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100 Years Ago Today It Began: "Austria Has Chosen War"

The good news is that 100 years later the world is a far more stable and peaceful place.



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Macro Weakness Sends Stocks Reeling, All Indices Red Post-MH17

Well that escalated quickly. Friday's micro (earnings-based) weakness has extended to today's macro weakness and removed any "ignore the geopolitics, just buy the dips"-exuberance. All US equity indices are once again below the levels pre-MH17 headlines with the Dow and Russell 2000 worst performers. It appears investors need some reassurance that Yellen's "price-equity" ratio is still 'fair'.



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Pending Home Sales Tumble From Recovery Highs, Biggest Miss In 2014

Following last week's collapse in new home sales (and last month's massive beat and surge in pending home sales), it was likely not a total surprise that pending home sales would slow, but the -1.1% MoM print is the worst in 2014 (and the biggest miss in 2014). The median existing home price continues to rise (up 4.3% year-over-year) but this is the slowest rate of gain since March 2012. NAR is quick with the excuses and this time.. no weather is to blame.



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US Services PMI Beats After Last Week's Manufacturing PMI Record Miss, Employment Plunges

With US manufacturing PMI having missed by the most on record last week, it was only "fair" that the Services PMI from recent IPO Markit would beat expectations and hold at record highs. At 61.0 this is equal to the best print in history... but there is somethng wrong here. The surge in employment in June has been eviscerated as the index plunged back from record exuberance at 56.1 to 52.8 with some respondents noting "a degree of caution about the business outlook." This is not good news for long-awaited wage inflation that promises to lift all boats...



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China's Solution To “Property Companies Facing Huge Debt Burdens”: Much More Debt

“Property companies are facing huge debt burdens,” said Sun Binbin, a bond analyst at China Merchants Securities Co. in Shanghai. “If the regulator hadn’t eased, there probably would have been more defaults.” Or, translated: if the companies weren't allowed to "fix" their huge debt burdens with even more debt, it would have been a complete catastrophe.



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Argentina Bonds/Currency Tumble As Delegation Snubs Mediation

With 2 days until the 30-day grace period for 'negotiating' the already defaulted upon bonds is over and Argentina is once again dumped from the public markets, the demands for a "continuous mediation" by Judge Griesa appears to have fallen on dear ears. Bloomberg reports that the Argentina delegation will not meet with the mediator today.. and Argentina bonds are tumbling (and CDS soaring). Markets are implying around 45-50% chance of a default being triggered, which, as Jefferies noted last week, seems low. Argentina's black-market peso (blue dollar rate) weakened to 12.75 (just shy of its weakest ever at 13.00) implying a 50% devaluation over the peso.



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"Reprehensible" Lloyds Bank Agrees To $105 Million Wristslap For Manipulating Libor

That will teach them! Having received full credit for for co-operation and suspending some individuals, Lloyds Bank has been fined the staggeringly wrist-slap-like sum of $105 million for the "manipulation, attempted manipulation, and false reporting of Libor." As WSJ reports, the British bank becomes the seventh financial institution to strike a deal with U.S. and U.K. authorities who are conducting a long running probe into allegations of widespread attempts to manipulate Libor. With no less than the head of the Bank of England calling the bank's actions (mainpulating JPY Libor for at least 2 years) "reprehensible," and the CFTC adds individuals bevahior was a "gross breach of trust." Well we are sure after this they will never manipulate another market ever again...



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Near-Record Trulia Shorts Crushed After Zillow Acquires Incomeless Company For $3.5 Billion

What a difference a weekend makes... After offering $2 billion for Trulia last week (and seeing its share soar), Zillow has decided that $3.5 billion worth of its bubblicious paper money-stock is the right price for its real estate marketing and income-less competitor Zillow. Of course, on the back of near-record short interest the stock has exploded higher once again this morning and is now up over 60% from before last week's offer. We suspect the word 'synergy' will be used heavily (and not the word 'layoff') but in the interests of helping our fellow man, we present the combined firm's income statement...



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Spanish Bond Yields Tumble Below 2.5% - Lowest In History

European peripheral bond yields have compressed from "whatever it takes" highs to "whatever..." lows in the last two years as no amount of factual representation of the dismal reality of Europe's non-recovery can affect the centrally-planned virtuous cycle of ECB carry-trade funded idiocy occurring in the bond markets. Theoretically, Draghi's removal of the credit risk/convertibility premium has left these bonds to trade on growth/inflation expectations alone... and at record lows, they don't seem too hopeful. While Spain 10Y dropped below 2.5% (and we could list 20 fundamental factors that flash red), we thought it ironic that as Italy's 10Y drops below 2.7% for the first time in history it is delinquent on $100 billion in services rendered to its private businesses.



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UN Says MH-17 Downing "May Be War Crime"; Russia Responds Photos Of Ukraine Shelling Are Fake

With the start of the new weeks, and with the MH-17 tragedy increasingly more distant and blurred, with no definitive evidence on either presented so far, with a stripped black box revealing nothing, and with the Air Traffic control recordings still in Ukraine secret service hands, the "He said, She said" is about to escalate to a fever pitch.



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RANsquawk - Week Ahead - 28th July 2014



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Frontrunning: July 28

  • The market in one sentence: Buying on Dips Pays Most in Five Years as Stocks Rebound (BBG)
  • Europe subdued, Russia shares tumble on new sanctions (Reuters)
  • Chinese Data Don’t Add Up (WSJ)
  • Argentine Default Drama Nears Critical Stage (WSJ)
  • Global Pressure Mounts on Israel to End Gaza Fighting (BBG)
  • Ukraine troops advance as experts renew attempt to reach crash site (Reuters)
  • Prospects Brighten for Republicans to Reclaim a Senate Majority (WSJ)
  • Europe’s banking union faces legal challenge in Germany (FT)
  • Investors Bet on China's Large Property Developers (WSJ)
  • Hague court orders Russia to pay over $50 billion in Yukos case (Reuters)


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US Equities Flat While China Surges On More Stimulus And Bailout Hopes

There has been little in term of tier 1 data releases to drive the price action so far in the overnight session which means participants focused on the upcoming US related risk events including the Fed, Q2 GDP and July Payrolls. This, combined with WSJ article by Fed’s Fisher who opined that the FOMC should consider tapering the reinvestment of maturing securities and begin shrinking the Fed’s balance sheet (note that Fisher’s opinion piece is written based on a speech he gave on July 16th) meant that USTs came under pressure overnight in Asia and in Europe this morning. There has been little notable equity futures action (for now: the USDJPY algo team gave it a good ramp attempt just before Europe open, and will repeat just around the US open despite Standard Chartered major cut to its USDJPY forecast from 110 to 106 overnight), although we expect that to change since today is the day when Tuesday frontrunning takes place with full force. We expect equities to completely ignore the ongoing deterioration in Ukraine and the imminent release of EU's own sanctions against Russia, as well as what is now shaping up as an Argentina default on July 30.



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Apocalypse Preview: Chinese River Turns Blood-Red

Things in China are getting downright biblical. First it was the floating animal apocalypse: who can forget the 16,000 floating pigs, followed by a thousand dead ducks, culminating with 5 dead black swans. But nothing quite beats the dramatic impact of the inner river of Wenzhou flowing blood red.



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Second US Citizen Infected With Ebola In Liberia, Which Shuts Down Borders To Slow Epidemic

Update, one which many will say has been long overdue: Liberia Shuts Border Crossings to Slow Ebola Spread.

It was a few short hours ago when we reported that as part of the escalating Ebola epidemic in West Africa a US doctor, Kent Brantly had himself succumbed to the deadly virus. Moments ago we found out that a second US doctor from the same aid organization in Liberia, has been infected with Ebola.



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