24Jun2015 Pre-Market Commentary: U.S. Futures Down Fractionally, WTI Oil Steady Markets Expected To Open Lower, Greek Debt Repayment Crisis Remains A Crisis

Here is the current market situation from CNN Money

European markets are mixed today. The CAC 40 is up 0.56% while the FTSE 100 gains 0.12%. The DAX is off 1.12%.

U.S. Economy Contracted in First Quarter, but Not as Severely

The Commerce Department said the economy shrank at an annual rate of 0.2 percent, an upward revision from the 0.7 percent contraction last reported.

Saxobank CIO Explains Why The Greek ‘Problem’ Won’t Be Solved

“Even if a deal between Greece and its creditors is struck, the problem isn’t solved,” warns Saxobank CIO Steen Jakobsen, which leaves the door open to a snap election being called shortly and a referendum on continued membership of the EU just weeks later. Debt refinancing will be the first issue, with the country needing a significant discount. But how can the country secure that, asks Jakobsen, when the government is unwilling to bring in significant reforms?

Tsipras flies to Brussels to try to bridge gaps with Greece’s creditors

ATHENS/BRUSSELS (Reuters) – Greece’s international lenders demanded on Wednesday that it improve proposed tax and reform measures in a last-minute race to clinch a deal to unlock aid and avert a debt default next week.

Oil holds above $64 before U.S. supply report, eyes on Iran

LONDON (Reuters) – Oil held above $64 a barrel on Wednesday before a U.S. government report expected to show domestic crude inventories fell for an eighth week, a sign that a supply glut is easing.

Collapse Part 3: No Institutional Path To Contraction

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Collapse is not an event, it is a process.

One poorly understood source of collapse is the lack of pathways to contraction and a reduction of complexity/cost. The only pathway that is clearly marked is the one to expansion–of production, debt, credit, government, income, benefits, costs and complexity: more agencies, more regulations, more committees, more staff, more of everything. The path to less complexity, less debt, less production and a contraction of the entire system doesn’t exist in most institutions.
Many dismiss any talk of collapse as mere fear-mongering. This is a legitimate issue to discuss, for if we focus exclusively on the lurid horrors of being killed by a shark in open water (for example) while ignoring the much higher risks of being killed by falling off a ladder at home, we have distorted the risks of accidental death and done a disservice to our understanding of various risks.
But collapse is not an event, it is a process. As a result, systemic collapse doesn’t lend itself to statistical calculations of probability. Processes are driven by dynamics, not odds.
So those dismissing any discussion of collapse as mere fear-mongering are doing a disservice to our understanding of processes–or lack thereof. One interesting feature of collapse is that it can result from either a choking over-abundance of complex, costly processes or a complete lack of essential processes, conceptually and practically.
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With Tsipras in Brussels, Greek Debt Talks Reach Crucial Point

Athens has made some concessions, European creditors are demanding far more, and a giant loan payment comes due in less than a week.

Challenging the Emerging Markets Consensus

The hardwired response to financial turmoil is to sell emerging markets. That increasingly looks like outdated thinking.

Greece Rejects “Totally Unaccepetable” IMF Counterproposal Demanding Pension Cuts, VAT Hike

As reported earlier and as tipped here on Monday, markets will have to call off the party for now because the focus of the Greek debt deal negotiations has now shifted back to Brussels after all eyes had turned briefly to Athens on Tuesday following reports which indicated a deal in principle had been struck. Here’s what we said less than 24 hours ago:

The IMF demands no tax hikes and pension cuts. Instead it will get almost exclusively tax hikes, amounting to 92% of the proposed measures, and just a few cuts, few of which actually impact Greek pensions. In short: the proposal is not only unsustainable, it is also unenforceable, something which the Germans – already facing a third Greek bailout – will be quick to point out.

Which is why tomorrow, after Tsipras is finished with the meeting with the Troika, he will have a new homework assignment: revise the “final final” proposal and come up with much less in tax hikes, much more in spending cuts: something which the already furious hard-line elements within Syriza will have a field day with.

And that is precisely what happened. As WSJ reports, creditors have decided to stick to their “red lines” after all:

Significant divisions remain between Greece and its international creditors over measures Athens must implement before receiving desperately needed bailout aid, according to a document seen by The Wall Street Jou …

Frontrunning: June 24

Greece Handed New Terms as Tsipras Approaches Decision Time (BBG)

As U.S. Probes $12.7 Trillion Treasury Market, Trader Talk Is a Good Place to Start (BBG)

Signs Swedish QE Backfiring as Liquidity Evaporates (BBG)

ECB approves ELA funding requested by Greece- banking source (Reuters)

Greek Millennials Can’t Find Work But Actually Want to Keep the Euro (BBG)

Greek deal or not, the euro is now a different beast (Reuters)

Promoter’s Arrest Sheds Light on Cynk’s $6 Billion Surge (BBG)

The World’s Biggest Economies Are About to Feel the Impact of China’s Slowdown (BBG)

Senate Clears Trade Bill’s Way to Passage (WSJ)

Macau Builds, but Gamblers Don’t Come

Macau’s new casinos are opening their doors, but so far China’s gamblers are still refusing to show.

U.S. firms fear financing drought as deadline looms for trade bank

WASHINGTON (Reuters) – A battle in Congress that could shut down the U.S. Export-Import (Ex-Im) Bank next week is already causing headaches for small exporters as they try to stop customers from defecting to foreign competitors and as export financing starts to freeze up.

Falling Oil Prices And Global Saving

by Liberty Street Economics

— this post authored by Thomas Klitgaard and Patrick Russo

The rise in oil prices from near $30 per barrel in 2000 to around $110 per barrel in mid-2014 was a dramatic reallocation of global income to oil producers. So what did oil producers do with this bounty? Trade data show that they spent about half of the increase in total export revenues on imports and the other half to buy foreign assets. The drop in oil prices will unwind this process. Oil-importing countries will gain from lower oil bills, but they will also see a decline in their exports to oil-producing countries and in purchases of their assets by investors in these countries. Indeed, one can make the case that the drop in oil prices, by itself, is putting upward pressure on interest rates as income shifts away from countries that have had a relatively high propensity to save.

Futures dip after Greece’s lenders reject some proposals

(Reuters) – U.S. stock index futures were lower on Wednesday after Greece’s creditors rejected some proposals from the country and doubts returned if Athens will be able to avert defaulting on its loans.

As Chinese Try Stocks, Indians Go for Gold

The rapid run-up in Chinese shares is dimming the allure of another popular investment: gold. Luckily for fans of the metal, demand is looking healthy in India, the other big retail market in Asia.

Foreign Reserves Slip in Emerging Markets, Raising Risks

Central banks in emerging markets are running down foreign-currency reserves at the fastest pace since the financial crisis, reducing some countries’ capacity to weather potential shocks, such as a rate increase in the U.S.

Buy Programs Stumble After Greek Deal Proposal Goes Back To Drawing Board In Last Minute

And it started off all so well: the market, blissfully ignoring what we wrote just yesterday in Why The IMF Will Reject The Latest Greek Proposal In Just Two Numbers, was in full blown levitation mode overnight when it sent Japanese stocks to their highest close since 1996 (pre dot com) and with the Chinese central bank doing its best to keep levitating local stocks away from the abyss, pushing the SHCOMP up another 2.5%.

European shares opened small in the green, hopeful despite a Greece deal not yet being finalized. The market tried to hold its gains despite an appalling unemployment number in Finland and a blah Ifo report from Germany. These numbers began to weigh, even as the ECB’s QE program is not going to be tapered anytime soon. And then red headlines ran quoting Greece PM Tsipras saying “creditors didn’t accept Greek proposals.” Oops, market immediately got hit, but didn’t panic.”

Euro Stoxx 50 went from flat to down 1% and is bouncing. As BBG’s Richard Breslow adds, predictably, the market is taking this as a ploy, not an end game. Of course, this is precisely the “Bear Stearns is fine” conventional wisdom that Cramer was spewing days before Bear failed because nobody could fathom how anyone can conceive of a worst case scenario. Only it isn’t nobody: we reported before of a Goldman’s “Conspiracy Theory” Stunner: A Greek Default Is Precisely What The ECB Wants.

It was Goldman’s green light that let Lehman fail. Will it be twice in under a decade?

In any event, safe-haven flows have been observed across the board heading into the North America crossover following the report posted …

IBM and Box Team Up to Target Global Data-Storage Market

The deal will give Box, which already has a dedicated base of millions of users, access to IBM’s international reach and artificial-intelligence software.

Julius Baer shares hit record high on U.S. tax probe news

ZURICH (Reuters) – Julius Baer stock jumped nearly 6 percent to an all-time high on Wednesday after the Swiss private bank said it would book an initial $350 million for an expected settlement in a U.S. tax probe, far less than the market had expected.

“No Deal”: Tsipras Says Creditors Did Not Accept Greek Proposal

Who could have possibly foreseen that the IMF would throw up all over the Greek “proposal”… aside from this post here “Why The IMF Will Reject The Latest Greek Proposal In Just Two Numbers” yesterday afternoon of course. In any event, moments ago Bloomberg reported that just as we wrote here yesterday afternoon, there is no deal and that Greek PM Alexis Tsipras told his associates that creditors not accepting equivalent fiscal measures has never happened before, according to a Greek govt official, who asked not to be named in line with policy.

Creditors “not accepting parametric measures has never happened before. Neither in Ireland, nor in Portugal, nor anywhere. This strange stance can hide two scenarios; they either don’t want an agreement or serve specific interests in Greece,” the official cited Tsipras as saying.”

As a reminder, Tsipras is meeting Wednesday with European Central Bank President Mario Draghi, International Monetary Fund Managing Director Christine Lagarde and European Commission President Jean-Claude Juncker in an effort to reach a deal before Greece’s bailout expires and about 1.5 billion euros ($1.7 billion) in payments come due to the IMF on June 30.

Here is the man himself tweeting as much and confirming that the blame game continues:

The repeated rejection of equivalent measures by certain institutions never occurred before-neither in Ireland nor Portugal. #Greece (1/2)

— Alexis Tsipras (@tsipras_eu)

Nikkei hits 18-and-a-half-year high, Europe edges higher

LONDON (Reuters) – European shares edged higher on Wednesday as investors anxiously awaited fresh talks aimed at averting a Greek default, while the dollar held on to most of the previous day’s gains on prospects of higher U.S. interest rates.