The North American and European trading sessions today were fully focused on the uncertainly surrounding Greece’s future with a referendum on the EU’s latest offer scheduled for Sunday. Stock markets across the continent sold off and finished with the MIB down 5.1%, the IBEX down 4.5%, the Dax down 3.5% and the CAC down 3.7%. Markets outside the Eurozone also fell but at a smaller pace with the FTSE
and S&P/TSX down about 2.0% and the Dow down 1.4% (still a 250 point loss).
In contrast after an initial selloff, EUR, NOK and SEK regained their footing and advanced through the day. This confirms my suspicions published in my recent Meech Lake report that currency markets may have already priced in a potential Grexit, while today’s trading indicates stock markets clearly had not fully accounted for Grexit risk.
Greek stock markets did not open today but Greece ETFs I found trading today fell about 15% in Germany and the US.
European treasury markets were mixed with Greece soaring more than 375 basis p[oints to 14.35% while yields for Italy, Spain and Portugal also rise while those for France, Germany, the UK and US fell. Gold spiked early on but then gave most of it back which indicates that overall, there still hasn’t been a huge amount of defensive capital flows but what moves there were have been mainly contained to bond markets.
Apparently lost in the shuffle, but a growing problem, Puerto Rico also appears to be close to a default on its $72 billion in debt. Much of that is owed to US financial institutions and the risk of default there appears to have been dragging on the US financial sector today.
Commodity markets have also been active. Crude oil sold off on indications Iranian nuclear talks may be extended past the June 30th deadline, which suggests that there remains hope a deal can be reached, that could allow Iran to start exporting crude oil once again. Grains were mixed but wheat finished the day in the plus side again up 2.7% on concerns about the impact El Nino could have on this year’s crop between flooding in the US and drought in Canada, Ukraine and Russia.
This all sets the stage for what could potentially be another active day for trading in Asia Pacific markets. While Greece may continue to influence action particularly in pairs like EURJPY, there’s also a lot of potential local and regional developments that could spark trading moves.
Chinese markets remain in focus as they continue their free fall, giving back the massive gains made back a few months ago when links between the Hong Kong and Shanghai markets were improved. The PBOC’s weekend interest rate cut didn’t appear to help much, today we’ll see if markets can stabilize or if they continue dropping back to Earth.
Action in Chinese markets could influence trading in JPY which appeared to benefit yesterday from capital coming out of China and seeking a defensive haven. There are a number of Japanese economic indicators that may also influence trading in the Yen and the Nikkei today. A number of reports are also due for New Zealand and Australia which could spark activity in NZD and AUD as well.
There have been no major corporate reports after the US close today.
Significant announcements released overnight include:
US pending home sales 8.3% vs street 11.8%
US Dallas Fed (7.0) vs street (16.0)
Canada industrial prices 0.5% vs street 0.3%
Canada raw material prices 4.4% vs street 4.5%
Norway retail sales (3.4%) vs street (1.5%)
Spain retail sales 3.4% vs street 3.7%
Germany consumer prices 0.3% vs street 0.5%
Spain consumer prices 0.3% vs street 0.1%
Upcoming significant announcements include:
8:45 am AEST NZ building permits previous (1.7%)
11:00 am AEST NZ ANZ activity outlook previous 32.6
11:00 am AEST NZ ANZ business confidence previous 15.7
11:00 am AEST Australia new home sales previous 0.6%
11:30 am AEST Japan labour cash earnings street 0.7%
11:30 am AEST Japan real cash earnings street 0.2%
2:00 pm AEST Japan vehicle production previous (7.5%)
3:00 pm AEST Japan housing starts street 5.5%
3:00 pm AEST Japan construction orders previous (12.1%)
7:00 am BST Germany retail sales street 2.8%
8:55 am BST Germany unemployment chang street (5K)
8:55 am BST Germany unemployment rate street 6.4%
9:00 am BST Italy unemployment rate street 12.3%
10:00 am BST Italy consumer prices street 0.2%
9:30 am BST UK Q1 GDP street 2.5%
10:00 am BST Eurozone unemployment rate street 11.1%
10:00 am BST Eurozone consumer prices street 0.2%
10:00 am BST Eurozone core CPI street 0.8%
10:00 am BST Greece retail sales previous (0.4%)
8:30 am EDT Canada Apr GDP street 1.5%
9:45 am EDT US Chicago PMI street 50.0 vs previous 46.s
10:00 am EDT US consumer confidence street 97.4
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