Dow dropped 67 (after paring earlier losses), decliners over advancers 2-1 & NAZ fell 14. The MLP index lost 3+ to the 393s (multi year lows) & the REIT index was off fractionally in the 308s. Junk bond funds declined & Treasuries gained as stocks were sold. Oil sank to the 54s on chaos in the intl markets while gold did little.
AMJ (Alerian MLP Index tracking fund)
Greek voters delivered a decisive verdict on proposals put forward by intl creditors. In the Sun referendum, 61% of voters backed Tsipras’s rejection of further spending cuts & tax increases in a Greek referendum. There was 62.5% turnout of 9.86M registered voters. Emergency negotiations start again this week. Euro-area leaders are set to meet tomorrow, & things will get started today beginning with conference calls among the European players. European Commission pres Jean-Claude Juncker was set to hold a conference with ECB head Mario Draghi & Jeroen Dijsselbloem, who heads the Eurogroup of euro-area finance chiefs. Angela Merkel will meet French pres Hollande this evening. The ECB Governing Council is also due to talk, with a decision pending on what to do about Greek banks given the increased risk of default. Euro-area finance ministers are slated to meet tomorrow in Brussels. On the Greek side, Tsipras will need to find a replacement for Finance Minister Varoufakis, who resigned. He’ll also have to decide what to do about the banks, which were shut all last week. Greece won’t leave the euro overnight, but may face face 3-4 weeks of increasing pressure to start printing its own money. That’s because Greek banks might soon be unable to meet ECB demands for the collateral needed to keep access to Emergency Liquidity Assistance, & the Greek gov would run out of cash to pay its bills & workers. At that point, it would be Greece’s decision to back out of the currency bloc. The ECB probably won’t withdraw its support until after the euro area’s political leaders have made up their minds. That process won’t end before tomorrow's summit, & might drag on for weeks. Instead, the institution’s bank supervision arm will decide how to value the gov-backed assets held on Greek banks’ balance sheets. Meanwhile, the central bank’s monetary policy arm will consider whether to object to collateral that lenders post to gain ELA access from the Bank of Greece. Then, the banks would get calls for new collateral and might come up short. Taken together, the supervisory & ELA review could show the Greek banks to be insolvent, & Greece wouldn’t have the means to use €s to prop them up again. The ECB’s Governing Council has declared it will work closely with the Bank of Greece to maintain financial stability.
Leveraged bets on Chinese stocks have increased to a record versus the size of the market as prices fall faster than margin traders cut positions. The outstanding balance of margin loans on the Shanghai & Shenzhen stock exchanges climbed to 4.4% of overall market capitalization on Thurs from 3.6% on Jun 12 (when the market peaked). Unregulated borrowing could increase the debt to market cap ratio to more than 9%. Higher leverage may undermine gov measures to stem the steepest 3-week rout in in a qtr-century. Margin traders reduced positions for 9 days thru Thurs, the longest stretch of declines on record, even as the central bank cut interest rates & the securities regulator eased margin-trading rules. A 5X surge in leveraged wagers had helped propel the Shanghai Composite Index index to a more than 150% gain in the 12 months thru Jun 12. The equity gauge rose 2.4% at the close today, paring a 7.8% gain at the open.
The US & Iran hold the key to a nuclear accord between world powers & the Persian Gulf nation, China’s Foreign Minister Wang Yi said, 36 hours before the latest deadline is set to expire. Wang & top diplomats from France, Germany, Russia & the UK joined the negotiations on their 10th day. Diplomats who have given themselves until tomorrow to strike a deal may need an additional day or 2 to draft it, Iranian officials said. “The comprehensive agreement is within reach,” Wang told reporters. “What’s important is that today and tomorrow all parties -- especially the United States and Iran -- should make the final decisions as quickly as possible.” After almost 2 years of negotiation, diplomats are closer to sealing an accord that would return energy-rich Iran to world markets while giving regional rivals guarantees that the Islamic Republic’s nuclear work can’t be used to make weapons. While progress continues to be made, “we are not yet where we need to be on several of the most difficult issues,” John Kerry told reporters. Among the most contentious issues are the pace of sanctions relief & the lifetime of the “snap-back” mechanism to reimpose sanctions should an accord be violated. Ultimately Iran hopes to see a large part of its $100B in frozen assets abroad returned. Much of the past week has involved discussions with International Atomic Energy Agency. While the IAEA isn’t formally a party to the negotiations, it will play a key role in implementing a final accord.
Chaos reigns on the intl scene. Euro officials will have to make it up on what to do next about Greek debt. Confusion reigns, what else is there to say? The crash in the Chinese stock market with the outlook for more selling is very discouraging. Speaking about making it up as we go along, the talks about Iran's nuclear work is another mess. Besides the nuclear issues, Iran is hoping to have a huge amount of money unfrozen. After month of negotiations, that is still stuck in the mud. There is plenty for the stock market to worry about, but losses on the Dow have been pared from down 200 when Asian markets opened last night. However Dow remains on defense with the sellers in command.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CLQ15.NYM | ...Crude Oil Aug 15 | ...54.44 |  ....2.49 | (4.4%) |
| GCN15.CMX | ...Gold Jul 15 | ........1,163.50 | ...0.50 | (0.0%) |
Greek voters delivered a decisive verdict on proposals put forward by intl creditors. In the Sun referendum, 61% of voters backed Tsipras’s rejection of further spending cuts & tax increases in a Greek referendum. There was 62.5% turnout of 9.86M registered voters. Emergency negotiations start again this week. Euro-area leaders are set to meet tomorrow, & things will get started today beginning with conference calls among the European players. European Commission pres Jean-Claude Juncker was set to hold a conference with ECB head Mario Draghi & Jeroen Dijsselbloem, who heads the Eurogroup of euro-area finance chiefs. Angela Merkel will meet French pres Hollande this evening. The ECB Governing Council is also due to talk, with a decision pending on what to do about Greek banks given the increased risk of default. Euro-area finance ministers are slated to meet tomorrow in Brussels. On the Greek side, Tsipras will need to find a replacement for Finance Minister Varoufakis, who resigned. He’ll also have to decide what to do about the banks, which were shut all last week. Greece won’t leave the euro overnight, but may face face 3-4 weeks of increasing pressure to start printing its own money. That’s because Greek banks might soon be unable to meet ECB demands for the collateral needed to keep access to Emergency Liquidity Assistance, & the Greek gov would run out of cash to pay its bills & workers. At that point, it would be Greece’s decision to back out of the currency bloc. The ECB probably won’t withdraw its support until after the euro area’s political leaders have made up their minds. That process won’t end before tomorrow's summit, & might drag on for weeks. Instead, the institution’s bank supervision arm will decide how to value the gov-backed assets held on Greek banks’ balance sheets. Meanwhile, the central bank’s monetary policy arm will consider whether to object to collateral that lenders post to gain ELA access from the Bank of Greece. Then, the banks would get calls for new collateral and might come up short. Taken together, the supervisory & ELA review could show the Greek banks to be insolvent, & Greece wouldn’t have the means to use €s to prop them up again. The ECB’s Governing Council has declared it will work closely with the Bank of Greece to maintain financial stability.
Greeks Say ‘No’ in Referendum: Now What?
Leveraged bets on Chinese stocks have increased to a record versus the size of the market as prices fall faster than margin traders cut positions. The outstanding balance of margin loans on the Shanghai & Shenzhen stock exchanges climbed to 4.4% of overall market capitalization on Thurs from 3.6% on Jun 12 (when the market peaked). Unregulated borrowing could increase the debt to market cap ratio to more than 9%. Higher leverage may undermine gov measures to stem the steepest 3-week rout in in a qtr-century. Margin traders reduced positions for 9 days thru Thurs, the longest stretch of declines on record, even as the central bank cut interest rates & the securities regulator eased margin-trading rules. A 5X surge in leveraged wagers had helped propel the Shanghai Composite Index index to a more than 150% gain in the 12 months thru Jun 12. The equity gauge rose 2.4% at the close today, paring a 7.8% gain at the open.
China’s Stock Plunge Leaves Market More Leveraged Than Ever
The US & Iran hold the key to a nuclear accord between world powers & the Persian Gulf nation, China’s Foreign Minister Wang Yi said, 36 hours before the latest deadline is set to expire. Wang & top diplomats from France, Germany, Russia & the UK joined the negotiations on their 10th day. Diplomats who have given themselves until tomorrow to strike a deal may need an additional day or 2 to draft it, Iranian officials said. “The comprehensive agreement is within reach,” Wang told reporters. “What’s important is that today and tomorrow all parties -- especially the United States and Iran -- should make the final decisions as quickly as possible.” After almost 2 years of negotiation, diplomats are closer to sealing an accord that would return energy-rich Iran to world markets while giving regional rivals guarantees that the Islamic Republic’s nuclear work can’t be used to make weapons. While progress continues to be made, “we are not yet where we need to be on several of the most difficult issues,” John Kerry told reporters. Among the most contentious issues are the pace of sanctions relief & the lifetime of the “snap-back” mechanism to reimpose sanctions should an accord be violated. Ultimately Iran hopes to see a large part of its $100B in frozen assets abroad returned. Much of the past week has involved discussions with International Atomic Energy Agency. While the IAEA isn’t formally a party to the negotiations, it will play a key role in implementing a final accord.
China Urges U.S.-Iran Compromise 36 Hours to Atomic Deadline
Chaos reigns on the intl scene. Euro officials will have to make it up on what to do next about Greek debt. Confusion reigns, what else is there to say? The crash in the Chinese stock market with the outlook for more selling is very discouraging. Speaking about making it up as we go along, the talks about Iran's nuclear work is another mess. Besides the nuclear issues, Iran is hoping to have a huge amount of money unfrozen. After month of negotiations, that is still stuck in the mud. There is plenty for the stock market to worry about, but losses on the Dow have been pared from down 200 when Asian markets opened last night. However Dow remains on defense with the sellers in command.
Dow Jones Industrials
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