Although it was a holiday in the US, UK and Germany, weekend developments in Europe rocked the markets that were open. Election results in Spain and Poland confirmed results from earlier this year in Greece and the UK indicating a clear disenchantment with the EU project as it stands and a desire for change now coming from all four corners of the continent. 1) SouthWest: Over the weekend, the two establishment parties including PM Rajoy’s People’s Party lost a lot of ground in local and regional elections to anti-austerity challengers Podemos (who won the mayoralty of Barcelona and came up just short of a win in Madrid) and Ciudadnos. New parties gaining ground sets the stage for what could be a very hotly contested Federal election this fall. The IBEX has dropped 2% on growing political uncertainty. Spain may only be the tip of this iceberg. The MIB fell 2% on the day heading into Italian regional elections set for this weekend. Portugal’s opposition Socialists have also been making noise lately as they stake out an anti-austerity platform ahead of their own federal election this fall. 2) NorthWest: Talk in the UK over the weekend has been over who will and who will not be able to vote in the upcoming UK referendum on whether to stay in or leave the EU. PM Cameron is preparing to start negotiations with the EU on a new deal for Britain. Considering Greece has been talking to a brick wall for months, there doesn’t appear to be much of a mood for deals in the EU establishment leaving me to think he may not get very far either. 3) NorthEast: In Poland, despite presiding over one of the strongest economies in Europe, President Komorowski lost his re-election bid to challenger and now incoming President Andrzej Duda. This result signals a strong desire for change across the continent because if a strong economy can’t keep incumbents in power, one has to wonder if there is a wider trend building toward sweeping out the old establishment. Interestingly, PLN has been steadily strengthening today on the news. 4) SouthEast: Greece indicated over the weekend that it is likely to miss one of its upcoming payments to the IMF which means it could be in default as soon as June 5th. After months of negotiations, it looks like the endgame for Greece may come in the next few weeks, whether through a deal or a Grexit. Greece is the first hole in the dyke and if the EU mishandles the situation, several more leaks could spring open in short order. It appears that many EU leaders had been stonewalling Greece to try and block opposition parties in other parties by suggesting a vote for new ideas would be a waste if Syriza got nowhere. This move instead appears to have sent the message that the establishment has no interest in austerity relief anywhere encouraging voters desperate for change to look for new alternatives. With the EU now in the position where it may have to fight fires in all directions, today’s EUR breakdown under $1.1000 could be a sign of things to come, particularly if disenchantment with the establishment works its way from the edges into the core. Markets hate uncertainty and Europe’s cloudy political outlook could start to increasingly weigh on the single currency once again. As is common on days when the US is closed, trading in Canada was pretty quiet. A moderate drop in the oil price dragged on CAD and Canadian energy stocks. Banks were steady ahead of the Big Six bank earnings reports due between Wednesday and Friday. Asia Pacific markets started the week off strong with Hong Kong leading the way and could go their own way again today with little in the way of leadership from other regions. In terms of economic reports, NZD may attract some early attention with focus turning to SGD later as the day progresses. Tomorrow morning the US gets back to business with a flurry of second tier reports the most important of which may be durable goods orders trying to break a six month losing streak. Corporate News There are no major corporate announcements today. Economic News Significant announcements released overnight include: There were no major announcements in North America today. Upcoming significant announcements include: 8:45 am AEST New Zealand trade balance street $98M 10:00 am AEST Singapore GDP street 2.2% 3:00 pm AEST Singapore industrial production street (3.6%) 8:30 am BST Sweden producer prices previous 2.3% 11:00 am BST UK CBI sales street 20 vs previous 12 8:30 am EDT US durable goods orders street (0.5%) 8:30 am EDT US durables ex transport street 0.3% 9:00 am EDT US house price index street 0.7% 9:45 am EDT US flash service PMI street 56.5 10:00 am EDT US new home sales street 505K 10:00 am EDT US consumer confidence street 95.0 10:30 am EDT US Dallas Fed (11.5) vs street (16.0)
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