In a repeat of Thursday's action, Chinese stocks which had opened about 1% lower, remained underwater for most of the session before attempting a feeble bounce which took the Shanghai Composite fractionally into the green, before the now traditional last hour action which this time failed to maintain the upward momentum and the last day of the month saw a surge in volume which dragged the market to its lows before closing roughly where it opened, -1.13% lower. This caps the worst month for Chinese stocks since since August 2009, as the government struggles to rekindle investor interest amid a $3.5 trillion rout, one which has sent the Shanghai market lower by 15% - the biggest loss among 93 global benchmark gauges tracked by Bloomberg.
Having exposed the reality that the world's capital markets are a manipulated shell game, Janus' Bill Gross has a message for the perpetual bulls in his latest letter to investors - "say a little prayer." Gross continues, "low interest rates are not the cure – they are part of the problem," warning that ZIRP has enabled, "a host of zombie and future zombie corporations now roam the real economy. Schumpeter’s 'creative destruction' – the supposed heart of capitalistic progress – has been neutered. The old remains in place, and new investment is stifled." As he previously warned, when the central bank manipulation is removed the likely trajectory of prices is downward...
"The International Monetary Fund’s board has been told Athens’ high debt levels and poor record of implementing reforms disqualify Greece from a third IMF bailout of the country, raising new questions over whether the institution will join the EU’s latest financial rescue."
Chinese Stocks Tumble In Close Of Trading "Causing Panic", US GDP To Be Revised Higher On Seasonal AdjustmentsSubmitted by Tyler Durden on 07/30/2015 06:54 -0400
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.
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.
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.
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.
"I have lost everything. I don't know what to do... I trusted the government too much... I won't touch stocks again, I have ruined everyone in my family." "I will sell all my shares tomorrow if there is a chance." ... "I am pretty sure that if the government does not come to rescue us, the situation will get much worse," ... "I managed to sell them all at a loss today, and so I lost 320,000 yuan in two days. I don't have confidence on the market any more. I don't want to get into the market again."
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.
"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."
Just as Japan thought they could go back to pre-Plaza Accord growth rates by holding on to the old ways in the 1990s, the Chinese will expect the growth miracle to return in 2016 with the “right” policies. It will not. It is all a mirage though. Just as in Japan, the Chinese will not allow the market process to do its magic to get the economy back on a stable footing. Draconian measures to stop the recent stock market rout are a clear testimony of that. In other words, the Chinese economy will resemble that of Japan, and it will do so very soon, if it is not already there. China is heading straight into a zero growth environment, and will be mired there for years to come.
The Chinese stock market crash has hit the world’s largest auto-market hard. For now, China is a dream turned sour for the Michigan-based Ford and General Motors and Germany’s Volkswagen. The risks are enormous and will become greater with time.
There is now a new symbol for Greece's perpetual debt servitude...
Last week was a complete dead zone for US macro, however with the peak of Q2 earnings season there was more than enough commotion for everyone. This week US macro starts to pick up again, with Durable Goods on Monday, followed by Case Shiller, Q2 GDP, the Chicago PMI, various consumer confidence indices, and of course, the July FOMC meeting on Wednesday.