx Europe Senior Financial Index of credit-default swaps on 30 European banks and insurers climbed by as much as 21 basis points to 98 basis points. The increase is the biggest in percentage terms since Sept. 15, 2008, Bloomberg data show.
• Greece Risk May Pose Black Swan Dangers for Emerging Markets. Here we go again. A flight to haven assets has begun as Greece’s economy faces a tailspin, sparking concern defaults and bank collapses could spill over to other European nations, and impose a global impact. This time, though, Europe and the U.S. confront the risk of contagion with a strengthened policy toolkit -- including new mechanisms to monitor and support banks, and a system of swap lines to inject liquidity. In Japan, the central bank is led by a governor who’s already pumping unprecedented monetary stimulus. If developed markets can regard the risk of Grexit with less trepidation than the maelstrom of 2008, for emerging markets, some of the ground has shifted in an undesired direction. Their combined growth rate is less than half the pace of 2007. Some, including Indonesia and Malaysia, have mounted up on dollar-denominated debt even as their currencies slumped, increasing their vulnerability in a mass exodus from risk.   
• Greek Crisis: What's Behind the Euro Strength. (video)
• Shanghai Enters Bear Market. (video) 
• China Economy Slowing for Several Years: Male. (video)
• China’s CSRC Says Margin Trading ‘Controllable’ as Stocks Plunge. China’s securities regulator said Monday margin trading at brokerages was “controllable,” seeking to stem a stock-market rout amid concern traders had borrowed excessive amounts of money to buy shares. Margin calls on Monday morning on the off-market HOMS pooling system were only about 2.2 billion yuan ($354 million), a “fraction” of total transaction value, the China Securities Regulatory Commission said in a statement on its official microblog. Deposits in margin accounts were “nowhere near” dangerous levels, the regulator said.
• Brazil ETF Leads Emerging-Market Outflows as Greece Adds to Woes. Brazil’s biggest exchange-traded fund tumbled to a one-month low amid speculation that a possible Greece exit from the euro would deepen the largest outflows among emerging markets this year. The iShares MSCI Brazil Capped ETF had about $800 million in withdrawals in the first six months of 2015, according to data compiled by Bloomberg. The fund extended this year’s slump to 12 percent. The Ibovespa retreated 2 percent to 52,936.38 at 1:58 p.m. in Sao Paulo, the most in the Americas. Brazilian shares have dropped 8.8 percent from this year’s high as the nation struggles to shore up the budget and keep its investment-grade credit rating at a time when the economy is set for the worst recession in 25 years. Stocks joined a global rout Monday after Greece shut lenders and imposed capital controls, a measure that will deepen the country’s recession and risk driving it toward an exit from the euro.
• Worldwide Stock Volatility Soars as Sleepy VIX Awakens on Greece. Gauges of stock volatility surged around the world as the weekend meltdown in Greece collided with China’s market unraveling and traders bought hedges to stanch the bleeding. The Chicago Board Options Exchange Volatility Index surged 24 percent, its biggest increase since December, while a gauge of European share swings climbed 15 percent to an eight-month high. The surge shook U.S. traders out of a two-month-long slumber in which weekly changes in the S&P 500 have failed to exceed 1 percent for the longest stretch since 1993. 
• European Banks Erase $67 Billion as Greece Edges Toward Exit. (video) European banks slumped the most since 2011, erasing almost 60 billion euros ($67 billion) in market value, after Greece imposed capital controls and shut lenders. The Stoxx 600 Banks Index fell as much as 4.4 percent, the biggest decline since November 2011. The gauge closed down 4 percent, eliminating most of last week’s rally. Lenders in Italy, Portugal and Spain were among the biggest decliners, led by Banco Comercial Portugues, which tumbled 11 percent.
• Nickel Declines to Six-Year Low as Aluminum Nears Bear Market. Nickel slid to the lowest since May 2009 as Greece’s debt crisis undermined confidence in the global growth outlook. Aluminum fell closer to entering a bear market. The LMEX Index of six industrial metals is heading for a fourth straight quarterly loss, the longest streak since 2001. Greece’s standoff with its creditors is adding to economic concerns amid a slowdown in China. Europe is forecast to account for almost one-fifth of the world’s nickel demand this year, Morgan Stanley estimates.
• Bond Insurers Drop, Credit Risk Jumps on Puerto Rico Concern. Shares of the two biggest bond insurers dropped while a gauge of their credit risk surged as Puerto Rico’s governor called the island’s $72 billion of debt unpayable. Assured Guaranty Ltd. dropped 12 percent in New York, while MBIA Inc. fell 16 percent. Credit-default swaps that protect against the risk that the insurers won’t be able to meet their obligations climbed by the most in a year. The insurers, who guaranteed a combined $9.4 billion of Puerto Rico debt, face the prospect of losses as Governor Alejandro Garcia Padilla -- who previously said the commonwealth would do whatever it takes to avoid default -- told the New York Times that investors should prepare to sacrifice. Credit-swaps tied to Assured Guaranty Municipal Corp. jumped 70 basis points to 441 basis points and earlier reached 461, the highest since January 2014, according to data provider CMA. Contracts linked to MBIA increased 101 to 732 basis points, the highest since April.
• U.S. Rails Skid Into Bear Market on Triple Whammy Cargo Slump. U.S. railroads, Wall Street favorites for much of the past decade, are slumping into a bear market amid a three-way squeeze from plunging coal, crude-oil and grain shipments. An index of the four largest publicly traded U.S. carriers has dropped 20 percent from its peak in November, paced by Kansas City Southern, as the companies struggle to offset the loss of volumes. They haven’t tumbled this much since 2011.
• EPA Loses at U.S. High Court on Power-Plant Emissions Rule. The U.S. Supreme Court ruled against the Obama administration’s effort to limit toxic pollution from the nation’s coal-fired power plants, leaving the fate of a landmark environmental regulation in doubt. The 5-4 decision went against an Environmental Protection Agency mercury rule that forces utilities to shutter old coal plants or invest billions of dollars in equipment to clean up the emissions from their smokestacks. The court said the EPA should have considered the costs and benefits before deciding whether to impose limits on the toxic emissions.

ZeroHedge: 

• Greece Will Default To IMF Tomorrow, Government Official Says.
• Massive Greek "No" Protest In Front Of Parliament - Live Feed. (video)
• Greek Contagion Uncontained: Portugal Bond Risk Spikes Most In Over 7 Years. (graph)
• ECB Strikes Back: Threatens With Greek Deposit Haircut If And When ELA Found To Be "Illegal" On Wednesday.
• Chinese Regulator Blames Ongoing Market Crash On "Rumors", Demands Traders "Act Rational". (graph)
• European Bank Risk Spikes Most In 5 Years To 19-Month Highs. (graph)
• Greek 10Y Bonds Collapse - Yield Tops 15%. (graph)
• An Inadvertent Warning From BlackRock(BLK).
• Dallas Fed Surges Back, Beats By Most Since Jan 2012 But Hope Tumbles. (graph)
• Pending Home Sales Rise At Slowest Pace Since 2014, April Revised Lower. (graph)
• Puerto Rico Bonds Are Collapsing. (graph)
• "Uncontained" - Greek Stocks Crash 17% As European Banks Plunge Most In 3 Years. (graph)

Business Insider: 

• Greece will default.
• 'There is no US precedent for anything of this scale or scope'.
• S&P DOWNGRADES GREECE, PUTS GREXIT ODDS AT 50%, WARNS DEFAULT COULD HAPPEN IN 6 MONTHS.
• Here are the companies and industries whose insiders are dumping tons of stock.
• ART CASHIN: 'I think China may be more important than Greece.'

Reuters:

• Puerto Rico needs debt restructuring, reforms: economists' report. Puerto Rico needs to restructure its debts and should make reforms including cutting the number of teachers and raising property taxes, a report by former International Monetary Fund economists on the Caribbean island's financial woes said. The report, which was obtained by Reuters, gave a damning review of how Puerto Rico has arrived at its current state, which it said requires both structural reform and debt restructuring to fix. "Puerto Rico faces hard times," the report said. "Structural problems, economic shocks and weak public finances have yielded a decade of stagnation, outmigration and debt... A crisis looms."

Telegraph: 

• Greece debt crisis live: EU leaders say the referendum is a choice between euro and drachma as Grexit looms. Greeks can take out only €60 per day from ATMs as Greece admits it will default on €1.6bn debt.
• European debt crisis: It's not just Greece that's drowning in debt. (map)

Deutschlandradio:

• Issing Says ECB Greece Policy Bordering on State Financing. Former ECB Chief Economist Otmar Issing says the central bank's emergency funding for Greek banks has been bordering on state financing, which is banned by law. "It was high time the ECB put a stop to this barely concealed government funding," he said. "Bundesbank President Weidmann has pointed out for some time that the Greek central bank awards loans to banks in Greece which have no access to the capital market. These banks buy bonds of a country which has lost the confidence of investors. This comes very close to direct state funding." "It was more or less an increasing fiction that this is supporting solvent banks. The ECB, like other institutions, has to obey the law." "If the ECB had not set a limit, then more money would have been produced, withdrawn by the Greeks from their bank accounts and partially moved abroad. This leads to ever higher claims within the European system of central banks, far exceeding 100 billion euros, of which a substantial part affects Germany." "This money will be more or less lost," he said.

Bear Radar

Style Underperformer:

• Mid-Cap Growth -1.52%

Sector Underperformers:

• 1) Alt Energy -3.22% 2) I-Banks -2.52% 3) Steel -2.43%

Stocks Falling on Unusual Volume:

• AGO, VTAE, ORC, E, BPOP, VTWO, DEO, AMBC, GDOT, CUK, FRME, CCC, CBT, GCI, MEI, SMLP, TRS, CMCM, FMO, KNOP, TUBE, VDSI, IHG, EUFN, AZN, NSM, TAL, SRPT, XOOM and OFG

Stocks With Unusual Put Option Activity:

• 1) XLB 2) LOW 3) GT 4) DHI 5) CCL
  

Stocks With Most Negative News Mentions:

• 1) M 2) QCOM 3) MU 4) BPOP 5) BK
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Value -1.13%

Sector Outperformers:

• 1) Utilities +.53% 2) Hospitals +.03% 3) REITs -.32%
  

Stocks Rising on Unusual Volume:

• PETX, APH and ALDR

Stocks With Unusual Call Option Activity:

• 1) JOE 2) SLCA 3) HCA 4) MBI 5) ARLP
  

Stocks With Most Positive News Mentions:

• 1) TGNA 2) CHK 3) IMKTA 4) BDX 5) LPNT
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 5.4% Above 100-day average
• 1 Sector Rising, 9 Sectors Declining
• 16.4% of Issues Advancing, 81.8% Declining
• 15 New 52-Week Highs, 228 New Lows
• 49.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 42.5
• Vix 16.7
• Total Put/Call 1.24
• TRIN/Arms .96

Monday Watch

Today's Headlines 

Bloomberg: 

• Greece Shuts Banks to Avert Collapse After ECB Freezes Support. Greece will shut its banks Monday to avert a financial collapse after the European Central Bank froze emergency loans to the nation’s lenders. Piraeus Bank SA Chief Executive Officer Anthimos Thomopoulos disclosed the decision to reporters after a meeting of the government’s financial-stability panel on Sunday. As he left the same session, Finance Minister Yanis Varoufakis said an announcement would be made after a Cabinet meeting due to start imminently in Athens. Banks will remain shut until at least after a July 5 referendum called by Prime Minister Alexis Tsipras on whether to accept austerity in exchange for a European bailout, Kathemerini newspaper reported, citing unnamed sources.

• Euro Faces Existential Threat as Greece’s Membership in Jeopardy. Three years after Mario Draghi pledged to do whatever it took to save the euro, the breakdown in the Greek rescue talks is calling into question the integrity of the entire currency union. While Greece accounts for less than 2 percent of the euro zone’s output, its exit would hurl the bloc into unknown territory by setting a precedent for other nations to reconsider membership. The euro dropped 1.4 percent to $1.1011 as of 5:44 a.m. in Tokyo on Monday.

• IMF Won’t Help Greece If Payment Missed, Lagarde Says. International Monetary Fund officials, stung by the breakdown of negotiations over a new European bailout package for Greece, won’t provide further aid if the Greeks miss a payment due to the IMF on June 30, Managing Director Christine Lagarde said. Lagarde, in an interview with the BBC, also said a referendum scheduled in Greece for July 5 will be asking voters to weigh creditors’ proposals that are no longer under consideration. 

• El-Erian Sees 85% Grexit Odds With ‘Massive’ Contraction Coming. Greece is heading for a “massive economic contraction” and is likely to be forced out of the euro zone, according to Mohamed El-Erian, the former chief executive at Pacific Investment Management Co.

• Closing Greek Stock Exchange Puts Focus on ETFs Without Prices. Shutting down the Greek market has trained attention on exchange-traded funds tracking its stocks, adding an element of speculation to their prices as long as the Athens bourse is closed. In the U.S., owners of the Global X FTSE Greece 20 ETF will have less information in deciding how much the security is worth, while in Europe the Lyxor ETF FTSE Athex 20 may see added volatility.

• Hidden Debt Risks Rise as Chinese Developers Scrap Bond Promises. China’s developers are scrapping safeguards written into their bonds, sparking concern that they are attempting to hide rising debt loads after a landmark default. Five developers this year have loosened or are trying to relax financing limits and make it easier to enter joint ventures that can move liabilities off their balance sheets. That’s up from three in the same period of 2014. Junk-rated issuers including Agile Property Holdings Ltd. and Modern Land China Co. have sought to trim protections for overseas investors, dragging them to the weakest since 2011, according to Moody’s Investors Service.

• The $8 Trillion Penny Stock: China’s Market of Boom-Bust-Repeat. It looks like the price chart of an over-the-counter penny stock: dizzying gains, abrupt U-turns, harrowing declines. But this is no obscure security from the rough-and-tumble fringes of Wall Street. It’s China’s Shanghai Composite Index, the yardstick for an $8.1 trillion equity market -- the world’s largest after the U.S. -- where extreme volatility is becoming the norm. Fueled by record amounts of borrowed money and the whims of more than 80 million individual investors, swings in the Shanghai Composite have climbed to the highest levels since 2008. They’re bigger than every other benchmark index worldwide after Greece, along with a quarter of the 100 most-traded penny stocks on U.S. bourses, according to data compiled by Bloomberg. “You’d think you wouldn’t see this volatility in such a large equity benchmark,” Ankur Patel, the chief investment officer at R-Squared Macro Management LLC, said by phone from Birmingham, Alabama. “The flows in and out have been so substantial and it’s been driven by retail investors. Those are the same characteristics you see in penny stocks.”

• China’s Auditor Says State Firms Falsified Revenue and Profit. Some of China’s biggest state firms were found to have falsified revenue and profits, while some state lenders doled out loans to unqualified borrowers, the nation’s auditor said amid an intensifying crackdown on corruption. Fourteen state-owned companies, including State Grid Corp., Cosco Group and China Southern Power Grid Co., falsified 29.8 billion yuan ($4.8 billion) in revenue and 19.4 billion yuan in profits, the National Audit Office said in a statement on its website Sunday. The office issued its 2014 work report Sunday, along with several statements and audit reports for individual companies.

• Japan Industrial Production Slumps in May, Denting Recovery. Japan’s industrial production dropped more than forecast in May, sapping a recovery in the world’s third-largest economy. Output fell 2.2 percent from April, when it increased 1.2 percent, the trade ministry said on Monday. Economists had forecast a 0.8 percent decline.

• BIS Warns of Increasing Risk of Liquidity Trap in Bond Markets. Global bond markets face the risk of a “liquidity illusion” because holdings are becoming concentrated in the hands of fund managers, according to the Bank for International Settlements. The top 20 managers account for 40 percent of all assets as dealers reduce inventories, BIS economists wrote in their annual report. Assets under management more than doubled in about a decade to $75 trillion in 2013. Investors are becoming more influential in credit markets as banks reduce bond holdings to meet regulations introduced since the financial crisis. That shift is making markets more homogeneous, increasing the risk that liquidity will vanish in a selloff. 

• Treasuries Surge With Aussie, Japanese Bonds Amid Greece Turmoil. The benchmark Treasury 10-year yield dropped 15 basis points to 2.32 percent as of 11:54 a.m. in Tokyo, Bloomberg Bond Trader data show. The 2.125 percent note due in May 2025 climbed 1 10/32 to 98 9/32. Yields on similar-maturity Australian notes dropped 11 basis points to 2.95 percent and those on Japanese securities of the same tenor declined three basis points to 0.44 percent.

• Leu, Forint Lead Emerging Currencies Lower on Greece Turmoil. Emerging-market currencies fell the most in a month as demand for riskier assets weakened amid concern Greece’s possible exit from the euro zone will lead to contagion. A Bloomberg gauge of the most-traded developing-nation currencies declined 0.6 percent as of 11 a.m. in Hong Kong, set for its lowest close since March 19.

• Mideast Stocks Sink on Fear Attacks May Spread in Gulf Nations. Stocks in Dubai, the Middle East’s commercial hub, led regional declines on concern militants could target other Arab Gulf nations after Kuwait’s deadliest attack in decades killed 27 people. The DFM General Index dropped 2.2 percent, the most since June 11, to 4,055.97 at the 2 p.m. close in the emirate. Kuwait’s SE Price Index slipped 0.2 percent to the lowest since December. More than 200 people were wounded when a bomb ripped through a Shiite mosque in the country, which shares borders with Iraq and Saudi Arabia. 

• China’s Stocks Extend Rout as Shanghai Index Set for Bear Market. China’s stocks sank in volatile trade, with the benchmark index poised to enter a bear market, as an interest-rate cut over the weekend failed to stem the biggest nation’s rout since 1996. The Shanghai Composite Index tumbled 3.8 percent to 4,035.48 at the morning break, taking declines from its June 12 peak to more than 20 percent. A gauge of technology stocks sank 8 percent Monday to lead declines among industry groups. The Shanghai index’s 10-day volatility reading jumped to the highest level since 2008. The Shenzhen Composite Index tumbled 5.9 percent to its lowest level since May 8, taking its three-day loss to 17 percent. The Hang Seng China Enterprises Index dropped 3.1 percent at 11:31 a.m. local time, and the Hang Seng Index fell 2.4 percent.

• Asian Stocks Fall as Greece Fears Spur Flight to Safer Assets. Asian stocks tumbled as investors sought shelter in haven assets while they weighed a possible Greek exit from the euro zone. Shares in Shanghai sank even after the central bank cut interest rates. Japan’s Topix index dropped 1.7 percent as the yen jumped 0.8 percent against the dollar and 2.1 percent versus the euro. The MSCI Asia Pacific Index lost 1.6 percent to 145.43 as of 11:37 a.m. in Hong Kong, as more than 20 shares fell for each that rose. The Shanghai Composite Index slumped 3.8 percent after earlier rising 2.5 percent.

• Iron Seen Below $40 by Capital Economics on Sharp Move Down. Iron ore may tumble into the $30s a metric ton in the second half as surging low-cost supplies from the world’s biggest producers swamp the market, expanding a glut, according to Capital Economics Ltd. The surplus will become more evident in the next six months, Caroline Bain, senior commodities economist in London, said in an interview. Higher volumes from Australia and Brazil will spur the renewed slump even as stimulus spending in China boosts steel demand, Bain said, forecasting that the raw material will end the year at $45.

• Gold Climbs on Haven Demand as Greece Risks Exit From Euro Zone. Gold rose with silver as Greece shut banks and imposed capital controls, boosting demand for haven assets amid concern that the country’s euro membership is in jeopardy. Bullion for immediate delivery rallied as much as 1.1 percent to $1,188.23 an ounce and was at $1,182.76 at 11:07 a.m. in Singapore, according to Bloomberg generic pricing. Gold for August delivery jumped 1.2 percent to $1,187.60 on the Comex and traded at $1,181.50.

• Fed’s Dudley Says September Rate Rise Possible After Better Data. The Federal Reserve could begin raising interest rates in September if economic data continue to improve as they have in recent weeks, said William C. Dudley, president of the Federal Reserve Bank of New York. “If the data continue to evolve in the way they have, I think September is very much in play,” Dudley said in an interview with the Financial Times conducted on Friday and published Sunday.

Wall Street Journal: 

• Iran Wish List Led to U.S. Talks. Years of clandestine exchanges between the two countries helped build a foundation for nuclear negotiations. Iran secretly passed to the White House beginning in late 2009 the names of prisoners it wanted released from U.S. custody, part of a wish list to test President Barack Obama’s commitment to improving ties and a move that set off years of clandestine dispatches that helped open the door to nuclear negotiations. The secret messages, via an envoy sent by the Sultan of Oman, also included a request to... 

• Assad Chemical Threat Mounts. U.S. officials see strong possibility of chemical attacks if rebels threaten Syrian regime strongholds. U.S. intelligence agencies believe there is a strong possibility the Assad regime will use chemical weapons on a large scale as part of a last-ditch effort to protect key Syrian government strongholds if Islamist fighters and other rebels try to overrun them, U.S. officials said. Analysts and policy makers have been poring over all available intelligence hoping to determine what types of chemical weapons the regime might be able to...

• Repairing the ObamaCare Wreckage. The King v. Burwell ruling aside, the fact remains that premiums are skyrocketing and choices are shrinking. Ironically, it is the growing government centralization of health insurance at the expense of private insurance that must be addressed. The 107 million people on Medicaid or Medicare in 2013 will increase to 135 million by...

Fox News: 

• Calls grow for probe of Clinton's private server. (video) Calls for Hillary Clinton to allow a third party to examine her private server grew louder Friday following revelations that she had withheld more than a dozen Benghazi-related emails from the State Department. "Secretary Clinton's failure to turn over all Benghazi and Libya documents is the reason why we have been calling for an independent, third party review of her server," Rep. Lynn Westmoreland, R-Ga., a member of the House Select Committee on Benghazi, told the Washington Examiner.

CNBC:

• Greece Live Blog: Markets rocked as key vote looms.

Zero Hedge:

• Ignoring Tsipras Plea For Calm, Greeks Storm ATMs, Stores, Gas Stations. (pic)

• Greek Capital Controls Begin: Greek Banks, Stock Market Will Not Open On Monday.

• Dow Futures Open Down 300 Points, 10Y Yield Tumbles 20bps As EURUSD Plunges Over 200 Pips. (graph)

• "Contained" Greek Contagion Smashes Japanese Banks Lower. (graph)

• Pension Funds Are "Compromising Their Solvency" OECD Warns. (graph)

• The Greek Butterfly Effect.

• Goldman Explains Who Gets Stuck With The Bill When Greece Leaves The Party.

• China Jumps On PBOC Hail Mary, Then Plunges Into Bear Market. (graph)

• Here Comes "Prexit": Puerto Rico In "Death Spiral", Debts Are "Not Payable", Governor Refuses To "Kick The Can".

• Collapsing CDS Market Will Lead To Global Bond Market Margin Call.

• A Helpless China Tips Its Hand: A Market Crash "Poses Great Danger To Social Stability".

• "Artificial" Phantom Liquidity Will Disappear In "Adverse, Turbulent" Markets, BIS Warns. (graph)

• What Bull Market? 42% Of Stocks Are In Correction. (graph)

• Greek Parliament Votes In Favor Of Referendum.

• IMF Confirms Greek Referendum "Irrelevant" After Program Expires On Tuesday.

Business Insider:

• European stock futures are getting obliterated. (graph)

• CNN spots 'ISIS flag' at gay pride parade and summons national security analyst... (video)

• Terror on the beach: Tourists recount the horrors of Tunisia attack that left dozens dead.

• REPORT: Greece's stock market will be closed for at least a week.

• SpaceX's 'reusable rocket' just exploded to bits — but the company says it's going to push forward anyway.

Reuters:

• RPT-Sydney's crazy housing market no mere craze. Outlandish property prices make daily headlines in Sydney - a peeling 1900s three-bed with no kitchen sink for A$2.6 million ($2 million), a parking space in Kirribili for A$120,000 - and first-time buyers have little prospect of relief. Home price growth in the harbour city is well into the double digits, fed by record low interest rates, a rapidly rising population, chronic undersupply, a tax system that pampers property investors and a stream of Asian money.

• China's easing may prop up stocks, but risks rewarding speculators. "The government appears eager to maintain a bull market to expand the capital market and reduce reliance on bank lending," wrote Standard Chartered economists in reaction to the cuts. "Although the use of monetary policy for that purpose is questionable."

Financial Times:

• Low rates hold back global growth, BIS warns. Ultra-low interest rates hold back global growth and fuel instability, the Bank for International Settlements has warned, as it urged central banks to move more swiftly towards normalising monetary policy. The BIS said in its annual report that monetary authorities from the US to Japan had been handed too much responsibility to steer the global recovery and that much more of the weight had to fall on governments, which were failing to pass vital structural reforms.

• US shale equity sales slow. Share sales by US oil and gas companies have slowed sharply in recent months, in a sign of the tightening financial pressures on the industry following the fall in crude prices.

Telegraph:

• The latest and breaking news from Greece. 

• The world is defenceless against the next financial crisis, warns BIS. Monetary policymakers have run out of room to fight the next crisis with interest rates unable to go lower, the BIS warns. The world will be unable to fight the next global financial crash as central banks have used up their ammunition trying to tackle the last crises, the Bank of International Settlements has warned. The so-called central bank of central banks launched a scatching critique of global monetary policy in its annual report. The BIS claimed that central banks have backed themselves into a corner after repeatedly cutting interest rates to shore up their economies.

Sueddeutsche Zeitung:

• Greece Won't Get Better Deal After Referendum. Greece won't be offered a better deal after the referendum scheduled for July 5, citing German Vice-Chancellor Sigmar Garbriel in an interview. Gabriel says he was "appalled" that Greeks rejected a very far-reaching offer than included a third bailout program and debt restructuring. "Mr. Tsipras wants to accept all these offeres only if Europe doesn't link them to any conditions for reforms in Greece. Europe won't be able to accept this even after a referendum," he said.

ORF TV:

• ECB's Nowotny Sees Greece Missing June 30 Payment to IMF. Greek govt. will likely default on payment to IMF due June 30, ECB Governing Council member Ewald Nowotny said in an interview. No guarantee Greece won't leave euro, he said. Tourists visiting Greece should "stock up on cash, on euro cash," he said.

Leipziger Volkszeitung:

• Germany Faces EU80b Greek Default Loss, Lawmaker Says. German public coffers face a loss of at least EU80b from a Greek default, lawmaker Gunter Krichbaum, chairman of European Affairs Committee in lower house of parliament, says. German lawmakers may need to approve "humanitarian aid" because a Greek default may ignite unrest.

ADR Interview: 

• Germany's Steinmeier 'Dismayed' by Tsipras Moves. German Foreign Minister Frank-Walter Steinmeier says he's "somewhat dismayed" by recent policy steps take in Greece "and especially on the part of the prime minister." Greece faces risk of illiquidity and time is running out, he said.

La Stampa:

• OECD's Mann Says Markets Unprepared for Possible Grexit. Asked about "worst outcome" on Greece, OECD Chief Economist Catherine Mann says financial markets aren't prepared, according to an interview. Markets moving as if there were no risks, she said.

Night Trading

• Asian indices are -2.5% to -1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 117.0 +9.5 basis points.

• Asia Pacific Sovereign CDS Index n/a.

• S&P 500 futures -1.43%.

• NASDAQ 100 futures -1.43%.

Morning Preview Links

Earnings of Note

Company/Estimate 

• (APOL)/.47

Economic Releases

10:00 am EST

• Pending Home Sales for May are estimated to rise +1.4% versus a +3.4% gain in April.

10:30 am EST

• Dallas Fed Manufacturing Activity for June is estimated to rise to -16.0 versus -20.8 in May.

Upcoming Splits

• None of note

Other Potential Market Movers

• The German retail sales report could also impact trading today.

BOTTOM LINE: Asian indices are sharply lower, weighed down by industrial and financial 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 week.