15Jul2015 Pre-Market Commentary: U.S. Futures Quiet Ahead Of Yellen’s Fed Speech Later Today, Markets Expected To Open Flat

Here is the current market situation from CNN Money

European markets are higher today with shares in France leading the region. The CAC 40 is up 0.22% while London’s FTSE 100 is up 0.17% and Germany’s DAX is up 0.08%.

Yellen Sees U.S. on Path to Raise Rates This Year

Federal Reserve Chairwoman Janet Yellen said the U.S. central bank was on a path to raise short-term U.S. interest rates this year as the domestic economy improves even against a backdrop of global threats, largely sticking to a script she laid out in a speech last week.

June 2015 Producer Prices Year-over-Year Deflation Again Decreases

Written by Steven Hansen

The Producer Price Index year-over-year deflation continued – but again was marginally less than last month. The intermediate processing continues to show a large deflation in the supply chain.

Reluctant Tsipras fights to pass reforms in Greek parliament

ATHENS (Reuters) – Prime Minister Alexis Tsipras battled to win lawmakers’ approval on Wednesday for a bailout deal to keep Greece in the euro, while the country’s creditors, pressed by the IMF to provide massive debt relief, struggled to agree a financial lifeline.

Yellen says economy on track, defends Fed ‘transparency’

WASHINGTON (Reuters) – Federal Reserve Chair Janet Yellen said on Wednesday the U.S. central bank remains on track to raise interest rates this year, with labor markets expected to steadily improve and turmoil abroad unlikely to throw the U.S. economy off track.

Delta Air beats second-quarter profit estimates, expects unit revenue drop

(Reuters) – Delta Air Lines Inc on Wednesday reported that second-quarter profit jumped 85 percent, topping expectations, but forecast a third-quarter drop in unit revenue as the carrier continued to see weaker demand abroad due to the strong U.S. dollar.

Toshiba to book $2-$3 billion losses over accounting scandal

TOKYO (Reuters) – Toshiba Corp expects to book charges of 300 billion to 400 billion yen ($2.4-3.2 billion) related to improper accounting, people briefed on the matter said on Wednesday, as Japan’s biggest accounting scandal in years expands.

“Rigged” – The Most Absurd Global Financial Situation Ever

Submitted by Tim Price via The Cobden Centre,

One woman, who declined to give her name but said she is almost 80, invested RMB 20,000 ($3,200) when the market was at 5,000 points. “I’ve lost two thirds of my money,” she said, her voice cracking. “I really want it back and when I get it, I will never invest in the stock market again.”

“..These elderly investors were entering the back half of their lives at the moment when China began to embrace reform. “Old people often don’t understand economics,” says Nie Riming, a pensions expert at the Shanghai Institute of Finance and Law. “They are easily duped.”

– From ‘A bull market with Chinese characteristics’ in The Financial Times, by Tom Mitchell, Gabriel Wildau and Josh Noble, 11 July 2015.

A man may be extremely intelligent, but mankind, as a whole, is pig-ignorant. We are all fools. To put it another way, we can, as individuals, gain much knowledge and perhaps even wisdom during a lifetime, but the likelihood of that knowledge and wisdom persisting through generations may well be vanishingly small.

How else to explain the festival of incompetence currently barrelling its way through the financial markets ?

“It couldn’t happen here,” conclude western investors as they watch the increasingly desperate machinations of the Chinese authorities, for example, as they attempt to put a floor under stock prices. Desperate, as in ridiculous, desperate, Basil Fawlty-ish lengths to prevent reality from crashing in upon a deflating stock market bubble.

BofA profit soars as expenses fall to lowest since 2008

(Reuters) – Bank of America Corp , the No. 2 U.S. bank by assets, reported its biggest quarterly profit in nearly four years on Wednesday as mortgage banking revenue soared and expenses fell to their lowest since the financial crisis.

UK Furious At Proposed 7 Billion Greek Ponzi-Perpetuating Bridge Loan

The two most important stories out of Greece on Tuesday were: 1) the IMF’s leaked report on Greek debt sustainability, and 2) the race to secure between 7 and 12 billion in bridge financing to hold Greece over until the ESM gets off the ground.

Although a new program is in the works and should get the greenlight once Tsipras succeeds in forcing Greek lawmakers to legislate away their sovereignty and any semblance of pride they have left, Athens has bills that need paying, the most important of which comes due to the ECB (on its SMP holdings) on July 20. The Greeks must make the payment to Mario Draghi – otherwise the central would be compelled to interrupt the liquidity drip that’s keeping the Greek banking sector from collapsing altogether. There’s also the issue of public sector salaries and pension payments which Greeks would prefer to receive in euros as opposed to the IOUs suggested by German FinMin Wolfgang Schaeuble.

We outlined the options available for bridge financing on Tuesday morning, noting that all alternatives involve creditors effectively paying themselves either literally or in spirit or otherwise entail the perpetuation of some manner of ponzi scheme (i.e. allowing Greece to sell T-bills to Greek banks).

On Wednesday, the EU Commission decided to go the EFSM route and will look to tap 7 billion of the 11-12 billion that remains in the fund. The formal request by the EU Commission says the funds from the EFSM “aim to provide a bridge financing to allow Greece to face some urgent financial obligations until it starts receiving financial assistance under a new programme from the ESM [and] would safeguard financial stability in the Union and in the euro area.”

This isn’t as simple as it sounds. The EFSM was replaced by the ESM and wasn†…

Winner in Iran Deal: Oil-Thirsty China

Tuesday’s nuclear accord between Iran, the U.S. and other powers frees up more cheap oil for Beijing’s global buying binge.

Oil’s Fall Requires Major Changes

Big oil and gas producers are likely to unveil more cost cutting in response to falling prices. Unless that comes with a fundamental overhaul, those benefits may not last long.

China growth beats forecasts but stocks dive again

BEIJING (Reuters) – China’s economy grew an annual 7 percent in the second quarter, beating analysts’ forecasts, though its volatile stock markets took a sharp dive in a reminder of the threats to Beijing’s efforts to direct the economy out of a slowdown.

Investors Wary of Swiss Franc Bets

Six months after the Swiss franc’s sudden surge rocked financial markets around the globe, investors are largely steering clear of a currency they once considered to be among the safest in the world.

Barclays says Rake to stay as deputy chairman until end of 2015

LONDON (Reuters) – Barclays said on Wednesday that Michael Rake intends to continue as the bank’s deputy chairman and senior independent director until at least the end of 2015.

Frontrunning: July 15

Tsipras Braves Parliament on Aid as Greek Outlook Worsens (BBG)

European markets rise before Yellen speech, Greek vote (Reuters)

China’s Growth Beats Economists’ Forecast as Stimulus Kicks In (BBG)

China stocks drop again, positive data shrugged off (Reuters)

Yellen intensifies Republican outreach amid Fed probe, Senate bill (Reuters)

Iran deal holds both promise and peril for Hillary Clinton (Reuters)

Iranians Party Into the Night as Khamenei Backs Accord (BBG)

U.S. Chamber calls for long list of reforms for SEC enforcement program (Reuters)

Apple’s Lack of Sales Data Raises Flags About Demand for Watch (BBG)

I.M.F.’s Insistence on Greek Debt Relief Adds to Complexity of Talks

The fund’s decision to go public with its concerns made clear that a draft agreement was only a starting point for further discussions.

Futures steady ahead of Yellen speech, Greek vote

(Reuters) – U.S. stock index futures were little changed on Wednesday as investors await Federal Reserve Chair Janet Yellen’s comments on raising interest rates and the outcome of a Greek parliament vote on the terms of a third bailout.

Bank Of America Earnings Rebound On Expense Drop Even As FICC Revenues Slide 9%

If yesterday’s JPM results were largely a story of contracting trading revenues offset by a decline in expenses, then in many ways today’s Bank of America results mimicked what Jamie Dimon did in the second quarter. Moments ago BofA reported that in a quarter in which it repurchased $775 million in stock, it generated $5.3 billion in net income, or $0.45 per share, above the $0.36 declining consensus estimate as a result of a $1.9 billion drop in non-interest expenses, even as FICC trading revenue tumbled just as it did for JPM and Jefferies, sliding 9% Y/Y, offset by a rise in equity trading courtesy of China.

However, the bottom line number benefited from the addition of the following “one-time” addbacks:

$0.7B positive market-related NII adjustments 2, or $0.04 per share after-tax

$0.4B gain from sales of consumer real estate loans, or $0.02 per share after-tax

$0.2B benefit to representations and warranties provision (recorded in revenue), or $0.01 per share after-tax

Which implied the real EPS print was about $0.38. Considering the fudge factor was the usual reserve release, which in Q2 was $288 million. In other words, net of all other items, BofA’s EPS were right as expected.

A quick look at the “internals” of the organic business reveals that in addition to non-GAAP revenue and EPS, BofA is now also adjusting its NIM data series, because while the reported Net Interest Income posted a modest increase to $10.7 billion,or 2.37% NIM – the highest in over a year – the actual NIM excluding market-related adjustments, dropped from 2.28% to 2.22% the lowest in over a year, and amount …

Exclusive: ECB pressures German bank HSH to cut bad loans in half – sources

FRANKFURT (Reuters) – The European Central Bank (ECB) is pressing German lender HSH Nordbank to cut in half its bad-loan ratio, as the supervisor steps up reform pressure on weak banks, two sources familiar with the matter told Reuters.

European markets rise before Yellen speech, Greek vote

LONDON (Reuters) – European stocks rose and bond yields fell on Wednesday, with investors optimistic that the Greek parliament will approve a vital third bailout, although the moves were limited before a speech by Federal Reserve chief Janet Yellen.

Juncker Echoes IMF Call For Greek Debt Re-Profiling

Tuesday was all about debt relief for Greece.

To recap, a new “secret” report on Greek debt sustainability leaked to Reuters on Tuesday morning suggested that the Fund believes the country requires “debt relief measures that go far beyond what Europe has been willing to consider so far.” The report goes on to paint a rather bleak picture of Greece’s economic and financial situation:

Greece’s public debt has become highly unsustainable. This is due to the easing of policies during the last year, with the recent deterioration in the domestic macroeconomic and financial environment because of the closure of the banking system adding significantly to the adverse dynamics. The financing need through end-2018 is now estimated at Euro 85 billion and debt is expected to peak at close to 200 percent of GDP in the next two years. Debt would peak at close to 200 percent of GDP in the next two years. This contrasts with earlier projections that the peak in debt—at 177 percent of GDP in 2014—is already behind us. By 2022, debt is now projected to be at 170 percent of GDP, compared to an estimate of 142 percent of GDP projected in our published DSA. Borrowing at anything but AAA rates in the near term will bring about an unsustainable debt dynamic for the next several decades. Other options include explicit annual transfers to the Greek budget or deep upfront haircuts. The choice between the various options is for Greece and its European partners to decide.

The EMU leaders and finance ministers who gathered in Brussels last weekend were supposedly made aware of the IMF’s assessment on Sunday or early Monday, and indeed …