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Monday, July 2

2nd Jul - US Open: Now What?

Markets have not moved more after Friday’s rally day. Obviously, European indices are on the positive side, as US had more time to push higher on Friday and Europe has today catched up. Yields, CDS prices also remain somewhat unchanged on a similar “extrapolated” measure. The commentary seems to be cautious on the results of the EU summit. While it is agreed that at least the result was better than nothing, the something that was promised or “agreed upon” largely remains a question mark. There are big issues: Will the ESM be ratified, how will the proposed ECB-banking governance go ahead, how long everything will take (at least half a year, and a lot can happen in that time) - and most importantly, where will the money come from.

I am not big on fighting trends, but would rather not be too much long from current levels. This week, ECB’s expected rate cut on Thursday and the US independence day on 4-July are the main true events – in addition to the usual deciphering of European leaders’ statements.

I am posting this a bit early and will update the regular links as they come online. In this post plenty on China, and after the summit coverage writers are now back to commenting on open issues.

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Earlier on MoreLiver’s:
Weekender: Weekly Support  weekly roundups and calendars
EU Summit Special all the good ones I’ve found on the summit
Weekender: Trading & Markets quant stuff, stock market views etc
Weekender: Off-Topic crime, psychology etc.

News & Recap – RanSquawk / ZH
Frontrunning – ZH
The Lunch Wrap – FT
EM New York headlines – FT
Overnight summary – Bank of America / ZH
Today’s front pages – presseurop
Daily press summary – Open Europe

Morning MarketBeat: Turning Point for Stocks? – WSJ
Broker Note Briefing – WSJ
Morning Take-Out – NYT
Currencies Consolidate Pre-Weekend Moves Marc to Market
The T Report: The U.S. is Not Europe – TF Market Advisors

Pre-market Commentary – Marketwatch
Pre-Market Trading – CNNMoney          
Pre-Market – NASDAQ
US Equity Preview – Bloomberg
Earnings & Events – The Street
MarketCurrents – Seeking Alpha

Debt crisis: live – The Telegraph
The Euro Crisis Blog – WSJ
Tracking Europe’s Debt Crisis – NYT
FX Options Analytics – Saxo Bank
European 10yr Yields and Spreads – MTS indices

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EURO CRISIS
Banking union vs. fiscal union and capturebruegel
There seems to be some convergence on the idea of (i) a supranational guarantee of deposits to avoid destabilizing bank runs, (ii) a supranational mechanism to resolve, restructure and recapitalize banks as well as (iii) the resulting supranational authority to regulate and supervise banks with the necessary intrusive powers centralized above national authorities. Yet if these proposals are appealing on paper, they pose at least three essential political challenges that can easily be overlooked and come back with a vengeance

Not So Fast: Finland And Holland Will Block ESM Bond Buying – ZH
http://www.zerohedge.com/news/not-so-fast-finland-and-holland-will-block-esm-bond-buying

What's needed to maintain the risk-on mentality this week?Saxo Bank
General commentary and weekly review

The Four Paths Forward For The Euro AreaZH
Goldman: 1) The Cultural Revolution 2) The Long March 3) The Great Leap Forward 4) Disintegration.

State auditor sounds warning on 2013 French deficitReuters
France will have to find 6-10 billion euros ($7.6-12.6 billion) this year and a massive 33 billion in 2013 to meet its European deficit targets, or risk unnerving financial markets, the state auditor told the new Socialist government on Monday.

Fiscal compact, bailout fund challenged in German courteuobserver
Six constitutional complaints were lodged in Germany over the weekend against the treaty on fiscal discipline and the establishment of a permanent eurozone bailout fund. The plaintiffs cite a lack of democratic oversight and a denting of budgetary powers.

Europe’s Great IllusionKrugman / NYT
The stakes are very high, and
Europe’s leaders are, by and large, neither evil nor stupid. But the same could be said, believe it or not, about Europe’s leaders in 1914. We can only hope that this time is different.

Europe on the rackThe Economist
The longer the euro area’s debt crisis drags on, the more it resembles an instrument of economic torture. Like the medieval rack, every turn of the crisis tears Europe further apart.

Devalue the Euro?Bruce Krasting
If I'm right, after a few weeks things turn south again in the capital markets.Then what?... Devalue the Euro by 20++%.... Is this feasible? I say it is. It has happened twice before in history. In 1985 the world got the Plaza Accord that devalued the dollar and in 1987 we got the Louvre Accord that revalued the dollar. In both cases, the global central banks (CBs) and acted together.

Soviet collapse holds a lesson for the euroFT
The end of the cold war served as midwife at the birth of the euro. The grand project of monetary union had been talked about many times before but it was collapsing communism and German reunification that produced the final push. Unlike the Soviet Union, the eurozone is not predestined to collapse under the weight of its own contradictions, but neither is its survival inevitable.

Why Germany's TARGET2-Based Eurozone Preservation Mechanism Is Merely A Ticking Inflationary TimebombZH
Goldman’s views

Germany's growing exposureSober Look
if you were Jens Weidmann or the the Bundestag or Angela Merkel or the German public for that matter, and you were looking at the chart below of Bundesbank's assets, what would you think?

Revisting the effective exchange rates of the EuroECB (pdf)

Speech Jörg Asmussen: Can we restore confidence in Europe?ECB

EURO CRISIS: SUMMIT
Europe and Yogi BerraDavid Kotok / The Big Picture
European leaders have finally determined something that was apparent to everyone for years.  Now comes the difficult part: how to implement a euro zone-wide banking system…Merkel agreed to give up something she did not have in order to achieve the continuation of austerity requirements in the southern countries.  She agreed not to press for the two tiered seniority pledge.

EU summit aftermathMacroScope / Reuters
None of the above means that the summit results should be dismissed, it’s just more of the theme we’ve seen for two years. Germany and others have moved, presumably because they remain deeply concerned, but incrementally in a way that may bring some calm but in no way gets ahead of the crisis.

EU Summit: Bono's back from the edge...Saxo Bank
The outcome of the EU summit was undeniably a positive, particularly in comparison to previous summits, but as the dust settles the markets will have to decide whether the announced measures are enough. Sadly, in my opinion, they are not.

CHINA
After ‘Election’, Pro-Democracy Protests Hit Hong KongForbes
Two Chinas, One MissionForbes
China: one country, two realitiesbeyondbrics / FT

HSBC/Markit China manufacturing PMI shows further contraction in JuneASA
China’s Economy Stabilizing, Latest Data ShowsForbes
China’s inventory-building masking a bigger demand slumpalphaville / FT

Large and medium steelmakers profits fell 94.26% yoy for Jan-MayASA
 
Macau casino revenue increased by 12.2% yoy in JuneASA

BizDaily: China's debt problemBBC (mp3)
Has China's government bailed out its debt-laden local authorities? Lesley Curwen talks to Patrick Chovanec, an Associate Professor at China's elite Tsing-hua University.

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