Here is what you need to know.
Chinese stocks got slaughtered. China’s Shanghai Composite crashed 7.4% to record its biggest drop since January 19. Friday’s 335 point shellacking was the biggest point decline in more than seven years, and has the Shanghai Composite on the cusp of a bear market as trade sits 19% off the June 12 high. Reuters attributes the recent weakness to “a flood of IPOs, tighter cash supply and general anxiety about policy direction.”
There are plans to ‘ring fence’ Greece. Talks between Greece and its creditors continue, and are expected to last through the weekend. Even if a deal is reached, both Greek and German parliaments must approve a deal, which presents even more obstacles to the already tense situation. The Financial Times reports, “Multiple officials said there was no chance of creditors accepting the new Greek proposal and that they were readying plans to “ring fence” Greece so any economic upheaval unleashed by a default would not spread. Those plans are believed to include capital controls and even humanitarian aid.” Greece’s 2-year yield is higher by 3 basis points at 21.06%.
Japanese data continues to impress. Household spending climbed 4.8% to post its first increase since March 2014, right before the government’s sales tax increase was implemented. Economists were looking for an increase of 3.4%. Meanwhile, the unemployment rate held at 3.3%, its lowest in several decades. Tokyo’s Core CPI measured up 0.1%, in-line with estimates. Japan’s yen is stronger by 0.2% at 123.40 per dollar.
Nike earnings crushed estimates. The athletic apparel giant announced diluted earnings $US0.98 per share, easily outpacing the $US0.86 that was expected. Revenue rose 5% to $US7.8 billion, edging out the Wall Street estimate of $US7.7 billion. Futures orders climbed 13%, surpassing the 11% gain that was anticipated.
Micron disappointed. The chipmaker announced adjusted earnings of $US0.43 per share, missing the Wall Street estimate of $US0.57. Revenue slowed 3.2% to $US3.85 billion, which was shy of the $US3.90 billion that was expected. The company said weak PC demand led to the disappointing quarter.
A Russian lawmaker is targeting Coca-Cola and Pepsi. State Duma lawmaker Igor Zotov (A Just Russia party) wants to block Russian imports of Coca-Cola and Pepsi products. Zotov wants the ban to be included in the embargo against nations that imposed economic sanctions against Russia.”In order to support the President and the Government in the counter-sanctions, we propose restrictions on imports from The Coca-Cola Company and PepsiCo that are official supporters of the US Republican Party and the US Democratic Party respectively, which, in turn, are lobbying for extending the sanctions against Russia,” Zotov said as he addressed Russian Prime Minister Dimitry Medvedev.
The US Export-Import bank is closing. As of midnight on June 30, the bank will lose its authority to write new loans and extend credit. “This is a small step toward renewing a competitive free-market economy and arresting the rise of the progressive welfare state and the cronyism connected to it,” noted Representative Jeb Hensarling, a Republican from Texas. The bank was established in 1934.
The IMF doesn’t like the Fed’s ‘dots’. A paper written by IMF staff suggests the Fed’s dot plot is confusing.”It is not straightforward to connect the dots to get a coherent vision of the path ahead,” the team wrote. Reuters reports, the team would rather see the Fed provide a single forecast that gave a clear view.
Stock markets around the world are lower. China’s Shanghai Composite (-7.4%) paced the decline in Asia and Britain’s FTSE (-0.9%) leads the way lower in Europe. S&P 500 futures are up 0.75 points at 2094.75.
US economic data is light. Michigan Sentiment – Final will be released at 10 a.m. ET.