Eurozone

A non-bombastic discussion of market forces and what to expect next

According to the latest, just released survey concerns about both geopolitics and Greece have been largely forgotten, as have Chinese debt defaults, and instead these have been replaced with far more overarching fears about a China recession (made all the more acute after China's devaluation) and an Emerging Market debt crisis. In fact, according to BofA, "2 out of 3 investors think either China recession or EM debt crisis = biggest "tail risks."

It will probably not come as a surprise that with oil trading at 6 year lows, and with China barely able to keep the plates spinning,  according to the latest NYSE data, Energy and Industrial were the most shorted sectors as the shorts congregate, having smelled if not blood than ongoing commodity and excess capacity turmoil. What about the remaining 8 sectors?

Everyone seems to focus on gold's price while forgetting its value as a diversification.

PBoC Injection Shows China Worries About Outflows- WSJ

Greek PM Alexis Tsipras has lost the support he needs to win a confidence vote, setting up the possibility of snap elections. Meanwhile, German Chancellor Angela Merkel's bulletproof reputation will be tested on Wednesday when the Bundestag will be forced to vote on the Greek bailout without an assurance that the IMF will ultimately shoulder a portion of the burden.

"Time is now rapidly running out," warns The Telegraph's John Ficenec as the British paper takes a deep dive into the dark realities behind the mainstream media headlines continued faith in central planning. Sounding very "Zero Hedge", Ficenec warns that from China to Brazil, the central banks have lost control and at the same time the global economy is grinding to a halt. It is only a matter of time before stock markets collapse under the weight of their lofty expectations and record valuations.

• Markets will be keeping a close an eye on what action/if any the PBoC take to try and keep Chinese growth prospects on course.
• Main releases this week come in the form of US and UK CPI reports and the FOMC minutes release

• Oil moves nearer six-year low on Japan data, oversupply (Reuters)
• Commodity Slide Spurs Treasuries as Emerging Markets Extend Drop (BBG)
• Because 7 years is "just right" - BOE Official Says Don’t Wait Too Long on Rates (WSJ)
• How Medicare Rewards Copious Nursing-Home Therapy (WSJ)
• Millennials Are Developing Parents’ Taste for Jaguars, Cadillacs (BBG) ... and even more debt
• Mexican Billionaire’s Firms Swept Up in U.S. Probe of Citigroup (BBG)

The purpose of austerity is to create insecurity and instill fear in the general population in order to protect the finance and banking sector from popular rage against the crimes the participants of this sector have committed against ordinary people. This rage ought to have given rise a long time ago to legal actions and desperately needed fundamental reforms to take away from bankers the right to create money, a right which they have abused at tremendous cost to ordinary people. Instead of collective reforms, what we are being subjected to is a policy of deliberately spreading insecurity together with the scapegoating of vulnerable people.

A look at next week's data in the somewhat larger context, and a look at interest rate differentials

China, Australia, Brazil, Canada, Sweden - it is beyond us how anyone can declare the crisis isn’t spreading. Be prepared – there are going to be lots of opportunities to both make and lose money. But first, you have to recognize what is happening.

Anyone with any sense for global economic trends ought to be worried. The signs are everywhere of a serious deflationary crisis.

Greek lawmakers are now set to vote on the final draft of the country's third bailout program. If the proposal doesn't clear parliament, eurozone finance ministers will likely delay implementation of the ESM program, setting up the possibility that Athens will be forced to tap the remaining funds in the EFSM for a bridge loan in order to make a €3.2 billion payment to the ECB next week.

The last three times Asian currencies collapsed against the US Dollar at this rate, the global financial system was shaken to the core. With China piling on this time, we wonder - what happens next, as a tsunami of deflation is exported towards the shores of the "we'll hike no matter what" Fed's American shores...