One day after the Greek "pre-deal" was announced and the world breathed a sigh of relief, sending US stocks soaring and Greek halted stocks, well, tumbling (via ETFs and ADRs), things are oddly quiet and in fact quite red in Europe, with futures in the US modestly lower, following both China's first red close in several days (SHCOMP -1.2%), and a Europe which is hardly looking very euphoric at this moment: it is almost as if the algos finally got to read the fine print of the Greek deal after trading all day on just the headlines.
RANsquawk Week Ahead - 13th July 2015: Greece agree preliminary deal with creditors, however there still remains hurdlesSubmitted by RANSquawk Video on 07/13/2015 08:55 -0500
China Soars Most Since 2009 After Government Threatens Short Sellers With Arrest, Global Stocks SurgeSubmitted by Tyler Durden on 07/09/2015 07:57 -0500
The Shanghai Composite Index had dropped as much as 3.8% to a 4 month low before the news that the cops were going to arrest anyone who was caught "maliciously shorting stocks", when everything suddenly took off, and the SHCOMP closed a "Dramamine required" 5.8% higher, the biggest daily increase since March 2009! Stocks around the globe followed, with US equity futures wiping out much of yesterday's losses and up 1% at last check.
Today's market battle will be between those (central banks) "hoping" that a Greek deal over the weekend is finally imminent (which on one hand looks possible after a major backpeddling by Tsipras - who may never have wanted to win the Greferendum in the first place - yesterday in Brussels and today during his speech in the Euro Parliament, but on the other will be a nearly impossible sell to Greece as any deal terms will be far harsher than the deal offered by the Troika 2 weeks ago and will have no debt reduction), and those who finally noticed that the Chinese central planners have effectively lost control.
When it comes to Greece, and Europe in general, "hope" continues to remain the driving strategy. As Bloomberg's Richard Breslow summarizes this morning, "if you were looking for a word to describe the general feeling of equity markets today, you might well pick hopeful. U.S. equity futures opened higher and have been up all day. European bourses opened cautiously higher as they await word, any word, from the European finance ministers or more importantly, Chancellor Merkel. Equity markets will continue to be very reactive to European headlines, but so far, no news has been taken as a reason for hope." Which incidentally, has been the general investment case for the past 6 years: "hope" that central banks know what they are doing.
The referendum on Sunday will likely have a significant impact on the prospects of Greece reaching a new bailout agreement and the immediate future of the governing Syriza party. Following the expiration of the second bailout and the missed IMF repayment on 30th June, Greece has had to impose capital controls while negotiations between the country and its creditors have been put on hold until after the referendum. Eurozone officials have indicated that a “No” vote would likely mean a Greek exit from the currency union although the Greek government sees the vote as only pertaining to the terms of a bailout programme.
While we showed what the all important Goldman jobs preview looks like, here is a quick snapshot of what consensus expects will be reported in 15 minutes:
- US Change in Nonfarm Payrolls (Jun) M/M Exp. 233K (Low 160K, High 290K), Prev. 280K, Apr. 221K
- US Unemployment Rate (Jun) M/M Exp. 5.4% (Low 5.3%, High 5.5%), Prev. 5.5%, Apr. 5.4%
- US Average Hourly Earnings (Jun) M/M Exp. 0.2% (Low 0.1%, High 0.3%), Prev. 0.3%, Apr. 0.1%
So much going on that by the time an article is prepared, everything has changed and it has to be scarpped. But, in any event, here is an attempt to summarize all that has happened in another turbulent overnight session.
The Greek D-(efault) day has arrived, and with it so has quarter-end window dressing for many underwater hedge funds (recall the S&P is now red for the 2015) which means the rumor mill today will be off the charts. And sure enough, less than an hour ago, futures exploded higher as did the EURUSD, following another "report/rumor" of a last minute detente between Greece and the Troika when Greek Ekahtimerini said that "Tsipras is reconsidering the last-ditch offer made by European Commission President Jean-Claude Juncker, sources have told Kathimerini."
Following yesterday's furious market drop in Chinese stocks, just before the overnight open, Morgan Stanley came out with a much distributed report urging investors "Not to buy this dip", and so they didn't. As a result, the Shanghai Composite imploded, at one point trading down 8% while the Chinext and Shenzhen markets crashed even more. This was the single biggest Shanghai Composite one-day drop since 2007, and with a close at 4192.87 the SHCOMP is now on the verge of a bear market, down 19% from its June 12 highs. China's second largest market, Shenzhen, is now officially in a bear market.