Hong Kong

• Gold claws back ground, European assets lose Greek tarnish (Reuters)
• Greece's Euro Exit Back on the Agenda Next Year, Economists Say (BBG)
• Greece submits bill needed to start rescue talks (Reuters)
• Wall Street Lenders Growing Impatient With U.S. Shale Revolution (BBG)
• Overtime Rules Send Bosses Scrambling (WSJ)
• As Markets Swing, Beijing Steadies Yuan (WSJ)
• Tennessee rampage suspect went to Qatar in 2014 (Reuters)
• Kathryn Dominguez to Be Nominated for Fed Governor (WSJ)

Chinese Gold reserves jump 604 tons from 1,054 tons last reported in 2009 to 1,658 tons. Many gold observers ask: "Is that it"? Since 2009 China has mined over 2,000 tons of gold and imported over 3,300 tons of gold through Hong Kong*. Where did it all go?

Many analysts believe the officially reported 1,660 tonnes to be an understatement given the enormous volumes of gold that have been passing through Hong Kong - and through Shanghai in more recent years - and the large amounts that have been produced and bought domestically.

It is important to remember that as we have long pointed out two other entities, besides the PBOC, have also been buying gold - the State Administration of Foreign Exchange (SAFE) and the China Investment Corporation (CIC).

• Gold Plunges to Lowest Since 2010 (BBG)
• In Greek crisis, one big unhappy EU family (Reuters)
• Greek Banks Reopen Their Doors (WSJ)
• Greek reshuffle hints at autumn election (FT)
• Angela Merkel signals conditions for Greek debt talks (FT)
• Dollar hits three-month high on rate view, pans gold (Reuters)
• History Shows Iran Could Surprise the Oil Market (BBG)
• ‘Charlie Hebdo’ Will Cease Publishing Cartoons of Prophet Muhammad (Newsweek)

Today's action is so far an exact replica of Friday's zero-volume ES overnight levitation higher (even if Europe's derivatives market, the EUREX exchange, did break at the open for good measure leading to a delayed market open just to make sure nobody sells) with the "catalyst" today being the official Greek repayment to both the ECB and the IMF which will use up €6.8 billion of the €7.2 billion bridge loan the EU just handed over Athens so it can immediately repay its creditors. In other words, Greek creditors including the ECB, just repaid themselves once again. One thing which is not "one-time" or "non-recurring" is the total collapse in commodities, which after last night's precious metals flash crash has sent the Bloomberg commodity complex to a 13 year low.

The divergence theme is not longer being eclipsed by the Greek drama and the Chinese stock market slide.  See how this week's developments fit into the bigger picture.  

Due to significant retail participation and the fact that the equity mania in China has served as a distraction for a nation coping with decelerating economic growth and a bursting property bubble, some (and we were among the first) began to suggest that the broader economy and indeed, social stability, may be at risk in China if stocks continued to fall. The extent to which this suggestion represented a real concern (as opposed to the ravings of a tin foil hat fringe blog) was underscored by the extraordinary measures China adopted in a desperate attempt to stop the bleeding and, later by several sellside strategists who began to warn about possible spillovers into the real economy. Now, with Beijing still struggling to restore the stock bubble, the first signs of knock-on effects are beginning to emerge.

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• Greece licks wounds after bailout vote, ECB move expected (Reuters)
• Lose-Lose: Pushing Greece Out of Euro Is Costlier Than Write-Off (BBG)
• EMU brutality in Greece has destroyed the trust of Europe's Left (Telegraph)
• Schaeuble Shrugs Off Greek Vote Saying Euro Exit Is Best (BBG)
• Merkel’s tough tactics prompt criticism in Germany and abroad (FT)
• Investors Get Caught in Oil’s Slippery Wake (WSJ)
• Obama Girds for Battle With Congress on Iran Deal (WSJ)

• Tsipras Braves Parliament on Aid as Greek Outlook Worsens (BBG)
• European markets rise before Yellen speech, Greek vote (Reuters)
• China’s Growth Beats Economists’ Forecast as Stimulus Kicks In (BBG)
• China stocks drop again, positive data shrugged off (Reuters)
• Yellen intensifies Republican outreach amid Fed probe, Senate bill (Reuters)
• Iran deal holds both promise and peril for Hillary Clinton (Reuters)
• Iranians Party Into the Night as Khamenei Backs Accord (BBG)

As $170 billion hedge fund Bridgewater noted, "new participants are now discovering that making money in the markets is difficult," and sure enough, as WSJ reports, Asian hedge funds have suffered steep losses in June. Several hedge funds were hit with losses on longs (unable to square positions due to suspensions) as well as a dearth of effective tools to short, or bet against, Chinese stocks as they dropped, highlighting the downside of investing in an environment where managing risks is difficult and government actions are unpredictable.As the world anxiously awaits tonight's Retail Sales, Industrial Production, and crucially #goalseeked GDP, Chinese big cap stocks are continuing losses from the last 2 days. The CSI-300 - China's S&P 500 - is now down over 7% from post-intervention highs on Monday.

“Greeks cannot withdraw cash left in safe deposit boxes at Greek banks as long as capital restrictions remain in place”, Nadia Valavani, a Deputy Finance Minister in Greece told local television station according to a Reuters report.

• Greek lawmakers split over bailout as vote looms (Reuters)
• Greek Bailout Rests on Asset Sale Plan That Already Failed (BBG)
• Greece Needs $25 Billion to Get Through August, Scicluna Says (BBG)
• Tsipras Enters Parliament Den to Sell Aid Deal to Greeks (BBG)
• Greece makes samurai bond repayment (FT)
• Iran, World Powers Have Reached Nuclear Agreement (BBG)
• Janet Yellen’s Fed Flounders in Political Arena (WSJ)

• Greece Capitulates to Creditors’ Demands to Cling to Euro (BBG)
• Euro zone strikes deal with Greece after all-night struggle (Reuters)
• Tsipras Moves From Predator to Prey at Euro 'Torture' Summit (BBG)
• Euro’s Greek Boost Evaporates as Analysts Predict Losses to Come (BBG)
• Greek Fury Meets Resignation at Demands for Concessions (BBG)
• Poland Blames ‘Carefree’ Greek Populists for Tough EU Aid Deal (BBG)
• Europeans Press for Iran Nuclear Deal on Monday (WSJ)
• Iran nuclear talks: Deal 'near completion' (BBC)
• In speech, Clinton to put wages at heart of economic policy (Reuters)
• China’s Incendiary Market Is Fanned by Borrowers and Manipulation (NYT)

The Chinese economy is in an obvious deepening swoon and the median company on the Shanghai exchange had a PE ratio of 60X before the recent break. But no matter. Not only does everything financial race the skyscrapers to the sky in the land of red capitalism, but valuation upside is apparently whatever the comrades in Beijing want it to be. Says Goldman’s chief stock tout for China,“It’s not in a bubble yet.”. Why? Because “China’s government has a lot of tools to support the market.”