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16Jun2015 Pre-Market Commentary: U.S. Index Futures Lower As Greek Contagion Spreads Through Europe And Ahead Of Two Day Fed Meeting

Written by Gary

U.S. index futures are lower this morning questioning any possibility of a market up day. Fears that Greece will default is continuing to spook European markets, hitting the region's stock markets hard.

Investors are also cautious ahead of a two-day Federal Reserve meeting and as the Greek debt crisis showed no signs of abating.

Here is the current market situation from CNN Money

This morning doesn't have the feel of full blown risk aversion, but there is a queasiness out there that is causing markets to feel every spin and lurch uncomfortably. The metaphor would, of course, be more apt if this unease was causing the screens to look green rather than decidedly red, but there you have it.

What Is Moving the Markets

Here are the headlines moving the markets.

U.S. housing starts pause after hefty gains, building permits soar

WASHINGTON (Reuters) - U.S. housing starts fell in May after a hefty increase the prior month, but a surge in permits for future construction to a near eight-year high suggested the pullback was temporary and pointed to underlying strength in housing.

Greek PM sticks to hard line as contagion hits euro zone bonds

ATHENS (Reuters) - Prime Minister Alexis Tsipras told opposition leaders on Tuesday that disagreements among international lenders were to blame for an impasse in negotiations, sticking to a hard line that has brought Greece to the brink of default.

Boeing wins AerCap order for 737 MAX jets worth $10.7 billion

PARIS (Reuters) - Boeing Co won an order for 100 737 MAX 8 passenger jets from Dutch aircraft leasing company AerCap at the Paris air show on Tuesday, in a deal worth $10.7 billion at list prices.

Tsipras Slams "Criminal" IMF In Defiant Speech

In the wake of reports that Greece could be headed for a "Lehman Weekend" complete with capital controls and an "emergency" Sunday meeting, the headlines are coming fast and furious on Tuesday morning, with Tsipras calling the IMF's stance "criminal" and Merkel digging in for the worst.











Bank Of America Begins 66-Day Countdown Until The "Ghost Of 1937" Returns

In 66 trading days on September 17, 2015, the Federal Reserve will, according to Bank of America, hike rates for the first time since 2006, which according to BofA will "end the era of excess liquidity."

We disagree entirely, but let's hear what BofA's Michael Hartnett has to say:

On September 17th the Fed will hike the Fed funds rate by 25bps according to Ethan Harris & our US economics team, the first hike since June 2006.

Recent US economic data support this view, in particular the solid May payroll & retail sales reports. Note that after a Q1 wobble, one of our favorite cyclical indicators, US small business confidence, has also bounced back into expansionary territory. Ethan Harris forecasts 3.4% US GDP growth in Q2, after 0.2% in Q1, and US rates strategist Priya Misra forecasts a Fed funds rate of 0.5% by year-end, and 1.5% by end-2016. Like Ethan & Priya, the futures market also looks for a modest Fed tightening cycle: Eurodollar futures contracts are currently pricing in 3-month rates in the US rising from 0.01% today to 0.65% by year-end, and to 1.54% by end-2016.

Yes, the US economy is so strong the Bureau of Economic Analysis has to fabricate double seasonal adjustments to goalseek GDP data that is non-compliant with the narrative. As for economists being wrong about a rate hike, or overestimating future US growth, let's just say it won't be the first time they are wrong...

Still, one thing BofA is right about: this time the normalization process will be different.


Fitbit Boosts Proposed IPO Price

Fitbit raised the estimated price range for its initial public offering by $3 a share, implying a valuation for the wearable fitness tracking company of nearly $4 billion.

Fitbit Raises Price Range for I.P.O.

The maker of health-tracking devices now expects to price its initial public offering at $17 to $19 a share, a midpoint range that values the company at nearly $3.7 billion.

"Lehman Weekend" Looms For Greece As Europe Readies "Emergency" Sunday Meeting

Last week, Greek PM Alexis Tsipras submitted two three-page proposals that were ostensibly designed to close the gap with creditors. EU officials were incredulous, calling the drafts "not serious."

Tsipras had effectively resubmitted Greece's previous proposal (i.e. a proposal that did not include concessions on a VAT hike or pension cuts) only this time, he included a second document that outlined how Athens hoped to tap leftover bank recap funds from the EFSF and bailout money from the ESM. Greece took that same proposal to Brussels over the weekend and it didn't fly there either, leaving Europe to wonder just how far Tsipras was willing to go with the brinksmanship.

The problem is simple and it's been outlined in these pages extensively. The game of chicken can theoretically go on at the political level for some time. That's because the bundled IMF payment isn't due for another two weeks and even if it were missed, Christine Lagarde has quite a bit of discretion as it relates to sending an official failure to pay notice to the IMF board and triggering cross acceleration rights for Greece's other creditors. In other words, a formal default is a matter of politics and it can be put off for at least 30 days past the end of this month.

What cannot be controlled at the political level is what happens on the ground in Greece. That is, the economy is bleeding jobs and businesses and the banking sector is hemorrhaging hundreds of millions of euros every day. If suppliers cut off credit to the Greek economy and deposit flight turns into a panicked bank run, the glacial pace of political logrolling will prove hopelessly inadequate to contain the situation, meaning the country could descend into chaos while both sides watch in horror from the negotiating table in Brussels. Yesterday, Germany's EU Commissioner Gu ...

Frontrunning: June 16

Greek PM sticks to hard line as contagion hits euro zone bonds (Reuters)

Greek Deadlock Has Leader Hoping for Miracle to Avoid Default (BBG)

Greek Showdown Puts Merkel's Teflon Legacy at Risk (BBG)

Greek standoff saps Europe, dollar swings ahead of Fed (Reuters)

Allianz Increased Holdings of Greek Debt as Its Largest Investor (BBG)

French Bonds Infected as Greek Crisis Swells Euro-Region Spreads (BBG)

Statoil to cut 1,500 more jobs as savings drive intensifies (FT)

UnitedHealth, Anthem Seek to Buy Smaller Rivals (WSJ)

Five Million Reasons Why China Could Go to War (BBG)

Former CIA Chief Says Government Data B ...

Futures slip as investors remain cautious ahead of Fed meet

(Reuters) - U.S. stock index futures were lower on Tuesday as investors were cautious ahead of a two-day Federal Reserve meeting and as the Greek debt crisis showed no signs of abating.

Raise Homeownership By Lowering Rents

by Zillow

Renting is traditionally a stepping stone to homeownership. And an affordable rental market typically coincides with higher homeownership rates. More affordable rents allow households to save money for a down payment on a home and other home-buying expenses. On the flip side, less affordable rents in some markets often go hand-in-hand with lower homeownership rates, as more money going into landlords' pockets each month means less going into tenants' savings accounts.

It's Not Only Greece This Morning.

Some broad macro commentary from Bloomberg's Richard Breslow

This morning doesn't have the feel of full blown risk aversion, but there is a queasiness out there that is causing markets to feel every spin and lurch uncomfortably. The metaphor would, of course, be more apt if this unease was causing the screens to look green rather than decidedly red, but there you have it.

It's not only Greece this morning. Things just don't seem to be functioning smoothly anywhere. More arrests in Hong Kong, delays to the Shenzhen-Hong Kong Exchange link, Kuroda having to say he didn't mean what he said, weaker start to the new month's numbers in the U.S., an Indian export number that put paid to any hopes of a reversal of what has been an inexorable six-month collapse, disappointing European car sales (slowest in 6 months) with noted weakness in Latin America being cited, peripheral bond spreads widening out, Spanish 10-yr hitting highest yield in 10 months. Well you get the idea.

But base case remains from a clear plurality of analysts that Greece will be saved (can kicked), China growth expectations are rising, monsoons will pour rain and the FOMC will thread the needle and be both optimistic and placatory. And this is actually a sign of healing. The market is trying to see the bright side of life. Of course if this optimism expectation is based solely on the belief that central banks will "provide" it may require a measure of temperance

The BOJ's Kuroda held a press conference today and tried to walk back the dog of his JPY comments that sent USD/JPY down 3 big figures. Today's "retraction" was worth a fleeting 50 pips. People have the short JPY position and it turned into a thank you very much moment. And markets are growing tired of serial official comments being retracted, refined and modified. Perhaps global bankers are simply making too many speeches. Fed and EU speakers, please take note

RBA minutes came ...

Global Risk Off From China To Europe To US, As Greek Impasse Hits Markets

Another day of constant Grexit chatter, and this time the futures are really starting to react as what was seen as mostly impossible for the past 4 months is now considered virtually inevitable (even if as both UBS and MS say, very little if any of the upcoming contagion and volatility has been priced in).

The first tremors emerged when Greece announced it would not present a new proposal to the Eurogroup to unlock aid, relying instead on what has already been submitted and which the Troika said was inadequate. Then, confusing matters, a new GPO poll posted on Greece's Mega TV showed that increasingly more, or over 56% at last count, of Greece would prefer a "bad" deal with creditors than being kicked out of the Eurozone putting the future of Tsipras' cabine tin jeopardy. And then, hinting that the endgame is officially here, the FT reported that "Eurozone officials discuss holding emergency summit on Greece", suggesting a second Lehman weekend may be just around the corner.

As a result European equities slipped to a four-month low on Tuesday, with the lack of progress in debt negotiations between Greece and its international creditors making investors nervous and prompting them to cut their exposure to riskier assets like stocks. Greece's benchmark ATG share index fell 3.9 percent, taking total losses since Friday to about 14 percent, as Greece and its creditors hardened their stances on Monday after talks aimed at preventing a default and possible euro exit faltered.

Quoted by Reuters, Laith Khalaf, senior analyst at Hargreaves Lansdown, said that "the can of Greek debt has been kicked down the road so many times there comes a point when it has to be ...

Greek PM seeks long-term deal, sees debt restructuring problems

ATHENS (Reuters) - Greek Prime Minister Alexis Tsipras said on Tuesday Athens was seeking a viable, long-term deal that would pull the country out of economic crisis but faced a deadlock with creditors over debt restructuring.

Buffett Doubles Down With Australian Insurance Stake

Billionaire investor Warren Buffett bolstered his bet on Asia's insurance market by buying a stake in one of Australia's largest general insurers.

Airbus starts development of new X6 heavy helicopter

PARIS (Reuters) - Airbus Helicopters will start a two-year development phase for a new model aimed at improving fuel-efficiency and comfort for civilian customers in markets such as search and rescue and the energy sector, it said at the Paris air show on Tuesday.

EU-U.S. trade deal seems distant dream after early optimism

BRUSSELS (Reuters) - When U.S. trade chief Michael Froman opened talks in 2013 on an EU-U.S. free trade deal he said he was confident it could be reached on "one tank of gas." Two years later, negotiations have all but stalled.

Greek centrist party calls on Tsipras to reach deal soon

ATHENS (Reuters) - The leader of Greece's centrist To Potami party called on Prime Minister Alexis Tsipras on Tuesday to reach a deal with the country's creditors and said his party was ready to back in parliament any agreement which kept Greece in the euro zone.

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