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Futures Flat, China Slides Again, Oil Tumbles Near 2015 Lows

It has been more of the same in the latest quiet overnight session where many await tomorrow's NFP data for much needed guidance, and where Chinese markets opened weaker, rose during the day, then went through a mini rollercoaster, then sold off in the afternoon.  The Shanghai Composite and HS China Enterprises indices finished down .9% and .3%, respectively. Trading volume continued to be very subdued, running at half the thirty day average as some 20 million "investors" have pulled out of the market to be replaced with HFTs such as Virtu.  But while stock action has been muted, the story of the night so far is oil and the energy complex broke out of a tight overnight range early in the European session to continue yesterday's downward trend, seeing WTI Sep'15 futures fall below the USD 45.00 handle after yesterday's DoE crude oil inventories saw US crude output rise by 0.552%. As of this moment oil was trading at $44.72, just pennies above the low print of 2015.

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Chinese Stocks Slide Again, Copper Tumbles To 6 Year Low; Greek Market Crashes After One Month Trading Halt

If China had hoped it would root out intervention by eliminating Citadel's rigging algos, and unleash a buying spree it was wrong: the Shanghai Composite opened negative, and never managed to cross into the green, despite the usual last hour push higher, ending down -1.1% and down for 6 of the past 7 days. The real action, however, was not in Asia but in Europe, and specifically Greece, where the stock market finally reopened after a 1+ month "capital control" hiatus. Despite the attempt to micro manage the reopening, the result was not pretty, with stocks crashing 23% at the open and staging barely a rebound trading -17% as of this moment, even as banks promptly traded down to the -30% limit as the realization that an equity-eviscerating recapitalization (or bail-in) is now inevitable.

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The Great Greek Fudge

A third Greek bailout involving loans from the European Stability Mechanism (ESM), the eurozone’s bailout scheme, is now being negotiated. The start was quite rocky, with haggling over the precise location in Athens where negotiations need to take place and Greek officials once again withholding information to creditors. Therefore, few still believe that it will be possible to conclude a deal in time for Greece to repay 3.2 billion euro to the ECB on 20 August. Several national Parliaments in the Eurozone would need to approve a final deal, which would necessitate calling their members back from recess around two  weeks before the 20th, so it’s weird that French EU Commissioner Pierre Moscovici still seems so confident that the deadline can be met.

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If Varoufakis Is Charged With Treason, Then Dijsselbloem Should Be As Well

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.

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Frontrunning: July 28

  • Fed Officials May Offer More Clarity on Rates (WSJ)
  • Stocks rebound, shrugging off volatile and weak China (Reuters)
  • Three-Day Selloff Knocks 11% From China Shares (WSJ)
  • China shares fall again as Beijing scrambles to calm markets (Reuters)
  • VAT hikes to make Greek destination less popular (Kathimerini)
  • Varoufakis - Something is rotten with the eurozone’s hideous restrictions on sovereignty (FT)
  • EU denies Varoufakis 'tax control' claims (FT)
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Ex-IMF Chief: Germany Should Leave The Euro, Not Greece

In her euro-hegemonic role Germany failed to properly handle the Greek Crisis. What economics have been whispering among themselves after the scandalous Brussels Agreement of July 13th is now on the public discussion. One of IMF’s former European bailouts official, Ashoka Mody made it very clear in his article on Bloomberg on Friday morning: It’s Germany not Greece that has to leave the eurozone.

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De-Dollarization - Mapping The Ruin Of A Reserve Currency

The dollar has been a stalwart of international trade over the majority of the last century. Around the time of the formation of the Eurozone, it reached its recent peak at 71.0% of official foreign exchange reserves. Since then, its composition of global reserves has more recently dropped to a more modest 62.9% in 2014. However, the dollar is slowly losing its status as the world’s undisputed reserve currency.

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Complete Humiliation: Greek Parliament Pressed To "Approve" German "Coup"

In the final act of what has become a modern Greek tragedy, lawmakers will now be forced to choose between "approving" what is effectively a German overthrow of the Greek government, or face the collapse of the banking system and an economic depression of unimaginable propotions. 

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Schaeuble's Modest Proposal For Greek Bridge Loan: Pay Salaries In IOUs

While Greek PM Alexis Tsipras is busy figuring out how best to go about pushing the "deal" he reached on Monday morning in Brussels through parliament, EU finance ministers are scrambling to put together billions in bridge financing that will hold Athens over until the activation of the ESM program which is likely at least four months away. Although it's as yet unclear which "least bad" option is preferable for Greece's external debt, Wolfgang Schaeuble has an idea for how the country might pay public sector employees.

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Munchau: "The Eurozone As We Know It Is Destroyed"

Despite the euphoria in global equity markets, The FT's Wolfgang Munchau - once one of the keenest euro enthusiasts - warns regime change is coming in Europe. The actions of the creditors has "destroyed the eurozone as we know it and demolished the idea of a monetary union as a step towards a democratic political union," Munchau exclaims, fearing they have "demoted the eurozone into a toxic fixed exchange-rate system, with a shared single currency, run in the interests of Germany, held together by the threat of absolute destitution for those who challenge the prevailing order." He concludes rather ominously, "we will soon be asking ourselves whether this new eurozone, in which the strong push around the weak, can be sustainable."

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After "Deal", Here's What's Next For Greece

Now that Greece has capitulated and offered up its sovereignty in what can only be described as an unconditional surrender to Berlin and Brussels, here's what's next for the country, the government, and the Greek people.

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Deal Struck Following Total Capitulation By Tsipras: Market Awaits Greek Reaction To Draconian Deal Terms

Just around 9am CET, after a 17-hour mammoth all-night session, Greece did manage to cobble together a "deal" if one may call this latest embarrassing can-kicking that, which was nothing short of total capitulation by Tsipras. As part of the deal, Greece "surrendered to European demands for immediate action to qualify for up to 86 billion euros ($95 billion) of aid Greece needs to stay in the euro" in the words of Bloomberg.

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Why Greece Is The Precursor To The Next Global Debt Crisis

The one undeniable truth about the debt drama in Greece is that each of the conventional narratives - financial, political and historical - has some claim of legitimacy. These facts matter not only because contagion from Greek debt defaults may ripple in dangerous ways through the financial system, but because they are also true for many other members of the Eurozone. The Euro is a fatally-flawed monetary concept and what we now seeing playing out was eminently predictable from the start.

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