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Quote of the Day

“What the IMF is saying is the Europeans have to provide Greece with debt relief, and that debt relief will mean there’s less of a fiscal adjustment. They’re softening their position, but it’s a little late in the day.”

Desmond Lachman, a former IMF official and now a resident fellow at the American Enterprise Institute in the story, “Kinder, Gentler IMF Austerity Stance Came Too Late to Aid Greece”

Lead Stories

Greece Must Meet Sunday Deadline to Reform or Face Euro Exit
European leaders set a Sunday deadline to rescue Greece, saying otherwise they’ll take the unprecedented step of propelling the country out of the euro.

Germans Forget Debt Relief History Lesson in Greece Crisis
NY Times
As negotiations between Greece and its creditors stumbled toward breakdown, culminating in a sound rejection on Sunday by Greek voters of the conditions demanded in exchange for a financial lifeline, a vintage photo resurfaced on the Internet.
It shows Hermann Josef Abs, head of the Federal Republic of Germany’s delegation in London on Feb. 27, 1953, signing the agreement that effectively cut the country’s debts to its foreign creditors in half.

HSBC employees sacked for ‘abhorrent’ mock Isil execution video
The Telegraph
The bank has apologised after a video emerged online of staff dressed in jumpsuits apparently pretending to behead an Asian colleague

Goldman Sachs Says There’s No China Stock Bubble, Sees 27% Rally
China’s biggest stock-market rout since 1992 has done nothing to erode the bullish outlook of Goldman Sachs Group Inc.
Kinger Lau, the bank’s China strategist in Hong Kong, predicts the large-cap CSI 300 Index will rally 27 percent over the next 12 months as government support measures boost investor confidence and monetary easing spurs economic growth. Leveraged positions aren’t big enough to trigger a market collapse, Lau says, and valuations have room to climb.

How a Chaotic Grexit Could Wipe Out $1.4 Trillion in Global M&A
The fallout of a Greek exit from the euro could wipe out as much as $1.4 trillion in future mergers and acquisitions, according to a study by law firm Baker & McKenzie.
A disorderly ‘Grexit’ — where the financial impact spreads unconstrained across global markets — could stymie about $250 billion of dealmaking next year in Europe, excluding the U.K., according to the study, which is based on financial modeling by Oxford Economics.

Unequal terms alienate smaller investors
By Becky Pritchard, Financial News
Private equity firms are increasingly offering their largest investors better fund terms and conditions, leaving smaller investors out in the cold.

Corzine, others settle MF Global lawsuit for $64.5 million
Jon Corzine and other former MF Global Holdings Ltd officials have reached a $64.5 million settlement of litigation brought by investors seeking to hold them liable for the now-defunct futures brokerage’s 2011 bankruptcy.
The preliminary all-cash settlement with Corzine, who was MF Global’s chief executive and previously New Jersey’s governor, and nine other defendants resolves the last major piece of litigation by MF Global stock, bond and convertible bond investors over the company’s rapid descent into Chapter 11.

Balancing Act for Regulators Seeking to Curb Leveraged Loans
Dealbook – NY Times
In its effort to limit leveraged loans, the government is finding once again that regulating the financial industry is like a game of Whac-a-Mole, with new unregulated players popping up to fill the risky gaps.
Leveraged lending is associated most commonly with buyouts by private equity firms, which borrow significant sums to purchase public companies. Under the calculus of such deals, more debt usually translates into greater returns for the private equity firms.

Lehman Case Shows Blurred Lines on Repos
Dealbook – NY Times
In a little-noticed recent opinion, a distressed debt trader came awfully close to undermining the basis for the repo safe harbors. It did so mostly by making a common sense argument.
But the United States Court of Appeals for the Second Circuit blocked that possibility by noting that distressed debt trader was essentially trying to have it both ways.

Your Dirt-Cheap ETF Threatens Asset Managers’ Record Profits
Many of the world’s asset managers may need to work harder for their money.
Their profits revisited peak levels in 2014, and assets under management rose to a third consecutive record, at $74 trillion. But that growth came largely from rising global asset values. At the same time, a continued shift into lower-cost products such as exchange-traded funds (ETFs) pinched net revenue growth, and the amount of net new assets flowing into the firms barely budged, according to Boston Consulting Group’s global asset management report.

Libor Reform Has Not Gone Far Enough, Says Regulator; Financial benchmark at the heart of the rate-rigging scandal remains broken
Nearly five years after the emergence of a rate-rigging scandal that cost banks more than $7 billion in fines, the financial benchmark at the heart of the affair remains broken.

Banks team up to resolve OTC swaps margin disputes
Philip Stafford, FT
The world’s largest swaps dealers and market infrastructure providers are working on a utility to cut down the number of disputes over the amount of margin used in swaps trading.

Boutiques face existential threat as time runs out on MiFID II
Investment Week
Smaller fund firms have been left in limbo as delays in finalising dealing commission regulations leave them unsure of the future of their businesses.

FCA publishes final rules to make those in the banking sector more accountable
The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have today published the final rules confirming the approach to improving individual accountability in the banking sector. The final rules cover the Senior Managers Regime; the Certification Regime; and new Conduct Rules.

Goldman Restructures Its Activism Defense Team
By MICHAEL J. de la MERCED, NY Times
Goldman Sachs has reshaped its activism defense practice, days after the senior banker who led the team, William Anderson, defected to the boutique investment bank Evercore Partners.

Goldman Sachs Names Karen Cook Investment Banking Chairwoman in London
Dealbook – NY Times
Goldman Sachs has named Karen Cook, one of its top bankers in London, as chairwoman of its investment banking division.
According to an internal memorandum, Ms. Cook will continue to serve her most important clients in Britain in her new role, while helping enhance the firm’s investment banking business.

Central Banks

Kinder, Gentler IMF Austerity Stance Came Too Late to Aid Greece
A growing recognition by IMF economists since the global financial crisis of the dangers of imposing too much austerity on cash-starved countries may have come too late to help the fund’s biggest client: Greece.
From 2008 to 2013, the International Monetary Fund became more accepting of fiscal measures to aid expansion around the world and began to recommend nations with limited room for stimulus make a more-gradual return to budget surpluses, according to a 2014 analysis of IMF research by Cornel Ban, an international-relations professor at Boston University.

European Central Bank Holds Key to Greece’s Future
A looming bond payment by Greece to the European Central Bank is emerging as the potentially decisive event in the country’s attempt to stay in the euro and avoid a banking collapse.
On July 20, Greece must repay EUR3.5 billion ($3.84 billion) in bonds held by the European Central Bank. The Athens government doesn’t have the money and without a fresh infusion from its main creditors—other eurozone governments and the International Monetary Fund—it almost certainly won’t have it by then.

Central Banks See a Lot to Like in Treasuries
Institutional Investor
Not everyone has shied away from U.S. Treasuries as yields have rebounded over the past two months.
Foreign central banks’ Treasury holdings rose for nine of the past ten weeks and matched a prior record high of $3.03 trillion on July 1, according to Federal Reserve data. The dollar’s decline from its 12-year peak in March and the rise in Treasury yields sparked the purchases. Central banks’ Treasury purchases often move inversely with the dollar.

BRICS Central Banks Sign Forex Reserves Pool Pact – Real Time Economics
The five major emerging national economies, known by the acronym BRICS, were a step closer to setting up a $100 billion pool of mutual reserves by signing an “operational agreement” on a visit to Moscow, the Bank of Russia said Tuesday.
The pool would be drawn on by the central banks of Brazil, Russia, India, China and South Africa whenever they suffered a shortage of dollar liquidity, helping them maintain financial stability, Russia’s central bank said.

Kenya’s Central Bank Governor Hamstrung by Sliding Currency
Kenya’s new central bank governor Patrick Njoroge is hamstrung by a sliding currency that’s challenging his ability to support an economy hit by a collapse in tourism.
Njoroge, 53, chairing his first Monetary Policy Committee meeting on Tuesday, is set to leave the benchmark interest rate unchanged at 10 percent, according to 14 of the 16 economists surveyed by Bloomberg. Two predicted an increase of 50 basis points to 100 basis points.


Grexit will leave the euro fragile
Financial Times
So what should the eurozone do now? Last week I concluded that the Greeks should vote Yes. They decided instead overwhelmingly to reject the terms of a deal that had been withdrawn. What might that mean? And how should the eurozone respond?

Central Banks Across the World Pressured to Fight Against Euro Depreciation
Greece’s debt turmoil has found a favorite conduit for spreading contagion: the $5.3 trillion-a-day foreign-exchange market.
From Sweden to Switzerland, central banks are battling to contain an appreciation of their currencies versus the euro. Greek risks are also infiltrating markets in Eastern Europe after Greece’s decisive vote against austerity this week. Even the Bank of England, whose economy is showing signs of a gradual recovery, may find itself compelled to delay tightening monetary policy, while Japan has signaled it may boost stimulus if the yen strengthens.

Currencies dominated by risk aversion
Financial Times
Commodity currencies, the euro and sterling experienced hefty selling pressure on Tuesday as the market was hit by a triple whammy of the Greek crisis, a gathering bear market in oil and China’s equity turmoil.
Risk aversion dominated trading, a sentiment that has gathered pace in the aftermath of Sunday’s No vote in the Greek referendum. The grim mood in Brussels at the meeting of eurozone finance ministers saw 1 per cent knocked off the euro, driving it below $1.10 against the dollar.

The global selloff in emerging-markets currencies is intensifying
Emerging-markets currencies are getting crushed on Tuesday.
A trio of market crises — tumbling commodity prices, deteriorating relations between Greece and its creditors and the imploding Chinese stock market — are largely to blame.

Indexes & Index Products

MSCI asks clients if Greek stock market closure warrants different treatment
Index provider MSCI on Tuesday asked clients for feedback on whether Greece’s decision to temporarily shut its stock market

S&P Capital IQ Adds Intra-Day Pricing On Munis To Its Roster Of Pricing Products And Services
S&P Capital IQ
S&P Capital IQ, a leading provider of financial research, data, analytics and securities pricing, announced the availability, starting today, of a new intra-day municipal bond pricing service designed to assist regulatory and industry efforts aimed at bringing about greater transparency to that market. Provided by Standard & Poor’s Securities Evaluations Inc., a business unit of S&P Capital IQ specializing in multi asset class mark to market solutions, the new service will enable users to track pricing on over 3 million bonds throughout the trading day.

Nasdaq: Semi-Annual Review Of The OMX Helsinki 25 Index – The New Portfolio Of The OMX Helsinki 25 Index Will Become Effective On August 3, 2015
Nasdaq (NASDAQ:NDAQ) announces today the results of the semi-annual review of the OMX Helsinki 25 index, (Nasdaq Helsinki: OMXH25), which will become effective with the market open on Monday, August 3, 2015.

Video: MSCI Hong Kong Index – Hot or Not
The MSCI Hong Kong Index is the biggest and most liquid option for investors looking to get broad exposure in the Hong Kong equity market.

No signs of contagion so far- S&P Dow Jones Indices
Portfolio Adviser
S&P Dow Jones Indices has said its data indicates bond market contagion stemming from the Greece situation is not a huge concern.

China Targets Short Sellers in Stock-Index Futures Contracts
Bloomberg Business
hina will limit the opening of new futures contracts in an index of small-company stocks to rein in excessive trading and stem a bear market rout.


There’s No Love For Gold
Two of the biggest beneficiaries of the crisis in Greece are the U.S. dollar and Japanese yen. Demand for safe-haven currencies is natural in times of uncertainty but gold should also be performing. However instead of rising, the price of gold has fallen to its lowest level in 15 weeks intraday.

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