European Stocks Plunge To Seven-Month Lows; Banks In Bear Market

The narrow EuroStoxx 50 index is now at its lowest in over seven months (-5.4% year-to-date and -12.5% from its highs in May) and the broader EuroStoxx 600 is also flailing lower. The European bank stocks pushed down to their lowest in almost 10 months and are now in bear market territory - down 22.5% from their highs. Spain and Italy are now testing their lowest level in 9 months. While the sovereign bond market had been relatively quiet last week, it started to catch down to stocks today with Portugal, Spain, Italy, and Belgium all giving up significant parts of their Draghi-promise gains. Europe's VIX broke above 26% for the first time in almost 10 months. Think that there should be a flight-to-safety? Think again - Swiss 2Y rates spiked to 10.1bps (remember it was -44.5bps in August 2012) - their highest in 22 months. EURUSD smashed lower in the pre-open US and then oscillated higher in the most mechanically odd manner for the rest of the EU day...

Berlusconi Convicted In 'Sex-With-Minor' Case; Sentenced To 7 Years In Jail

While appeals will be quick to come, the 'Ruby' trial has resulted in former PM Silvio Berlusconi being convicted in the 'sex-with-minor' case:

  • *MILAN COURT RULES ON BERLUSCONI'S SEX-WITH-MINOR TRIAL
  • *ITALY'S BERLUSCONI CONVICTED IN RUBY TRIAL
  • *BERLUSCONI CONVICTED ON ABUSE OF POWER IN MILAN TRIAL
  • *BERLUSCONI SENTENCED TO 7 YRS IN JAIL
  • *BERLUSCONI BARRED FROM PUBLIC OFFICE FOREVER: MILAN COURT
  • *ITALY'S BERLUSCONI CAN APPEAL CONVICTION

With the central bank backstop seemingly being removed, the impact on Italian politics is unclear (aside from increased uncertainty as his own party may splinter its support for the colaition) but for now his empire - MediaSet is halted down 5.2%...

Guest Post: Bifurcation Nation

To say there are haves and have-nots and two major political camps does not distinguish this era from any other. But despite this surface similarity to previous eras, there is a palpable zeitgeist that the nation is bifurcating into two camps which no longer overlap or communicate using the same cultural signifiers and symbology. There is also a growing awareness that the divide between very wealthy and the middle income households has widened into an enormous canyon of inequality

They Said To Sell In May... They Were Right

Simply put, despite the euphoric sentiment from business media, if you had sold on any day during May (stocks or bonds intriguingly) then you are currently making money...

Market Update: Surveying The Damage So Far

UPDATE: The pre-open ramp has been totally flushed in stocks and VIX has exploded

Much as the world of business media would like the world to work in a 'great rotation' like way; in reality the markets - all of them - ebb and flow on the back of leverage, repo, and liquidity. At no time in the recent past has that been more evident than in the last few days as every asset class in almost every ragion of the world is rediced in price by a market of angry liquidity-addicted carry traders demanding moar as their dealer wonders off into retirement. Overnight saw an early rise in Japan (and China) evaporate into a collapse, that spilled over further into Europe, and now the US. Despite a sudden rampaplooza across FX and equity markets in the pre-open, things do not look pretty as the great rotation is replaced by the great unwind.

Anglo-Irish Picked Bailout Number "Out Of My Arse" To Force Shared Taxpayer Sacrifice

The Irish people, who sacrificed their sovereignty and billions of Euros, are waking this morning to a stunning revelation that the bailout to save Anglo-Irish was engineered by the Bank's leadership to game as much money as possible from the central bank. The Irish Independent has secret recordings from the period in 2008 - below - that show senior management luring the State into giving it billions as they admit the EUR 7 billion number was "picked out of my arse." The bottom-line is that the bank knew they were in trouble and so decided to game the Central Bank and their regulators knowing that once the State began the flow of money, it would be unable to stop: "If they (Central Bank) saw the enormity of it up front, they might decide they have a choice. You know what I mean? They might say the cost to the taxpayer is too high . . . if it doesn't look too big at the outset... if it looks big, big enough to be important, but not too big that it kind of spoils everything, then, then I think you have a chance. So I think it can creep up... [once] they have skin in the game." Will there be an Irish Spring as the conspiracy theory of the banking bailout now become conspiracy fact?

Deluded Worlds And Unpleasant Realities

Words, once spoken, are no longer your own. Words, strung together, may be the most powerful spells in our kingdom. Two speeches, one in America and one in Europe buoyed the world. One speech made in America has now ended the experiment. No magic wand was needed. The world had deluded itself that it would never come to pass; but, the real pain of induced withdrawal from the central banks' monetary creation is upon us. The words cannot be taken back. The meat is minced!

Bank Of China Declares Moratorium On Transfers, Online Banking; Counters Inoperable

From Caijing, google translated. We hope the gist of the narrative in Mandarin is far less scary, because if the translation is even remotely accurate, then all hell may be about to break loose in China: "This morning, the Bank of China Bank moratorium on transfers, online banking, counters are inoperable... Customer service said, now silver futures transfer service has been fully suspended, online banking, the counter can not be handled, and now has the background system response, recovery time is not yet known."

Moody's Retaliates At Hong Kong For Snowden Insubordination

Uncle Warren appears unhappy with the humiliating can of whoop-ass Hong Kong unleashed on his favorite crony banana republic. So he has retaliated in the only way he knows: Moody's.

  • HONG KONG BANKING SYSTEM OUTLOOK REVISED TO NEGATIVE BY MOODY'S
  • MOODY'S CITES CONCERNS ON PERSISTENT NEG REAL INTEREST RATES
  • MOODY'S CITES POTENTIAL HK 'PROPERTY BUBBLES' - this one is really good.

But the best reason is:

  • MOODY'S CITES HK BANKS' GROWING EXPOSURES TO MAINLAND CHINA

Yup. Moody's just figured out Hong Kong has exposure to... China. Of course, Hong Kong's downgrade of US foreign policy to laughably pathetic, outlook hilarious on Sunday, was a complete coincidence.

Meanwhile The 10 Year...

Is headed for the moon... in yield terms that is. Because if Bernanke's hope was that the handoff from buyers to sellers would be a smooth one, he may want to conference in Kuroda and get some advice on what happens when the bond market is halted limit down.Good thing Bernanke is not a real hedge fund, or else the $35 billion intraday P&L crash (so far), and $250 billion in the past two months, may raise a few eyebrows.

Snowden Not On Aeroflot Flight To Cuba

To all the dozens of journos who bought tickets on Aeroflot's flight from Moscow to Havana just so they can instagram Snowden sitting in 17A using countless creative photofilters, we hope said purchase was refundable, because the plane took off and the famous NSA whistleblower was not on it.

Frontrunning: June 24

  • Stocks Fall With China in Bear Market as Bonds Decline (BBG)
  • Russia defiant as U.S. raises pressure over Snowden (Reuters) ...
  • and sure enough: Kerry Warns Hong Kong and Russia on Snowden  (WSJ)
  • Slow-Motion U.S. Recovery Searches for Second Gear (WSJ)
  • PBOC Sees ‘Reasonable’ Liquidity in China’s Financial System (BBG)
  • Italy's Berlusconi faces verdict in underage sex trial (Reuters)
  • Fed Monetary Course Difficult for a Bernanke Successor to Alter (BBG)
  • Another China central bank worry; companies push into lending (Reuters)
  • Gold Miner Writedowns at $17 Billion After Newcrest Fallout (BBG)
  • Snowden Faces Often-Posed U.S. Fugitive Question: Where to Run? (BBG)

US Traders Walk In To Another Bloodbath

Lots of sellside squeals this morning following the epic bloodbath in China, where in addition to what we already covered hours ago, has seen at least five companies  (China Development Bank, Shanghai ShenTong Metro, China Three Gorges Corp., Doosan Infracore China Co. and Chongqing Shipping Construction Development) delay or cancel bond offerings as the PBOC's admission of capital "misallocation" is slowly but surely freezing both bond and stock markets. And while the plunge was contained first to China, then to Asia, then to Europe (where the Spanish 10 Year once again surpassed 5% as expected following the carry trade unwind), with the arrival of bleary-eyed US traders the contagion is finally coming home. In a redux of last week, 10 Year yields are shooting up, hitting as high as 2.63% a few hours ago, while equity futures are now at the lows of the session. It could turn very ugly, very fast, especially if the Hamptons crowd were to actually read the stunning BIS annual report released on Sunday, which not even Hilsenrath explaining "what the BIS really meant" will do much to change the fact that the days of monetary Koolaid are ending.

First Hong Kong, Now Russia Refuses To Intervene On Snowden

In keeping with its firm Christian values, after Hong Kong slapped the US on one cheek yesterday when it allowed a passportless Snowden to leave the country for Moscow, the US has now turned the other cheek. And RUssia's Vladimir Putin was happy to oblige with a perfectly placed uppercut. As the WSJ reports, the Kremlin said Monday that it won't intervene in the case of former U.S. government contractor Edward Snowden and that Russia had no advance knowledge of his arrival from Hong Kong on Sunday. President Vladimir Putin's spokesman Dmitry Peskov said that a decision about holding Mr. Snowden and sending him back to the U.S. to face charges wasn't a matter for the Kremlin."Snowden did nothing illegal in Russia. There are also no orders for his arrest through Interpol to Russian law enforcement agencies," an unnamed security official told the RIA-Novosti news agency." Of course, the NSA which is actively intercepting every Russian (and global) form of communication, knew all about this long ago...

China Crashing: Shanghai Composite Tumbles Most Since 2009

The Shanghai Composite, which had largely been able to weather the recent dramatic shocks to both liquidity and the economy, finally threw in the towel and crashed. Moments ago the Shanghai Composite fell 5.5%, the biggest intraday slide since August 2009, and dropping below 2,000 for first time since December.

David Stockman's Non-Recovery Part 5: Peak Debt And The Wages Of Keynesian Sin

In the final section of this five-part series (Part 1, Part 2, Part 3, and Part 4) on the dismal reality behind the non-recovery, David Stockman explains what lies ahead. He details in his new book 'The Great Deformation', that the mainstream notion that there is a choice between fiscal austerity and fiscal stimulus is wishful thinking. It does not recognize that owing to the triumph of crony capitalism and printing-press money America has become a failed state fiscally. What lies ahead is a continuous, mad-cap cycling back and forth - virtually on an odd-even day basis - between deficit cutting and fiscal stimulus to the GDP. As Stockman notes, the proximate cause of this recession waiting to happen is the federal government’s unfolding encounter with Peak Debt. The latter is not a magical statistical point such as a federal debt ratio of 100 percent of GDP, but a condition of permanent crisis - "no viable economy can survive on chronic fiscal deficits nor can it fail to save at a sufficient rate to fund a healthy level of investment in productive capital assets. The blithe assumption to the contrary which animates current policy rests on self-serving clichés such as “deficits don’t matter” and the Chinese savings glut." So the American economy faces a long twilight of no growth, rising taxes, and brutally intensifying fiscal conflict. These are the wages of five decades of Keynesian sin - the price of abandoning financial discipline.

The BIS Chart That Abe And Kuroda Would Rather You Didn't See

Earlier we noted the rather peculiarly truthful (lack of optimistically-biased bullshit) annual report from the BIS as reading ZeroHedge-sermon-like. There is a smorgasbord of data, charts, and quotes strewn throughout the 204-page melodrama but one caught our eye. Reflecting on the fact that governments in several major economies currently benefit from historically low funding costs, and yet at the same time, rising debt levels have increased their exposure to higher interest rates, the BIS projects the dismal reality that any rise in interest rates without an equal increase in the output growth rate will further undermine fiscal sustainability. Although predicting when and how a correction in long-term rates will unfold is difficult, it is possible to examine the potential impact on the sustainability of public finances and how any normalization of rates (or Abe's success in creating 2% 'inflation' in Japan) leads the nation's debt-to-GDP ratio to explode to a surely-Krugman-mind-blowing 600% debt-to-GDP.