First Impressions

Chicago Topples Lightning Amid Thunder, Floods and Tornado Warnings
By John J. Lothian

The Chicago Blackhawks beat the Tampa Bay Lightning for the Stanley Cup last night in a stormy night in Chicago. Tornado warnings hit the city late in the afternoon as people were headed home for the day.

The basement of my house in Elmhurst flooded suddenly amid the drenching rains that hit the area. I did not get to watch the Blackhawks win the championship, as I was bailing out my basement.

The 2015 MarketsWiki Education World of Opportunity Summer Intern Education Series will be held in Chicago on August 4, 5 & 7. Save the dates. We will also be holding a one day event in New York on July 15. Details on sign ups and speakers lists will be coming soon. We will also be announcing dates for London events again soon too. The MarketsWiki Education web site is in the final stages of a much-needed facelift. We hope to roll everything out together.

Trading Tech 300 has its first nine sign ups with the Chess and Public Speaking Merit Badges being offered by Advantage Futures on July 15. The maximum number of participants is 24, so if you have a Boy Scout, or a girl of the right age interested in Scouting, sign them up here

Patrick Lothian gets married this weekend in Ohio. The extended Lothian family will all be headed back to the state where my father grew up for the wedding. Jim Kharouf will be editing JLN on Friday as I will be in transit to the wedding and Doug Ashburn is off for the day, and the following week.

Patrick Young has reported in his newsletter that “Alan Whiting, Chairman of LIFFE, formerly an executive at LME and much else besides, died at the weekend from a recurrence of prostate cancer.”

Quote of the Day

“We are probably going to be in a very volatile trading period before a crash eventually happens. It is plain that China is in a bubble.”

Hao Hong, the chief China strategist at Bocom International in Hong Kong in the story, ” The China Bubble is Going to Burst”.

Lead Stories

Eurozone officials discuss holding emergency summit on Greece
Peter Spiegel in Brussels, Stefan Wagstyl in Berlin and Kadhim Shubber in London, FT
Eurozone officials are discussing holding an emergency summit on Sunday for leaders to tackle the crisis in Greece amid mounting fears a deal to break an ongoing impasse between Athens and its bailout creditors will not be reached at a high-stakes finance ministers meeting on Thursday.

The China Bubble is Going to Burst
It’s no longer a question of whether China’s stock-market rally is a bubble, but when the bubble will burst.
That’s the refrain from a growing number of analysts as valuations climb to levels that by some measures already exceed the peak of China’s last equity mania in 2007.

French Bonds Infected as Greek Crisis Swells Euro-Region Spreads
Europe’s bond selloff is spreading to markets traditionally viewed as safer, with only Germany remaining unscathed by Greece’s impasse with creditors.
The extra yield, or spread, that investors get for holding French or Belgian 10-year bonds rather than benchmark German debt surged above 50 basis points for the first time this year. Even bonds of the Netherlands and Finland, which have top AAA grades from at least two of the three major ratings companies, are suffering as the fallout from the Greek debacle spreads beyond the euro-zone periphery.

Small US banks left behind by dithering Congress
Barney Jopson in Americus, Georgia, FT
Cruising past the leafy verges and homespun businesses of Americus, Georgia, a banker named Rick Whaley points to another building with parent-like pride. “This is a veterinarian that we put in business,” he says. “It was one of those gut calls community bankers make.”

JPMorgan wins dismissal of shareholder lawsuit over London Whale
JPMorgan Chase & Co officials including Chief Executive Officer Jamie Dimon do not have to face a shareholder lawsuit claiming they failed to properly investigate the “London Whale” trading scandal that caused $6.2 billion in losses, a federal appeals court ruled on Tuesday.
The 2nd U.S. Circuit Court of Appeals in New York said a lower court judge did not abuse his discretion by dismissing the lawsuit by shareholder Ernesto Espinoza.

Ex-AIG CEO Greenberg says will appeal bailout ruling
Former American International Group chief executive Maurice “Hank” Greenberg will appeal a U.S. judge’s ruling that awarded him and other shareholders no damages over the company’s 2008 bailout, his company Starr International Co said in a statement on Tuesday.

Low Interest Rates Could Limit Growth of Federal Debt, Budget Office Says
NY Times
As large as the nation’s post-recession debt is, American taxpayers could catch a break for years to come from continued abnormally low interest rates, which hold down the cost of financing that debt and in turn limit the debt’s growth, congressional analysts said on Tuesday.

Judge in A.I.G. Case Rebukes Davis Polk Law Firm
Dealbook – NY Times
Maurice R. Greenberg, the former chief executive of the American International Group, did not name the big New York law firm Davis Polk & Wardwell as a defendant in his lawsuit challenging the terms of the federal government’s bailout of his company during the financial crisis.
But at times, it might seem that way from reading the ruling in the case issued on Monday by Judge Thomas C. Wheeler of the United States Court of Federal Claims.

Hayes told brokers to call in favours, Libor trial hears
Tom Hayes, the former star trader on trial on alleged Libor-rigging charges, asked brokers to wine and dine traders at other banks in order to help him distort benchmark interest rates, according to evidence presented in a London court on Monday.

Guy Who Manages $112 Billion Sees No Bond Buyers
By Mark Gilbert, Bloomberg
If you haven’t realized by now that a lot of people are worried about bond-market liquidity, then I’m not sure why you’re bothering to read me. (You’re certainly not paying attention to my smarter and funnier colleague, Matt Levine.) But in the hope that you’ll at least start taking an interest in where your pension fund is hanging out these days, maybe you’ll listen when a guy who manages $112 billion tells you that if bad things happen in bond land, the fire doors might turn out to be locked.

Et tu, Robo?
Shaun Wurzbach – Indexology – S&P Dow Jones Indices
Many US financial advisors must feel like they are “under the gun” as the President and parts of his administration call for a stronger fiduciary standard. Simultaneously, I receive several emails per day on “robo-advisors” and how they spell doom for financial advice as we know it. I find the second challenge to financial advisors much more interesting. I’ll share my reasons for why I think that robo-advice may disrupt the business of some financial advisors.

HSBC, JPMorgan may move parts of businesses to Luxembourg – The Times
HSBC Holdings Plc and JPMorgan Chase & Co are in talks to relocate parts of their businesses to Luxembourg from the UK as they weigh the possibility of a British exit from the European Union, the Times reported.

Blockchain Tech could Save Banks $20B, says new Santander Report
Brave New Coin
“It is only a matter of time before distributed ledgers become a trusted alternative for managing large volumes of data,” argues Santander Innoventures, the venture arm of the Spanish bank Santander, in a new paper. In collaboration with fintech venture fund Anthemis and research firm Oliver Wyman, the report, titled The Fintech Paper 2.0, dived into how emerging fintech technologies, including the decentralized ledger behind digital currencies, could affect banks.

Central Banks

Federal Reserve’s high-wire act takes on fresh risk
Financial Times
The US Federal Reserve’s judicious communication is always a high-wire act. But at this week’s meeting the safety net has been removed, and the wind is blowing strongly.
Patchy economic data and the Fed’s caution means that economists and investors have discounted any chance of an interest-rate increase at this week’s monetary policy meeting.

Fed Decision Day Guide: Interest-Rate Projections, Gradual Pace
Here’s what to look for when the Federal Open Market Committee releases its policy statement along with quarterly economic projections at 2 p.m. Wednesday in Washington, and Federal Reserve Chair Janet Yellen holds a press conference at 2:30 p.m.


FCA Chose Not to Chase Some Firms in FX Probe
The Financial Conduct Authority chose not to pursue all institutions involved in the foreign exchange rigging scandal, believing that targeting the worst cases would be enough to send a message of deterrence to all.

Cuba likely to end dual currency system
Financial Times
Cuba is likely to eliminate its dual currency system by the end of this year in a first step to simplifying a multiple exchange system that investors view as a serious obstacle to business.
Cuba currently operates two currencies: the peso (CUP), which largely circulates in the domestic economy, and the so-called convertible peso (CUC). Residents and tourists can purchase CUCs at government exchange offices at a rate of one for 25 CUP ($0.04). State and foreign companies must exchange CUCs at the official one-to-one rate. Neither currency is convertible outside the island.

Indexes & Index Products

GRAPHIC-China A-shares will be gamechanger for emerging market benchmark
Including Chinese mainland stocks in MSCI Inc’s emerging markets index will have a significant impact for global investors in funds tied to the index given the weighting and volatility of the shares, a Reuters graphical data analysis shows.

Strategic beta ETFs muscling out active strategies
Asia Asset Management
Institutions have been replacing active strategies with strategic beta ETFs; claims a new research report from global analytics firm Cerulli Associates (Cerulli). Jennifer Muzerall, senior analyst at Cerulli, explained that many institutional firms that were unhappy with the results from their active managers began seeking alternative approaches to risk-adjusted returns as part of the fallout from the financial crisis. “A number of institutional players started investing in strategic beta ETFs as part of this shift,” she noted.

Bond-Funded Buybacks Draw Skeptics
As investors size up the potential risks and returns of corporate bonds, some are keeping a closer eye on a new concern: what the company plans to do with the proceeds. Companies typically offer bonds to fund acquisitions, invest in their businesses or refinance debt. But a growing number are using them to fund dividends and stock buybacks.


ICE Benchmark Administration Announces Bank of China as a Direct Participant to the Gold Auction
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, today announced that Bank of China has been approved by ICE Benchmark Administration (IBA) to participate in the gold auction which is used to determine the LBMA Gold Price.

China, India are ‘changing the nature’ of gold bullion markets
There is a shake-up in the gold market—and emerging markets like China and India are to blame.
Emerging-market demand is ‘changing the nature of the bullion market,” HSBC analysts, led by James Steel, said in a note on Tuesday.

Gold price to climb as fears of a ‘Grexit’ rise
The price of gold is tipped to rise as investors use the precious metal as a hedge against financial fallout from Greece’s ongoing debt crisis.
Gold has been trading at about $US1180 per ounce in the last week, and between $US1170 and $US1210 per ounce for months, despite a strengthening US dollar.

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