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Market Update

Black Gold Says Hello to the Homo Hammer After Iran Deal

“Oil prices tumbled on Monday after a groundbreaking agreement aimed at curbing Iran’s nuclear program eased tensions in the region and raised the prospect of more oil exports from the country.

The preliminary accord, which was struck between Iran and six world powers, offers the Middle East nation $7 billion in relief from economic sanctions.

Iran, a major global oil producer, has seen oil salesslump by 60% from previous sanctions since the beginning of 2012. That has led to an $80 billion loss in revenue, according to the U.S. government.

Related: What the deal means for Iran’s oil sector

Although the new deal won’t allow Iran to increase oil sales for six months, it could still pave the way for more supplies to be released to the global market….”

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Fears of Tighter Chinese Monetary Policy Sack Global Markets

“(Reuters) – Concerns over tighter Chinese monetary policy hit global shares still high on hopes of extended U.S. stimulus on Wednesday, when the dollar tentatively steadied at an eight-month low after its latest slide.

European shares saw their biggest falls in two weeks as markets opened when fears of tighter policy in China were amplified by reports that some of its big banks were tripling write-offs on bad loans.

Asian markets saw widespread weakness as a variety of factors ranging from a strengthening yen in Japan and fading rate cut hopes in Australia added to the negativity.

“What has happened this morning is that we have the Chinese rate surge on the policy tightening fears,” said Alvin Tan, a strategist at Societe Generale in London.

“That has basically generated a broad correction in risk assets and in Europe that is continuing.”

Short-term Chinese money rates underscored investors’ concerns that regulators there are poised to tighten liquidity to quell growing inflationary pressures.

The benchmark seven-day repo contract, which had been steadily sliding since October 9, spiked in the morning session, a day after a policy adviser to the People’s Bank of China (PBOC) told Reuters it was weighing tightening measures.

In Europe, A string of earning misses from some of the region’s biggest corporate names including chip maker STMicroelectronics (STM.PA) and brewer Heineken (HEIN.AS) added to the pressure on shares.

Investors were also digesting the first firm details from the European Central Bank on it plans to check the health of euro zone banks over the next year.

The FTSEurofirst 300 .FTEU3 was down as much as 0.7 percent as trading gathered pace, with Italian, Spanish and Portuguese markets leading the way with respective falls of 1.4, 1.2 and 1.3 percent.


The ECB’s new supervision role is the first leg of a three-pronged plan for a banking union in the euro zone and is designed to ensure there are no holes that could leave the bloc vulnerable.

Jan von Gerich, chief developed market strategist for Nordea, said that while if done properly it should help the euro zone, in the short term it could revive questions about its weaker members.

“The most interesting part will be what it says about Italy….”

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Fitch Puts U.S. Credit Rating on Negative Watch

“This just in: credit rating agency Fitch has revised the outlook for the U.S.A.’s AAA credit rating to negative from stable.

The news comes just as the latest talks in Washington, D.C. over how to raise the debt ceiling and end the government shutdown seem to be falling apart.

“The prolonged negotiations over raising the debt ceiling (following the episode in August 2011) risks undermining confidence in the role of the U.S. dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the U.S.,” said Fitch in a press release. “This ‘faith’ is a key reason why the U.S. ‘AAA’ rating can tolerate a substantially higher level of public debt than other ‘AAA’ sovereigns.”

Fitch and Moody’s still rate the U.S. AAA, the highest credit rating on the scale.

S&P, the other of the three key rating agencies, stripped America of its AAA rating back in 2011 during the last debt ceiling crisis, citing political instability as the key driver of the downgrade.

Below is the full text of the Fitch release…”

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Yellen + GOP Grace = Full Retard Rally

After smellin’ Yellen all week for fed chair and surmising she will be dovish; the markets rejoiced full retard mode when news came out earlier today that the GOP will offer a raising of the debt limit. If the president agrees to the proposal it will only stave off any potential short term default and will not reopen government until serious talks resume in the current standoff.




Art Cashin on today’s rally 







[youtube://http://www.youtube.com/watch?v=l5oWzB4Xgzw 450 300]

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Twitter Gets an Upgrade, Buy Rating, and a $50 Price Target Despite Not Having Traded a Share

“It has been only four days since Twitter first took the wraps off its initial public offering prospectus. But that hasn’t stopped Robert Peck from setting a high $50-a-share price target on the still-private social network.

Mr. Peck, of SunTrust Robinson Humphrey, was the first research analyst to set a public target on Twitter’s not-yet-public stock. But by the time the regulatory filing came out, he had already conducted what he described as several months’ worth of work: talking to industry contacts, marketers and others.

Still, going first wasn’t the aim, he said in an interview.

“It wasn’t the main reason we did it, but it was a nice sort of benefit,” Mr. Peck told DealBook.

Instead, he wanted to use what even he would concede was limited information to decide whether Twitter was a worthwhile investment. What he concluded was unambiguous: His note set a $50 price target for Twitter, more than double the $20.62 at which the company itself valued its stock in August. That would value the company at around $31 billion on a diluted basis, up from nearly $13 billion now.

For Mr. Peck, the decision was based on the sense that Twitter had room to grow. Despite recording a net loss for the 12 months through the end of June, the company has been spending significantly on new tools like Vine, a short-video platform, and MoPub, a big advertising exchange.

“It reminds me of Facebook when they had just rolled out a bunch of new products that hadn’t shown up in the financials yet,” he said in the interview. “I like to see those investments in the platform.”

In his note, Mr. Peck argues that Twitter is a unique platform that isn’t quite like Facebook. Instead, it lets users broadcast their interests, 140 characters at a time, while also conversing with others. And it supplements other media like TV, as users comment on TV shows like “Breaking Bad” in real time.

The research note concedes that Twitter’s future is hard to determine…..”

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Russell 2k Break Out Have Bulls Considering New Highs All Around

“With the small cap Russell 2000 hitting record levels for a third day Tuesday, traders are watching to see if the S&P 500and Dow will follow it. The Dow is within striking distance of its all-time high, just 109 points from 15,409, the close reached on May 28, and the S&P is just 1 percent away from the high it set on May 21, of 1669.

“I didn’t think it would get there this quickly, but it sure seems like it might make it,” said Randy Frederick, managing director of active trading and derivatives at Charles Schwab.

“The key is 15,340,” said Paul LaRosa, chief market technician at Maxim Group. “If we close above that, the highs are in sight.” The Dow closed up 75 points Tuesday, at 15,300, and the S&P 500 closed at 1652, up 11. The number he is watching in the S&P 500, is 1654, Tuesday’s intraday high, and if it closes above that level, he expects to see new highs.

“It feels like we could get there and a lot of the technology names are looking pretty good, some of the regional banks look good,” said LaRosa. “The consumer companies led it early on and now they’re treading water while technology, banks and special situations have been powering this rally lately…Retailers are one group that’s been strong.”

LaRosa said the two big threats to the rally are interest rates and earnings. Treasurys were mostly higher Tuesday, and the 10-year yield was unchanged at 2.63 percent, off the 2.73 percent level it hit Friday but well above its early May low of 1.62 percent….

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European Markets Rally on Portugal Holding Coalition Together, Hopeful of a Brighter Future

European stocks rose, rebounding from their biggest decline in almost two weeks, amid speculation that economic data will improve and as Portugal’s politicians reached an agreement to hold the governing coalition together. U.S. index futures gained and Asian shares fell.

Novartis AG (NOVN) climbed 1.7 percent after saying a psoriasis treatment met all its objectives in a clinical study. Lloyds Banking Group Plc (LLOY) advanced 2.7 percent after a person with knowledge of the matter said a former Standard Chartered Plc executive may mount a bid for a stake in the U.K.’s biggest mortgage lender. Bovis Homes Group Plc jumped 4.6 percent as the company said that profit increased in the first half.

The Stoxx 600 increased 1.4 percent to 292.26 at 11:10 a.m. inLondon. Standard & Poor’s 500 Index futures added 0.6 percent after the equity benchmark rose 1 percent on July 5 after a better-than-forecast payrolls report. The MSCI Asia Pacific Index slid 1.5 percent today.

“The world looks rosy to investors again, after the U.S. market rallied on much better-than-expected employment numbers that investors finally seem to be interpreting as good news,” John Plassard, who helps oversee $28 billion as vice president at Mirabaud Securities LLP in Geneva, wrote. “We have reached a point where markets will reflect the real economy more.”

In Portugal, Prime Minister Pedro Passos Coelho proposed that Paulo Portas, leader of the junior party in the governing coalition, become vice premier. The appointment helps cement a deal to hold the coalition together. Portugal’s PSI 20 Index retreated 2.7 percent last week when Portas resigned after Coelho appointed a new finance minister.

Finance Ministers

Euro-area finance ministers meeting at 3 p.m. in Brussels will discuss Greece’s progress in meeting the conditions needed to obtain further aid from the International Monetary Fund,European Central Bank and European Commission. Greece’s Finance Minister, Yannis Stournaras, said the Greek government will probably reach a deal with international creditors before today’s Eurogroup meeting….”

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China Stocks Melt Down the Most in Two Weeks

Chinese stocks dropped the most in two weeks as indexes tracking energy, materials and industrial companies sank to the lowest levels since November 2008.

China Shenhua Energy Co., the nation’s biggest coal producer, slipped 3.6 percent, taking its loss this year to 38 percent. Yunnan Tin Co. plunged 8.7 percent after saying its chairman is under investigation. Zijin Mining Group Co. (601899), China’s largest gold producer, declined for the first time in six days after saying first-half profit probably decreased. Goldman Sachs Group Inc. cut its earnings forecasts for Chinese mining companies, citing lower metal prices and sales.

The Shanghai Composite Index (SHCOMP) fell 2.4 percent to 1,958.27 at the close, after climbing 1.4 percent last week. The CSI 300 Index slid 2.8 percent to 2,163.62. The Hang Seng China Enterprises Index (HSCEI) retreated 1.1 percent in Hong Kong. The ChiNext index of smaller companies lost 2.5 percent.

“There’s a lack of confidence in the economy,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “There’s also concern about possible capital outflows. There’s nothing positive for stocks.”

U.S. employers added more workers than economists expected in June, data July 5 showed, stoking expectations the Fed will be able to taper asset purchases that prompted capital flows into emerging markets.

China’s State Council, headed by Premier Li Keqiang, pledged last week to improve the effectiveness of financial support for the economy after a cash crunch. Misallocation of capital is hampering the restructuring of the economy and the financial sector must play a better role in helping the overhaul, the cabinet said July 5 after equity markets closed. The State Council said it will maintain its “prudent” monetary-policy stance while ensuring a reasonable supply of money and credit.

Inflation Data…”

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CDS Worries in Portugal Send Yields Higher and European Markets Lower

“Contracts protecting against losses on Portuguese sovereign and corporate bonds led increases in Europe’s credit-default swap markets as the nation’s borrowing costs jumped.

Swaps insuring Portugal’s sovereign debt surged as much as 105 basis points to 507, the biggest advance since May 2010 and the highest level in eight months, according to data compiled by Bloomberg. Contracts on EDP-Energias de Portugal SA, the country’s biggest utility, climbed 60 basis points to 392.5 basis points at 11:40 a.m. in London, while Banco Comercial Portugues SA increased 47 basis points to 593 and Banco Espirito Santo SA rose 44 basis points to 560.

Portugal’s 10-year bond yield topped 8 percent for the first time this year after two ministers quit the coalition government, putting budget cuts at risk as the country works to meet the terms of its bailout program. Rating downgrades of European banks and unrest in Egypt also drove up credit risk.

“Portugal is almost certainly going to become a crisis,” Bill Blain, a strategist at Mint Partners Ltd in London, wrote in a note to clients today. “When politicians walk away from government, you know a new election is coming. That’s the point economic reform dies.”

The cost of insuring European corporate debt against default rose to the highest in a week, signaling deterioration in perceptions of credit quality.

Credit Risk

The Markit iTraxx Crossover Index of default swaps on 50 companies with mostly high-yield credit ratings climbed 22 basis points to 478. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings added 5.5 basis points to reach 120.

The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased 13 basis points to 176 and the subordinated index rose 20 to 262….”

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Poor China Service Data Sends Asian Markets Reeling

“Asian stocks dropped for the first time in six days as resource companies retreated after metals prices slid overnight and an official report showed China’s services industry expanded at a slower pace.

BHP Billiton Ltd., the world’s largest mining company, sank 3.2 percent. Tokyo Electric Power Co. led declines on the Asia-Pacific equity benchmark after the Japanese utility soared 19 percent yesterday. Suntory Beverage & Food Ltd. (2587) gained 1.5 percent on its debut in Tokyo after raising almost $4 billion in Asia’s largest public offering this year. Nikkei 225 Stock Average futures dropped as Portugal’s government bond yields surged on political infighting that threaten austerity plans.

The MSCI Asia Pacific Index lost 1.1 percent to 130.12 as of 6:11 p.m. in Hong Kong, with all 10 industry groups declining. Investors are waiting on U.S. jobs figures for signs the Federal Reserve may start tapering record stimulus as China’s economy slows and Europe’s debt crisis lingers.

“Economic growth is slowing in China and is holding the market back,” Stephen Corry, a Hong Kong-based chief investment strategist at LGT Group, a private banking and asset-management group that oversees about $107 billion, said in a phone interview. “It’s difficult to see much upside. GDP growth will struggle to meet the government’s 7.5 percent target for 2013. Valuations are rock bottom but that’s not a good enough indication to purchase.”

The benchmark MSCI Asia Pacific Index retreated 8.9 percent through yesterday from an almost five-year high on May 20. That gauge yesterday traded at 12.7 times average estimated earnings, compared with 14.6 for the Standard & Poor’s 500 Index and 12.7 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Utilities Drop….”

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Market Update

U.S. equities had a decent rally underway until news out of Egypt suggested that the army was going to oust the president and suspend the constitution. Hundreds of thousands of people are in the streets and some minor clashes have been reported between supporters of president Morsi and haters of Morsi.

The U.S. and the UN are urging dialogue, but there seems to be no chance of this and the fear is that this will erupt into much more than a military coupe.

For the most part U.S. equities are down a tad as opposed to tanking.

Oil remains high and closing in on a hundo while gold is still down paring about half it losses on the day.

Financials led the rally this morning and remain in good relative strength given the reversal of this morning’s rally.

Currently basic materials lead to the downside, followed by conglomerates and the transportation sector.

Today’s new highs include $BMO, $UDR, $BMO, $QUAD, $TOYOF,$OUTR, $ANGI, & $SLXP, new lows find $CCJ, $CTR, $BXE, $MHK, $UTEK, $TSU, $KKR, $TICC, $EXP, $JRO, $SNPS, $PCAR, $ITRI, $TRLA, $DIS, $ATO, $PX, $HUM, $IRBT, $PX, $WLH, $BBRY, $FMS, $OLED, $BBY, $CLF, & $ERC

Market update

[youtube://http://www.youtube.com/watch?v=gViK0ytvt78 450 300]

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Emerging Markets Fall for the First Time in 6 Trading Sessions

“Emerging-market stocks fell for the first time in six days as South Korean automakers tumbled and Chinese companies retreated in Hong Kong.

Hyundai Motor Co. (005380) and Kia Motors Corp. (000270) slid at least 3.4 percent on speculation their combined U.S. market share will weaken. Zoomlion Heavy Industry Science & Technology Co. and China National Building Material Co. (3323) paced declines among Chinese equities in Hong Kong as trading resumed after a holiday and Bank of America Corp. cut its forecast for China’s economic growth. Egyptian bond yields fell after the nation’s army gave President Mohamed Mursi 48 hours to respond to protesters’ demands and end a political impasse.

The MSCI Emerging Markets Index lost 0.5 percent to 936.97 as of 4:16 p.m. in Hong Kong, snapping the longest winning streak since March. Bank of America today reduced its forecast for China’s economic growth in the second quarter to 7.6 percent from the previous estimate of 7.7 percent, a day after data showed two gauges of manufacturing fell in June.

China’s economy will show more signs of slowdown as the government signals its intention to keep controls on credit and the property sector,” Vattana Vongseenin, who oversees the equivalent of $25 million of assets as chief executive officer of Phillip Asset Management Co., said in Bangkok. “The Chinese slowdown will weigh on investors’ sentiment.”

Hyundai Slides…”

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The Nikkei Rallies as the Yen Weakens, Margin Users Become the Most Bullish Since 2000

“…The Topix increased 1.8 percent to 1,171.84 at the close in Tokyo, with volume 22 percent below the 30-day average. The gauge climbed 9.6 percent over the past four trading days, the most since April 8. The Nikkei 225 Stock Average added 1.8 percent to 14,098.74.

“Earnings at Japanese companies are likely to beat estimates because their yen forecasts are pretty conservative,” said Kuninobu Takeuchi, Tokyo-based executive portfolio manager at DIAM Co., which oversees more than $124 billion globally. “The yen comes under selling pressure when risk sentiment improves globally.”

Today’s advance pares the Topix’s losses from an almost five-year high on May 22 to 8.2 percent. The gauge is up 36 percent this year amid optimism Japan may beat deflation and achieve sustainable growth.

Bullish Bets

Investors using borrowed money to trade Japanese stocks are the most bullish since 2000, signaling expectations the rally will continue. The number of Japanese shares bought through margin accounts that profit when stocks rise outnumbered those that make money during declines by about 7 to 1, the highest for 13 years, data compiled by Bloomberg show….”

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Emerging Markets and Their Currencies Get Smashed Hampering Borrowing Costs

“Emerging-market stocks tumbled the most in 20 months, currencies weakened and government borrowing costs rose after China’s cash crunch worsened and the Federal Reserve said it may reduce monetary stimulus this year.

The MSCI Emerging Markets Index slid 3.2 percent to 916.20 as of 12:11 p.m. in London, the most since Oct. 3, 2011. Turkey’s benchmark stock index lost 4.4 percent, the most among major emerging markets, as the lira and India’s rupee hit record lows. BYD Co. (1211) slumped 9.3 percent in Hong Kong, while KGHM Polska Miedz SA fell 8.5 percent in Warsaw. Yields on South Africa’s benchmark 10.5 percent bonds due December 2026 jumped 0.42 percentage point to 8.33 percent.

Fed Chairman Ben S. Bernanke said yesterday the central bank may start reducing bond purchases and end the program in 2014 should risks to the U.S. economy abate. China’s benchmark money-market rate climbed to a record and a private report showed manufacturing shrank at a faster pace this month. Funds investing in developing-nation assets saw outflows of more than $19 billion in the three weeks to June 12, the most since 2011, according to EPFR Global.

“After 10 years of solid inflows into emerging-market debt, we should prepare ourselves for a period of outflows,” Maarten-Jan Bakkum, an emerging-market strategist at ING Investment Management in The Hague, said by e-mail. “This should push currencies down more, lead to higher interest rates in emerging markets and make it necessary for investors to adjust their EM growth expectations downwards.”

Cheap Money….”

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