There’s been a ton of action in the markets overnight with developments coming in fast and furious as we head into what could be a big weekend for developments which could keep trading active well into next week.
First, European markets are staging big relief rallies today with major continental indices up 2.5-3.5% and the FTSE
(which fell less on Grexit concerns) up 1.5%. continental currencies are also rallying today with NOK, EUR, SEK and CHF soaring to the top of the league table. Last night’s proposal from Greece (with help from France) to introduce sweeping reform and austerity measures in exchange for debt relief and a £50B in financial support has been well received by the street and perhaps more importantly has not been immediately dissed by creditors. Hopes that a deal to keep Greece in the Euro this weekend have sparked these relief rallies, although we’re not out of the woods yet with Germany still opposed to debt reduction. There’s a conference call among the creditor group (IMF, ECB, EU) set for today, with a Eurogroup finance ministers meeting set for Saturday and an EU summit set for Sunday, so it looks like things could come to a head one way or another this weekend.
Second, Chinese markets rallied for a second straight day as trading halts, selling bans and threats to arrest short sellers continue to help Chinese markets to regain their footing. The big shocks of the last few months and extraordinary measures taken mean that markets could stabilize in a wide range and we could still see significant volatility. Still, fears of contagion and concerns that the stock market crash could take the Chinese economy down with it that had spread into commodities and other markets appear to be receding.
Overall, the fears about the Greece and China situations potentially spiralling out of control have started to fade for now. There has been a clear outflow of capital from defensive stances back into risk markets. JPY, gold and USD have gone into retreat while European treasury yields show declines for Italy, Spain and Portugal plus a huge 350 basis point drop for Greece (one time where a big plunge is a good thing) while yields for UK, Germany and France have started to rebound.
There also have been some developments in North America that could move markets today.
The Canadian Labour Force survey was mixed. Although headline jobs fell by 6K, a massive 65K increase in full-time jobs was masked by a 72K decline in part-time jobs. Still this big shift from part-time to full time indicates a healthy job markets and makes a Bank of Canada rate cut at this month’s meeting unlikely, although Governor Poloz could leave the door open to a future cut if needed. CAD has been rallying on the news.
Later today Fed Chair Yellen is scheduled to speak. There have been a number of comments from FOMC members over the last two weeks on when interest rates could start to lift off and how many increases we could see this year. There has been a lot of discussion around the street on whether the China and Greek crises could force the Fed to delay rate hikes but recent commentary from the Fed has suggested those effects could be contained regionally and not impact the US. Any comments she has today on the US economy and on interest rates could attract a lot of attention from traders and potentially spark intraday market action.
One other thing, negotiations with Iran on a nuclear deal continue although the deadline for a quick Congressional review has now passes. Any progress or regress on this front could impact trading in oil today and into next week.
There have been no major corporate announcements this morning.
Significant announcements released overnight include:
Canada jobs change street (10K)
Canada full-time previous 31K
Canada part-time previous 28K
Canada unemployment rate street 6.9%
France industrial production 2.8% vs street 2.4%
Norway consumer prices 2.6% vs street 2.0%
Italy industrial production 3.0% vs street 1.2%
UK construction output 1.3% vs street 3.1%
UK trade balance (£0.3B) vs street (£2.1B)
Greece industrial production (4.0%) vs previous 0.4%
India industrial production 2.7% vs street 4.0%
Japan producer prices (2.4%) vs street (2.2%)
Australia home loans (6.1%) vs street (3.0%)
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