China's stock markets plunged to practically bear market territory, which stands for a downturn of 20 percent or more in multiple market indexes, as a US$767 billion market cap was wiped out in a single day.

The Shanghai Composite Index, which measures China’s largest market, closed down 7.40 percent on the day (equivalent to a 1325 points drop in the Dow), which was down 18.90 percent from its recent peak that was set on June 12, only two weeks ago

The Shenzhen Composite Index, which is China’s second most important index, tumbled 7.9 percent on the day and was down 20 percent from the peak it reached earlier this month.

In this global interconnected world where stock markets do not reflect economic realities, a “not so stupid” question could be: “Is this this that feared "canary in the coalmine” scenario developing?

Anyway, rumors signal the Chinese Central Bank could lower its reference interest rates once again. We’ll see if they do so.

In the meantime on Thursday in the U.S., we got further good news that confirms the economy is continuously performing better as apparently consumers now have finally started spending what they earned.

We saw the 4-week moving average of continuing claims for unemployment insurance coming in at 2.237 million, which remains close to the lowest level we have seen since November 2000.
 
Besides that, personal income improved 0.5 percent with wages & salaries rising 0.5 percent, which is a 5.0 percent rise y/y while disposable income rose 0.5 percent, which a 3.8 percent increase y/y.

We could go on, but if these positive data continue to come in as they do now, no doubt that will signal the U.S. economy continues to strengthen, which should bring the data dependent Fed could change its dovish view and start rising the fed funds rate earlier than what the FOMC expected last week, and that in itself would be a good reason because it would be for better than expected U.S. economic performance.

The Dallas Fed released on Thursday its Trimmed Mean PCE inflation rate, which is an alternative measure of core inflation in the price index for personal consumption expenditures (PCE), that came in “up” at 2.3 percent at an annualized rate for May.

The overall personal consumption expenditures (PCE) inflation rate for May, released by the Bureau of Economic Analysis, was at an annualized 3.8 percent rate, up from 0.5 percent in April, while the inflation rate for PCE excluding food and energy was at an annualized 1.6 percent rate, up from 1.5 percent in April, which are all higher inflation numbers the Fed takes into account.

Besides all that, there still is Greece and before anything else concerning the developing "Greek train wreck," its interesting taking notice the Greek Central Bank has now, for three days in a row, not asked for any increase in the ECB’s emergency loans (ELA) facility, hereby keeping the total of liquidity aid just short of 89 billion euro, which nevertheless represents an increase by roughly 50 percent to where ELA for Greece stood in the beginning of February.

Investors who have a direct or indirect interest in what’s going on with Greece, which is much more than most think, and as we still wait for an outcome of the ongoing negotiations with Greece’s creditors, which are all the eurozone governments, the ECB and the IMF, investors should better keep in mind in case there comes an agreement on a bailout deal (of course not a sure thing) this would only be the start of very difficult months for the Greek government to come.

With what we know so far it looks like we shouldn’t have to wait too long before we all know where we really are as Eurogroup President Dijsselbloem just said a Greek deal has to happen by Saturday for the simple reason that it needs to go through the 19 parliaments of all the eurozone member states, and first of all in Greece before Tuesday.

Whether or not we will get that deal that would permit unlocking the last bailout tranche of 7.2 billion euros ($8.1 billion) remains an open question.

Greece needs those funds to pay 1.5 billion euros ($1.7 billion) to the IMF by next Tuesday, June 30. Failing to do so would result in a default on Greece's debt to the IMF, which could force Greece to exit the eurozone and, who knows, even the EU. If that were to be the case, all this will come at the cost of renewed political instability in Greece and a lot of uncertainty about the euro and the eurozone.

Yes, we are on the cusp of a difficult weekend; let’s hope it doesn’t become a lethal weekend.