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29Jun2015 Pre-Market Commentary: U.S. Futures Down 1%, Greece Issues Capital Controls, Asian Markets Down 3%, U.S. Markets To Open Lower

Written by Gary

After a weekend of Greek drama, European stocks slumped and the euro tumbled. Asian Markets closed off 3% as China enters bear phase of deteriorating economics.

U.S. futures are off one percent and U.S. markets are expected to open much lower this morning.


Here is the current market situation from CNN Money

European markets are sharply lower today with shares in France off the most. The CAC 40 is down 2.89% while Germany's DAX is off 2.73% and London's FTSE 100 is lower by 1.51%.

Chinese stock investors who rode a wave of buying are being left in a bind as the broad sell-off persists. It would be a mistake to assume that China's broader economy will shrug off this market meltdown.

What Is Moving the Markets

Here are the headlines moving the markets.

Greece in shock as banks shut after snap referendum call

ATHENS (Reuters) - Greeks struggled to adjust to shuttered banks, closed cash machines and a climate of rumors and conspiracy theories on Monday as a breakdown in talks between Athens and its creditors plunged the country deep into crisis.

"Uncontained" - Greek Stocks Crash 17% As European Banks Plunge Most In 3 Years

Despite the Greek stock market being closed there is an option for hedging the exposure that all the smart money has been building to Greece in the past few days - GREK - the US-trade Greek ETF. In the pre-open, GREK is trading down 17% but the problems lie ahead as more and more realize how illiquid it is and redemptions are forced to be made from 'cash' - since there is no way to offload the underlying Greek stocks, unless OTC trades can be arranged with other entities - which could thus expose the entire false-liquidity-facade of the ETF industry.

GREK - the Greek Stock ETF - is getting hammered on negligible volume already...

While the best efforts of the SNB are underway to protect the markets from unease, European banks are suffering the exact 'contagion' that we were told numerous times would be contained.

And European Banks are getting crushed

led by Italian banks...

Charts: Bloomberg

...

A Shortage of Tools for Betting Against China

Even after a two-week selloff, valuations of some China shares remain sky-high. So where are the short sellers?

Greek Contagion Spreads As Several Italian Bank Stocks Failed To Open

While things have normalized since the open thanks entirely to the SNB's aggressive EUR-buying, CHF-selling intervention (good to see that central banks have read the BIS' report and have learned from their prior intervention mistakes), earlier this morning we got a snapshot of what happens if and when the SNB, and then the ECB itself, finally lose control when as a result of the Greek crisis the contagion promptly spread a few hundred kilometers west to Italy where as the WSJ reported, "several Italian banks failed to start trading on Monday as fears over a Greek debt default induced many investors to shed peripheral stocks, including Italian, with banks suffering the most."

As the paper reported sales orders on Italian stocks, in particular financial stocks, piled up before the market opening. At the start, the sales orders were so numerous that the system couldn't manage to process them, something that often happens when specific news causes a sell-off on a stock.

Theoretical prices for Italian banks--the prices at which they would have started trading--hovered around losses of 8% to 10% at the beginning of the trading session.

UniCredit SpA and Intesa Sanpaolo managed to start trading some time after the market opened, but were suspended immediately, accumulating losses of around 6% compared with Friday's closing prices.

Ironically, in an attempt to avoid just this kind of selling panic, on Sunday, Italy's banking lobby head Antonio Patuelli dismissed fears of contagion on Italian lenders, saying the country's banks' direct exposure to Greece was less than EUR1 billion.

For now the SNB has stabilized things but how much longer will this artificial "stability" continue especially if the just concluded speech by Jean-Claude Juncker managed to antagonize Greeks even further and pus ...

Frontrunning: June 29



China's Stocks Enter Bear Market as Rate Cut Fails to Stop Rout (BBG)

Stocks Tumble Around the World on Greek Crisis (WSJ)

Some say back to the drachma for a Greek reboot (Reuters)

Greece Imposes Capital Controls as Fears of Grexit Grow (BBG)

Panic Sets in Among Hardy Hedge Fund Investors Remaining in Greece (NYT)

Euro off Greece-driven lows after SNB intervenes (Reuters)

Western Union to close in Greece for rest of week (Reuters)

European banks, bonds shaken by Greek turmoil (Reuters)

Greece Tries to Defy History of Capital Controls Doomed to Fail (BBG)

Bunds Surge Most Since 2012 as Greek Cri ...

Next Few Days Could Transform Greece and Europe

Greece wants change, but if it exits the euro it could show Europe is less unified and more fragile than its leaders want us to think.

What Do Rating Agencies Think About "Too-Big-to-Fail" Since Dodd-Frank?

by Liberty Street Economics

-- this post authored by Gara Afonso and Joao Santos

[First in a two-part series] Did the Dodd-Frank Act end ''too-big-to-fail" (TBTF)? In this series of two posts, we look at this question through the lens of rating agencies and financial markets. Today we begin by discussing rating agencies' views on this topic.

U.S. futures fall as Greek crisis worsens

(Reuters) - U.S. stock index futures fell around 1 percent on Monday as fears that Greece could be the first country to exit the euro zone intensified after bailout talks with lenders broke down over the weekend.

European Failures Coming Fast And Heavy Now

Is the time of "server controls" upon us?


The New Health Care: A Promising Medicare Plan, if Only Health Organizations Would Stick Around

A new program seems to be working in reducing spending and improving quality, but it has a worryingly high attrition rate.

Central Banks Scramble To Stabilize Crashing Markets: China Fails, Switzerland Succeeds (For Now)

Following a week in which the Chinese stock bubble popped and a weekend in which the Eurozone bubble followed, it was all up to central banks to stabilize the devstation that would follow should the Plunge Protection Team, now global, not show up.

And while US equities futures were looking grim overnight, China at least started off on the right foot, rising a little over 2% in early trading following China's scramble to stabilize markets as it knows the alternative could very well be (deadly) civil unrest. And then something unexpected happened: the market did not follow the Chinese central bank script. In fact, as noted earlier, stocks plunged tumbling as much as limit down for CSI-300 futs, and the SHCOMP crashing the most since 1996.

This was not supposed to happen: in fact, with China unleashing the bazooka of the double rate cuts, it was virtually assured that at least China's stock would rise as the rest of the world tumbled on Greek worries. That it did not was the biggest red flag, far more so than what the Greek referendum reveals this weekend, as it means that after Sweden last week, now China has lost control!

According to Paul Chan, chief investment officer for Asia ex-Japan at Invesco in Hong Kong, "China's fourth interest-rate cut since November failed to stabilize the stock market as it was seen as a stopgap measure to stem a slide in share prices rather than an effort to revive the economy." He added that "It seems like policy make ...

European banks, bonds shaken by Greek turmoil

LONDON (Reuters) - European bank stocks and borrowing costs for Italy, Spain and Portugal bore the brunt on Monday of financial markets' fright at the growing risk that Greece will leave the euro.

Western Union to close in Greece for rest of week

LONDON (Reuters) - Western Union , the world's largest money transfer company, said it was closed for business in Greece on Monday and would remain closed for at least the rest of the week.

Greece Shuts Down Banking System

Greece shut down its banking system, ordering lenders to stay closed for six days starting Monday, and its central bank moved to impose controls to prevent money from flooding out of the country.

University of Phoenix Flight May Be Short

Earnings expectations for University of Phoenix operator Apollo Education have been lowered so much that the company has a chance of beating them. But ride any lift in its stock price with caution.

Fed's Dudley says September rate hike 'very much in play': FT

NEW YORK (Reuters) - A September interest rate hike is "very much in play" if the U.S. economy continues to strengthen, though the Federal Reserve could also wait until December to start tightening policy, an influential Fed official said in a newspaper interview.

Manulife Arm Proceeds With Singapore IPO of U.S. Assets

The Canadian insurer's asset-management arm will start taking orders from investors for an up to US$450 million Singapore IPO of a clutch of U.S. office properties.

Carnage Continues: EU Equity Futures Crash 7%, Bund Yields Plunge 20bps, Italy/Spain Bonds Dumped

It appears Greece matters after all - US futures are tumbling, Japanese stocks are tanking (as JPY is bid on mass carry unwinds), Chinese stocks are limit down and collapsing.. and now European equity futures are open and in free-fall. Bunds are well bid, down 20bps to 72bps.



*EURO STOXX 50 FUTURES FALL 7% AT MARKET OPEN

DAX is down over 5%...

France's CAC and UK FTSE 100 are also down hard.



*GERMAN BONDS SURGE AT OPEN, 10-YEAR YIELD FALLS 20 BPS TO 0.72%



*SPANISH 10-YEAR BONDS DECLINE WITH YIELD RISING 43 BPS TO 2.54%

*ITALIAN BONDS DECLINE WITH 10-YEAR YIELD RISING 57 BPS TO 2.72%

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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