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We continue with emerging markets where the Turkish lira dropped below last Friday's lows (chart shows the number of lira one dollar buys).
Given that the coup had failed, why is the lira still under pressure? It has to do with the rather disturbing headlines coming out of Turkey. Firing thousands of teachers in response to the coup? Is this Turkey's version of the Cultural Revolution? What's next, burning books?
Source: The Telegraph
Source: Reuters
Source: @FT
On Twitter, the message from the Turkish Deputy PM (who used to be the finance minister) was clear: stop beating up on the lira. The central bank is not going to ease too much, and there is no need to hoard dollars because "capital controls are out of the question". Perhaps.
Source: Twitter
Indeed, we had only a 25bp rate cut by the Turkish central bank - less than expected. Stabilizing the lira has become the priority now.
The bounce in Turkey's stock market didn't last.
US dollar investors in Turkish shares are now down 11.5% over the past week.
The nation's government bonds sold off further although the yields remain relatively low vs. earlier this year.
Similarly, Turkey's sovereign CDS spread saw a relatively minor increase thus far.
Source: Deutsche Bank
1. In other emerging market developments, the JPMorgan EM currency index was weaker as well - with the South African rand and the Mexican peso selling off.
Source: Bloomberg, thanks Mike
2. A large net long spec position in the Russian ruble (discussed a couple of days back) could begin unwinding if the currency weakens further. 
Source:; h/t @Matt__J
3. The Russian consumer is in a difficult spot as retail sales continue to decline.
Source: Bloomberg
4. In Poland, on the other hand, retail sales remain robust as wages strengthen.
5. Chile's business sentiment continues to deteriorate despite a relatively strong economy. Bloomberg has a potential explanation.
Source: Bloomberg
6. The Mexican stock market hit a 2-year high (in peso), which should help boost confidence.
7. Signs point to another devaluation in the Egyptian pound as the currency drops sharply in the black market.
Source: @markets
1. Turning to China, the nation's banks' assets of questionable quality continue to rise. Will Beijing be forced to implement a recapitalization program?
Source:  ‏@SLI_Global
2. The renminbi could soon weaken to the 2010 levels.
Source: ‏@M_McDonough
3. Why is Hong Kong's economy so much weaker than the Mainland's? One explanation is that China's economic figures are simply flawed. The other is the recent strength of the HK dollar relative to the renminbi (second chart below) - making HK stuff much more expensive for the Mailand's visitors/customers. It's probably a combination of the these.
Source: ‏@benjaminbland​
Source: @barchart
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1. We now switch to the Eurozone where investors have been moving money into EM bonds to escape record low yields.
Source: @IIF
2. German business confidence fell to the lowest level since November 2012 - primarily on Brexit concerns.
Source: ZEW
3. In fact, business confidence across the Eurozone disappointed.
4. One of the issues the Italian banking system is facing has to do with the amount of time/effort it takes to take a borrower through the bankruptcy process.
Source:  ‏@TenYearNote
5. Speaking of the Italian banking system, the EU's top court just ruled that bail-ins have to be the way forward in providing taxpayer support to banks. It means that if the Italian government tries to recapitalize any of the banks, it has to force subordinated debt holders to take a haircut. And a huge amount of subordinated debt in Italy is held by retail investors (via "HY deposits"). This is a real blow for Matteo Renzi.
Source: @fastFT
6. Credit standards in the Eurozone continue to ease. Will the recent pressure on the banking system reverse this trend? Is demand for loans going to hold up (second chart below)?
Source: Goldman Sachs
Source: ‏@auaurelija
1. Now on to the UK where the ZEW index (the same indicator discussed above) plummetted.
Source: @MxSba
2. The IMF severely downgraded the UK's economic growth forecasts.
Source: ‏@fastFT
3. The British pound is under pressure again as speculative accounts take further bets against the currency.
Source: @WSJ
4. Fund flows show capital leaving the UK. The domestic demand will have to slow significantly in order for the nation to finance its massive current account deficit.
Source: @IIF
5. UK house prices were up over 8% (YoY) in the month before the EU Referendum vote.
6. UK inflation rose more than expected in June as a result of higher-cost airfares. Now, after the sterling devaluation, there is much more inflation on the way.
6. As discussed before, UK's pensions are catching up with the US counterparts in deficit levels (underfunding). With gilt yields at historic lows, the nation's pensions will find themselves in a deeper trouble over time.
Source: JPMorgan, @MatsGlettenberg
1. Back in the United States, the Atlanta Fed GDPNow model is forecasting 2.4% GDP growth in the second quarter. That is roughly in line with the NY Fed's Nowcast. Such result would be a good outcome, considering the weakness in manufacturing and a mediocre performance by the service sector.
Source:  ‏@AtlantaFed 
2. Looking at the third quarter, the NY Fed Nowcast is tracking 2.6% growth. Once again, a decent outcome, given all the headwinds.
Source: @NYFedResearch
3. The Gallup US Economic Confidence Index looks terrible - especially the "economic outlook" component. 
Source: @Gallup
3. US housing starts rose 4.8% in June (beating consensus) with housing supplies remaining tight.
Year-over-year growth in multi-family housing permits has turned negative, while single-unit structures continue to grow.
Source: @NickTimiraos,  ‏@JmBadalamenti
However, US housing starts for single-family homes as a proportion of total starts (chart below) remain depressed.
4. Increasing numbers of Americans rely on rental income as the cost of rent continues to rise.
Source: @business
5. Interbank funding rates in the US remain elevated after Brexit. Here is the 1-week US LIBOR.
6. The US dollar index (DXY) is grinding higher - we haven't seen DXY above 97 since March.
1. In US equity markets, the financial Blogger sentiment is most bullish since 2012.
Source: ‏@hmeisler
2. Continuing with the "frothy markets" theme, here is CNN's Fear & Greed Index.
Source: ‏CNN Money
3. VIX closed below 12 for the first time in a year. 
Source: @barchart
4. While it's tempting to go long vol at these levels, VIX futures contango (roll-down the curve) can be extremely painful for longer-term net-long VIX holders.
5. The VIX curve is fairly steep, indicating increased risk appetite.
6. Despite the "frothy market" indicators (above), the Merrill Lynch fund manager survey suggests managers are highly risk averse.
Source: @NickatFP
Source: @NickatFP
Investors also want firms to spend on Capex rather than pay dividends or buy back shares.
Source: @NickatFP
Separately, more investors expect central banks to implement "helicopter money" policies. More on this later.
Source: @NickatFP
7. The Justice Department is apparently preparing to challenge some of the health insurance industry consolidation (see link below).
Source: ‏; report here
In credit markets, US loan funds AUM started declining again.
Source: ‏@lcdnews
1. Turning to commodities, China's steel production hits record levels. So much for curtailing overcapacity. The Shanghai steel futures take a hit.
Source: Macquarie, @tracyalloway
2. US grains remain under pressure. Here is wheat, corn, and soy.
3. Copper is surprisingly strong given the rally in USD.
Finally, here is a chart on private debt fund raising: few large distressed debt funds and many small direct lending funds.
Source: ‏@theleadleft, @Preqin
From our sponsor: 

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Turning to Food for Thought, we have 5 items today:

1. ‏More Republicans than Democrats are now against free trade?
Source: @FiveThirtyEight, ‏@JmBadalamenti
2. How men and women split domestic duties.
Source:‏ @wef, @JmBadalamenti
3. ‏Who pays for the UN?
Source: ‏@StatistaCharts, @JmBadalamenti
4. Presidential elections voter turnout statistics in the US.
Source: @PostPolls
5. Not much to say here ...
Source: ‏@voxdotcom
From our sponsor: 
Thanks to Josh@NickatFP@MattGarrett3, Jake Badalamenti, and for helping with research for the Daily Shot.

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