After weeks of topping out and rolling over, the bottom fell out from under the crude oil price today with WTI dropping a whopping 6.7% and Brent falling 5%. Downward pressure has intensified in recent sessions after it fell through the bottom of a trading channel near $56.50 but in addition to technical factors, uncertainty surrounding Greece and China also weighed on commodities. China’s stock markets continued to retreat and despite recent government efforts, the unwinding of last spring’s massive rally continues unabated. This has increased concerns the stock market retreat could destabilize the Chinese economy and curtail resource demand, concerns that have also pressured the copper market. That being said, Chinese markets did drop into the trading ranges they were in prior to the rally which started in March and then rebounded, an encouraging sign. Although they could still retest their winter lows, it appears possible that as they get back to where they started, Chinese indices could potentially start to stabilize. But its early days yet. Greece also remained a big topic of discussion today, knocking European indices back 203% for the most part with Italy’s MIB falling 4%. In contrast the FTSE only fell about 1% and US indices finished near flat on the day. Following yesterday’s Greek NO vote, the ECB increased the haircut on Greek collateral to 60% from 50%. Greece’s Finance Minister Varoufakis resigned in a bid to clear the air and restart negotiations but it remains to be seen if the other side will reciprocate. Greece also extended capital controls to Wednesday amid questions about how much longer its banks can keep operating. There were also a lot of rumours flying around today. Apparently Germany still isn’t interested in negotiating a compromise and it remains to be seen if other parties can change their mind. Greece is expected to present new proposals Tuesday with a number of meeting scheduled so things could come to a head over the next 24-48 hours Today is also the monthly RBA meeting so AUD pairs could also be active. The central bank is not expected to cut interest rates, but there was some speculation after last week’s disappointing retail sales and manufacturing PMI reports. With AUD now down near 75 cents, it will be interesting to see if the central bank keeps talking the dollar aggressively down. Corporate News There have been no major corporate reports after the US close today. Economic News Significant announcements released overnight include: US Markit service PMI 54.8 vs street 54.9 US ISM non manuf PMI 56.0 vs street 56.4 Canada Ivey PMI 55.9 vs street 56.0 vs previous 62.3 Germany factory orders 4.7% vs street 3.8% Upcoming significant announcements include: 9:30 am AEST Australia construction PMI previous 47.8 2:30 pm AEST Australia RBA interest rate 2.00% no change expected TBA Singapore GDP street 2.4% 7:00 am BST Germany industrial production street 2.6% 9:00 am BST Norway industrial production previous (3.4%) 9:30 am BST UK industrial production street 1.6% 9:30 am BST UK manufacturing production street 1.8% 3:00 pm BST UK NIESR GDP estimate previous 0.6% 8:30 am EDT Canada trade balance street ($2.5B) 8:30 am EDT US trade balance street ($42.7B)
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