Futures Levitate After Greek Creditors Repay Themselves; Commodities Tumble To 13 Year Low

As we said in our Friday morning wrap, a low volume levitation coupled with a stronger dollar managed to lift stocks to yet another green close, while the Nasdaq soared to a new all time high on terrible breadth with decliners far outpacing advancers however it was all about Google which added in value more than the market cap of about 80% of S&P companies.

The dollar's resumed strength means corporate revenues are about to slide again, confirming the revenue recession that the S&P has found itself will last a long time. However, judging by recent non-GAAP revenue numbers, the algos will gladly ignore the 2-3% recurring decline in top-line number because USD strength is expected to be "one-time" non-recurring which is somewhat of a paradox in a world in which, according to economists, the Fed is poised to hike rates as soon as September.

Today's action is so far an exact replica of Friday's zero-volume ES overnight levitation higher (even if Europe's derivatives market, the EUREX exchange, did break at the open for good measure leading to a delayed market open just to make sure nobody sells) with the "catalyst" today being the official Greek repayment to both the ECB and the IMF which will use up €6.8 billion of the €7.2 billion bridge loan the EU just handed over Athens so it can immediately repay its creditors. In other words, Greek creditors including the ECB, just repaid themselves once again.

One thing which is not "one-time" or "non-recurring" is the total collapse in commodities, which after last night's precious metals flash crash has sent the Bloomberg commodity complex to a 13 year low.

Finally, of the notable overnight items, when Chinese stocks swooned following comments in Caijing that China's plunge protection vehicle, the CSF, is studying an exit plan for the stock stabilization plan, China's Securities Regulatory Commission had no choice but to immediately come out and deny this, which it did: shortly before the Chinese close, the CSRC said it would "continue to focus on stabilizing market and preventing systemic risks." As a result, the early weakness was BTFDed, and Chinese stocks closed just off intraday highs, up 0.88% to 3,992.

The re-opening of Greek banks after being shut for 3 weeks amid the fall-out between Greece and its creditors failed to spur volatility, with stocks opening up the week in a very muted and contained price action (Euro Stoxx: +1.1%) . More so, the delayed open by EUREX exchange did little to anguish market participants, as the absence of any new pertinent macroeconomic news-flow did little to provide an incentive for sharp moves. As a result, stocks are seen broadly higher, with information tech and energy sectors leading the gains.

At the same time Bunds edged lower, with peripheral bond yield spreads also tighter, albeit marginally as market participants reacted to the re-opening of Greek banks , as well as source comments suggesting that Greece have given the order to make the EUR 6.8bIn repayment to its creditors.

Asian equities shrugged off the positive lead from Wall Street , which saw the NASDAQ-100 hit fresh record highs following a slew of strong earnings from large tech names including Intel and Google . ASX 200 (+0.3%) initially fell amid weakness in miners after the slump in commodity prices, before paring the move late in the session. Shanghai Comp (+0.9%) fluctuated between gains and losses with the index having briefly broke above 4,000, with Chinese property prices over the weekend showing a 2nd consecutive monthly increase, while Y/Y figures continued to decline albeit at a slower pace . Finally markets in Japan remained closed due to Marine day holiday.

In FX, EUR/USD edged higher, with the 1-month implied volatility falling to its lowest level since March , supporting other EUR related crosses such as EUR/JPY and EUR/GBP, which in turn saw GBP/USD move through the 50DMA to the downside. The apparent risk on sentiment meant that EUR/CHF remained bid since the open, while USD/JPY grinded to its higher level since 24th June.

In commodities, the most notable move was the previously noted Gold flash crash which trades lower, albeit off the overnight lows where prices fell by as much as USD 43/oz in a minute to hit the lowest level since March'10. Some analysts noted that the move was exacerbated by stops being tripped on the break of last week's lows and through USD 1100 which was also the lowest in 5 years . For a summary of the selling seen in Gold please click here. Elsewhere in the metals complex Platinum fell below USD 1000/oz for the first time since February 2009 while analysts at Goldman Sachs have said that they are still extremely bearish on copper and consider the current nickel price as an opportunity to buy or hedge. The energy markets trades relatively range bound amid light news flow, with Brent underperforming WTI amid concerns over increasing Iranian crude supplies.

Going forward, the ongoing earnings reporting season will regain the focus, with the attention centred on IBM and Morgan Stanley.

In summary: European shares rise with the tech and health care sectors outperforming and basic resources, media underperforming. Greece gave order to repay EU6.8b to creditors after last week’s tentative bailout deal as Greek banks reopened. Gold drops, dollar trades near a 3-month high versus euro. The Italian and Swedish markets are the best-performing larger bourses, U.K. the worst. The euro is little changed against the dollar. Irish 10yr bond yields fall; French yields decline. Commodities decline, with gold, natural gas underperforming and WTI crude outperforming.

Market Wrap

  • S&P 500 futures up 0.1% to 2121.5
  • Stoxx 600 up 0.6% to 408.1
  • US 10Yr yield little changed at 2.35%
  • German 10Yr yield down 3bps to 0.76%
  • MSCI Asia Pacific down 0.3% to 144.2
  • Gold spot down 1.9% to $1112.5/oz
  • 18 out of 19 Stoxx 600 sectors rise; tech, health care outperform, basic resources, media underperform
  • Asian stocks fall with the Shanghai Composite outperforming and the Kospi underperforming; MSCI Asia Pacific down 0.3% to 144.2
  • Nikkei closed, Hang Seng down 0%, Kospi down 0.2%, Shanghai Composite up 0.9%, ASX up 0.3%, Sensex down 0.2%
  • Euro up 0.07% to $1.0838
  • Dollar Index up 0.13% to 97.99
  • Italian 10Yr yield down 6bps to 1.86%
  • Spanish 10Yr yield down 6bps to 1.88%
  • French 10Yr yield down 4bps to 1.03%
  • S&P GSCI Index down 0.7% to 401.8
  • Brent Futures down 0.8% to $56.6/bbl, WTI Futures down 0.3% to $50.7/bbl
  • LME 3m Copper down 0.5% to $5455/MT
  • LME 3m Nickel down 0.4% to $11450/MT
  • Wheat futures down 1.4% to 546 USd/bu

Bulletin headline summary from Bloomberg and RanSquawk

  • Gold trades lower, albeit off the overnight lows where prices fell by as much as USD 43/oz in a minute to hit the lowest level since March'10.
  • The re-opening of Greek banks after being shut for 3 weeks amid the fall-out between Greece and its creditors failed to spur volatility, with stocks opening up the week in a very muted and contained price action.
  • Going forward, the ongoing earnings reporting season will regain the focus, with the attention centred on IBM and Morgan Stanley.
  • Treasury curve little changed in overnight trading, today offers no economic data nor Fed speakers ahead of next week’s FOMC meeting; 3M and 6M bill auctions today; Japan closed for Marine Day.
  • Greece gave the order to repay €6.8b ($7.4b) to creditors after last week’s tentative bailout deal, the Finance Ministry said, as Greek banks reopened
  • BlackRock, which oversees about $4.7t, bought Greek debt last week, benefiting from prices that were overly depressed by investor concern that the nation would struggle to implement requirements of its latest bailout deal
  • Barclays is considering deeper job cuts that could see its workforce shrink by about a quarter over the coming years, said a person with knowledge of the matter
  • Job vacancies in London’s financial services industry jumped 56% in June, reversing a drop in the previous month, led by compliance hiring, a survey showed
  • The business of financing China’s trade is shrinking, curbing what had been a fast-growing revenue stream for banks in Hong Kong and Singapore over the past decade
  • A fifth of China’s stock market remains frozen as 576 companies were suspended on mainland exchanges as of the midday break on Monday, equivalent to 20% of total listings, and down from 635 at the close on Friday
  • Gold fell to the lowest level in more than five years on the outlook for higher U.S. interest rates and as China said it held less of the metal in reserves than some analysts forecast
  • Gold pared losses amid speculation the sudden slump in prices in morning trade in Asia was driven by larger- than-usual volumes being sold in China and New York
  • Sovereign 10Y bond yields mostly lower. European stocks rise, China drops and Japan closed for Marine Day, U.S. equity- index futures rises. Crude oil, copper and gold fall

US Event Calendar

  • No major reports

DB's Jim Reid completes the overnight summary

After three successive Sundays spent ruminating about Greece, it felt like there was a big void in my life yesterday. A very heavy England loss in the cricket deepened it. Given that the last three Sunday evenings had been spent working, I offered my wife her choice of how we spent last night. She suggested I cook dinner and we watch "Fifty Shades of Grey". All I can say is that it was a terrible movie and that I longed for a Greece conference call to distract me. I nearly tried to invent a fake one!

Talking of Greece, the banks re-open today for the first time in three weeks. Greece is unlikely to be a huge macro influence now for a couple of months but events like this are certainly worth keeping an eye on to assess the likelihood of future progress or lack of it. Aside from the banks we also heard from German Chancellor Merkel who suggested that it would be possible to discuss Greek debt relief through extending maturities once the ESM deal has been negotiated, but she once again reiterated the ruling out of any haircuts. Merkel also dismissed any suggestions of a dispute with German Finance Minister Schaeuble who had said in a Der Spiegel interview over the weekend that the two had differences, although he downplayed any talks of a potential resignation. Meanwhile, late on Friday we also saw Greek PM Tsipras announce a cabinet reshuffle as largely expected, replacing various members of the Syriza party who had previously opposed the proposals at the parliamentary vote last week, including the more outspoken Left Platform faction leader Lafazanis.

Looking at how markets have kicked off the week in Asia this morning, as well as most equity bourses starting on a soft-ish note Gold (-2.26%) has taken a steep leg lower to a five-year low of $1109/oz after a report out of the PBoC on Friday shedding light on the amount of reserves China was holding. Despite a 60% rise relative to the last report in 2009, the amount of reserves have seemingly disappointed the market relative to expectations with bullion at once stage falling nearly 5% this morning. The tumble follows a 1% fall on Friday. Elsewhere the Dollar index is +0.2% in early trading while equity bourses are mostly trading down. In China the Shanghai Comp (-0.43%) and CSI 300 (-0.93%) have reversed earlier gains, while the Shenzhen (+0.12%) is fluctuating between gains and losses with 633 companies (around 22% of listings) still suspended from trading on the mainland exchanges. The Hang Seng (-0.24%) and Kospi (-0.25%) are also down while bourses in Japan are closed for a public holiday. Asia credit is unchanged this morning.

Back to Friday, it was a reasonably quiet day on the whole in markets with investors seemingly taking something of a breather following the Greece and China driven moves of the last few weeks. In the US the S&P 500 closed +0.11%, although this hid what was largely broad based declines with all sectors closing in negative territory aside from tech stocks which benefited from a 16% rally for Google following Thursday’s post market close earnings report. This helped support the NASDAQ (+0.91%) which extended its recent record high while the Dow (-0.19%) finished a touch lower. The Dollar benefited from a post-CPI print boost with the Dollar index finishing +0.20% having initially traded lower on Friday to close out a solid week (+1.91%). Just on the data, the June headline (+0.3% mom) and core (+0.2% mom) both came in as expected, helping to lift the annualized rates to +0.1% yoy and 1.8% yoy respectively, a 0.1% increase for both relative to May. A decent lift in shelter costs during the month was cited as contributing significantly to the month’s print, while the 6-month annualized core print of 2.3% is now the highest since January 2012.

Elsewhere on the data front, housing starts (+9.8% mom vs. +6.7% expected) and building permits (+7.4% vs. -8.0% expected) for June both came in well ahead of expectations with the latter in particular rising to a 8-year high on an annualized basis although the expiring tax abatement program in the Northeast has been a large reason for the recent surge in permits. The preliminary University of Michigan reading for July was slightly disappointing however, falling 2.8pts to 93.3 (vs. 96.0 expected). Declines were fairly evenly split across the current conditions (-2.9pts to 106.0) and expectations (-2.6pts to 85.2) surveys although we did see +0.1% increases for the 1yr (+2.8%) and 5-10yr (+2.7%) inflation expectations surveys. 10yr Treasuries closed virtually unchanged on the day at 2.348% having traded in a tight range.
There was an equally subdued feeling to trading in European markets on Friday. The Stoxx 600 saw a modest +0.06% gain to help cap a 4.3% return for the week, while regionally it was reasonably mixed with the CAC (+0.06%) up but with declines for the DAX (-0.37%), IBEX (-0.26%) and FTSE MIB (-0.07%). Despite no data in the region, bond yields declined with 10y Bunds closing 4.4bps lower at 0.786% while Italy (-7.0bps), Spain (-4.8bps) and Portugal (-4.1bps) were all led lower with also a decline in yields across the Greek curve.

Elsewhere, with Greek headlines abating, some of that focus is now turning to Ukraine where the FT is reporting that the nation has extended talks with creditors amid precautions that the country could default as soon as Friday if no agreement is reached. A joint statement issued last week suggested that progress has been made, however a deal to restructure Ukraine’s $70bn debt load has still yet to have been reached. The FT is reporting that Ukraine is looking for a 40% haircut on bonds in order to make the debt load sustainable, however the group of four creditors, much like the Greek situation, continue to insist that a haircut is not needed and instead have proposed maturity extensions and coupon reductions. One to keep an eye on for now.

Taking a look at this week’s calendar. With no data due in the US it’s a reasonably quiet start to proceedings today with just German PPI for June the only notable release. Tuesday starts in Japan where we get the Conference Board leading index before we turn over to the UK where we get public sector net borrowing data. It’s quiet once again in the US tomorrow with no data due. We kick off the Asia session on Wednesday with the June Conference Board leading indicator out of China. French business and manufacturing confidence and Italian industrial orders follow before we get the Bank of England minutes. In the US on Wednesday we’ve got existing home sales for June along with the FHFA house price index due. Turning to Thursday, Japan trade data will be closely watched in the morning while we get UK retail sales and Euro area consumer confidence closer to home. Initial jobless claims, Chicago Fed National activity index, Conference Board leading indicator and the Kansas City Fed manufacturing activity print are all due in the US. We end the week on Friday with the flash July PMI indicators for the Euro area as well as regionally in Germany and France. Meanwhile in the US we conclude the week with new home sales for June as well the flash manufacturing PMI for July. With a fairly quiet calendar for data, there will be much focus on earnings where we see 131 S&P 500 companies reporting this week including Apple, Microsoft, Amazon, Verizon, AT&T and Coca-Cola.