Your MUST-READ Morning Stock Futures Cheat Sheet: Global recap

The exclusive Markets Morning Report is supplied by The Precision Report.

The Precise Take – Global recap

Big Picture Analysis:  Risk markets have surged overnight on news of the Greek debt deal that will force 50% haircuts on some of its debt.  News from the Euro Summit yesterday was that European banks will need to recapitalize to the tune of 106 billion Euros by June 30, 2012, with a focus on restructuring in the form of debt for equity swaps (the EFSF will be a last resort only, so is said).  The EFSF itself will be leveraged to provide 1 trillion Euros to buy Spanish and Italian (and likely other country’s) debt over the coming years.  The ECB will step in to mitigate some of the debt deflationary forces by providing liquidity to the banks through term deposits.  With Mario Draghi to take the helm of the ECB on November, odds of a rate cut at the November 3 meeting are being priced in.  To less fanfare, overnight, the Bank of Japan announced more quantitative easing and will target Japanese government bonds (notably, not currencies, with USDJPY hitting fresh 60 year lows as a result).  After a tame CPI reading in Australia last week, a rate cut for next week’s RBA meeting is being priced in as well.  Notably, the prior two months that the RBA commenced an easing cycle were September, 2008 and February, 2001.  Under the radar, iron ore has dropped 30% over the last few weeks.  Of the major central banks, only China’s appears to be holding steady, and it is ominous that news of severe contraction in several key markets there, including real estate, have yet to influence global risk markets.

Putting it all together, there are powerful deflationary forces at work all over the world that are seeking to clear various markets, which the central banks are attempting to counter by the equivalent of printing money.  Who will win?  We cannot say.  We had noted this week that long term prospects have improved and the risk markets could surge far higher than many would think possible.  This must be tempered with an understanding that risk markets are running purely on liquidity and, as such, are prone to violent reversal on the realization of its absence.

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Today’s  Scheduled News (all times EDT)

Major Market Movers
Pending Home Sales at 10:00 am

Minor Market Movers
7 Yr Note Auction at 1:00 pm

Tomorrow’s Scheduled News

Major Market Movers
Personal Income and Outlays at 8:30 am
Consumer Sentiment at 9:55 am

Minor Market Movers
Employment Cost Idx at 8:30 am