Australia

Australian consumers are more worried about the medium term outlook than at the peak of the financial crisis, and rightfully so. As The Telegraph reports, by the end of the first quarter this year, Australia’s net foreign debt had climbed to a record $955bn, equal to an already unsustainable 60pc of gross domestic product, and is set to rise as RBA's bet that depreciation in the value of the country’s currency would help to offset the decline in its overbearing mining industry hasn’t happened to the extent they would have wished. Furthermore, as UBS explains, China's real GDP growth cycles have become an increasingly important driver of Australia's nominal GDP growth this last decade. With iron ore and coal prices plumbing new record lows, a Chinese (real) economy firing on perhaps 1 cyclinder, and equity investors reeling from China's collapse; perhaps the situation facing Australia is more like Greece than many want to admit, as Gina Rinehart, Australia’s richest woman and matriarch of Perth’s Hancock mining dynasty stunned her workers this week: accept a 10% pay cut or face redundancies.

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.  

The last time these criteria were met... stocks plunged over 90% over the next 24 months.

After weeks of overnight turbulence following every twist and turn in the Greek drama, this morning has seen a scarcity of mostly gap up (or NYSE-breakding "down") moves, and S&P500 futures are unchanged as of this moment however the Nasdaq is looking set for another record high at the open after last night's better than expected GOOG results which sent the stop higher by 11% of over $40 billion in market cap. We expect this not to last very long as the traditional no volume, USDJPY-levitation driven buying of ES will surely resume once US algos wake up and launch the self-trading spoof programs. More importantly: a red close on Friday is not exactly permitted by the central planners.

• 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)

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.

The Pentagon has released its “National Military Strategy of the United States of America 2015,” June 2015. This report tells us that war with Russia is our future unless Russia agrees to become a vassal state like every country in Europe, and Canada, Australia, Ukraine, and Japan. Otherwise, the neoconservatives have decided that it is impossible for Americans to tolerate living with a country that makes decisions independently of Washington. If America cannot be The Uni-Power dictating to the world, better that we are all dead. At least that will show the Russians.

While the party in the 1990s ended badly, the festivities currently underway may end in outright disaster. The party-goers may not just awaken with hangovers, but with missing teeth, no memories, and Mike Tyson's tiger in their hotel room.

Yes, it’s still entirely possible that Tsipras submitted this last set of proposals knowing full well they won’t be accepted. But he’s already gone way too far in his concessions. This is an exercise in futility. It’s time to acknowledge this is a road to nowhere.

It's officially Groundhog day... and month... and year... and so on.

More than even the unfolding "chaos theory" pandemonium in Greece, market watchers were even more focused on whether or not China and the PBOC will succeed in rescuing its market from what is now a crash that threatens social stability in the world's most populous nation. And, at the open it did. The problem is that as the trading session progressed, the initial 8% surge in stocks faded as every bout of buying was roundly sold into until every other index but the benchmark Shanghai Composite turned sharply red.

What investors will focus on in the week ahead

Initial conditions matter when contemplating impact of Greek referendum

• Chinese stocks tumble again, ignoring Beijing's blandishments (Reuters)
• Plight of Greek pensioners heaps pressure on Tsipras (Reuters)
• Cash Crunch Hits Everyday Life in Greece (WSJ)
• Souvlakis Tell a Story Well Beyond Today's Greek Crisis (BBG)
• Greek Referendum on Bailout Too Close to Call, Poll Shows (BBG)
• Move Over Greece: For Treasuries Traders, Today Is About the Fed (BBG)
• ECB adds corporate names to QE-eligible bonds (FT)
• Special Report: How Greece went bust (Reuters)
• Puerto Rico’s Pain Is Tied to U.S. Wages (WSJ)

Four months after the UK opened the membership floodgates and dealt Washington a humiliating political blow, China has officially launched the Asian Infrastructure Investment Bank.