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Rally In Retail, Transports, Automobile, Nasdaq And Small Cap Stocks Take World Currencies And Emerging Market Currencies Higher

Financial Market report for July 7, 2011

1) … World Currencies, DBV, Emerging Market Currencies, CEW, and commodity currencies, CCX, rallied today as Semiconductors, XSD, Copper Mining, COPX, Networking, IGN, Retail, XRT, Transportation, IYT, Small Cap Value, RZV, Small Cap Growth, RZG, Small Cap Consumer Discretionary, PSCD, Small Cap Energy, PSCE, Small Cap Health Care, PSCH, and Small Cap Industrial Shares, PSCI, Small Cap Revenue, RWJ, Software, SWH, Internet, HHH, Manufactured Housing, CVCO, Leisure and Entertainment, PEJ, consumer services, VCR, Real Estate, IYR, together with Gasoline, UGA, rose strongly.

Gold, GLD, is in breakout on fears of sovereign debt default as a sovereign debt crisis in the US looms, and the banking and sovereign debt crisis in Europe remains unresolved.

The Russell 2000, IWM, Industrials, IYJ, and Utilities, XLU, Dow, DIA, and The Standard and Poors 500, SPY, rose to a double top.

The Morgan Stanley Cyclicals Index, $CYC, Hard Asset Producers, HAP, and the New York Composite, NYC, rose manifesting an Elliott Wave 2 High.

Automobile Dealer and Auto Parts stocks, such as Autozone, AZO, Amerigon, ARGN, Dana Holding, DAN, Modline Manufacturing, MOD, Tenneco Automotive, TEN, Titan International, TWI, TRW Automotive, TRW, and Wabco Holdings, WBC, rose strongly today as is seen in the chart of AZO, PAG, AN, SAH, KMX, and ABG.

Seigniorage stocks such as Annaly Capital Management, NLY, and Cardtronics, CATM, rose to new highs.

Credit providers such as American Express, AXP, Discover Financial services, DFS, and Capitol One Finance, COF rose strongly while Mike Mish Shedlock relates Credit crisis in Brazil.

Are we witnessing a blow off top in world stocks, ACWI, and VT, iimmediately before a world sovereign debt, BWX, and US sovereign debt crisis, IEF, TLT, EDV, ZROZ?  

Currencies rising strongly today included BNZ, SZR, FXA, FXM, FXC, BZF, DBV, CEW. and CCX.

2) … In today’s sovereignty news
Bloomberg reports Portugal, Spain Government Notes Fall as Jean Claude Trichet Comments Provide No Balm. Government notes from Europe’s most- indebted nations declined as European Central Bank measures to accommodate recently-downgraded Portuguese bonds failed to alleviate concern the debt crisis is spreading. Yields on Portuguese and Irish two-year notes rose to records even after ECB President Jean-Claude Trichet said in Frankfurt today that policy makers “decided to suspend the application of the minimum credit-rating threshold” for Portugal. German bunds slid after the central bank raised borrowing costs and Trichet said monetary policy in the euro region remains “accommodative.” “The situation is simply so bad,” that “really the market is focused on the other negatives, like Portugal being downgraded,” said Niels From, chief analyst at Nordea Bank AB in Copenhagen. “There is a negative spiral for Portugal and there are definite concerns about contagion to other bigger peripherals.” The yield on two-year Portuguese notes was up 84 basis points at 17.59 percent as of 3:08 p.m. in London after reaching a record 18.28 percent. Spanish two-year note yields rose four basis points to 3.66 percent, Italian yields on securities of similar maturity increased six basis points to 3.33 percent and Irish two-year yields jumped 67 basis points to 15.98 percent. Greek two-year notes fell, pushing the yield up 35 basis points to 28.79 percent. (Hat Tip to Between The Hedges)

Wall Street Journal reports Pimco's El-Erian: Greece Vulnerable for Euro Zone Sabbatical. One of the world's biggest bond investors warned Thursday that the euro-zone debt troubles may spin out of control should policy makers continue to kick the can down the road. In written comments for a live question-and-answer event at on Thursday, Mohamed El-Erian, chief executive and co-chief investment officer of Pacific Investment Management Co., or Pimco, said: "If it wishes to avoid a really disorderly outcome, Europe will be forced to opt for one of two corner solutions: fiscal union, or debt restructuring and, possibly, a euro-zone sabbatical for at least one (and possibly up to three) of the 17 members of the euro-zone." "The more Europe delays this choice, and it is a difficult one, the greater the risk that policy makers may lose control of the situation," said Mr. el-Erian. He added that Greece is the most vulnerable country for both a debt restructuring and a euro-zone sabbatical. (Hat Tip to Between The Hedges)

Bloomberg reports Swap Traders Target Spain, Belgium After Greece.  Credit-default swaps traders are increasing bets that Spain and Belgium will be dragged deeper into Europe's sovereign debt crisis, while reducing trades involving Greece and Portugal. Investors had bought and sold 7,866 contracts insuring a net $18.7 billion of Spanish debt as of July 1, according to the Depository Trust & Clearing Corp. That's up 11% from what was at stake at the end of last year, and an increase of almost 35% from a year earlier. Belgian debt insurance contracts have soared 26% to $7.1 billion this year, while those involving Greece tumbled 25% to $4.8 billion and trades on Portugal dropped 23% to $6.1 billion. Traders are speculating the combination of an economic slump that's driven Spanish unemployment to 21% and a political vacuum in Belgium, which has been without a government for more than a year, will hobble efforts by those nations to curb budget deficits. "Spain is the wildcard," said Barnaby Martin, head of European credit strategy at Bank of America Merrill Lynch in London. "With growth data becoming more shaky, the market has become more concerned about contagion to Spain."  

Bloomberg reports U.S. Consumer Bureau Plans to Write Rules for Mortgage Servicers. The Consumer Financial Protection Bureau is preparing to impose rules on U.S. mortgage servicing firms, said Raj Date, the bureau’s associate director. When the bureau begins formal operation July 21, “mortgage servicing will be one of CFPB’s priorities,” Date said in testimony prepared for delivery to members of the House Financial Services. (Hat Tip to Between The Hedges).

MarketWatch reports Debt Talks 'Constructive' But No Deal: Obama.  Talks with congressional leaders about cutting the federal deficit and raising the debt limit were “very constructive,” but Democrats and Republicans are still far apart on issues, President Barack Obama said Thursday. (Hat Tip to Between The Hedges)

USA Today reports Tough New Clean-Air Rules Will Target Drifting Pollution.  The Environmental Protection Agency Administrator Lisa Jackson is expected to announce tough new regulations Thursday that seek to significantly reduce emissions from many coal-fired power plants. The new measures will cover plants in as many as 28 states whose pollution blows into other states. The new regulations will likely inflame already heated opposition in some quarters to EPA regulations. A policy rider announced Wednesday by House Republicans would prevent EPA from regulating greenhouse gas emissions from power plants for one year. Rep. Mike Simpson, R-Idaho, chairman of the House Appropriations Committee's Interior, Environment and Related Agencies panel, said the provision was necessary to rein in out-of-control and job-killing regulation.  (Hat Tip to Between The Hedges)

Mike Mish Shedlock reports ECB Suspends Collateral Rules for Portuguese Debt, Hikes Rates .25; Trichet Says "No" to Selective Default, Market Yawns and relates “Trichet can shout "no default" from the mountain tops but it is not his call to make”

Mike Mish Shedlock relates You Cannot Roll Over What You Do Not Have. The Wall Street Journal reports Greek Rescue Snarled by Sales.  Europe's hopes for a significant contribution by private bondholders to a new bailout for Greece are fading, as it becomes clear that banks have sold off a substantial proportion of their Greek government-bond holdings despite pledges by some of the institutions not to do so. Greece has about €64 billion ($93 billion) of benchmark bonds coming due in the next three years, among other liabilities, and euro-zone leaders had hoped that private lenders would voluntarily take on longer maturities in order to improve the  country's battered finances. Euro-zone officials have described €30 billion as their target for private-sector participation in the new bailout. Governments want holders of Greek bonds that mature before the end of 2014 to agree to reinvest some of the money as the bonds mature. But the €30 billion target appears increasingly unrealistic. The problem is that the banks and insurers at the negotiating table no longer hold as much of the debt maturing through 2014 as they did a year ago. In May of last year, German banks and insurers made a nonbinding pledge to maintain about €8 billion in Greek debt and loans for three years. Yet the current Greek debt holdings of those institutions suggests they have sold some of their holdings anyway. In an interview with Der Spiegel, the German weekly, Chief Executive Officer Michael Diekmann said Allianz had fulfilled its commitment under last year's pledge not to sell into "a falling market." He also said that the insurer had agreed not to sell only for as long as it made "economic sense."  Analysts said banks were likely to have sold off short-term Greek debt because it trades at a smaller discount to face value than does longer-term debt. Meanwhile, hedge funds and other investors, who are likely to have bought up the paper, are less likely to be persuaded to engage in the debt rollovers being proposed by euro-zone governments.

Business Insider reports Portugal's unbelievable bond crash

Zero Hedge reports The ECB has decided to suspend the application of the minimum credit rating treshold on Portugese debt … And reports ECB Suspends Rating Requirement For Portuguese Collateral … I relate welcome to the One Euro Government; and ask is there any doubt there is a fiscal union in Europe?  Is there any question that a United State of Europe is rising on the European continent?.

Daniel Gross relates Washington continues to play 'Deal or No Deal'.

CNBC asks DId, Apple, AAPL Just Inked iPhone Deal with China Mobile?

Reuters reports New Greek aid package awaits private sector buy-in.

Associated Press reports Government to ease foreclosure rules for unemployed.

World Socialist Website reports American Axle to close Detroit Plant

Zero Hedge reports Obama Administration To Extend Mortgage-Free Living For America's Unemployed To One Year

Business Insider reports on the Age of Wilding in article Karachi Explodes: Dozens Already Dead as Wave of Violence Sweeps Through Pakistan's Largest

3) … Commentary

Seigniorage, that is moneyness, in the Age of Deleveraging will come come from fear of and respect for the Sovereign and the Seignior, as well as from regional stakeholders who will be appointed with their power and authority coming from regional framework agreements; their word will and way will be the way forward out of a soon coming economic collapse this being seen in the Financial Times report that Wolfgang Schäuble relaunched his bond swap plan given the no-compromise position of the ratings agencies.