“Short term volatility is greatest at turning points and diminishes as a trend becomes established.” – George Soros.

1. China Factory Activity Shrank Again in July — China’s factory activity shrank more than initially estimated last month, tightening the most in two years and extending the sell-off of Chinese equities. The final Caixin/Markit China Manufacturing PMI dropped to 47.8, from 49.4 in June, marking the fifth straight month of contraction. The final reading was lower than the flash PMI of 48.2 and the official manufacturing PMI, which fell to 50.0 in July from 50.2 in June.
2. Puerto Rico Debt-Crisis Grows as Payments Halt, Agency Defaults — Puerto Rico has confirmed that it failed to make a debt payment over the weekend, placing the U.S. commonwealth into default for the first time in its history. Congress may help the territory through the passage of a bankruptcy bill, although that effort has faced opposition. The island has also floated the idea that the Treasury Department could guarantee its debt when it seeks to borrow in the market again – helping to lower the cost significantly.
3. Greek Stock Market Re-Open After a Five-Week Shutdown — the Athen’s ASE Stock Index plunged nearly 30% last week, the worst fall on record, after the Athens Stock Exchange reopened following a five-week shutdown. Greek Banking stocks down by another near 30% plunge in banking stocks, as investors react to continuing questions about a new bailout from the EU and the country’s worsening economy.
4. Bill Ackman Takes $5.5 billion Stake in Oreo Maker Mondelez(MDLZ) — Ackman’s Pershing Square Capital Management LP revealed its stake, which amounts to about 7.5% including options and forward contracts, in a statement late Wednesday night. Nelson Peltz’s Trian Fund holds 3.1% of MDLZ.
5. China Spends Heavily to Prop Up Stocks — Peking University economist Christopher Balding has added up the bailout and stimulus measures announced since the Chinese equity panic in late June. They total $1.3T, or more than 10% of GDP. To put that in perspective, America’s Troubled Asset Relief Program was originally authorized to spend $700B. And that was a response to a systemic financial crisis in an economy some 70% bigger than China’s.
6. Bullish Sentiment Sees Slight Rise — courtesy of BIG, according to the weekly survey from the American Association of Individual Investors (AAII), bullish sentiment increased from 21.11% up to 24.32%. Even after the increase, though, bullish sentiment remains well below its average of 38% for the current bull market; a level it hasn’t been above for 19 weeks now.

The week ahead — Economic data from Econoday.com: