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Daily Agenda: For Global Equity Markets It’s Déjà Vu All Over Again

Japanese consumer spending shows signs of life though J.P. Morgan dims growth outlook; rare-earth mining company Molycorp Inc. files for Chapter 11.

Trading today is leaving many investors with a sense of déjà vu. Market sentiment is shifting back toward uncertainty. Markets in China tumbled again and over the weekend, there will be yet another round of emergency meetings to discuss the Greek debt crisis. The Shanghai Composite Index fell 7.4 percent to close at 4,192.87, almost 20 percent below the year-to-date high. European stocks sold off broadly after German Chancellor Angela Merkel and French President François Hollande each reiterated that the European Union had reached a line in the sand and that Greek leaders must meet basic demands to reach an accord with creditors and avoid default.

Japanese household spending rebounds. In a victory for the Bank of Japan’s ongoing easing campaign, data from the Ministry of Internal Affairs and Communications for May released today indicated that household spending jumped 4.8 percent year-over-year, the first positive annual reading since March 2014 prior to the nation’s sales tax increase. Separately, May headline consumer price index levels showed price gains remain moderate, at 0.5 percent versus the same month in 2014. Despite the positive signals, not all analysts are convinced that the Bank of Japan will meet its goals soon. On Friday in a report distributed to investors, J.P. Morgan economist Masamichi Adachi lowered his forecasts for second-quarter GDP to 0 percent.

Nike earnings beat estimates.Oregon–based apparel and footwear company Nike reported fiscal fourth-quarter earnings that significantly exceeded consensus analysts’ estimates. Diluted earnings per share registered at $0.98 versus expectations for $0.86 while headline sales reached $7.8 billion, up 5 percent versus the same period a year ago.

Canadian miner eyes European acquisition. Saskatchewan–based mining giant Potash Corp. announced today an offer worth roughly $9 billion to acquire German rival K+S. If completed, the deal would cement the firm’s dominance for production of the crucial fertilizer ingredient. K+S management has not yet responded to the offer, though according to Reuters, sources say that the firm is likely to reject the bid as too low. The share price of the German firm leapt 40 percent during trading in light of the proposed offer.

Private credit expands in Europe. European Central Bank data on private-sector lending released today indicated that in May the euro zone hit the fastest pace of growth in credit in three years. With headline index growth at 0.5 percent year-over-year the expansion was largely driven by increased household borrowing.

Rare-earth miner files for bankruptcy. Once a high-flying darling of equity investors, Greenwood Village, Colorado–headquartered Molycorp Inc. filed for Chapter 11 protection yesterday in the largest U.S. corporate bankruptcy year-to-date. In a statement, the company indicated that it has a working agreement with creditors to restructure $1.7 billion in debt and has secure operating capital to remain operational during the reorganization process. The firm, a miner of rare-earth metals critical for specialized industrial applications, had seen its market capitalization swell to $6 billion during the so-called commodities super-cycle following the 2008–’09 financial crisis.

Portfolio Perspective: UnwindingRobert Savage, CCTrack Solutions

TGIF? The weekend ahead repeats the last weekend of worry with Greece still the main focus and driver of fear. The plan-B meetings on Saturday aren’t so hopeful sounding. Capital controls in Athens Monday are becoming more likely, should the markets not hear what they want Sunday evening — specifically a deal in which the EU and Syriza agree to bail each other out. The ability to waste a good crisis seems at odds with how most other regions work. Overnight news was all about Japan, which was good on jobs and household spending and nowhere in CPI, as deflation fears remain on the edges. The ability for Japan to grow on a weaker yen and exports has proven false, so it’s up to something else in the Abenomics quiver to do the heavy lifting. Hope is unwinding today faster than an old spinning top — just as China where the Shanghai Composite managed a near repeat of last Friday’s collapse. There is no safe buying of the dips anymore. Wealth effects unwind and fear returns.

Robert Savage is the CEO of CCTrack Solutions, a New York–based hedge fund firm.

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