"Calm Reigns" Everywhere As Greece Inches Closer To Default, China Crashes

Tyler Durden's picture

In what is perhaps the most glaring instance of central bank intervention yet, Reuters today captured the market mood as follows: "Calm ruled Europe's stock and currency markets on Friday as Greece inched closer to a default later this month....the euro was down just 0.3 percent against the dollar and major European stock markets gained in early trade." Why is Europe (and by extension US futures) so desperate to show green today even with a Greek default imminent? The same reason we explained back in January when we said the ECB and the Fed would do everything in their power to eliminate all Greek "negotiating" leverage which from day one was the attempt to create market contagion from Grexit. Unfortunately for Greece, the ECB's QE intervened and blew a hole right through its plans, and now, it finds that not only do markets not care about the Greek contagion about which even Janet Yellen warned, but in the US hit all time highs!

The inverse, however, is certainly not true as ECB "sources" leak each and every day just how bad the Greek bank run is, and promptly put this information into the public domain in hopes of accelerating the already terminal bank run which unless halted will lead to capital controls and ultimately the fall of the Tsipras regime: precisely what the Troika has been after all along, as we also explained all the way back in February. Sure enough, just a few hours ago Reuters "sources" reported that after €2 billion exited the Greek financial system in the first three days of the week, on Thursday the outflow hit what may have been a record €1 billion in one day.

Varoufakis quickly slammed such rumors: "Regrettably, no discussion of our proposal took place within the Eurogroup. Even more regrettably, instead of that essential discussion, we observed pernicious ‘leaks’ to the press regarding Greece’s banking system." Rumors which have done their job, and have put the Greek financial system in a toxic spiral from which there is now no return absent total surrender by the government, or, of course, a last minute bailout by the Russia-China axis which would diametrically change the shape of things in Europe.

But we'll cross that bridge when we get to it, especially since overnight China had other problems, and as noted earlier, had its stock market not only enter the third 10% correction in the past few weeks, but its stocks tumbled 6.4%!

A closer look at markets shows that stocks in Asia settled mixed, after the sentiment following a positive close Wall Street which  saw the NASDAQ Composite and Russell 2000 print fresh record highs, was offset by Greek debt concerns and amid reports out of China that the CSRC is planning trading risk management rules for brokerage firms. Despite the Shanghai Comp (-6.4%) entering technical correction phase amid reports that the CSRC are planning implementing trading risk management rules for brokerage firms and the 25 IPO's which have occurred this week. Furthermore, analysts at JP Morgan noted that China's stocks are a buying opportunity as the government will likely intervene should equities fall further, also noting that the most compelling trade is H shares. Meanwhile, the BoJ left their annual rise in monetary base unchanged in a 8-1 vote, with JPY taking little notice of the decision and the Nikkei 225 (+0.9%) ended the week in the green after breaking back above its 50 DMA to reclaim the 20,000 level.

As noted above, while Greece teeters, stocks in Europe are levitating: The sentiment was akin to the calm before the storm, after nothing was agreed at yesterday’s Eurogroup meeting with EU’s Tusk subsequently convening an emergency summit of Eurozone heads for 1800BST on Monday. Furthermore, multiple sources suggested that Greek Bank deposit outflows reached over EUR 1bln yesterday. This morning Greek PM Tsipras said that he is positive on Monday's emergency Eurozone meeting, adding that there will be a solution that would allow Greece to return to growth. While EU's Moscovici said that the EU is not looking for Greece to slash pensions, and reiterates that the 'ball in Greece's court'. The German Finance Ministry spokeswoman said that capital controls on Greece have not been discussed.

Still, stocks (Eurostoxx50 +0.8%) traded higher and were in part supported by the follow through price action out of the US, where both the NASDAQ Composite and Russell 2000 indices closed at record highs, though it is worth remembering that today sees number of options/futures contracts expiry which may skew the price action. Still, gains were led by the more defensive sectors such as health-care, reinforcing the fragile nature of this morning’s upside.

The cautious sentiment following yet another failure to agree to resolve the crisis in Greece yesterday evening as well as the technical head and shoulders observed in EUR/USD which saw the pair trend lower throughout the first half of the European trading session, while CHF also benefited from safe-haven flows. At the same time, the consequent bounce back by the USD  index (+0.4%) weighed on the commodity linked currencies such as AUD, which saw AUD/USD move back below the 50DMA and also the 100DMA lines.

Firmer USD weighed on the commodity complex, with WTI and spot gold trading lower and the precious metals trading below the 200DMA and in close proximity to the 100DMA line.

In summary: European shares remain higher, close to intraday highs, with the autos and travel & leisure sectors outperforming and basic resources, utilities underperforming. Meeting of finance officials to reach a deal over Greek aid ended in frustration, forcing leaders to call for an emergency summit for Monday. ECB plans to hold an emergency session of its Governing Council on Friday to discuss a deterioration in liquidity at Greek banks, three people familiar said. German airwave auction raises $5.7b to top 2010 sale. Bank of Japan leaves monetary policy unchanged as forecast. Shanghai Composite Index capped its worst weekly decline in seven years.

The French and Dutch markets are the best-performing larger bourses. The euro is weaker against the dollar. Japanese 10yr bond yields fall; Greek yields decline. Commodities decline, with copper, Brent crude underperforming and natural gas outperforming.

There is no macro events in the US, just the Fed's Williams and Mester on the docket, which means many more Greek rumors and denials, lots of stop hunts - if yesterday is any indication, stocks should soar in the first few seconds of trading - and the usual OpEx "pin" manipulation.

Market Wrap

  • S&P 500 futures up 0.1% to 2116.7
  • Stoxx 600 up 1.1% to 388.5
  • US 10Yr yield down 2bps to 2.32%
  • German 10Yr yield down 3bps to 0.78%
  • MSCI Asia Pacific up 0.4% to 147
  • Gold spot down 0.1% to $1200.4/oz
  • 79.2% of Stoxx 600 members gain, 18.5% decline * Eurostoxx 50 +1.3%, FTSE 100 +0.5%, CAC 40 +1.3%, DAX +1.1%, IBEX +1.2%, FTSEMIB +1.2%, SMI +1%
  • Asian stocks rise with the ASX outperforming and the Shanghai Composite underperforming.
  • Nikkei 225 up 0.9%, Hang Seng up 0.2%, Kospi up 0.2%, Shanghai Composite down 6.4%, ASX up 1.3%, Sensex up 0.7%
  • Fidelity Offers to Take Colt Private for 570 Million Pounds
  • Euro down 0.48% to $1.1305
  • Dollar Index up 0.38% to 94.4
  • Italian 10Yr yield down 6bps to 2.24%
  • Spanish 10Yr yield down 5bps to 2.23%
  • French 10Yr yield down 5bps to 1.16%
  • S&P GSCI Index down 0.9% to 433.5
  • Brent Futures down 1.4% to $63.4/bbl, WTI Futures down 1.1% to $59.8/bbl
  • LME 3m Copper down 1.7% to $5659/MT
  • LME 3m Nickel down 0.7% to $12635/MT
  • Wheat futures down 0.5% to 491 USd/bu

Bullet Headline Summary from Bloomberg and RanSquawk

  • EUR trades lower after nothing was agreed at yesterday’s Eurogroup meeting with EU’s Tusk subsequently convening an emergency summit of Eurozone heads for 1800BST on Monday.
  • Deutsche Bank analysts state that capital controls in Greece are looking closer than ever, however the German Finance Ministry refuted those claims and said that capital controls have not been discussed.
  • Going forward, focus will be on the release of the latest CPI report out of Canada, impending update by Moody’s on Spanish sovereign debt rating and also ECOFIN meeting
  • Treasuries gain overnight, U.S. 10Y yield now ~8bps lower WTD, as concerns over potential Greek EU exit sends investors into lower risk assets; there are no U.S. economic data releases today.
  • The ECB plans to hold an emergency session of its Governing Council today to discuss a deterioration in liquidity at Greek banks, three people familiar with the matter said
  • Greek PM Tsipras insisted a deal to avert a default can be reached at an emergency summit of European leaders on Monday
  • With Greece on the brink of running out of money and at risk of reneging on its June 30 IMF repayments, Portugal is desperate  to make sure it doesn’t get dragged back into another debt crisis
  • Danish voters ousted the government of Prime Minister Helle Thorning-Schmidt and backed an opposition in which the anti- immigration Danish People’s Party emerged as the biggest force
  • European banks are heading to Asia for capital as new rules at home demand they sell more than $1 trillion of equity and subordinated debt to increase loss buffers
  • Chinese stocks tumbled, capping their worst week since the global financial crisis in 2008, amid mounting concern that the nation’s longest bull market has propelled valuations to unsustainable levels
  • Texas Governor Abbott signed a law last week to build a depository for its 5,600 bars of gold and repatriate it from the Federal Reserve in New York
  • S&p500 companies listed buybacks or dividends among the use of proceeds in $58 billion of bond deals in the past three months, the most on record, according to data compiled by Bloomberg and Sundial Capital Research
  • Sovereign 10Y bond yields lower, led by Greece (-49bps). Asian, European stocks gain, U.S. equity-index futures gain. Crude oil, copper, gold lower

US Event Calendar

  • 11:40am: Fed’s Williams speaks in San Francisco
  • 12:45pm: Fed’s Mester speaks in Pittsburgh

DB's Jim Reid completes the overnight event recap

It looks like it’ll be make or break week for Greece next week after yesterday’s Eurogroup stalemate resulted in an emergency EU Leaders summit being scheduled for Monday in Brussels. The fragility of deposit flight on Greek banks looks set to have hit new highs after the ECB also announced that it plans to hold an emergency session of its Governing Council concerning this today, just two days after raising the ELA cap and with Reuters headlines suggesting that deposit outflows amounted to around €2bn from Monday through Wednesday this week. Despite the Greece concerns, the more dovish tone out of the Fed on Wednesday - which was perhaps reinforced at the margin by yesterday’s inflation data - supported equity markets yesterday as the S&P 500 (+0.99%) and Dow (+1.00%) both enjoyed a better session, while the Stoxx 600 (+0.13%) and DAX (+1.11%) managed to pare earlier losses into the close.

The rhetoric was unsurprisingly negative following yesterday’s Eurogroup. With the IMF confirming that no grace period applies to the June 30th bundled repayments and subsequently resulting in default should it be missed, Eurogroup President Dijsselbloem summed up yesterday’s progress by saying that ‘regrettably, too little progress has been made’ and that ‘no agreement is in sight’. EC Council President Tusk urged that ‘it is now time to urgently discuss the situation of Greece at the highest political level’, while Dijsselbloem, when questioned if he could imagine Greece being forced out of the Euro, said that ‘the way it goes now we’re going in that direction’. Meanwhile, Greek finance minister Varoufakis warned that an ‘accident’ was drawing ‘dangerously close’. It’s now looking likely that the EU summit proposed for Monday will conclude with a take it or leave it offer as well as a formal deadline. In the mean time, with deposit flight from Greek banks under huge pressure, the ECB’s Coeure said that he was unsure if Greek banks would be open on Monday although this was seemingly downplayed by an EU official in headlines later on Bloomberg. Capital controls appear to be drawing ever closer with each passing day however.

So recapping the calendar now, an emergency ECB Governing Council meeting will be held today (scheduled for 11am GMT) to discuss the ELA cap. This will be followed by an EU Emergency Leaders Summit due 6pm GMT on Monday, while it’s possible that over the weekend we get another Eurogroup meeting to prepare the agenda. A Heads of State and Government Summit is then scheduled for 25th-26th June before IMF bundled payments due June 30th. Of course this timeline will be subject to what happens on Monday. It’s set up to be another jittery one for markets again next week however.

Markets yesterday appeared to shrug off Greece temporarily for the most part and take the lead from Wednesday’s FOMC. 10y Treasuries initially extended their move down in yield, falling around 4bps at the open before then paring most of the gains to finish slightly higher (+1.8bps) at 2.335%. The Dollar extended losses however with the Dollar index falling 0.27% and to the lowest level now since May 15th. Gold (+1.38%) had its strongest day for nearly 2 months, closing at $1202/oz. In terms of the data, yesterday’s May CPI print for the US showed a miss versus expectations at both the headline and the core, although in reality this benefited from rounding more than anything else. Unrounded, both headline (+0.4% mom vs. +0.5% expected) and core CPI (+0.1% mom vs. +0.2% expected) came in at +0.4445% and +0.1454% respectively and so a smaller miss than first anticipated. It was enough to bring the annualized rates down to 0.0% yoy and +1.7% yoy however.

Looking at the follow up in markets in Asia this morning, aside from further weakness in China, equity bourses are generally following the lead from the US. Indeed, the Nikkei (+0.77%), Hang Seng (+1.08%), Kospi (+0.63%) and ASX (+1.29%) are all up. It’s a different story in China however where the Shanghai Comp (-2.05%) and Shenzen (-2.55%) have taken a steep leg lower and are bordering now on a 10% correction from the June 12th highs. Elsewhere, 10y Treasuries are 2.1bps lower at 2.313% and Asia credit is around a basis point tighter. The BoJ has also kept its asset purchasing scheme unchanged at ¥80tn annually in its latest statement. The Bank said that inflation ‘appears to be rising on the whole from a somewhat longer term perspective’ while the board also said that the economy ‘has continued to recover moderately’.

Aside from the inflation data it was a reasonably strong day for data flow in the US. Initial jobless claims (267k vs. 277k expected) fell 13k to bring the four-week average down to 277k. Real average weekly earnings remained unchanged at +2.3% yoy, while the June reading for the Philadelphia Fed business outlook rose 8.5pts to 15.2 (vs. 8.0 expected). Finally the Conference Board’s leading indicator was up +0.7% mom (vs. +0.4 expected), although that’s supported by strong building permits data for last month which we previously noted was probably benefiting from a tax incentive and is likely to return to more normalized levels.

European markets certainly appeared to be supported by the better sentiment in the US session. Having traded in negative territory for most of the day, equity markets pared losses although it appeared that some mid-morning Greece headlines concerning funding extensions also helped. Greek equities actually closed a touch higher (+0.37%) while 10y yields fell 9.3bps to 13.03%. Yields fell across most of Europe yesterday in fact. 10y yields in Spain (-5.1bps), Italy (-2.1bps) and Portugal (-5.3bps) all moved down, while Bunds finished just the 0.1bps lower at 0.805%. The only notable data release came out of the UK where retail sales (+0.2% mom vs. -0.2% expected) helped support a stronger day for the Pound (+0.30%), rising for the fifth consecutive session against the Dollar to a seven-month high at $1.588.

There was more Central Bank focus in Europe yesterday. The Swiss National Bank kept the deposit rate at a record low, with SNB’s Jordan providing a slightly more upbeat tone for the outlook and upgrading the bank’s inflation forecast modestly for the remainder over the year. In Norway we saw the Norges Bank, as expected, cut its deposit rate to a record low 1%. The outlook continued to remain dovish with a statement from the Central Bank saying that the rate may be reduced further in the course of autumn. Updating our list we’ve now got 52 Central Banks who have eased so far this year.

In terms of today’s calendar it’s pretty quiet for the most part with just German PPI and UK public sector net borrowing data due this morning while in the US there are no data releases expected. The Fed’s Mester and Williams speaking will be important in the context of the first Fedspeak post FOMC. The focus is set to remain on Greece however starting with the ECB’s emergency ELA meeting.

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Bearwagon's picture

Default, already, Greece, damn it! You could have pulled an iceland all the time, and it still is not too late. Default, and you shall find out that this has never been about you in the first place ...

Element's picture

It's time.

Remember in 2010 when, "This Time Is Different: Eight Centuries of Financial Folly", by Carmen M. Reinhart and Kenneth Rogoff, first came out? They pointed out back then that their research showed clearly that the average time, historically, from initial regional financial crisis, to the first sovereign defaults, averaged around 7-years duration.

It's been about 7-years since Bear Sterns and Lehman's.


Sandmann's picture

Yes, funny how Excel spreadsheets were used to detract from the real message in the book

Wolferl's picture

Throw those pathetic Greek deadbeats out of Europe already.

tc06rtw's picture

 …  didn’t your sister used to make  $8000 per month  posting links  on the internet ?

weburke's picture

speaking of book, I used to think, how the heck will a greek leader arise to wreck the world as the bible claims...script spoiler alert....it only goes downhill.

doctor10's picture

Embrace your inner Drachma!!!

XAU XAG's picture

"DRACMA  identifies it self as EURO'S." 

justinius1969's picture

Agreed.. Do yourselves and the whole world a favour DEFAULT...

This is just a just a farce of garagntuam proportions...

Honour your proud ancestors, they met real adversity head on and always came out on top...

The Euro is no Xerxes the Great.. Just do it!

XAU XAG's picture

Updating our list we’ve now got 52 Central Banks who have eased so far this year.


Global econ.....................is just awsome

VinceFostersGhost's picture



....and the band played on.


In this version of the Titanic....we trash the kids. Bankers to the lifeboats first.


Hopefully the free crap will last just long enough for a clean getaway.

Monetas's picture
Monetas (not verified) Jun 19, 2015 6:16 AM

Theft begets Theft !

Bangin7GramRocks's picture

Welcome all newcomers to the 57th The World Is Ending Day brought to you by Zero Hedge! Sew your gold into your underwear and load your guns!

VinceFostersGhost's picture



Don't need gold and guns....I've got sweet paper.


I trust my leaders....Boehner and Obama have my interests at heart.....and they're working everyday for my future.

XAU XAG's picture



I trust my leaders....Boehner and Obama have my interests at heart.....and they're working everyday for my future POSITIVE TAX REVENUE


Fixed it for you..................have a great weekend.....don't do anything I would'ent do!

VinceFostersGhost's picture





We have about 1/3 enough to pay this years bills.


We'll just print the other 2/3s. Hillary or Jeb will figure out the rest.

XAU XAG's picture

2/3s short.......................must be a WAR going on to be that short!



Raise interest rates.....................thier having a bath!

eclectic syncretist's picture

The troika only has one thing that Greece doesn't, and it only costs $10-20 thousand. All Greece would need to do is install the curtain in front of it and they would have no more need for the Troika. Indeed, they would be as powerful as the Troika.


lordbyroniv's picture

mmmmmmmmmmmmmmmmmmmmmm sweet paper 

Debeachesand Jerseyshores's picture

You know the SHTF when the Central Bank of Norway lowers its rate to 1% with further easing in the Fall...

new game's picture

fiat debt at below value of money; rates to promote consumption on a planet that is becoming "exhausted" as the eco systems run out of tyme to replenish and clense. hopeless, doomer delight for the laugh and enjoy the day peoples like me, ha...

IndyPat's picture

The planet is only tired of you.

firstdivision's picture

Had all my retirement funds rolled out of equities and bonds.  Keep your powder dry cause this will not end well, especially with the market set up for gooseing up equities to make everything seem awesome. 

lordbyroniv's picture

"So a man will sometimes go through half an hour of mortal terror with a brigand, yet when the knife is at his throat at last, he feels no fear." Raskolnikov - 'Crime & Punishment'
wmbz's picture

"It looks like it’ll be make or break week for Greece next week after yesterday’s Eurogroup stalemate"

Riiiight! It's always  "make or break" week for Greece!


So if they do default that should send the DOW up what? A 1000 points in a day?

Super FUBAR!

Bangin7GramRocks's picture

The trick is the Dow goes down 100 on the default rumor and up 300 on the bailout rumor. Repeat this 10 times and we have a 2000 point rally. It's like magic!

new game's picture

technically they have to the end of the month to make an already over due payment to the imf. 11 days of moar hope and despair. fiat masters will patch over the debt with moar debt. greeks want their ride to go on, sumting is better than collapse, just the way the strip miners like to do things, keep scraping a layer of wealth til its no long worth it to keep it going. getting closer, closing in on the greek oligarchs that are too stupid to get out. but it may be hard to take a 5 star resort with ya, ha...

XAU XAG's picture

hope and despair     =     Rope and despair

deimos178's picture

You can alway's tell a Greek, you just can't tell them much.

Sandmann's picture

So Tusk announces a Monday indaba no doubt to deflect the fact that it all goes pear-shaped on Sunday

Bill of Rights's picture

They defaulted back in 2010, now that everyone has picked the carcass dry and got paid off through the funneling of fraud based debt payments can we move on to bigger and better things. Like how fraudulent and sneaky the US Government and the Fed are...

mojojojo's picture

Central banks won't let the market crash! Inflation is low, they can't raise rates!

Take advantage of record low interest rates and load up on debt! Spend tomorrows income today!

Chase yield in the stock market, you don't wanna miss out!

Borrow credit and spend on consumer goods, maintain escape velocity!

Spend all your credit today, before the banks go on holiday!

Negative real interest rates! Fuck savers, we don't need capital to have capitalism!

We don't need workers to produce capital, we don't need savings with ZIRP!

Expand central bank balance sheet! The music must never stop!

The economy has recovered see, see the flat line of the interest rate!

Initiate cataclysm! Raise rates!

By the power of grey skull, I have the power!!!!!!!!!!!!!!!!!!

Pullmyfinger's picture

Whistling past the graveyard, they will carry on as if everything is under control and can never end until the system falls on its face and crumbles on impact like a severely desiccated corpse. 

max2205's picture

Pin = fucked 

buzzsaw99's picture

if the greeks would just "let revenue rise" as per the cbo everything would be great

nakki's picture

 This morning Greek PM Tsipras said that he is positive on Monday's emergency Eurozone meeting, adding that there will be a solution that would allow Greece to return to growth. While EU's Moscovici said that the EU is not looking for Greece to slash pensions, and reiterates that the 'ball in Greece's court'. The German Finance Ministry spokeswoman said that capital controls on Greece have not been discussed.

"What are you people, on dope?" Mr. Hand 

Bemused Observer's picture

" the already terminal bank run which unless halted will lead to capital controls and ultimately the fall of the Tsipras regime"

Why do you assume the Tsipras regime would fall? It is entirely possible that the opposite would happen, and the Greek people would rally behind their leaders...

There will always be opposition, but so far, it doesn't look like Tsipras has pissed off his people enough to make them get rid of him. In fact, they seem to be pretty much on board with what's happened so far. I see a lot of signs directing the government to tell the creditors to fuck off...

Of course anything is possible. But it might not be wise to make assumptions about how people will behave. Especially people who have been abused for so long, with no end in sight. You put people in that situation, and they may decide any price is worth getting rid of you.