Greece

We start off the overnight wrap up with the usual place, China, where in a mirror image of Wednesday's action, stocks once again started off uneventful, then gradually rose in the afternoon session and meandered near unchanged territory until the last half hour, when out of the blue they tumbled to close near the day's low, some 2.2% below yesterday's closing level.  What caused it?  One possible catalyst came from Reuters which reported that that Chinese banks were investigating their exposure to the stock market via wealth management products and loans backed by stock as collateral. 

"He is going to pay me back in some sort of product when he is able to, maybe in cheese."

Religious imagery... peak condescension... everyone proclaiming "gold is dead"... In a nutshell, sentiment has plunged to negative levels not seen in years, if not more than a decade. Here are four mainstream media articles that provide some evidence we may be approaching a sentiment low. Some of them we're sure you’ve seen, others perhaps not. What amazes us is how they’ve all come out within the last two weeks.

If Greece does find it has a legal basis to criminally charge Varoufakis with treason merely for preparing for a Plan B, then it brings up an interesting question: if Varoufakis was a criminal merely for preparing for existing the Euro, then comparable treason charges should also be lobbed against none other than Varoufakis' nemesis - Eurogroup president and Dutch finance minister Jeroen Dijsselbloem.

Why I've come to thinking that Kyle Bass' short JGB premise may well be wrong

10 year Greek bond yields are spiking this morning (and prices therefore plunging) as trading actvity picks up in the dormant peripheral capital markets. The 2025s are downover 5pts from their last traded price back in late June with yields spiking back up toward 12.5%. This derisking comes after, as we detailed earlier, not only is the Greek economy collapsing but while Brussels is "satisfied with the smooth and constructive cooperation with the Greek authorities and that should allow us to progress as swiftly as possible," Greek PM Tsipras is threatening snap election as rebellion within 'his' party grows.

There will always be some "crisis" or excuse to do nothing. But the fact remains that the U.S. economy is not at zero interest rate health. Monetary policy is broken with the status quo. Unlimited and constant central bank participation in the markets is ultimately destructive, encourages dangerous risk taking (just buy every dip, nothing can go wrong,) and has become too much of an aphrodisiac for policy makers. Savers are being told you are the patsies for share buybacks.

With creditors now on the ground in Athens, and with a third prior actions vote in parliament due at the first of August, Greek PM Alexis Tsipras spoke out about the new bailout "deal", debt re-profiling, the referendum, party politics, and the possibility of early elections in an interview with Sto Kokkino radio station.  

On a day when market participants will care about only one thing - how hawkish (or dovish) the FOMC sounds at 2:00 pm (no Yellen press conference today) - Chinese stocks provided the usual dramatic sideshow and traded unchanged or modestly negative for most of the day despite the latest $100 billion injection, the close of trading on Wednesday was a mirror image of what happened in the last hour on Monday, as various Chinese "plunge-protection" mechanism went into a furious buying frenzy and government-backed funds rushed to buy anything that trades in the last 60 minutes of trading in what may be the most glaring example of banging the close yet.

At the end of the day, both China and Greece are signaling that a new round of deflation has begun in the markets. Stocks are bouncing today, but a tectonic shift has begun.

The FOMC are to hold their July policy meeting on Wednesday at 1900BST/1300CDT with the overwhelming consensus being that the Fed will once again keep rates at their record low with attention more so on subtle tweaks to the statement given the broader consensus of a September move and given that this month there will be no projections or press conference.

Seriously...

In a key ruling that may have implications far beyond Austria's borders, the country's constitutional court has struck down a bail-in that would have imposed losses totaling some €800 million on junior Heta bondholders.

As Greece prepares to weather still more austerity in exchange for a third EU bailout program, the economy has fallen into a veritable tailspin, as retail sales collapse, doctors flee, and credit is nowhere to be found. 

"Greece is playing it correctly. Agree to everything. Give Germany no excuse to do what they want. Get the money. This is why France, among others, want this all agreed as quickly as possible, because they know this deal is not how it will end, but an end that keeps the EUR together must be found. The Germans know it too. They also know that they have been had and it is their own fault."